Category Archives: Business and Economy

Sociological study on why “nearly half of the motels in the U.S. are owned by Indian Americans”

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A new sociological book titled Life Behind the Lobby tackles an interesting topic: why Indian Americans have gravitated toward the motel business. Here are some thoughts from the author about the study:

At first, I was caught by the numbers of it all: 40% of all motels in the United States are owned by Indians. After initial conversations with motel owners, I realized there was a lot more to learn: how they got started, how they afford motels, what happens to their children. There are so many layers, it becomes fascinating. I wouldn’t have pursued this project because of the numbers alone, but they were a key part of why I got started…

Dating back to the 1940s, the first Gujarati motel owner, Kanjibhai Desai, who came to the U.S. via Mexico, was based in San Francisco. He managed a “residential hotel,” which is the present-day equivalent of a youth hostel. People who stayed there were generally down and out.

Other Gujaratis who came to the U.S. in the 40s and 50s were typically farmers back in India, and even if they didn’t own land, they didn’t want to work for someone else. Part of the reason they gravitated towards the motel business was related to their desire to be autonomous in their work lives. They also wanted to know people who had done it before and succeeded. Those two factors helped create motivation and triggered a domino effect where others who were interested in small business and concerned about mobility went into the same thing…

At the same time, they still have to prove they are worthy owners as there are still stereotypes of Indian owners that pervade. They still have to make sure they are seen as 100% American. They’ve moved from becoming a novelty to a trend to a problem (especially following 9/11) to being somewhat accepted. There’s a lot about it that’s very impressive and it’s a testament to America, in terms of opportunity. But once you see the sacrifices the owners make—all the family living in motels, relying on kin from India to make things work—you realize they have other things that help them move up and it’s not just about meritocracy.

This sounds a little like chain migration where established immigrants bring over family and friends. However, in this case, the family and friends who came from India also often got involved in the motel industry.

This is a limited conversation here so I wonder about a few things:

1. How profitable is the motel industry these days? It may have made more sense in the 1940s and 1950s but is this lucrative today?

2. How much opposition have Indian American hotel owners had to overcome over the decades?

3. Is there competition between Indian American motel owners as they might be cutting into each other’s profits? If so, how does this get resolved?

4. How unusual is it to have this great of a concentration of one ethnic/racial group in one industry?

Microsoft promo videos feature a preponderence of McMansions?

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In the middle of a “Xbox music preview,” Paul Thurrot makes an interesting observation about the homes shown in Microsoft promotional videos:

A promotional video then ensued. It was loud and peppy and featured the same overly-white, McMansion-living trendy families that always seem to exist in Microsoft’s promo videos since this is the only life that Microsoft employees in Redmond area understand. But it reveals a few interesting clues about how the Zune Music service will be changing and evolving as it becomes Xbox Music…

I don’t know how accurate this observation is as I don’t regularly watch tech industry promo videos. However, let’s assume it is true. Perhaps McMansion owners are more likely to purchase Microsoft products so Microsoft is simply portraying its target demographic. Perhaps Microsoft critics would love to tie Microsoft to McMansions and put together ideas that Microsoft simply mass produces products that don’t work well in the long run.

What are particular companies or perhaps products that would work well in advertisements with McMansions? A few ideas:

1. McDonald’s. An easy connection: mass production, supersizing, quantity over quality. Both have their enthusiastic detractors. Both seem to continue on anyhow (see this recent piece about a recent jump in sales of McMansions).

2. SUVs. These are commonly put together as symbols of excess and environmental waste. A Hummer would work well here. But what about a Honda CR-V or a Toyota Rav4?

3. Home Depot or any other big box home improvement store. Your mass produced McMansion is falling apart after five years or you need materials for a big brick fireplace on your 300 square foot patio? Save money and buy whatever you need here.

Contrast this with companies that might rather drop dead than be caught advertising with McMansions. Apple: not exactly the image they are trying to portray. Ikea tends to go with smaller spaces. Trendy companies as well as green products likely want to avoid being tied to McMansions.

Walmart increases nearby home values

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The Atlantic reports on a University of Chicago working paper (subscription req.) that having a Walmart nearby noticeably affects housing prices:

Home values within a half mile of a new store got a 2 and 3 percent boost. Within a mile, the store pushed up values 1 to 2 percent. That translated to a $7,000 average bump for nearby homes and $4,000 for houses a little further away.

