Is Social Security an Entitlement?

Background

Alan Simpson, Senator from Wyoming, Co-chair of Obama’s deficit commission, called senior citizens “the Greediest Generation” as he compared Social Security to a Milk cow with 310 million teats”. The following is a response1 from a unknown fellow in Montana:

_________________________________________________________________

“1. As a career politician, you have been on the public dole for FIFTY YEARS…

2. I have been paying Social Security taxes for 48 YEARS (since I was 15 years old. I am now 63)…

3. My Social Security payments, and those of millions of other Americans, were safely tucked away in an interest bearing account for decades until you political pukes decided to raid the account and give OUR money to a bunch of zero ambition losers in return for votes, thus bankrupting the system and turning Social Security into a Ponzi scheme that would have made Bernie Madoff proud…

4. Recently, just like Lucy & Charlie Brown, you and your ilk pulled the proverbial football away from millions of American seniors nearing retirement and moved the goalposts for full retirement from age 65 to age 67. NOW, you and your shill commission is proposing to move the goalposts YET AGAIN…

5. I, and millions of other Americans, have been paying into Medicare from Day One, and now you morons propose to change the rules of the game. Why? Because you idiots mismanaged other parts of the economy to such an extent that you need to steal money from Medicare to pay the bills…

6. I, and millions of other Americans, have been paying income taxes our entire lives, and now you propose to increase our taxes yet again. Why? Because you incompetent bastards spent our money so profligately that you just kept on spending even after you ran out of money. Now, you come to the American taxpayers and say you need more to pay of YOUR debt…

To add insult to injury, you label us “greedy” for calling “bullshit” on your incompetence. Well, Captain Bullshit, I have a few questions for YOU…

1. How much money have you earned from the American taxpayers during your pathetic 50-year political career?

2. At what age did you retire from your pathetic political career, and how much are you receiving in annual retirement benefits from the American taxpayers?

3. How much do you pay for YOUR government provided health insurance?

4. What cuts in YOUR retirement and health care benefits are you proposing in your disgusting deficit reduction proposal, or, as usual, have you exempted yourself and your political cronies?

It is you, Captain Bullshit, and your political co-conspirators who are “greedy”. It is you and they who have bankrupted America and stolen the American dream from millions of loyal, patriotic taxpayers. And for what? Votes. That’s right, sir. You and yours have bankrupted America for the sole purpose of advancing your pathetic political careers. You know it, we know it, and you know that we know it.

And you can take that to the bank, you miserable son of a bitch.

Always say what you mean !! Always mean what you say !! NEVER COMPROMISE ……… “____________________________________________-

The above letter makes many claims but offers no numbers to help us to decide who is right. Below is a more substantive angry email I received that attempts to quantitatively “expose” the “Social Security Scam”.

____________________________E-Mail___________________________________-

Remember, not only did you contribute to Social Security but your employer did too. It totaled 15% of your income before taxes. If you averaged only $30K over your working life, that's close to $220,500.

If you calculate the future value of $4,500 per year (yours & your employer's contribution) at a simple 5% (less than what the govt. pays on the money that it borrows), after 49 years of working you'd have $892,919.98.

If you took out only 3% per year, you'd receive $26,787.60 per year and it would last better than 30 years (until you're 95 if you retire at age 65) and that's with no interest paid on that final amount on deposit! If you bought an annuity and it paid 4% per year, you'd have a lifetime income of $2,976.40 per month.

Washington has pulled off a bigger Ponzi scheme than Bernie Madoff.

Entitlement?? NOT!!! I paid cash for my social security insurance!!!! Just because they borrowed the money, doesn't make my benefits some kind of charity or handout!!

Congressional benefits ---- free healthcare, outrageous retirement packages, 67 paid holidays, three weeks paid vacation, unlimited paid sick days, now that's welfare, and they have the nerve to call my social security retirement entitlements?

They call SS and Medicare an entitlement even though most of us have been paying for it all our working lives and now when it's time for us to collect, the government is running out of money. Why did the government borrow from it in the first place? Imagine if the *GOVERNMENT* gave 'US' the same support they give to other countries.

Sad isn't it?

99% of people won't have the guts to forward this.

I'm one of the 1% -- I Just Did.

Discussion

The above email asserts that any claim that Social Security pays retired people who worked all their adult lives more than their contributions to the system actually merit, is bogus. Their mathematical argument in support of this assertion is as follows:

1) The combined contribution to Social Security by workers and their employers is about 15% of before tax income.

2) If a worker averaged as little as $30K per year in his working life, the combined contribution to the Social Security system on his behalf would be about $4,500 per year (i.e. 3,000*.15) and $220,500 after 49 years of work.

3) The future value of $4,500 per year after 49 years at an interest rate of 5% per year (less than what the govt. pays on the money that it borrows) is $892,919.98.

4) $892,919.98 distributed at the rate of 3% per year, $26,787.60 (i.e. 892,919.98*.03) would last more than 30 years (until 95 if you retire at age 65) without interest paid on the on the final amount on deposit!

Assignment

Your group has been hired by the AARP to write a report that looks into the merit of the above analysis. Your report should:

1) Address the mathematical consistency of the assertions made in steps 1) through 4). If you find any inconsistencies please state and explain them.

2) One member of the AARP group reaching out to you recently retired at age 65 after 40 years of work where he averaged roughly $30,000 per year. His Social Security Taxable Income is given in Table 1 on the next page. Using the assumptions about Social Security made in the email analysis, calculate the current value of his Social Security Contributions and whether it can support 30 years of annual Social Security Income of $26,787.60 (without interest paid on the current amount of deposit). If not,

a) Explain the difference between this portfolio and the one in the above analysis.

b) Assuming a 5% return on current monies in the Social Security Account and a 30 year payout period, how much annual payout could this portfolio support?

3) Look up how much Social Security would actually pay each of the 2 people described above.

4) Based on all of the above, what is your conclusion as to the merits of calling Social Security and entitlement.

5) The above email claims a 15% combined contribution to Social Security by both employee and employer and 5% yearly interest rate on money in the fund.. Check to see whether these numbers are historically correct. If not, using the correct values recalculate the numbers for the AARP member in Table 1.

6) Based on current interest rates, is an assumption of 5% on Social Security funds realistic? If not, recalculate using what you consider to be a realistic interest rate.

In the concluding section of your report, based on all of your analysis and fact finding, state yo

Table 1

Social Security

Year Salary

1972 $ 4,121.40

1973 $ 4,680.00

1974 $ 5,400.00

1975 $ 6,480.00

1976 $ 7,920.00

1977 $ 8,069.40

1978 $ 9,180.00

1979 $ 9,900.00

1980 $ 10,620.00

1981 $ 13,740.00

1982 $ 15,540.00

1983 $ 17,075.40

1984 $ 19,440.00

1985 $ 21,420.00

1986 $ 22,680.00

1987 $ 23,760.00

1988 $ 25,200.00

1989 $ 26,280.00

1990 $ 27,000.00

1991 $ 28,800.00

1992 $ 30,780.00

1993 $ 32,040.00

1994 $ 33,300.00

1995 $ 34,560.00

1996 $ 36,360.00

1997 $ 36,720.00

1998 $ 37,620.00

1999 $ 39,240.00

2000 $ 41,040.00

2001 $ 43,560.00

2002 $ 45,720.00

2003 $ 48,240.00

2004 $ 50,940.00

2005 $ 52,200.00

2006 $ 52,740.00

2007 $ 54,000.00

2008 $ 56,520.00

2009 $ 58,500.00

2010 $ 61,200.00

2011 $ 64,080.00

Why might some economists argue that plentiful commodities (natural resources & minerals) might be an economic drag overall? What is your view, as for example regarding Russian oil and other such examples? discus through the article....

Raw materials need not undermine the countries that export them

THE LAMP POSTS in Kliptown, South Africa, do not all stand up straight. One lists awkwardly, laden with cables carrying stolen electricity to a squatters' settlement nearby. Many families in this suburb of Soweto, a formerly black township in greater Johannesburg, are still crammed into makeshift housing. When it is hot outside, the temperature inside is "times two", says one resident, who shares six rooms with 20 others. And when it turns cold, the chill inside is also "times two".

On the other side of the railway tracks the government is investing heavily in Walter Sisulu Square, where in 1955 the African National Congress (ANC) and its allies adopted the Freedom Charter, a statement of principles for a post-apartheid nation. The charter's commitments, written in stone on a monument in the square, include demolishing slums and building well-lit suburbs. They also include transferring ownership of the mineral wealth beneath the soil to the people. The contrast between what the charter says and what the slum itself reveals tells you how broken the system is, says one squatter.

The resources beneath South Africa's soil, including iron ore, precious metals and coal, ought to be an unmitigated blessing. Johannesburg, the city of gold, owes its existence to these riches. Its landscape is still dotted with piles of sandy residue, or "tailings", from mining and quarrying. The industry accounts for over 20% of South Africa's exports and employs over 450,000 people. But it also adds to the volatility of South Africa's economy and the pugnacity of its politics.

Mining and quarrying shrank by 4.7% in 2016, then rebounded, growing by 4.3% year-on-year in the first half of 2017. This improvement partly reflects stronger growth in China, which consumes almost half of the world's coal, 30% of its gold jewellery and over 40% of its steel. But the industry's economic prospects remain hostage to its political fortunes.

Like any industry, mining must offer sufficiently rewarding pay and profits to attract the capital and labour it requires. Unlike other industries, however, mining tends to generate excess returns or "rents" on top of that. Bosses, workers and politicians are then tempted to squabble over the division of those rents, sometimes to the detriment of the sector as a whole. This kind of economic volatility and political bitterness are two of the more troublesome "tailings" from resource wealth, not only in South Africa but in many emerging markets. In 11 of the 24 countries in MSCI's benchmark equity index, resource rents exceeded 5% of GDP between 2011 and 2015. That qualified them as "resource-rich", according to the World Bank. The rents of all 24 members taken together also amounted to about 5% of their combined GDP.

Many of these resource-rich economies have gone through a twin-peaked or "M-shaped" cycle since the mid-2000s. Their commodities sector (as a proportion of GDP) peaked on the eve of the financial crisis in 2007, plunged, then rebounded between 2008 and 2011 and faltered again after 2014. The first drop reflected a collapse in demand following the global financial crisis. The second one was more complicated. A slowdown in Chinese commodity purchases played a part, especially in the case of coal and construction-related resources such as iron ore. But in the case of oil, a rise in supply (and projected supply) was more important. The boom in tight oil and shale production in America prompted OPEC, the oil exporters' cartel, to pump more crude to defend its market share. Cheap energy, in turn, cut the cost of agricultural production and dampened demand for biofuels, leading to lower prices for grains and soyabeans.

It is not easy to cope with a commodity cycle of this magnitude, driven by a boom in demand in the world's second-biggest economy, then a supply boom in the biggest. In the face of these global forces, emerging economies can resemble the squatter's house in Kliptown: their economies run twice as hot when commodity markets warm up, and twice as cold when the temperature drops. But although resource-rich economies cannot entirely escape the ups and downs of global commodity cycles, they can do a lot to moderate them. By containing the upturns, they can cushion the downturns. The key to this lies not in the mining industry itself, but in a country's central bank and finance ministry. Resource-rich economies need equally resourceful macroeconomic policies.

One of the best examples is Chile. Its fiscal rule curbs government spending when the copper price exceeds its long-term trend, as judged by an independent committee of experts. During good times, fiscal restraint makes room for mining to boom without unduly squeezing the rest of the economy. During bad times, it leaves scope for fiscal easing to offset the damage.

Chile's fiscal benchmarks were better calibrated than the rule Russia introduced in 2008 (and overhauled in 2013). Rather than allow an independent committee to estimate the long-term oil price, Russia used a backward-looking average. According to the IMF, that resulted in a benchmark oil price of $85 a barrel in 2016 when prices had already fallen to $42.

Russia was forced to abandon its fiscal rule in 2015. By then the country's central bank had also given up trying to defend the rouble, allowing it to fall in line with the price of crude. At the time Russia's devaluation was humiliating. But a cheaper exchange rate can be a godsend for an oil exporter when the price of crude drops. Russia's diminished currency kept the rouble value of oil revenues steady. And by boosting Russia's competitiveness, it helped to offset the damage that lower oil prices inflicted on the country's trade balance. Unemployment is now lower than it was in 2013, when oil prices were around $100 a barrel.

Having survived the M-shaped commodity cycle, resource-rich emerging markets can hope for an easier script in the years ahead. China's growth has stopped slowing and OPEC production has stopped rising. The cartel decided in November 2016 to cut production by over 3% to 32.5m barrels per day (a decision matched by restraint from 11 other oil producers, including Russia). America, meanwhile, has become an "unwitting swing producer" of oil, in the words of the Economist Intelligence Unit, a sister company of The Economist. When crude prices drop below $45 a barrel, shale producers withdraw, pushing the price back up. When prices rise above $56, America's nimble operators invest in new rigs, pushing the price back down. So another bout of commodity-price volatility should not scupper the emerging-market recovery.

