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Rethinking vocational high school as a path to college

Thu, 2014-10-23 11:04

This story originally appeared on "American RadioWorks" as part of their hour-long documentary "Ready to Work: Reviving Vocational Ed."

For years, vocational high schools have been seen as a lesser form of schooling – tracking some kids off to work while others were encouraged to go on to college and pursue higher income professions. But things are changing. Vocational high schools are focusing much more on preparing students for higher education. 

At one of those schools - Minuteman Regional High School in Lexington, Massachusetts - students can learn traditional trades like carpentry, plumbing and welding. They can also learn high tech fields such as video game design, engineering, and biotechnology.

Minuteman students spend half their time in vocational classes – often referred to as “career and technical classes - and half their time in academic courses. About 60 percent of the school’s graduates go on to college. That’s not the way things were when principal Ernest Houle learned welding at a vocational high school back in the 1980s.

“The highest-level math I ever had in high school was an Algebra 1,” says Houle. “And that only happened my sophomore year because it fit in the schedule.”

Houle went to Leominster Trade School, in Massachusetts. The school was located in a wing off the regular high school; Houle says he and his classmates were referred to as “trade rats” and no one expected them to go to college. After high school graduation, Houle worked as a welder.

“It wasn’t until I went to become a teacher and I realized that not being offered the classes during high school made it more difficult for me when I got into the college arena,” he says.

The origins of vocational ed

Vocational education wasn’t designed to prepare students for college. The Smith-Hughes Act of 1917, the law that first authorized federal funding for vocational education in American schools, explicitly described vocational ed as preparation for careers not requiring a bachelor’s degree.

“The early vocational education was driven by a philosophy of fitting people to their probable destinies,” says Jim Stone, director of the National Research Center for Career and Technical Education. “Kids from poor families were tracked off into becoming the worker bees. Others were tracked off to go to universities and be the intelligentsia.”

Stone says vocational education was designed to teach kids the specific skills for one job. To be a welder or a cosmetologist, for example, “with the idea that, once you become a welder, you’ll always be a welder. Or once you become a cosmetologist, you’ll always be a cosmetologist,” says Stone. The goal was, get kids really skilled at one thing, “and life will be good,” he says.

The idea that people could be trained in one area and rely on an industry to employ them for life was a reasonable one for much of the 20th century. There were lots of jobs – good union jobs – for people with just a high school education. But by the 1970s, the good jobs that required just a high school education were beginning to disappear. Technology and globalization were increasing the skill levels required for most occupations, and making the labor market more volatile. Entire sectors of the economy were being wiped out, and new kinds of jobs were being created.

To be successful in this kind of economy, experts say workers have to be multi-skilled and able to retrain for new jobs throughout their careers. Everyone needs a good academic foundation in order to do that, experts say, and most kids in vocational programs were not getting that foundation.

Improving vocational ed

By the late 1990s, vocational education had a major image problem. Vocational programs had become a kind of dumping ground for kids who weren’t succeeding in the traditional academic environment. That included a lot of students with behavior problems, and a lot of students with learning disabilities. In many school districts, vocational education wasn’t much more than a “second-tier special ed program,” says Jim Stone.

At the same time, the standards and accountability movement was taking hold in public education. States had begun to write academic standards, or goals, for what students should learn. In 2001, Congress passed the No Child Left Behind Act. That law required states, in exchange for federal education funding, to test their students every year and to insure that all students would eventually be proficient in math and reading.

 All students meant the kids in vocational programs too. And once states starting testing their students, it became clear that many students in vocational programs were at the bottom in terms of math and reading skills. Under No Child Left Behind, those programs could eventually be shut down for poor performance. If they were going to survive, vocational schools had to up their game in terms of academics.

 “The early 2000s was a time of significant change in voc ed,” says Dave Ferreira, executive director of the Massachusetts Association of Vocational Administrators.

“What we wanted to do was create a student who was able to go out” and get a job, he says, but also able to “get accepted into a four-year college or university.” The idea was to make sure all students were both “career and college ready.”

Massachusetts stands out as a state that devoted significant time and resources to overhauling its vocational education programs, according to experts.

The key was to convince vocational teachers to put aside “the old philosophy of saying, ‘It’s all about the trades. I don’t teach academics,’” says Ferreira, and to help them learn how they could integrate academic instruction into career training. For example, show teachers how to teach writing skills when students were writing up materials lists and job estimates.

And it wasn’t all about integrating academics into career classes, says Ferreira. It was also about adding academic classes to the vocational curriculum. 

Massachusetts has largely succeeded in bringing the academic quality at its vocational high schools up to par with its traditional high schools. In 2013, students at regional vocational high schools in Massachusetts did as well on the state English tests (92 percent proficient) as students at traditional high schools (93 percent proficient). On the math tests, they did nearly as well: 78 percent of students at regional vocational high schools were proficient in math compared to 82 percent at traditional high schools.

Career and college readiness

Ernest Houle, the former welder who is now principal of Minuteman High School, started working at the school as a teacher’s aide in 1996. He says things were already different from when he was a student at Leominster Trade School a decade earlier.

“The students [at Minuteman] had advanced math classes, they had the opportunity to enroll in foreign language classes,” he says.

Houle worked his way up at the school, earning a Bachelor of Science in occupational and vocational education and a Master of Science in educational leadership along the way. To get his Bachelor’s degree, Houle had to take a calculus class, a tall order having had only Algebra 1 in high school.

“It was a lot of hard work and staying after class, working with the professor,” says Houle. But he did it.

“I am probably the poster child for the importance of career and college readiness,” he says with a chuckle. He says his goal is to make sure every student who graduates from Minuteman is prepared for higher education.  

“Students get the same kind of college prep here that they’d get at any high school,” he says. “And they get career skills too.” That’s a bonus students don’t get at most traditional high schools, and it’s one of the reasons many students and parents choose Minuteman.

A better path to college

Sean and Brandon Datar went to private school until 8th grade. Their dad is an electrical engineer and their mom teaches at a Montessori school. They’re probably not the kinds of kids you’d imagine at a vocational high school.

But when Brandon was looking at options for high school, Minuteman stood out, says his dad, Nijan Datar.

“Being an engineer myself, I like the fact that schools like this cater to making an actual living,” he says.

