Category Archives: Business and Economy

More road traffic due to a recovering economy

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The Texas A&M Transportation Institute suggests traffic has increased due to an improved economy:

America’s traffic congestion recession is over. Just as the U.S. economy has regained nearly all of the 9 million jobs lost during the downturn, a new report produced by INRIX and the Texas A&M Transportation Institute (TTI) shows that traffic congestion has returned to pre-recession levels.

According to the 2015 Urban Mobility Scorecard, travel delays due to traffic congestion caused drivers to waste more than 3 billion gallons of fuel and kept travelers stuck in their cars for nearly 7 billion extra hours – 42 hours per rush-hour commuter. The total nationwide price tag: $160 billion, or $960 per commuter…

Recent data from the U.S. Department of Transportation shows that Americans have driven more than 3 trillion miles in the last 12 months. That’s a new record, surpassing the 2007 peak just before the global financial crisis. Report authors say the U.S. needs more roadway and transit investment to meet the demands of population growth and economic expansion, but added capacity alone can’t solve congestion problems. Solutions must involve a mix of strategies, combining new construction, better operations, and more transportation options as well as flexible work schedules.

I’d love to know whether the average driver would prefer a depressed economy or more traffic. This could be an example of competing interests: a depressed economy could have ramifications for jobs and retirement savings but many people may not have to think about it if they have a job. Yet, if you have a job, an increasingly lengthy commute makes few happy. This might lead to people wanting the economy to be better but not wanting those people to drive. (If only all the new jobs could be telecommuting workers!)

Is the real story about the economy or is it about (a) an increasing population (though the population growth rate may be quite low, the US still added over 2 million people in 2013) and (b) cheaper gas over the last year?

To pay or not to pay for Facebook

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Would you rather pay Facebook with money or data?

Not long ago, Zeynep Tufekci, a sociologist who studies social media, wrote that she wanted to pay for Facebook. More precisely, she wants the company to offer a cash option (about twenty cents a month, she calculates) for people who value their privacy, but also want a rough idea of what their friends’ children look like. In return for Facebook agreeing not to record what she does—and to not show her targeted ads—she would give them roughly the amount of money that they make selling the ads that she sees right now. Not surprisingly, her request seems to have been ignored. But the question remains: just why doesn’t Facebook want Tufekci’s money? One reason, I think, is that it would expose the arbitrage scheme at the core of Facebook’s business model and the ridiculous degree to which people undervalue their personal data…

The trick is that most people think they are getting a good deal out of Facebook; we think of Facebook to be “free,” and, as marketing professors explain, “consumers overreact to free.” Most people don’t feel like they are actually paying when the payment is personal data and when there is no specific sensation of having handed anything over. If you give each of your friends a hundred dollars, you might be out of money and will have a harder time buying dinner. But you can hand over your personal details or photos to one hundred merchants without feeling any poorer.

So what does it really mean, then, to pay with data? Something subtler is going on than with the more traditional means of payment. Jaron Lanier, the author of “Who Owns the Future,” sees our personal data not unlike labor—you don’t lose by giving it away, but if you don’t get anything back you’re not receiving what you deserve. Information, he points out, is inherently valuable. When billions of people hand data over to just a few companies, the effect is a giant wealth transfer from the many to the few…

Ultimately, Tufekci wants us to think harder about what it means when we pay with data or attention instead of money, which is what makes her proposition so interesting. While every business has slightly mixed motives, those companies that we pay live and die by how they serve the customer. In contrast, the businesses we are paying with attention or data are conflicted. We are their customers, but we are also their products, ultimately resold to others. We are unlikely to stop loving free stuff. But we always pay in the end—and it is worth asking how.

Perhaps we are headed toward a world where companies like Facebook would have to show customers (1) how much data they actually have about the person and (2) what that data is worth. But, I imagine the corporations would like to avoid this because it is better if the user is unaware and shares all sorts of things. And what would it take for customers to demand such transparency or do we simply like the allure of Facebook and credit cards and others products too much to pull back the curtain?

Is it going too far to suggest that personal data is the most important asset individuals will have in the future?

Claim: nightclubs closing due to new Millenial social patterns

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The number of nightclubs in the UK has declined in the last decade and here is one possible reason why:

Even famous London dance-music clubs such as Turnmills, Bagley’s and The End have succumbed to a process that has seen the UK’s total portfolio of nightclubs shrink by almost half from 3,144 in 2005 to 1,733 a decade later.

