406 (29 January 2020)

Welcome!  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.

(4 May 2009)The Buddha as a Businessman: Economics and Law in an Old Indian ReligionUniversity of California TV

********This 58-minute lecture by UCLA professor of Asian Languages and Cultures Gregory Schopen, “explores the Buddha as an astute businessman, economist and lawyer.”  It lightly discusses text and provides insight into aspects of the Buddha that are seldom discussed.  While watching, it occurred to me that all religious movements, especially those connected with monastic dimensions, must confront the basic issue of economic sustainability.  This is a great lecture by someone who knows his subject well.

(24 January 2020)Afternoon of a PawnbrokerThe New York Times

********This graphic article provides clear ideas of what pawn shops are and how they work, indicating that they are an important financial option for the unbanked.  Much of its content is drawn from an interview with Rachel Wilen, who is the president of GEM Pawnbrokers, which has 26 locations in New York; Wilen has “been in the business since 1992.”  She notes, “Most of our customers live paycheck to paycheck.  They can’t get money from the bank, so they use us like their bank. . . . They use their jewelry like a credit card.  If you have bad credit, we don’t care.  We don’t do credit checks.  You just have to own the item. . . . You think pawn means pawning your item off, like you’re getting rid of it.  But pawn actually means collateral loans.  Pawning is lending money.  What we’re doing is we’re holding on to your jewelry as collateral. . . . Most of our business is lending money.”

(25 January 2020)Clayton Christensen, Guru of ‘Disruptive Innovation,’ Dies at 67The New York Times

——–“Clayton M. Christensen, a Harvard professor whose groundbreaking 1997 book, ‘The Innovator’s Dilemma,’ outlined his theories about the impact of what he called ‘disruptive innovation’ on leading companies and catapulted him to superstar status as a management guru, died on Thursday in a Boston hospital.”  The Economist called Innovator’s Dilemma “one of the six most important business books ever written.”  Christensen wrote that “corporate giants were so focused on doing the very things that had been taught for generations at the nation’s top business schools . . . [that] they were blindsided by small, fast-moving, innovative companies that were able to enter markets nimbly with disruptive products and service and grab large chunks of market share.  By laying out a blueprint for how executives could identify and respond to these disruptive forces, Professor Christensen . . . struck a chord with high-tech corporate leaders.”

********A clear instance of disruption of a giant (Gillette) by the small (Dollar Shave Club) is provided by “They Changed the Way You Buy the BasicsThe New York Times.  Michael Dubin, who founded Dollar Shave Club, “helped usher in a business model for 21st century entrepreneurs to take on previously unassailable consumer brands: Technology had the potential to change the world of physical goods and the way brands are created. . . . By targeting a corporate giant’s weakness—high prices or inconvenience or a stodgy image—a clever start-up with the right strategy, the right message and the right product value could create a new national brand virtually overnight.”  Many other “overnight sensations” are mentioned in the article.  For a further development of the ideas contained in the article, see Billion Dollar Brand Club: How Dollar Shave Club, Warby Parker, and Other Disruptors Are Remaking What We Buy, by Lawrence Ingrassia. 

(27 January 2020)How the G.O.P. Became the Party of the Left BehindThe New York Times

********A very interesting article with dramatic graphs showing voting percentages for Republicans as it relates to deciles of U.S. per capital income.  Since 1992 there has been an inverse relationship between Republican voting percentage and per capita income, i.e., the higher the per capita income, the lower the Republican voting percentage.  Generally speaking, this relationship has strengthened, in the sense that lower per capita income voters have voted more Republican and higher per capita income voters have voted less Republican; the strengthening was especially dramatic in 2016.  The remainder of the article, by columnist Eduardo Porter, sheds some light on these changes, taking Dayton, Ohio as its touchstone.

(28 January 2020) [SR]’The Bridge’ Review: A Pipeline Joining East and WestThe Wall Street Journal

********This is a review of The Bridge: Natural Gas in a Redivided Europe, by Thane Gustafson; Gustafson is a professor of political science at Georgetown University.  It shows how  consumption and trade between the EU and Russia created “a vast web of gas fields, pipelines, and compressors . . . [that serve] thousands of factories and millions of consumers, binding them together in a dense network.”  Along the way geopolitical relations between Russia and the West are explored in depth.  A lengthier review that requires no subscription can be found in Energy Reporters, which speaks very highly, too, about Gustafson’s earlier book The Wheel of Fortune: The Battle for Oil and Power in Russia.  Gustafson is currently at work on a book tentatively titled Klimat: The Future of Russia in the Era of Climate Change.  The Energy Reporters review refers to Gustafson’s three books as a trilogy, and so it seems to be: oil, natural gas, and beyond.

(28 January 2020)Everything You Think You Know About Housing Is Probably WrongThe New York Times

********This article takes a look at the idea of “housing density.”  Its context is a show at the Skyscraper Museum in New York on that very notion.  Housing density “gets to the heart of some of the biggest problems facing American cities today. . . . opposition to density has . . . stiffened as the gulf widens between the 1 percent and everyone else.  Well-to-do NIMBYs, congenitally opposed to new developments, have lately been joined by anti-displacement tenant activists—advocates for poor and working-class residents who might ordinarily want more housing but have come to fear that nearly all development brings gentrification that prices the most vulnerable out of neighborhoods.  In cities like New York, San Francisco, Chicago and Boston, this new alliance means even initiatives promising some subsidized housing have become line in the sand.” 

Paradox lies within the article.  According to Yonah Freemark, a scholar of urban development, people tend to “perceive public housing as dangerous, failed, not integrated into the supporting communities.  So they thing density is the enemy.”  As the Skyscraper Museum show demonstrates, “that notion gets density almost exactly backward.”  In Chicago, “the densest neighborhoods are mostly on the wealthier North Side.  In New York, the largely well-to-do Upper West Side is one of the densest neighborhoods in the city; East New York, in Brooklyn, is one of the least dense.”  As the late, well-known urbanist Jane Jacobs preached, the show enumerates: “New York’s lower-density housing developments failed to achieve the quality of life that high-density neighborhoods provide.”  As the article notes, perhaps some “of the community pushback [on higher density] derives from a lack of collaborative planning and architecture.  The added costs and complications of upfront design can help deliver buy-in, better neighborhoods and more affordable housing.  People want to feel invested and need to picture improvements.”

The article concludes, “Solving what ails American cities also requires urbanists and activists to acknowledge that not all real-estate development is automatically bad.  It demands rethinking some anti-densifying rules and regulations.  And it will depend on a shared understanding of what density actually means.”  Words to reflect upon, as Asheville considers its own density concerns.

(29 January 2020)Milton Friedman’s World Is Dead and GoneBloomberg.com

——–The recently concluded gathering of “the rich and powerful” in Davos, Switzerland “put the longstanding debate about the social responsibility of corporations front and center by proclaiming its official them as ‘stakeholders for a cohesive and sustainable world.’”  In doing so, “the World Economic Forum confirmed that it’s taken sides in a debate rekindled last year by the Business Roundtable.”  The Roundtable, last year, “had issued a statement highlighting a ‘fundamental commitment to all of our stakeholders,’ . . . thereby situating itself in opposition to the view of corporate responsibility made popular half a century ago by the economist Milton Friedman.”  In 1970, Friedman had said that “business executives who diverted corporate assets toward social goals were betraying their obligations to shareholders.”  Yet, there are five key points to note in the debate between supporters of the recent Roundtable statement and those who support Friedman.

********The key points are related later in the article.  Friedman’s main statement appeared in The New York Times Magazine on September 13, 1970.  You can read it—six pages—here

May you have a good week!

Bruce

405 (22 January 2020)

Welcome!  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.

(16 January 2020) [SR]An Amish Lesson for Small Business SuccessThe Wall Street Journal

——–“Dalton, Ohio is an unlikely place to find fresh insight into how to thrive in a chaotic 21st-century economy.  It is the word’s largest Amish settlement and home to Pioneer Equipment, a manufacturer of plow, tillers, manure spreaders and other forms of horse-drawn farm equipment.  Pioneer is owned and run by the Wengerd family, who are Old Order Amish, which means that they get around in a horse-and-buggy and keep their homes disconnected from the power grid, free of telephones, computers and other modern technologies.  Yet despite the antiquated nature of what Pioneer Equipment makes and how they make it, the company is a success.” 

One factor contributing to that success is that “the narrowness and complexity of Pioneer’s market is actually a strength.  While 25,000 farmers aren’t enough to attract the full attention of the big players like John Deere, Kubota and Caterpillar, they are more than enough to support Pioneer and several other Amish farm equipment makers, all of which are growing healthily.”  So, “companies like Pioneer offer an alternative path.  By focusing obsessively and passionately on an audience that they know uniquely well, and by embracing the tools that will help them serve that audience while rejecting those that won’t, such small businesses are able to thrive in the 21st-century economy.”

********The author of the article, Adam Davidson, is also the author of The Passion Economy: The New Rules for Thriving in the Twenty-First CenturyIn the terms of Michael Porter’s book Competitive Strategy, it appears the Pioneer has adopted a strategy that is Narrow and Differentiated, the Differentiation Focus.  You can see the 2×2 table of Porter’s four generic strategies here.  Evidently these markets are too small—at present—for large firms to bother with. 

