283 (21 September 2016)

Welcome to week 283!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

(10 September 2016): “Free exchange: All in the family” (http://www.economist.com/news/finance-and-economics/21706504-america-does-little-help-peoples-work-life-balance-enter-heather-boushey-all)

********This article takes a look at the work of Heather Boushey, an economist on the transition team of Hillary Clinton, which puts her “in line for a top job in a Clinton administration.”  Boushey has made “inequities in the labour market the focus of her research. . . . In ‘Finding Time: The Economics of Work-Life Conflict’ . . . Ms Boushey argues that America’s labour-market troubles are largely the result of its failure to grapple with changes in family structures.”  This is something to consider because “American is an extraordinary outlier in the quality of its safety net for families.  It does not require firms to provide any paid family leave (when, for example, a child is born).  The average in the OECD, a club of mostly rich countries, is 54 weeks.”  You can learn more about Finding Time and some of her other work at: https://www.amazon.com/Finding-Time-Economics-Work-Life-Conflict/dp/0674660161/.  There is also a Q&A with a reporter from The Wall Street Journal at: http://blogs.wsj.com/economics/2016/03/14/qa-heather-boushey-on-why-work-life-policies-arent-just-something-for-the-ladies/.

(15 September 2016): “Winemakers Toil to Beat the Heat of Climate Change” [SR](http://www.wsj.com/articles/winemakers-toil-to-beat-the-heat-of-climate-change-1473857879)

——–Grapes are ripening much earlier in the Clare Valley of South Australia.  According to Neil Paulett, a winemaker there, grapes “are ripening a month earlier than when he started the wine label that carries his name in the 1980s.”  As a result, “Some of Australia’s largest wine companies, along with academics and researchers, are investigating ways to mitigate the impact.”  Mitigation involves alternative pruning methods as well and new strains of yeast that are “less efficient at turning sugar into alcohol.”  More alcohol “is a problem not only for flavor, but also because some jurisdictions tax wine at a higher rate if it has more alcohol.”

********The three-minute video accompanying the article contains much of the content of the article and is available without a subscription.  A good opportunity to hear some Australian English.  What is missing from the video, and which I found so dramatic, was the graph that shows “The day grapes hit a certain level of ripeness each year since 1993.”  It provides information for Cabernet Sauvignon, Chardonnay, and Shiraz.  Each grape had very similar behavior, with dramatically shortening of time to ripeness.  “Cabernet Sauvignon grape ripened about 7 weeks earlier than it did in 1993.”  Clearly, those who grow grapes and make wine are confronting big challenges.  The graphs is the WSJ are largely reproduced at: http://www.theaustralian.com.au/business/winemakers-labour-to-beat-the-heat-of-climate-change/news-story/6a7c5288140114b40773660c72d1acde.

********Wine production in Australia is responding to climate change but wine production in Russia is responding to international sanctions against the country as well as the Russian annexation of Crimea.  With regard to the latter, we have “In Russia, Patriotism Now Comes in a Wine Glass” [SR](http://www.wsj.com/articles/in-russia-patriotism-now-comes-in-a-wine-glass-1473896193).  “Russian wine production—on the wane before the Ukrainian conflict—jumped nearly 25% in 2015 from the year before . . . and vintners say it is on the rise again this year.”  Although wine may be enjoying a renaissance in Russia, it hasn’t been easy to find wines of sufficient quality for some in the restaurant business.  “Konstantin Pilberg, the chief sommelier at Lavka-Lavka, a farm-to-table restaurant that boasts locally sourced cuisine, said he tried 550 Russian wines before finding 33 that made the cut to be on the restaurant’s rotating wine list.”  History has been one of the factors that has held back the development of an indigenous wine industry.  “In the 1980s, Soviet leader Mikhail Gorbachev launched a sobriety campaign, in which most of the country’s grape vines were cut down.”

(17 September 2016): “Buttonwood: Trust busting” (http://www.economist.com/news/finance-and-economics/21707193-dangerous-contradiction-between-economic-reality-and-political-rhetoric-trust)

********A concise statement of the role trust plays in economic and political affairs.  It points to the challenges posed by a decline in trust.  The paragraph that follows ties things up nicely.

——–“Trust is built into the heart of almost all economic activity.  Once humans specialized, they required others to produce what they themselves did not—the farmer needed the blacksmith to produce his tools, the blacksmith need the farmer to supply his food. . . . Any hint of a general erosion of trust—of a retreat to the kind of economic nationalism that marked the 1930s—would be a very worrying sign.”

********Trust is a topic that has received increasing attention in economics and neighboring disciplines in recent decades.  The book that came first to mind is Trust: The Social Virtues and the Creating of Prosperity (https://www.amazon.com/Trust-Social-Virtues-Creation-Prosperity/dp/0684825252/), by Francis Fukuyama, although a glance at the Table of Contents does not suggest that he discusses changes in trust within a society.  The author of Buttonwood concludes by noting “Today’s economy and financial system depend on global co-operation; today’s political system is one where such co-operation is increasingly seen by voters as intrinsically suspicious.  That is a dangerous disconnect.”