The economic instability and political division sometimes associated with natural resources have caused some economists to think of them as a curse, not a blessing. In a seminal paper published in 1995, Jeffrey Sachs and Andrew Warner, two economists then both at Harvard, found that economies dependent on resource exports grew more slowly than others not so blessed.

But economic thinking on this issue is also prone to division and swings in sentiment. Several researchers have questioned whether the resource curse is real or just a statistical illusion. The seminal Sachs-Warner study, they say, may be marred by reverse causality: rather than resource dependence leading to slow growth, it could be the other way around. This is because the two authors calculate resource exports as a proportion of GDP, so anything that lowers GDP will mechanically increase resource dependence by their measure, creating the illusion of a causal link from resources to growth.

Economists may have missed the blessings of natural resources because they were looking in the wrong place. Oil, gold, copper and other endowments may add to the level of GDP but not its growth rate. Imagine, for example, a $100bn economy growing at 1% a year. Suppose it suddenly discovers a big platinum deposit, which yields a steady additional income of $100bn, year in, year out. That would double the country's GDP to about $200bn, much to the benefit of its people. But it would also halve the country's growth rate, because now half of this $200bn economy is growing at 1% and the other half not at all.

Graham Davis of the Colorado School of Mines calls this phenomenon "resource drag". In South Africa the mining and quarrying industry has been growing more slowly than the economy as a whole since 1980, dragging down South Africa's overall GDP growth by about 0.4 percentage points. But having both the resources and the drag is still better than having neither.

Patricio Meller of CIEPLAN, a Chilean think-tank, reckons that economists have been biased against natural resources ever since Adam Smith, who witnessed impressive advances in pin-making but comparative stasis in agriculture. Even in Smith's day that was a mistake, says Mr Meller. After all, Britain's industrial revolution owed a lot to coal-mining.

Mr Meller sees the natural resources in his country as a platform for technological innovation. Many of the lorries that serve Chile's mining industry, for example, are remotely controlled by people sitting in an office in Santiago, over 1,000km away. Indeed, the combination of technologies--big data, end-to-end sensors, analytics--now being applied to advanced manufacturing could also be applied to mining and agriculture.

The application of new technologies to commodities may alleviate whatever curses natural resources can bring. But their application to manufacturing industry is raising a different fear in labour-rich emerging markets. As industrial machines become more sophisticated, will they increasingly replace industrial workers? And if fewer jobs are on offer in metal-bashing and clothes-making, who will employ them?

Block quote: Economists have questioned whether the "resource curse" is real. Rather than resource dependence leading to slow growth, it could be the other way around

PLEASE READ AND ANSWER QUESTIONS

Global View: International Privacy Laws

Today’s online world, including the increasing use of the cloud to store data on remote third-party servers, offers unprecedented opportunities for the global storage and transfer of personal information. To address the risks associated with the unregulated exchange of personal information, many jurisdictions around the world have enacted privacy laws, regulations, and rules dealing with data collection, processing, storage, disclosure, and use. Although definitions of the term privacy vary, common elements include freedom or protection of individuals and sometimes groups from unauthorized or unwanted intrusion into, or observation of, their personal information and from violation of the integrity of this information.

The type of protection, as well as the speed, level of completeness, and depth of regulation and implementation, varies from country to country. Increasingly, countries have addressed the cross-border transfer of personal information and taken steps to prevent the circumvention of existing national laws governing the storage, processing, and disclosure of information through the “off-shoring” of these activities. Accordingly, when multinational companies do business outside their home country, including offering products or services on the Internet, and collect personal information from residents of a foreign country, they are likely to fall under the privacy laws and regulations in that country.

The following is a brief overview of privacy laws and regulations in several key jurisdictions.

European Union

The European Union (EU) Data Protection Directive (Directive 95/46/EC), adopted in 1995, requires its Member States to safeguard the privacy of personal data by

(1)

giving notice to individuals about how their information will be used;

(2)

offering a choice when disclosing information to third parties (with opt-in consent required for sensitive information);

(3)

maintaining the security of personal information;

(4)

ensuring that the data are reliable, accurate, and current; and

(5)

giving individuals access to examine, correct, and delete information about themselves.

Because each EU Member State had to incorporate the provisions of the Data Protection Directive into national law for them to be binding, there is some variation in the privacy laws among the states.

The EU adopted the General Data Protection Regulation (GDPR) in 2016. It will enter into full force across all Member States on May 25, 2018. The GDPR will replace Directive 95/46/EC and affect organizations based within the EU, as well as foreign organizations doing business there. Although the GDPR is intended to make it easier for multinational entities operating across the EU to comply with data protection law, certain aspects of the regulation permit Member States to enact their own legislation, so inconsistencies in application may exist.

An important principle of both the Data Protection Directive and the GDPR is that personal information generally should not be collected unless the collection is

(1)

proportional (meaning adequate and not excessive relative to its purpose),

(2)

transparent (meaning that the affected individual must be informed as to the circumstances of the collection and consent to it), and

(3)

for a legitimate purpose.

The GDPR will make it easier for individuals to access and control their own data, including information on how their data are processed; make it easier to transfer personal data between service providers; clarify the “right to be forgotten,” which allows an individual to require that certain personal data be deleted (the subject of the “Inside Story” in Chapter 24); and, under certain circumstances, require notification when data have been hacked (e.g., if the breach is likely to result in a “high risk” to the data subject). Additionally, a data subject’s consent to process personal data must be “as easy to withdraw as to give.” In the case of “sensitive data,” consent must be explicit.

By modernizing and unifying the rules, cutting red tape, and reinforcing consumer trust, the GDPR will help businesses reap the benefits of the “Digital Single Market.” The legislation will create a “one-stop-shop” so that businesses can deal with only one privacy supervisory authority, making it less costly to do business in the EU; require companies based abroad to apply the same rules as EU-based firms when offering services inside the EU; provide for a “risk-based approach” to incorporating the rules; and require firms to build in data protection safeguards when developing products and services in the beginning stages of development (so-called data protection by design).

The GDPR broadened the definition of personal and sensitive data to include political opinions, religious and philosophical beliefs, health and sex life, and genetic and biometric data. The regulation applies both to data controllers (the entities determining how and why personal data are processed) in the EU and to data processors (the entities that process the personal data on behalf of data controllers) in the EU. The GDPR also applies to controllers and processors outside of the EU whose processing activities involve offering goods or services to EU data subjects or monitoring these subjects’ behavior within the EU.Penalties for breaching the GDPR can be significant.

Unlike the Data Protection Directive, the GDPR does not require a company that processes personal information (“personal data”) to register or notify data protection supervisory authorities before it starts collecting personal information. Instead, data controllers are required to maintain appropriate records to evidence compliance with the GDPR. Personal information may be transferred into third countries (countries outside the EU) only if the third country provides an adequate level of protection for the information.

Although the United States is not regarded as providing adequate protection, the EU and the United States adopted the EU-U.S. Privacy Shield in 2016 to permit the transfer of personal information from any EU member state to the United States under certain circumstances. The EU-U.S. Privacy Shield requires U.S. companies to ensure that individuals’ digital information, “from social media posts and search queries to information about workers’ pensions and payroll,” is not misused. Companies must adhere to seven principles: notice; choice; accountability for onward transfer; security; data integrity and purpose limitation; access; and recourse, enforcement, and liability, all as determined by self-assessment or assessment of a third party, with recertification required each year. The rules apply to all companies regardless of whether they are social media platforms, pharmaceutical companies, or industrial conglomerates subject to the jurisdiction of the FTC or the U.S Department of Transportation. In addition, the agreement requires the United States to provide an annual guarantee that its intelligence agencies will not have “indiscriminate access” to Europeans’ digital data when these data are sent to the United States. The agreement enables about $260 billion of trade in digital services, with nearly 2,000 companies (including Facebook, Google, and Microsoft) relying on the EU-U.S. Privacy Shield to store data about EU citizens on U.S. servers. A separate Swiss-U.S. Privacy Shield became effective in April 2017 and covers data transfers from Switzerland.

In January 2017, the European Commission proposed a revision to the ePrivacy Directive that aims to reinforce the right to privacy and control of data for European citizens. (Directive 2002/58/EC, referred to as the ePrivacy Directive, protects the privacy of communications over public electronic networks.) The revision would require messaging, email, and voice service providers to guarantee the “confidentiality of conversations and metadata around the time, place and other factors of those conversations.” The rules would prohibit service providers, such as Facebook Messenger, Google, WhatsApp, Skype, and others, from listening to, tapping, intercepting, scanning, or storing communications without users’ consent (except for certain “critical” functions); require “explicit consent” before data could be used for advertising; and eliminate consent requirements for cookies that do not affect privacy (“privacy intrusive” cookies would still require consent). As with the GDPR, the fines for noncompliance would be significant. The proposed rule was designed to close the “perceived regulation gap between traditional telecom[] companies and predominantly US-based internet communications companies” and to also allow telecom companies to use certain metadata—for example, the length and location of calls—to provide more services and earn more revenue. Although one EU regulator asserted that the proposed regulation is balanced because it gives consumers a high level of protection while also permitting businesses to innovate, others have stated that the EU is “on the verge of a regulation overload,” as this proposal follows shortly after the adoption of the GDPR.Further, an industry spokesperson representing Google and other companies argued that the proposed revision risks “incoherence and confusion” because the GDPR requires one approach to safeguarding privacy and ePrivacy calls for another approach.

Exercise:

Read Global View article on international privacy laws [pages 247-249 of textbook.]

Note especially the European Union General Data Protection Regulation [GDPR] which entered into force on May 25, 2018. Note that the EU approach to data privacy is that the data is a digital asset of the owner and that organizations seeking to use your data must secure your affirmative consent and that the consent needs to be proportionate, transparent and for a legitimate purpose, including the right to be forgotten. The regulation applies to organizations outside the EU to the extent that they handle the data of EU nationals.

You are the Chief Privacy Officer of Facebook. Facebook accumulates and analyzes the data of persons accessing its service [even if open on your computer when doing other activities.] Facebook then sells advertising to third parties based on the data. Facebook currently considers your accession to their service as consent for the collection and use of your data. Facebook currently benefits from increased use. This is called a network effect. 'Network effect' is a phenomenon whereby a product or service gains additional value as more people use it.

Write a one [1] paragraph response in Word format and post to the Course Discussion Board:

If data is a digital asset owned by the individual, do individuals in the EU have the right to charge Facebook for each use of the individual's data? If so, what impact will this have on the market value of Facebook's stock

**Only need the bold answered

In Java, implement the Athlete, Swimmer, Runner, and AthleteRoster classes below. Each class must be in separate file. Draw an UML diagram with the inheritance relationship of the classes.

1. The Athlete class
a. All class variables of the Athlete class must be private.

b.is a class with a single constructor: Athlete(String lName, String fName, int birthYear, int birthMonth, int birthDay, char gender). All arguments of the constructor should be stored as class variables. There should only be getter methods for first and last name variables. There should be no getters or setters for birthYear, birthMonth, birthDay.

c. Getter and setter methods for the gender of the athlete. The method setGender accepts a character and store it as a class variable. Characters 'm', 'M' denotes male, 'f' or 'F' denotes male or female. Any other char will be treated as undeclared. The method getGender return either the word "male" or "female" or “undeclared”.

4. The method computeAge() takes no arguments and returns the athletes computed age (as of today's date) as a string of the form "X years, Y months and Z days". Hint: Use the LocalDate and Period classes.

   i. e.g. "21 years, 2 months and 3 days". ii. e.g. "21 years and 3 days".

   iii. e.g. "21 years and 2 months". iv. e.g. "21 years".

   v. e.g. "2 months and 3 days".

5. The method public long daysSinceBirth() takes no arguments and returns a long which is the number of days since the athlete’s date of birth to the current day. Hint: Use the LocalDate and ChronoUnit classes.

6. The toString method returns a string comprised of the results ofgetFname, getLName and computeAge. E.g.

   i. “Bunny Bugs is 19 years and 1 day old”

7. The equals method returns true if the name and date of birth of this athlete and the compared other athlete are the same, otherwise return false.

2. The Swimmer class
a. All class variables of the Swimmer class must be private.

2. inherits from the Athlete class and has a single constructor,

   Swimmer(String lName, String fName, int birthYear, int birthMonth, int birthDay, char gender, String team). There should be a class variable for team. There should be a getter method for team.

3. The Swimmer class stores swim events for the swimmer. There should be a class variable for events. A swimmer participates in one or more of these events. The addEvent method is oveloadedand either adds a single event for the swimmer public boolean addEvent(String singleEvent) or adds a group of events for the swimmer public boolean addEvent(ArrayList multiEvents). Each event is of type String. Duplicate events are not stored and return false if duplicate found.

4. There should be a getter method that returns the class variable events.

5. The overridden toString method returns a string comprised of the concatenation of the parent’s toString return plus " and is a swimmer for team: XXXXX in the following events: YYYYY; ZZZZZZ." E.g.

   i. “Missy Franklin is 24 years and 4 months old and is a swimmer for team: Colorado Stars. She participates in the following events: [100m freestyle, 100m backstroke, 50m backstroke]”

3. The Runner class
a. All class variables of the Runner class must be private.

2. inherits from the Athlete class and has a single constructor,

   Runner(String lName, String fName, int birthYear, int birthMonth, int birthDay, char gender, String country). There should be a class variable for country. There should be a getter method for country.

