409 (19 February 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.

(13 February 2020)Never Mind the Internet.  Here’s What’s Killing MallsThe New York Times

********This piece is by Austan Goolsbee, an economist at the University of Chicago.  The decline of brick-and-mortar retail in the U.S. has been widely attributed to e-commerce, most notably Amazon.  But Goolsbee indicates that there is a bigger story, pointing out that there are three “major economic forces” that have had a bigger impact than the Internet.  They are big box stores, income inequality, and the move toward services instead of things.  I thought his discussion about income inequality was especially interesting.  He concludes by saying, “In short, the broad forces hitting retail stores are more a lesson in economics than in the power of disruptive technology.  It’s a lesson all retailers will have to learn someday—even the mighty Amazon.”

(13 February 2020)Shopping under the influenceThe Washington Post

********This article connects nicely with Goolsbee’s third force—the move toward services instead of things.  In Nordstrom’s new flagship store in New York City, “the most buzzed-about attraction” is a full bar, to be specific, Shoe Bar, which serves $17 cocktails, sells wine by the glass, and has a half dozen craft beers.  It is packed by 4 pm most days.  Customer Kathy Miller, of Carefree, Arizona, notes: “To attract shoppers these days, you have to do something different and fun . . . And, of course, the more you drink, the more you spend.”  This phenomenon is not limited to NYC and seems to be growing.  “Across the country, shopping centers, malls and major chains . . . are increasingly allowing—even encouraging—customers to imbibe while they browse.  It’s the latest attempt by stores to offer shoppers an experience they can’t get online.”  That said, the article also mentions that there is some evidence that those shopping online may be influenced by alcohol, too.  Evidently, drinking and browsing can be done in-store and online.

(13 February 2020)The Green MileThe Washington Post Magazine

********Coal mines and their aftermath are the subject of this article, especially the coal mines of Eastern Kentucky.  The central figure in the story, human-wise, is Patrick Angel, who for 25 years oversaw the reclamation efforts of lands that had been strip-mined or mountaintop-removed.  “He told coal companies to do one thing when they were done with a site: pack the remaining rubble as tightly as possible, and plant grass—the only type of plant he trusted to hold the ground in place.”  Eventually he “realized something was very wrong.  The big, productive, life-nurturing forests of Appalachia weren’t just slow to come back; they weren’t coming back, period.”  Angel “has spent the rest of his career undoing the damage.”  What has proven far more effective in returning forests to barren lands are large machines that “drag two massive, fanglike shanks that . . . rip open the ground in a checkerboard pattern, loosen soil and make room for growing tree roots.  Then small armies of volunteers . .  descend on the site . . . [to] plant tulip trees, oaks, pines and chestnuts.  What was once a forest brimming with diverse life, before becoming a denuded strip mine and then a weedy rubble pile, would be a forest again.  Thanks in large part to Angel, now 70, more than 187 million trees have been planted on about 275,000 acres of former mines.”  Angel provides a powerful example of looking, learning, and acting.

(13 February 2020)Build Build Build Build Build Build Build Build Build Build Build Build Build BuildThe New York Times

********Housing, especially affordable housing, is one of the major problems facing the United States, most especially in California, where homelessness in Los Angeles and San Francisco receives regular attention in local and national media.  This article tells the story of one well-to-do town, Lafayette, California, east of Oakland, and its efforts to prevent the construction of a 315-unit housing development.  The story will sound familiar to residents of the Asheville, North Carolina area, where each new development meets strong resistance from those who live nearby.  The author of this article, Connor Dougherty, is also the author of Golden Gates: Fighting for Housing in America.  You can read a review here.

            The City Manager of Lafayette, Steve Falk, had a front-row seat in the negotiations, discussions, yelling, and character assassination that were all part of the consideration of the housing development.  Ultimately, he would lose his job because he came to understand housing development differently because of how his involvement.  In this way, he reminds me of Patrick Angel and Eastern Kentucky.  The person who was instrumental in changing the mind of  Falk was Sonja Trauss, an outspoken housing advocate, who was a persistent champion of housing construction.  She founded a movement—“YIMBY for Yes in My Back Yard—[that] has become an international phenomenon, with supporters in dozens of housing-burdened regions including Seattle; Boulder, Colo.; Boston; Austin, Texas; London and Vancouver.”  YIMBY, of course, is a play on NIMBY—Not in My Back Yard.  You can learn more about the YIMBY movement here.

