Category Archives: Business and Economy

Shared cultural interests leads to hiring at elite firms

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A new sociological study argues having the right cultural interests or pursuing certain cultural activities can lead to getting a job at elite firms:

Big-time investment banks, law firms and management consulting companies choose new workers much as they would choose friends or dates, zeroing in on shared leisure activities, life experiences and personality styles, a new study finds…

As a result, evaluators described their own and others’ firms as having distinct personalities related to employees’ extracurricular interests and social styles. Companies ranged from “sporty” and “scrappy” to “egghead” and “country club.” One outfit even specialized in hiring people with drab personalities.

Top-ranked firms uniformly favored applicants who cited upper–middle class leisure pursuits such as rock climbing, playing the cello or enjoying film noir.

Picking employees from the same cultural basket may have pluses and minuses, Rivera adds. Hiring people with common traits and interests may create a cohesive work force. But shunning prospective employees with different life histories could also make firms susceptible to reaching decisions quickly without evaluating alternative ideas.

This challenges the American ideal of meritocracy where hard work should lead to a job. While the study suggests these cultural interests don’t matter as much when organizations are hiring for more technical jobs, it does matter for white-collar and upper-class jobs. This could also challenge the role of college courses: how many college classes are about developing a “scrappy” or “country club” approach to life? In contrast, the experience outside the classroom at some colleges (plus the applicants’ earlier life history) might contribute quite a bit to learning about and then developing these cultural skills.

It would also be interesting to look more at the personalities involved in hiring and branding that companies develop. Marketing today often involves selling a brand and image more so than focusing on the particulars of a product. Is this branding simply about marketing or does it bleed through the culture of the entire organization?

Republicans propose copyright reform

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Techdirt links to a remarkable Republican policy brief on copyright reform:

The purpose of copyright is to compensate the creator of the content: It’s a common misperception that the Constitution enables our current legal regime of copyright protection – in fact, it does not…[L]egislative discussions on copyright/patent reform should be based upon what promotes the maximum “progress of sciences and useful arts” instead of “deserving” financial compensation….

Today’s legal regime of copyright law is seen by many as a form of corporate welfare that hurts innovation and hurts the consumer. It is a system that picks winners and losers, and the losers are new industries that could generate new wealth and added value.

This has the potential to mark the beginning of a huge political shift on intellectual property issues. Heretofore, most copyright reform advocates have pursued a judicial strategy, trying to persuade courts to narrowly read (or overturn) sweeping statutory language. By and large, courts have declined to limit copyright laws in this fashion. If those laws were actually changed, however, that would compel different outcomes.

A policy brief is not even a bill, let alone a law. But the conversation has started.

Zara devotes its full marketing budget to leasing expensive retail space near high-status brands

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Here is a way retailers can take advantage of space: locate near high-status stores.

How about advertising? Basically, Zara doesn’t do it. There is no ad budget. Instead, the company spends ungodly amounts of money buying storefronts next to luxury brands to own the label of affordable luxury:

“The high street is really divided according to brand value,” says [Masoud Golsorkhi, the editor of Tank, a London magazine about culture and fashion], who is also a consultant for fashion brands. “Prada wants to be next to Gucci, Gucci wants to be next to Prada. The retail strategy for luxury brands is to try to keep as far away from the likes of Zara. Zara’s strategy is to get as close to them as possible.”…

Zara stores cozy up to the most famous brands in the world to sing their luxury ambitions even as they profit off a brilliant, cheap, short supply chain that delivers similar fashion at a much lower price.

In this case, proximity matters. By being located near prestigious brands, Zara is pulled up more to their level. Additionally, shoppers willing to wander into the really high-status stores might then also wander into Zara. This seems to be the strategy of the shopping mall as well: utilize several important anchor stores (or anchor facilities/restaurants in “lifestyle centers“) to help bring in more customers who will then also visit other stores along the way.

I wonder: are there any streets or malls where retailers have found ways to expressly disallow stores like Zara? Imagine a high-end outlet mall where there are only high-end retailers and no middle-brow stores or aspiring stores are allowed. Leasing prices is one way to do this but this article makes it sound like firms like Zara can do an end run by paying those big sums and then not spend money on traditional marketing.

Is James Bond’s social status diminished by product placement?