            Frieda Caplan, also known as the Kiwi Queen, provides another example of someone who was very successful by focusing on exotic fruits and vegetables that larger firms wouldn’t touch.  Caplan recently passed away, and her obituary tells the story of how she became the “Mick Jagger of the produce world.”  Caplan was “a tenacious maven credited for introducing kiwis, mangoes, habanero and shishito peppers, passion fruit, bean and alfalfa sprouts, baby carrots, sugar snap peas, starfruit, blood oranges, shiitake mushrooms, turmeric, and hundreds more fruits and vegetables into the supermarket mainstream.”  She notes, “I had a reputation of trying anything new . . . I couldn’t compete with all the boys on the big items . . . so I built the business selling things that were different.”

            There is a documentary about Frieda Caplan called “Fear No Fruit.”  Amazon reviewers love it, but it is somewhat hard to find.  For a somewhat lengthier obituary of Caplan, see The New York Times.

(16 January 2020) [SR] “For the Economy, Climate Risks Are No Longer Theoretical” The Wall Street Journal

——–“Last year Australia’s central bank hoped that several interest-rate cuts would mark a turning point for its slowing economy.  That was before the worst bushfires in Australia’s history hit tourism, consumer confidence and growth forecasts for this year.  There is now a good chance the bank will cut interest rates again soon.”  Although climate change “can’t be directly blamed for any single extreme weather event . .  it is makes such events more likely.”  It is thought that “Climate crises in the next 30 years may resemble financial crises in recent decades: potentially quite destructive, largely unpredictable and, given the powerful underlying causes, inevitable.”  Accordingly, “Climate has muscled to the top of business worries.”  This year at the annual meeting of the World Economic Forum in Davos, Switzerland, “climate-related risks took the five top spots in terms of probability, the first time a single issue had done so in the survey’s 14-year history.”  Pointing to the importance of climate change, studies “reviewed by David Mackie of JPMorgan Chase suggest climate change could reduce global gross domestic product by 1% to 7% by 2100,” assuming “business as usual.” 

********Clearly climate change is on the mind of business leaders, one example of which is provided by the article “The winning conservative climate solution,” The Washington Post, authored by George P. Shultz and Ted Halstead.  They summarize the “newfound Republican climate position . . . as follows: The climate problem is real, the Green New Deal is bad and the GOP needs a proactive climate solution of its own.  Our big question is what form it should take.”  Shultz and Halstead note that there are “essentially three ways to reduce emissions—regulations, subsidies and pricing.”  According to them, “The winning Republican climate answer is the third option: carbon pricing.  Just as a market-based solution is the Republican policy of choice on most issues, so should it be on climate change. . . . Not surprisingly, this is the favored option of corpora America and economists—including all former Republican chairs of the president’s Council of Economic Advisers.”  The thoughts of Shultz and Halstead are further developed in a downloadable and highly readable brochure “The Pricing Advantage.”  This is likely as simple and concise argument one will find of the benefits or carbon pricing as one arrow in the climate change policy quiver.

            A useful perspective on pricing solutions is provided by Robert J. Samuelson in “Can Wall Street save us from climate change?  (Fat chance.)The Washington Post.  Told through a discussion of the role of Larry Fink of BlackRock, which manages a $7 trillion collection of investment funds, Samuelson rightfully points out that “First—and foremost—combating global warming is mainly a governmental problem and can’t conceivably be accomplished without acknowledging that.  Private firms, whether electric utilities or vehicle manufacturers, may be the instruments to attack climate change, but they will respond to the policies and incentives created by the political process.”  But the political reality is that, “although many Americans say they oppose global warming, they buying public prefers SUVs and lower electricity bills to smaller cars and higher bills.  As a result, federal anti-climate-change laws are virtually nonexistent.”

(18 January 2020)How the ‘Sharing’ Economy Erodes Both Privacy and TrustThe New York Times

——–In an age in which digital surveillance is increasingly prevalent, does the notion of trust lose its meaning?  Brian Chesky, the CEO of Airbnb, holds that “we don’t think you can be trusted in a place where you’re anonymous.”  So in order to “participate in services like his . . . you need to expose yourself.  It’s a model of consumerism that depends on customers’ transparency.  It’s also a model of consumerism that makes our traditional idea of trust irrelevant.  To trust someone is to assume that you can rely on them—that they do not need to be monitored or policed.  But the infrastructure of the sharing or trust economy is largely a series of technical advances that enable us to track people constantly, removing any need to trust them.”  Ultimately, “Without private spaces, where life occurs beyond our vision or knowledge, there is no need for trust.”

********The article concludes, “Much of today’s privacy debate assumes that precious parts of our lives are under threat from intrusive corporations and governments.  And this is so.  But at an even more fundamental level, the design of our digital economy is steadily eroding the temperamental qualities that we need in order to treasure privacy at all: our tolerance for opaqueness, uncertainty and disconnectedness—and our faith in the decency of others.”  Articles such as this drive home the importance of The Age of Surveillance Capitalism, by Shoshana Zuboff.

May you have a good week!

Bruce

404 (15 January 2020)

Welcome!  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.

(9 October 2017)The flaws a Nobel Prize-winning economist wants you to know about yourselfQuartz

********A nice summary of some of the central ideas of behavioral economics, particularly as related to Richard Thaler.  Biased thinking often results in behavior that might in some conceptualizations be regarded as not rational.  Evidently the economics version of “Darwin’s Bulldog” for those critical of behavioral economic is Gerd Gigerenzer, as noted in “Behavioral Economics’ Latest Bias: Seeing Bias Wherever It Looks.”

(8 January 2020)The Surprising History of McDonald’s and the Civil Rights MovementThe New York Times

——–[This is a review of Franchise: The Golden Arches in Black America, by Marcia Chatelain.]  “Say the name McDonald’s, and what comes to mind?  Tasty hamburgers or hardened arteries?  Entry-level jobs or dead-end McJobs?  Responsive community outreach or mercenary corporate power?  In Franchise: The Golden Arches in Black America,’ Marcia Chatelain has written a smart and capacious history suggesting that McDonald’s should summon all of those thoughts, and then some.”  The book recounts “a somewhat bizarre but incredibly powerful marriage between a fast-food behemoth and the fight for civil rights.”  The partnership between “the civil rights movement and the McDonald’s Corporation bristled with compromises and contradictions from the beginning.”  A story relating Southern Christian Leadership Conference president Ralph Abernathy makes that clear.  “Throughout this impressively judicious book, [Chatelain] . . . is attuned to the circumstances that encourage increasingly intricate ties between McDonald’s and black communities across the country.  This isn’t just a story of exploitation or, conversely, empowerment; it’s a cautionary tale about relying on the private sector to provide what the public needs, and how promises of real economic development come up short.”

********The review concludes noting that Chatelain writes: “History encourages us to be more compassionate toward individuals navigating few choices . . . and history cautions us to be far more critical of the institutions and structures that have the power to take choices away.”  A book worth reading.

(10 January 2020)Ethan Brown went vegan but missed fast food.  So he started a revolutionThe Los Angeles Times

********Ethan Brown is the founder and CEO of Beyond Meat.  This wide-ranging article discusses Beyond Meat’s origin, products, and challenges, as well as providing information about Ethan Brown himself.  The origin story goes back to when Brown was in middle school standing in line at a Roy Rogers to order his favorite, the Double R Bar Burger, which “contains a quarter-pound beef patty, a seared slice of Smithfield ham and American cheese, all stuffed into a buttered Kaiser roll.”  Having a love of animals “fostered by a rural dairy farm his father operated as a side business,” that day the 13-year old began to feel differently about things as it “dawned on him that his cravings were being sated by cows’ milk and butchered steers and pigs.”  Brown’s father Peter G. Brown is a philosopher at McGill University.

Brown’s success thus far—he is reputed as having a net worth of $400 million—has been oriented by a desire to replicate the taste and texture of meat products, rather than simply provide a substitute for them.  In doing so he has sought to produce for a much larger market, holding that “our job here is to enable a mainstream consumer to make healthier choices in their life and do it where they eat.”

(10 January 2020)Economists Have No Idea What Replaces Free TradeBloomberg.com

********Columnist Noah Smith attended the annual meeting of the American Economic Association and reports on a session he attended entitled “Making global markets work for American workers.”  He notes that the participants “laid out the problems with free trade, the shortcoming of U.S. trade policy during the past few decades and some suggestions for improvement.  But although the economists did a great job of critiquing the old free-trade consensus, there was no clear idea of what to replace it with.”  Nonetheless, one thing that “economists almost all agree on . . . is that tariffs are a bad response to the drawbacks of free trade, serving mainly as a tax on domestic consumers.  They also invite retaliation, causing more carnage.  But if not tariffs, then what?  So far, there’s no clear answer.”