3. The Runner class stores race events for the runner. There should be a class variable for events. Each event is a Distance. The list of valid events is given below:
   M100, M200, M400, M3000, M5000, M10000. A runner participates inone or more of these events. The addEvent method is oveloadedand either adds a single event for the runner public boolean addEvent(String singleEvent) or adds a group of events for the runner public boolean addEvent(ArrayList multiEvents). Each event is of type String. Duplicate events are not stored and return false if duplicate found.

4. There should be a getter method that returns the class variable events.

5. The toString method returns a String in the form: " AAA BBBB is XX years, YY months and ZZ days. He is a citizen of CCCCCCC and is a DDDDDDDD who participates in these events: [MJ00, MK00, ML00]”. If she does not participate in M3000 or M5000 or M10000 then she is a sprinter. If she does not participate in M100 or M200 or M400 then she is a long-distance runner. Otherwise she is a super athlete. E.g.

   i. “Bunny Bugs is 19 years and 1 day old. His is a citizen of USA and is a long-distance runner who participates in these events: [M10000]”

4. The AthleteRoster class
a. All class variables of the AthleteRoster class must be private.

2. Does not inherits from the Athlete class. The AthleteRoster class has a single constructor, AthleteRoster(String semster, int year). There should be class variables for semester and year. There should be getter methods for semester and year.

3. The AthleteRoster class has only one method for adding Athlete to the roster, by using the boolean addAthlete(Athlete a)method. The method returns true if the athlete was added successfully, it returns false if the athlete object already exists in the roster and therefore was not added.

4. Your AthleteRoster class will have only one class level data structure, an ArrayList, for storing athlete objects.

5. The String allAthletesOrderedByLastName() method returns a string object with of all the names of the athletes (Swimmers, Runners, etc.) in ascending order of last names(a-z).

6. The String allAthletesOrderedByAge() method returns a string object with of all the names of the athletes (Swimmers, Runners, etc.) in descending order of age(100-0).

7. The String allRunnersOrderedByNumberOfEvents() method returns a string object with of all the names of the Runners only in ascending order of number of events they participate in (0-100).

Here is the driver:

import java.util.ArrayList;
import java.util.Arrays;

public class AthleteDriver {
   public static void main(String args[]) {

       //Check Athlete Class
       Athlete a1 = new Athlete("Daffy","Duck", 2000, 9, 7,'j'); System.out.println("Gender is "+a1.getGender());//undeclared
       a1.setGender('F');
       System.out.println("Gender is "+a1.getGender());//female
       a1.setGender('m');
       System.out.println("Gender is "+a1.getGender());//male
       System.out.println("ComputeAge method says "+a1.computeAge());
       System.out.println("First name is : "+a1.getFname()); //Daffy
       System.out.println("DaysSinceBirth method says "+a1.daysSinceBirth()+" days"); System.out.println("Last name is : "+a1.getLname()); //Duck
       System.out.println("Output of our toString correct?: \n"+a1);
       System.out.println("=======================================\n");

       //Check Runner Class
       Runner r5 = new Runner("Bugs","Bunny", 2000, 9, 8, 'm',"USA");
       System.out.println("Did we add M10000 successfully?: "+r5.addEvent("M10000")); //true
       System.out.println("Did we unsucessfully try to add M10000 again?: "+r5.addEvent("m10000")); //false
       ArrayList<String> temp = new ArrayList<String>(Arrays.asList("M100", "M3000"));
   System.out.println("Did we successfully add mutiple events?: "+r5.addEvent(temp));//true
       System.out.println("Did we unsucessfully try to add mutiple events?: "+r5.addEvent(temp));//false
       System.out.println("How many events does Bugs participate in?: "+r5.getEvents().size());//3
       System.out.println("Gender is "+r5.getGender());//male
       System.out.println("Output of our toString correct?: \n"+r5);
       System.out.println("=======================================\n");

       //Check Swimmer Class
       Swimmer s1 = new Swimmer("Franklin", "Missy", 1995, 5, 10, 'F', "Colorado Stars");
       System.out.println("Did we add 100m backstoke successfully?: "+s1.addEvent("100m backstoke")); //true
       System.out.println("Did we unsucessfully try to add 100m backstoke again?: " +s1.addEvent("100M Backstoke")); //false
       temp = new ArrayList<String>(Arrays.asList( "200m backstoke","200m freestyle"));
       System.out.println("Did we successfully add mutiple events?: "+s1.addEvent(temp));//true
       System.out.println("Did we unsucessfully try to add mutiple events?: "+s1.addEvent(temp));//false
       System.out.println("How many events does s1 participate in?: "+s1.getEvents().size());//4 System.out.println("Gender is "+s1.getGender());//female
       System.out.println("Output of our toString correct?: \n"+s1);
       System.out.println("=======================================\n");

       //Check AthleteRoster
       Swimmer s2 = new Swimmer("Ruele", "Naomi", 1997, 1, 13, 'F',"Florida International University");
   //   s2.addEvent(newArrayList<String>(Arrays.asList("100m backstoke","50m backstoke","100m freestyle")));

   //   Runner r1 = new Runner("Bolt", "Usain", 1986, 8, 21, 'M',"Jamaica");
//       r1.addEvent("M100"); r1.addEvent("M200");

   //   Runner r2 = new Runner("Griffith", "Florence", 1959, 12, 21, 'F',"United States of America"); r2.addEvent("M100"); r2.addEvent("M200");
   //   r2.addEvent("M400"); r2.addEvent("M10000"); r2.addEvent("M3000");
   //   r2.addEvent("M5000");

   //   AthleteRoster ar = new AthleteRoster("Fall",2019);
   //   ar.addAthlete(a1);
   //   ar.addAthlete(s1);
   //   ar.addAthlete(r1);
   //   ar.addAthlete(r2);
   //   ar.addAthlete(s2);
   //   ar.addAthlete(r5);
   //   System.out.println(ar.allRunnersOrderedByNumberOfEvents());
       System.out.println("=======================================\n");

   //   System.out.println(ar.allAthletesOrderedByAge());
       System.out.println("=======================================\n");

   //   System.out.println(ar.allAthletesOrderedByLastName());
       System.out.println("=======================================\n");

   }

}

Complete the code before the due date. Submission of the completed eclipse project is via github link posted on the class page. Add your UML drawing to the github repo. ________________________________________________________________________ Example output:

__________Example from AthleteDriver shown below

Gender is undeclared
Gender is female
Gender is male
ComputeAge method says 19 years and 4 days
First name is : Duck

DaysSinceBirth method says 6943 days Last name is : Daffy
Output of our toString correct?:
Duck Daffy is 19 years and 4 days old =======================================

Did we add M10000 successfully?: true
Did we unsuccessfully try to add M10000 again?: false
Did we successfully add multiple events?: true
Did we unsuccessfully try to add multiple events?: false
How many events does Bugs participate in?: 3
Gender is male
Output of our toString correct?:
Bunny Bugs is 19 years and 3 days old. His is a citizen of USA and is a super athlete who participates in these events: [M10000, M100, M3000] =======================================

Read the case study and answer three questions below:

Patti Smith looked up at the bright blue Carolina sky before she entered the offices of Horizon Consulting. Today was Friday, which meant she needed to prepare for the weekly status report meeting. Horizon Consulting is a custom software development company that offers fully integrated mobile application services for iPhoneTM, AndroidTM, Windows Mobile® and BlackBerry® platforms. Horizon was founded by James Thrasher, a former marketing executive, who quickly saw the potential for digital marketing via smartphones. Horizon enjoyed initial success in sports marketing, but quickly expanded to other industries. A key to their success was the decline in cost for developing smartphone applications, which expanded the client base. The decline in cost was primarily due to learning curve and ability to build customized solutions on established platforms. Patti Smith was a late bloomer who went back to college after working in the restaurant business for nine years. She and her former husband had tried unsuccessfully to operate a vegetarian restaurant in Golden, Colorado. After her divorce, she returned to University of Colorado where she majored in Management Information Systems with a minor in Marketing. While she enjoyed her marketing classes much more than her MIS classes, she felt the IT know-how acquired would give her an advantage in the job market. This turned out to be true as Horizon hired her to be an Account Manager soon after graduation. Patti Smith was hired to replace Stephen Stills who had started the restaurant side of the business at Horizon. Stephen was “let go” according to one Account Manager for being a prima donna and hoarding resources. Patti’s clients ranged from high-end restaurants to hole-in-wall mom and pop shops. She helped develop smartphone apps that let users make reservations, browse menus, receive alerts on daily specials, provide customer feedback, order take-out, and in some cases order delivery. As an Account Manager she worked with clients to assess their needs, develop a plan, and create customized smartphone apps. Horizon appeared to be a good fit for Patti. She had enough technical training to be able to work with software engineers and help guide them to produce client-ready products. At the same time she could relate to the restaurateurs and enjoyed working with them on web design and digital marketing. Horizon was organized into three departments: Sales, Software Development, and Graphics, with Account Managers acting as project managers. Account Managers generally came from Sales, and would divide their time between projects and making sales pitches to potential new clients. Horizon employed a core group of software engineers and designers, supplemented by contracted programmers when needed. The first step in developing a smartphone application involved the Account Manager meeting with the client to define the requirements and vision for the application. The Account Manager would then work with a Graphic User Interface (GUI) designer to come up with a preliminary story board of how the application would function and look. Once the initial concept and requirements were approved the Account Manager was assigned two pairs of software engineers. The first pair (app engineers) would work on the smartphone side of the application while the second pair would work on the client side of the application. Horizon preferred to have software engineers work in tandem so they could check each other’s work. The two app engineers would typically work full time on the application until it was completed while the other engineers would work on multiple projects as needed. Likewise, GUI designers would work on the project at certain key stages in the product development cycle when their expertise was needed. The head of Graphics managed the GUI designers’ schedule while the head of Software managed the software engineer assignments. At the end of each project Account Managers submitted performance reviews of their team. The Director of Sales was responsible for the Account Managers’ performance reviews based on customer satisfaction, generation of sales, and project performance. Horizon believed in iterative development, and every two to three weeks Account Managers were expected to demonstrate the latest version of applications to clients. This led to useful feedback and in many cases redefining the scope of the project. Often clients wanted to add more functionality to their application once they realized what the software could do. Depending upon the complexity of the application and changes introduced once the project was under way, it typically took Horizon two to four months to deliver a finished product to a client. Patti was currently working on three projects. One was for Shanghai Wok, a busy Chinese mom and pop restaurant located in downtown Charlotte, North Carolina. The owners of Shanghai Wok wanted Horizon to create a smartphone app that would allow customers to order and pay in advance for meals they would simply pick up at a walk-up window. The second project was for Taste of India that operated in Kannapolis, North Carolina. They wanted Horizon to create a phone app that would allow staff at the nearby bio-tech firms to order food that would be delivered on-site during lunch and dinner hours. The last project was for Nearly Normal, a vegetarian restaurant which wanted to send out e-mail alerts to subscribers that would describe in detail their daily fresh specials. James Thrasher was an admirer of Google and encouraged a playful but focused environment at work. Employees were allowed to decorate their work spaces, bring pets to work, and play ping-pong or pool when they needed a break. Horizon paid its employees well but the big payoff was the annual Christmas bonus. This bonus was based on overall company profits, which were distributed proportionately based on pay grade and performance reviews. It was not uncommon for employees to receive a 10–15 percent boost in pay at the end of the year.

STATUS REPORT MEETING

As was her habit Patti entered the status report meeting room early. David Briggs was in the midst of describing the game-winning catch John Lorsch had made in last night’s softball game. Horizon sponsored a co-ed city league softball team which most of the Account Managers played on. Patti had been coaxed to play to ensure that the requisite number of “females” were on the field. She balked at the idea at first; softball wasn’t really her sport, but she was glad she did. Not only was it fun, but it gave her a chance to get to know the other managers. James Thrasher entered the room and everyone settled down to business. He started off as he always did by asking if anybody had important news to bring to everyone’s attention. Jackson Browne slowly raised his hand and said, “I am afraid I do. I just received notification from Apple IOS that they have rejected our TAT app.” TAT was a phone app that Jackson was the project lead on that allowed subscribers to reserve and see in real time what swimming lanes were available at a prestigious athletic club. This announcement was followed by a collective groan. Before an Apple app could go operational it had to be submitted and approved by Apple. Usually this was not a problem, but lately Apple had been rejecting apps for a variety of reasons. Jackson went on to circulate the list of changes that had to be made before Apple would approve the app. The group studied the list, and in some cases ridiculed the new requirements. Ultimately, James Thrasher asked Jackson how long it would take to make the necessary changes and resubmit the app for approval. Jackson felt it would probably take two to three weeks at most. Thrasher asked who the engineers that worked on this project were. Patti’s heart fell. One of the app engineers who had developed the TAT app was working on her Shanghai Wok project. She knew what was going to happen next. Thrasher announced, “OK everyone, it only makes sense that these engineers are the best ones to finish what they had started so they are all going to have to be reassigned back to the TAT project. Those affected are going to have to get together after this meeting and figure how you are going to replace them.” The meeting then proceeded as planned with all the account managers reporting the status of their projects, and sharing relevant issues with the group.