The family had been touring public and private high schools in the Boston suburbs, many of them considered among the best high schools in the country. But Datar wasn’t impressed. He says the main goal seemed to be getting students into the best, and most expensive, colleges. But no one seemed to be talking about what kids were going to do with their college degrees once they got them. 

His wife, Teresa Datar, says high school students need more direction.

“My feeling is that in many high schools, students don’t know why they’re in the classes that they’re in. They’re just kind of biding time,” she says. “And then they go off to college and they flounder.”

Her son Sean did not want that to happen to him. He says what he liked best when he toured Minuteman is that the students he met seemed to have a plan for their lives.

“When you think about it, you want to know what you want to do, and you want to be sure of it, by the time you go to college,” says Sean. “You don’t want to pick a major, get like $50,000 in debt,” and then realize you want to do something else.

Ed Bouquillon, the superintendent of the school district where Minuteman is located, says one goal of vocational education is to help kids figure out what they don’t want to do.

“Sometimes I’ll have kids who, at the end of their four years, they’ll say, ‘Dr. B, you know, I came here in nursing and I really don’t like it.’ And that’s a valuable thing to know,” says Bouquillon. Better to figure it out in a public high school, where you’re not paying tuition, than at a college that’s charging you thousands of dollars, he says.

But students and families who choose vocational education face stereotypes. Nijan Datar says friends and neighbors in their affluent Boston suburb were kind of startled when they heard his son Brandon was going to Minuteman.

“What we did was definitely not the norm here,” says Datar. “I have had raised-eyebrow looks. It’s almost like you can read that other person’s mind thinking, OK, the reason I did this is because my son is not very smart.”

But Datar says his family chose Minuteman because it seemed like a better path to college than a traditional high school. His sons are “going to a regular high school but also dipping [their] feet into the real world and starting to get an understanding of what it takes to get a job,” he says.

His son Brandon is now a freshman at the Colorado School of Mines, working on a bachelor’s degree in geological engineering. His son Sean is a sophomore at Minuteman, majoring in robotics.

After Minuteman

Alice Ofria graduated from Minuteman in 2009. She majored in environmental science. Now she works as a lab technician for the drinking water department in Billerica, Massachusetts.

It started as an internship, the summer after she graduated from Minuteman. But she was so good at the job, the town hired her on as a permanent employee, says John Sullivan, her boss.

“She’s an expert in computers and a whiz in chemistry,” says Sullivan.

Sullivan says it’s hard for the town to find people with Ofria’s skills. There’s a “chasm” between what people learn in school and what’s needed in the “real world,” says Sullivan. Even college graduates don’t tend to have the needed mix of skills and knowledge. 

But Ofria was ready to go from day one, he says.

“The program at Minuteman prepared her to actually learn” what she needed to on the job, and fast. “She’s done outstanding work here,” he says.

As a lab technician for the town, Ofria stated off making more than $26 an hour. She gets regular raises, and health and retirement benefits too. Her friends are amazed.

“Most of my friends are waitresses or work as a secretary somewhere, or at a tanning salon,” she says. Some of them are college graduates, struggling to get by. But Ofria recently bought a new truck and went on a vacation to Puerto Rico.

And having a good job – she now makes more than $30 an hour – was a huge help when it came to paying college tuition. In May, Ofria graduated from the University of Massachusetts, Boston with a bachelor’s degree in environmental science. And just last month, she picked up a second job – as a teacher’s aide in the Environmental Technology program at Minuteman. She’s thinking about pursuing a teaching career, and if she does, she says she wants to teach at a vocational high school.

“Vocational school is where it’s at, to put it bluntly,” she says. “Because no one experienced a field, a trade and also got the same [academic] education. None of my friends experienced that, except for the friends I went to Minuteman with.”

Rethinking vocational high school as a path to college

Thu, 2014-10-23 11:04

This story originally appeared on "American Radio Works" as part of their hour-long documentary "Ready to Work: Reviving Vocational Ed."

For years, vocational high schools have been seen as a lesser form of schooling – tracking some kids off to work while others were encouraged to go on to college and pursue higher income professions. But things are changing. Vocational high schools are focusing much more on preparing students for higher education. 

At one of those schools - Minuteman Regional High School in Lexington, Massachusetts - students can learn traditional trades like carpentry, plumbing and welding. They can also learn high tech fields such as video game design, engineering, and biotechnology.

Minuteman students spend half their time in vocational classes – often referred to as “career and technical classes - and half their time in academic courses. About 60 percent of the school’s graduates go on to college. That’s not the way things were when principal Ernest Houle learned welding at a vocational high school back in the 1980s.

“The highest-level math I ever had in high school was an Algebra 1,” says Houle. “And that only happened my sophomore year because it fit in the schedule.”

Houle went to Leominster Trade School, in Massachusetts. The school was located in a wing off the regular high school; Houle says he and his classmates were referred to as “trade rats” and no one expected them to go to college. After high school graduation, Houle worked as a welder.

“It wasn’t until I went to become a teacher and I realized that not being offered the classes during high school made it more difficult for me when I got into the college arena,” he says.

The origins of vocational ed

Vocational education wasn’t designed to prepare students for college. The Smith-Hughes Act of 1917, the law that first authorized federal funding for vocational education in American schools, explicitly described vocational ed as preparation for careers not requiring a bachelor’s degree.

“The early vocational education was driven by a philosophy of fitting people to their probable destinies,” says Jim Stone, director of the National Research Center for Career and Technical Education. “Kids from poor families were tracked off into becoming the worker bees. Others were tracked off to go to universities and be the intelligentsia.”

Stone says vocational education was designed to teach kids the specific skills for one job. To be a welder or a cosmetologist, for example, “with the idea that, once you become a welder, you’ll always be a welder. Or once you become a cosmetologist, you’ll always be a cosmetologist,” says Stone. The goal was, get kids really skilled at one thing, “and life will be good,” he says.

The idea that people could be trained in one area and rely on an industry to employ them for life was a reasonable one for much of the 20th century. There were lots of jobs – good union jobs – for people with just a high school education. But by the 1970s, the good jobs that required just a high school education were beginning to disappear. Technology and globalization were increasing the skill levels required for most occupations, and making the labor market more volatile. Entire sectors of the economy were being wiped out, and new kinds of jobs were being created.