(10 January 2020)Chronicling a Community, and a Country, in Economic CrisisThe New York Times

********This is a review of Tightrope: Americans Reaching for Hope, by Nicholas D. Kristof and Sheryl WuDunn.  Kristof and WuDunn, who are married to one another, received a 1990 Pulitzer Prize for journalism for their reporting on the Tiananmen Square protests.  Kristof grew up on a small family farm in rural Oregon in the 1960s and 70s, near Yamhill, population 1,105.  Tightrope offers “a litany of stories from across the country, revealing the structural causes of countless so-called personal failures among the working poor. 

Most of these stories come from . . . Yamhill, which thrived with blue-collar industry just a few generations ago, [but now] serves as a microcosm for a nation in which life expectancy has alarmingly declined.”  In contrast to some authors of the plight of the working class who left their rural, working class homes and left them behind, “Kristof remains tied to the strained community through friends and the sheep farm” on which he grew up.  As a result, Yamhill is “conveyed up close by way of detailed reporting on living people—intimate access achieved because the authors, while outliers with respect to their professional status and home on the opposite coast, are also of the place.”  The authors “show over and over how ‘bad choices’ are rooted in problems bigger than the individual: childhood abuse, lack of knowledge, dearth of resources.” 

            Tightrope “catches what many analyses miss about struggling communities across color lines: an undercurrent of self-hatred, in which people blame themselves for bad outcomes and are loath to ask for a ‘handout.’”  They note, “One hazard of our social Darwinism . . . is that it is absorbed even by those who are themselves on the bottom, leading them to stigmatize themselves.”

(11 January 2020)Merchants of ThirstThe New York Times

********This article tells the tale of water supply in Kathmandu, Nepal, where public water supply is problematic and private water tankers now provide substantial amounts of water at prices many times those of public water.  One tanker driver notes about the water he is transporting, “This is like liquid gold . . . Maybe more than gold.”  Such is the situation in a land where water resources are drying up, population is growing and urbanizing, and the public sector has fallen far behind in providing basic human goods like water and services like passable roads. 

(12 January 2020)Ten years on, Citizens United ruling has changed U.S. politics—but not in the way many fearedThe Los Angeles Times

——–“Ten years ago this month, the Supreme Court shocked the American political establishment with the declaration that corporations had the same rights as people in t eyes of the 1st Amendment, and therefore were exempt from restrictions on political spending. . . . A decade later, the ruling in Citizens United vs. Federal Election Commission has certainly changed the way money influences American politics—but largely in ways that were unforeseen at the time.”  The expected “flood of corporate money into politics in the form of independent expenditures . . . never materialized.  Nor did a cascade of funds from labor unions and other left-oriented groups.  Nevertheless, the ruling Jan. 21, 2010, did unleash a torrent of new money into politics in the form of contributions from wealthy individuals” like Sheldon Adelson, Charles and David Koch, Michael Bloomberg, Tom Stever, and George Soros. 

********Interestingly, “Not one major American corporation spent money independently in support of a candidate in 2014 and 2016 . . . Students of campaign finance believe a major reason for the relatively small corporate contributions . . . is a reluctance to alienate customers.”  As Colby College political scientist Anthony J. Corrado, Jr., who is an expert of campaign finance, notes: “You want to sell soap to everybody, not just to Republicans or just to Democrats.”

            In the process of learning more about the work of Anthony Corrado, I found what  appears to the source of the material used by the Times, namely, the July 2017 Committee for Economic Development publication “The Landscape of Campaign Contributions: Campaign Finance after Citizens United.”  This 24-page publication can be downloaded here.  At the download page, you can also here a 20-minute interview with Corrado in which he discusses some of the surprising things he discovered while studying the 2014 and 2016 elections.

May you have a good week!

Bruce

403 (8 January 2020)

Welcome!  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.

(17 December 2019)The African cocoa farmers who are taking on Big ChocolateThe Los Angeles Times

********This article appeared previously in The Financial Times.  It is the first of three articles—two follow below—that discuss the chocolate industry, particularly the conditions of those who grow cocoa; “two-thirds of the global supply of cocoa” is produced in Ghana and Ivory Coast of West Africa.  Those who produce cocoa tend to be impoverished, resting at the bottom of a “multibillion-dollar pyramid” in which little “trickles down” to cocoa farmers.  It is estimated that “Chocolate is a $100-billion industry” the raw material of which “makes less than $6 billion” for farmers.  Attempts by farmers to capture more of that $100 billion by further processing raw materials have run into high electricity costs, thereby keeping “most of the added value near the Western consumer markets it serves.”  One of the initiatives being embraced in Ghana and Ivory Coast is the imposition of a $400 per ton premium above the market price of cocoa.  The consequences of the premium are discussed inn [SR]Cocoa Cartel Stirs Up Global Chocolate MarketThe Wall Street Journal.

            Typically companies would resist attempts to increase the price of the raw materials they use, but this has not been the case for major cocoa purchasers, like Mars Wrigley and Mondelez, as is discussed in “Chocolate companies ask for a taste of government regulationThe Washington Post.  This has resulted from a recognition that voluntary efforts to “eradicate child labor” have failed.  The companies have “also acknowledged that cocoa is a ‘major driver’ of deforestation, an environmental abuse linked to global warming”  Companies are directing their regulatory efforts tow the European Union, “where most cocoa is imported.”  As an aside, the “seven institutions of the European Union . . . are seated in four different cities, viz. Brussels, Frankfurt, Luxembourg City and Strasbourg.”  This contrasts with the African Union which is located in Addis Ababa, Ethiopia.  There are interesting comments made about Ethiopia in the 2019 Nobel Peace Prize lecture.

(2 January 2020)Other People’s Money Was the Tech Innovation of the DecadeBloomberg.com

——–[This is the Opinion of Shira Ovide of Bloomberg.]  “Technology changed every molecule of life in the 2010s. . . . Because tech is changing everything, it’s hard to pick a single transformative technology for the 2010s.  But my big for the biggest impact of the decade isn’t a technology at all: It’s money—and lots of it.”  Many of the companies that are shaking things up—Tesla, Netflix, and Uber, for example—“couldn’t exist in their current form without an unprecedented flood of investment money that flowed into tech startups after the financial crisis.” 

Cash availability was the result “of post-financial crisis policy-making that created conditions for economic growth and incentives for people to put their money into assets that had more risk and more promise.  In a feedback loop, once technology changes started seeping into more corners of life and business, investors were motivated to hunt for more areas in which technology could apply its disruptive magic.”

********When I read Eccentric Orbits: The Iridium Story, I was struck my how very difficult it was for a very well-established business executive to chase down $200 million to buy the functioning assets of Iridium.  Compare this to the seemingly endless amounts of money that have been directed toward Uber, which is still struggling to find a way to profitability.  That considered, I can see that “other people’s money” took on an especially important role in the 2010s.

(3 January 2020)Older People Need Geriatricians.  Where Will They Come From?The New York Times

——–There is a rising need for geriatricians.  “These doctors not only monitor and coordinate treatment for the many ailments, disabilities and medications their patients contend with, but also help them determine what’s most important for their well-being and quality of life.”  Geriatrics as a field is relatively young, becoming “a board-certified medical specialty only in 1988.”  And the field has training programs for geriatricians have shown “virtually no growth when adjusted for the rising United States population.”  One estimate of future needs shows that “the nation will need 33,200 such doctors in 2025.  It has about 7,000, only half of them practicing full time.”  It will be hard to fill the gap because “geriatrics fails to attract enough young doctors to the graduate fellowships it does offer.  Leaving aside geriatric psychiatry, more than a third of 384 slots went unfilled last year.”

********As the article points out, the compensation of geriatricians pales in comparison to that received by anesthesiologists, radiologists, and cardiologists.  Additionally, the field does not yield “much glamour or the prospect of medical heroics.”  Still, “geriatricians reported higher career satisfaction than most.”  One point made by the article was especially striking.  “Health professionals increasingly recognize that if they’re not in pediatrics, they will be seeing lots of seniors, whatever their specialty.

(3 January 2020)Factory closures may have helped fuel the opioid crisis.  Here’s howThe Los Angeles Times

——–“For the last wo decades, U.S. communities stricken by automotive closures have been hurting.  And death rates among working-age adults have been rising.  Researchers have long suspected these dual trends, especially evident across the national’s industrial heartland, are linked by an American epidemic of despair.  Economic distress, population flight and the loss of local sports teams, lunch joints and barber shops have hollowed out communities that were long solidly middle class.  The resulting hopelessness has been corrosive to the health of those who live in them.”  Now a new study appearing in JAMA Internal Medicine “suggests that in recent years, opioid drugs have done much of the actual killing.”  Comparing areas with auto plants that did and did not shut down between 1999 and 2016, the researchers found “that in the five years after an automotive plant shut down, counties within commuting distance of the shuttered factory experienced a far sharper rise in fatalities related to opioids than did counties in which major automotive factories remained open.”  To be specific, “In the 29 counties affected by closures, there were 20.6 opioid deaths per 100,000 people each year.  That increase was 85% higher than the rates at which opioid deaths grew in the 83 counties without closures.” 

********The researchers “believe their findings provide new evidence that communities in major distress are more prone to so-called ‘deaths of despair’—a much-debated topic as a collection of disparate trends has driven down average U.S. life expectancy.”