            Trauss would later speak at a City Council meeting in Lafayette on the development.  She noted that “the entire notion of public comment on new construction was inherently flawed, because the beneficiaries—the people who would eventually live in the buildings—couldn’t argue their side.”  It is a good point, one that is broadly applicable to a variety of social phenomena.  As the article notes near its beginning, the real solution to the housing problem is sociological.  People “are going to have to change.”

(13 February 2020)N&O Parent Company McClatchy Files for Bankruptcy Indy Week

——–“McClatchy Co., the second-largest newspaper chain in the country, filed for bankruptcy Thursday [the 13th] . . . If a bankruptcy judge accepts McClatchy’s restructuring plan, after 163 years of family control, the company will be delisted from the New York Stock Exchange and turned over to a hedge fund.  In North Carolina, McClatchy owns The News & Observer, The Charlotte Observer, and the Durham Herald-Sun.

********This seems like old news—just another example of the hard times befalling print media.  The News and Observer and The Charlotte Observer have the largest circulation of North Carolina newspapers.  This development comes not long after the largest newspaper company in the nation was created when “Gannett, the parent company of USA Today and more than 100 other dailies, and New Media Investment Group, the owner of the newspaper chain GateHouse Media, announced their intention to join forces.”  In November, 2019, “shareholders at the two companies voted yea.  And now one in five daily papers in the United States has the same owner, under the Gannett name.”  The Asheville Citizen-Times is a Gannett paper. 

It is hard to imagine that the Gannett merger had much to do with the bankruptcy of McClatchy, no doubt both developments are the result of diminishing revenues from print distribution, largely driven by decreasing advertising.  What is the alternative to merger?  Bankruptcy.  You can learn more about the McClatchy bankruptcy filing in The New York Times.  As the article notes, “If the Chapter 11 plan gains court approval, McClatchy would become the latest newspaper company to fall under the control of Wall Street investors, an unlikely relationship that has become more common as the financial industry seeks to wring profits from an ailing business.”

(17 February 2020)The Health System We’d Have if Economists Ran ThingsThe New York Times

********This article reports some of the results of a survey of 200 Ph.D. health economists.  It is mostly descriptive, rather than analytical.  The article concludes noting that “If health economists were in charge of the health system, not a lot would change, with some notable exceptions.  Medicaid would not have work requirements . . . and taxes would go up for Medicare and for employer-based health insurance.” 

            I searched for the report that must have served as the foundation for this article but could not find it, the closest relevant site being from a 2019 conference.  You can learn more about the American Society of Health Economists here

            One issue not reported on—presumably not inquired about in the survey—is the problem of “surprise” medical bills.  Although “two-thirds of Americans say they are worried about being able to afford an unexpected medical bill” and “Nearly eight in 10 American say they want federal legislation to protect patients against surprise bills,” there seems to be little movement towards resolving the “three-way competition” among hospitals, doctors, and insurers that is a source of the problem.

May you have a good week!


408 (12 February 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. 

(10 February 2020)What You Need to Know About the Spreading CoronavirusBloomberg.com

********This is a Quicktake on the Coronavirus, update on February 10th from a post on January 6th.  This post covers the basics.

            The coronavirus provides an opportunity to examine a host of issues not regularly covered.  For example, what does the legal term force majeure mean?  It seems to fall under the umbrella of “acts of God.”  Bloomberg has a nice discussion of the expression in “When God Appears in Contracts, That’s ‘Force Majeure’.”  Simply put, unanticipated events such as the spread of the coronavirus provide an opportunity for contractual parties to void their contracts.  It strikes me as a great topic for a master’s thesis or doctoral dissertation, e.g., “Force majeure and the Flu Pandemic of 1918.”  Also known as the Spanish Flu, this public health disaster must have lead to many canceled contracts.

            Global trade has certainly been disrupted by the coronavirus, and many China-related links in supply chains have been temporarily broken.  This point is clearly illustrated by “Ships Are Skipping China and It’s Causing Turmoil for TradeBloomberg.com.  As the article notes, “February 2020 will come to be remembered as a period of historic disruption to physical supply chains the world over, as the coronavirus wrecks trade.”  The impact on container shipments, chemicals, dry bulk commodities, and crude and oil products have been especially significant as China’s role in world trade has increased.  Shipping companies like AP Moller-Maersk A/S, the world’s largest shipper, has been especially affected “because 90% of all trade moves by sea and China has grown into the maritime industry’s main source of cargoes.”  It is estimated that almost 600,000 20-foot [container] boxes are currently out of action as a result of the virus. .  . Though rates can vary, using an estimate of $1,000 per container, that means shippers had to stomach a hit of $600 million this week.”