POST-MEETING

As everyone filed out, Patti looked around to see who else was in her same boat. There were three other Account Managers as well as Jackson Browne. Resource assignments were a reoccurring issue at Horizon given the nature of their work. Horizon had developed a policy where decisions were made based on project priority. Each project was assigned a Green, Blue or Purple designation based on the company priority. Priority status was based on the extent the project contributed to the mission of the firm. The Shanghai Wok project given its limited size and scope was a Purple project, which was the lowest ranking. The list of available software engineers was displayed on the big screen. Patti was only familiar with a few of the names. Leigh Taylor who had the only Green project immediately selected Jason Wheeler from the list. She had used him before and was confident in his work. Tom Watson and Samantha Stewart both had Blue Projects and both needed to replace a mobile app engineer. They both immediately jumped on the name of Prem Mathew, claiming he was the best person for their project. After some friendly jousting, Tom said, “OK, Sam, you can have him; I remember when you helped me out on the Argos project; besides my project is just beginning. I’ll take Shin Chen.” Everyone looked at Patti; she started by saying, “You know, I am only familiar with a few of these names; I guess I’ll go with Mike Thu.” Jackson interjected, “Hey everyone, I am really sorry this happened, and I am sure Mike is a good programmer, but I recommend you work with Axel Gerthoff. I have used him before, and he is a very quick study and a joy to work with.” This was a relief to Patti and she quickly took his advice. They left to submit a report to Thrasher detailing the decisions they each had made and the impact on their projects.

1. How successful was the post-meeting?

2. What factors contributed to the success or failure of this meeting?

3. What kind of project management structure does Horizon use? Is it the right structure? Explain.

Small Business Management

QUESTION:

What will be the evaluation for the proposed low-cost marketing activities for enhancing the generation of the future bookings and the brand awareness of this small business?

Critically assess.

CASE STUDY

The children's party market is no jelly and trifling matter. "It's a huge industry," Tim Jenkins writes after his interview with Amanda Frolich from

Amanda's Action Kids. According to Frolich, "People spend an absolute fortune on their children's birthday parties and fortunately the recession hasn't affected our business."

Like Paul Lindley, founder of Ella's Kitchen, who used his parenting experience to launch a successful start-up, the party business with low barriers-toentry sees numerous parent small business concepts. Michelle Hill incorporated her own party business called The Land of Make-Believe after spending hours creating props, themed food, and thinking up games suitable for her five-year-old son's shared birthday party. This birthday spectacular experience helped her identify a clear gap in the market.

According to Tim Jenkins, a modest £50 party spend per UK child equates to an annual £35 million for a single school-year group. With £250 not

untypical for an outsourced party service, it is easy to value the industry in the hundreds of millions.

The Land of Make-Believe party concepts include themes for cheerleaders, pirates, and fairies; cowboys and Indians; witches and wizards; Fairy Godmother, Teddy Bear picnic, glamor, and Grease the musical with Pink Ladies and T-Birds. Party concepts that tend to appeal more to boys, perhaps relying less on dressing up and dancing, include club energy sports, go-karting, football, army games, reptiles and pets, and fire engine-themed parties. Leisure venues also offer some stiff competition with swimming pool visits, laser quest, bowling, cinema, and restaurant visits also popular. Business Model Essentials Successful party concepts need a certain "wow" factor that is popular with the children, but also satisfies parents' social needs too. Thus, it is important to also consider appropriate services for parents. Maslow's hierarchy of needs framework perhaps offers some useful cues: shelter, comfort, psychological self-actualization—be that social linger space, self-service hot beverages, a glass of wine, or a latte bar. Party providers need to balance novelty with tried and tested formulas, perhaps offering evolving theme linkages that might anticipate new film releases, particularly sequels. They look to reduce parental hassle with branded off-the-shelf invitation cards and party bags that appeal particularly to cash-rich, often time-poor, parents. Entrepreneur.com neatly summarizes the party service offering: "You'll plan the theme, provide costumes (unless guests arrive wearing their own), décor, food, favors and other assorted goodies, entertainment, and clean up afterward so parents can enjoy the festivities instead of running themselves ragged."

The business model usually has relatively low start-up costs—a website and a telephone number will generally suffice. Wardrobe, props, and base supplies are not insignificant items and should be carefully considered in financial planning. There is some wide variation in the complexity of offerings in the sector from a light touch and self-contained entertainer magician or comedian whose equipment might be limited to a costume, a music system, and some props that fit into a large suitcase or two to the full-service party-planning-solution provider offering a venue, full catering, the all-important candle-covered cake, decorations, and party bags. Three core components are required for a successful party operation, namely venue, catering, and entertainment. Fixed costs can be kept low, but are dependent on avoiding the purchase of a specialized vehicle and/or long-term premises by using a client-arranged venue. Children's party planning is clearly not a job for someone craving regular Monday through Friday, 9 a.m. to 5 p.m. hours. The ability to successfully interact with children and their parents, balancing controlled fun and calm authoritativeness, is particularly important but often rather taken for granted.

Marketing Communication Angles

A reputation for running successful parties is crucial to stimulate positive word-of-mouth referrals via parental social networks, accentuated by frequent contact at school pick-ups and drop-offs, but also on social media, and in particular parenting website communities such as mumsnet.com, which offers local listings, discussion boards, and advice-based content. In addition to successfully hosting enjoyable parties, which should drive positive referrals, a number of low-cost marketing activities can be implemented to help generate future bookings such as

-      Arranging to share a business card or small colour flyer via the party bag that is often given to departing guests. -     Posting flyers at local clubs and church halls.

-      Advertising in directories (telephone and web).

-      Donating a free party to a school/community charity auction.

-      Writing advertorial content accompanied by strong images in the local press (note parental permission and ethical issues around publishing photos of children).

-      Creating a website and social media presence on key sites.

-      Performing at community group/school events.

-      Printing car stickers to build brand awareness and share web and telephone contacts.

Rugged Earth Adventures

One ex-army officer's start-up inspiration led to a birthday party business centered on a military outdoor adventure theme. Having experimented with a number of temporary locations, the business finally settled on a large piece of underutilized agricultural land that comprises a mix of scrub land, combined with lines of commercially unsuccessful shrubs and trees.

The customer segment that this business proposition appeals to is mostly parents of boys—approximately 75 percent of participants are male, aged between 6 and 10 years. The children participate in a two-hour party that sees them run around outside in a natural environment. Issued with a foam bullet Nerf gun and protective glasses, participants are initially put into two teams, jungle versus desert, utilizing authentic British army terminology. A second game, the less frenetic snipers-and-seekers, is a form of hide-and-seek using realistic camouflage costumes. Then the young people are carefully instructed on how to thoroughly cook their own sausage, which is served as a hot dog, and the party concludes with toasted marshmallows. During one of the well-timed rest periods, a picnic basket is offered to the participants around the campfire with a variety of foods—an array that is low in chocolate and big on fruit and vegetables, which is appealing to parents, but it also includes less healthy but popular cupcakes and crisps. With overprotective parents, toy guns that fire projectiles, and an open fire, the safety briefing is taken very seriously and uses a highly authoritative army style. Children are regularly reminded about safe behavior requirements around the fire pit, particularly when wearing flammable costumes. Compliant use of safety glasses is paramount, with regular and direct reinforcement of the safety rules taking place. Hosting and supervising parents are made to feel at ease, provided with access to self-service hot and cold drinks and a place to perch. An informal satisfaction polling takes place just prior to the end around the campfire; positive responses are anticipated, thanks to a fairly simple formula that is well executed. The opportunity afforded to parents to relax while watching a group of children enjoy a totally stress-free afternoon is actually quite enjoyable. The business income comes predominantly from weekend parties, with the current site offering a capacity of three or possibly four parties per day. Each party can entertain 10 to 24 young people and costs between £120 and £295 (£12 to £20/child, excluding cake and party bags, which are £5 per child extra). Activity days, attractive for dual working parents, are also offered during the Easter and summer school holidays, priced at £26 to £34 per day. The revenue generated covers operating costs after a very short operational period.

Fukui Prefecture is situated on the northwest coast of Japan, over 400 kilometers west of
Tokyo. In 2014, over 95 percent of Japanese-produced eye-glass frames were made in Fukui
Prefecture, principally in the cities of Fukui and Sabae. In the early 20th century, the Fukui
economy was dominated by agriculture. Taking advantage of the seasonal lull in
employment during the winter months, Mr Masunaga Gozaemon and his brother Kohachi
started a business in the village of Shono to manufacture celluloid eye-glass frames.
Initially, the quality of Fukui-made eyeglasses was low. To raise standards, Mr
Gozaemon established a guild like system in which full-fledged craftsmen could set up their
own businesses. Production took off during World War I, and by 1937, the Fukui industry
comprised 70 factories employing 800 workers, and producing 1.5 million pairs of eyeglasses
a year.
In the 1980s, Fukui manufacturers perfected the production of titanium frames. These
are light and sturdy, and cause fewer allergies than conventional metals, but require
considerable skill to make. The strong tradition of craftsmanship in Fukui enabled the
production of titanium frames.
Mr Shoji Gozaemon, great grandson of the pioneer, Masunaga Gozaemon,
emphasized, “One of the characteristics of Japanese craftsmanship is a kind of redundancy of
detail. There is a tendency to pay careful attention to the minutest details. The spirit of
Japanese craftsmanship often involves spending more time and effort over producing
something than is strictly necessary” (Nippon.com 2012).
Besides manufacturers of eye-glass frames, the Fukui industry also includes
manufacturers and suppliers of lenses, sunglasses, reading glasses, parts, materials such as
titanium wire and preformin, and machines and tools.
With the entry of low-cost Chinese manufacturers into the market, the manufacturing
of eye-glasses in Fukui prefecture peaked in 1992. Within twenty years, by 2012, 40 percent
of Fukui eye-glass manufacturers had gone out of business, and employment and production
dropped by one-third. Another challenge is demographic. Japan is a rapidly ageing society.
In just eight years between 2011-17, the working population of Sabae fell by 11 percent to
30,000.
One possible response is automation. Fund manager, Howard Smith, asserts that
“with chronic depopulation challenges in rural areas, most companies must adapt or die. That
involves planning for succession and investing heavily in automation” (Financial Times,
2018).
(c) 2018. I.P.L. Png. This case is based in part on “Sabae, Fukui: A Town with an Eye for Design”,
Nippon.com, 24 April 2012, “Luxottica Group Invests in ‘made in Japan’”, Press Release, Luxottica
Group, 6 March 2018, and “Made in Japan: can handcrafted glasses survive an automated world?”
Financial Times, 4 April 2018.
2
Mr Ryozo Takeuchi is chairman of Takeuchi Optical, founded in 1932 and presently
employing 80 persons. Mr Takeuchi is also president of the Fukui Optical Association. He
describes automation as a buzz-word, and maintains that metal frames must be finished by
hand. In his factory, titanium frames pass through the hands of ten different workers and are
then polished for 72 hours in a bath of pulverized walnut shells.
Another response has been to shift away from the previous OEM (original equipment
manufacturing) model, in which Fukui produced eye-glasses and parts for international
brands such as Prada and Dior. In 1996, Fukui manufacturer Boston Club launched its own
brand, Japonism, and followed up in 2002, by opening a retail store in the fashionable
Minami-Aoyama district of Tokyo.
Chief designer of Boston Club, Kasashima Hironobu, remarked, “Traveling to
international fairs overseas … brought home to me that constantly emphasizing the technical
know-how we have built up over the years is not enough to make us internationally
competitive. ... We need to promote the worldview expressed by our brand and appeal to the
consumer by emphasizing the values that lie behind it” (Nippon.com 2012).
Boston Club’s previous strategy had been to design products that could only be made
with Japanese technology. Turning design convention on its head, Boston Club decided to
emphasize durability – to produce eyeglasses which could be used for life. It developed the
new Rudder Hinge which can be detached and replaced when necessary. With replaceable
parts, the frames can be used almost indefinitely.
In 2003, over 20 Sabae manufacturers joined to develop an industry brand, “291.” In
2008, they opened Glass Gallery 291, a retail outlet in the Aoyama district of Tokyo and then
another outlet in the Megane Museum at Sabae. In 2017, Masunaga Optical, the company
founded by pioneer Masunaga Gozaemon, employed 173 workers at its factory, and operated
retail stores in Tokyo, Osaka, Nagoya, and Nara.
However, not all Fukui eye-glass manufacturers have been able to adapt. Some lack
the managerial expertise or capital. Looking out from his factory, Mr Takeuchi pointed to
three businesses that had recently gone bankrupt.
Some owners are selling. Founded in 1966, Fukui Megane presently employs 170
workers and specializes in making titanium and solid gold frames. It pioneered multi-colored
gold frames and is still the only the producer in the world. In March 2018, Fukui Megane
sold a 67 percent stake to multinational eyeware manufacturer, Luxottica, which owns brands
including Ray Ban and Oakley, and manufactures for brands such as Chanel, Prada, and
Giorgio Armani.
Luxottica Group Executive Chairman, Mr Leonardo Del Vecchio, explained that “The
acquisition of Fukui Megane represents a first step for the entry of our Group in the world of
Japanese production. We intend to continue investing to recreate a productive pole of
excellence in Sabae, in line with the Luxottica model. For the first time in the history of
3
eyewear, we will have under the same roof two great artisan schools such as the Italian and
the Japanese ones” (Luxoticca 2018).
The aging ownership of other Fukui eye-glass manufacturers without successorship
plans presents an opportunity for mergers and acquisitions. Specialists, Nihon M&A Center,
M&A Capital Partners, and Strike, can help find buyers and consolidate and automate the
industry.
In 2007, former investment banker, Mr Kenzo Matsumura, bought five companies
that were spun off from the merger of Japanese toy manufacturers Tomy and Takara. Among
them was a trading house that sold reading glasses through a television shopping channel. Mr
Matsumura expected that, in a fast ageing society, the demand for reading glasses would
boom. However, the reading glasses were bad and hardly profitable. The cost of production
was 3,300 Yen, the trading house charged a wholesale price of 3700 Yen, while the television
channel priced the glasses at 10,000 Yen.
The condition of the factory in Sabae was parlous. In Mr Matsumura’s words, “The
machinery was battered and looked 40 years old. There were women doing lens coatings by
hand. Everything was manual. The defect rate was 30 percent” (Financial Times, 2018).
Major lens manufacturers like Hoya and Nikon outsourced production to China and
Thailand. Mr Matsumura criticized their strategy, “If you fully automate a factory, you can
be in Japan running that factory more productively and at lower cost than in China”
(Financial Times, 2018).
He set up an automated factory in Chiba prefecture, east of Tokyo, which produces
Hazuki reading glasses at a rate of 20,000 a day. Shrouded in secrecy, with further
automation, the factory is expected to triple the rate of production.
Hazuki has also repositioned the product as a sophisticated fashion item, while
maintaining the retail price at 10,000 Yen. In February 2018, during the Winter Olympics,
Hazuki spent US$5 million on television advertising, which led to a spectacular boost in sales.