To be successful in this kind of economy, experts say workers have to be multi-skilled and able to retrain for new jobs throughout their careers. Everyone needs a good academic foundation in order to do that, experts say, and most kids in vocational programs were not getting that foundation.

Improving vocational ed

By the late 1990s, vocational education had a major image problem. Vocational programs had become a kind of dumping ground for kids who weren’t succeeding in the traditional academic environment. That included a lot of students with behavior problems, and a lot of students with learning disabilities. In many school districts, vocational education wasn’t much more than a “second-tier special ed program,” says Jim Stone.

At the same time, the standards and accountability movement was taking hold in public education. States had begun to write academic standards, or goals, for what students should learn. In 2001, Congress passed the No Child Left Behind Act. That law required states, in exchange for federal education funding, to test their students every year and to insure that all students would eventually be proficient in math and reading.

 All students meant the kids in vocational programs too. And once states starting testing their students, it became clear that many students in vocational programs were at the bottom in terms of math and reading skills. Under No Child Left Behind, those programs could eventually be shut down for poor performance. If they were going to survive, vocational schools had to up their game in terms of academics.

 “The early 2000s was a time of significant change in voc ed,” says Dave Ferreira, executive director of the Massachusetts Association of Vocational Administrators.

“What we wanted to do was create a student who was able to go out” and get a job, he says, but also able to “get accepted into a four-year college or university.” The idea was to make sure all students were both “career and college ready.”

Massachusetts stands out as a state that devoted significant time and resources to overhauling its vocational education programs, according to experts.

The key was to convince vocational teachers to put aside “the old philosophy of saying, ‘It’s all about the trades. I don’t teach academics,’” says Ferreira, and to help them learn how they could integrate academic instruction into career training. For example, show teachers how to teach writing skills when students were writing up materials lists and job estimates.

And it wasn’t all about integrating academics into career classes, says Ferreira. It was also about adding academic classes to the vocational curriculum. 

Massachusetts has largely succeeded in bringing the academic quality at its vocational high schools up to par with its traditional high schools. In 2013, students at regional vocational high schools in Massachusetts did as well on the state English tests (92 percent proficient) as students at traditional high schools (93 percent proficient). On the math tests, they did nearly as well: 78 percent of students at regional vocational high schools were proficient in math compared to 82 percent at traditional high schools.

Career and college readiness

Ernest Houle, the former welder who is now principal of Minuteman High School, started working at the school as a teacher’s aide in 1996. He says things were already different from when he was a student at Leominster Trade School a decade earlier.

“The students [at Minuteman] had advanced math classes, they had the opportunity to enroll in foreign language classes,” he says.

Houle worked his way up at the school, earning a Bachelor of Science in occupational and vocational education and a Master of Science in educational leadership along the way. To get his Bachelor’s degree, Houle had to take a calculus class, a tall order having had only Algebra 1 in high school.

“It was a lot of hard work and staying after class, working with the professor,” says Houle. But he did it.

“I am probably the poster child for the importance of career and college readiness,” he says with a chuckle. He says his goal is to make sure every student who graduates from Minuteman is prepared for higher education.  

“Students get the same kind of college prep here that they’d get at any high school,” he says. “And they get career skills too.” That’s a bonus students don’t get at most traditional high schools, and it’s one of the reasons many students and parents choose Minuteman.

A better path to college

Sean and Brandon Datar went to private school until 8th grade. Their dad is an electrical engineer and their mom teaches at a Montessori school. They’re probably not the kinds of kids you’d imagine at a vocational high school.

But when Brandon was looking at options for high school, Minuteman stood out, says his dad, Nijan Datar.

“Being an engineer myself, I like the fact that schools like this cater to making an actual living,” he says.

The family had been touring public and private high schools in the Boston suburbs, many of them considered among the best high schools in the country. But Datar wasn’t impressed. He says the main goal seemed to be getting students into the best, and most expensive, colleges. But no one seemed to be talking about what kids were going to do with their college degrees once they got them. 

His wife, Teresa Datar, says high school students need more direction.

“My feeling is that in many high schools, students don’t know why they’re in the classes that they’re in. They’re just kind of biding time,” she says. “And then they go off to college and they flounder.”

Her son Sean did not want that to happen to him. He says what he liked best when he toured Minuteman is that the students he met seemed to have a plan for their lives.

“When you think about it, you want to know what you want to do, and you want to be sure of it, by the time you go to college,” says Sean. “You don’t want to pick a major, get like $50,000 in debt,” and then realize you want to do something else.

Ed Bouquillon, the superintendent of the school district where Minuteman is located, says one goal of vocational education is to help kids figure out what they don’t want to do.

“Sometimes I’ll have kids who, at the end of their four years, they’ll say, ‘Dr. B, you know, I came here in nursing and I really don’t like it.’ And that’s a valuable thing to know,” says Bouquillon. Better to figure it out in a public high school, where you’re not paying tuition, than at a college that’s charging you thousands of dollars, he says.

But students and families who choose vocational education face stereotypes. Nijan Datar says friends and neighbors in their affluent Boston suburb were kind of startled when they heard his son Brandon was going to Minuteman.

“What we did was definitely not the norm here,” says Datar. “I have had raised-eyebrow looks. It’s almost like you can read that other person’s mind thinking, OK, the reason I did this is because my son is not very smart.”

But Datar says his family chose Minuteman because it seemed like a better path to college than a traditional high school. His sons are “going to a regular high school but also dipping [their] feet into the real world and starting to get an understanding of what it takes to get a job,” he says.

His son Brandon is now a freshman at the Colorado School of Mines, working on a bachelor’s degree in geological engineering. His son Sean is a sophomore at Minuteman, majoring in robotics.

After Minuteman

Alice Ofria graduated from Minuteman in 2009. She majored in environmental science. Now she works as a lab technician for the drinking water department in Billerica, Massachusetts.

It started as an internship, the summer after she graduated from Minuteman. But she was so good at the job, the town hired her on as a permanent employee, says John Sullivan, her boss.

“She’s an expert in computers and a whiz in chemistry,” says Sullivan.

Sullivan says it’s hard for the town to find people with Ofria’s skills. There’s a “chasm” between what people learn in school and what’s needed in the “real world,” says Sullivan. Even college graduates don’t tend to have the needed mix of skills and knowledge. 