(11 February 2020)Should College Athletes Profit From Their Fame?  Here’s Where the Debate StandsThe New York Times

——–“The National Collegiate Athletic Association and its sprawling membership of schools are mire in fights—behind closed doors, in statehouses and on Capitol Hill—over whether and how student-athletes should be allowed to profit off their renown.”  California legislation—effective 2023—has provided an impetus to forward the conversation.  Taken a nod from California, “lawmakers in dozens of other states” are considering “bills of their own, and many have drawn bipartisan backing.  Some of those proposals would take hold far faster than the California law.  In Florida, for instance, one proposal was written to go into effect this summer if it passes.”  Given the fear that a crazy quilt of state laws “could undermine rules that apply to colleges nationwide,” the NCAA “has conceded that it must modernize its bylaws.”  Some withing the NCAA are looking for “a congressional solution” that would provide a uniform approach to all colleges and provide “legal cover to a multibillion-dollar industry where antitrust issues are a chronic concern.”

********Evidently, the NCAA’s Article 12, “which covers amateurism and athletic eligibility, is under the greatest scrutiny by elected officials across the county.”  Part of the article “bars a student-athlete from accepting compensation in exchange for allowing ‘his or her name or picture to advertise, recommend or promote directly the sale or use of a commercial product or service of any kind.”  In addition, the bylaws forbid activities like “taking cash for autographs or monetizing social media challenges.”  Agents are another issue.

            One can’t help but think that the so-called nobility of amateurism in sport is a vestige of a day long gone.  Given that, it is hard to see the struggle between the NCAA (and its members) and college athletes as anything other than an economic competition.  I would like to see someone clearly lay out what is at stake for the NCAA, its members, and college athletes to loosening the bonds of amateurism.  That might help provide some useful perspective.

            The presumed occasion for the NYT article is a testimony before “the U.S. Senate Committee on Commerce, Science and Transportation on the issue of name, image and likeness (NIL).”  You can learn more about the testimony here.  It included a panel which included the president of the NCAA, Mark Emmert.  Senator Richard Blumenthal, in his questioning, got Emmert, and all the other members on the panel, to indicate that the current model of name, image and likeness needs to be “radically modified.”

May you have a good week!


407 (5 February 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.

(31 January 2020)How Private Equity Buried PaylessThe New York Times

********One of the big stories in Asheville, North Carolina during the last week involved the liquidation/bankruptcy of the Earth Fare natural food chain.  Extensive reporting on Earth Fare has appeared in The Asheville Citizen-Times, most notably “From one Asheville store to over 50 locations, here’s what led Earth Fare to bankruptcy,” by reporter John Boyle  The article is quite thorough but doesn’t say much about the private equity firm Oak Hill Capital, which purchased the firm from Roger Derrough, a co-founder of Dinner for the Earth which later became Earth Fare, in 2007.  The NYT article provides description and analysis of the effects of private equity on Payless ShoeSource, giving additonal context for thinking about the demise of Earth Fare. 

            Private equity is a big topic with contrasting views about its efficacy and desirable.  Vox has an article that provides accessible information.  See “What is private equity, and why is it killing everything we love?”  It provides basic discussion about its role, some of the recent challenging cases, including Payless, and notes additional literature, for example, “The Demise of Toys ‘R’ Us Is a Warning” in The Atlantic.

(1 February 2020) [SR] “The Oddsmakers of the College Deathwatch” The Chronicle of Higher Education

——–“For years, businesspeople, pundits, and policy makers have speculated on the health of the higher-education sector, and some predictions of a die-off among the nation’s colleges have only gotten more dire over time.”  The likes of Peter Drucker, Clayton Christensen, and Andrew S. Rosen have figured among the doomsayers.  

But now “a small industry of higher-education oddsmakers armed with data has emerged.  A wave of government agencies, media outlets, companies, and scholars are crunching numbers on finances, retention, and rankings to determine just how doomed particular colleges are, exactly.”  Although such information has “long been used to assess the health of private companies . . . colleges can be far more complicated entities, with missions and goals that don’t fit neatly into profit and loss categories.”  Analysts at Moody’s Investors Service are “skeptical of rating a college’s future performance on a handful of numbers.”