            The expression ‘deaths of despair’ reminded me of the forthcoming (March 2020) book Deaths of Despair and the Future of Capitalism, by Anne Case and Angus Deaton.  I have long been intrigued by the downside of the business cycle and their book should provide some relevant information, although, it must be said, that the business cycle is a macroeconomic phenomenon, but the microeconomic phenomenon of despair from plant closings is one that is always with us.  For an Opinion piece that gives names and context to deaths of despair, read “Who Killed the Knapp Family,” by Nicholas Kristof and Sheryl WuDunn.

(6 January 2020)What if a Vaping Tax Encouraged Cigarette Smoking?The New York Times

——–“The surging popularity of vaping among young Americans is driving lawmakers to use one of their favorite tools to discourage unwanted behavior: taxes. . . . But what if a vaping tax actually encouraged smoking instead of reducing it?  A new study suggests that these new taxes have the potential to do just that—by discouraging adult smokers from considering nicotine vaping, a safer way to ingest nicotine, or encouraging vapers to switch to cigarettes instead.  The study . . . examined what happened in Minnesota, one of the first states to impose a steep vaping tax (95 percent).  The effect was that declines in smoking there leveled off, while they continued to fall in similar states that hadn’t imposed such taxes.”  Vanderbilt University economist W. Kip Viscusi, who was not involved in the study, explained the results: “By decreasing the extent to which people use e-cigarettes, you decrease quitting of conventional cigarettes.”

********Simply put, imposing a new tax on e-cigarettes but not imposing a new tax on cigarettes implies that the price of cigarettes relative to e-cigarettes means that the relative price of cigarettes has fallen, making cigarettes relatively more attractive, ceteris paribus.  The article goes on to develop the distinction between those who are already smoking one or the other, like many adults, for whom the just-made argument is especially appropriate.  However it is clear that the vaping tax is meant to apply to those who are not already smoking, e.g., children and teens.  In light of the above, it seems like any legislature that aspires to do something about vaping (e-cigarettes) must also consider cigarettes.

(10 January 2020) [SR]Everything Must Go: Record Pace of Shut Stores Fuels Business for ‘the Closers’The Wall Street Journal

——–“In the hollowed-out retail economy, Jerry Robertson finds himself almost continuously in demand.  He specializes in closing stores. . . . Part sales guru, part therapist, Mr. Robertson has deployed to 28 states, from Amish country in Indiana to West Hollywood, slashing prices for deal-hungry customers while consoling longtime employees and managers who are often working the final days of their jobs.”  Robertson and others “are part of a nomadic segment of workers thriving  amid industry chaos.  Last year, retailers announced plans to shutter more than 9,300 U.S. stores, a record, according to Coresight Research.  Liquidation companies that help close stores report that they are busier than ever.  As consumers shift more of their spending online and Amazon.com Inc. continues to reshape the landscape, many expect more fallout.”

********A giant among liquidation firms is Great American Group, which “has closed more than 6,800 stores since 2013.”  You can learn more about GAG, which is “a leading provider of asset disposition solutions and valuation and appraisal services,” here.

May you have a good week!

Bruce

402 (1 January 2020)

Happy New Year!  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.  TIF Weekly is available on the web.

On New Year’s Eve, I completed Eccentric Orbits: The Iridium Story, by John Bloom.  I decided to read the book because it relates to “satellite constellations” that are so much “in the news” at this time.  So what is a satellite constellation?  It is a set of satellites, coordinated in activity, that provides location, phone or internet service to large portions of the globe, often the entire globe.  You can find a more technical definition here

Iridium seems to have been the first company to provide phone service to the entire globe, and it is still in business, you can learn more about Iridium here.  The interest in Iridium’s story stems from the incipient efforts of a number of well-financed companies to create satellite constellations that will provide internet services globally.  The company furthest along this path is Starlink, “a satellite constellation being constructed by American company SpaceX.”  SpaceX is the brainchild of Elon Musk.  “As on November 2019, SpaceX has deployed 122 satellites. . . . In total, nearly 12,000 satellites will be deployed by the mid-2020s.”  The satellites are being launched using SpaceX’s Falcon 9 rocket. 

A bit behind Starlink is Amazon, which is working to launch a 3,236-satellite constellation to provide internet service.  This is Project Kuiper, which will be a Low Earth Orbit constellation, one which will “provide low-latency, high-speed broadband connectivity to unserved and underserved communities around the world.” 

Still further behind is Apple, which has a team working on satellites to beam data to devices.  However, it’s “not clear if Apple intends to pursue the costly development of a satellite constellation itself or simply harness on-the-ground equipment that would take data from existing satellites and send it to mobile devices.”  Apple “rarely enters new categories without a clear way to make money.”  Apple is not alone on the margins of the internet-by-constellation industry.  Facebook and OneWeb are also “in the hunt.” 

So I hope the foregoing indicates the relevance of a book about the efforts of Dan Colussy to rescue Iridium from bankruptcy; Motorola was the owner of Iridium.  The first 14 chapters of the book—426 pages—examine in great detail the agonizing struggles that Colussy went through save Iridium.  Struggles with Motorola.  Struggles with governmental regulators throughout the world.  Struggles with the Pentagon.  And the enormous challenge of raising what now seems like a tiny amount of money to maintain a phone service that saved the lives of many and provided a clear vision of what was possible from satellites communicating with one another in low earth orbits.  To me, the clear message of the book is the importance of absolute dogged determination to get things done.  Colussy seems to have lived by the words “failure is not an option.”

(24 December 2019)Farm to Table?  More Like Ghost Kitchen to SofaThe New York Times

——–“New York City is the country’s largest market for food delivery, and demand is only growing. . . . A means through which investors stand to make more money from food delivery has manifested in the city and will multiply in 2020.  The means is a type of business called a ghost kitchen.  These are food establishments, usually fast-casual, that make meals that can be purchased exclusively with a delivery app like Seamless, Grubhub, DoorDash or Uber Eats.  Ghost kitchens can house extensions of existing restaurants or new brands.”  The “money-making part is in the bundling: Several ghost kitchens can exist within the same physical kitchen, sharing ingredients and equipment and cooking staff used to supply multiple restaurant brands.”

********An interesting phenomenon, which brings to mind the role of input sharing in a variety of enterprises.  Not so unusual, I suppose.  Just think of a college cafeteria where many different types and styles of food are being created for students, faculty, and staff.  In this case, however, foods are being delivered via apps and may be associated with different restaurant brands.  You can learn more about ghost kitchens here.

(27 December 2019)A Decade of Urban Transformation, Seen From AboveThe New York Times

——–“Change can seem slow” on the ground.  “But zoom out—way out—and it’s clear that the last decade has brought remarkable transformation to many communities.  It’s visible from 400 miles above: Vast new exurbs have been carved from farmland, and once-neglected downtowns have come to life again.  The tech industry has helped remake entire city neighborhoods, and it has dotted the landscaped with strange new beasts, in data centers and fulfillment hubs.”  Working with members of Descartes Lab, a geospatial analytics company, The Upshot used satellite imagery to reveal “intimate details—a single home, bulldozed; a tennis court, reinvented—and big patterns that recur across the country

********This is a fascinating, quite literal, look at change in the “built environment” over the last decade.  It is well worth the time to show the dramatic change that some areas have experienced in a decade’s worth of development and destruction.  Particularly striking to me is the first image in the article, which shows the development of “ring structure” around many city centers, a phenomenon to reminds me of the work of von Thünen.  Atlanta is especially striking, but take a look at the state of Texas, too. 

(27 December 2019)Proposed tariffs could send some European wine prices out of reachThe Washington Post

********This article, by Post’s wine columnist Dave McIntyre, discusses the impact of current and prospective tariffs on European wines.  The current 25% tariff, imposed of French, German, Spanish, and British wines (with alcohol content less than 14%) in retaliation for EU subsidies on large aircraft.  More recently, the Office of the U.S. Trade Representative said, “it was considering 100 percent tariffs on French goods, including champagne and other sparkling wines, in retaliation for France’s new digital services tax.”  Obviously, this is likely to affect the price of wine purchased from a retailer or in a restaurant.  To me the interesting thing about this article is McIntyre’s analysis of how the price of a bottle of wine or a glass of wine will respond to each tariff percentage, which proceeds by examining the distribution chain and standard markups.  This is a different approach than would customarily be used in, say, ECON 101, but no less valuable to consider.  Jenny Lefcourt, who is a co-owner of a New York-based importer, catches the nature of the power behind theses tariff impositions when she notes: “I spent 20 years of my life building a successful business, and in one signature the Trump administration could make it all crumble.”

(31 December 2019)Doctors, Nurses and the Paperwork Crisis That Could Unite ThemThe New York Times

********This article, written by a nurse and a physician, examines the electronic record-keeping burdens borne by their respective professions, a burden that a recent study by the National Academy of Medicine requires that “on average nurses and doctors spend 50 percent of their work day treating the screen, not the patient.”  In fact, “Electronic health records are almost universally disliked, with one telling exception, those used by clinicians at the Department of Veterans Affairs.  The reason: Billing concerns don’t shape the records at government-run V.A. hospitals.  They document only what’s necessary to deliver better care.”  Elsewhere in the health system, such records “increasingly serve the needs of America’s corporate, profit-motivate health care.”  Specifically, “Insurance companies and hospitals demand ever more data to make decisions about payments and billing, so clinicians have to provide much more information about each patient at each interaction.  Mounting regulatory requirements that get built into these records are described as insuring patient safety, but are ultimately tied to compensation, which means money.  And in a system rife with legal risks, there is a strong incentive to overdocument everything.”