Unfortunately, I don’t have a subscription and thus cannot look at the paper directly, but I have a few questions:

1.  Do other big-box retailers (e.g., Target) similarly boost nearby housing prices?
1a.  Is Walmart’s boost larger?

2.  Is there a corresponding drop in housing prices if/when a particular Walmart closes (often only to reopen at a new location a few miles away)?
2a.  If yes, is the drop greater than the boost?

Second-class shareholders

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Commenting on James Surowiecki’s recent New Yorker piece, Felix Salmon decries the structure of Facebook’s IPO, which left Mark Zuckerberg with 57% of the voting shares while actually owning only 18% of the company:

The reason to be concerned about the rise of companies with dual-class share structures, then, is not all that dissimilar to the reason to be concerned about the rise of big private companies more generally. The stock market is no longer the common ownership of the means of production: it’s a place where early-stage investors can exit to a group of muppets and high-frequency traders.

Initial public offering (IPO) investors are increasingly being offered “ownership” of companies that comes with little or no actual control.  As Surowiecki puts it, companies are effectively telling investors, “Thanks for your money. Now shut up.”  It’s a very peculiar system that gives majority stockholders a non-majority say in corporate governance.

RIAA: all of everything are belong to us

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Correction:  Techdirt is now reporting that this story is bogus and that the RIAA never threw out a number in the trillions.

The Recording Industry Association of America sued peer-to-peer filesharing service Limewire for copyright infringement years ago, and it successfully shut down that service back in 2010.  Now, the RIAA says it’s owed a few dollars in damages for those years of Limewire’s infringement.  $72 trillion, to be exact:

According to documents recently filed in the U.S. District Court for the Southern District of New York, the RIAA was asking for damages of about $72 trillion dollars, a figure that the judge in the case said is “absurd.” Judge Kimba Wood wrote in a recent decision that, “An award based on the RIAA calculations would amount to ‘more money than the entire music industry has made since Edison’s invention of the phonograph in 1877.'”

The estimated wealth of the entire world is about $60 trillion, meaning that the RIAA should have known how outlandish its claims were to begin with.

A modest quibble with the AV Club’s figures:  the CIA puts Gross World Product (the combined GDP for all countries on Earth) a bit higher, at $70.16 trillion for 2011.  But any way you slice it, the RIAA thinks that copyright infringement due to one (now defunct) company entitles it to the value of everything in the world.

Literally.

What is the future of Facebook if half of Americans think it is a fad?

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A new survey reveals some controversy in how long Americans think Facebook will last:

Half of Americans think Facebook is a passing fad, according to the results of a new Associated Press-CNBC poll. And, in the run-up to the social network’s initial public offering of stock, half of Americans also say the social network’s expected asking price is too high…

The public overall is similarly divided on the company’s future. Just under half of adults (46 percent) predict a short timeline for Facebook, while 43 percent say it has staying power.

I’m not sure why we should think that average Americans should be experts on the value of Facebook’s IPO but the questions about the staying power of Facebook are pretty fascinating. I wonder what exactly it means that people call Facebook a fad: does that mean it is too popular (this could go along with the idea that Facebook is overvalued) or that it will someday disappear (maybe replaced, maybe simply fades away)? These are two very different options: Facebook’s membership numbers will probably level off at some point but that is very different than suggesting Facebook may not be around in ten years.

To me, these figures suggest several things:

1. The IPO could be a very important turning point for Facebook, perhaps akin of a transition from young adulthood to becoming a mature company. Will the company continue to grow or is this the beginning of the end (particularly in public perceptions)?

2. There is still room for Facebook to become more integrated into the daily life of people, particularly older Americans. Perhaps the number of users can’t increase all that much but the time one spends on Facebook can.

3. Facebook still needs to show a certain segment of the population that it is “worthwhile” and not just a “fad. “I’m not sure exactly what this would look like. It could include giving Facebook more functions so that more online activity, like shopping (though respondents to this survey are not very favorable about the idea of giving Facebook this data), takes place through Facebook. Or perhaps it includes convincing people that the social interaction on Facebook is now how normal social interaction takes place.

On the whole, this means that there is a lot for Facebook still to do.

Sociologist argues that there aren’t as many high-paying high-tech jobs as people think

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While commentators suggest that college students should pursue high-tech careers, a sociologist argues that there aren’t as many jobs in this sector as people think:

Finally, it is a big mistake to think that the tech sector is a panacea for the jobs crisis. University of Michigan professor of business and sociology Gerald Davis has examined the data and found that the job-producing high-tech’s potential is consistently overplayed.

