331 (22 August 2018)

Welcome to week 331!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription to be read in their entirety, although complete articles might be found by an Internet title search.

Please let me know if you have questions or comments.

(15 August 2018): [SR] Corona Brewer Bets $4 Billion on Cannabis StartupThe Wall Street Journal

——–“Corona brewer Constellation Brands Inc. is investing about $4 billion into Canadian marijuana grower Canopy Growth Corp., one of the biggest corporate wagers on the potential global market for cannabis-infused drinks and other products.”  Constellation CEO Rob Sands holds that cannabis is “the logical fourth leg” for the beer, wine and spirits company, given it “a total mood-modulation portfolio.”  During the last year, “three big companies—Constellation, Heineken NV and Molson Coors Brewing Co.—have announced development plans for cannabis-infused beverages.”

********The notion of the “logical fourth leg” of a “mood-modulation portfolio” is odd to read but easy to understand.  Consumers are changing how they spend their disposable income on these products and presumably more people will be purchasing marijuana-based products as they become legal in more places.  The moves of Constellation and others seems to be a way of protecting overall revenues.  This idea is developed a bit in “What Corona Owner’s $4 Billion bet on a Marijuana Firm Says About Pot’s FutureThe New York Times.  In addition, Bloomberg.com has a slew of pieces on the purchase—just go its homepage and search on Constellation.  Especially interesting is the seven-minute podcast “Constellation Brands Bets on Pot.”  It is the first segment of a 33-minute podcast.

(16 August 2018): In the Circular Economy, Products Are Designed to Be RecycledBloomberg.com

——–“Take, make, use, dispose.  For centuries, this has been the standard approach to production and consumption.  Companies take raw materials and transform them into products, which are purchased and used by consumers, who ultimately toss them out, creating waste.  Increasingly, people are starting to challenge the sustainability of this model.  Many—including the EU and the governments of China, Japan and the U.K.—argue that we should ditch this linear system in favor of a so-called circular economy of take, make, use, reuse and reuse again and again.”

********I suspect the notions discussed here a pretty familiar and intuitive.  I.e., a circular economy is a former linear economy where the waste of the LE has been fed back as a resource for further production.  As green thought-leader Bill McDonough writes, “everything is a resource for something else.”  Of course, waste will still be produced, and there are costs associated with feeding back waste into production, one of which might be reduced product quality.  Check out The Reference Shelf at the end of the article for additional information.  I was drawn to the link to the article “Circular Economy: The Concept and Its LiteratureEcological Economics. which can be downloaded.  Its Table 1 lists six limits: thermodynamics, system boundaries, economy scale, path dependency, government and management, social and cultural definition, and social and cultural definitions.

(16 August 2018):The Finance 202: Elizabeth Warren takes on corporate giants as she lays 2020 markerThe Washington Post

********Get ready to hear a multitude of references to the Accountable Capitalism Act, as put forward by Elizabeth Warren.  Recent history seems to point to an opinion piece that appeared in The Wall Street Journal on August 15th, [SR]Companies Shouldn’t Be Accountable Only to Shareholders.”  The gist of the ACA seems to be (1) the establishment of federal, rather than state, charters for corporations with annual revenue greater than $1 billion, (2) the requirement that the interests of all stakeholders, rather than just shareholders, be considered, and (3) the election of at least 40% of corporate directors by employees.  This will surely result in extensive, and no doubt unkind, discussion in the weeks to come.  There is lengthy discussion of it in “Elizabeth Warren has a plan to save capitalismVox.  In some respects the ACA expands upon the notion of a benefit corporation, i.e., “a type of for-profit corporate entity . . . that includes positive impact on society, workers, the community and the environment in addition to profit as its legally defined goals.”  There is an interesting, and somewhat surprising article in Forbes—“Sen. Elizabeth Warren, Republicans, CEOs & BlackRock’s Fink Unite Around ‘Accountable Capitalism’”—that makes that connection.

(17 August 2018):The Costs of Motherhood Are Rising, and Catching Women Off GuardThe New York Times

——–“An economic mystery of the last few decades has been why more women aren’t working.  A new paper offers one answer: Most plan to, but are increasingly caught off guard by the time and effort it takes to raise children.”  In particular, during the 1990s “Motherhood became more demanding.  Parents now spend more time and money on child care.  They feel more pressure to breast-feed, to do enriching activities with their children and to provide close supervision.  A result is that women underestimate the costs of motherhood.”  Contributing to that underestimation is the fact that the “cost of motherhood fell for most of the 20th century because of inventions like dishwashers, formula and the birth control pill” but that’s no longer the case.  “The cost of child care has increased by 65 percent since the early 1980s.  Eighty percent of women breast-feed, up from about half.  The number of hours that parents spend on child care has risen, especially for college-educated parents, for whom it has doubled.”