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Product placement is rampant in Hollywood films and here is a look at what products James Bond is now selling:

Never mind the other products basking in the superspy’s aura, such as Sony mobile phones and Vaio laptop computers, Macallan single-malt Scotch, Honda cycles, Bollinger Champagne, Globe-Trotter suitcases, Crockett & Jones footwear, Walther guns, Aston Martin cars, Swarovski jewelry, Omega watches, OPI nail polish, Land Rovers and Range Rovers and all the rest.Some pay for the privilege, some make other arrangements. Some, like the new James Bond fragrance hawked by Procter & Gamble, aren’t in the film. But all told, sponsorship and other ancillary deals for “Skyfall” are said to have brought in $45 million, about a third of what it cost to produce the film, one of the best in the Bond series…

Today’s sophisticated media consumer expects to see brands in TV shows, movies and even video games, according to Tom Weeks, senior vice president at LiquidThread (formerly known as Starcom Entertainment), the branded entertainment and content development operation within Chicago’s Starcom MediaVest Group. But proper context — proper casting — is a must…

Caterpillar, which first tied up with 007 in 1999’s “The World is Not Enough,” hopes the “Skyfall” connection boosts brand awareness, particularly in emerging markets like China, which seems a manageable goal.

Perhaps this kind of brand integration is inevitable: brands are always looking for subtle and not-so-subtle ways to associate their products with being “cool.” And what could be better than Bond, an international spy who doesn’t have stuff at home but instead uses all sorts of gadgets all around the world?

But, I’m reminded of Naomi Klein’s arguments in No Logo about the increasing branding of our world. If Bond is so cool, why does he need to be so connected to brands? Isn’t Bond, like the rock ‘n’ roll stars of the 1960s who built their initial popularity on rebelling and not selling out, just selling out? If Bond has to shill for products, what hope is there for the rest of society? Something doesn’t connect here: Bond’s status is tied to the idea that he isn’t beholden to the trappings of life that hold back average people yet the newer movies are now suggesting he too is just another part of the capitalistic world. Thus, Bond is just another commodity who needs other commodities to be successful. His status is now less dependent on his character or his unique actions, but, like other commodities, is tied to the fate of other commodities.

Increasing racial segregation in the American workplace

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Two sociologists argue there is evidence that some American workplaces have become more racially segregated in recent decades:

The results of our research found in part that there has been a trend toward racial re-segregation among white men and black men since 2000 and increased segregation since 1970 between black women and white women in American workplaces — so much so that it has eliminated progress made in the late 1960s. This is not simply an academic question, but a fundamental problem with American society. While most of us morally embrace equal opportunity and race and gender equality, we find that America is still a long way from those commitments. Only by confronting our shortcomings as a society can we address them…Distressingly, 19 of the 58 industries we surveyed — nearly one-third of all industries — showed a trend toward racial re-segregation between white men and black men over the last dozen years. Transportation services, motion pictures, construction, securities and commodities brokerages are some of the sectors that reflect this trend. In addition, re-segregation since 1970 between black and white women in workplaces has eliminated progress made in the late 1960s.

Transportation services, railroads, publishing and many low-wage manufacturing industries show increased segregation between black and white women. Unfortunately, increased access to private sector managerial jobs for black men and black women came to a grinding halt more than 30 years ago as well. Meanwhile, black women’s employment segregation from white women has actually grown somewhat, as white women made continued gains into traditionally white male jobs…

Where has there been progress? In general, African Americans tend to do better in workplaces that use formal credentials to make hiring decisions. Minorities and white women have made the most progress in professional jobs. These occupations require specific educational credentials to be considered for employment. African Americans also progress in those relatively rare large, private-sector firms that monitor their managers diversity track record.

It sounds like jobs based on social networks tend to be more segregated while jobs based on credentials allow more opportunities for non-whites. This reminds me of the sociological study Race and the Invisible Hand: How White Networks Exclude Black Men From Blue-Collar Jobs. Royster found in studying vocational schools that although black and white students were getting similar educations, the instructors and school gave white students more access to the primarily white social networks in the vocational trades while black students were left more to fend for themselves.

 

I would be curious to know how job segregation lines up with residential segregation, one of the more persistent features of American life in the last century. In other words, are workplaces in more diverse areas less segregated?

Since having a good job is tied to income, building wealth, accessing social networks and social capital, and new opportunities, this is important information. Also, this is a reminder fighting segregation is not a linear process.

