Today, the importance of enhancing any dynamic company's brand by ensuring that its value-chain is aligned with and in sync with the UN Sustainable Development Goals, is not lost on global corporate C-suites.
Operating sustainably creates consumer loyalty and helps to increase profits.
It is the reason why well-run companies such as Olam respond quickly and positively when environmental activist groups, such as Mighty Earth, investigate their operations and issue reports that paint a negative picture of the impact they have on host communities and ecosystems.
We have culled and posted a webpage from the website of the multinational company, Olam, which refers to an agreement it reached recently - at a meeting moderated by The World Resources Institute - when it met in Washington DC with the U.S. environmental NGO, Mighty Earth, which investigated Olam's activities in the Ivory Coast, Gabon, Ghana, as well as other highly forested areas in the world covered by Olam's corporate footprint in terms of third-party raw materials suppliers.
One hopes it will inspire the most creative leaders in Ghana's business world - and hopefully get them to examine how their value-chains impact communities and ecosystems across Ghana. And, as cocoa farmers ourselves, we deem it proper to say kudos to Olam for responding so positively to the report by Mighty Earth.
Please read on:
"Olam
Olam and Mighty Earth agree to collaborate on Forest Conservation and Sustainable Agriculture in Highly Forested Countries
London, February 21, 2017
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Olam-and-Mighty-Earth-agree-to-collaborate-on-Forest-Conservation-and-Sustainable-Agriculture-in-Highly-Forested-Countries (1) (221 KB)
Olam Sustainable Palm Oil Policy February 2017 (182 KB)
Building-a-sustainable-Palm-Oil-business-Web-version-with-links (2 MB)
Response from the Republic of Gabon National Agency for National Parks to Mighty English_RoG (820 KB)
Olam response to Mighty report with Supplier Annex_Monday 12 December 2016_update2 (628 KB)
In the wake of Mighty Earth’s 2016 report, Palm Oil’s Black Box, Mighty Earth and Olam met in Washington D.C. and agreed to move forward on two imperatives: enabling models for responsible agricultural development that support forest conservation whilst addressing poverty reduction and job creation in Gabon and other high forest cover countries; and the need for palm oil traders to collectively strengthen incentives for suppliers in Southeast Asia to avoid deforestation and exploitation of workers or communities.
The meeting was convened to discuss the impact of the palm oil and rubber plantations developed by Olam with its Joint Venture partner, the Republic of Gabon, as well as Olam’s third party palm oil sourcing in Southeast Asia. The World Resources Institute moderated the meeting.
Olam agreed to:
Suspend further land clearing of forest in Gabon for palm and rubber plantations for a year (a period that can be extended). During this time, Mighty Earth and Olam agreed to support a multi-stakeholder process to develop further specific criteria for responsible agricultural development in countries that have most of their land covered by forests.
Continue to implement its time-bound plans to map and disclose more information about its third-party palm oil supply chains in Asia and require its third party suppliers to adhere to the High Carbon Stock Approach (described at highcarbonstock.org) as per its updated Palm Oil Policy.
Publish its procedures to address supply chain risks, including independent verification of compliance of high-risk sources.
Issue a revised grievance procedure that includes Olam’s third-party palm oil suppliers and protects the anonymity of those providing input. Olam will continue to routinely investigate and work to remediate any complaints received from indigenous or local communities.
Supplement its current sustainability policies with explicit references to protecting peat and ensuring no exploitation of workers or local communities.
Mighty Earth agreed to:
Suspend its current campaign targeting Olam’s oil palm and rubber operations for a year, including its complaint to FSC (a period that can be extended).
Work with the Gabonese government, civil society, and international experts and stakeholders to advance conservation and responsible development.
In a spirit of dialogue and increased mutual understanding, Olam and Mighty Earth jointly agreed to participate in stakeholder events with civil society organisations and government in Gabon, to encourage and support the High Carbon Stock Approach working group to develop clear guidelines for responsible development in highly forested landscapes, and to further explore conservation and restoration initiatives.
Olam’s Co-Founder and Group CEO, Sunny Verghese, said, “Olam remains committed to best practice in forest conservation, sustainable agricultural development, poverty reduction and job creation,” while noting, “we hope these actions can help sovereign countries like Gabon set their own pathways to sustainable development.”
“Mighty Earth welcomes the opportunity to help Gabon develop in a responsible way, and provide a model for conservation in high forest cover countries,” said Mighty Earth Chairman, former Congressman Henry Waxman.
“While this agreement focuses on palm oil and rubber, we hope it creates momentum for action across commodities. World Resources Institute provided important assistance in reaching this agreement by facilitating this negotiation, and helped spur valuable dialogue to advance broader forest-friendly development.”
World Resources Institute President and CEO, Andrew Steer, noted “Balancing forest protection and new agricultural projects can be very challenging, and it is vital for countries, companies and civil society to work together and find common ground. This agreement is a good example of how organisations can come together to agree on a sustainable and prosperous path forward.”
For further information, please contact:
Olam Corporate Communications
Nikki Barber, General Manager, Nikki.barber@olamnet.com, +44 207 484 8994; +44 7568 108 555
Mighty Earth
Marisa Bellantonio, Media Specialist, marisa@mightyearth.org, +1-203-479-2026
Notes to Editors
About Olam International Limited
Olam International is a leading agri-business operating across the value chain in 70 countries, supplying various products across 16 platforms to over 16,200 customers worldwide. From a direct sourcing and processing presence in most major producing countries, Olam has built a global leadership position in many of its businesses. Headquartered in Singapore and listed on the SGX-ST on February 11, 2005, Olam currently ranks among the top 50 largest listed companies in Singapore in terms of market capitalisation. In 2016, Fortune magazine recognised Olam at #23 in its ‘Change the World’ list. More information on Olam can be found at www.olamgroup.com.
About Mighty Earth
Mighty Earth is a global environmental campaign organization that works to protect forests, conserve oceans, and address climate change. We work in Africa, Southeast Asia, Latin America, and North America to drive large-scale action towards environmentally responsible agriculture that protects native ecosystems, wildlife, and water, and respects local community rights. Mighty Earth’s global team has played a decisive role in persuading the world’s largest food and agriculture companies to dramatically improve their environmental and social policies and practices. More information on Mighty Earth can be found at www.mightyearth.org
About World Resources Institute
WRI is a global research organization that spans more than 50 countries, with offices in the United States, China, India, Brazil, Indonesia and more. Our more than 450 experts and staff work closely with leaders to turn big ideas into action to sustain our natural resources – the foundation of economic opportunity and human well-being. Our work focuses on six critical issues at the intersection of environment and development: climate, energy, food, forests, water, cities and transport. For more information, www.wri.org
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Saturday, 30 September 2017
Shopify Blogs/Kevin Donnelly: Why Customer Lifetime Value Matters (and How to Calculate It for Your Business)
Shopify Blogs
Why Customer Lifetime Value Matters (and How to Calculate It for Your Business)
by Kevin Donnelly Business Finance
Jul 19, 2017 10 minute read 13 comments
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Why Customer Lifetime Value Matters (and How to Calculate It for Your Business)
How do you measure your online store’s success? Do you typically focus on things like sales and revenue?
While these metrics are useful for tracking the short-term performance of content and campaigns, they don’t always paint a complete picture of your business’ future. Even looking at your current sales numbers can sometimes leave you with just a fleeting glimpse of your true financial situation.
Customer Lifetime Value (CLV) is one of the most important factors in determining your business’ present and future success. It’s an often-overlooked metric that can accurately predict how much your customers are really worth. By measuring the net profit that you’ll take in over the course of your entire relationship with a customer, you’ll be able to narrow down exactly how valuable they are to your business.
CLV gives you crucial insight into how much money you should be spending on acquiring your customers by telling you how much value they’ll bring to your business in the long run. Rather than just racing to keep your head above water, you’ll be able to understand which customers you should be focusing on and, more importantly, why you should be focusing on them.
Why Is Customer Lifetime Value Important?
dollar money currencyCustomer Lifetime Value is a clear look at the benefit of acquiring and keeping any given customer.
Not all customers are created equal. In fact, the top 1% of ecommerce customers are worth up to 18 times more than average customers.
As a business owner, you need to be able to focus your efforts on acquiring the right customers—the customers who will take your business from being a flash-in-the-pan success to a household name.
While CLV is incredibly useful, it’s traditionally very difficult to calculate. If you’ve tried to uncover your CLV in the past, you’ve probably found yourself knee-deep in complicated algorithms and formulas.
Thankfully, there are much simpler ways to calculate your CLV, but don’t let the simplicity fool you— the complexity of other formulas isn’t without good reason. Customer behaviors are very difficult to predict and can seem completely random at a glance which makes CLV an inherently complex measure to track.
Just think about it. Some of your customers might make small purchases every week, others might make big purchases once a year—and there all sorts of combinations in between. How can you possibly predict how much your next customer will actually contribute to your business?
CLV takes some of the mystery out of knowing how your current and future customers will behave. By calculating your CLV, you’ll be able to understand how often certain types of customers will make purchases and when those same customers will stop making purchases for good.
Although there are some more advanced methods for forecasting CLV out there, the strategy that we’ll be covering in this post is a straightforward way for you to get the information you need to refine your approach to customer acquisition.
With this simplified approach to Customer Lifetime Value, you’ll easily be able to take a snapshot of your customers’ purchasing history and flip it into a widescreen forecast of their future actions.
Segmenting Your Customers with RFM
business meetingBefore we dive into Customer Lifetime Value, let’s take a look at the foundational elements of analyzing customer value: Recency, Frequency, and Monetary Value (RFM).
RFM is a technique for organizing your customers from least valuable to most valuable by taking into account the following factors:
Recency refers to the last time that a customer made a purchase. A customer who has made a purchase recently is more likely to make a repeat purchase than a customer who hasn’t made a purchase in a long time.
Frequency refers to how many times a customer has made a purchase within a given time frame. A customer who makes purchases often is more likely to continue to come back than a customer who rarely makes purchases.
Monetary Value refers to the amount of money a customer has spent within that same time frame. A customer who makes larger purchases is more likely to return than a customer who spends less.
By segmenting your customers with RFM, you’ll be able to analyze each group individually and determine which set of customers has the highest CLV.
To use RFM to organize your customers, you’ll need to grab three pieces of data about every individual customer: The date of their most recent transaction, the number of transactions they’ve made within a consistent timeframe (a year will work best), and the total amount that they’ve spent during that same timeframe.
If you own a Shopify store, you’ll be able to find all of this data in the Reports section of your Admin.
customer lifetime value
Head to Reports and click "Sales by Customer Name". You'll be able to find data like order count and total sales for every customer here.
For RFM calculations, each of these variables needs to given a scale. The simplest way is to use a scale of 1 to 3. This might seem a bit confusing, but don’t worry, it’s not as complicated as it looks. Remember: This scale is just a way to help you visualize which groups of customers are most valuable.
You’ll be assigning your customer’s recency, frequency, and monetary value each a value on your scale of 1 to 3. Think of these three values as categories: 1 being the least valuable, 2 being somewhat valuable, and 3 being the most valuable.
So, when you sort your data, your least valuable ⅓ of customers will get assigned a score of 1, the ⅓ above that will get a 2, and so on.
To help you get a better idea of how this might work, let’s take a look at an example spreadsheet.
rfm recency frequency monetary value
For this spreadsheet, I’ve already collected my customers’ information and broken down each variable into three categories based on my data. To do this, I’ve taken the range of data for each variable and divided it into three equal segments.
As an example, for Recency, customers who have made a purchase within the last four months are given a 3. Customers who have made a purchase within the last four to eight months are given a 2. And customers who have made a purchase within the last eight to twelve months are given a 1.
rfm recency frequency monetary valueNow, we’ll add up the score for each customer and list a total under RFM Score.
rfm recency frequency monetary value
Finally, sort your chart by RFM Score and divide your results by highest (shown here in red), middle (orange), and lowest score (yellow).
Your highest scoring results will be your most valuable customer segment—be sure to dive into the data to try and find common threads between these customers that could indicate why they provide more value and how you can target them better.
What You’ll Need to Calculate Your Customer Lifetime Value
Now that you've segmented your customers with RFM, it's time to determine the value of each segment to see which of your customers perform the best.
To calculate the Customer Lifetime Value for each of your customer segments, you’ll need to track down three key pieces of data within your pre-established timeframe: Average Order Value, Purchase Frequency, and Customer Value.
Average Order Value
Average Order Value represents the average amount of money that a customer spends every time they place an order. To get this number, you’ll simply need to take your total revenue and divide it by your total number of orders.
If you own a Shopify store, you can find this information by heading to the Reports section of your Admin and taking a look at your Sales by Month. You’ll just need to divide your Total Sales by your Order Count for the past year.
Note: To get a more accurate number, be sure to click Define under Total Sales and uncheck everything except for Subtotal.
Average Order Value = Total Sales / Order Count
Purchase Frequency
Purchase Frequency represents the average amount of orders placed by each customer. Using the same timeframe as your Average Order Value calculations, you’ll need to divide your total number of orders by your total number of unique customers. The result will be your Purchase Frequency.
Shopify store owners can also find this data in their Reports under Sales by Customer.
Purchase Frequency = Total Orders / Total Customers
Customer Value
Customer Value represents the average monetary value that each customer brings to your business during a timeframe. To calculate your Customer Value, you’ll just need to multiply your Average Order Value by your Purchase Frequency.
Customer Value = Average Order Value x Purchase Frequency
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Free Reading List: Conversion Optimization for Beginners
Turn more website visitors into customers by getting a crash course in conversion optimization. Access our free, curated list of high-impact articles below.
Calculating Your Customer Lifetime Value
calculating customer lifetime valueNow that you have the Customer Value for each segment of your customer base, calculating the CLV is as simple as taking your Customer Value and multiplying it by the average customer lifespan.
Your average customer lifespan is the length of time that your relationship with a customer typically lasts before they become inactive and stop making purchases permanently.
When it comes to customer lifespan, it’s important to understand the difference between being a contractual and non-contractual business.
Most online stores are non-contractual, meaning that once a purchase is made, the transaction is effectively over. The difficulty with these types of businesses is in identifying when an active customer (someone who makes purchases and will continue to make purchases) becomes an inactive customer (someone who will never make a purchase from your business again).
However, some online stores (like subscription box-based businesses) fall into the contractual category. With a contractual business, you know exactly when a customer becomes inactive because they announce it when they end their contract or subscription. With a contractual business, it’s much easier to identify your average customer lifespan.
If your store is brand new or has only been around for a few years, you might not have access to enough data to determine the average lifespan length of your customers. But don’t worry—there’s a quick way to work around this and still get some actionable results from your calculations.
For newer stores, a lifespan of three years will work fine as a rough estimate. This will give you a good idea of how customers will potentially perform within the immediate future (as well as give you some added incentive to keep them around).