Questions:

1. With reference to the Japanese eye-glass manufacturing industry, discuss why productivity differs within an industry.
2. What does a buyer get from acquiring a Fukui manufacturer of eye-glass frames?
Compare the benefits to Luxoticca vis-à-vis a private equity firm.
3. Do you agree with Mr Takeuchi that automation is a buzz-word?
4. If you were Mr Matsumura, where would you locate your factory? Discuss the advantages and disadvantages of locating in a cluster.

Instruction: please summarize this entire case study in three pages. (The Bill & Melinda Gates Foundation)

The Bill & Melinda Gates Foundation Growing up in Seattle, William H. Gates III was a slender, intense boy with a messy room and a dazzling mind. At age seven or eight he read the entire World Book Encyclopedia. At his family’s church the minister challenged young congregants to earn a free dinner by memorizing the Sermon on the Mount, a passage covering Chapters 5, 6, and 7 in the Book of Matthew. At age 11 young Bill became the only one, in 25 years of the minister’s experience, ever to recite every word perfectly, never stumbling, never erring. 1 Yet Christianity itself never attracted Gates. Years later he would remark, “There’s a lot more I could be doing on a Sunday morning,” an incongruous conviction for one who would become devoted to serving the poor. 2 His brilliance, however, was lasting. At private Lakeside prep school he was a prodigy, often challenging his teachers in class. Obsessed with computers in their then-primitive form, he stayed up all night writing code, a routine that would stay with him. He also read biographies of great historical figures to enter their minds and understand how they succeeded. After high school he attended Harvard University hoping to find an atmosphere of exciting erudition. Instead, he grew bored and left to pursue a fascination with computers. At age 19, Gates founded Microsoft Corporation with his Lakeside School friend Paul Allen. As its leader he was energetic, independent, and confrontational. He developed the reputation of a fanatical competitor willing to appropriate any technology and crush market rivals. He built a dominant business and by 1987, at age 31, he was a billionaire. Microsoft’s stock took flight, making more billions for Gates. However, even as he became the world’s richest man he remained absorbed in running the corporation.

References :1 James Wallace and Jim Erickson, Hard Drive: Bill Gates and the Making of the Microsoft Empire (New York: HarperBusiness, 1992), pp. 6–7. 2 Garrison Keillor, “Faith at the Speed of Light,” Time, July 14, 1999, p. 25.

He put little energy into charity, thinking it could wait until he grew old. But the world expected more. Requests for good deeds and contributions poured in. Gates responded with the help of his father, who worked in a home basement office handling his son’s donations. In 1994, Gates formalized his giving by creating the William H. Gates Foundation and endowing it with $94 million. His father agreed to manage it from the basement. Eventually, this arrangement evolved into the Bill & Melinda Gates Foundation, which included the name of his wife and was run by a professional staff from its new headquarters in Seattle. A foundation is essentially an organization with a pool of money for giving to nonprofit and charitable causes. It is not taxed if it gives out at least 5 percent of its funds each year. Bill Gates gave his foundation $16 billion in Microsoft stock in 2000. Since then he has given more. Today the Foundation is endowed with $37 billion, making it the world’s largest. It has two parts. One part decides what projects to fund. So far, more than $25 billion has been given out. The other part manages the endowment by investing the money to make it grow. The Gateses are deeply involved in the foundation’s work, which is based on a pair of “simple values” that inspire them. One is that “all lives—no matter where they are being led—have equal value,” and the other is that “to whom much is given, much is expected.” Giving is tightly focused on three areas—global health, poverty in developing nations, and U.S. public education. Because the foundation’s endowment is unprecedentedly large, more than the gross domestic products (GDPs) of 107 countries, its goals are ambitious. One is to correct market signals that cause modern medicine to neglect diseases of the poor, thus failing to value all lives equally. Pursuing this goal, the foundation has spent more than $3.8 billion on basic vaccinations for newborns in countries with low GDPs, preventing so far an estimated 3.4 million deaths. 3 It purchases such massive amounts of vaccines that prices fall, allowing doses for millions more children. It spends billions more to create new vaccines for tropical parasitic diseases and to fight a resurgence of polio in Africa. Bill Gates is characteristically intense, impatient, and direct in the quest to save lives. Learning that the global health staff was paying big travel grants for people to fly to meetings, he issued a curt memo about “rich people flying around to talk to other rich people.” He lectured the staff: “Our net effect should be to save years of life for well under $100, so, if we waste even $500,000, we are wasting 5,000 years of life.”

References: 4 Bill Gates at 31, already a billionaire. Source: © Ed Kashi/CORBIS. 3 Statement of Helen Evans, “State of the World’s Vaccines and Immunization Report 2009,” GAVI Alliance, October 31, 2009, at www.gavialliance.org. 4 Quoted in Andrew Jack, “Gates Foundation: Smaller Funds, Hard Decisions,” FT.com, September 30, 2009, at www.ft.com.

In 2006 Bill Gates’ friend Warren Buffett, chairman of Berkshire Hathaway and, at the time, the world’s second-richest man, decided to give most of his wealth away and made a bequest of 10 million shares of Berkshire Hathaway to the Gates Foundation. He believed Bill and Melinda Gates were doing such a superior job he could do no better and, rather than manage billions of dollars of giving on his own, he left his legacy in their hands. At the time, his gift was worth $31 billion, a sum that roughly doubled the Gates endowment. It arrives in annual installments of between $1 billion and $2 billion. The Gates Foundation confronts enormous social problems. Poverty and disease defy solution. Spending large sums in poor nations is a challenge. Corruption diverts funds. Agencies lack capacity. When infant lives are saved by vaccination, more people live to seek ordinary care. Some nations struggle to provide even the most basic care due to shortages of doctors and nurses. Thus, children are saved from diphtheria only to die in large numbers from common diarrhea. 5 Improving education is another nightmare. After spending $1 billion over six years to make small high schools better, an analysis showed that attendance, graduation rates, and test scores on basic subjects were lower than at similar schools not funded by the Gates Foundation. 6 Despite its magnificence, the Gates Foundation attracts critics. It is directed by only three trustees–Bill and Melinda Gates and Warren Buffet–putting its multibilliondollar expenditures in the hands of just two families. 7 It has been called an elitist, antidemocratic institution subsidized by taxpayers (through its tax exemptions) but having no accountability to society. 8 Suspicions are raised that its grants, being so big, shape the world’s health agenda and distort research priorities, for example, by overemphasizing vaccines for tropical diseases as opposed to other forms of treatment. 9 However, the Gateses and Warren Buffet want to extend the example set by their philanthropy. In 2009 they arranged a series of small, confidential dinners attended by fellow billionaires. Guests were asked to pledge the majority of their wealth to charity, either during their lifetime or at death, each one determining which causes to fund. Over the next year this initiative was formalized in a “Giving Pledge” joined by 40 billionaires. 10 Their pledges are moral commitments; they are not monitored or enforced as legal contracts. The Gateses and Buffet hope to spread the initiative to other nations. Their goal is to divert wealth from the very rich to enlarge the scope of global philanthropy for generations to come.

References :5 Laurie Garrett, “The Challenge of Global Health,” Foreign Affairs, January/February 2007. 6 The National Institutes of High School Transformation, Evaluation of the Bill & Melinda Gates Foundation’s High School Grants Initiative: 2001–2005 Final Report (Washington, DC: American Institutes for Research, 2006), pp. 9–10. 7 Pablo Eisenberg, “The Gates-Buffett Merger Isn’t Good for Philanthropy,” Chronicle of Philanthropy, July 20, 2006, p. 33. 8 “Philanthropic World Voices Mixed Reaction on Buffett’s Gift to Gates Fund,” Chronicle of Philanthropy, July 20, 2006, p. 12, comment of Rick Cohen. 9 David McCoy, et al., “The Bill & Melinda Gates Foundation’s Grant-Making Programme for Global Health,” The Lancet, May 9, 2009, p. 1652. 10 Carol J. Loomis, “The $600 Billion Challenge,” Fortune, July 5, 2010.

Philanthropy is one method for converting wealth to social value. Bill Gates and Warren Buffet follow a long tradition of rich capitalists who make fortunes, then later in life spend their wealth on works of kindness. In this chapter we will expand on the subject of philanthropy. First, however, we look at how managers implement social responsibility efforts within their firms. Social responsibility, like any other corporate goal, must be systematically planned, organized, and carried out. We will set forth a model of how this can be done

Based on the article:

Question: Write a short description of the possible functions of lipid droplets.

"Expanding the roles for Lipid droplets."

Lipid droplets are the intracellular sites for neutral lipid storage. They are critical for lipid metabolism and

energy homeostasis, and their dysfunction has been linked to many diseases. Accumulating evidence suggests

that the roles lipid droplets play in biology are significantly broader than previously anticipated. Lipid

droplets are the source of molecules important in the nucleus: they can sequester transcription factors and

chromatin components and generate the lipid ligands for certain nuclear receptors. Lipid droplets have also

emerged as important nodes for fatty acid trafficking, both inside the cell and between cells. In immunity, new

roles for droplets, not directly linked to lipidmetabolism, have been uncovered, with evidence that they act as

assembly platforms for specific viruses and as reservoirs for proteins that fight intracellular pathogens. Until

recently, knowledge about droplets in the nervous system has been minimal, but now there aremultiple links

between lipid droplets and neurodegeneration: many candidate genes for hereditary spastic paraplegia also

have central roles in lipid-droplet formation and maintenance, and mitochondrial dysfunction in neurons can

lead to transient accumulation of lipid droplets in neighboring glial cells, an event thatmay, in turn, contribute

to neuronal damage. As the cell biology and biochemistry of lipid droplets become increasingly well understood,

the next few years should yield many new mechanistic insights into these novel functions of lipid

droplets.

Introduction

Lipid droplets are the sites where cells store neutral lipids, such

as triglycerides, steryl esters, and retinyl esters [1–3]. These

stored lipids can then be used in times of need to generate

energy, membrane components, and signaling lipids. Impairment

of the machinery that makes or degrades lipid droplets

has severe physiological consequences [1,4–6], demonstrating

that lipid droplets play central roles in cellular and organismal

energy homeostasis, in particular, and overall lipid metabolism

in general.

Lipid droplets also allow cells to safely sequester otherwise

toxic lipids. For example, as amphipathic molecules, overabundant

fatty acids can severely compromise membrane integrity.

Once turned into triglycerides and incorporated into lipid droplets

(Figure 1A), they are relatively inert, stable, and harmless.

This protective function is probably the reason for the abundant

accumulation of lipid droplets in many disease states characterized

by aberrant lipid supply and metabolism, such as obesity,

atherosclerosis, and fatty liver disease [1,6,7].