            Regrettably, monitoring costs of an activity or a product tend to be given little consideration in economic life, especially when monitoring is imposed by law, regulation, or accrediting body.  In the case of electronic health records, monitoring costs are clearly substantial.  To the mind of the microeconomist, the optimal amount of monitoring would equate the marginal benefit of a given amount of monitoring with the marginal cost of a given amount of monitoring (provided that the total benefit of monitoring was at least as great at the total cost of monitoring).  Such considerations, though, fall too often by the wayside.

            The article “How Cutting Food Stamps Can Add Costs Elsewhere The New York Times, connects nicely with the cost-benefit orientation of the paragraph above.  The reduction in cost of the SNAP program by reducing food security, is likely to increase the demand for health services and increase health care costs.  Were those additional health care costs considered?  Most likely they, too, fell by the wayside.  Consideration of costs and benefits of Regulatory Planning and Review were put in place by Executive Order 12866, signed by President Clinton in 1993.  A more expansive and current discussion can be found in a 2017 publication of the Congressional Research Service, “Cost-Benefit Analysis and Financial Regulator Rulemaking.”  A more expansive and very current (2018) book on CBA is The Cost-Benefit Revolution, by Cass Sunstein.

May you have a good week!

Bruce

401 (25 December 2019)

Welcome!  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. 

(9 December 2019)Zipcode Destiny: The Persistent Power Of Place And EducationHidden Brain

********This 52-minute interview of Harvard economist Raj Chetty by Shankar Vedantam is not to be missed.  Chetty is incredibly clear and precise in his discussions of: (1) childhood education, (2) economic mobility and the role of place (including race and gender), and (3) policy and practice.  With regard to childhood education and economic mobility, he was able to reorient thinking about each of them by taking a longer view of policy interventions, when short-term results had been disappointing.  Here is the breakdown of the topics in the podcast:

Childhood education—Start to 15:45

Economic mobility and the role of place—15:45 to 35:15

Policy and practice—35:15 to 52:05

In the waning moments of the interview, Vedantam relates a searchable database—The Opportunity Atlas—developed by Chetty and others that allows anyone in the United States to “trace the roots of today’s affluence and poverty back to the neighborhoods where people grew up.”  Go to the link and click on Begin Exploring.

            There is a story on Chetty’s work, “The Economist Who Would Fix the American Dream,” in the August issue of The Atlantic.  There Harvard economist notes about Chetty, “The question with Raj . . . is not if he will win a Nobel Prize, but when.”  The article touches upon many of the issues discussed in the interview.

            Short-term thinking can, of course, cause problems in many domains, not just in childhood education and economic mobility. It is often said that the time horizon of politicians extends no further than the next election and no doubt academics in many settings are also focused on the next annual faculty record.  Finally, it is sometimes said that the time horizon of those in business extends no further than the next stockholders’ meeting, perhaps to the next quarterly earnings call.  With all this in mind, there is an issue regarding excessive focus on the short-run to the relative exclusion of the long-run.  The opinion piece “Short-Term Thinking Is Poisoning American BusinessThe New York Times, takes a look at the problematic nature of an obsession on the short-run by those in business.

(19 December 2019) [SR]Recycling Rethink: What to Do With Trash Now That China Won’t Take ItThe Wall Street Journal

********This article discusses now-familiar ideas about the many consequences following from China’s decision to stop importing recycling materials from the U.S., much of which was highly contaminated with waste and the like.  Somewhat different is challenge this has posed for many households in which recycling is “something that’s ingrained in you.”  Even in the absence of the elimination of recycling programs, many households continue to dutifully separate recyclables from trash.

            One of the relative stars in recycling is cardboard, old corrugated cardboard (OCC) to be precise.  This material tends to be easy to remove from the recycling stream and relatively clean.  You can learn more about OCC, single-stream recycling, and other matters in 4:32 minute video “Where Your Old E-Commerce Boxes End Up.”

(21 December 2019)Rural American Turning to Grocers, High-Fee ATMs as Banks LeaveBloomberg.com

——–“Fifty years ago Allendale, South Carolina, was a bustling community catering to New Yorkers driving to Florida.  These days the tiny town makes the nightly news for drive-by shootings—and caught the attention of federal regulators after it lost half of its bank branches.  The lack of financial institutions is a major challenge facing smaller towns, where more than 1,500 bank branches closed between 2012 and 2017 . . . The loss of a simple credit union in Allendale speaks to deeper issues plaguing many rural communities, which are falling increasingly far behind cities even as America’s economy soars.”  Rural counties during that time period lost 14% of its bank branches, as compared to 9% for urban counties.

********This article draws heavily upon “Perspectives from Main Street: Bank Branch Access in Rural Communities,” a 32-page analysis published in November 2019  by the Board of Governors of the Federal Reserve System. 

(25 December 2019)Killer Slime, Dead Birds, an Expunged Map: The Dirty Secrets of European Farm SubsidiesThe New York Times

——–“In the spring of 2017, a European Union Working group of environmentalists, academics and lobbyists was having a technical discussion on green farming practices when a map appeared on an overhead screen.  In an instant, the room froze.  A farm lobbyist objected.  Officials murmured their disapproval.  The map juxtaposed pollution in northern Italy with the European Union subsidies paid to farmers in the region.  The overlap was undeniable and invited a fundamental question: Is the European Union financing the very environmental problems it is trying to solve?”  Although EU authorities boast about being green, “they sidestep an undeniable tension between facts and wishful policymaking.  This month . . . ambitious goals to fight climate change and save species from extinction [were set].  Yet one of the biggest impediments is the bloc’s $65-billion-a-year agricultural subsidy program that is intended to support farmers.”

********Interesting to me was learning that the Baltic Sea has “huge dead zones” not unlike the dead zone extending into the Gulf of Mexico from at the mouth of the Mississippi River.  The article is accompanied by information about conditions in a small number of EU countries, including Italy, Poland, the Netherlands, and France.  Of particular interest was the graph showing the relationship between the population of the gray partridge, a so-called indicator species, and the initiation of farming subsidies in 1962, which suggests (but does not establish) that the decline of the partridge, as well as the turtle dove, is related to the farm subsidy.  A recent article in the Asheville Citizen-Times indicates that “Climate change puts two-thirds of bird species at risk of extinction.”  (For the website that lies behind some of the reporting, check out this link and enter your zip code.  You will have a chance to learn the bird species in your area that are: highly vulnerable, moderately vulnerable, slightly vulnerable, and stable.)  What are the causal links, i.e., what is the argument, that takes us from subsidies to declining bird populations?

May you have a good week!

Bruce

400 (18 December 2019)

Welcome!  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.

(6 December 2019)Can a Coal Town Reinvent Itself?The New York Times

——–[Dateline Grundy, Virginia, roughly 123 as-the-crow-fly miles NNE of Asheville, North Carolina]  “This corner of southwestern Virginia has long sought alternatives to coal as a source of sustenance.  The Appalachian School of Law, which opened in the 1990s in the shell of Grundy Junior High School, was heralded as a new economic engine, lubricated—of course—with taxpayer funds.  So was the Appalachian College of Pharmacy, founded in 2003 some 20 minutes down the road in Oakwood.  County officials considered a dental school, but figured it was too expensive.  They still get grumpy about the optometry school, on which they spent $250,000 in feasibility studies only for it to open across the state line in Pikeville, Ky.  Then there is downtown Grundy itself, much of which was moved up the hill to avoid periodic floodwaters from the Levisa Fork, a tributary of the Big Sandy River.  Virginia estimates that the relocation and flood-proofing projects, started almost 20 years ago, cost $170 million in federal and state funds.”  And that is only part of the story.  Despite all these efforts, the “economic engine [of the area] is still the one that carried this corner of Appalachia through the 20th century.”  As Jay Rife, head of the county Industrial Development Authority, notes: “We are a one-industry community, and that’s coal.”

********The graphs accompanying the article clearly show how important transfer payments such as social security and Medicare, among others, are as a share of personal income in the area.  These transfer payments have fallen far short of what used to be received by coal workers.  The principal of Grundy High School “recalls Porsches and Mercedes-Benzes parked in the high school lot when she went to school there.”  Economist Lawrence H. Summers noted at a recent conference of the Federal Reserve Bank of Boston, “There is probably no issue more important for the political economy of the next 15 years, not just in the United States but around the world, than what happens in the areas that feel rightly that they are falling behind and increasingly left apart.”  Drawing attention to the lack of opportunity in areas such as Grundy, one resident notes: “There are not many jobs around here . . . Just teachers, state troopers and coal.”

            A dramatic illustration of Grundy’s situation and the point Summers made is provided by “A Third of America’s Economy Is Concentrated in Just 31 CountiesBloomberg.com.  Once you look at the map, there will be little surprise where these counties are located—they tend to be in large metropolitan areas; Los Angeles has the largest county GDP.