The statistic from the Association of Licensed Multiple Retailers (ALMR) is a signal not just of the effect of the smoking ban and the imposition of student loans but of a fundamental shift in the way a new generation chooses to spend its entertainment budget…

A night out at a pop-up restaurant or a secret cinema feels more adventurous than yet another club night, which will only drain finances needed for that ambitious summer holiday trip. According to Yakob, nightclubbing has become for many young people a “couple of times a year” experience, hearing the best DJs on the best sound systems…

Twice a year punters aren’t going to pay a nightclub’s bills. But even for some dedicated music fans, the lure of a night of House music could be reduced by their long hours of listening to playlists on a premium streaming service during daily commutes. The UK is among Spotify’s strongest markets. Felim McGrath, analyst at market research company GlobalWebIndex, says: “In years gone by you would go to a nightclub at the weekend to discover music played by a top DJ. Now you can do that online via a curated playlist.”

While this isn’t good news for the nightclub economy, the social ramifications are interesting. For pre-teens to young adults, music is often an essential part of the social experience. It is part of creating an identity, burn off steam and/or transgress boundaries, and unite with other people. All of this can be done with music online – it just takes different forms. For example, instead of going to nightclubs or as many concerts, users can post in forums and comment sections about their favorite artists. Instead of interacting with strangers (who may share the same music interests) at venues, the music is now more privatized as users can select what they want wherever they want. Like many experiences with the web, users get more choice in more places but lose embodied experiences with others.

At the worst, in the future no one will emerge from their headphones and personalized experiences. At the best, perhaps the music listened to and discussed online can lead to new kinds of unique experiences outside of the typical nightclub and concert experiences.

Realtors argue their guild needs more professionalization

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Real estate is an important part of the American economy but a recent report from the National Association of Realtors suggests realtors need more training:

In an unusual move for a major American trade association, the million-member National Association of Realtors has commissioned and released a frank and sometimes searing assessment of top challenges facing its industry for the next several years. The critiques hit everything from the professionalism and training of agents to the commissions charged consumers, and even the association’s ?leadership.

-“The real estate industry is saddled with a large number of part-time, untrained, unethical and/or incompetent agents. This knowledge gap threatens the credibility of the industry.” Ouch!

-Low entry requirements for agents are a key problem. While other professionals often must undergo extensive education and training for thousands of hours or multiple years, realty agents need only complete 70 hours on average to qualify for licenses to sell homes, with the lowest state requirement for licensing at just 13 hours. Cosmetologists, by contrast, average 372 hours of training, according to the report.

-Professional, hard-working agents across the country “increasingly understand that the ‘not-so-good’ agents are bringing the entire industry down.” Yet there “are no meaningful educational initiatives on the table to raise the national bar …”

 

This is a good example of maintaining professional standards, a key activity of many business associations. (For an award-winning sociological read on trade associations and a book for which I did a small amount of research work, see Solidarity in Strategy: Making Business Meaningful in American Trade Associations.) Keeping track of the actions of thousands of members is a difficult task. The NAR has the ability to bestow the name REALTOR®. Upping the standards with harder tests and stricter requirements has been done by lots of groups in order to improve their status.

But, this might also have some negative consequences:

1. Might it encourage more people to bypass realtors all together? This is easier than ever with the Internet.

2. If I remember correctly, the average age of realtors has increased in recent years. Might this simply increase that?

3. Might this issue be solved in other ways like if realtors worked within agencies that stressed standards or through mentoring programs that offer benefits for both parties?

4. Do realtors want more regulatory oversight like other groups – such as cosmetologists? This may help up their status but could lead to more hoops to jump through.

“The Underappreciated Architecture of Waffle House”

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Waffle House recently announced plans for a fancier new building in New Orleans. One journalist suggests this undervalues the chain’s existing architecture:

Waffle House is not Chartres Cathedral, admittedly, but it has a certain architectural je ne sais quoi. The classic Waffle House is minimalist in design, with a lemon-yellow strip running around the top, above a wide band of windows and, often, a red or red-striped awning. The interior is outfitted with retro globe lights and red-and-chrome stools. Unlike most fast-food joints, Waffle House has an open kitchen, so you can watch the cooks as they scatter and smother your hash browns…

New Orleanians will be excited to get a Waffle House in Mid-City, and I would never begrudge them that. But this new design is all wrong for Waffle House as a brand, and falls short of its status as a Southern icon.