But Ofria was ready to go from day one, he says.

“The program at Minuteman prepared her to actually learn” what she needed to on the job, and fast. “She’s done outstanding work here,” he says.

As a lab technician for the town, Ofria stated off making more than $26 an hour. She gets regular raises, and health and retirement benefits too. Her friends are amazed.

“Most of my friends are waitresses or work as a secretary somewhere, or at a tanning salon,” she says. Some of them are college graduates, struggling to get by. But Ofria recently bought a new truck and went on a vacation to Puerto Rico.

And having a good job – she now makes more than $30 an hour – was a huge help when it came to paying college tuition. In May, Ofria graduated from the University of Massachusetts, Boston with a bachelor’s degree in environmental science. And just last month, she picked up a second job – as a teacher’s aide in the Environmental Technology program at Minuteman. She’s thinking about pursuing a teaching career, and if she does, she says she wants to teach at a vocational high school.

“Vocational school is where it’s at, to put it bluntly,” she says. “Because no one experienced a field, a trade and also got the same [academic] education. None of my friends experienced that, except for the friends I went to Minuteman with.”

Tackling email overload: Lost cause, or noble battle?

Thu, 2014-10-23 11:02

Update: Amy Scott did, in fact, hear from Marketplace's IT department...

On Oct 23, 2014, at 6:13 PM, "Li, Tinson" wrote:

Hi Amy,

Just heard your segment on PM.  Cool piece.  But 49,000 emails?  Can we work with you on cleaning some, if not all, of that up?

Please let us know.

Tinson Li 

Consider the following statistic for just a few moments, which comes to us from the Radicati Group, a tech research firm: By the end of today, more than 100 billion business emails will have been sent and received around the world.  As any office worker will tell you, we are drowning in email—which is why Google has announced a new invitation-only service called Inbox to help manage the clutter.

Reading and sorting email "starts to feel sort of like this to-do list that other people have assigned to you,” says Google spokesperson Andrea Freund. Inbox is designed to “take the work off your shoulders,” she says.

For example, the app will analyze your email messages and highlight content you’re likely to care about. Take a flight confirmation email from an airline – the departure time and gate number will display at the top of the inbox, and automatically update with any changes.

Inbox is the latest in a series of apps and services designed to help people identify the information they need, and quickly filter out the junk. Others include Mailbox and Boxer. Even traditional corporate programs like Microsoft’s Outlook have many tools to automatically sort and filter messages.

Sharon Profis is a senior editor at CNET, and one of those “inbox zero” types who strive to read and deal with all their email by the end of each day. She says there will never be one solution.

“They all tackle email a little bit differently, and that’s the point, because each of us likes to manage our emails differently,” she says.

One study by McKinsey & Company estimated people spend a quarter of their workdays dealing with email.

That adds up to billions of dollars in lost productivity, says Jonathan Spira, who wrote the book “Overload.”

To truly tackle email, he says, you have to change people’s habits. One of the best tools he’s seen is a prompt that asks, essentially, “do you really need to copy five people on that message?” before you hit "send."

“That’s the type of thing that changes behavior and helps direct emails only to the people who absolutely need to see it,” Spira says.

CNET’s Sharon Profis says all of these tools will only work if people are willing to spend time setting them up.

We're looking for the fullest inbox in America. Think you've got it? Tweet @Marketplace.

How many emails do you have in your inbox? Tell the truth. #numberslove

— Marketplace (@Marketplace) October 23, 2014

 

Blue chips: down, but not out

Thu, 2014-10-23 11:01

It's been a rough week for some venerable names in the American economy – McDonald's, Coca-Cola, and IBM all reported very “meh” results.

They’re the old guard – the “blue chips” – the companies investors count on for solid, steady growth. In the dating pool, blue chips would be the nice guy, who returns your calls, drives his mom’s old station wagon, and gets you home at a reasonable hour.

Historically, they were big, well-known companies, often in consumer goods, like Procter & Gamble, General Motors, General Electric and General Mills, says Lawrence White, an economics professor at the N.Y.U. Stern School of Business.

“Lots of generals in there,” he jokes.

But even blue chips can fall, says White, recalling General Motors' bankruptcy.

“The stock holders of the old General Motors came out with nothing,” he says.

As the market pushed higher and higher in recent years, it wasn’t blue chip companies leading the charge, says Quincy Krosby, a market strategist for Prudential Financial.

But she does expect them to gain strength and hold onto investors.

“Even the companies that have been disappointing, they’ve got cash on their balance sheets,” she explains. “So they’re going to try to fix the problem and they’re going to pay investors, most likely, for waiting while that happens by offering dividends.”

Still, time marches on, says Joshua Brown, the CEO of Ritholtz Wealth Management. Tomorrow’s blue chips might be a tech stock like Facebook, or Chipotle, perhaps Under Armour.

“They certainly have blue chip status amongst the younger generation and if they can continue to execute the way they have, we may well be looking at the next generation of Blue Chips,” says Brown. “In order for that to happen, some of the older companies have to go away.”

Brown’s optimistic that McDonald’s and Coca-Cola will now hustle to catch up with consumer changes and reinvent themselves, though he cautions it won’t happen overnight.

Should they need inspiration, they might look to Nike.

“Nike’s a great example of a blue chip that remains a blue chip through a lot of different changes in taste and preferences,” he says. 

Microsoft: a tale of three CEOs

Thu, 2014-10-23 06:00

Microsoft has had three CEOs since it was founded in 1975: Bill Gates, Steve Ballmer, and Satya Nadella, who's been on the job eight months now. 

As Bethany McLean writes in this month's Vanity Fair magazine, this is a pivotal moment for Microsoft and its leadership as the company shifts focus to cloud computing and mobile devices.  

Click the media player above to hear Bethany McLean in conversation with Marketplace's David Gura.

PODCAST: Amazon search

Thu, 2014-10-23 03:00

This week, we've gotten good news about the third quarter from Yahoo! Comcast's revenue was up 4 percent. Boeing reported profit up 18 percent. This morning, we've heard from Southwest Airlines and Jet Blue. They both had record earnings last quarter. More on the current state of the markets.  And we know what Amazon sells, but how about what the company buys? Analysts say they're going to pay close attention to the company's investments. We take a look at why. Plus Marketplace's economics guy, Chris Farrell, has been thinking a lot about water. How we use it. How we pay for it. And he's been asking himself a lot of questions many consumers don't. More on that.