(8 December 2019)It’s a Vast, Invisible Climate Menace.  We Made It VisibleThe New York Times

********This article is about methane, its detection, and deregulation.  Methane, of course, is a potent greenhouse gas, the levels of which “have soared since 2007 for reasons that still aren’t fully understood.  But fracking natural-gas production . . . is a prime suspect.”  The detection dimension of the article relates to the use of a special infrared camera, with “a lens made not of glass but metal.”  That camera revealed methane plumes that would otherwise be invisible.  Finally, there is deregulation.  As is well known, the Trump administration is engaging in an “historic effort to weaken environmental and climate regulations.”  In fact, “this August, the E.P.A. had proposed a broad rollback, including rescinding direct regulations of methane emissions completely.”  The article pointed out to me, in addition to methane emission issue, how important it is to extend detection beyond the narrow bounds of human perception.  Methane detection is only a start.

(10 December 2019)One more year on the farm: A visual narrative of one [Minnesota] family’s fight to save their landThe Washington Post

********This article, mostly images with an ongoing narrative, takes one through a year at a Minnesota farm, sketching some of the challenges confronted during the year, some market driven, others driven by weather.  One thing that comes through powerfully is a sense of not being in charge of events, a thought captured by the expression “a hope in the unseen that most farmers need.”

(13 December 2019) [SR]Donkeys face worldwide existential threatScience

——–“Over the past 6 years, Chinese traders have been buying the hides of millions of butchered donkeys from developing countries and shipping them to China, where they’re used to manufacture ejiao, a traditional Chinese medicine. The trade has led to an animal welfare nightmare, along with a threat to donkey populations, the severity of which is only now emerging. Without drastic measures, the number of donkeys worldwide will drop by half within 5 years, according to a recent report. The crisis threatens many of the world’s rarer donkey breeds and a vital means of transport for the poor. But it is also spurring new studies of donkey biology—including how to speed their reproduction.”

********Personal note.  The Larsons have a donkey, which we acquired to be a companion animal for our mule.  We don’t horse around.  When we purchased it, some other potential buyers were interested in it wanted to butcher it.  Perhaps it would have been used to manufacture ejiao, too.  We will never know.  This two-page article provides a marvelously concise discussion of the consequences of a substantial increased demand for the body parts of a sentient being and its global consequences.

(15 December 2019)From Canada’s Legal High, a Business LetdownThe New York Times

——–“When Canada became the first major industrialized nation to legalize recreational marijuana, visions of billions of dollars in profits inspired growers, retailers and investors, sending the stock market soaring in a so-called green rush.  A year later, the euphoria has vanished.”  The principal problem is that “the provincial governments in Ontario and Quebec, whose residents account for about two-thirds of Canada’s population, have opened or licensed legal pot shops at a glacial pace—despite a clear demand.  Potential customers are still underserved with just 24 legal marijuana shops for Ontario’s 17.5 million residents.  So many are still buying on the black market.”  Contributing to the persistence of the black market is its freedom from taxation, and “the elaborate regulatory structure for legal cannabis [that] has been an impediment to sales.  Canada’s regulations were designed only to decriminalize marijuana use, not necessarily to encourage it.  The result is a system that mimics the country’s approach to tobacco, and largely blocks marketing and advertising.”

(17 December 2019)VanillanomicsBloomberg Businessweek

********This island of Madagascar in larger than France and its northeast region “is the world’s largest producer of natural vanilla.”  This article provides an on-the-ground look at how vanilla is grown and sold.  A journey into a region where each vanilla bean is touched by hand hundreds of time during its life cycle.

(17 December 2019)How Families Cope with the Hidden Costs of Incarceration for the HolidaysThe New York Times

********This article summarizes some of the many costs that the families of the incarcerated bear in order to maintain the mental and physical health of their loved ones.  These costs have increased as prison services have become more privatized.  The “Bureau of Justice Statistics estimates that the United States sends more than $80 billion each year to keep roughly 2.3 million people behind bars.  [But] Many experts say that figure is a gross underestimate . . . because it leaves out myriad hidden costs that are often borne by prisoners and their loved ones, with women overwhelmingly shouldering the financial burden.”

(January 2020)Click Here to Kill: The dark world of online murder marketsHarper’s Magazine

********This is a dark, dark article, taking a stroll through the Internet where the “assassination marketplace of the dark web” lurks.  The story of a young woman in Minnesota is truly sobering.

May you have a good week!  

Bruce

399 (11 December 2019)

Welcome!  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. 

(13 September 2019)Evaluating the Genuine FakeInside Higher Ed

********This is a review of Genuine Fakes: How Phony Things Teach Us About Real Stuff, by Lydia Pyne.  In a time of purported “fake news” it is of some interest to take a broader view of the material world and discuss what is real and what is not.  In her book she “focuses on the paradoxical status of a number of ‘tangible, physical things that have been made, unmade and remade any number of ways throughout history.’  The genuine fake poses questions about the relationship between authenticity and value in ways that compel thought rather than numb it.”  I think this book touches upon the distinction between mass-produced goods and craft goods that is noted in the immediately following article. 

(4 December 2019) [SR]The U.S. Furniture Industry Is Back but There Aren’t Enough WorkersThe Wall Street Journal

——–[Dateline Hickory, North Carolina] “Here’s the good news: There are now more reasons to make furniture in the U.S. than at any point since the financial crisis.  Crate & Barrel and Williams-Sonoma Inc. are expanding manufacturing in the U.S., and the factories of longtime furniture makers are humming.  Here’s the bad news: There aren’t enough skilled workers available to support the renaissance.”  Furniture companies “face special challenges after years of shrinking.  A generation of prospective sewers and upholsterers have steered clear of the industry, leaving it heavily reliant on an aging workforce.”  One of the workforce solutions has been to expand training opportunities for the young and old alike, in places like Catawba Valley Community College.  But with fewer graduates than needed to meet production requirements, companies like Hickory’s Century Furniture have stretched out their delivery times, currently at nine weeks.

********One thing in the article that struck me as interesting, if not surprising, was the types of furniture products that tended to locate internationally and those that tended to remain in the U.S.  Mass-produced, high volume furniture production tended to relocate to China, for example, and low volume, specialty furniture tend to stay in the U.S.  Factories in the U.S. “still churn out about half of upholstered furniture sold in this country, much of it in places like Catawba County, in the foothills of the Blue Ridge Mountains.”  It is the demand for upholstered furniture that has picked up in recent years.  And so, “When business picked up, there just weren’t enough skilled people.”

            A related article, that also speaks to the importance of education in a work force that increasingly demands higher skills, is [SR]American Factories Demand White-Collar Education for Blue-Collar WorkThe Wall Street Journal.  The message is clear.  “College-educated workers are taking over the American factory floor.  New manufacturing jobs that require more advanced skills are driving up the education level of factory workers who in past generations could get by without higher education, an analysis of federal data by The Wall Street Journal found.  Within the next three years, American manufacturers are, for the first time, on track to employ more college graduates than workers with a high-school education or less, part of a shift toward automation that has increased factory output, opened the door to more women and reduced prospects for lower-skilled workers.”  The Journal analysis found that “Employment in manufacturing jobs that require the most complex problem-solving skills, such as industrial engineers, grew 10% between 2012 and 2018; jobs requiring the least declined 3%.” 

(6 December 2019) [SR]GDP Doesn’t Include Proceeds of Crime.  Should It?The Wall Street Journal

——–“When the U.S. calculates its gross domestic product, it only includes things that are legal.  But if the wares of drug dealers, pimps, bookies and other black-market denizens were included, the GDP would expand by more than 1%, according to one estimate.  It would also align our national accounts more closely with those of the European Union, whose members already incorporate some illegal activities in their tallies. . . . The EU began accounting for illegal activities in its national accounts about five years ago.”

********As the article goes on to point out, a consideration of the importance of adding illegal activities to GDP depends upon the growth rate of illegal activities compared to legal activities.  According to James Tebrake, assistant director of the statistics department of the International Monetary Fund, “if the illegal economy were growing at, say, 1% faster than everything else, that’s a dynamic we might want to pick up.”  There is evidence that “real illegal output did grow faster than overall GDP during the 1970s and after 2008.”  Rachel Soloveichik, a research economist at the Bureau of Economic Analysis, has been studying the likely impact of the inclusion of illegal activities on GDP.

(8 December 2019)Satellites Are Changing the Night Sky as We Know ItBloomberg.com

——–“Expect the night sky to start changing fast.  One day soon, the stars we can see from Earth could be outnumbered by a vast swarm of satellites. . . . SpaceX has plans to launch 30,000 more satellites, in addition to the 12,000 already approved by the FCC and FAA. . . . The result could be cheap or free high-speed Internet access for everyone on the planet, at the price of our view of timeless constellations.”  It is estimated that the naked eye “can pick up just 10,000 or so [stars] from a relatively dark place.”  In addition to fundamentally changing the view of the night sky, additional satellites increase the probability of collisions.  An international agreement to limit space debris is one way that collision risk can be limited.