Increasing Your Customer Lifetime Value
increase customer lifetime valueWhile your calculations may have given you some results to get excited about, there’s always room for improvement! Here are some quick tips for getting the most out of every customer relationship by creating new opportunities to increase their value:
Encourage Your Customers to Spend More
A key part of increasing your customers’ lifetime value is encouraging them to spend more on each order, boosting your overall average order value.
Pricing plays a huge psychological role in how much customers spend and what customers choose to purchase. Here are some ideas that might improve your pricing model:
English speakers read from left to right. If you’re selling expensive items, focus on making the left digit as low as possible to trick the mind into perceiving the price as smaller than it actually is. As an example, $199 seems a lot less expensive than $200.
Comparison pricing helps make decisions for customers. Do you offer multiple models of the same product? Line them up and contrast the strengths of each model to justify the price point and help your customers pull the trigger quicker.
Social proof is a powerful thing. Try incorporating an Instagram feed into your product pages with apps like Like2HaveIt and Shoppable Instagram to show off how other customers are using your products. Not only will your customers feel inspired, but they’ll also be more inclined to hit “Add to Cart”.
Scarcity means exclusivity. The more exclusive something seems, the more valuable it is in the minds of your audience. Encourage your customers to act now and place larger orders by setting up sales with fixed deadlines.
Free shipping discounts create larger carts. If you offer free shipping, consider setting your discount threshold higher. Depending on your business (and the average price of your products), this could mean $50, $100, or even higher. If your customers typically come close to hitting the threshold, they’ll easily be able to justify tossing an extra item in their cart to get free shipping.
Keep Your Customers Coming Back More Often
For better CLV, it’s important to not just keep your customers coming back, but to keep them coming back frequently and for longer amounts of time.
Here are some easy ways to improve your customer frequency and lifespan by giving your customers some incentive to pay you a visit more often:
Turn receiving a package into an event. The key to keeping your customers surprised, delighted, and coming back for more is a memorable unboxing experience. Put some extra love and care into how you ship your products with free gifts, personalized notes, and fun packaging.
Newsletters are your secret weapon. Email marketing is a fantastic tool for any business. Keep customers in the loop on product restocks, upcoming sales, and exclusive deals with a well-curated, beautifully designed newsletter.
Engage with your fans on social media. Platforms like Facebook, Twitter, and Instagram are perfect for reaching out and connecting with your audience. Stay at the top of your customers’ minds with an engaging and fun social media presence.
Loyalty programs keep customers around. Use a loyalty program to show your most dedicated customers that you care by offering them gifts and rewards for repeat purchases.
Consider subscriptions to hook customers. Do you offer a product that customers need to buy regularly like coffee beans or socks? Think about setting up a subscription program to lock in repeat business. It’s easier for you and your customers.
Putting Your Customer Lifetime Value to Work
With your Customer Lifetime Value in hand, you’ll now be able to start building smarter, more efficient campaigns by optimizing your spending and fine-tuning your targeting.
One of the primary uses for CLV is to help you keep your Cost Per Acquisition as low as possible.
If you don’t know how much you’re spending to acquire new customers, all you need to do is divide your total marketing/sales budget for a specific timeframe by the amount of new customers you gained in that same timeframe. The resulting number will be the average amount that you spend every time your business acquires a new customer.
The difference between your Customer Lifetime Value and your Cost Per Acquisition is your Return On Investment, or ROI. That’s the amount of money you get out of a customer relationship after you’ve deducted the money that you spent to kickstart the relationship in the first place. To stay profitable, you’ll need to maximize your ROI.
Additionally, if you know your CLV, you’ll also be able to figure out how much you can afford to spend on paid ad campaigns on Google and Facebook.
To determine how much you should be putting into campaigns, you’ll first need to know your conversion rate.
For instance, if your Customer Lifetime Value is $100 and the conversion rate for one of your marketing campaigns is 10%, then your maximum bid for that campaign should be 10% of $100. So, in this scenario, you’d be able to bid a maximum of $10 per click without blowing your budget.
Find the Right Customers for Your Business
Success isn’t about finding customers—it’s about finding the right customers. Now that you can calculate the lifetime value of your current customer base, you’ll be able to start crafting campaigns that target and win over those customers that really make the difference for your bottom line.
Have any questions about calculating your CLV? Let us know in the comments below!
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About the Author
Kevin Donnelly is a content creator at Shopify with an unhealthy Drake obsession.
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Why Customer Lifetime Value Matters (and How to Calculate It for Your Business)
by Kevin Donnelly Business Finance
Jul 19, 2017 10 minute read 13 comments
Email Pinterest Facebook Facebook LinkedIn
Why Customer Lifetime Value Matters (and How to Calculate It for Your Business)
How do you measure your online store’s success? Do you typically focus on things like sales and revenue?
While these metrics are useful for tracking the short-term performance of content and campaigns, they don’t always paint a complete picture of your business’ future. Even looking at your current sales numbers can sometimes leave you with just a fleeting glimpse of your true financial situation.
Customer Lifetime Value (CLV) is one of the most important factors in determining your business’ present and future success. It’s an often-overlooked metric that can accurately predict how much your customers are really worth. By measuring the net profit that you’ll take in over the course of your entire relationship with a customer, you’ll be able to narrow down exactly how valuable they are to your business.
CLV gives you crucial insight into how much money you should be spending on acquiring your customers by telling you how much value they’ll bring to your business in the long run. Rather than just racing to keep your head above water, you’ll be able to understand which customers you should be focusing on and, more importantly, why you should be focusing on them.
Why Is Customer Lifetime Value Important?
dollar money currencyCustomer Lifetime Value is a clear look at the benefit of acquiring and keeping any given customer.
Not all customers are created equal. In fact, the top 1% of ecommerce customers are worth up to 18 times more than average customers.
As a business owner, you need to be able to focus your efforts on acquiring the right customers—the customers who will take your business from being a flash-in-the-pan success to a household name.
While CLV is incredibly useful, it’s traditionally very difficult to calculate. If you’ve tried to uncover your CLV in the past, you’ve probably found yourself knee-deep in complicated algorithms and formulas.
Thankfully, there are much simpler ways to calculate your CLV, but don’t let the simplicity fool you— the complexity of other formulas isn’t without good reason. Customer behaviors are very difficult to predict and can seem completely random at a glance which makes CLV an inherently complex measure to track.
Just think about it. Some of your customers might make small purchases every week, others might make big purchases once a year—and there all sorts of combinations in between. How can you possibly predict how much your next customer will actually contribute to your business?
CLV takes some of the mystery out of knowing how your current and future customers will behave. By calculating your CLV, you’ll be able to understand how often certain types of customers will make purchases and when those same customers will stop making purchases for good.
Although there are some more advanced methods for forecasting CLV out there, the strategy that we’ll be covering in this post is a straightforward way for you to get the information you need to refine your approach to customer acquisition.
With this simplified approach to Customer Lifetime Value, you’ll easily be able to take a snapshot of your customers’ purchasing history and flip it into a widescreen forecast of their future actions.
Segmenting Your Customers with RFM
business meetingBefore we dive into Customer Lifetime Value, let’s take a look at the foundational elements of analyzing customer value: Recency, Frequency, and Monetary Value (RFM).
RFM is a technique for organizing your customers from least valuable to most valuable by taking into account the following factors:
Recency refers to the last time that a customer made a purchase. A customer who has made a purchase recently is more likely to make a repeat purchase than a customer who hasn’t made a purchase in a long time.
Frequency refers to how many times a customer has made a purchase within a given time frame. A customer who makes purchases often is more likely to continue to come back than a customer who rarely makes purchases.
Monetary Value refers to the amount of money a customer has spent within that same time frame. A customer who makes larger purchases is more likely to return than a customer who spends less.
By segmenting your customers with RFM, you’ll be able to analyze each group individually and determine which set of customers has the highest CLV.
To use RFM to organize your customers, you’ll need to grab three pieces of data about every individual customer: The date of their most recent transaction, the number of transactions they’ve made within a consistent timeframe (a year will work best), and the total amount that they’ve spent during that same timeframe.
If you own a Shopify store, you’ll be able to find all of this data in the Reports section of your Admin.
customer lifetime value
Head to Reports and click "Sales by Customer Name". You'll be able to find data like order count and total sales for every customer here.
For RFM calculations, each of these variables needs to given a scale. The simplest way is to use a scale of 1 to 3. This might seem a bit confusing, but don’t worry, it’s not as complicated as it looks. Remember: This scale is just a way to help you visualize which groups of customers are most valuable.
You’ll be assigning your customer’s recency, frequency, and monetary value each a value on your scale of 1 to 3. Think of these three values as categories: 1 being the least valuable, 2 being somewhat valuable, and 3 being the most valuable.
So, when you sort your data, your least valuable ⅓ of customers will get assigned a score of 1, the ⅓ above that will get a 2, and so on.
To help you get a better idea of how this might work, let’s take a look at an example spreadsheet.
rfm recency frequency monetary value
For this spreadsheet, I’ve already collected my customers’ information and broken down each variable into three categories based on my data. To do this, I’ve taken the range of data for each variable and divided it into three equal segments.
As an example, for Recency, customers who have made a purchase within the last four months are given a 3. Customers who have made a purchase within the last four to eight months are given a 2. And customers who have made a purchase within the last eight to twelve months are given a 1.
rfm recency frequency monetary valueNow, we’ll add up the score for each customer and list a total under RFM Score.
rfm recency frequency monetary value
Finally, sort your chart by RFM Score and divide your results by highest (shown here in red), middle (orange), and lowest score (yellow).
Your highest scoring results will be your most valuable customer segment—be sure to dive into the data to try and find common threads between these customers that could indicate why they provide more value and how you can target them better.
What You’ll Need to Calculate Your Customer Lifetime Value
Now that you've segmented your customers with RFM, it's time to determine the value of each segment to see which of your customers perform the best.
To calculate the Customer Lifetime Value for each of your customer segments, you’ll need to track down three key pieces of data within your pre-established timeframe: Average Order Value, Purchase Frequency, and Customer Value.
Average Order Value
Average Order Value represents the average amount of money that a customer spends every time they place an order. To get this number, you’ll simply need to take your total revenue and divide it by your total number of orders.
If you own a Shopify store, you can find this information by heading to the Reports section of your Admin and taking a look at your Sales by Month. You’ll just need to divide your Total Sales by your Order Count for the past year.
Note: To get a more accurate number, be sure to click Define under Total Sales and uncheck everything except for Subtotal.
Average Order Value = Total Sales / Order Count
Purchase Frequency
Purchase Frequency represents the average amount of orders placed by each customer. Using the same timeframe as your Average Order Value calculations, you’ll need to divide your total number of orders by your total number of unique customers. The result will be your Purchase Frequency.
Shopify store owners can also find this data in their Reports under Sales by Customer.
Purchase Frequency = Total Orders / Total Customers
Customer Value
Customer Value represents the average monetary value that each customer brings to your business during a timeframe. To calculate your Customer Value, you’ll just need to multiply your Average Order Value by your Purchase Frequency.
Customer Value = Average Order Value x Purchase Frequency
Template Icon
Free Reading List: Conversion Optimization for Beginners
Turn more website visitors into customers by getting a crash course in conversion optimization. Access our free, curated list of high-impact articles below.
Calculating Your Customer Lifetime Value
calculating customer lifetime valueNow that you have the Customer Value for each segment of your customer base, calculating the CLV is as simple as taking your Customer Value and multiplying it by the average customer lifespan.
Your average customer lifespan is the length of time that your relationship with a customer typically lasts before they become inactive and stop making purchases permanently.
When it comes to customer lifespan, it’s important to understand the difference between being a contractual and non-contractual business.
Most online stores are non-contractual, meaning that once a purchase is made, the transaction is effectively over. The difficulty with these types of businesses is in identifying when an active customer (someone who makes purchases and will continue to make purchases) becomes an inactive customer (someone who will never make a purchase from your business again).
However, some online stores (like subscription box-based businesses) fall into the contractual category. With a contractual business, you know exactly when a customer becomes inactive because they announce it when they end their contract or subscription. With a contractual business, it’s much easier to identify your average customer lifespan.
If your store is brand new or has only been around for a few years, you might not have access to enough data to determine the average lifespan length of your customers. But don’t worry—there’s a quick way to work around this and still get some actionable results from your calculations.
For newer stores, a lifespan of three years will work fine as a rough estimate. This will give you a good idea of how customers will potentially perform within the immediate future (as well as give you some added incentive to keep them around).
Increasing Your Customer Lifetime Value
increase customer lifetime valueWhile your calculations may have given you some results to get excited about, there’s always room for improvement! Here are some quick tips for getting the most out of every customer relationship by creating new opportunities to increase their value:
Encourage Your Customers to Spend More
A key part of increasing your customers’ lifetime value is encouraging them to spend more on each order, boosting your overall average order value.
Pricing plays a huge psychological role in how much customers spend and what customers choose to purchase. Here are some ideas that might improve your pricing model:
English speakers read from left to right. If you’re selling expensive items, focus on making the left digit as low as possible to trick the mind into perceiving the price as smaller than it actually is. As an example, $199 seems a lot less expensive than $200.
Comparison pricing helps make decisions for customers. Do you offer multiple models of the same product? Line them up and contrast the strengths of each model to justify the price point and help your customers pull the trigger quicker.
Social proof is a powerful thing. Try incorporating an Instagram feed into your product pages with apps like Like2HaveIt and Shoppable Instagram to show off how other customers are using your products. Not only will your customers feel inspired, but they’ll also be more inclined to hit “Add to Cart”.
Scarcity means exclusivity. The more exclusive something seems, the more valuable it is in the minds of your audience. Encourage your customers to act now and place larger orders by setting up sales with fixed deadlines.
Free shipping discounts create larger carts. If you offer free shipping, consider setting your discount threshold higher. Depending on your business (and the average price of your products), this could mean $50, $100, or even higher. If your customers typically come close to hitting the threshold, they’ll easily be able to justify tossing an extra item in their cart to get free shipping.
Keep Your Customers Coming Back More Often
For better CLV, it’s important to not just keep your customers coming back, but to keep them coming back frequently and for longer amounts of time.
Here are some easy ways to improve your customer frequency and lifespan by giving your customers some incentive to pay you a visit more often:
Turn receiving a package into an event. The key to keeping your customers surprised, delighted, and coming back for more is a memorable unboxing experience. Put some extra love and care into how you ship your products with free gifts, personalized notes, and fun packaging.
Newsletters are your secret weapon. Email marketing is a fantastic tool for any business. Keep customers in the loop on product restocks, upcoming sales, and exclusive deals with a well-curated, beautifully designed newsletter.
Engage with your fans on social media. Platforms like Facebook, Twitter, and Instagram are perfect for reaching out and connecting with your audience. Stay at the top of your customers’ minds with an engaging and fun social media presence.
Loyalty programs keep customers around. Use a loyalty program to show your most dedicated customers that you care by offering them gifts and rewards for repeat purchases.
Consider subscriptions to hook customers. Do you offer a product that customers need to buy regularly like coffee beans or socks? Think about setting up a subscription program to lock in repeat business. It’s easier for you and your customers.