********The article concludes, “Generations of girls have ben told they can achieve anything they aspire to, including having both a career and children—and many women have done so.  But at the same time, both work and parenting have become more demanding.  The result is that women’s expectations seem to be outpacing the realities of public policy, workplace culture and family life.”  Given the mention of public policy, I wonder if the same behavior is being observed in European countries, especially the Nordic, where “family-friendly” policies seems to be more the norm?

********A companion article, of sorts, is “How Sexism Follows Women From the Cradle to the WorkplaceThe New York Times, which touches upon the topics raised above, and more.  This is one paper in which the invisible handshake—social and historical forces—in the form of norms, plays an especially pronounced role.  As noted in the article, “women appear to internalize social norms when they are young on issues like when to have children, what tasks are appropriate for women in the work force or even how much society values the work of women.”

(18 August 2018):Was John Maynard Keynes a liberal?The Economist

——–“In 1944 Friedrich Hayek received a letter from a guest of the Claridge Hotel in Atlantic City, New Jersey.  It congratulated the Austrian-born economist on his ‘grand’ book, ‘The Road to Serfdom’, which argued that economic planning posed an insidious threat to freedom.  ‘Morally and philosophically, I find myself’, the letter said, ‘in a deeply moved agreement.’  Hayek’s correspondent was John Maynard Keynes, on his way to the Bretton Woods conference in New Hampshire, where he would help plan the post-war economic order.”  In a 1925 essay “Am I a Liberal?” Keynes wrote “The Class war will find me on the side of the educated bourgeoisie.”  There is evidence to show that Keynes, “unlike many of his followers, was not a man of the left.”

********I wasn’t familiar with the essay “Am I a Liberal?” but you can read it at your leisure.  This brief is the third of six Philosophy Briefs on Liberal thinkers.  In my judgment, the brief provides a coherent summary of broad ideas expressed in The General Theory of Employment, Interest, and Money (1936).  The article seems to answer Keynes’s question when it is related that Keynes “belonged to a new breed of liberals who were not in thrall to laissez-faire, the idea that ‘unfettered private enterprise would promote the greatest good of the whole’.  That doctrine, Keynes believed, was never necessarily true in principle and was no longer useful in practice.  what the state should leave to individual initiative, and what it should shoulder itself, had to be decided on the merits of each case.”

(18 August 2018):The global arms trade is booming.  Buyers are spoiled for choiceThe Economist

——–Demand is growing in the global arms market, just as the number of sellers is rising.  “Above all, buyers are becoming more insistent on their right to shop around.  Although the global market for conventional weapons is dominated by the United States, “America feels strangely nervous about maintaining that role, and this year it has adopted a more aggressive sales posture.  Under a policy proclaimed in April and mapped out in more detail last month, American diplomats have been told to promote weapons sales more actively and speed up procedures for approving them.”

********Russia is the second largest seller of conventional weapons.  The arms market seems to be one in which the invisible foot—legal and political forces—play an important role.  The reason why they do, however, relates to the invisible handshake—social and historical forces.  Thus the global arms trade provides a setting ripe for analysis framed by the invisible forces.  One interesting aspect of the arms market, noted in the article, is that a “number of countries . . . have graduated from being mainly buyers of weapons and knowhow to sellers—Turkey, the Emirates and South Korea, for example.”

(20 August 2018):LinkedIn Will Allow Economics Researchers to Mine Its DataBloomberg.com

——–“Once upon a time, Facebook Inc. allowed academic researchers access to its data.  We know how that story ends: with the Cambridge Analytica scandal.  Now LinkedIn Corp., the professional social networking site owned by Microsoft Corp., says it will open its vast trove of data to academic researchers.  But this time the company . . . [is] putting controls in place to protect user privacy.”  Igor Perisic, LinkedIn’s chief data officer, said in an interview that “the company was mostly looking to advance the state of knowledge about the labor market and the economy.”  Its current initiative is called the LinkedIn Economic Graph Program.

********The Economic Graph Program sounds intriguing.  “The Economic Graph is a digital representation of the global economy based on 560 million members, 50 thousand skills, 20 million companies, 15 million open jobs, and 60 thousand schools. . . . Through mapping every member, company, job, and school, we’re able to spot trends like talent migration, hiring rates, and in-demand skills by region.”  This information helps “connect people to economic opportunity in new ways.”  The August 2018 LinkedIn Workforce Report for the U.S. provides a host of interesting information about the 20 largest U.S. metro areas.  Most interesting to me was the information about skills gaps.  It turns out that “Demand for data scientists is off the charts.”