********Space junk is a big problem.  You can learn more about its various dimensions in “Satellites Are Crowding Space, and It’s Time for a Cleanup PlanBloomberg.com.  It was because of the increasing efforts by SpaceX, Amazon, and others that I decided to read Eccentric Orbits: The Iridium Story, by John Bloom.  Iridium was a company launched by Motorola to establish a satellite-based global phone business.  I’ve been finding the book—I’m 40% through it—engrossing.  It has many of the characteristics of the SpaceX model: low earth orbits (LEOs) and many satellites, but it was oriented to phones, not the Internet.  By the way, Iridium still exists.  You can learn more about it here.

(8 December 2019)Who Put the ‘S’ in ‘ESG’ (and What Does it Mean)?Bloomberg Businessweek

********ESG investing is frequently discussed in the press without elaboration or explanation.  This article is set up like a Bloomberg QuickTake and provides seven paragraphs of discussion what ESG investing is—E stands for Environmental, S for Social, and G for Governance—and some of its historical predecessors, e.g., Socially Responsible Investing.  ESG investing seems to be closely related to the recent—August 2019—Business Roundtable Statement on the Purpose of a Corporation, which places additional emphasis on all corporation stakeholders, rather than just shareholders.

            An article that goes along very well with the one on ESG investing is “Finland Is a Capitalist ParadiseThe New York Times.  Its authors, Anu Partanen and Trevor Corson moved to Helsinki from Brooklyn in search of a better life.  As the article shows, they found it.  In discussing their move and their lives before and after Brooklyn (mostly after), they have come to a variety of conclusions about socialism and capitalism, especially as they relate to Finland and the U.S.  Here is an example:

the Nordic nations as a whole, including a majority of their business elites, have arrived at a simple formula: Capitalism works better if employees get paid decent wages and are supported by high-quality, democratically accountable public services that enable everyone to live healthy, dignified lives and to enjoy real equality of opportunity for themselves and their children. 

And why would the Nordic countries, including Finland, adopt this formula?

Some Nordic capitalists actually believe in equality of opportunity and recognize the value of a society that invests in all of its people. But there is a more prosaic reason, too: Paying taxes is a convenient way for capitalists to outsource to the government the work of keeping workers healthy and educated.

I would be curious to know if the U.S. governance system, where states have substantial power relative to the federal government, plays a role in the inability to advance some of the reforms which, in Finland and the other Nordic countries, capitalists find comfort.  As the authors note, the Finnish approach “liberates businesses to focus on what they do best: business.”

            Anu Partanen is the author of The Nordic Theory of Everything: In Search of a Better Life.  It is interesting to note that 34-year-old Sanna Marin, who just took office on December 10th as Finland’s Prime Minister, is “the youngest head of government in the world.  She leads a coalition headed by women.”       

(9 December 2019)Paul A. Volcker, Fed Chairman Who Waged War on Inflation, Is Dead at 92The New York Times

********An informative piece on Paul Volcker, who served as Chairman of the Federal Reserve under presidents Carter and Reagan.  Particular emphasis is given to his central role in breaking the inflationary momentum of the U.S. but a much broader view of his life and work is provided.  I was surprised to learn that he served as “unpaid chairman of the National Commission of the Public Service, a nonprofit organization founded in 1987 to encourage private-sector leaders to serve in government.”  For a memoir on Volcker’s life, read Keeping At It: The Quest for Sound Money and Good Government.

(10 December 2019)Sicilian Homes Went Up for Auction Starting at €1.  More Than 100,000 People Called.The Wall Street Journal

­——–“Leonardo Ciaccio, mayor of Sambuca in Sicily, put 16 houses up for auction at a starting price of €1 early this year as part of an effort to halt the depopulation of his small town. Within weeks, more than 100,000 people, mostly from the U.S., requested information.”  All 16 houses sold to the highest bidders “able to commit to renovating the dilapidated properties.”  Now, the mayor says, “Sambuca is in a renaissance.”  This approach is being used by 16 towns in Italy, “most of them in the poorer south.”  They are “selling abandoned houses for as low as €1—about $1.11.  The catch: Buyers need to renovate them.  “Small towns and villages in many European countries are under demographic pressure as people leave for big cities and those remaining have fewer children. . . . Small-town shrinkage is particularly acute in Southern Europe, where immigration compensates less for locals moving away: Migrants tend to settle in Northern Europe or large cities.”

********The challenges of the rural areas of Southern Europe are hardly unique.  For only the most recent article, take a look at “2 North Carolinas: Cities grow at record pace while rural counties fall behindAsheville Citizen-Times.

May you have a good week!  

Bruce

398 (4 December 2019)

Welcome!  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. 

(29 November 2019)Climate Change Adds Wrinkle to Art Collectors’ ConcernsThe New York Times

——–“If being a collector [of art] is imbued with the romance of money and taste, then keeping track of all the pieces in a collection is its opposite.  Verifying the purchase price and date, the artist’s information, the history of a work is about as romantic as accounting.  But this drudgery is increasingly becoming necessary for high-end collections as climate change makes severe weather worse in the coastal areas where the affluent tend to live.”  Lisa Lindsay, of the Private Risk Management Association, notes: “As we go into 2020, the days are gone when homeowners needed to just put an insurance policy in place to protect themselves but could then move on . . . People [now] need to work with someone who can put together a comprehensive plan.”

The stakes are high, as “the worldwide art collection in private hands is estimated to be worth more than $1.7 trillion.  But individual owners have been slower than institutions and companies to catalog what they have.”

********Businesses like Artwork Archive, Art Galleria, Artlogic, and Veevart have emerged “to help owners and artists catalog their works.  According to Ms. Lindsay, climate change has been the main factor in driving these changes.  She comments, “Climate change is a reality . . . These sever weather events are going to continue and maybe increase.  We need people to understand there’ plenty that can be done” to address the risks.

            It occurred to me while reading this that there climate change is a great disruptor of markets, just like digital technology.  Consequently, climate change presents many opportunities for entrepreneurial gain.  Along those lines, the article “Weather is turning into big business.  And that could be trouble for the publicThe Washington Post is worth perusing. 

            Not all entrepreneurs are successful, of course, and that underlies an intriguing article in The Wall Street Journal [SR]Why Entrepreneurs Don’t Learn From Their Mistakes.”  As the article notes, “Part of the folklore about successful entrepreneurs is that they succeeded because they first failed. . . . But this is a myth.  While second-chance stories are comforting, . . . research shows that entrepreneurs don’t learn from their mistakes.  In fact, it’s the opposite: Fail once and you’re most likely to fail again.”  Although there “are many reasons why this is so, . . . the most important is [that] . . . Learning is a complex process that usually doesn’t proceed as simply and obviously as we hope.  We struggle to take away lessons about what went wrong and then apply those insights to new situations.  Or we simplify our experiences and leave out key details that would help us get a complete picture of why things went wrong.”  For a lengthy academic paper on the subject, for the link to the ZEW Discussion Paper here.

(29 November 2019)We need a major redesign of lifeThe Washington Pos

——–“It’s time to get serious about a major redesign of life.  Thirty years were added to average life expectancy in the 20th century, and rather than imagine the scores of ways we could use these years to improve quality of life, we tacked them all on at the end.  Only old age got longer.  As a result, most people are anxious about the prospect of living for a century.”  But “Long lives are not the problem.  The problem is living in cultures designed for lives half as long as the ones we have.”  The Stanford Center on Longevity is working to create “The New Map of Life” while asking “How do traditional models of education, work, lifestyles, social relationships, financial planning, health care, early childhood and intergenerational compacts need to change to support long lives?”

********This is certainly a problem that engages all of the invisible forces—hand (economic), foot (legal and political), and handshake (social and historical).  This all seems obvious, though.  If one had an additional 20 years, say, to distribute over one’s life course, would you really put all of them in retirement? 

            You can learn more about the Stanford Center on Longevity and “The New Life Map” here.  On that same page, you can download a nine-page white paper on the Map.

(2 December 2019) [SR]The Water Wars that Defined the American West Are Heading EastThe Wall Street Journal

——–“Water stress, a hallmark of the American West, is spreading east. . . . Increasing competition for water is playing out across the Eastern U.S., a region more commonly associated with floods and hurricanes and one that was mostly a stranger, until recently, to the type of bitter interstate water dispute long seen in the West.  Eastern farmers’ rising thirst for water, together with urban growth and climate change, now is taxing water supplies and fueling legal fights that pit states against each other.  The shift has exposed the region to changes in water supply occurring globally as swelling populations, surging industrial demand and warmer temperatures turn a resource seen as a natural right into a contested one.”

********The article focuses on water conflicts between Florida and Georgia over the “Apalachicola-Chattahoochee-Flint River basin.”  In this case, the conflict pits Georgia farmers, who are using water for irrigation, against Florida oysterman, who need fresh water for oysters.  The more water used in Georgia, the less there is for Florida.  According to some water experts,  eastern states are “unprepared for scarcity, armed with a patchwork of regulations and laws that assume water will remain plentiful.  Unlike in the West, where most major river basins are governed by interstate compacts, only a few such agreements exist in the East.”