The company owes that status to an architect you’ve never heard of, Clifford A. Nahser. A World War II veteran and Georgia Tech graduate, Nahser was still a fledgling architect when Waffle House co-founder Joe Rogers Sr. approached him for help designing his prototype diner in Avondale Estates, near Atlanta. As the chain grew, Nahser went on to design hundreds more restaurants, drawing up the plans in his basement after his day job at Atlanta Public Schools…

What bothers me is not that Waffle House feels it’s time for a change (maybe it is) so much as the direction they’ve chosen. As the “loft” aesthetic has permeated American culture, we’re seeing watered-down faux-warehouse details in outposts of Chipotle and Starbucks, and that is the style we see here. It’s as generic as the classic Waffle House look is distinctive. Couldn’t the company have hired an architect known for his or her use of bold color to bring more of a pop sensibility?

There seem to be two main issues at play here:

1. How much should restaurant chains (and for that matter, retail chains as well) look alike or different? Waffle House has a very recognizable logo as well as a common design aesthetic. How much does this help the brand in terms of sales, nostalgia, recognition? Does a chain benefit from looking significantly different than other chains or should there be some similarity so people feel they can comfortably cross over?

2. How much do architectural movements – here, a more minimalistic and modernist design – get translated into fast food restaurants? I’ve argued before that Americans don’t particularly like modernist homes but perhaps this kind of modernist architecture is associated with a particular industry (fast food) that arose in the post-World War II era of prosperity and highways. The architecture and landscape of interstates and suburban sprawl is often criticized so how many people would defend the look of Waffle House?

More painted lawns in California

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Why tear out your drought-stricken lawn in California when you can just have it painted green?

Wasting no time, a Lawnlift employee gets to work in Pearson’s yard by mixing up a potion of water and natural pigments which bring to mind cosmetics used by women every day.

Within minutes, the dessicated lawn is rejuvenated before its owner’s astonished eyes.

“I love it! This is the color of my grass when I water it every day. I absolutely love it. I am thrilled,” she said.

The product is non-toxic, lasts for 12 weeks and is water-resistant — even if the lack of rain is the main threat to California’s gardens.

Power acknowledges that his company is cashing in on the drought, in particular over the last 12 months.

“Sales from last March to this March have easily doubled and in fact we are 150 percent higher than last year and we attribute most of that to the drought,” he said.

California is not the only market for his products: he also sells in Canada, and a few weeks ago made a $15,000 sale to Algeria.

No need to give up that symbol of the American Dream – the manicured lawn – when you can take advantage of ingenuity – non-toxic paint that lasts 12 weeks! I’ve seen numerous articles on this in recent years and I would love to see some pictures of what lawns look like after 12 weeks rather than view more images of the initial verdant pictures from the initial spraying. Perhaps now is a good time to get into the lawn painting industry…

Is Starbucks really a “third place”?

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Starbucks CEO Howard Schultz likes to claim his stores operate as “third places,” a term coined by sociologist Ray Oldenburg. But, do they really fill this role?

Now that so many street corners seem to have a Starbucks, has the international chain truly become that “place on the corner” where people connect? In fact, Oldenburg dismisses the Starbucks coffee shop as an “imitation”, debilitated by the company’s pursuit of that other quintessentially American obsession, security, and the sterile, predictable environment it produces. “With its overriding concern for safety,” Oldenburg told Bryant Simon, author of Everything But the Coffee: Learning about America from Starbucks, “it can’t achieve the kind of connections I had in mind.”

Walk into a Starbucks today, and you may not notice much connection going on: some customers come in chatty groups, but many others arrive in search of nothing more than a place to open their laptops and get some work done; in effect, using Starbucks not as a third but a second place — their workplace. Most simply grab their coffee and go, never pausing to avail themselves of the chairs and couches provided, while others prefer to keep human interaction to an absolute minimum by using the drive-through window, a resoundingly un-urban feature Starbucks introduced in 1994.

Starbucks’ ongoing retooling and experimentation suggests that Schultz, for all he talks about his company’s resurrection of the “third place”, has yet to hear a sufficient amount of political banter and schoolchildren’s chatter in his stores. Starbucks’ enormous scale and need to service the American demand for frictionless convenience contradicts its mission to replicate the appeal of continental coffee-house culture: how much of a neighbourhood-rooted venue for chance encounter can you provide when you have to run thousands and thousands of them, making sure they all do more-or-less the same thing?