Putting Your Customer Lifetime Value to Work
With your Customer Lifetime Value in hand, you’ll now be able to start building smarter, more efficient campaigns by optimizing your spending and fine-tuning your targeting.
One of the primary uses for CLV is to help you keep your Cost Per Acquisition as low as possible.
If you don’t know how much you’re spending to acquire new customers, all you need to do is divide your total marketing/sales budget for a specific timeframe by the amount of new customers you gained in that same timeframe. The resulting number will be the average amount that you spend every time your business acquires a new customer.
The difference between your Customer Lifetime Value and your Cost Per Acquisition is your Return On Investment, or ROI. That’s the amount of money you get out of a customer relationship after you’ve deducted the money that you spent to kickstart the relationship in the first place. To stay profitable, you’ll need to maximize your ROI.
Additionally, if you know your CLV, you’ll also be able to figure out how much you can afford to spend on paid ad campaigns on Google and Facebook.
To determine how much you should be putting into campaigns, you’ll first need to know your conversion rate.
For instance, if your Customer Lifetime Value is $100 and the conversion rate for one of your marketing campaigns is 10%, then your maximum bid for that campaign should be 10% of $100. So, in this scenario, you’d be able to bid a maximum of $10 per click without blowing your budget.
Find the Right Customers for Your Business
Success isn’t about finding customers—it’s about finding the right customers. Now that you can calculate the lifetime value of your current customer base, you’ll be able to start crafting campaigns that target and win over those customers that really make the difference for your bottom line.
Have any questions about calculating your CLV? Let us know in the comments below!
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Kevin Donnelly is a content creator at Shopify with an unhealthy Drake obsession.
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Guardian Labs: Friction Free - commerce in the customer age
Paid content
Guardian Labs
Friction Free - commerce in the customer age
Why the internet of things will sweep away the supermarket
Paid for by
Braintree
The rise of connectivity and the internet of things is making it possible to buy anything – tickets, petrol, clothes – exactly when it suits you. Welcome to the world of contextual commerce
Payment onlinePhoto of man payment by credit card
Contextual commerce will mean that banks cards are stored on a range of devices, from smartphones and watches to clothes and cars. Photograph: mixetto/Getty Images
Shares
80
An array of emerging technologies are enabling merchants to begin creating a world of seamless shopping, in which the barriers to commerce will disappear. Pushing a trolley around a supermarket may soon be a thing of the past; stocking up on the necessities of life will be achieved with just a few clicks on a smartphone.
At last year’s Mobile World Congress, Facebook co-founder and chief executive Mark Zuckerberg said he hoped that virtual reality (VR) would become a “killer application” of 5G, the next generation of mobile broadband. Due to launch in 2020, 5G promises download speeds up to 50 times faster than 4G.
Press the button: trends in mobile living
Paid for by Braintree
Read more
Virtual reality shopping is shaping up to be an effective way to remove the friction from shopping. For example, China’s e-commerce giant Alibaba has unveiled a virtual reality system where shoppers pay for goods while wearing VR goggles simply by nodding their heads.
Advertisement
New technology is having a transformative effect on the retail sector. We are on the cusp of a new age of connectivity with the development of the internet of things. This will usher in an era where everyday objects become shopping terminals. Connected cars will monitor their owners’ needs and learn about their shopping habits. At this year’s Consumer Electronics Show in Las Vegas, Honda revealed an in-car payment system that notifies the driver when they get close to a smart fuel pump or parking meter that accepts payments from the car. The driver selects the amount of fuel they want or programmes in the parking time. The amount is then displayed on their dashboard. They simply press to confirm.
Amazon’s Dash buttons also set a direction for frictionless commerce. A button for, say, a detergent brand is placed by the householder’s washing machine. The consumer simply presses the button when they need a refill and the system’s one-click ordering process will make sure the product is sent to their home.
These examples illustrate the way technology is moving retail into an era of convenience and context. Consumers will be able to purchase goods and services “in the moment”, rather than sitting down to work out a shopping list and then ticking off the goods as they buy them.
This “contextual commerce” is already happening on mobile devices, social media platforms – for example, buyable pins on Pinterest – and aggregator websites. When consumers visit price comparison sites for financial services, flights or other products, they can purchase the desired product directly on that site, rather than be redirected to the merchant’s website. If friends are on a messaging app discussing a band, a button allowing them to buy tickets to the band’s next gig appears. There’s no need to search around for dates and tickets – the opportunity opens up as the context arises.
Contextual commerce is still in its early days, but with increased connectivity and social media engagement it is forecast to grow. But let’s not forget the leisure shopper. As digital technology makes buying simpler, this will create a space for physical stores to provide shopping as theatre. Stores will be able to offer showrooms for fashion, specialty foods, electronic goods and furniture. Retailers will link into consumers’ social media profiles as they enter the stores, connecting to their mobiles via beacons. They will use this personal data to recommend goods in-store and make offers, guiding shoppers around the store and turning the trip into an entertainment experience.
The trend towards friction-free shopping will require simple, one-click payment methods. Credit card and banking details will be stored on a range of connected devices, such as smartphones and smartwatches – even clothes and cars. Payment will be made with the wave of a hand or the turn of an ignition key.
Seamless shopping will make life easier. But retailers need to ensure that shopping remains vibrant, gratifying and fun, as it grows ever more convenient.
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Guardian Labs
Friction Free - commerce in the customer age
Why the internet of things will sweep away the supermarket
Paid for by
Braintree
The rise of connectivity and the internet of things is making it possible to buy anything – tickets, petrol, clothes – exactly when it suits you. Welcome to the world of contextual commerce
Payment onlinePhoto of man payment by credit card
Contextual commerce will mean that banks cards are stored on a range of devices, from smartphones and watches to clothes and cars. Photograph: mixetto/Getty Images
Shares
80
An array of emerging technologies are enabling merchants to begin creating a world of seamless shopping, in which the barriers to commerce will disappear. Pushing a trolley around a supermarket may soon be a thing of the past; stocking up on the necessities of life will be achieved with just a few clicks on a smartphone.
At last year’s Mobile World Congress, Facebook co-founder and chief executive Mark Zuckerberg said he hoped that virtual reality (VR) would become a “killer application” of 5G, the next generation of mobile broadband. Due to launch in 2020, 5G promises download speeds up to 50 times faster than 4G.
Press the button: trends in mobile living
Paid for by Braintree
Read more
Virtual reality shopping is shaping up to be an effective way to remove the friction from shopping. For example, China’s e-commerce giant Alibaba has unveiled a virtual reality system where shoppers pay for goods while wearing VR goggles simply by nodding their heads.
Advertisement
New technology is having a transformative effect on the retail sector. We are on the cusp of a new age of connectivity with the development of the internet of things. This will usher in an era where everyday objects become shopping terminals. Connected cars will monitor their owners’ needs and learn about their shopping habits. At this year’s Consumer Electronics Show in Las Vegas, Honda revealed an in-car payment system that notifies the driver when they get close to a smart fuel pump or parking meter that accepts payments from the car. The driver selects the amount of fuel they want or programmes in the parking time. The amount is then displayed on their dashboard. They simply press to confirm.
Amazon’s Dash buttons also set a direction for frictionless commerce. A button for, say, a detergent brand is placed by the householder’s washing machine. The consumer simply presses the button when they need a refill and the system’s one-click ordering process will make sure the product is sent to their home.
These examples illustrate the way technology is moving retail into an era of convenience and context. Consumers will be able to purchase goods and services “in the moment”, rather than sitting down to work out a shopping list and then ticking off the goods as they buy them.
This “contextual commerce” is already happening on mobile devices, social media platforms – for example, buyable pins on Pinterest – and aggregator websites. When consumers visit price comparison sites for financial services, flights or other products, they can purchase the desired product directly on that site, rather than be redirected to the merchant’s website. If friends are on a messaging app discussing a band, a button allowing them to buy tickets to the band’s next gig appears. There’s no need to search around for dates and tickets – the opportunity opens up as the context arises.
Contextual commerce is still in its early days, but with increased connectivity and social media engagement it is forecast to grow. But let’s not forget the leisure shopper. As digital technology makes buying simpler, this will create a space for physical stores to provide shopping as theatre. Stores will be able to offer showrooms for fashion, specialty foods, electronic goods and furniture. Retailers will link into consumers’ social media profiles as they enter the stores, connecting to their mobiles via beacons. They will use this personal data to recommend goods in-store and make offers, guiding shoppers around the store and turning the trip into an entertainment experience.
The trend towards friction-free shopping will require simple, one-click payment methods. Credit card and banking details will be stored on a range of connected devices, such as smartphones and smartwatches – even clothes and cars. Payment will be made with the wave of a hand or the turn of an ignition key.
Seamless shopping will make life easier. But retailers need to ensure that shopping remains vibrant, gratifying and fun, as it grows ever more convenient.
Topics
Friction Free - commerce in the customer age
advertisement features
Share on LinkedIn
Share on Pinterest
Share on Google+
promoted linksfrom around the web
Recommended by OutbrainAbout this Content
Everything You Need to Know About the Energy Code Everything You Need to Know About the Energy Code Greenbuilder
EU Consortium Gets €14M to Personalize Treatment of Inflammatory Diseases EU Consortium Gets €14M to Personalize Treatment of… GenomeWeb
Facebook Is Changing The Way We See Translation Facebook Is Changing The Way We See Translation Facebook Code
The Bubbliest Private Jacuzzi Rooms across the US The Bubbliest Private Jacuzzi Rooms across the US Room5
Autism Appears Overrepresented in Certain… GenomeWeb
Facebook Changes The Way We Reload Our Browsers Facebook Code
Introducing the Flex House: Right-Sized Living Greenbuilder
Cheap 4G Cell Phones Deals Around You To… Local.com
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Investopedia/Vanessa Page: The Psychology Behind Why People Buy Luxury Goods
The Psychology Behind Why People Buy Luxury Goods
By Vanessa Page | Updated September 22, 2017 — 5:10 PM EDT
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AAPL
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Buying a luxury handbag these days seems to be no more uncommon than purchasing a pair of shoes at Target Corp. (TGT). The physical appeal of luxury goods is undeniable – the leather is softer, the shoes are more comfortable – but the price tag is often off-putting. Unless you’ve got a good job or fantastic savings habits, luxury consumer goods will sit on your credit card for a long time.
The Irrational Consumer
It’s well known that people don’t behave rationally, and considering the enormous consumer debt Americans have, consumers clearly don’t always act in their best financial interests. Luxury goods are a great example of how irrational we can be; a decent and sturdy handbag can be purchased for $50, yet people will still spend thousands to buy a brand name. Why?
One reason is the way we tend to look at the positive elements of a product while ignoring its disadvantages. There’s no need to explain why this works in the favor of the luxury goods companies’ marketing departments. Take Apple Inc. (AAPL), for example. Consumers wait overnight for new releases and have immense brand loyalty even though Macbooks and iPhones aren’t technologically unique or superior. In fact, Samsung makes phones with better features and Microsoft Corp. (MSFT) and Xiaomi make phones at a much cheaper price point. Nevertheless, Apple seems to break sales records year after year.
Since we perceive non-luxury goods as inferior, we are quick to point out the negatives of those products. When talking about a cheap foreign car that needs repairs, it’s a piece of shoddy construction; on the other hand, a luxury car that needs repairs is just suffering from wear and tear. We conclude that higher priced goods are of better quality and we spend irrationally, believing you get what you pay for regardless of whether the goods are proven better than their affordable counterparts. (For more, see The Disposable Society: An Expensive Place To Live.)
Self-Esteem And Luxury Goods
According to a study published by the Journal of Experimental Social Psychology, low self-esteem is a big factor in whether a person will buy luxury goods that he may not be able to afford. For consumers trapped in institutionalized poverty or those living paycheck to paycheck, a luxury good can go a long way in increasing self-esteem or providing a sense of belonging. In China, men use luxury goods to show off their success and flaunt wealth. Chinese women, like American women, tend to purchase luxury goods in order to give in to hedonistic tendencies.
With marketing departments creating a need for luxury goods and the rise of online shopping, a $500 scarf is just a click away. Luxury goods are the ultimate retail therapy, and fortunately for luxury brands, the Internet has made them easy accessible for impulse shopping when you’re feeling blue. (For more, see How Do I Stop Emotional Spending?)
A sense of accomplishment is yet another reason why people buy luxury goods. Long gone are the days when your friends would throw a small party and someone would bake a cake to celebrate a new promotion; now becoming the boss means treating yourself to $700 Louboutins.
Authenticity Matters
Speaking of Louboutins, you'd think rational people would buy a pair of black shoes for $50 and paint the soles red rather than spend hundreds on a pricey pair of luxury shoes. But where’s the fun in that? There’s a reason why people will pass the fake Rolex sellers on the street to pay full-price for an authentic one: despite appearing the same, the owner will know that he doesn’t have a real luxury good.
This flies in the face of reason yet again. If we buy luxury goods to show off to others and to feel like we belong, why wouldn’t a facsimile do the trick? Researchers at Yale have determined that this quest for authenticity develops early in childhood. A study that tried to convince children that a cloning machine had produced their favorite item found that most child refused to accept the duplicate as identical. It turns out that the sentimentality of the item – the memory or pride or feeling that comes from having purchased a genuine luxury good – is part of the reason that we seek authenticity. Simply put, treating yourself to fake Louboutins would be like not having treated yourself at all.
The Bottom Line
People buy luxury goods for a variety of reasons, all of which are related to the strong emotions that we attach to expensive material goods. Whether we are financially comfortable or not, we will often purchase luxury items to show off to or gain acceptance from others and to reward ourselves for an accomplishment. Now that we understand the psychology behind why people buy luxury goods, we’ll be better equipped to quash down any emotions that try to convince the rational part of our brains that the more expensive something is, the better its quality.
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© 2017, Investopedia, LLC. Feedback All Rights Reserved Terms Of Use Privacy Policy
By Vanessa Page | Updated September 22, 2017 — 5:10 PM EDT
Share
Add To Watchlist
AAPL
Apple Inc
154.12
+0.55%
Buying a luxury handbag these days seems to be no more uncommon than purchasing a pair of shoes at Target Corp. (TGT). The physical appeal of luxury goods is undeniable – the leather is softer, the shoes are more comfortable – but the price tag is often off-putting. Unless you’ve got a good job or fantastic savings habits, luxury consumer goods will sit on your credit card for a long time.
The Irrational Consumer
It’s well known that people don’t behave rationally, and considering the enormous consumer debt Americans have, consumers clearly don’t always act in their best financial interests. Luxury goods are a great example of how irrational we can be; a decent and sturdy handbag can be purchased for $50, yet people will still spend thousands to buy a brand name. Why?
One reason is the way we tend to look at the positive elements of a product while ignoring its disadvantages. There’s no need to explain why this works in the favor of the luxury goods companies’ marketing departments. Take Apple Inc. (AAPL), for example. Consumers wait overnight for new releases and have immense brand loyalty even though Macbooks and iPhones aren’t technologically unique or superior. In fact, Samsung makes phones with better features and Microsoft Corp. (MSFT) and Xiaomi make phones at a much cheaper price point. Nevertheless, Apple seems to break sales records year after year.