Lipid droplets are particularly important in tissues specialized

for energy storage or lipid turnover, such as adipose tissue,

the liver, and the intestine [2,3,8], yet they also accumulate in

skeletal muscle, the adrenal cortex, macrophages, and mammary

glands [1]. They control lipid signaling in immune cells

and are the targets of attack by pathogens [9]. Finally, they

have been observed in most cell types and occur throughout

the animal kingdom, in plants, and in unicellular organisms.

Recently, it has become apparent that lipid droplets play even

broader cellular roles than previously appreciated. For example,

they modulate the availability of proteins and signaling lipids in

the nucleus, act as hubs for fatty acid trafficking, are used by

viruses as assembly platforms, and their dysfunction in neurons

and glia may lead to neurodegeneration. This review summarizes

key recent findings into these emerging roles of lipid droplets,

with the aim of sharing these exciting developments with researchers

beyond the lipid-droplet field. Lipid droplets are still

relatively understudied organelles and, given the versatile functions

already revealed, it seems likely that further roles in new

areas of biology will be discovered.

Some Basic Concepts in Lipid-Droplet Biology

In the last few years, there has been an explosive growth in our

understanding of the structure, biogenesis, and turnover of lipid

droplets, which have been extensively covered in many excellent

recent reviews [1,5,10–15]. Among cellular organelles, lipid

droplets have a unique structure (Figure 1A): a central core of

hydrophobic (neutral) lipids is surrounded by a single layer of

amphipathic lipids and proteins (reminiscent of half a membrane

bilayer). The triglycerides in the hydrophobic core are generated

by an elaborate biosynthetic pathway (for a summary, see [10]),

with the final step being catalyzed by the acyl-CoA:diacylglycerol

acyltransferases DGAT1 and DGAT2 (Figure 1A), converting

diacylyglycerol (DAG) and fatty acids, first activated to

acyl-CoA, into triglycerides. Both enzymes are located in the

endoplasmic reticulum (ER), where triglycerides accumulate at

privileged sites that represent nascent lipid droplets [16]; mature

lipid droplets are generated by continuous growth of these

structures and finally become distinct from the ER, likely via aprocess resembling budding [10,13]. DGAT2 is only inserted

into one leaflet of the ER membrane and can therefore diffuse

onto the surface of lipid droplets, promoting triglyceride synthesis

and continued droplet growth locally [17]. The hydrophobic

core can also contain steryl esters, the synthesis of which is

catalyzed by acyl-CoA:cholesterol acyltransferases. Depending

on cell type and conditions, steryl esters or triglycerides may

predominate.

Breakdown of the droplet triglycerides can occur by two

distinct pathways. Cytoplasmic triglyceride lipases bound to

the surface of lipid droplets hydrolyze triglycerides to DAG and

fatty acids. DAG can be further broken down, in two steps, into

fatty acids and glycerol (Figure 1C). In adipose tissue and

many other cells, the bulk of triglyceride hydrolysis is catalyzed

by a single lipase, adipose triglyceride lipase (ATGL) [5]. Lipid

droplets can also be turned over by autophagy (Figure 1C):

like other cellular organelles, lipid droplets are taken up by autophagosomes,

which fuse with lysosomes to form autolysosomes.

The hydrolytic enzymes delivered from lysosomes then

break down the autophagosome content; triglycerides, in particular,

are predominantly hydrolyzed by lysosomal acid lipase

(LAL) [5]. Discovered in hepatocytes [18], autophagy of lipid

droplets (‘lipophagy’) appears to make varied contributions to

triglyceride breakdown, depending on cell type and physiological

conditions [5].

Lipid Droplets as Modulators of Nuclear Functions

Lipid droplets arise from the ER and typically reside in the cytoplasm,

often at considerable distance from the nucleus. Nevertheless,

recent studies have uncovered intimate connections

between lipid droplets and nuclear events. There is emerging

evidence for a nuclear population of lipid droplets, which has

been proposed to directly modulate lipid metabolism in the nucleus.

In addition, lipid droplets in the cytoplasm can sequester

transcription factors, enzymes, and chromatin components —

and possibly many other proteins—and thus control their availability

in the nucleus.

Nuclear Lipid Droplets

Two different groups have reported the presence of lipid droplets

inside nuclei [19,20]. Using dyes specific for neutral lipids, small

spherical structures were identified in the nuclei of cultured cells

as well as in biochemically isolated nuclei [20]. Electron microscopy

of serial sections revealed that at least some of these

structures truly reside inside the nuclear compartment [19].

Biochemical fractionation suggests that these structures differ

in their lipid composition from the lipid droplets in the cytoplasm

[20]; however, they resemble cytoplasmic lipid droplets in their

morphology and in the presence of neutral lipids and were thus

named ‘nuclear lipid droplets’. It is not yet known how these lipid

droplets arise, what proteins they associate with, or what their

functional significance is. However, it is an intriguing possibility

that they contribute to nuclear lipid homeostasis and locally

modulate the availability of signaling lipids.

Exchange of Proteins between Lipid Droplets and Nuclei

Cytoplasmic lipid droplets can also profoundly affect nuclear

events. For example, lipid droplets have been implicated in suppressing

the activity of a transcription factor by keeping it out of

the nucleus [21]. The lipid-droplet protein Fsp27, also known as

CIDEC, is expressed in adipocytes and promotes fusion between

droplets, causing the formation of a single droplet per

cell [22,23]. A yeast two-hybrid screen revealed the transcription

factor NFAT5 (nuclear factor of activated T cells 5) as a potential

Fsp27 interaction partner. NFAT5 is cytoplasmic under hypotonic

conditions and translocates to the nucleus upon hypertonic

stress to activate osmoprotective genes [24]. The physical interaction

between Fsp27 and NFAT5 was confirmed in vivo, and

Fsp27 knockdown in adipocytes led to expression of NFAT5

target genes even in the absence of hypertonic stress [21]. To

examine the underlying mechanism, Fsp27 was ectopically expressed

in the heterologous HEK293 cell line; under these conditions,

Fsp27 was observed broadly throughout the cytoplasm.

Fsp27 overexpression reduced the amount of nuclear NFAT5, as

determined both by imaging and biochemistry, and blunted the

expression of NFAT5 target genes when cells were exposed to

hypertonic stress [21]. These results suggest that Fsp27 is able

to sequester NFAT5 in the cytoplasm and interferes with its

nuclear trafficking; since endogenous Fsp27 is associated with

lipid droplets in adipocytes, this interaction would retain

NFAT5 at the droplet surface (Figure 2A), something that remains

to be demonstrated directly. It will be interesting to determinewhether the interaction between Fsp27 and NFAT5 is regulated,

for example, by signaling pathways controlling lipolysis.

In Drosophila embryos, lipid droplets are associated with large

amounts of specific histones [25] via the histone anchor Jabba

[26]. This association is first detected during oogenesis and

makes it possible for females to build up massive histone stores

in the developing eggs (Figure 2B,C). Wild-type embryos contain

enough excess histones for thousands of diploid nuclei, whereas

mutants lacking Jabba have drastically reduced histone stores

[26]; indirect evidence suggests that extranuclear histones not

bound to lipid droplets are degraded. Transplantation experiments

revealed that in the embryo droplet-bound histones

can transfer to nuclei [25] and presumably support chromatin

assembly. Surprisingly, embryos lacking this droplet-bound histone

supply develop largely normally [26,27]. This is possible

because of the intricate regulation of histone metabolism in early

embryos (reviewed in [28]), which also contain abundant levels of

histone messages deposited during oogenesis. When new synthesis

of histones in the embryo is even mildly impaired, Jabba

mutants cannot sustain development and die very early [26].

Thus, in this case, lipid droplets sequester a nuclear protein for

long-term storage. This sequestration allows the organism to

build up histone stores during oogenesis and keep them available

for when they are needed later for chromatin assembly

(Figure 2C).

Lipid droplets of early Drosophila embryos also appear

to affect histone metabolism in the short term, by buffering

the histone supply [27]. When droplets are transplanted

between embryos, the donor droplets can bind histones

from the recipient embryo, suggesting that histones can be

loaded onto droplets even in embryos. In Jabba mutants,

the synthesis of histone H2A and its variant H2Av are

imbalanced, and H2Av overaccumulates in the nuclei, an

event linked to DNA damage [27]. This nuclear overaccumulation

does not occur in wild-type embryos, presumably because

here lipid droplets can trap histones produced in excess and

prevent their unregulated entry into nuclei. Whether other

species use similar droplet-based histone buffering remains

to be determined, although histones have also been detected

on lipid droplets in housefly embryos, rat sebocytes, and

mouse oocytes [25,29,30]

The enzyme CCT1 also displays dramatic exchange between

lipid droplets and nuclei. CCT1 is one of two isoforms of

CTP:phosphocholine cytidylyltransferase, an enzyme that catalyzes

the rate-limiting step in the synthesis of the phospholipid

phosphatidylcholine. In cultured fly cells, CCT1 is usually present

in the nucleus, but, under conditions in which cells synthesize

new triglycerides and expand the hydrophobic core of droplets,

CCT1 accumulates at the droplet surface [31,32] (Figure 2D). The

presence at the droplet surface is critical to expand the droplet

surface in concert with growth of the core: droplet binding activates

the enzyme and thus leads to an increase in the cellular

phosphatidylcholine supply. Whether CCT1’s presence in the

nucleus in the basal state is functionally important remains unclear.

Nuclear accumulation is apparently not a mechanism to

prevent access to the droplet surface: fluorescence recovery

after photobleaching (FRAP) experiments revealed that CCT1

is not immobilized inside nuclei, but rapidly exchanges with a

cytoplasmic pool. And overexpression of CCT2, an isoform

exchanging between the cytoplasm and droplets, can fully

rescue the effect of CCT1 depletion on droplet growth [31].

High nuclear accumulation and consequent low cytoplasmic

pools of CCT1 might possibly modulate the kinetics of relocalization

to droplets.

Prp19 is a subunit of the NineTeen Complex, which is involved

in a number of nuclear events, including spliceosome activation

and transcription elongation [33]. In mouse adipocytes, Prp19

was also found associated with lipid droplets, and Prp19 knockdown

resulted in reduced triglyceride accumulation [34]. It is not

clear whether this dual localization to lipid droplets and to thenucleus represents distinct functions of Prp19, or whether the

two populations are connected. Initial experiments with inhibitors

of nuclear export revealed no changes in overall intracellular

Prp19 distribution [34].

Modulation of Lipid Signaling

Peroxisome proliferator-activated receptors (PPARs) are transcription

factors bound and activated by lipid ligands, including

fatty acids and their derivatives. In oxidative tissues, such as the

mammalian heart and liver, PPARa promotes the expression of

proteins involved in lipid homeostasis [35]. In principle, fatty

acids from exogenous sources or synthesized de novo might

activate PPARa directly. However, free fatty acids are typically

channeled, via activation to acyl-CoA, into specific metabolic

pathways [36] and thus are not readily available for signaling.

Studies in mice uncovered that PPARa signaling is severely

compromised in the hearts of animals lacking ATGL [37]. Given

that lack of ATGL function in the heart causes many profound

changes (such as massive lipid accumulation and mitochondrial

dysfunction), the effect on PPARa signaling might conceivably

be indirect. Yet pharmacological stimulation of the PPARa

pathway is sufficient to reverse these phenotypes, establishing

PPARa signaling as a primary defect in these mutant hearts

and suggesting a direct link between lipid droplets and PPARaactivation [37]. It was proposed that

ATGL-mediated triglyceride hydrolysis

generates the ligands for PPARa [37]

(Figure 3A). This pathway may be tissue

specific because liver-specific knockdown

of ATGL impaired the expression

of PPARa target genes in this tissue, but PPARa agonists failed

to reverse this effect [38].

Lipid Droplets as Hubs for Fatty Acid Trafficking

Lipid droplets act as a sink for overabundant fatty acids, and they

can release lipids when needed for energy production, synthesis

of membrane components, or signaling. It is becoming increasingly

apparent that lipid trafficking to and from droplets is highly

regulated in space (Figure 3A). Fatty acids from triglyceride hydrolysis

signal to nuclear receptors (as discussed above); fatty

acids released during autophagy are shuttled through lipid droplets,

as a way station before import into mitochondria for ATP

production; production of steroid hormones in flies requires lipid

exchange between the ER, lipid droplets, and mitochondria; and

within a population of cells, high accumulation of droplets in a

subset of cells has been proposed to protect the rest of the cells

from fatty acid overload.

Lipid Trafficking between Lipid Droplets and

Mitochondria

In starved mammalian cells, fatty acids fuel ATP production, via

b-oxidation in mitochondria. These fatty acids could be derived

from triglycerides (Figure 1B,C) or from various membranous

organelles. To follow the flux of fatty acids through variouscompartments, mouse embryonic fibroblasts (MEFs) were

allowed to incorporate fluorescently labeled lipids into either lipid

droplets or membranes, and their fate during starvation was

monitored by imaging and biochemistry [39]. Fatty acids present

as triglycerides in lipid droplets moved to mitochondria fairly

quickly and were readily broken down. When ATGL (Figure 1B)

was knocked down, transfer of fatty acids was dramatically

reduced and mitochondrial oxygen consumption rates dropped.