Maybe you could make a case either way. In favor, coffee shops serve as third places in numerous cultures and their presence almost everywhere means Americans have a common place outside their private homes and workplaces to get together. Yet, Starbucks present a common “McDonaldized” experience (it may be coffee but it is still fast food and often dependent on a car-driven society) that is primarily controlled by corporate interests. Perhaps only in a society that is so privatized (emphasis on single-family homes, cars, moving away from urban problems, individualism, etc.) could a chain coffee store even make the case that it is about community.

Rising development costs in American cities

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It is getting more and more expensive to build new developments in American cities:

Land costs in the urban cores have dramatically escalated, making it difficult for developers to find developable parcels that pencil. Adding to the issue of expensive land prices, in December 2014, the Wall Street Journal reported that construction costs are rising faster than the inflation rate: the U.S. Labor Department’s consumer price index had risen only 1.3 percent above the previous year, while the construction index was higher by 5.2 percent.

Land is scarce and expensive

In most major U.S. urban markets, the cost of land has risen aggressively, in line with the greater demand for urban living by millennials and empty nesters. In Los Angeles, for example, land for industrial developments—many of which are changing from industrial use to residential mixed-use—have averaged approximately $23 per sq. ft. at the beginning of 2014 and  by year‘s end, asking prices were as high as $32 per sq. ft. There has been and continues to be keen competition for every developable site, with the urban core expanding into previously blighted areas.

Current shortage of construction professionals and skilled labor

Construction employment was disproportionately affected by the recession. As a result, many construction professionals—both labor and management—left the industry. Across the country, there are 1.4 million fewer people employed in construction than there were at the peak in 2007, according to the U.S. Bureau of Labor Statistics. Many in the construction industry who lost their jobs during the recession have found new careers, and many skilled tradesmen left the industry all together. Compounding the shortage is the lack of high-quality training available to young people entering the construction workforce today…

Materials costs have little impact

Countering some of the rise in construction costs is the fact that most materials costs, apart from glass, have not greatly increased. Associated Builders and Contractors Inc. reported in April 2015 that, although concrete products prices are up 4.1 percent on a yearly basis, total input prices have fallen by 3.6 percent since the same time last year. For example, iron and steel prices are down 11.5 percent and softwood lumber prices are 7.4 percent lower than one year ago. Current crude petroleum prices are down 55 percent and crude energy materials prices are down by 43.7 percent from the same time last year.

If this is the case, this could have negative consequences in a number of areas including: it might take more to get the construction industry going to overcome these costs; this limits the incentives for developers to construct cheaper or affordable housing (such as starter homes); and only the really wealthy can purchase and utilize urban land.

Ethnographic study explains how to get better tips without sacrificing dignity

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While in graduate school, one sociology student collected data from his job as a delivery man on how to collect the best tips:

So in the year that Thompson worked for Jake’s—not the restaurant’s real name, but the moniker the sociologist gave the calzone spot in a paper he published in the Journal of Contemporary Ethnography last year—he found ways to bring in money without sacrificing his dignity. There was one semi-official rule, passed down from Jake’s laid-back manager: You can’t outright ask for tips. Everything else was left up to Thompson and his band of fellow delivery guys.

Here are a few of the tips (and there are nine total):

Look Like a Customer

One of the Jake’s drivers found that his tips were better when he was clean-shaven: A furry face, he found, usually netted him about $2.00, but a clean one landed $2.50, or sometimes even $3.00. Do calzone lovers hate beards? Probably not, the driver theorized—it’s just that the college students he delivered to thought he was younger without the beard. Customers, he found, were more likely to tip if they thought he was a student, too…

Love the Pets

“You know what really works?” one driver asked Thompson. “Dogs. You compliment their dogs.” The driver said that he got down on the floor and played with customers’ pooches. It worked. “They gave me a five!” he said.

The Receipt Trick

One of Thompson’s personal favorite tricks came at the very end of the delivery interaction, when a customer using a credit card had to sign the receipt. If she left the tip line conspicuously blank, Thompson would turn back to her and say, “Sorry, boss needs you to fill out the entire thing!” That forced the customer to either come out and admit that she was purposely stiffing him, or wilt under his passive aggression. Cha-ching!

The Change Trick(s)

There are a few ways to pull the change trick. The first, another one of Thompson’s favorites, was wide-eyed innocence. “Great, a five dollar tip!” he would exclaim if a customer had given him a nice round bill, possibly hoping for change. “Awesome!” Only the customers who really, really wanted to leave a bad tip—and were willing to go through a very uncomfortable social interaction to do so—would demand their change back.