Since we perceive non-luxury goods as inferior, we are quick to point out the negatives of those products. When talking about a cheap foreign car that needs repairs, it’s a piece of shoddy construction; on the other hand, a luxury car that needs repairs is just suffering from wear and tear. We conclude that higher priced goods are of better quality and we spend irrationally, believing you get what you pay for regardless of whether the goods are proven better than their affordable counterparts. (For more, see The Disposable Society: An Expensive Place To Live.)
Self-Esteem And Luxury Goods
According to a study published by the Journal of Experimental Social Psychology, low self-esteem is a big factor in whether a person will buy luxury goods that he may not be able to afford. For consumers trapped in institutionalized poverty or those living paycheck to paycheck, a luxury good can go a long way in increasing self-esteem or providing a sense of belonging. In China, men use luxury goods to show off their success and flaunt wealth. Chinese women, like American women, tend to purchase luxury goods in order to give in to hedonistic tendencies.
With marketing departments creating a need for luxury goods and the rise of online shopping, a $500 scarf is just a click away. Luxury goods are the ultimate retail therapy, and fortunately for luxury brands, the Internet has made them easy accessible for impulse shopping when you’re feeling blue. (For more, see How Do I Stop Emotional Spending?)
A sense of accomplishment is yet another reason why people buy luxury goods. Long gone are the days when your friends would throw a small party and someone would bake a cake to celebrate a new promotion; now becoming the boss means treating yourself to $700 Louboutins.
Authenticity Matters
Speaking of Louboutins, you'd think rational people would buy a pair of black shoes for $50 and paint the soles red rather than spend hundreds on a pricey pair of luxury shoes. But where’s the fun in that? There’s a reason why people will pass the fake Rolex sellers on the street to pay full-price for an authentic one: despite appearing the same, the owner will know that he doesn’t have a real luxury good.
This flies in the face of reason yet again. If we buy luxury goods to show off to others and to feel like we belong, why wouldn’t a facsimile do the trick? Researchers at Yale have determined that this quest for authenticity develops early in childhood. A study that tried to convince children that a cloning machine had produced their favorite item found that most child refused to accept the duplicate as identical. It turns out that the sentimentality of the item – the memory or pride or feeling that comes from having purchased a genuine luxury good – is part of the reason that we seek authenticity. Simply put, treating yourself to fake Louboutins would be like not having treated yourself at all.
The Bottom Line
People buy luxury goods for a variety of reasons, all of which are related to the strong emotions that we attach to expensive material goods. Whether we are financially comfortable or not, we will often purchase luxury items to show off to or gain acceptance from others and to reward ourselves for an accomplishment. Now that we understand the psychology behind why people buy luxury goods, we’ll be better equipped to quash down any emotions that try to convince the rational part of our brains that the more expensive something is, the better its quality.
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DropShipping Online
shopify.com
Start a Free 14 Day Trial Now! Quick & Easy Setup
SurveyMonkey®
surveymonkey.com
Create & Send Surveys For All Purposes. Upgrade Now For More Powerful Features.
Related Articles
Investing
Problems In The Luxury Market?
Investors know that the luxury goods market is a cyclical industry, but this time may be different.
Managing Wealth
Why the Ultra Rich Stopped Being Obsessed with Brands
Good-bye, bling; hello, quiet luxe. The spending habits of the wealthy are changing, and luxury brands must change with them.
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Now – while the buyer's market lasts and before interest rates rise again – may be the ideal time to buy a luxury home.
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The Best ETFs for Investing in Luxury Goods
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RELATED FAQS
Which economic factors most affect the demand for consumer goods?
Understand how key economic factors such as inflation, unemployment, interest rates and consumer confidence affect the level ... Read Answer >>
What factors influence a change in demand elasticity?
Learn about demand elasticity, factors that affect the demand elasticity of a good or a service, and how these factors affect ... Read Answer >>
What is the difference between a capital good and a consumer good?
Learn to differentiate between capital goods and consumer goods, and see why capital goods require savings and investment ... Read Answer >>
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© 2017, Investopedia, LLC. Feedback All Rights Reserved Terms Of Use Privacy Policy
Investopedia: What is the 'Agency Theory'?
Agency Theory
What is the 'Agency Theory'
The agency theory is a supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving problems that can exist in agency relationships due to unaligned goals or different aversion levels to risk. The most common agency relationship in finance occurs between shareholders (principal) and company executives (agents).
VIDEO
BREAKING DOWN 'Agency Theory'
Agency theory addresses problems that arise due to differences between the goals or desires between the principal and agent. This situation may occur because the principal isn’t aware of the actions of the agent or is prohibited by resources from acquiring the information. For example, company executives may have a desire to expand a business into other markets. This will sacrifice the short-term profitability of the company for prospective growth and higher earnings in the future. However, shareholders that desire high current capital growth may be unaware of these plans.
Contrasting Risk Appetites
Another central issue dealt with by agency theory handles the various levels of risk between a principal and an agent. In some situations, an agent is utilizing resources of a principal. Therefore, although the agent is the decision-maker, they are incurring little to no risk because all losses will be the burden of the principal. This is most commonly seen when shareholders contribute financial support to an entity that corporate executives use at their discretion. The agent may have a different risk tolerance than the principal because of the uneven distribution of risk.
Third Party Relationships
An agency, in general terms, is the relationship between two parties, where one is a principal and the other is an agent who represents the principal in transactions with a third party. Agency relationships occur when the principals hire the agent to perform a service on the principals' behalf. Principals commonly delegate decision-making authority to the agents. Because contracts and decisions are made with third parties by the agent that affect the principal, agency problems can arise.
Other Examples of Principal-Agent Relationships
Agency theory handles numerous situations in which one party acts on the behalf of the other. Financial institutions are given the responsibility of generating shareholder wealth. However, its business practice forces it to incur risk by issuing loans – some of which are outside the comfort level of shareholders. Financial planners and portfolio managers are agents on behalf of their clients and the client’s investments. Finally, a lessee may be in charge of protecting and safeguarding assets that do not belong to themselves. Even though the lessee is tasked with the job of taking care of the assets, the lessee has less interest in protecting the goods than the actual owners.
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The agency problem is a conflict of interest inherent in any relationship where one party is expected to act in another's best interests. In corporate finance, the agency problem usually refers to a conflict of interest between a company's management and the company's stockholders. The manager, acting as the agent for the shareholders, or principals, is supposed to make decisions that will maximize shareholder wealth even though it is in the manager’s best interest to maximize his own wealth.
!--break--While it is not possible to eliminate the agency problem completely, the manager can be motivated to act in the shareholders' best interests through incentives such as performance-based compensation, direct influence by shareholders, the threat of firing and the threat of takeovers.
Principal-Agent Relationship
The agency problem does not exist without a relationship between a principal and an agent. In this situation, the agent performs a task on behalf of the principal. This may arise due to different skill levels, different employment positions or restrictions on access.
For example, a principal will hire a plumber — the agent — to fix plumbing issues. Although the plumber‘s best interest is to make as much income as he can, he is given the responsibility to perform in whatever situation results in the most benefit to the principal.
Incentives
The agency problem arises due to an issue with incentives. An agent may be motivated to act in a manner that is not favorable for the principal if the agent is presented with an incentive to act in this way. For example, in the plumbing example earlier, the plumber may make three times as much money by recommending a service the agent does not need. An incentive (three times the pay) is present, and this causes the agency problem to arise.
Reducing and Eliminating the Agency Problem
The agency problem may be minimized by altering the structure of compensation. If the agent is paid not on an hourly basis but by completion of a project, there is less incentive to not act on the principal’s behalf. In addition, performance feedback and independent evaluations hold the agent accountable for their decisions.
Historical Example of Agency Problem
In 2001, energy giant Enron filed for bankruptcy. Accounting reports had been fabricated to make the company appear to have more money than what was actually earned. These falsifications allowed the company’s stock price to increase during a time when executives were selling portions of their stock holdings. Although management had the responsibility to care for the shareholder’s best interests, the agency problem resulted in management acting in their own best interest.
BREAKING DOWN 'Agency Problem'
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Investopedia:What is the 'Agency Problem'?
Agency Problem
Share
What is the 'Agency Problem'
The agency problem is a conflict of interest inherent in any relationship where one party is expected to act in another's best interests. In corporate finance, the agency problem usually refers to a conflict of interest between a company's management and the company's stockholders. The manager, acting as the agent for the shareholders, or principals, is supposed to make decisions that will maximize shareholder wealth even though it is in the manager’s best interest to maximize his own wealth.
!--break--While it is not possible to eliminate the agency problem completely, the manager can be motivated to act in the shareholders' best interests through incentives such as performance-based compensation, direct influence by shareholders, the threat of firing and the threat of takeovers.
Principal-Agent Relationship
The agency problem does not exist without a relationship between a principal and an agent. In this situation, the agent performs a task on behalf of the principal. This may arise due to different skill levels, different employment positions or restrictions on access.
For example, a principal will hire a plumber — the agent — to fix plumbing issues. Although the plumber‘s best interest is to make as much income as he can, he is given the responsibility to perform in whatever situation results in the most benefit to the principal.
Incentives
The agency problem arises due to an issue with incentives. An agent may be motivated to act in a manner that is not favorable for the principal if the agent is presented with an incentive to act in this way. For example, in the plumbing example earlier, the plumber may make three times as much money by recommending a service the agent does not need. An incentive (three times the pay) is present, and this causes the agency problem to arise.
Reducing and Eliminating the Agency Problem
The agency problem may be minimized by altering the structure of compensation. If the agent is paid not on an hourly basis but by completion of a project, there is less incentive to not act on the principal’s behalf. In addition, performance feedback and independent evaluations hold the agent accountable for their decisions.
Historical Example of Agency Problem
In 2001, energy giant Enron filed for bankruptcy. Accounting reports had been fabricated to make the company appear to have more money than what was actually earned. These falsifications allowed the company’s stock price to increase during a time when executives were selling portions of their stock holdings. Although management had the responsibility to care for the shareholder’s best interests, the agency problem resulted in management acting in their own best interest.
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BREAKING DOWN 'Agency Problem'
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The agency theory is a supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving problems that can exist in agency relationships due to unaligned goals or different aversion levels to risk. The most common agency relationship in finance occurs between shareholders (principal) and company executives (agents).
BREAKING DOWN 'Agency Theory'
Agency theory addresses problems that arise due to differences between the goals or desires between the principal and agent. This situation may occur because the principal isn’t aware of the actions of the agent or is prohibited by resources from acquiring the information. For example, company executives may have a desire to expand a business into other markets. This will sacrifice the short-term profitability of the company for prospective growth and higher earnings in the future. However, shareholders that desire high current capital growth may be unaware of these plans.
Contrasting Risk Appetites
Another central issue dealt with by agency theory handles the various levels of risk between a principal and an agent. In some situations, an agent is utilizing resources of a principal. Therefore, although the agent is the decision-maker, they are incurring little to no risk because all losses will be the burden of the principal. This is most commonly seen when shareholders contribute financial support to an entity that corporate executives use at their discretion. The agent may have a different risk tolerance than the principal because of the uneven distribution of risk.
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MIT Technology Review/James Temple: By converting heat to focused beams of light, a new solar device could create cheap and continuous power.
MIT Technology Review
Hot Solar Cells
By converting heat to focused beams of light, a new solar device could create cheap and continuous power.
Availability: 10 to 15 years
By James Temple
Solar panels cover a growing number of rooftops, but even decades after they were first developed, the slabs of silicon remain bulky, expensive, and inefficient. Fundamental limitations prevent these conventional photovoltaics from absorbing more than a fraction of the energy in sunlight theoretically double the efficiency of conventional solar cells.
Why It Matters The new design could lead to inexpensive solar power that keeps working after the sun sets.
Key Players - David Bierman, Marin Soljacic, and Evelyn Wang, MIT
- Vladimir Shalaev, Purdue University
- Andrej Lenert, University of Michigan
- Ivan Celanovic, MIT
Availability 10 to 15 years
The key step in creating the device was the development of something called an absorber-emitter. It essentially acts as a light funnel above the solar cells. The absorbing layer is built from solid black carbon nanotubes that capture all the energy in sunlight and convert most of it into heat. As temperatures reach around 1,000 °C, the adjacent emitting layer radiates that energy back out as light, now mostly narrowed to bands that the photovoltaic cells can absorb. The emitter is made from a photonic crystal, a structure that can be designed at the nanoscale to control which wavelengths of light flow through it. Another critical advance was the addition of a highly specialized optical filter that transmits the tailored light while reflecting nearly all the unusable photons back. This “photon recycling” produces more heat, which generates more of the light that the solar cell can absorb, improving the efficiency of the system.
Black carbon nanotubes sit on top of the absorber-emitter layer, collecting energy across the solar spectrum and converting it to heat.
The absorber-emitter layer is situated above an optical filter and photovoltaic cell, which is visible underneath.
There are some downsides to the MIT team’s approach, including the relatively high cost of certain components. It also currently works only in a vacuum. But the economics should improve as efficiency levels climb, and the researchers now have a clear path to achieving that. “We can further tailor the components now that we’ve improved our understanding of what we need to get to higher efficiencies,” says Evelyn Wang, an associate professor who helped lead the effort.
Do you think this approach could one day compete on cost and efficiency with standard solar panels?
Tell us what you think.
The researchers are also exploring ways to take advantage of another strength of solar thermophotovoltaics. Because heat is easier to store than electricity, it should be possible to divert excess amounts generated by the device to a thermal storage system, which could then be used to produce electricity even when the sun isn’t shining. If the researchers can incorporate a storage device and ratchet up efficiency levels, the system could one day deliver clean, cheap—and continuous—solar power.
Concentrated light from a solar simulator shines through the window of a vacuum chamber, where it reaches the solar thermophotovoltaic device and generates electricity.
Hear more about clean energy at EmTech MIT 2017.
Register now
Tagged
photovoltaics, solar energy, renewables, clean energy, solar thermophotovoltaics, storage, 10 Breakthrough Technologies 2017
Credit
Photographs by Ken Richardson
James Temple
James Temple Senior Editor, Energy
I am the senior editor for energy at MIT Technology Review. I’m focused on renewable energy and the use of technology to combat climate change. Previously, I was a senior director at the Verge, deputy managing editor at Recode,… More
READ 5 COMMENTS
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Hot Solar Cells
By converting heat to focused beams of light, a new solar device could create cheap and continuous power.
Availability: 10 to 15 years
By James Temple
Solar panels cover a growing number of rooftops, but even decades after they were first developed, the slabs of silicon remain bulky, expensive, and inefficient. Fundamental limitations prevent these conventional photovoltaics from absorbing more than a fraction of the energy in sunlight theoretically double the efficiency of conventional solar cells.
Why It Matters The new design could lead to inexpensive solar power that keeps working after the sun sets.