 

Neither Obama or Romney tackling issue of housing

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There are plenty of issues to talk about this election season but neither Obama or Romney have done much to address housing:

For existing homeowners and the government, though, housing remains an enormous issue. If new government initiatives are not implemented, it could take another three to five years for the market to fully recover, analysts estimate. And The Wall Street Journal reports that neither candidate has offered ways to remake failed mortgage giants Fannie Mae and Freddie Mac, which have already cost taxpayers $140 billion and face further losses.

Across the United States, nearly 10.8 million properties — 22 percent of homes with a mortgage on them — remain underwater, according to CoreLogic, a data analysis firm. The numbers of properties where owners owe more than their home is worth is shrinking, but analysts say the process can, and must, be sped up.

Both Obama and Romney, though, have been silent on the issue. Why?

“It turns out to be a lose-lose issue for both candidates,” John Vogel, a professor at Dartmouth’s Tuck School of Business, recently told MarketWatch. “And therefore gets ignored.”

For each candidate, the reason for staying mum on housing is different. Obama does not have the strongest record to run on. And Romney has found that wading into housing opens himself up to being painted as a heartless corporate mogul.

So housing greatly contributed to the economic crisis yet neither candidate wants to bring it up. Perhaps this topic might top an unfortunate list titled something like “topics that candidates absolutely do not want to talk about.” They can discuss a range of controversial topics like abortion, education, social security and medicare reform, the outsourcing of jobs, and tough foreign policy topics but not housing…

After seeing a variety of opinions on the topic of housing in the last few years, I wonder if most people, including the experts, are just hoping it comes back. Thus far, government policies do not seem to have helped much. As some have noted, without a more robust housing market, it is difficult for people to move and take advantage of the jobs that might be available. Local governments need increasing property tax values to bring in more revenues. Mortgage lenders, the real estate industry, and builders and developers would benefit from more activity. And if the housing industry doesn’t come back quickly? There doesn’t seem to be much in place for this possibility.

I wonder what Americans would want to hear about housing, if it even rates highly enough (or might simply be part of “the economy”). In the earlier stages of the economic crisis, there was a lot of talk about not providing a lot of support to people who should have known better than to take out mortgages they might not be able to afford. Who deserves to get help? Would Americans be happy with more regulation of mortgage lenders so they won’t be allowed to offer mortgages homeowners that could harm borrowers?

15 of 20 biggest mortgage originators in 2006 no longer in business

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Here is one of the consequences of the economic crisis: three-quarters of the biggest mortgage originators in 2006 are no longer operating.

Only five of the 20 biggest mortgage originators from 2006 are still around independently today. The rest either filed for bankruptcy or got bought as the mortgage market imploded in 2007 and 2008, as the table below from SNL Financial shows.

This is what capitalism looks like, kind of. Lenders that weren’t too big to fail did fail, and then got scooped up for what buyers thought were bargain basement prices — or in Countrywide’s case, managed to market themselves before the market completely collapsed.

The chart is pretty fascinating. Firms that were powerful and active not too long ago, including Countryside Home Loans, Washington Mutual Bank, Wachovia Mortgage FSB, and Countrywide Bank FSB, are no longer operating. Granted, some of these companies were acquired by other corporations but these were large firms in their own right and some were at the top in terms of market share.

My quick takeaway: business fields can change rapidly.

Creative class fared better in economic crisis than working and service classes

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Richard Florida discusses how the creative class weathered the economic crisis better than blue-collar workers:

The crisis hit hardest at blue-collar workers, while creative class workers and metros with higher shares of creative class jobs fared considerably better. The unemployment rate for creative class workers, which was 1.9 percent in 2006 before the crisis, increased to just 4.1 percent in the years following the recession’s official end — an increase of 2.2 percentage points. The unemployment rate for workers in blue-collar jobs increased from from 6.5 percent before the onset of crisis to 14.6 percent at its end, more than three times higher than that for creative class workers and a jump of more than 8 percentage points. The unemployment rate for workers in routine service jobs increased from 5 percent to 9.3 percent at its end, more than double that for creative class workers a 4.3 percent jump…