(17 September 2016): “The superstar company: A giant problem” (http://www.economist.com/news/leaders/21707210-rise-corporate-colossus-threatens-both-competition-and-legitimacy-business)

——–“Disruption may be the buzzword in boardrooms, but the most striking feature of business today is not the overturning of the established order.  It is the entrenchment of a group of superstar companies at the heart of the global economy. . . . As our special report this week makes clear, the superstars are admirable in many ways. . . . But they have two big faults.  They are squashing competition, and they are using the darker arts of management to stay ahead.  Neither is easy to solve.  But failing to do so risks a backlash which will be bad for everyone.”  The increasing concentration of economic activity “is at its most worrying in America.  The share of GDP generated by America’s 100 biggest companies rose from about 33% in 1994 to 46% in 2013.”  Furthermore, “The five largest banks account for 45% of banking assets, up from 25% in 2000.  In the home of the entrepreneur, the number of startups is lower than it has been at any time since the 1970s.”

********The Special Report referred to above can be found at: http://www.economist.com/printedition/2016-09-17.  It seems that antitrust thinking (and political will) has not kept up with globalization and the network economies of the internet.

(19 September 2016): “Drugmakers fight state opioid limits amid addiction crisis” (http://www.citizen-times.com/story/news/2016/09/18/drugmakers-fight-state-opioid-limits-amid-addiction-crisis/90622452/)

——–“The makers of prescription painkillers have adopted a 50-state strategy that includes hundreds of lobbyists and millions in campaign contributions to help kill or weaken measures aimed at stemming the tide of prescription opioids, the drugs at the heart of a crisis that has cost 165,000 Americans their lives and pushed countless more to crippling addiction.”

********This is the first of two articles resulting from a joint investigation by the Associated Press and the Center of Public Integrity.  It was accompanied, in a sense, by a Guest Commentary by Jill Westmoreland Rose, who is the “U.S. Attorney & Chief Law Enforcement Officer for the 32 westernmost counties in” North Carolina.  You can find it at: http://www.citizen-times.com/story/opinion/contributors/2016/09/16/guest-columnist-opioid-heroin-abuse-national-epidemic/90497640/.  The second installment of the two-part investigation can be found here: https://www.publicintegrity.org/2016/09/19/20201/pro-painkiller-echo-chamber-shaped-policy-amid-drug-epidemic.  This site can also be used to access the first installment of the series.  Valuable background for the Commentary by the U.S. Attorney and the two installments is provided by the invaluable Dreamland: The True Tale of America’s Opiate Epidemic (https://www.amazon.com/Dreamland-True-Americas-Opiate-Epidemic/dp/1620402521/), by Sam Quinones.

(21 September 2016): “Warehouse Workers of the Near Future” (http://www.wsj.com/articles/fully-autonomous-robots-the-warehouse-workers-of-the-near-future-1474383024)

——–“When Target Corp. decided to revamp one of its biggest California distribution centers, it had a choice.  It could build a new warehouse, it could install established technologies for picking products off shelves or it could take a risk on a new breed of robots from a reclusive billionaire.  Target went with the billionaire’s bots.  Target’s new automatons are from Symbotic LLC, part of a grocery empire run by New England billionaire Rick Cohen. . . . His sales pitch to grocery chains and retailers, including Target, Coca-Cola Co. and Wal-Mart Stores Inc. is simple: Symbotic’s automation system includes autonomous robots that can travel untethered among storage racks in a distribution center. . . . That is in contrast to many other warehouse-automation systems, in which the robots tend to be bolted down or limited to fixed routes or tracks and are less flexible in what they can do.”  Cohen notes, “What we’re doing with autonomous bots is not that dissimilar from what Google is doing with autonomous cars . . . I think within five years, it’ll change distribution.”  In the low-margin grocery business, automation provides an opportunity to control “the three big costs of conventional human-staffed distribution centers—labor, time and real estate.”

********The key word in the paragraph above is ‘untethered’ and the important note is that untethered bots are like autonomous cars.  It is amazing to see how the easier movement of information is now enabling easier movement of things, and this will become more prevalent.  Frank Bruni, the vice president of supply-chair operations for Kroger’s, made a telling comment when he said, “Every project we look at, we look at automation as a potential part of it.”

********The article includes a link to a three-minute video that provides an inside look at a warehouse using a variety of bots.  The general manager of the warehouse makes an important point, also mentioned in the article, that whereas human beings like the same things to be located in the same place, that is not the case for bots.  Consequently, it is possible to store the same things in different places, often times economizing on space.  Thus the potential for real estate savings.  You can learn more about Symbotic at: http://www.symbotic.com/.

********A counterpoint to the more mechanized developments with regard to warehousing is provided by grass-fed beef.  The Wall Street Journal explores this in “Why Grass-Fed Beef Is on a Roll” [SR](http://www.wsj.com/articles/why-grass-fed-beef-is-on-a-roll-1474388110).  Reporters Ellen Byron and Sarah Nassauer write that “When many people eat beef, they want to know I the cow ate grass.  Grass-fed beef, once a niche luxury, is now sold at ballgames, convention centers and nearly every Wal-Mart in the U.S.”  Such beef is perceived by many consumers to be “a healthier, higher-quality alternative to conventional beef and are willing to pay more for it, no matter that labeling—and flavor can be inconsistent.”  Although grass-fed beef “comprised just 1.4% of the $18 billion fresh-beef market in the U.S. in 2015, . . . its growth rate has far outpaced conventional beef in recent years . . . Last year, sales of grass-fed beef rose nearly 40% over the year before, while conventional beef grew 6.5% in the same period.”  In thinking about the two articles, one on moving packages and one on beef, in one instance we are moving toward something that is more mechanized and in the other less so.  Both seem to be responding to the preferences of “the ultimate consumer” for lower prices (moving packages) and higher perceived quality (grass-fed beef) but it seems like we care about how cattle are raised but not care about how packages are moved.

May you have a good week!

Bruce

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