(3 December 2019)Exposé of data gender bias wins FT/McKinsey book prizeThe Financial Times

——–“Caroline Criado Perez has won the 2019 Financial Times and McKinsey Business Book of the Year Award for Invisible Women, her examination of how designers and developers have perpetuated bias toward men in the data they use.  In an earlier FT review of the book, it was noted: “Criado Perez comprehensively makes the case that seemingly objective data can actually be highly male-biased, and that public spending, health, education, the workplace and society in general are worse off as a result.”

********The full title of Criado Perez’s book is Invisible Women: Data Bias in a World Designed for Men.  Bias is a very general idea and is likely to be prevalent in most empirical studies.  One can easily imagine a host of books entitled Invisible X: Data Bias in a World Designed for Y.  In the rush to establish the relevance of a piece of research, it is all too easy to ignore of conveniently forget about the data (and the assumptions) made to arrive at one’s results.

            An article that points out the consequences of a different kind of data ignorance is “When a Disappointment Helped Lead to a Nobel PrizeThe New York Times.  Earlier in his career, Michael Kremer conducted a study on school children in western Kenya, expecting to find that the provision of textbooks would improve student performance.  But the preliminary results indicated that such provision did not improve student performance, which “shocked” Kremer.  Reflecting on his results led Kremer “to think harder about the schooling system in Kenya.  He said he began to realize that one problem was an excessive focus on top students, and he went on to design and test other measures that would help a broader range of people.”  Ultimately, it seems, as the textbooks were designed for the top students, students who were not-so-capable struggled to use them.  The author of this article, Seema Jayachandran, was a student of all three winners of this year’s Nobel Prize in Economics.

            Six books were in contention for the 2019 Award.  You can the short list here.

(3 December 2019)Hemp Industry Is Cleared to Do Business With BanksThe New York Times

——–“The number of banks in the United States willing to lend to hemp producers can be counted on one hand.  That is about to change.  Federal and state bank regulators announced Tuesday that they were scrapping a burdensome requirement that banks said kept them away from the hemp business.  Banks will no longer have to treat their hemp customers as suspicious and file reams of paperwork to anti-money-laundering authorities for each interaction.  The change could provide a major boost to a niche product that began its own legalization process last year.”

********As noted in the article, the inability to access the banking system has been one of the factors holding back the expansion of hemp in many quarters.  The actions of federal and state regulators, which “does not affect the legal marijuana businesses dealing with the same problems,” is a step forward to allowing banks to “dive into a lucrative new industry that has been plagued by security concerns and is desperate for even the most basic services, like checking accounts and credit card processing.”

May you have a good week!  

Bruce

397 (27 November 2019)

Welcome!  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.

Happy Thanksgiving!

(20 November 2019)The Big Business of Unconscious BiasThe New York Times

——–Lately the diversity, equity, and inclusion (DEI) industry, also known as the diversity and inclusion (DI) industry “is booming, creating new career paths and roles.  Institutions and businesses are trying to correct power imbalances, which means a growing need for experts who can help address and define issues like unconscious bias.”  Michelle Kim of experiential DEI workshop Awaken, of Oakland, California, notes: “Were seeing employees demanding action, not just lip service.”  Overall, postings for DEI-related jobs “were up more than 25 percent from August 2018 to August 2019.”  The industry is no longer “approaching these issues with perfunctory, so-called sensitivity training . . . Today, no one is going to ‘hug it out’ after a single lecture about embracing difference.”  The sessions of Awaken are “taught over the course of months, . . . [combining] large group activities, self-reflection and small group conversations, and focus on themes like exploring identities, overcoming microaggressions, thoughtful ally-ship and, most recently, inclusive language.”

********The article goes on to note, “Millennials’ expectation of inclusion is part of what is driving C.E.O.s and directors to bring in D.E.I. consultants.  That generation [1981-1996] will make up 75 percent of the work force by 2025, according to Brookings, the nonprofit public policy organization.”  You can find the source of that statement here.

            Universities such as Cornell, Georgetown, and Yale off “certificate programs and online courses” on DEI, and Textio software “can scan thousands of documents for language bias.”  Learn more about Textio here, as well as its product Textio Hire, which scores writing on a number of criteria, including bias.  Artificial Intelligence seems to underly their software.  There are some great opportunities for “with it” people who write well and are computer savvy.

            While we are on the subject of AI, this seems like a good place to mention a blog I recently ran across, The Enlightened Economist of Diane Coyle; Coyle is the Bennett Professor of Public Policy at the University of Cambridge and the author of GDP: A Brief but Affectionate History.  Her post of November 18, 2019 summarizes notes three books on AI and recommends a reading order. 

(21 November 2019)Inside the bloody cartel war for Mexico’s multibillion-dollar avocado industryThe Los Angeles Times

——–The Mexican criminal group called the Viagras are setting up a grow operation in Michoacan state.  Not marijuana, it turns out, but avocados.  Illegally clearing forests to do so, they are planting their own groves of “green gold.”  More than “a dozen criminal groups are battling for control of the avocado trade in and around the city of Uruapan, preying on wealthy orchard owners, the laborers who pick the fruit and the drivers who truck it north to the United States.”  As a result, “Homicides are at an all-time high in Mexico . . . Yet much of the killing today has little to do with drugs.  Organized crime has diversified. . . . Compared with drug trafficking, a complex venture that requires managing contacts across the hemisphere, these new criminal enterprises are more like local businesses.  The bar to entry is far lower.”  According to Falko Ernst of the International Crisis Group, “For many of those smaller groups, it’s far easier to just prey on local populations.”  Michoacan state, as it turns out, “is a microcosm of what is happening elsewhere in the country—and a potent illustration of how the government has unintentionally fueled more violence.”

********As the article goes on to note, the increased demand for avocados in the U.S., where per capita consumption went from 2.1 pounds in 2001 to 7.5 pounds in 2018, has helped make the avocado business increasingly attractive.  Interestingly, Michoacan is “the only state in the country allowed to the United States, which banned avocados from Mexico until 1997 over concerns about pests.”

(22 November 2019)If that was a retail apocalypse, then where are the refugees?The Washington Post

********This article is complex and hard to summarize, but it deals with the role of retail jobs as an entry to the labor force.  Evidently the hardest-hit sectors “are those we often associate with shopping malls, such as clothing, department, toy and electronic stores.  Remove such stores, in fact, and you’ll find retailers added tens of thousands of jobs since early 2017.  Building materials, groceries, auto parts and gas-station convenience stores led the way.”  And those people leaving their jobs “seems to be related to them quitting, rather than getting fired or laid off.  Quitting is generally considered healthy it shows workers are confident they can get better offers.”  Economist Nick Bunker of Indeed, a job site, notes: “People often think the sign of a weaker labor market is lots of layoffs . . . But an unappreciated symptom of a weak labor market is employers pulling back on hiring.”  Quits, it would appear, has made firing workers to reduce the workforce unnecessary.  So, if some retail businesses are not hiring workers ready to enter the workforce, where are they being hired?  It may be that “many will instead find their first job in food services, the one industry more precarious and lower-paying than retail.”  Perhaps a strong economy will allow more robust hiring in “non-mall retail sectors.”  As Bunker said, “Lot’s of people lose their jobs in good economies; they just get hired again quickly . . . We really get into trouble when employers aren’t looking to hire.”

(24 November 2019)Why Scientists Defend Dangerous IndustriesThe Chronicle of Higher Education

********This article is an interview with David Michaels, the former top official at OSHA for seven years and the author of the forthcoming (2020) book The Triumph of Doubt: Dark Money and the Science of Deception.  (The link provided includes access to the Table of Contents.)  Evidently the book is a take on the ways that money has been a corrupting influence on university research and provides illustrations of that corruption, as well as suggestions how to diminish it.  Full disclosure of potential conflicts of interest is his primary recommendation.  The title provides echoes to two well-received books: Merchants of Doubt (2011) and Dark Money (2017), both of which I have read.  In 2008 Michaels published Doubt Is Their Product: How Industry’s Assault on Science Threatens Your Health.  In the interview, Michaels notes two reasons why a new book was needed: (1) under the current administration, regulatory agencies are now being headed by the “same product-defense scientists whom . .  [he wrote] about 10 years ago” and (2) the product-defense approach of ten years ago “has now become so common across all industries.”  I’ll read it when it comes out. 

(26 November 2019)Meet the Leftish Economist With a New Story About CapitalismThe New York Times

——–Mariana Mazzucato is an economist based at University College London.  She is trying to change “the way society thinks about economic value.  While many of her colleagues have been scolding capitalism lately, she has been reimagining its basic premises.  Where does growth come from?  What is the source of innovations?  How can the state and private sector work together to create the dynamic economies we want?  She asks questions about capitalism we long ago stopped asking.  Her answers might rise to the most difficult challenges of our time.”

********As the article notes, Mazzucato, whose Ph.D. is from the New School for Social Research, is the author of two books on modern political economic theory: The Entrepreneurial State and The Value of Everything.  She was awarded the 2019 Not the Nobel Prize for “reimagining the role of the state and value in economics.”  Mazzucato’s ideas have found expression in the ideas of Elizabeth Warren, Alexandria Ocasio-Cortez, and Marco Rubio.

May you have a good week!  

Bruce