Key Players - David Bierman, Marin Soljacic, and Evelyn Wang, MIT
- Vladimir Shalaev, Purdue University
- Andrej Lenert, University of Michigan
- Ivan Celanovic, MIT
Availability 10 to 15 years
The key step in creating the device was the development of something called an absorber-emitter. It essentially acts as a light funnel above the solar cells. The absorbing layer is built from solid black carbon nanotubes that capture all the energy in sunlight and convert most of it into heat. As temperatures reach around 1,000 °C, the adjacent emitting layer radiates that energy back out as light, now mostly narrowed to bands that the photovoltaic cells can absorb. The emitter is made from a photonic crystal, a structure that can be designed at the nanoscale to control which wavelengths of light flow through it. Another critical advance was the addition of a highly specialized optical filter that transmits the tailored light while reflecting nearly all the unusable photons back. This “photon recycling” produces more heat, which generates more of the light that the solar cell can absorb, improving the efficiency of the system.
Black carbon nanotubes sit on top of the absorber-emitter layer, collecting energy across the solar spectrum and converting it to heat.
The absorber-emitter layer is situated above an optical filter and photovoltaic cell, which is visible underneath.
There are some downsides to the MIT team’s approach, including the relatively high cost of certain components. It also currently works only in a vacuum. But the economics should improve as efficiency levels climb, and the researchers now have a clear path to achieving that. “We can further tailor the components now that we’ve improved our understanding of what we need to get to higher efficiencies,” says Evelyn Wang, an associate professor who helped lead the effort.
Do you think this approach could one day compete on cost and efficiency with standard solar panels?
Tell us what you think.
The researchers are also exploring ways to take advantage of another strength of solar thermophotovoltaics. Because heat is easier to store than electricity, it should be possible to divert excess amounts generated by the device to a thermal storage system, which could then be used to produce electricity even when the sun isn’t shining. If the researchers can incorporate a storage device and ratchet up efficiency levels, the system could one day deliver clean, cheap—and continuous—solar power.
Concentrated light from a solar simulator shines through the window of a vacuum chamber, where it reaches the solar thermophotovoltaic device and generates electricity.
Hear more about clean energy at EmTech MIT 2017.
Register now
Tagged
photovoltaics, solar energy, renewables, clean energy, solar thermophotovoltaics, storage, 10 Breakthrough Technologies 2017
Credit
Photographs by Ken Richardson
James Temple
James Temple Senior Editor, Energy
I am the senior editor for energy at MIT Technology Review. I’m focused on renewable energy and the use of technology to combat climate change. Previously, I was a senior director at the Verge, deputy managing editor at Recode,… More
READ 5 COMMENTS
Related Video
More videos
Sustainable Energy
Are Hurricane Risk Models Dangerously Out of Date? 25:32
Rewriting Life
We Tried 23andMe's Pain Tolerance Test 04:13
Rewriting Life
CRISPR Decoded 02:22
Next in 10 Breakthrough Technologies 2017
Reversing Paralysis: 10 Breakthrough Technologies 2017
Scientists are making remarkable progress at using brain implants to restore the freedom of movement that spinal cord injuries take away.
by Antonio Regalado
Self-Driving Trucks: 10 Breakthrough Technologies 2017
Tractor-trailers without a human at the wheel will soon barrel onto highways near you. What will this mean for the nation’s 1.7 million truck drivers?
by David H. Freedman
Paying With Your Face: 10 Breakthrough Technologies 2017
Face-detecting systems in China now authorize payments, provide access to facilities, and track down criminals. Will other countries follow?
by Will Knight
View the full list
From Our Advertisers
In partnership with Hewlett Packard Enterprise
A Field Guide to Digital Transformation
In partnership with Hewlett Packard Enterprise
A Fireside Chat: Unlocking the Power of Hybrid, Flexible IT
In partnership with Samsung
Fight Scale with Scale
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Insider Basic $29.95/year*
Six issues of our award winning print magazine, unlimited online access plus The Download with the top tech stories delivered daily to your inbox.
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Investopedia/Claire Boyte-White: Issued Share Capital vs. Subscribed Share Capital
Issued Share Capital vs. Share Capital
By Claire Boyte-White | Updated August 7, 2017 — 10:01 AM EDT
Subscribed share capital, which is what investors have expressed an interest in, is very different from issued share capital, which is the actual issued stock.
Share capital refers to the amount of funding a company raises through the sale of shares of stock to public investors. Share capital constitutes the main source of equity financing and can be generated through the sale of common or preferred shares.
Though share capital refers to a dollar amount, it is dictated by the number and selling price of a company's shares. For example, if a company issues 1,000 shares for $25 per share, it generates $25,000 in share capital. Share capital falls into one of several categories, depending on where the company is in the equity-raising process. They include:
Called-Up Vs. Paid-Up Share Capital: Depending on the business and applicable regulations, companies may issue stock to investors with the understanding the investors will pay at a later date. Any funds due for shares issued but not fully paid for are called-up share capital. Any funds remitted for shares are considered paid-up capital.
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By Claire Boyte-White | Updated August 7, 2017 — 10:01 AM EDT
Subscribed share capital, which is what investors have expressed an interest in, is very different from issued share capital, which is the actual issued stock.
Share capital refers to the amount of funding a company raises through the sale of shares of stock to public investors. Share capital constitutes the main source of equity financing and can be generated through the sale of common or preferred shares.
Though share capital refers to a dollar amount, it is dictated by the number and selling price of a company's shares. For example, if a company issues 1,000 shares for $25 per share, it generates $25,000 in share capital. Share capital falls into one of several categories, depending on where the company is in the equity-raising process. They include:
Called-Up Vs. Paid-Up Share Capital: Depending on the business and applicable regulations, companies may issue stock to investors with the understanding the investors will pay at a later date. Any funds due for shares issued but not fully paid for are called-up share capital. Any funds remitted for shares are considered paid-up capital.
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What types of capital are not considered share capital?
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Why is the value of capital stock important to public shareholders?
Understand what capital stock is and how it's issued and authorized. Learn why the value of capital stock important to public ... Read Answer >>
Why is an increase in capital stock on a company's balance sheet a bad sign for stockholders?
Understand what capital stock represents for a company and understand the significance for investors when a company initiates ... Read Answer >>
How does monetary policy influence the Fisher effect?
Find out if paid-up capital generated by the sale of stock has to be repaid by the issuing company and how these funds are ... Read Answer >>
What's the difference between a capital stock and a treasury stock?
Learn about treasury capital stock, how to calculate a company's capital and treasury stock, and the differences between ... Read Answer >>
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Investopedia: 'What is 'Share Capital'?
Share Capital
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What is 'Share Capital'
Share capital consists of all funds raised by a company in exchange for shares of either common or preferred shares of stock. The amount of share capital or equity financing a company has can change over time. A company that wishes to raise more equity can obtain authorization to issue and sell additional shares, thereby increasing its share capital.
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BREAKING DOWN 'Share Capital'
The amount of share capital a company reports on its balance sheet only accounts for the total amount initial paid by shareholders. If those shareholders later resell their shares on the secondary market, any difference between the initial and subsequent sales prices does not impact the company's share capital.
The term "share capital" is often used to mean slightly different things, depending on the context. When discussing the amount of money a company can legally raise through the sale of stock, there are actually several categories of share capital. Accountants have a much narrower definition.
Authorized, Issued and Paid Share Capital
Before a company can raise equity capital, it must obtain permission to execute the sale of stock. The company must specify the total amount of equity it wants to raise and the base value of its shares, called the par value. The total par value of all the shares a company is permitted to sell is called its authorized share capital. While a company may elect not to sell all its shares of stock during its initial public offering (IPO), it cannot generate more than its authorized amount. If a company obtains authorization to raise $5 million and its stock has a par value of $1, for example, it may issue and sell up to 5 million shares of stock.
The total value of the shares the company elects to sell is called its issued share capital. Not all these shares may sell right away, and the par value of the issued capital cannot exceed the value of the authorized capital. The total par value of the shares that the company sells is called its paid share capital. This is what most people refer to when speaking about share capital.
Share Capital in Accounting
The technical accounting definition of share capital is the par value of all equity securities – either common or preferred stock – sold to shareholders. Lay people, however, often include the price of the stock above par value in the calculation of share capital. The par value of stock is typically $1 or less, so the difference between the par and sale price of stock, called the share premium, may be considerable, but oy is not technically included in share capital or capped by authorized capital limits.
Assume company ABC issues and sells 1,000 shares. Each share has a par value of $1 but sells for $25. The company accountant logs $1,000 raised as paid share capital and the remaining $24,000, attributed to share premium, as additional paid in capital.
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Video Definition
Capital stock is the common and preferred stock a company is authorized to issue according to the corporate charter. Accountants define capital stock as one component of the equity section in a company's balance sheet. Firms can issue more capital stock over time or buy back shares that are currently owned by shareholders.
BREAKING DOWN 'Capital Stock'
Capital is defined as the total dollars a company receives to operate the business. Capital can be obtained by issuing stock (equity) or debt securities. Companies with consistent corporate profits raise more firm capital by issuing debt, because the firm can generate income to make interest payments. On the other hand, businesses with less consistent earnings raise funds by issuing equity. Investment firms perform financial statement analysis to determine if a company should issue stock, debt or a combination of both types of securities.
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Quora/Luca Monk: What is the best advice for a young first-time startup CEO?
12 Tips For Non-Technical Founders Who Want To Build The Next Facebook
The sooner you show your product to the outside word, the faster you can make changes to your business to suit what people want.
By Quora
This question first appeared on Quora: What is the best advice for a young first-time startup CEO?
Answer by Luca Monk, Student entrepreneur, on Quora
For you first-time non-technical founders:
Let me just start by saying, learn to deal with frustration. You’re in for a lot of it.
Let’s assume a couple of things. You know some programming basics, but not nearly enough to complete, or even contribute significantly to your project. You know just enough to communicate with who ever is helping you build the company tech. It could be a contractor, a co-founder, or an employee. Let’s say it’s an employee whom you’re paying.
From my first-time founder experiences, here are some tips I managed to pull together:
1) Multiply any deadline you have by 5 and that will give you an accurate time frame for completion. First-time founders tend to underestimate deadlines. Be realistic with the targets you set and stick to them. None of this, “Let’s get it built in four weeks, have 2000 customers three weeks after that, and VC funding two weeks after that.” Stop thinking you’ll get acquired in 12 months. You have to commit at least 3 years to this business.
2) Don’t get stuck in the “I can’t move forward without the tech” mentality.
Probably the worst thing to do. There is always something going on at a startup. Figure it out. You should be making calls, finding customers, user testing, validation, design, recruiting, and one million other things.
3) Just because you can’t see a fancy user interface doesn’t mean you should be worried. There is more to the tech than just the shiny landing page, but sometimes we non-technical people seem to forget that.
4) Don’t think you can do it all by yourself. “If I knew how to code I could have finished this by now.” You wouldn’t have, trust me.
5) Don’t force yourself into getting a co-founder when things get tough.
Forcefully looking for a co-founder because you’re stressed can put you in a tough position. You don’t want to make any serious decisions while under the gun; that’s how mistakes are made. #harveyspecter101.
6) Underpromise, overdeliver. It’s the mentality you should take when talking to venture capitalists.
7) Don’t be embarrassed about your MVP and postpone the launch. They say to ship your MVP as soon as possible, but you’re embarrassed to show what you’ve made to the world. Don’t be. Remember the saying “the early bird gets the worm”? Well, it’s true. The sooner you show your product to the outside word, the faster you can make changes to your business to suit what people want.
8) Iterate. Iterate. Iterate. Your first prototype will probably be wrong. Keep making changes to your product to find prominent market fit.
9) Stop thinking, “Once we build it, they will come.” Don’t expect users to flock to your tech because, you know, it’s your baby. You’re not the exception, you’re the rule. In this case, the rule is: 90% of startups fail. You have to work hard to succeed. There are no two ways about it.
10) Stop inflating user growth to make yourself feel better about your dismal efforts. “We had 100 people sign up in the first 10 minutes. All of them are my family and friends. But growth was amazing.”
11) Stop thinking, “Too many people are making the same thing, I should probably pivot.” At this point, you’ve probably hit your first roadblock. First-time founders get scared. It’s normal. But you have to keep going.
12) Don’t feel absolutely useless when the person you’re hiring can’t fix a bug. You think the end is near. Don’t panic.
There are about 1 million other things I could mention, but I think this is a nice list to begin with.
What is the best advice for a young first-time startup CEO?: originally appeared on Quora: The best answer to any question. Ask a question, get a great answer. Learn from experts and access insider knowledge. You can follow Quora on Twitter, Facebook, and Google+. More questions:
Entrepreneurship: How does living in the Silicon Valley bubble reduce your startup’s chance of success?
Startup Advice and Strategy: How important is it for a startup founder of a tech business to know how to code?
Growth Hacking: What does it mean to work in “growth” at a startup?
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
Published on: Aug 21, 2015
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The sooner you show your product to the outside word, the faster you can make changes to your business to suit what people want.
By Quora
This question first appeared on Quora: What is the best advice for a young first-time startup CEO?
Answer by Luca Monk, Student entrepreneur, on Quora
For you first-time non-technical founders:
Let me just start by saying, learn to deal with frustration. You’re in for a lot of it.
Let’s assume a couple of things. You know some programming basics, but not nearly enough to complete, or even contribute significantly to your project. You know just enough to communicate with who ever is helping you build the company tech. It could be a contractor, a co-founder, or an employee. Let’s say it’s an employee whom you’re paying.
From my first-time founder experiences, here are some tips I managed to pull together:
1) Multiply any deadline you have by 5 and that will give you an accurate time frame for completion. First-time founders tend to underestimate deadlines. Be realistic with the targets you set and stick to them. None of this, “Let’s get it built in four weeks, have 2000 customers three weeks after that, and VC funding two weeks after that.” Stop thinking you’ll get acquired in 12 months. You have to commit at least 3 years to this business.
2) Don’t get stuck in the “I can’t move forward without the tech” mentality.
Probably the worst thing to do. There is always something going on at a startup. Figure it out. You should be making calls, finding customers, user testing, validation, design, recruiting, and one million other things.
3) Just because you can’t see a fancy user interface doesn’t mean you should be worried. There is more to the tech than just the shiny landing page, but sometimes we non-technical people seem to forget that.
4) Don’t think you can do it all by yourself. “If I knew how to code I could have finished this by now.” You wouldn’t have, trust me.
5) Don’t force yourself into getting a co-founder when things get tough.
Forcefully looking for a co-founder because you’re stressed can put you in a tough position. You don’t want to make any serious decisions while under the gun; that’s how mistakes are made. #harveyspecter101.
6) Underpromise, overdeliver. It’s the mentality you should take when talking to venture capitalists.
7) Don’t be embarrassed about your MVP and postpone the launch. They say to ship your MVP as soon as possible, but you’re embarrassed to show what you’ve made to the world. Don’t be. Remember the saying “the early bird gets the worm”? Well, it’s true. The sooner you show your product to the outside word, the faster you can make changes to your business to suit what people want.