********Given that the demand for data scientists is “off the charts,” this seems to be the place to make a brief reference to [SR] “Models Will Run the World” The Wall Street Journal.  In 2011 Marc Andreesen’s essay “Why Software is Eating the World” appeared in the WSJ and has proven to prophetic.  “Today most industry-leading companies are software companies, and not all started out as such. . . . Investors in innovative companies are now asking what comes next.”  Stephen A. Cohen and Matthew W. Granade believe that “a new, more powerful, business model has evolved from its software predecessor.  These companies structure their business processes to put continuously learning models, built on ‘closed loop’ data, at the center of what they do.  When built right, they create a reinforcing cycle.  Their products get better, allowing them to collect more data, which allows them to build better models, making their products better, and onward.  These are model-driven businesses.”

********Cohen and Granade go on to note, “A model-driven business is something beyond a data-driven business.  A data-driven business collects and analyzes data to help humans make better business decisions.  A model-driven business creates a system built around continuously improving models that define the business.  In a data-driven business, the data helps the business; in a model-driven business, the models are the business.”  I wonder if all those data scientists being demanded are geared toward data-driven businesses or model-driven businesses?

(20 August 2018):Does $60,000 make you middle-class or wealthy on Planet Earth?The Washington Post

——–“The world is on the brink of a historic milestone: By 2020, more than half of the world’s population will be ‘middle class,’ according to Brookings Institution scholar Homi Kharas.  Kharas defines the middle class as people who have enough money to cover basics needs, such as food, clothing and shelter, and still have enough left over for a few luxuries, such as fancy food, a television, a motorbike, home improvements or higher education.”  Kharas further notes that “There was almost no middle class before the Industrial Revolution began in the 1830s . . . It was just royalty and peasant.  Now we are about to have a majority middle-class world.”  That middle class now “totals about 3.7 billion people . . . or 48 percent of the world’s population.”

********The article goes on to discuss some of the considerations that went into defining the global middle class, which depends, among other things, on family size, household income, and (of course) relevant prices.  What really caught my attention was the Dollar Street project of Sweden’s nonprofit Gapminder foundation, which has “photographed the daily lives of more than 250 families around the world. . . . The photos show the people and their homes, eating utensils, toilets, toothbrushes and transportation, allowing people to compare lifestyles around the world.”  As noted at the Dollar Street site, they visited “264 families in 50 countries, and collected 30,000 photos.”  At the site, there is the opportunity to sort by region, country, and family characteristics.  If you want a glimpse of what other people have, want, and value around the world, this is a great way to do it.

********All this reminded me of Hans Rosling’s stupendous 2006 Ted Talk, in which he brought dynamic bubble graphs to public attention.  You will need 20 minutes to watch the entire video, but it was well worth rewatching for me.  Rosling, who passed away in 2017, is funny and genuinely enthusiastic about his work.  (Watch 3 minutes to get the humor, 5 minutes to get the enthusiasm.)  You can create your own dynamic bubble graphs easily with one of Gapminder’s tools.

********I have been resensitized to Rosling’s work because of the recent publication of Factfulness: Ten Reasons We’re Wrong About the World—and Why Things Are Better Than You Think, by Hans Rosling with Ola Rosling and Anna Rosling Rönnlund, which appeared on the long list for the Financial Times and McKinsey Business Book of the Year.  There is a nice six-minute video summarizing some elements of the book at Gapminder.

(20 August 2018): “8 Fast-Food Chains Will End ‘No-Poach’ Policies” The New York Times

——–“Eight more restaurant chains have agreed to end a policy that blocks workers from switching jobs within the individual brands, becoming the latest companies to curtail a once-prevalent hiring practice that critics say depressed wages for some of America’s lowest-paid employees. . . . Such restrictions are not unique to the restaurant industry, but until recently they were ubiquitous, particularly among fast-food chains.  That began to change last year, after two prominent economists at Princeton produced a report that focused on how no-poach clauses could lock workers into low-wage jobs.”­

********You can learn more about the work of the Princeton economists—Alan Krueger and Orley Ashenfelter—in an earlier NYT article.  Although these agreements were reached with the attorney general of the state of Washington, the agreements “will affect the companies’ operations nationwide.”  I thought it was noteworthy that a distinction was made between noncompete clauses and no-­poach restrictions.  Employees are made aware of noncompete clauses, but “people who work for fast-food companies might have no idea that they are limited in where they may work.  No-poach restrictions are buried in thick contracts between corporate headquarters and franchisees.”

May you have a good week!

Bruce

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