Under the starvation conditions employed, lipophagy (Figure 1C)

was not induced and autophagy made no detectable contribution

to the transfer of fatty acids from droplets to mitochondria

or to mitochondrial oxygen consumption rates.

The rapid relocalization of fatty acids to mitochondria is presumably

accomplished by direct transfer. Lipid droplets and

mitochondria indeed display close physical associations [40–

42], and direct channeling of fatty acids from their site of release

(droplets) to the site of consumption (mitochondria) would minimize

the risk of toxic effects elsewhere, such as disruption of

cellular membranes or inappropriate nuclear signaling.

Curiously, during starvation, the number and size of lipid droplets

increased and total cellular triglyceride levels went up [39].

Using fluorescently labeled phospholipids and inhibition of

autophagy pathways, this effect was traced to autophagic

breakdown of membranous organelles. Presumably, fatty acids

from phospholipid breakdown in autolysosomes are employed

to replenish triglyceride stores in droplets upon starvation

(Figure 3A).

Mitochondria can be remodeled by fusion and fission [43],

allowing them to form highly interconnected networks or individual

fragments. In starved cells, mitochondria were highly fused, a

state that is apparently critical for efficient fatty acid import: usually

labeled fatty acids from lipid droplets are homogenously

distributed throughout the mitochondria, but when mitochondria

were fragmented, the label was distributed unevenly [39]. As a

result, fatty acids could not be metabolized as efficiently;

although cells with either fused or fragmented mitochondria upregulate

b-oxidation upon starvation, only those with fused mitochondria

were able to maintain these levels of b-oxidation. For

cells with fragmented mitochondria, levels of b oxidation and,

as a result, total mitochondrial respiration, dropped off with

time, presumably because not all mitochondria had a sufficient

supply of fatty acids (Figure 3B). The likely reason is that there

are many fewer lipid droplets than mitochondrial fragments,

and that only the mitochondria in direct physical contact with

lipid droplets can take up fatty acids efficiently. In fused mitochondria,

those fatty acids can diffuse through the entire

network. In support of this interpretation, when glutamine was

used as an alternative fuel, the fusion state of the mitochondria

did not matter; as glutamine diffuses through the cytoplasm,

its import into mitochondria is not restricted to a limited number

of sites, unlike the supply of fatty acids from lipid droplets. Presumably

because an oversupply of unmetabolized fatty acids is

dangerous, fatty acids were re-exported from the mitochondria,

and either accumulated back in lipid droplets or were released

from the cells into the extracellular space [39].

Efficiency of lipid exchange between mitochondria, ER, and

lipid droplets may also underlie a recent observation that

promotion of mitochondrial fusion is important for lipid-droplet

formation and steroid signaling in Drosophila. Mitochondrial

associated regulatory factor (Marf), the fly ortholog of mammalian

mitofusins, is a small GTPase that promotes fusion of

the outer mitochondrial membrane; thus, loss of Marf leads to

small, round mitochondria [44]. Marf-deficient flies show a

particularly dramatic phenotype in the ring gland, an endocrine

tissue responsible for hormone secretion [45]: mitochondrial

morphology is altered, the ER is fragmented, and lipid-droplet

number is dramatically reduced [44]. Ring gland lipid droplets

receive sterols from the ER and store them as steryl esters;

these, in turn, are the precursors for the production of the steroid

hormone ecdysone in the mitochondrial matrix. Efficient storage

and turnover of steryl esters therefore presumably requires intimate

contacts between the three organelles; in Marf mutants

the contacts between all three organelles were severely reduced

[44]. Lack of Marf in the ring gland also greatly impairs ecdysone

production, with dramatic organism-wide consequences [44].

Mitochondria may not be the only organelle for which close

contacts with lipid droplets promote efficient transfer of fatty

acids. Breakdown of fatty acids is not restricted to mitochondria,

but can also occur in peroxisomes. In the yeast Saccharomyces

cerevisiae, b-oxidation is even entirely restricted to peroxisomes.

Here, lipid droplets and peroxisomes display intimate physical

connections, which have been proposed to promote efficient

coupling of triglyceride breakdown with peroxisomal fatty acid

oxidation [46].

Lipid-Droplet Specialization across a Cell Population

The role of lipid droplets as buffers for fatty acid availability may

even extend to lipid exchange between cells in the same tissue.

A recent study identified a surprising heterogeneity in lipiddroplet

content in hepatocytes [47]: in mouse liver, some cells

have substantially larger numbers of lipid droplets than neighboring

cells (Figure 3C); this variability is especially apparent

under conditions of high overall lipid storage in the liver. Similar

variability was observed in primary hepatocytes in culture and

with a cultured cell line of liver origin (AML12), suggesting that

it is due to cell-intrinsic properties, rather than a reflection of

overall tissue structure.

Such heterogeneity might arise if some cells have acquiredmutations in lipid metabolism. However, a cell sorting strategy

demonstrated that heterogeneity is reversible and appears to

be a population property. After growth on fatty-acid-rich media,

cells were separated by flow cytometry into a low-lipid and a

high-lipid subpopulation. After culture in standard media to promote

breakdown of the stored lipids, the two populations were

again grown under fatty-acid-rich conditions. Remarkably,

both cultures showed the same broad distribution in lipid content.

Inhibitor studies indicate that heterogeneity arises from

fluctuations in biochemical networks controlling lipolysis, fatty

acid oxidation, and protein synthesis.

At the level of a whole organism, heterogeneity of lipid-droplet

content is very common. Many animals have adipose tissues

specialized for storing lipids. It was proposed that heterogeneity

within a single cell population similarly sets aside a subpopulation

of cells that collects lipids particularly well, stores them,

and releases them to their neighbors when needed [47]. To

test this idea, high-lipid cells were isolated in which lipid droplets

had accumulated fluorescently labeled fatty acids. After co-culture

with low-lipid cells (marked with a different fluorescent dye

to distinguish the two original populations), the high-lipid grouphad lost — and the low-lipid group had gained — some of the

labeled fatty acids. Thus, the high-lipid cells can indeed supply

lipids to their neighbors (Figure 3D).

But what is the point of setting aside a subpopulation of cells

with especially high lipid stores if — in the long run — the lipids

are presumably needed equally across cells? One possibility

has to do with the fact that overaccumulation of free fatty acids

is dangerous, both because of disruption of membranes and

because of toxic metabolites generated by fatty acid breakdown.

The high-lipid subpopulation indeed showed higher levels

of oxidative damage, as seen by levels of reactive oxygen species

(ROS; Figure 3C). Importantly, when fluorescently marked

low-lipid cells were co-cultured with either low-lipid or high-lipid

cells (unmarked) and challenged with fatty-acid-rich media, the

marked cells displayed lower ROS levels in the presence of

high-lipid cells. Thus, the presence of high-lipid cells protected

their low-lipid neighbors. High-lipid cells may remove fatty acids

more efficiently from the media, and thus the flux of free fatty

acids into the low-lipid cells is reduced. Remarkably, in the coculture

experiment with high-lipid cells, ROS levels were not

only reduced for the marked low-lipid cells, but also for the population

as a whole.

Although the detailed mechanisms underlying these protective

effects remain to be worked out, the reported experiments

nicely demonstrate a novel strategy, namely heterogeneity in

lipid-droplet accumulation, to alleviate risks from overabundance

of lipids. By accumulating more lipid droplets and more

ROS, the high-lipid subpopulation reduces the overall risk of lipotoxicity.

It is not yet clear how the high-lipid population is able to

handle its increased risk: these cells may induce specific protective

mechanisms, or they might repair their damage during the

time when they find themselves in the low-lipid state (which

will occur sooner or later, due to the stochastic nature of the

heterogeneity). Since heterogeneity has been observed in

cultured cells of various origins [47], this protective strategy

may be employed not just by hepatocytes, but more generally

in other cell types.

Lipid Droplets and the Fight against Pathogens

It has been long known that lipid droplets play important roles in

the immune system. They are sites of synthesis of eicosanoids,

signaling lipids important for inflammation, host defense against

pathogens, and cancer [48]. Various pathogens have, in turn,

evolved strategies to tap into the lipid droplets of the host

to ensure a sufficient lipid supply [49,50]. Recent years have

uncovered how certain viruses appropriate lipid droplets as

assembly platforms and how cells use lipid droplets in novel

ways to fight back.

Lipid Droplets and Viral Assembly

Infection with hepatitis C virus (HCV) is a global public health

threat and can lead to liver cirrhosis and liver cancer [51]. For

part of its life cycle, HCV crucially depends on lipid droplets

(see [52,53] for recent reviews): after infection, two newly expressed

viral proteins transiently accumulate on lipid droplets:

core protein, which is the major structural protein of the virus,

and NS5A, a regulator of viral replication. Droplet-bound viral

proteins then interact with the sites of viral RNA replication, a

process facilitated by the droplet-localized Rab18 [54] and

by dynein-mediated intracellular relocalization of lipid droplets

[55]. For the final maturation, the virus hijacks the pathway

responsible for secretion of the very-low-density lipoprotein

(VLDL) particles, and virions are released into the extracellular

space as low-density lipoviroparticles [56], whose lipids may

ultimately be derived from lipid droplets. HCV is not unique in

its use of lipid droplets; several other viruses assemble with

the help of lipid droplets [57,58].

Droplet accumulation is a necessary step for virus maturation;

if the interaction between core protein and lipid droplets is disrupted,

either with mutations in core protein or via pharmacological

approaches, core protein stability is greatly reduced and

virion assembly is impaired [59,60]. Thus, preventing the recruitment

of viral proteins to droplets is an attractive target for disrupting

the viral life cycle. Droplet targeting requires cis-acting

sequence motifs in both core protein and NS5A [61,62], but

also trans-acting host factors. In particular, DGAT1, one of the

two enzymes mediating triglyceride synthesis (Figure 1A), plays

a crucial role: DGAT1 binds to both NS5A and core protein,

and this interaction mediates recruitment of both proteins to

droplets and is required for efficient virion assembly [63,64].

Interestingly, inhibiting the enzymatic activity of DGAT1 is sufficient

to prevent droplet targeting of these proteins. Since

DGAT1 generates only a subset of lipid droplets (the others

depend on DGAT2; Figure 1A), it was proposed that DGAT1 concentrates

the viral proteins at the sites where it promotes lipiddroplet

formation and thus guides the viral proteins onto just

these lipid droplets [64] (Figure 4A).

Lipid Droplets as Stores for Antiviral and Antibacterial

Proteins

Viperin (which stands for virus inhibitory protein, ER associated,

interferon inducible) is an interferon-induced protein with broad

antiviral activity [65,66]. Viperin is targeted to the cytoplasmic

face of the ER and is also enriched around lipid droplets [62];

targeting to both locations is mediated by an amino-terminal

amphipathic a-helix [62]. Intriguingly, two of the viruses combatted

by viperin, HCV and Dengue virus, employ droplets for

their assembly. Using confocal microscopy and fluorescence

resonance energy transfer (FRET), viperin was shown to interact

with the HCV nonstructural protein NS5A at the droplet surface,

via its carboxy-terminal region [67]. This interaction as well as theamino-terminal droplet-targeting helix are required for viperin’s

antiviral activity against HCV [67]. For Dengue virus, in contrast,

while a physical interaction with the viral protein NS3 was important,

droplet binding was dispensable for the anti-viral effect [68].

The amino-terminal a-helix in viperin was also important to

restrict the replication of chikungunya virus, though presumably

through localization at the ER, rather than at lipid droplets [69].

Thus, at least in some cases, viperin apparently targets a

droplet-dependent step of viral replication and its enrichment

on the droplet surface is necessary for its activity (Figure 4A).

As discussed earlier, lipid droplets can be associated with histones.

This observation potentially has implications for immunity

since histones are increasingly recognized as antibacterial

agents [70,71]: in vitro, histones have broad antibacterial activity

[72], and histones present in extracellular secretions have been

reported to contribute to protection against bacterial pathogens

[73,74]. Analysis in Drosophila suggests that histones bound to

lipid droplets can similarly provide a defense against intracellular

bacterial invaders [75]. Droplets biochemically purified fromDrosophila embryos are associated with high levels of certain

histones [25] and are highly bactericidal in vitro [75]. A number

of independent approaches, including using histone antibodies

and mutations in the histone anchor Jabba [26], showed that

this killing activity of droplets was due to histones.

To test whether droplet-bound histones are protective in vivo,

wild-type and Jabba mutant embryos were injected with GFPlabeled

Escherichia coli; while bacterial numbers diminished in

the wild type, they dramatically increased in the mutants [75]

(Figure 4B). In the same injection assay, wild-type embryos

also showed significantly higher levels of survival when challenged

with a number of Gram-positive and Gram-negative bacteria.