One recent look at how the market pressures facing higher education is The College Stress Test, which “includes a section on how to calculate the market stress of a private, public, or two-year college—and, by extension, determine how endangered that particular college is.”  The approach of Stress Test differs from that of the ed-tech company Edmit, which came up “with a formula to determine how long private colleges had before they would run out of money and be forced to close.  Recently, Edmit and Inside Higher Ed had intended to publish a list of private colleges that were likely to close to but “decided not to release the list when various institutions threatened to sue.”

********The Inside Higher Ed article can be read here.  Regular and reliable financial assessment of financial viability certainly seems desirable but is fraught with interpretive challenges.  Higher education accrediting bodies routinely require colleges and universities to assess viability.  What do they look at and how do those elements compare to those of Stress Test and Edmit?

            For a related article in The Chronicle, see [SR]What Higher Ed Can Learn From Health Care.”  It is an interview with Peter Ubel, “a physician who is a professor in Duke University’s School of Business” and the author of Sick to Debt: How Smarter Markets Lead to Better Care.  Drawing parallels between health care and higher education, he says “I realize that I’ve been making my living off both education and health care, and they’re the parts of the economy where the cost has gone up far faster than overall inflation.”  Change in health care “have in many ways mirrored those in higher ed: Just as colleges have turned to adjuncts and distance education, hospitals now rely more on physician assistants and technology, like telemedicine, to help scale their services.  Small hospitals and clinics are also increasingly consolidating, an outcome that seems likely for the nation’s small institutions.”

            The article’s author, Scott Carlson, who also wrote “Oddsmakers,” comments: “a big part of Ubel’s solution to helping “both society and individuals save money” relies on making costs and quality transparent to the public.  College leaders should consider whether his prescription for what ails health care could work in higher ed.”  In drawing out the comparison between health care and education, he notes that they are both “labor intensive—and it’s highly trained labor at that, and you’re competing for that labor pool.  That’s expensive.  And quality is difficult to judge.  If you just look at the outcomes . . . you don’t know how good students were at math when they got to that school, or how bad the patients’ heart disease was when they got to that hospital.”

(1 February 2020)Tax code isn’t neutral on race, researchers findThe Washington Post

********This article summarizes some of the results of a recent publication of the nonpartisan Tax Policy Center—“Racial Disparities and the Income Tax System.”  By talking a close look at tax Form 1040, it is found that “tax policies can . . . exacerbate income and wealth inequalities stemming from long-standing discrimination in areas such as housing, education, and employment.”  The Center has an interactive guide that explains “various ways in which the tax code contributes to racial inequities.”  It is worth a look.

            While we are on the subject of disparities, a review of the book The Uncounted, by Alex Cobham, is worth a look.  The article’s title, “Missing population data hinder good accounting and fair resource distribution” Science.  As its lead-in reads, The Uncounted “documents how shortcomings of data in two key areas—population and finances—work together to exclude certain groups from exerting political power while simultaneously conveying greater political power to other groups.  Cobham . . . focuses on the extent to which many marginalized populations are often not counted in official statistics and the extent to which wealthy individuals and families are often able to hide their financial resources, properties, and other holdings from the government to avoid paying taxes on these assets.”

(4 February 2020)Coronavirus Adds to Pressure for U.S. Oil IndustryThe New York Times

——–“At a time when they are already cutting jobs and weighed down by debt, American oil producers are bracing for the latest shock to hit world energy markets: the economic effects of the coronavirus outbreak on China and beyond.  Oil and natural gas producers have been suffering from low commodity prices for the past year and now expect a sharp drop in global prices for their products.  As a result, they are preparing to slash investments in exploration and production.”  The virus has chiefly affected China thus far, and it “buys only about 200,000 barrels a day of oil and refined transportation fuels from the United States, out of 8.5 million barrels of total daily American exports.  But oil is a global commodity, and benchmark prices are set on world markets, not domestically.  Lower prices mean lower profits.”

********The basic idea, of course, is that the virus, as it spreads, will reduce the demand for oil and refined transportation fuels, which will decrease the prices of those products.  As a result, producers will tend to have lower profits and some consumers will be faced with lower prices—good for them.  But then there are all the jobs that are lost in the oil industry, domestic and international.

            Perhaps the most valuable insight from the article is related to looking at the SARS epidemic of 2002-3 for insight into the impact of the coronavirus in 2020.  The important being this: “China has become a much more important engine to the world economy over the last 17 years, and medical researchers cannot be sure that the new virus will fade during warmer weather like the flu.”  Given that, the impact of the coronavirus on the global economy may well be larger than that of the SARS epidemic.

May you have a good week!


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!


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!


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!


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!