What Amazon's earnings tell us about its competition

Thu, 2014-10-23 02:00

Amazon announces third quarter results after the closing bell on Thursday, and one thing that analysts may be paying close attention to is Amazon’s investments: how much money Amazon is spending and on what.

"If you traditionally think of Amazon as a retailer, be aware that they’re growing a strong advertising business,” says Colin Gillis, a senior technology analyst and director of research at BGC Financial.

That strong advertising business, Gillis says, is competing with Google. As of 2012, Amazon accounted for about a third of e-commerce searches. Even Google’s Executive Chairman Eric Schmidt says that Amazon is the company’s chief rival in search.

"Google values customers who are searching to purchase products,” Gillis says.

Amazon has captured those customers through aggressive investment into its business. And while Gillis predicts Amazon will announce third quarter revenue of $21 billion, investors will likely not see a penny of that, as Amazon reinvests into more growth.

"The one thing I’d say to look for would be the stock market’s reaction," says Brad Stone, author of the book, "The Everything Store: Jeff Bezos and the Age of Amazon.”

Stone says investors have historically been patient with Amazon as it increased revenue, but spent that money on itself instead of shareholders. But he says that arrangement is a potential source of vulnerability for the company.

"If investors start to waiver, maybe at some point Amazon needs to start providing returns to shareholders, and that means they can’t invest as much in the new business,” says Stone.

And if Amazon can’t invest, it might have less resources for its battle with Google. That battle has grown from search to a number of other areas, including mobile payments, smartphones, same-day shopping delivery, and cloud services.

Facebook's Zuckerberg courts China in Chinese

Thu, 2014-10-23 02:00

Mark Zuckerberg is trending across Chinese social media today. Yesterday, the Facebook founder delivered a 30 minute speech in Mandarin at Tsinghua University, known as the MIT of China. Zuckerberg himself told his Chinese audience that his Chinese was terrible — a display of culturally appropriate false modesty to be sure — but his Chinese language skills appeared strained at times.

But this appearance wasn't about Zuckerberg's Chinese language ability. Facebook has had its eye on China for years. Since 2009, the site has been blocked inside of China, inaccessible without a VPN that helps you get over the country’s so-called "Great Firewall." And for a man who wants to connect the world, not having access to a fifth of humanity is a problem. Like every other internet company, Zuckerberg is doing whatever he can to appeal to the Chinese government in the hopes of getting access to the China market.

Does he stand a chance in China?

"At this point, probably not," says Marketplace's Rob Schmitz. "Facebook’s biggest draw is that it puts you in touch with a user base of millions of people with whom you can share any sort of content. China’s government has shown that it’s scared of sites like this because it wants to control the information its citizens have access to, not cede that power to a foreign company that doesn’t self-censor."

Schmitz says if Facebook wanted access to China, it would have to offer some sort of localized censored version that would be cut-off from the rest of the world.

But Zuckerberg deserves a lot of credit for laying his pride on the line. In the world of business, if you’re going to stand any chance with the Chinese, you have to show that you’re willing to invest in Chinese culture and Chinese language. And according to Schmitz, no matter how messy his speech was, Zuckerberg is certainly doing that, and the Chinese are giving him big points for that effort.

 

Southwest tries to get back on schedule

Thu, 2014-10-23 02:00

Southwest Airlines long ago outgrew its role as a regional discount carrier. But the company continues to grow — this fall, it’s running its first non-stop flights from its Dallas home base to cities like New York, Chicago and Los Angeles — and it has seen some growing pains. Once the leader in on-time performance, Southwest slipped to the bottom last year, and the airline is still working its way back.  

Here's what happened: In August 2013, Southwest tried to make some extra money by adding flights without adding new planes. The tighter schedule didn’t work. Lots of delays.

But putting in a new schedule took months because of the airline’s antiquated reservation system.

"They would have had to go in and manually re-book every person," says Brett Snyder, who runs the site The Cranky Flier. "So they said, 'Well, this isn’t really feasible.'"

Because lots of plane tickets get booked months in advance, Southwest had to delay the start of a new, less-aggressive schedule until August of this year. Meanwhile, flights kept running late.

Southwest is still learning how to be a major airline, says Vinay Bhaskara, senior business analyst for Airways News. "They haven’t been this kind of airline for a very long time," he says. "It’s only been about seven years. United, Delta, and American have been that kind of airline for 30, 40 years."

However, Bhaskara thinks Southwest has strengths that will let it keep customers while it sorts things out, like non-stop flights to mid-size cities that don’t get much love from other big airlines, and — for now — no fees for the first two checked bags.

Quiz: College grads head downtown

Wed, 2014-10-22 21:01

Young adults with degrees are increasingly moving to inner cities, according to a study by City Observatory.

Where do college grads, ages 25 to 34, make up the greatest percentage of the total population?

Why the VIX is like the Headless Horseman

Wed, 2014-10-22 13:03

It’s Halloween, so we’re all busy planning what to wear for the annual scary holiday party.

I’m going as the VIX. Why? Because nothing scares the Street like the Fear Index.

Sure, James Carville may insist that the bond market is way more intimidating, but if it’s a short, sharp shock you want, I say you can’t beat the VIX. Just like the Headless Horseman, it gallops in and scares the bejeezus out of everyone with great results: witness the global markets last week. Traders and investors were reduced to a bunch of terrified, shivering jellies when they were told the VIX had soared to a two-year high of 30.

So what is the VIX?

The VIX is the volatility index. Volatility is when something goes up and down. Like my mood. If I’m all happy one day and in a raging fury the next, you might say I have a volatile temper. Not necessarily a bad temper – more mercurial. It’s the same with stocks and the indices that track them. The more up and down they go – the wilder the swings in the market – the more volatile they are, and some smart boffins have worked out how to measure that volatility on an index: the VIX. 

So how does the VIX measure volatility?

It does it by taking traders’ temperature. Not literally – that would really be something – rather, it tracks their expectations by watching how they make bets on what they think the S&P 500 index will do over the next 30 days. Using the wonder of math, those bets are crunched in various ways, and then displayed on a graph. If the traders think the market will only be a little bit bumpy, the VIX number will be low. If they fear there will be crazy wild swings, with stocks bouncing up and down like a roller coaster, the VIX number will be high. Hence the Fear Index.