This new immune mechanism may also operate at other

developmental stages: when adult flies were infected with the

intracellular pathogen Listeria monocytogenes, Jabba mutants

were impaired in restricting bacterial titers and were killed

much more readily than wild-type flies [75]. Loading up lipid

droplets with histones to kill bacterial invaders may be a

conserved innate immunity mechanism, since when mice were

challenged with lipopolysaccharide — to mimic bacterial infections

— the levels of droplet-bound histone H1 increased in the

liver [75].

Lipid Droplets and the Nervous System

Lipid metabolism plays crucial roles in the nervous system, for

many membrane functions and signaling events [76–78]. Yet until

recently, there has been only sparse and unconnected information

on the role of lipid droplets in neurons and other cells

of the nervous system. For example, lipid droplets have been detected

in the axons of Aplysia neurons cultured in vitro [79] and in

cultured neurons and brain sections of Huntington’s disease

models [80]. There are also links between a-synuclein, a protein

whose dysfunction or overexpression can cause Parkinson’s

disease, and lipid droplets: a-synuclein has been reported to

bind to lipid droplets in vitro [81] and in cultured cells [82], and

overexpression in yeast promotes droplet accumulation [83],

but the relevance of these observations for a-synuclein’s in vivo

function and for neurodegeneration has yet to be explored. However,

recent papers have identified the presence of lipid droplets

in neurons and in glia under certain disease conditions and suggest

that disrupted lipid-droplet function can contribute to neurodegeneration.

Hereditary Spastic Paraplegias and Lipid Droplets

Hereditary spastic paraplegias (HSPs) are inherited disorders

characterized by motor-sensory axon degeneration, weakness

in lower extremities, and spasticity [84]. Mutations in over 50

loci can cause HSP, and the cellular functions of the encoded

proteins show a surprising heterogeneity. Recently, a number

of HSP candidate genes have been shown to have crucial roles

in lipid-droplet biology: atlastin, REEP1, seipin, spartin, spastin,

and kinesin-1. Atlastin mediates fusion of ER tubules and also

controls the size of lipid droplets [85]. REEP1 maintains the

high curvature of ER tubules and, when overexpressed together

with atlastin, increases lipid-droplet size [85,86]. Seipin, an integral

membrane protein at the ER–droplet junction, is important

for lipid-droplet formation and maintenance [87,88]. Spartin

localizes to lipid droplets, interacts with E3 ubiquitin ligases,

and modulates the turnover of lipid-droplet proteins [89–91];

spartin knockout mice have increased lipid-droplet numbers in

their adipose tissue [92]. Spastin is a microtubule-severing protein

that mediates remodeling of the cytoskeleton; in mammalian

cells, a particular spastin isoform harbors a lipid-droplet targeting

sequence, and depletion of spastin in Drosophila or

C. elegans alters lipid-droplet number and cellular triglyceride

content [93]. KIF5A encodes the microtubule motor kinesin-1;

the same motor powers the motion of lipid droplets in Drosophila

[94]. Finally, several of the HSP candidate genes encode enzymes

implicated in phospholipid or fatty acid metabolism

[95,96]; their dysfunction might therefore alter the supply or

composition of the lipids stored in lipid droplets. These observations

raise the intriguing possibility that aberrant lipid-droplet

biogenesis or function might contribute to axonal degeneration.

However, since all of these proteins also have functions unrelated

to lipid droplets (such as controlling ER structure or promoting

vesicle trafficking), the link between lipid droplets and

HSPs remains tentative.

A much more direct connection to lipid droplets has recently

emerged from the analysis of the HSP gene DDHD2 [97]. Patients

with mutations in DDHD2 exhibit very early onset of the disease

(<2 years) and are often intellectually disabled [98]. The DDHD2

gene is highly expressed in the brain and encodes a serine

hydrolase that displays phospholipase activity in vitro. To determine

its function in vivo, DDHD2 activity was abrogated genetically,

using knockout mice, as well as pharmacologically, withselective inhibitors [97]. In both cases, adults accumulated large

amounts of triglycerides in the brain and the spinal cord, but

there was little to no effect in other tissues; brain phospholipid

content was unchanged. These observations suggest that

DDHD2 has a specific function in triglyceride metabolism of

the central nervous system. It likely acts as a triglyceride lipase

since recombinant DDHD2 expressed in cultured cells displays

triglyceride hydrolase activity and, compared with wild type,

total triglyceride hydrolase activity is significantly reduced in

brain lysates of DDHD2 mutant mice [97]. Finally, the main triglyceride

hydrolase in the fat body of the moth Manduca sexta

shares extensive sequence homology with DDHD2 [99].

The brains of DDHD2 knockout mice displayed abundant lipid

droplets, while lipid droplets were only rarely detected in wildtype

brains [97]. They accumulated predominantly in neurons

and were present in cytoplasm, dendrites, and axons. The

DDHD2 knockout mice also exhibited deficits in motor coordination

and cognition [97], reminiscent of the defects in the human

patients [98]. Intriguingly, in the patients, cerebral magnetic resonance

spectroscopy revealed an abnormal spectrum, with a

peak characteristic of lipid accumulation [98], though it is not

yet known whether this peak represents triglycerides. While

the mechanisms that link droplet accumulation and neuronal

impairment remain obscure, one intriguing observation is that

in the DDHD2 knockout mice some of the large droplets

observed were associated with noticeable swellings of the

neuronal processes and thus might present obstacles to intracellular

trafficking in the relatively thin axons and dendrites.

Glial Lipid Droplets

Glial cells are non-neuronal cells that surround neurons and play

important supportive roles in the central and peripheral nervous

system. Lipid droplets have been observed in culture in primary

glia as well as in glia-derived cell lines [100,101]. When carnitine

palmitoyltransferase 2 (CPT2), a mitochondrial enzyme necessary

for b-oxidation of long-chain fatty acids, is abolished in flies,

massive amounts of triglycerides accumulate specifically in the

brain of adults; glial cells, but not neurons, accumulated abundant

lipid droplets [102]. This seems to be a cell-autonomouseffect because CPT2 is expressed predominantly

in glia and CPT2 expression

solely in glia is sufficient to reverse triglyceride

accumulation in the brain. Flies lacking

CPT2 have a dramatically reduced

lifespan, and glial-specific CPT2 expression

was able to partially rescue this

defect, indicating that triglyceride metabolism

in glia may make an important contribution to overall

organismal energy metabolism.

Lipid droplets can accumulate in glia also non-cell-autonomously,

in response to mitochondrial dysfunction in neighboring

neurons [103]. For a subset of Drosophila mutants known to

cause neurodegeneration in adult photoreceptors [104], abundant

lipid droplets transiently accumulate in the glial cells next

to photoreceptors, prior to or concomitant with the onset of

neurodegeneration. No droplets were observed in the wild type

or in the neurons of mutant animals [103] (Figure 5A,B). The

mutants that showed accumulation of droplets in glial cells all

affect mitochondrial function and, in particular, cause increased

levels of ROS. Elevated ROS are indeed critical for droplet formation

in glia because pharmacological or genetic reduction of

ROS prevented droplet accumulation. Lipid droplets were also

detected in glial cells in a mouse model of neurodegeneration

caused by mitochondrial dysfunction, suggesting an evolutionarily

conserved pathway.

How do ROS promote the accumulation of glial lipid droplets?

The full pathway has yet to be worked out, but activation of

c-Jun-N-terminal kinase (JNK) and sterol regulatory element

binding protein (SREBP) pathways are critical; JNK mediates

stress responses [105] and SREBP controls transcription of

many metabolic genes and, in particular, promotes lipogenesis

[106,107]. Although droplets accumulate in glia, the trigger for

accumulation originates in neurons: when the mitochondrial

genes identified were knocked down in glia, there was no effect;

knockdown only in neurons was sufficient to promote glial lipid

droplets. In addition, expression of an antioxidant enzyme or

knockdown of JNK solely in neurons was able to reduce glial

droplet accumulation. Thus, mitochondrial dysfunction and

elevated ROS in photoreceptors cause accumulation of lipid

droplets in glia in a non-cell-autonomous manner.

Damage to neurons resulting from mitochondrial dysfunction

therefore leads both to transient formation of lipid droplets in

glia and to neurodegeneration. Are these lipid droplets an ultimately

futile protective response, do they promote neurodegeneration,

or are they innocent bystanders? Activation of JNK orSREBP in neurons in the absence of ROS still leads to glial lipid

droplets, but not neurodegeneration [103]. Thus, glial lipid droplets

per se are not detrimental for neurons. The culprit might

be lipids damaged by ROS, given that the mutants leading to

neurodegeneration displayed dramatically elevated levels of

peroxidated lipids. Furthermore, expression of two different

lipases, the ATGL homolog Brummer or the LAL homolog Lip4

(Figure 1B,C), dramatically reduced both lipid-droplet accumulation

and the levels of peroxidated lipids and also delayed neurodegeneration

(Figure 5C) [103]. These observations strongly

suggest that neurodegeneration is driven by altered lipid metabolism,

although the exact role of lipid droplets remains to be

elucidated.

The fatal neurodegenerative disease amyotrophic lateral sclerosis

(ALS) has recently also been linked to lipid droplets.

A particular subtype of ALS is caused by mutations in the human

VAMP (vesicle-associated membrane protein)-associated protein

B (hVAPB). Equivalent mutations in the fly ortholog DVAP,

when ectopically expressed, lead to degeneration of fly photoreceptors.

In genetic screens for enhancers and suppressors of this

phenotype, one of the most represented functional categories

was proteins linked to lipid droplets, including proteins involved

in droplet biogenesis and droplet motility [108]. The proteins

such identified will provide a rich source for follow-up studies to

dissect how lipid droplets might impact neurodegeneration.

Perspective

The crucial roles of lipid droplets in energy homeostasis and lipid

metabolism have focused a lot of recent attention on these still

relatively understudied organelles. Yet the examples discussed

above show that lipid droplets play even broader roles and touch

on biological processes only loosely connected to their traditionally

studied functions.

In particular, lipid droplets contribute to protein trafficking and

protein maturation in the cell. They exchange proteins with the

nucleus, modulate protein stability, and allow concentrated

accumulation of antiviral and antibacterial proteins. We do not

know enough to judge whether these processes have independently

evolved and all just happen to take advantage of lipid

droplets or whether they are indicative of a general cellular

pathway of protein trafficking. Lipid droplets have been proposed

to act as general protein sequestration sites [109]; such

sequestration might modulate the ability of these proteins to

interact with binding partners, promote assembly of protein

complexes, store damaged proteins safely before degradation,

or allow moving droplets to deliver proteins [109,110]. As many

published lipid-droplet proteomes contain proteins from other

compartments, there are ample candidates for testing how widespread

protein sequestration on droplets is. For the verified examples,

much work needs to be carried out to understand how

the sequestered proteins are targeted to lipid droplets, whether

they are bound stably or dynamically, and how release from

droplets is controlled. And why are these proteins sequestered

on lipid droplets and not elsewhere in the cell? Is droplet localization,

say, of histones, just an accident of evolution, or do lipid

droplets provide a unique cellular niche?

The emerging roles of lipid droplets as hubs for fatty acid trafficking

(Figure 3) suggest that the pathways that fatty acids take

from and to lipid droplets are highly regulated. But, apart from

some insights into the importance of direct contacts between

lipid droplets and mitochondria [42], little is known about the

molecular mechanisms controlling this trafficking. For fatty

acid trafficking modulated by droplet heterogeneity between

cells (Figure 3C,D), there are intriguing hints that heterogeneity

is a regulatable property since the extent of heterogeneity is

different between cells of different origin [47], but the control

pathways remain to be worked out.

For lipid droplets in the nervous system, it is now established

that both neurons and glia can accumulate lipid droplets under

certain disease conditions. But what role they play under these

conditions and whether droplets are normally present in the nervous

system is far from clear. For example, in the fly models of

neurodegeneration (Figure 5), it was proposed that accumulation

of lipid droplets in glia promotes neurodegeneration, as long as

high ROS levels provide a second insult [103]. However, lipase

overexpression in glia only mildly delayed neurodegeneration,

whereas lipase overexpression in neurons, where no droplets

were detected, had a much stronger protective effect. It will be

very interesting, in these examples and in the mouse models of

HSP, to examine whether ablation of droplet biogenesis in specific

cell types modulates the disease phenotypes, for better or

for worse, and how these effects compare to disruption or upregulation

of turnover pathways (Figure 1B,C). Real-time imaging

of the trafficking of labeled fatty acids (as in [39]) and characterization

of the lipidomes and proteomes of these droplets will provide

complementary information to characterize exactly how

lipid metabolism is derailed in the disease conditions.

Given the diverse novel roles proposed for lipid droplets, droplets

should be on the radar screen of many a biologist trying to

uncover the mechanistic basis of an ill-characterized process.

With the recent insights into biogenesis and turnover of lipid

droplets [14], one can now systematically determine how a process

is affected if droplets are entirely absent, are structurally

abnormal, or cannot be degraded. Because lipid droplets are

ubiquitous organelles but have been carefully studied in only a

few cell types, it seems likely that, as our understanding of these unique and dynamic organelles deepens, their cellular and physiological

roles will keep expanding.