8) Iterate. Iterate. Iterate. Your first prototype will probably be wrong. Keep making changes to your product to find prominent market fit.
9) Stop thinking, “Once we build it, they will come.” Don’t expect users to flock to your tech because, you know, it’s your baby. You’re not the exception, you’re the rule. In this case, the rule is: 90% of startups fail. You have to work hard to succeed. There are no two ways about it.
10) Stop inflating user growth to make yourself feel better about your dismal efforts. “We had 100 people sign up in the first 10 minutes. All of them are my family and friends. But growth was amazing.”
11) Stop thinking, “Too many people are making the same thing, I should probably pivot.” At this point, you’ve probably hit your first roadblock. First-time founders get scared. It’s normal. But you have to keep going.
12) Don’t feel absolutely useless when the person you’re hiring can’t fix a bug. You think the end is near. Don’t panic.
There are about 1 million other things I could mention, but I think this is a nice list to begin with.
What is the best advice for a young first-time startup CEO?: originally appeared on Quora: The best answer to any question. Ask a question, get a great answer. Learn from experts and access insider knowledge. You can follow Quora on Twitter, Facebook, and Google+. More questions:
Entrepreneurship: How does living in the Silicon Valley bubble reduce your startup’s chance of success?
Startup Advice and Strategy: How important is it for a startup founder of a tech business to know how to code?
Growth Hacking: What does it mean to work in “growth” at a startup?
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
Published on: Aug 21, 2015
0
+ WRITE A COMMENT
From Around The Web
7 Top European Countries That Offer Free College Education
Nordfx Clients Get the Opportunity to Trade Crypto-currencies
10 Best Native Ad Networks for Publishers and Advertisers
Revcontent Becomes Largest Content Recommendation Network in Terms of Reach
Personalize This Content
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Dr. Mercola: Everything You Need to Know About Vitiligo
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Call Toll Free: 877-985-2695
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Everything You Need to Know About Vitiligo
• 802 views
Girl with vitiligo
Story at-a-glance
Vitiligo is a skin condition that has been around for centuries and has been documented in various historical accounts
It is now being credited as an autoimmune disease where the immune system attacks and kills off the cells that are responsible for the production of melanin
Read these articles to know more about the symptoms, causes, treatment and prevention for vitiligo
Vitiligo is a skin condition that has been around for centuries and has been documented in various historical accounts. The clear cause for this condition has not yet been pinpointed because of the varying external factors connected to its development. However, it is now being credited as an autoimmune disease where the immune system attacks and kills off the cells that are responsible for the production of melanin.
Some of the earliest documents describing this condition go as far back as 3,000 years ago, some of which are found in Egyptian and Vedic texts. The only problem is that there is no clear contrast between vitiligo and leprosy during those ages, which led to the shunning of people with vitiligo from society because of the collective fear.1
These two conditions are different even though both cause depigmentation. Nowadays, a wider array of diagnostic devices and clearer distinctions between the two have lessened the societal stigma of vitiligo.
The Psychological Impact of Vitiligo
The loss of the melanin in select areas of the body can lead to a heightened sensitivity and risk of sunburn. But aside from this intolerance to sunlight, the physical changes to a person’s appearance can also cause severe psychological impacts on vitiligo patients.
This is because even though vitiligo has been proven to be noninfectious, some people still tend to be frightened of it, and to even shame or ridicule those who have it. The stigma of this can cause those with vitiligo to suffer numerous psychosocial issues and psychological repercussions.
Various studies have shown that the emotional effects caused by vitiligo can vary from mild embarrassment to complete loss of self-esteem because of the gradual change in the appearance of those who have it. Some of the recommended ways to prevent this include family support and counseling.2
Vitiligo Can Increase Your Risk for Other Autoimmune Diseases
People with vitiligo have also been observed to have a higher chance of developing various autoimmune diseases, including:3
• Alopecia areata refers to hair loss, which is caused by the immune system's attack on hair follicles. It can be seen in various areas of the body, mostly on the scalp or the face.4 The risk for this disease does not depend on race, age or sex, with everyone having the same risk as anyone else in the population.5
• Autoimmune thyroid diseases. The thyroid is responsible for the production of some of the hormones that regulate important body processes. Having an autoimmune thyroid disease mean that the immune system is unknowingly attacking the thyroid glands, which then causes them to either produce too much or too little of these hormones.
The body processes that depend on these hormones then go haywire, affecting the whole body system. Examples of autoimmune thyroid diseases include Graves’ disease and Hashimoto’s disease.6
• Addison's disease is an autoimmune disease where the body is not able to produce enough hormones because of the destruction of the adrenal glands. Two of the important hormones these glands produce are cortisol and aldosterone.
Cortisol is responsible for the regulation of blood sugar and inflammation, while aldosterone functions by regulating both blood pressure and blood volume by controlling salt and water levels.7
• Diabetes mellitus. This disease occurs when the pancreas is unable to produce enough insulin or when body cells have become insulin resistant. There are two types of diabetes mellitus: Type 1 and Type 2, with Type 1 being an autoimmune disease. Type 1 occurs when the body is unable to produce insulin because the immune system destroys the insulin-producing beta cells.8
Read these articles to know more about the symptoms, causes, treatment and prevention for vitiligo. You will also learn various holistic treatments and how you can deal with this autoimmune disease naturally.
MORE ABOUT VITILIGO
Vitiligo: an Introduction
What Is Vitiligo?
Vitiligo Symptoms
Vitiligo Causes
Types of Vitiligo
Vitiligo Treatment
Vitiligo Prevention
Vitiligo Diet
Vitiligo FAQ
Next
What Is Vitiligo?
+ Sources and References
Most Popular
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Disclaimer
Disclaimer: The entire contents of this website are based upon the opinions of Dr. Mercola, unless otherwise noted. Individual articles are based upon the opinions of the respective author, who retains copyright as marked. The information on this website is not intended to replace a one-on-one relationship with a qualified health care professional and is not intended as medical advice. It is intended as a sharing of knowledge and information from the research and experience of Dr. Mercola and his community. Dr. Mercola encourages you to make your own health care decisions based upon your research and in partnership with a qualified health care professional. If you are pregnant, nursing, taking medication, or have a medical condition, consult your health care professional before using products based on this content.
If you want to use an article on your site please click here. This content may be copied in full, with copyright, contact, creation and information intact, without specific permission, when used only in a not-for-profit format. If any other use is desired, permission in writing from Dr. Mercola is required.
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Disclaimer: The entire contents of this website are based upon the opinions of Dr. Mercola, unless otherwise noted. Individual articles are based upon the opinions of the respective author, who retains copyright as marked. The information on this website is not intended to replace a one-on-one relationship with a qualified health care professional and is not intended as medical advice. It is intended as a sharing of knowledge and information from the research and experience of Dr. Mercola and his community. Dr. Mercola encourages you to make your own health care decisions based upon your research and in partnership with a qualified health care professional. If you are pregnant, nursing, taking medication, or have a medical condition, consult your health care professional before using products based on this content.
If you want to use an article on your site please click here. This content may be copied in full, with copyright, contact, creation and information intact, without specific permission, when used only in a not-for-profit format. If any other use is desired, permission in writing from Dr. Mercola is required.
Terms & Conditions | Updated Privacy Policy | Sitemap
© Copyright 1997-2017 Dr. Joseph Mercola. All Rights Reserved.
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Call Toll Free: 877-985-2695
Tweet
Everything You Need to Know About Vitiligo
• 802 views
Girl with vitiligo
Story at-a-glance
Vitiligo is a skin condition that has been around for centuries and has been documented in various historical accounts
It is now being credited as an autoimmune disease where the immune system attacks and kills off the cells that are responsible for the production of melanin
Read these articles to know more about the symptoms, causes, treatment and prevention for vitiligo
Vitiligo is a skin condition that has been around for centuries and has been documented in various historical accounts. The clear cause for this condition has not yet been pinpointed because of the varying external factors connected to its development. However, it is now being credited as an autoimmune disease where the immune system attacks and kills off the cells that are responsible for the production of melanin.
Some of the earliest documents describing this condition go as far back as 3,000 years ago, some of which are found in Egyptian and Vedic texts. The only problem is that there is no clear contrast between vitiligo and leprosy during those ages, which led to the shunning of people with vitiligo from society because of the collective fear.1
These two conditions are different even though both cause depigmentation. Nowadays, a wider array of diagnostic devices and clearer distinctions between the two have lessened the societal stigma of vitiligo.
The Psychological Impact of Vitiligo
The loss of the melanin in select areas of the body can lead to a heightened sensitivity and risk of sunburn. But aside from this intolerance to sunlight, the physical changes to a person’s appearance can also cause severe psychological impacts on vitiligo patients.
This is because even though vitiligo has been proven to be noninfectious, some people still tend to be frightened of it, and to even shame or ridicule those who have it. The stigma of this can cause those with vitiligo to suffer numerous psychosocial issues and psychological repercussions.
Various studies have shown that the emotional effects caused by vitiligo can vary from mild embarrassment to complete loss of self-esteem because of the gradual change in the appearance of those who have it. Some of the recommended ways to prevent this include family support and counseling.2
Vitiligo Can Increase Your Risk for Other Autoimmune Diseases
People with vitiligo have also been observed to have a higher chance of developing various autoimmune diseases, including:3
• Alopecia areata refers to hair loss, which is caused by the immune system's attack on hair follicles. It can be seen in various areas of the body, mostly on the scalp or the face.4 The risk for this disease does not depend on race, age or sex, with everyone having the same risk as anyone else in the population.5
• Autoimmune thyroid diseases. The thyroid is responsible for the production of some of the hormones that regulate important body processes. Having an autoimmune thyroid disease mean that the immune system is unknowingly attacking the thyroid glands, which then causes them to either produce too much or too little of these hormones.
The body processes that depend on these hormones then go haywire, affecting the whole body system. Examples of autoimmune thyroid diseases include Graves’ disease and Hashimoto’s disease.6
• Addison's disease is an autoimmune disease where the body is not able to produce enough hormones because of the destruction of the adrenal glands. Two of the important hormones these glands produce are cortisol and aldosterone.
Cortisol is responsible for the regulation of blood sugar and inflammation, while aldosterone functions by regulating both blood pressure and blood volume by controlling salt and water levels.7
• Diabetes mellitus. This disease occurs when the pancreas is unable to produce enough insulin or when body cells have become insulin resistant. There are two types of diabetes mellitus: Type 1 and Type 2, with Type 1 being an autoimmune disease. Type 1 occurs when the body is unable to produce insulin because the immune system destroys the insulin-producing beta cells.8
Read these articles to know more about the symptoms, causes, treatment and prevention for vitiligo. You will also learn various holistic treatments and how you can deal with this autoimmune disease naturally.
MORE ABOUT VITILIGO
Vitiligo: an Introduction
What Is Vitiligo?
Vitiligo Symptoms
Vitiligo Causes
Types of Vitiligo
Vitiligo Treatment
Vitiligo Prevention
Vitiligo Diet
Vitiligo FAQ
Next
What Is Vitiligo?
+ Sources and References
Most Popular
apple cider vinegar
Healthy Recipes Ebook
Purslane
Common Health Questions
Post your comment
Click Here and be the first to comment on this article
Health
Health Articles
Health Videos
Health Guides
Health Guides
Body Hacks
Common Health Questions
Diseases Directory
E-books
Fitness Plan
Food Facts
Health Blogs
Herbal Oils
Herbs and Spices
Infographics
Nutrition Plan
Recipes
About Dr. Mercola
Shop for Health Products
Pets
Fitness
Shop
Contact Us
Disclaimer
Disclaimer
Disclaimer: The entire contents of this website are based upon the opinions of Dr. Mercola, unless otherwise noted. Individual articles are based upon the opinions of the respective author, who retains copyright as marked. The information on this website is not intended to replace a one-on-one relationship with a qualified health care professional and is not intended as medical advice. It is intended as a sharing of knowledge and information from the research and experience of Dr. Mercola and his community. Dr. Mercola encourages you to make your own health care decisions based upon your research and in partnership with a qualified health care professional. If you are pregnant, nursing, taking medication, or have a medical condition, consult your health care professional before using products based on this content.
If you want to use an article on your site please click here. This content may be copied in full, with copyright, contact, creation and information intact, without specific permission, when used only in a not-for-profit format. If any other use is desired, permission in writing from Dr. Mercola is required.
Terms & Conditions | Updated Privacy Policy | Sitemap
© Copyright 1997-2017 Dr. Joseph Mercola. All Rights Reserved.
Charities and Organizations
Charities and Organizations
Food Democracy Now!
Consumers for Dental Choice
Fluoride Action Network
NVIC
IRT
Organic Consumers Association
Center for Nutrition Advocacy
Cornucopia Institute
Vitamin D Council
Alliance for Natural Health USA
GrassrootsHealth
Caminos de Agua
OCA
American Botanical Council
IFOAM - Organics International
Regeneration International
MRSA Survivors Network
Rabies Challenge Fund
AHVMF
CANWI
Mercola.org
FAQ
Sign in
Join
Subscribe to Dr. Mercola's Natural Health Newsletter
Thank you! Your purchases help us support these charities and organizations.
Inside Mercola.com
About Dr. Mercola
Contact Us
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En Espanol
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Mercola Community FAQ
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Terms & Conditions
Updated Privacy Policy
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Aspartame
Cancer
Fitness
Fluoride
Fructose/Sugar
GMO
Mercury
Nutritional Typing
Pets
Vaccines
Vitamin D
Shopping
Autoship Program
California Residents
FAQs
GMO-Free Products
Healthy Rewards Program
Low Price Guarantee
Online Product Guide
Online Shopping
Our Service Commitment
Premium Products
Product Badge Glossary
Return Policy
Shipping Policy (Domestic)
Shipping Policy (International)
Store Locator
Wholesale Program
Disclaimer: The entire contents of this website are based upon the opinions of Dr. Mercola, unless otherwise noted. Individual articles are based upon the opinions of the respective author, who retains copyright as marked. The information on this website is not intended to replace a one-on-one relationship with a qualified health care professional and is not intended as medical advice. It is intended as a sharing of knowledge and information from the research and experience of Dr. Mercola and his community. Dr. Mercola encourages you to make your own health care decisions based upon your research and in partnership with a qualified health care professional. If you are pregnant, nursing, taking medication, or have a medical condition, consult your health care professional before using products based on this content.
If you want to use an article on your site please click here. This content may be copied in full, with copyright, contact, creation and information intact, without specific permission, when used only in a not-for-profit format. If any other use is desired, permission in writing from Dr. Mercola is required.
Terms & Conditions | Updated Privacy Policy | Sitemap
© Copyright 1997-2017 Dr. Joseph Mercola. All Rights Reserved.