So a high VIX number is bad?

Not necessarily. Think of the markets as the ocean and the VIX as a surf forecast. If the report says we’re going to have double overhead waves, driving rain and five mile-an-hour rip currents, a lot of surfers (like me) are going to stay in bed. Or maybe we’ll go down to the beach, stand on the shore and watch as the more adventurous and professional surfers (nutters) paddle out. Some of those daredevils will rue the day. They’ll come back with broken boards, splintered limbs and shattered dreams. But the really good – or lucky – ones will have an amazing time. Traders are like surfers. When the market is plunging one day and soaring the next, many step out of the market, which is why volume often falls when volatility is high. Most of those who have the nerve to hang in there will be shredded. But a lucky few will make pots of money, buying on the dips and selling on the highs. Like Goldman Sachs, which reported in its latest earnings release that a big chunk of its profits came from trading on the volatility in the markets.   

What’s behind this latest bout of volatility?

You can pick your villain. On the downside, you’ve got Ebola, continued conflict in the Middle East, protests in Hong Kong, poor earnings from some select blue chips in the U.S. (GE, IBM), fears of a global slowdown, and worries about the draw-down in government stimulus. On the upside, here in the U.S. you’ve got falling unemployment, rising consumer sentiment, falling oil prices, some great earnings from banks and tech companies, the upcoming holiday season and, of course, the fact that stock prices have fallen recently, creating a buying opportunity.

Sounds dangerous. Should we worried that the end is nigh?

It’s true that the VIX is still at a two-year high, but don’t panic. Breathe in and out of a paper bag and keep saying to yourself, “this too shall pass.” If you’re an individual investor, that means you should leave your stock where it is. Remember that these days you’re not just up against some sleazy dude in a fancy Italian suit and loud suspenders, you’re up against the machines, too.  So do the smart thing, and hang out on the beach sipping coffee while you watch the show. Remember, the VIX is just like the Headless Horseman: it gallops through the market, scares the wits out of everyone, and creates a hell of a mess. But the fear never lasts for long, and besides, it usually makes for some great stories.

Salmon runs hit records, even as drought threatens future

Wed, 2014-10-22 11:43

Along the West Coast, in Oregon, Washington and Alaska, fishermen are hauling in their salmon catches before winter sets in. Wild-caught salmon—the premier varieties of Chinook, Sockeye and Coho—can sell for $15/pound to $25/pound.

This year, that wild salmon has been more abundant, and possibly a bit cheaper, than in recent years. And yet, Google "salmon" and ominous headlines also come up: about this year's severe drought, endangered salmon runs across the western U.S, as well as looming long-term threats from climate change.

“The abundance of salmon that we have is sort of a conundrum to consumers, because they also hear stories about ESA-listed (Endangered Species Act) runs of fish, and that can make it quite confusing." said Stuart Ellis, fish biologist at the Columbia River Inter-Tribal Fish Commission in Portland, Oregon. CRITFC represents several Native American tribes with treaty rights to catch fish and manage hatcheries throughout the Columbia River system, which stretches hundreds of miles from the Oregon-Washington coast, to British Columbia.

Native fisherman Ira Yallup, 45, knows both sides of this story from a lifetime of fishing for salmon in the tributaries of the Columbia River in Washington. In October, he was fishing with friends and family from the Yakama Nation at a traditional site above Lyle Falls on the Klickitat River. The method of fishing has been passed down for generations; the fishermen use dipnets to snag the fish as they make their way upriver, jumping the rapids.

“This is the most fish I've ever seen,” said Yallup, who uses the catch to feed his family, donate to other tribal members, as well as sell to supplement his income as a forester. “This year, with the significant amount of fish that have returned, the price has dropped, because there's an overabundance of fish.” Yallup said he’s been getting between $0.80/pound and $1.50/pound for fresh-caught fish. Prices were higher in the spring before there was as much oversupply.

 

Stuart Ellis said salmon returns this year to the Columbia River above Bonneville Dam (about 150 miles from the mouth of the river) are higher than at any time since the 1920s. “This year it's going to be a little over 2 million fish total,” he said. “So it's a modern-day record.” Fish returns are believed to have been in the 15-million-plus per year range in the mid-1800s, before dams, agriculture and over-fishing decimated the fish returning to the river.

Alaska has also seen some strong salmon runs so far this year, after a record harvest in 2013. Meanwhile, in California, which is home to another major river system that historically produced large numbers of fish, the situation has been grave this year.

“After this year's drought, millions of salmon would be migrating down the Sacramento River right now. But instead, the salmon are headed for the ocean in a convoy of tanker trucks,” was the headline on a news report in March 2014 on KCRA television in Sacramento. Fish biologists worried that low water levels and high temperatures caused by the multi-year drought were endangering salmon eggs and hatchlings.

Stuart Ellis explains the disconnect in the West Coast salmon’s health this way: favorable ocean conditions over the past few years helped salmon that are now coming back to Pacific Northwest rivers to spawn. The numbers have also been boosted by hatchery-released fish, improvements in fish-passage technology at dams, better water management and habitat restoration.

Meanwhile, disastrous river conditions for eggs and juvenile salmon, caused by the severe drought that has hit the West, and especially California, may kill off some of the fish that would be returning from the ocean in 2017 and beyond.

And long-term problems threaten salmon across the region: habitat loss, water shortages and conflicts with agriculture, dwindling snowpack, climate change.

“Regardless of a consumer's socioeconomic status or ability to buy, we're all concerned global warming could be an issue, we're all aware of these longer-terms problems,” said Kelly Goldsmith, assistant professor of marketing at the Kellogg School of Management at Northwestern University.

Goldsmith studies the interplay of environmental issues and consumer decision-making. She thinks at this point, it is hard for even well-informed foodies to sort through the news and science, as well as environmental labeling programs by groups like the Monterey Bay Aquarium’s Seafood Watch, that certify fish in grocery stores and restaurants as “sustainable.”

“Consumers develop this conditioned response where, ‘if I eat salmon, I'm doing something bad,’” said Goldsmith. “The salmon is delicious, but another element of my consumption experience is, ‘I feel bad, because I know there are only so many left in the river.’ It becomes nearly impossible to know how to do the right thing.”