Two quick thoughts:

1. Training in sociology, particularly in face-to-face interaction, could go a long ways here. A number of these tips involve manipulating the particular social situation to the delivery person’s advantage. Instead of feeling embarrassed to be chasing a tip, the onus can effectively be put on the purchaser to go out of their way to not give a tip. In other words, this is all about impression management.

2. There is some interesting work in sociology regarding jobs or situations where money is clearly involved but can’t be discussed. This is one; it is uncouth to openly ask for a people but people can be acceptably nudged. Or in the art world, artists can’t quite openly say that they are in it to become wealthy but they clearly need to sell art to survive (and to gain status). Or, certain items like life insurance have to become morally acceptable (a process traced by sociologist Viviana Zelizer) before people will purchase them. Even in our world where economics and money seem like pretty powerful forces, there are still social constraints.

Ferguson doesn’t get much revenue from the Fortune 500 companies in town

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Many suburban communities give tax breaks to corporations so that they locate in their community. Ferguson, Missouri is one such case where Emerson Electronics and other businesses don’t pay as much as they might in local taxes:

In 2014, the assessed valuation of real and personal property on Emerson’s entire 152-acre, seven-building campus was roughly $15 million. That value has gone up and down over the last five years as Emerson has sold off some buildings and built others, but it has not exceeded $15 million in the period since the data center was completed. So what happened to that brand-new $50 million dollar building?…

For tax purposes, Emerson’s Ferguson campus is appraised according to its “fair market value.” That means a $50 million dollar solar-powered data center is only worth what another firm would be willing to pay for it. “Our location in Ferguson affects the fair market value of the entire campus,” Polzin explained. By this reasoning, the condition of West Florissant Avenue explains the low valuation of the company’s headquarters.In fact, the opposite is true: The rock-bottom assessment value of the Ferguson campus helps ensure that West Florissant Avenue remains in its current condition, year after year. It severely limits the tax money Emerson contributes to the Ferguson-Florissant district’s struggling schools (Michael Brown graduated from nearby Normandy High School, a nearly 100 percent African American school that has been operating without state accreditation for the last two years), and to the government of St. Louis County more generally. On the 25 parcels Emerson owns all around St. Louis County, it pays the county $1.3m in property taxes. Ferguson itself receives far less. Even after a 2013 property tax increase (from $0.65 to the state-maximum $1 per $100 of assessed value), Ferguson received an estimated $68,000 in property taxes from the corporate headquarters that occupies 152 acres of its tax base—not even enough to pay the municipal judge and his clerk to hand out the fines and sign the arrest warrants.

St. Louis County doesn’t just assess Emerson a low market value. It then divides that number in three—so its final property value, for tax purposes, ends up being one third of its already low appraised value. In some states, Ferguson would be able to offset this write-down by raising its own percentage tax rate. Voters would even be able to decide which services needed the most help and raise property taxes for specific reasons. But Missouri sets a limit for such levies: $1 per $100 of property. As Joseph Pulitzer wrote of St. Louis during the first Gilded Age, “millions and millions of property in this city escape all taxation.”…

Emerson Electric isn’t the only business on Ferguson’s West Florissant Avenue. The street is also home to a number of big box stores including a Home Depot, a Walmart, and a Sam’s Club, located at the city’s northern limit. These companies all came to town in 1997 through something called tax increment financing—known (to the extent it’s known at all) by the acronym TIF. Along with low appraisals and tax abatements, TIF districts are one of Missouri’s principal tools for encouraging new development.

The conclusion here is that these tax policies reproduce the economic inequalities in Ferguson. Hence, the community has to find alternative sources of revenue, such as targeting motorists.

Here is where this gets trickier: if Ferguson didn’t offer these deals, could it have attracted these businesses? If many suburbs participate in the game of tax breaks, wouldn’t someone else offer good tax breaks? Where race matters here is that communities like Ferguson – lower income, transitioning from white to black over recent decades – have to offer even better tax breaks to compete. But, for all of these communities, it is a race to the bottom as a better deal to attract a corporation means less revenue for the city. Still, local politicians can sell the jobs created or the prestige generated. But, as this article points out, the jobs and prestige may not help much in the long run.

What you might need here is a metropolitan wide policy against such tax breaks or TIF districts to reduce the competition. Or, perhaps some tax revenue sharing program where sales tax and property tax dollars are partly redistributed to reflect who shops at or works at these facilities (they all don’t come from the community in which the firm is located). Yet, such policies require a lot of political will and again encounter the problem of race as communities, especially wealthier ones, will not want to share their revenues with others.