Mercola Health Resources, LLC BBB Business Review
McAfee SECURE sites help keep you safe from identity theft, credit card fraud, spyware, spam, viruses and online scams
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Click to Verify - This site has chosen a GeoTrust SSL Certificate to improve Web site security
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Dr. Mercola: Banned in 60 Countries, Deadly Carcinogen Is Still Legal
Russia Hides Cancer Risks to Protect Its Role as the World’s Asbestos Dealer
September 30, 2017 • 8,277 views Disponible en Español
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Story at-a-glance
Asbestos kills 100,000 people each year and is banned in 60 countries
Russia mines 1 million tons of asbestos each year and supplies more than half of the world’s asbestos
Russia has stopped recording mesothelioma cases in an apparent effort to conceal the health risks of asbestos
By Dr. Mercola
In the U.S., when people hear the word “asbestos,” the first thing that comes to mind is cancer. So, it may surprise you that this way of thinking is not universal, particularly in Russia where the asbestos industry is not only alive, but thriving. The term “asbestos” is used to describe six types of asbestos minerals: chrysotile, amosite, crocidolite, tremolite, anthophyllite and actinolite — all of which are carcinogenic to humans.1
Asbestos, a naturally occurring mineral used worldwide in a variety of commercial products, is so toxic that even low-level exposure can cause lung cancer and other terminal diseases, including mesothelioma, a rare but aggressive form of cancer that can develop in the lungs, stomach or heart. Victims who contract this disease have a very low survival rate.2
Although many believe asbestos production is a thing of the past, the world’s asbestos industry remains profitable in many nations including in the U.S., Russia, China and India. The featured film, an episode of VICE Reports titled, “Why the Deadly Asbestos Industry Is Still Alive and Well,” reveals that despite the health dangers, 2 million tons of asbestos are exported every year to the developing world, where it’s highly unregulated and poses serious health risks.
In the film, VICE correspondent Milène Larsson travels to the world’s largest asbestos mine in Asbest, Russia. Asbest, which is Russian for “asbestos,” lies on the eastern slopes of the Ural Mountains and is home to 70,000 people — nearly all of whom are financially dependent on the asbestos mine.
Russian Mining Town Showcases Its Pride for Asbestos
Asbestos, which occurs as a long thin fiber in the environment, kills more than 100,00 people each year and is banned in 60 countries.3 Yet, Russia remains the world’s largest producer, exporting more than half of the world’s asbestos supply. If asbestos is so toxic, why is it still being used? What health effects are workers and residents living near asbestos mines experiencing?
VICE reporter Larsson set out to answer these questions and more by traveling to Asbest, Russia, where she observed firsthand the mining industry’s powerful influence over the city and its citizens. Seventy percent of the income in Asbest is dependent on the mine, she reports, which is owned by the Russian mining company Uralasbest. In Asbest, the asbestos industry is king.
The city’s pride for the industry can be seen in large asbestos-promoting banners hung all over town. Asbest even has an asbestos-themed anthem and a monument made of asbestos, symbolizing the city’s strange admiration for the deadly carcinogen. The first place Larsson visits is the asbestos mine, where half a million tons of asbestos are mined each year.
She is seen standing at the edge of the mine, which is about half the size of the island of Manhattan,4 wearing head-to-toe protective gear — what’s legally required in the U.S. and Europe when exposed to asbestos.
Locals, on the other hand, are seen in plain clothes, marveling at the view of the mine as if it’s their favorite pastime. The locals point and laugh at Larsson’s hazmat suit, making light of what they perceive to be overly cautious attire. “Are you not worried about the dust and asbestos fibers coming out of the mine?” she asks. “No, we’re not worried about anything in general,” they reply. “Things happen to you only when you are afraid of them.”
Russia Embraces Asbestos Despite Health Risks
Despite their remarks, the scientific literature overwhelmingly states that all levels of asbestos exposure may cause asbestos-related disease, and there is no safe level of exposure according to the National Institute for Occupational Safety and Health.5 It’s clear that the people of Asbest are not afraid of the mine, however. In fact, it’s viewed as a popular tourist attraction and a hot spot for taking wedding photos.
To showcase its long history with asbestos, the city has an asbestos history museum, which the VICE reporter visits to get a better handle on the community’s relationship with the asbestos industry.
The historian tells Larsson that Russia’s first asbestos depository was discovered in 1720 by a peasant named Safron Sagra, whose wife is said to have made mittens out of the mineral after he brought it home one night. According to the legend, the couple discovered the fireproof properties of asbestos after the mittens caught fire but did not burn.
News of the mineral’s value quickly spread, and by 1918, all of the mines were nationalized and owned by the Russian government. Entire economies were soon built around the asbestos industry, which employs 38,500 Russians. Another 400,000 depend on the asbestos mines for their livelihood, according to The New York Times, which adds:6
“Asbest is a legacy of the philosophy known as gigantism in Soviet industrial planning. Many cities wound up with only one, huge factory like this town’s sprawling asbestos plant. The cities, known as monotowns, were an important engine of the economy.
A Russian government study counted 467 cities and 332 smaller towns that depend on a single factory or mine. A total of 25 million people out of Russia’s population of 142 million people live in towns with only one main industry that cannot close, even if it is polluting.”
Today, locals describe a layer of asbestos dust that covers everything from their homes to their vegetable gardens. Yet, many seem unafraid of the health risks of asbestos and instead have accepted the contamination as a way of life.
Good Luck Finding the Truth: Locals in Asbest Are Reluctant to Discuss Health Effects
Determined to speak with someone about the true health effects of asbestos, Larsson meets with a retired mine worker who says he is skeptical of the mineral, but admits it’s impossible to know how many workers have been sickened by the mine. “Factories are too proud to admit that,” he says.
Discouraged by the locals’ refusal to talk candidly about the dangers of asbestos, Larsson wonders whether physicians and officials in Russia are aware of the health risks posed to workers and residents living near asbestos mines. So, she visits the Ural Oncology Center in Yekaterinburg, Russia, to meet with oncologist Dr. Sergey Berezin.
Berezin says the most common types of cancer he sees are lung cancer in men and breast cancer in women, but he denies having patients sickened from asbestos. As if that weren’t shocking enough, the oncologist admits that he completed his medical residency in the asbestos mining town and found the air to be “quite satisfying.”
He then leads Larsson to his office where he shows her decorations made from asbestos before stating that his sauna roof in the summer home he’s owned for 30 years is made from asbestos. Larsson, whose face is frozen in shock, asks to speak to some of Berezin’s patients, but he refuses. So, she heads to the local hospital in Asbest, but getting patients to talk negatively about asbestos proves difficult.
However, one women is heard saying: “You won’t find the real truth anywhere. Who will say? Everyone is afraid.” It quickly becomes clear that no one in Asbest is willing to speak negatively about the mine. The whole town relies on the industry, says Larsson, adding that the mining company owns everything down to the schools, churches and even the soccer team.
World Health Organization Asbestos Researcher Has Industry Ties
Hoping to escape the industry’s influence in Asbest, Larsson travels to Moscow to meet with the head of the Russian Academy of Medical Sciences, Dr. Evgeny Kovalevskiy, who is researching worker health in Asbest on behalf of the World Health Organization (WHO). When asked if it’s dangerous to live next to an asbestos mine, he replies, “Life is dangerous. It is hard to measure asbestos’ role because the Sverdlovsk Region is nearby and is very industrial. They have serious ecological problems.”
Larsson asks Kovalevskiy what his eight years of research has found about the health effects of asbestos, but he again dodges the question saying that like any epidemiological study, the “final results will take years.” Larsson wonders whether his reluctance to answer is a result of his alleged industry ties. In March 2013, a group of acclaimed scientists petitioned the WHO to end their relationship with Kovalevskiy over ethical questions surrounding his ties to the asbestos industry.
“We call on you to terminate IARC’s collaboration with the Scientific Research Institute of Occupational Health of the Russian Academy of Medical Sciences (RAMS) and with Dr. Evgeny Kovalevskiy because of unethical and improper scientific conduct on their part — conduct which is incompatible with the standards expected of IARC or any reputable scientific agency.”7
Developing World Faces an Epidemic of Asbestos-Related Disease
Russia is so protective of its asbestos industry that it has stopped recording mesothelioma as a separate type of cancer and is instead lumping it in with other diseases so that it’s no longer identifiable, says Dr. Arthur Frank, professor and chair emeritus of environmental and occupational health at Drexel University. But the absence of data doesn’t mean the absence of disease, he says, adding that the asbestos industry is using similar tactics as Big Tobacco in terms of concealing the industry’s health risks.
These tactics seem to be working in countries like China and India, which rely heavily on asbestos for building insulation and materials and automotive parts. In India, the asbestos industry provides 300,000 jobs and is worth $2 billion.8 The nation is also the world’s largest importer of asbestos, the majority of which it buys from Russia.
Frank predicts that the developing world is on the brink of an epidemic caused by asbestos-related diseases. While the U.S. is not immune to the dangers of asbestos, as it too has seen an epidemic of asbestos-related diseases, it’s nothing like what we will see in the developing world, he says.
Thousands of American Products Made With Asbestos
Similar to Russia today, the U.S. once had a booming asbestos industry, mining 137,000 tons at its peak in 1973.9 Deemed the “magic mineral,” asbestos was used in thousands of American products. It was heavily used by the military to insulate and fireproof ships, tanks, aircrafts and vehicles. The military relied on the mineral so extensively that 33 percent of mesothelioma victims in the U.S. are military veterans.10
However, no one was more affected by the deadly mineral than the residents of Libby, Montana, where asbestos killed hundreds and sickened thousands. The city is home to one of America’s worst man-made environmental disasters, notes the film. In 1919, companies began pulling vermiculite, which is often found alongside tremolite — a form of asbestos — from the mine in Libby, Montana. Known commercially as zonolite, vermiculite was used in a variety of construction materials including as insulation for homes and buildings.
The Environmental Protection Agency estimates that vermiculite was installed in more than 35 million American homes. Decades of mining vermiculite exposed workers and residents to toxic asbestos dust. The film shows Larsson traveling to Libby to speak with victims sickened by asbestos. “I just think I’ve been cheated.
They should’ve warned the people in this town about the seriousness of it. They got away with murder,” says Libby resident Don Munsel, who never worked in the mine but was exposed to asbestos dust carried in from his stepfather who worked in the mine.
Libby Residents Describe the Horror Caused by Asbestos
Larsson also talks with former mine workers Dean and Marilyn Norton who express anger and frustration with W.R. Grace, the company that owned the mine. “As beautiful as this country is, it killed us,” says Marilyn. “I know it’s going to kill me, and it’s probably going to kill my kids and my husband too,” she says, adding that it’s really W.R Grace that’s responsible. “They knew.”
The asbestos mined in Libby is a different kind than what’s mined in Russia. However, studies show conclusively that all types of asbestos cause cancer. Asbestos is a criminal industry, says Nicholas Ashford, a professor at MIT and former chair of the National Advisory Committee on Occupational Safety and Health.
Fifteen epidemiological societies say the asbestos industry should have been regarded as a hazard, he tells Larsson in the film. “When you disregard worker and public health, you’re committing murder,” says Ashford. “You can argue you don’t know which worker you’re murdering, but as a whole, the statistics are very clear.”
Many American Products Still Contain Asbestos
Asbestos is banned in many countries, but the U.S. isn’t one of them. While it’s not as widely used as it once was, asbestos is permitted in many American products as long as it consists of less than 1 percent asbestos.11 Some of these products include gaskets, roofing and fireproofing materials.
In 1973, the U.S. Environmental Protection Agency started banning asbestos-containing products. In 1989, the agency banned most asbestos-containing products under Section 6 of Toxic Substances Control Act. But in 1991, the “rule was vacated” by the courts. As a result, most of the original ban on the manufacture, importation, processing or distribution of asbestos products was overturned.
Asbestos-containing products that are still legal in the U.S. include clothing, pipeline wrap, vinyl floor tire, friction materials, roof coatings and brake blocks. Asbestos-containing products that are now banned in the U.S. include corrugated paper, rollboard, commercial paper, specialty paper and flooring felt.12 While the last asbestos mine closed in 2002, the U.S. still imports about 1,000 tons of asbestos, most of which comes from Brazil.13
Asbestos’ Useful Properties Captivates Humans Throughout History
Throughout history, asbestos and its unique properties has captivated the attention of humans. Its original use dates back to the ancient Greeks, who valued the mineral for its fireproof properties. The word “asbestos” actually means “indistinguishable” in ancient Greek. The Greeks used the mineral in the wicks of their eternal flames, and wove the material into garments, napkins and table cloths, which they would throw into the fire and marvel at its unique ability to emerge clean and unburned.14
Despite its harmful properties, the mineral is still used all over the world. American homes built before 1980 still contain asbestos, which can be found in floor tiles, roofs, furnaces, plumbing, appliances, fireplaces and window caulking. People are often exposed when the fibers become dislodged over time due to normal wear and tear.
The U.S. is one of the only developed nations that has not completely banned asbestos. The mineral is prohibited in the EU, U.K. and Australia — with Canada next on the list to phase the mineral out completely by 2018. Attempts to ban asbestos in America have been squashed by the asbestos industry, which cites job losses and negative economic effects as reasons to keep the industry alive.
How to Protect Yourself Against Asbestos
Fortunately, there are ways to protect yourself against asbestos exposure. Those most often exposed to asbestos are construction workers who come across the material when working in homes or buildings where it was installed prior to today’s regulations. If you suspect you’ve encountered asbestos, stop working and notify professionals. The safest way to handle asbestos is through a licensed contractor. However, if this isn’t possible, taking the following steps can reduce your exposure:15
Wear protective gear including a suitable face mask
Use hand tools instead of power tools to reduce dust
Clean up as you go to prevent waste buildup
Use a Type H vacuum or wet rags to clean up; do not sweep up dust and debris
Wash before breaks and before going home
+ Sources and References
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ACIM Event
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Disclaimer: The entire contents of this website are based upon the opinions of Dr. Mercola, unless otherwise noted. Individual articles are based upon the opinions of the respective author, who retains copyright as marked. The information on this website is not intended to replace a one-on-one relationship with a qualified health care professional and is not intended as medical advice. It is intended as a sharing of knowledge and information from the research and experience of Dr. Mercola and his community. Dr. Mercola encourages you to make your own health care decisions based upon your research and in partnership with a qualified health care professional. If you are pregnant, nursing, taking medication, or have a medical condition, consult your health care professional before using products based on this content.
If you want to use an article on your site please click here. This content may be copied in full, with copyright, contact, creation and information intact, without specific permission, when used only in a not-for-profit format. If any other use is desired, permission in writing from Dr. Mercola is required.