So far, though, consumers aren’t abandoning wild salmon; quite the contrary. With health concerns increasing, and savvy marketing of wild salmon by fishing groups, consumption has risen over the past decade. So have the prices consumers are willing to pay for their prime salmon steaks and filets.

Customers must spend more for free shipping

Wed, 2014-10-22 11:32

While there is no such thing as a free lunch, it seems that might hold true for free shipping, too.

Retailers are apt to promote free shipping around the holidays, but online shoppers using Amazon, Best Buy or the Gap will have to spend more money this year.

According to the Wall Street Journal, a customer must spend $82 on average to qualify for free shipping, based on data from July, up from $76 at the same time last year.

The companies claim the increased price is to cover the cost of the service in the first place.Last year, for instance, Amazon spent about $6.64 billion on shipping, but brought in only about $3.1 billion in payments for shipping.

The article also reports customers tend to change their shopping behavior in order to qualify for the free shipping, like adding an extra item to meet the minimum requirement.

The oil man who caused a silver craze - and bust

Wed, 2014-10-22 11:19

Nelson Bunker Hunt, the billionaire oil tycoon who once tried to corner the world's silver market, died yesterday in Dallas at the age of 88. He was an heir to the Hunt oil fortune and at one time, among the richest people on the planet. But a huge bet on the silver market in the late '70s led to a silver craze and a financial debacle.

Hunt's obituary in The Dallas Morning News describes him as an oilman, patriot, horseman, Christian and John Birch Society member, among other things. But in financial circles he and his brother were best known for owning a frighteningly big chunk of the world's silver. They wanted to hedge against raging inflation, they said.

"They bid up the price of silver from $9 an ounce to, at its peak, something like $50 an ounce in January 1980," said John Coffee, a professor at Columbia University.

But when worried regulators set new trading limits on silver, the Hunts couldn't meet a margin call. Silver prices collapsed, they lost over a billion dollars, their lenders were in trouble, and yes, a federal bailout of sorts ensued. Hunt declared bankruptcy – the largest personal bankruptcy in American history.

"It took me probably 30 days to get an organizational chart dealing with probably more than 250 companies that he owned or had an interest in all over the world," said Hunt's bankruptcy lawyer, Russell Munsch, of Munsch, Hardt, Kopf and Harr.

The front page of the New York Times on March 28, 1980 with a headline about Silver Thursday and the Hunt brothers. It reads, Silver's Plunge Jolts Hunts' Empire And Brings Turmoil to Wall Street, Fears of Sell-Off of Metal Depress Stock Prices and Pose Threat to Broker.

Jeffrey Williams, who wrote "Manipulation on Trial: Economy Analysis and the Hunt Silver Case," says lots of people lost money. But reforms? Not so much.

"The more time has passed," says Williams, who is a professor of agricultural and resource economics at UC-Davis, "the more I'm forced to conclude that the case did not have much effect on the way we regulate commodity markets."

Jim Stone, who chaired the Commodity Futures Trading Commission at the time, today said the silver crisis "nearly torpedoed top financial institutions in much the same way mortgage derivatives did in 2008." The Hunts were highly leveraged, and that problem, Stone says, remains "unfixed" and "the lesson unlearned."

The numbers for October 22, 2014

Wed, 2014-10-22 11:16

Ottawa was in lockdown after a shooting at the Canadian Parliament building and a war memorial Wednesday morning. A soldier and one suspect were killed, the CBC reported. Details are scarce, but Vox has a summary of what's confirmed and unconfirmed as of late Wednesday morning. Another useful reference: the breaking news consumer's handbook from "On the Media."

As we wait to learn more, here are the stories we're reading — and some numbers we're watching — Wednesday.

17

That's how many Pulitzers the Washington Post won under the leadership of Ben Bradlee, who served as editor for 26 years and died Tuesday at age 93. Bradlee lead the Washington Post during the Watergate scandal and the publication of the Pentagon papers, and he's credited with elevating the Post to one of the top newspapers in the country.

11 out of 20

According to the Federal Reserve, that's how many banks totally failed to meet the last big chunk of Dodd-Frank rules, in part because they weren’t thorough enough or made mistakes in their reporting. It's why some are turning to a computer program called the Volcker Assistant. It is, for all intents and purposes, like a Turbo Tax for banks trying to comply with financial regulations.

40 percent

Four in 10 people surveyed by Pew Research said they've experienced harassment online. A little less than half of those — 18 percent of all Internet users — said that harassment went on longer, or involved physical threats, sexual harassment or stalking.

Troubled times for Russia's oligarchs

Wed, 2014-10-22 11:15

Remember Yukos?

The giant Russian oil company was bankrupted almost a decade ago after the oligarch owner – Mikhail Khodorkovsky — clashed politically with President Vladimir Putin. Khodorkovksy was stripped of his shares, jailed, and had his company carved up and taken under state control.

Could something similar be happening to Vladimir Yevtushenkov, billionaire owner of telecom, tourism and oil giant Sistema?

Another oligarch – who’s much closer to Putin and runs the state-energy company Rosneft — made Yevtushenkov an offer for his oil interests. Yevtushenkov deemed the offer derisory and refused and is now paying the price. Under house arrest, he’s facing prosecution for fraud and money laundering.

In one crucial respect, Yevtushenkov is very different from the Yukos boss.

“He is widely regarded as a figure who is loyal to the authorities in Russia, he’s never previously stepped out of line.” says John Lough of the Chatham House think tank. “ He’s never criticized the Putin administration to my knowledge. It’s very striking that a figure so loyal to the system, has been put in this situation.”

Lawyer and Kremlin watcher Jamison Firestone is not surprised that Yevtushenkov has fallen foul of President Putin and his close associates.

“He’s got something they want. And they want to take it. It’s pretty simple.” says Firestone. “ Like in the Soviet Union, there is no such thing as private property in Russia today. You own stuff while they allow you to own it.”

Firestone knows more than most about such shenanigans. He fled Moscow after his colleague Sergei Magnitsky died in custody after allegedly uncovering high level corruption.

The attempted asset grab against Yevtushenkov could be an encouraging sign for the West. It could suggest that the EU and U.S. sanctions levied against Russia over Ukraine are biting and the oligarchs are starting to fight over their dwindling assets.