“Although the handful of teen billionaires who manage to cash in on the latest app may suggest otherwise, surprisingly few people actually work in the high-visibility success stories of the tech economy,” Davis writes in an article to be presented at the American Sociological Association meeting. “The combined global workforces of Google (32,467), Apple (63,300), Facebook (3000), Microsoft (90,000), Cisco (71,825), and Amazon.com (56,200) — 316,792 as of the end of 2011 — are smaller than the U.S. workforce of [grocery chain] Kroger (339,000). Notably, a recent survey of college graduates under 40 found than one in five listed Google as their most preferred employer, followed by Apple and Facebook. They might as well have chosen the NBA as Facebook, given the firm’s minuscule employment, and Apple’s recent surge in net jobs is almost entirely attributable to the roll-out of its retail stores, where most of its current employees work. The Computer and Electronic Products industry has seen a loss of 750,000 jobs since 2000 as production has been almost universally offshored. But even the Information Services sector, which includes telecommunications, broadcasting, publishing and data processing, shed over one million jobs during the same period.”

It sounds like aspirations and the number of available jobs don’t line up. Some could argue that there are plenty of smaller high-tech firms and start-ups along with plenty of opportunities for entrepreneurship but I’m guessing plenty of young adults would want to work for established (and cool!) companies.

Others have argued that people in or going to college should look at what jobs are going to popular in the future, presumably to avoid industries that are losing jobs. But what commentator would discourage young people from going into the high-tech sector even though they would quickly recommend steering clear of liberal arts degrees?

Financial planning with a hint of sociology?

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Economists and sociologists may have very different views of the world but what about combining some of both in financial planning? Here is a financial planner who argues he has an extra edge because he incorporates insights from sociology and a few other fields:

William Pitney, Financial Coach and President of Focus YouNiversity, LLC (FocusYOU), continues to enhance his expertise as a Sudden Money Advisor. Pitney attended the one-day workshop held in Portland, Oregon on April 19th as a requirement of the 12-month coaching program. The program is designed to provide a deeper understanding of the Financial Planning Process developed by Susan Bradley, CFP® and founder of the Sudden Money® Institute (SMI).

During the workshop, Pitney acquired new skills for navigating clients through financial and life transition events, allowing them to feel more confident as they move forward. SMI provides Pitney with access to the latest research, tools and processes to guide clients through Sudden Money and life events.

Traditional financial training and advice address the facts and figures of money only. SMI provides advanced training that also addresses the emotional and human side of money. “The skills and protocols I’ve acquired through Sudden Money enable me to advise clients in transition more effectively and makes it more comfortable for them as they go through these turbulent and often life altering transitions,” said Pitney.

As a Sudden Money Advisor, Pitney is among a select few professionals with expertise combining the fields of financial planning with cutting-edge research in neurology, sociology and psychology. These techniques integrate the technical, rational aspects with the human experiences of the person in transition.

Is there any evidence that incorporating sociological factors into financial planning leads to increased returns? If so, this could be lucrative for some sociologists down the road…

 

Argument: the rise of the American rental economy

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Even though ownership seems engrained in the American psyche, Daniel Gross argues that recent economic troubles are pushing the United States to a rental economy which may just thrive in the years to come:

In the American mind, renting has long symbolized striving—striving, that is, well short of achieving. But as we climb our way out of the Great Recession, it seems something has changed. Americans are getting over the idea of owning the American dream; increasingly, they’re OK with renting it. Homeownership is on the decline, and home rentership is on the rise. But the trend isn’t limited to the housing market. Across the board—for goods ranging from cars to books to clothes—Americans are increasingly acclimating to the idea of giving up the stability of being an owner for the flexibility of being a renter. This may sound like a decline in living standards. But the new realities of our increasingly mobile economy make it more likely that this transition from an Ownership Society to what might be called a Rentership Society, far from being a drag, will unleash a wave of economic efficiency that could fuel the next boom.

While downgrading the place of ownership in the American psyche may sound like a traumatic task, the cold, unsentimental fact about the American dream is that Americans never really owned it in the first place. For the past three decades, especially, consumers haven’t so much bought their quality of life as they’ve borrowed it from banks and credit card companies. And since the Great Recession, Americans have been busy rebuilding their balance sheets and avoiding new financial encumbrances. When American consumers can’t—or won’t—borrow to purchase the goods and services they’ve come to consider part of their standard of living, how does the economy get back on its feet?…

It’s tempting to view the rise of rentership as an economic step backward. Renters can’t build up equity, and they have less control over their living standards than owners. Renting is generally seen as something you do when you’ve failed as a homeowner or are not yet ready to be one. But I’d argue the rise of rentership is a sign of a system adapting—albeit too slowly—to new realities.