Even after controlling for all those things, the analysis found that having a creative class job dramatically reduced a person’s chance of being unemployed over the course of the crisis. All others things being equal, we found that having a creative class occupation reduced an individual’s probability of being unemployed by 2.0 percentage points between 2006 and 2011. Having a creative class job had a bigger effect on the probability of being unemployed than holding a college diploma and about the same effect as having an advanced degree…

The study also found that while unemployment rates were lower in metros with higher shares of creative class jobs, the biggest benefit for creative class workers came in regions with lower shares of creative class jobs. The impact of having a creative occupation on the likelihood of being unemployed, the study found, was slightly stronger in metropolitan areas with lower shares of creative workers…

These results, along with our findings related to the other major occupational groups, are indicative of a structural change taking place in the U.S. economy. This shift is characterized by high — and growing — unemployment in Working Class occupations, whereas the relative position of creative workers improved in the years following the recession.

These final sentences are key: the economic crisis exposed some of the larger structural issues in the American and global economy. The creative class, those with education, social status, and access to the white-collar and high-tech jobs often found in certain metropolitan areas that are producing a lot of wealth, did better in the economic crises. It didn’t mean that no creative class jobs were lost but relatively fewer jobs were lost. On the other hand, more working-class jobs were lost. On top of this, the working and service class didn’t have the same resources to weather the economic storm. When the value of investments, such as housing values and retirement plans, shrunk and jobs dried up, there wasn’t much to fall back on.

This situation is not likely to be fixed quickly. For example, it takes time to get education and only roughly a third of American adults have a college degree. It also takes time for a broader economy to shift away from a service and consumption oriented economy to one that creates more high-paying, information-age jobs.

Reducing time zones in Indonesia to improve business opportunities and unite ethnic groups

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Indonesia is currently discussing reducing the country’s time zones from three to one:

The government has been promoting since May a plan that aims to put all parts of the sprawling archipelago nation into the same time zone as many other Asian countries. Under the plan, all of Indonesia—which stretches 6,400 kilometers between India and Australia—would be eight hours ahead of Greenwich Mean Time, meaning the country’s capital city would shift one hour ahead of its current time.

The government says the move is expected to boost business transactions between Indonesia and the regional financial hubs such as Singapore, China, Hong Kong and Malaysia. Airlines could also profit through simpler flight schedules, increasing their productivity, it says…

While the time-zone idea isn’t seen as critical by many investors, it is popular among some who would find it easier to do business in the country. Russia in March reduced its time zones to nine from 11, while Brazil is considering cutting to one from three.

And it isn’t only monetary gains that Jakarta has in mind by abolishing the clock divisions—it also hopes to foster closer ties among the country’s more than 1,128 ethnic groups. With the country split into three zones, the thinking goes, it’s easier for groups to view themselves as part of different regions than as Indonesians first…

The business argument makes more sense to me. (Still: in an era of fast globalization, does a one or two hour time difference really matter?) However, I’m skeptical of the ethnic/cultural argument. Being on the same time zone really brings people together in a meaningful way? Perhaps fixing the time zones is an easier “fix” than other possible measures…

I remember going through a time zone while living in northern Indiana. At the time, our part of the state was on Eastern time half of the year and on Central time the other half of the year. This was somewhat confusing but I think the bigger issue was that a good portion of the northwestern part of the state wanted to be on the same time zone as Chicago for business purposes. But, I don’t recall any debate over whether these people in a different time zone were any less Hoosiers for this choice. (However, I could imagine something similar goes on in Indiana as it does in Illinois: people near Chicago think that is where all the action is…and isn’t downstate all about corn and farming?)

Another note: the 24 time zones match up with the rotation of the earth. So what does it mean when we put multiple time zones together for political, business, and cultural purposes? Is this a prime example of humanity running roughshod over nature?

Colbert shines light on U.S. prison labor

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A recent segment on the Colbert Report has brought attention to Unicor, a U.S. government entity designed “to employ and provide job skills training to the greatest practicable number of inmates confined within the Federal Bureau of Prisons”:

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Forcing people to work jobs that pay as little as $0.23/hour seems disconcertingly tantamount to slavery.  And it’s probably important to note at this juncture that the 13th Amendment simply does not apply to prisoners:

Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction [emphasis added].

The U.S. also imprisons more people than any other country on earth, and minorities are disproportionately likely to be incarcerated (see, e.g., this December 2011 DOJ report, see especially Table 3 in the appendix).  Taken together, this state of affairs is alarming.  To put it mildly.