“The pie is no longer growing and therefore the fights over particular portions can become more excessive.’ says Nick Redman of the International Institute for Strategic Studies.

But this may be more than a case of greedy oligarchs squabbling over their loot, with Putin backing a close associate. Lough says Putin many have singled out the unoffending Yevtushenkov for political reasons, and as a preemptive example.

“There are some Russian business people who interpret this as a sign to business from Mr Putin that says : ‘you may be unhappy about what’s happening at the moment with the sanctions, you may be feeling a degree of pain, but don’t think of stepping out of line.’ ”

It’s a risky tactic. It could backfire, claims Firestone, it could alienate all the oligarchs in the outer circle and eventually lead to the President’s toppling. This could be curtains for Putin.

“Most of Russian transitions in power happen the following way: you wake up and “Swan Lake” is playing on every single official channel. And then you know something has happened.” Firestone says. “A few hours later when they figure out the official story somebody gets on TV and tells us who the new leadership is .”

But –after the annexation of Crimea - the Russian leader’s public approval rating soared and now stands at around 80 percent. In contrast, all the oligarchs are universally loathed. So the humbling of Yevtushenkov is likely to be popular with ordinary Russians. It still could be some years before Putin has his “Swan Lake moment”.

The murky origin of the 20 percent down payment

Wed, 2014-10-22 11:10

Picture a mortgage, and you're likely imagining a down payment of 20 percent of the price of the house. 

"I think the 20 percent down payment has become the default, no pun intended," says Jonathan Miller, president of Miller Samuel Real Estate Appraisers and Consultants. "To many homeowners, I think it symbolizes a commitment."

The requirements of Fannie Mae and Freddie Mac — the government-backed entities that support the vast majority of new mortgages — are the most obvious reasons the standard applies today.

"Under Fannie and Freddie's rules, you can get a lower down payment mortgage, but that then requires extra payment in the form of mortgage insurance," says Susan Wachter, professor of real estate and finance at the University of Pennsylvania's Wharton School. 

The history of that requirement dates back to the Great Depression. According to Wachter, before the 1930s most mortgages were short-term and non-amortizing: a home buyer had to either pay off the whole house in a lump sum after a few years, or roll over the loan at a new interest rate. Down payments, on the other hand, were typically more than 30 percent.

After the resulting foreclosure crisis and construction halt — similar to what happened after the recent financial crisis — the government created the Federal Housing Administration, which backed mortgages, but required a 20 percent down payment. After World War II, the Department of Veterans Affairs and the FHA adopted a 30-year, fixed-rate standard. By the mid '50s, most mortgages fit that description.

But 30-year, fixed-rate, 20 percent-down loans weren't strictly the result of government-sponsored enterprises, or GSEs.

"When I bought my first home it was $22,000 and I had to put 20 percent down, and it was a conventional loan," says Chris Polychron,  president-elect of the National Association of Realtors. "The conventional lenders mimicked what the GSEs did."

Since the 1950s, 20 percent has remained the average down payment — with the exception of the run-up to the financial crisis in 2008. But how did 20 percent become that dividing line in the first place, back in the 1930s? As with so much of our economic life, it’s anybody’s guess.

"I would speculate if you scored 80 percent, you’re a B-minus student, and I guess that means you’re above average," says Miller. "So maybe that has something to do with it."

The economics behind the rush for an Ebola vaccine

Wed, 2014-10-22 11:03

Johnson & Johnson is the latest pharmaceutical firm to say it will join the race to find a vaccine for Ebola. The firm has even been talking with rival GlaxoSmithKline about ways to collaborate to speed up development.

That urgency speaks to the idea that while the epidemic is well under control in the U.S., it’s out of control in West Africa, where the World Health Organization reports nearly 1,000 people have been infected in just the past week.

“What you are seeing is a collaboration among industry, a collaboration with governments, a collaboration among charities to address what is becoming a horrific public health crisis,” says GSK’s Donna Altenpohl.

Until recently, developing a vaccine wasn’t viewed as lucrative in the industry. But Adel Mahmoud, former President of Merck Vaccines says the power of this virus is persuasive.

“What has changed today is failure of almost all control methods that we now exist,” he says.

Mahmoud says with public health efforts like quarantine and containment falling short it’s now obvious a vaccine is essential. With millions of Africans in need as well as medical workers worldwide, Mahmoud says it’s clear there’s a huge market.

It’s not clear how profitable that market will be. But believe it or not, that’s a secondary concern right now to drug makers, says USC economist Joel Hay.

“They hope if they develop good vaccines they can be compensated at some point. But I don’t think they are doing this out of a profit motive, they are doing it because they believe it’s the right thing to do,” he says.

Certainly down the road, the company that comes up with a vaccine first could score a major public relations win. But right now, Hay says, nobody – including the drug makers – stand to benefit if Ebola spreads beyond West Africa.

“Just think what would happen if people though that airplanes were not safe to fly in. the economy could be devastated very quickly,” he says.

Hay says for pharmaceutical companies in the business of making people better it’s gut check time.

Federal employees on extended paid leave

Wed, 2014-10-22 09:44

The official rulebook that allows federal employees paid time off has a very long list of legitimate reasons to miss work and still get paid. Perhaps you're donating blood? Maybe an organ? Or you have to go to a Boy or Girl Scout jamboree? 

But what if you're accused of a crime or of misbehavior in the workplace, and are in the process of an investigation? In that case, stay home...and still get paid. The total number of workers on paid administrative leave? Well that's a number that the government does not track.

"The real tension point here, I think is that they end up being at home for months, and in many cases years, while their cases are investigated," says Washington Post reporter Lisa Rein.

Listen to the full conversation in the audio player above.

PODCAST: Dodd-Frank digitizes

Wed, 2014-10-22 03:00

This morning, the U.S. Labor Department released the latest Consumer Price Index. That indicator of inflation was up only slightly. More on that. And banks have about nine months until they'll have to comply with what's called The Volcker Rule. That's the part of Dodd-Frank that's named after Paul Volcker, the former Federal Reserve chairman. The Volcker Rule says banks cannot own hedge funds or invest for their own benefit. They'll have to stick  to helping their customers make money. Simple as it may sound, the Volcker Rule is incredibly complex. But banks have a new tool to help them implement it.

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