The U.S. economy needs the dynamism that renting enables as much as—if not more than—it needs the stability that ownership engenders. In the current economy, there are vast gulfs between the employment pictures in different regions and states, from 12% unemployment in Nevada to 3% unemployment in North Dakota. But a steelworker in Buffalo, or an underemployed construction worker in Las Vegas, can’t easily take his skills to where they are needed in North Dakota or Wyoming if he’s underwater on his mortgage. Economists, in fact, have found that there is frequently a correlation between persistently high local unemployment rates and high levels of homeownership.

An interesting argument.

I wish Gross would explore the implications of this further. Perhaps for the “average” American, renting will make sense  in the future. It has several clear advantages: it doesn’t require one to take on a lot of upfront debt. This is most clear with mortgages: how many people will want to take on that amount of money when conditions can change quickly? (Does this idea about renting have any application for the other popular debt topic these days: college loans?) Second, it allows consumers to pick and choose more. If you are renting with a yearly lease, you have some freedom to adapt to changing circumstances. (There also could be some negative pressures due to rising rents, actions of landlords, etc.) If there is something that Americans like even more than ownership, it is choices. You can also see this trend in media options: we are moving away from a system of ownership to buffet or a la carte models where you can access thousands upon thousands of songs and movies on demand. Third, this seems like a classic American argument: the times are changing and there is money to be made by more quickly seizing on the new realities!

But there could also be some downsides to this. First, someone must still own things like housing units and rights to digital media. Will ownership be consolidated in the hands of a few? What happens if the few want to restrict access to their products? Does a society based more on the renting of housing units inevitably require things like rent control? Second, there is a long cultural history in the United States that ties renting to transience and lack of concern for the local community. For example, many suburban communities have resisted the construction of apartments because the perception is that people who live in apartments don’t contribute long-term to a community in the same way that homeowners do. (Of course, there are other reasons suburbanites resist apartments, including issues of race, class, and property values.) At its most blatant, homeownership was seen as a bulwark against Communism. These cultural biases can be overturned but it won’t necessarily come quickly or easily. Third, are there other aspects of life that would have to change to accommodate a shift to renting? Can widespread renting of homes work in suburbia? Can Zipcar exist in less dense areas? In other words, is this just about renting or about large-scale adjustments to American society based on new realities?

This bears watching. Is this the end of the dream of some of an ownership society?

Of food trucks and lawbreaking

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It’s no secret that the U.S. economy continues to struggle, particularly on the jobs front.  It’s not surprising, therefore, that lots of people are getting in touch with their inner entrepreneur and are seeking employment via their own small businesses.  Food trucks, although looked down on by some, clearly are a part of this self-starter trend, particularly in certain urban areas like Portland and New York.

Which is why I found a recent NPR Planet Money podcast on food trucks in NYC so interesting. From the transcript:

[T]he city sets lots of rules about where food trucks are not allowed — then lets the truck owners duke it out over the scraps.

You have to be 20 feet away from subway stations and building entrances. Two hundred feet from schools (call it the ice-cream truck provision). And the NYPD just started giving out tickets for selling food from metered parking spots.

“Following all the regulatory constraints that are currently enforced at this moment, there really is not any place for a food truck to park,” says David Weber [author of the Food Truck Handbook].

In other words, NYC on one hand licenses an activity (vending from food trucks) and on the other hand makes this activity illegal (through parking regulations that provide literally no legal spots from which to vend).  Of course, what this really means is (1) that food trucks continue to operate but (2) that they do so in technical violation of the law and subject to the whims of law enforcement’s discretion.

As a lawyer, this infuriates me.  It undermines the rule of law in a number of ways:

  • It tells citizens that one has to break the law simply in order to run a business.
  • It implies that there are two classes of law (laws one must obey and laws one need not) without providing a clear principle on which is which.
  • It institutionalizes an incentive for corruption and discrimination since every food truck operator is now a technical lawbreaker subject to law enforcement’s “discretion” (and thus harassment, solicitation for bribes, etc.).

To be clear:  I do not know whether any corruption or discrimination is taking place, and I am not accusing anyone of anything.  (Indeed, I have no direct knowledge of the situation on the ground and do not live in NYC.)  Taking David’s assertion at face value, however, it is clear that such facts would incentivize corruption and discrimination at the institutional level.