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September 30, 2017 • 8,277 views Disponible en Español
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Story at-a-glance
Asbestos kills 100,000 people each year and is banned in 60 countries
Russia mines 1 million tons of asbestos each year and supplies more than half of the world’s asbestos
Russia has stopped recording mesothelioma cases in an apparent effort to conceal the health risks of asbestos
By Dr. Mercola
In the U.S., when people hear the word “asbestos,” the first thing that comes to mind is cancer. So, it may surprise you that this way of thinking is not universal, particularly in Russia where the asbestos industry is not only alive, but thriving. The term “asbestos” is used to describe six types of asbestos minerals: chrysotile, amosite, crocidolite, tremolite, anthophyllite and actinolite — all of which are carcinogenic to humans.1
Asbestos, a naturally occurring mineral used worldwide in a variety of commercial products, is so toxic that even low-level exposure can cause lung cancer and other terminal diseases, including mesothelioma, a rare but aggressive form of cancer that can develop in the lungs, stomach or heart. Victims who contract this disease have a very low survival rate.2
Although many believe asbestos production is a thing of the past, the world’s asbestos industry remains profitable in many nations including in the U.S., Russia, China and India. The featured film, an episode of VICE Reports titled, “Why the Deadly Asbestos Industry Is Still Alive and Well,” reveals that despite the health dangers, 2 million tons of asbestos are exported every year to the developing world, where it’s highly unregulated and poses serious health risks.
In the film, VICE correspondent Milène Larsson travels to the world’s largest asbestos mine in Asbest, Russia. Asbest, which is Russian for “asbestos,” lies on the eastern slopes of the Ural Mountains and is home to 70,000 people — nearly all of whom are financially dependent on the asbestos mine.
Russian Mining Town Showcases Its Pride for Asbestos
Asbestos, which occurs as a long thin fiber in the environment, kills more than 100,00 people each year and is banned in 60 countries.3 Yet, Russia remains the world’s largest producer, exporting more than half of the world’s asbestos supply. If asbestos is so toxic, why is it still being used? What health effects are workers and residents living near asbestos mines experiencing?
VICE reporter Larsson set out to answer these questions and more by traveling to Asbest, Russia, where she observed firsthand the mining industry’s powerful influence over the city and its citizens. Seventy percent of the income in Asbest is dependent on the mine, she reports, which is owned by the Russian mining company Uralasbest. In Asbest, the asbestos industry is king.
The city’s pride for the industry can be seen in large asbestos-promoting banners hung all over town. Asbest even has an asbestos-themed anthem and a monument made of asbestos, symbolizing the city’s strange admiration for the deadly carcinogen. The first place Larsson visits is the asbestos mine, where half a million tons of asbestos are mined each year.
She is seen standing at the edge of the mine, which is about half the size of the island of Manhattan,4 wearing head-to-toe protective gear — what’s legally required in the U.S. and Europe when exposed to asbestos.
Locals, on the other hand, are seen in plain clothes, marveling at the view of the mine as if it’s their favorite pastime. The locals point and laugh at Larsson’s hazmat suit, making light of what they perceive to be overly cautious attire. “Are you not worried about the dust and asbestos fibers coming out of the mine?” she asks. “No, we’re not worried about anything in general,” they reply. “Things happen to you only when you are afraid of them.”
Russia Embraces Asbestos Despite Health Risks
Despite their remarks, the scientific literature overwhelmingly states that all levels of asbestos exposure may cause asbestos-related disease, and there is no safe level of exposure according to the National Institute for Occupational Safety and Health.5 It’s clear that the people of Asbest are not afraid of the mine, however. In fact, it’s viewed as a popular tourist attraction and a hot spot for taking wedding photos.
To showcase its long history with asbestos, the city has an asbestos history museum, which the VICE reporter visits to get a better handle on the community’s relationship with the asbestos industry.
The historian tells Larsson that Russia’s first asbestos depository was discovered in 1720 by a peasant named Safron Sagra, whose wife is said to have made mittens out of the mineral after he brought it home one night. According to the legend, the couple discovered the fireproof properties of asbestos after the mittens caught fire but did not burn.
News of the mineral’s value quickly spread, and by 1918, all of the mines were nationalized and owned by the Russian government. Entire economies were soon built around the asbestos industry, which employs 38,500 Russians. Another 400,000 depend on the asbestos mines for their livelihood, according to The New York Times, which adds:6
“Asbest is a legacy of the philosophy known as gigantism in Soviet industrial planning. Many cities wound up with only one, huge factory like this town’s sprawling asbestos plant. The cities, known as monotowns, were an important engine of the economy.
A Russian government study counted 467 cities and 332 smaller towns that depend on a single factory or mine. A total of 25 million people out of Russia’s population of 142 million people live in towns with only one main industry that cannot close, even if it is polluting.”
Today, locals describe a layer of asbestos dust that covers everything from their homes to their vegetable gardens. Yet, many seem unafraid of the health risks of asbestos and instead have accepted the contamination as a way of life.
Good Luck Finding the Truth: Locals in Asbest Are Reluctant to Discuss Health Effects
Determined to speak with someone about the true health effects of asbestos, Larsson meets with a retired mine worker who says he is skeptical of the mineral, but admits it’s impossible to know how many workers have been sickened by the mine. “Factories are too proud to admit that,” he says.
Discouraged by the locals’ refusal to talk candidly about the dangers of asbestos, Larsson wonders whether physicians and officials in Russia are aware of the health risks posed to workers and residents living near asbestos mines. So, she visits the Ural Oncology Center in Yekaterinburg, Russia, to meet with oncologist Dr. Sergey Berezin.
Berezin says the most common types of cancer he sees are lung cancer in men and breast cancer in women, but he denies having patients sickened from asbestos. As if that weren’t shocking enough, the oncologist admits that he completed his medical residency in the asbestos mining town and found the air to be “quite satisfying.”
He then leads Larsson to his office where he shows her decorations made from asbestos before stating that his sauna roof in the summer home he’s owned for 30 years is made from asbestos. Larsson, whose face is frozen in shock, asks to speak to some of Berezin’s patients, but he refuses. So, she heads to the local hospital in Asbest, but getting patients to talk negatively about asbestos proves difficult.
However, one women is heard saying: “You won’t find the real truth anywhere. Who will say? Everyone is afraid.” It quickly becomes clear that no one in Asbest is willing to speak negatively about the mine. The whole town relies on the industry, says Larsson, adding that the mining company owns everything down to the schools, churches and even the soccer team.
World Health Organization Asbestos Researcher Has Industry Ties
Hoping to escape the industry’s influence in Asbest, Larsson travels to Moscow to meet with the head of the Russian Academy of Medical Sciences, Dr. Evgeny Kovalevskiy, who is researching worker health in Asbest on behalf of the World Health Organization (WHO). When asked if it’s dangerous to live next to an asbestos mine, he replies, “Life is dangerous. It is hard to measure asbestos’ role because the Sverdlovsk Region is nearby and is very industrial. They have serious ecological problems.”
Larsson asks Kovalevskiy what his eight years of research has found about the health effects of asbestos, but he again dodges the question saying that like any epidemiological study, the “final results will take years.” Larsson wonders whether his reluctance to answer is a result of his alleged industry ties. In March 2013, a group of acclaimed scientists petitioned the WHO to end their relationship with Kovalevskiy over ethical questions surrounding his ties to the asbestos industry.
“We call on you to terminate IARC’s collaboration with the Scientific Research Institute of Occupational Health of the Russian Academy of Medical Sciences (RAMS) and with Dr. Evgeny Kovalevskiy because of unethical and improper scientific conduct on their part — conduct which is incompatible with the standards expected of IARC or any reputable scientific agency.”7
Developing World Faces an Epidemic of Asbestos-Related Disease
Russia is so protective of its asbestos industry that it has stopped recording mesothelioma as a separate type of cancer and is instead lumping it in with other diseases so that it’s no longer identifiable, says Dr. Arthur Frank, professor and chair emeritus of environmental and occupational health at Drexel University. But the absence of data doesn’t mean the absence of disease, he says, adding that the asbestos industry is using similar tactics as Big Tobacco in terms of concealing the industry’s health risks.
These tactics seem to be working in countries like China and India, which rely heavily on asbestos for building insulation and materials and automotive parts. In India, the asbestos industry provides 300,000 jobs and is worth $2 billion.8 The nation is also the world’s largest importer of asbestos, the majority of which it buys from Russia.
Frank predicts that the developing world is on the brink of an epidemic caused by asbestos-related diseases. While the U.S. is not immune to the dangers of asbestos, as it too has seen an epidemic of asbestos-related diseases, it’s nothing like what we will see in the developing world, he says.
Thousands of American Products Made With Asbestos
Similar to Russia today, the U.S. once had a booming asbestos industry, mining 137,000 tons at its peak in 1973.9 Deemed the “magic mineral,” asbestos was used in thousands of American products. It was heavily used by the military to insulate and fireproof ships, tanks, aircrafts and vehicles. The military relied on the mineral so extensively that 33 percent of mesothelioma victims in the U.S. are military veterans.10
However, no one was more affected by the deadly mineral than the residents of Libby, Montana, where asbestos killed hundreds and sickened thousands. The city is home to one of America’s worst man-made environmental disasters, notes the film. In 1919, companies began pulling vermiculite, which is often found alongside tremolite — a form of asbestos — from the mine in Libby, Montana. Known commercially as zonolite, vermiculite was used in a variety of construction materials including as insulation for homes and buildings.
The Environmental Protection Agency estimates that vermiculite was installed in more than 35 million American homes. Decades of mining vermiculite exposed workers and residents to toxic asbestos dust. The film shows Larsson traveling to Libby to speak with victims sickened by asbestos. “I just think I’ve been cheated.
They should’ve warned the people in this town about the seriousness of it. They got away with murder,” says Libby resident Don Munsel, who never worked in the mine but was exposed to asbestos dust carried in from his stepfather who worked in the mine.
Libby Residents Describe the Horror Caused by Asbestos
Larsson also talks with former mine workers Dean and Marilyn Norton who express anger and frustration with W.R. Grace, the company that owned the mine. “As beautiful as this country is, it killed us,” says Marilyn. “I know it’s going to kill me, and it’s probably going to kill my kids and my husband too,” she says, adding that it’s really W.R Grace that’s responsible. “They knew.”
The asbestos mined in Libby is a different kind than what’s mined in Russia. However, studies show conclusively that all types of asbestos cause cancer. Asbestos is a criminal industry, says Nicholas Ashford, a professor at MIT and former chair of the National Advisory Committee on Occupational Safety and Health.
Fifteen epidemiological societies say the asbestos industry should have been regarded as a hazard, he tells Larsson in the film. “When you disregard worker and public health, you’re committing murder,” says Ashford. “You can argue you don’t know which worker you’re murdering, but as a whole, the statistics are very clear.”
Many American Products Still Contain Asbestos
Asbestos is banned in many countries, but the U.S. isn’t one of them. While it’s not as widely used as it once was, asbestos is permitted in many American products as long as it consists of less than 1 percent asbestos.11 Some of these products include gaskets, roofing and fireproofing materials.
In 1973, the U.S. Environmental Protection Agency started banning asbestos-containing products. In 1989, the agency banned most asbestos-containing products under Section 6 of Toxic Substances Control Act. But in 1991, the “rule was vacated” by the courts. As a result, most of the original ban on the manufacture, importation, processing or distribution of asbestos products was overturned.
Asbestos-containing products that are still legal in the U.S. include clothing, pipeline wrap, vinyl floor tire, friction materials, roof coatings and brake blocks. Asbestos-containing products that are now banned in the U.S. include corrugated paper, rollboard, commercial paper, specialty paper and flooring felt.12 While the last asbestos mine closed in 2002, the U.S. still imports about 1,000 tons of asbestos, most of which comes from Brazil.13
Asbestos’ Useful Properties Captivates Humans Throughout History
Throughout history, asbestos and its unique properties has captivated the attention of humans. Its original use dates back to the ancient Greeks, who valued the mineral for its fireproof properties. The word “asbestos” actually means “indistinguishable” in ancient Greek. The Greeks used the mineral in the wicks of their eternal flames, and wove the material into garments, napkins and table cloths, which they would throw into the fire and marvel at its unique ability to emerge clean and unburned.14
Despite its harmful properties, the mineral is still used all over the world. American homes built before 1980 still contain asbestos, which can be found in floor tiles, roofs, furnaces, plumbing, appliances, fireplaces and window caulking. People are often exposed when the fibers become dislodged over time due to normal wear and tear.
The U.S. is one of the only developed nations that has not completely banned asbestos. The mineral is prohibited in the EU, U.K. and Australia — with Canada next on the list to phase the mineral out completely by 2018. Attempts to ban asbestos in America have been squashed by the asbestos industry, which cites job losses and negative economic effects as reasons to keep the industry alive.
How to Protect Yourself Against Asbestos
Fortunately, there are ways to protect yourself against asbestos exposure. Those most often exposed to asbestos are construction workers who come across the material when working in homes or buildings where it was installed prior to today’s regulations. If you suspect you’ve encountered asbestos, stop working and notify professionals. The safest way to handle asbestos is through a licensed contractor. However, if this isn’t possible, taking the following steps can reduce your exposure:15
Wear protective gear including a suitable face mask
Use hand tools instead of power tools to reduce dust
Clean up as you go to prevent waste buildup
Use a Type H vacuum or wet rags to clean up; do not sweep up dust and debris
Wash before breaks and before going home
+ Sources and References
Most Popular
turmeric
ACIM Event
Pumpkin Seeds
Common Health Questions
Post your comment
Show Comments (1)
Previous Article
Next Article
Subscribe to Dr. Mercola's Natural Health Newsletter
Thank you! Your purchases help us support these charities and organizations.
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About Dr. Mercola
Contact Us
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Health Videos
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Updated Privacy Policy
Special Info Sites
Aspartame
Cancer
Fitness
Fluoride
Fructose/Sugar
GMO
Mercury
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Pets
Vaccines
Vitamin D
Shopping
Autoship Program
California Residents
FAQs
GMO-Free Products
Healthy Rewards Program
Low Price Guarantee
Online Product Guide
Online Shopping
Our Service Commitment
Premium Products
Product Badge Glossary
Return Policy
Shipping Policy (Domestic)
Shipping Policy (International)
Store Locator
Wholesale Program
Disclaimer: The entire contents of this website are based upon the opinions of Dr. Mercola, unless otherwise noted. Individual articles are based upon the opinions of the respective author, who retains copyright as marked. The information on this website is not intended to replace a one-on-one relationship with a qualified health care professional and is not intended as medical advice. It is intended as a sharing of knowledge and information from the research and experience of Dr. Mercola and his community. Dr. Mercola encourages you to make your own health care decisions based upon your research and in partnership with a qualified health care professional. If you are pregnant, nursing, taking medication, or have a medical condition, consult your health care professional before using products based on this content.
If you want to use an article on your site please click here. This content may be copied in full, with copyright, contact, creation and information intact, without specific permission, when used only in a not-for-profit format. If any other use is desired, permission in writing from Dr. Mercola is required.
Terms & Conditions | Updated Privacy Policy | Sitemap
© Copyright 1997-2017 Dr. Joseph Mercola. All Rights Reserved.
Mercola Health Resources, LLC BBB Business Review
McAfee SECURE sites help keep you safe from identity theft, credit card fraud, spyware, spam, viruses and online scams
TRUSTe online privacy certification
Click to Verify - This site has chosen a GeoTrust SSL Certificate to improve Web site security
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Call Toll Free: 877-985-2695
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