The rich spend money very differently than the rest of us — or so we mere mortals with middle-class and lower-tiered bank balances imagine. Most of us don't have the first-hand shopping experience of rubbing luxury-garbed shoulders with the sumptuously perfumed rich.
“You don’t really typically see movie stars walking into the grocery store to pick up milk. They have a handler, they have a housekeeper,” says Kirby Rosplock, author of “The Complete Family Office Handbook,” and a fourth-generation member of a family business.
Rosplock, whom it might be accurate to categorize as wealthy, says, “I guess it depends on who’s categorizing me, because I’m not wealthy compared to a Warren Buffett or Carl Icahn.”
While you and I might be worried about our retirement, she says, the ultra-wealthy are saving their money for something else altogether — the future-future.
“They have to determine what they want for their lifestyle today," she says, "and what they want for their legacy when they’re not here.”
Like money for their grandchildren, a charity or an alma mater. After the recession, Rosplock says the wealthy are also likely to be more conservative with spending.
She says it's easy for marketers to get the rich wrong.
“The biggest mistake I see is marketers trying to play into the stereotype of who they think these people are," she says. "They’re not necessarily wooed by those strategies of showing the chic, sexy model wearing the bedazzled necklace."
Andrew Sacks, president of AGENCYSACKS and The Affluence Collaborative, two companies that help brands target affluent consumers, says marketers need to learn to dissect the wealthy, correctly breaking them down into subgroups, each with their own unique characteristics.
“To try and appeal to the wealthy as a group is not a winning strategy,” he says.
About 90 percent of rich Americans, notes Sacks, didn’t grow up wealthy. So affluent shoppers can also be intimidated by fancy-schmancy stores.
"There’s a lot on the line," Sacks says. "When you’re buying a $500,000 diamond, you really don’t want to be the fool and buy the thing that’s the wrong thing."
Which is one reason it’s important for luxury brands to educate consumers on the brand’s history and product quality. When you buy a luxury product with a high price tag, he says, it can start to feel all too normal.
“So you might buy Tom Ford shoes for the first time and feel like 'holy cow, I just spent $1,600 on these shoes... I really went overboard!'" But that threshold, he says, "becomes your new floor.”
In case you're wondering, $1,600 is how much Tom Ford shoes cost.
“I’m embarrassed to say it is,” says Sacks, noting his own feet, clad in the designer's footwear.
It's become increasingly more important for brands to learn how to connect with consumers on a personal level. They can begin, Sacks says, by saying thank you to their customers. Affluent consumers are spending a ton of money on products, and they’re not getting what they would expect in return.
For example, the time when Sacks and his wife bought a German car — for $80,000.
"We got nothing," he says. "We didn’t get a baseball cap. We didn’t get a letter. We really got nothing. Think about — could they have spent one-tenth of one percent, $80, on a gift to say thank you? I think they could have."
People are living longer than ever, says Sacks. "They’ve been wealthy for quite some time," he says. "At some point you run out of a need for stuff and you realize that your deepest human needs are not fulfilled by stuff."
Downtown Allentown, Pennsylvania, was once home to the most popular department store in the nation.
“Hess’s here did $190 million worth of retail sales in 1970,” says the city’s mayor Ed Pawlowski. “Think about that. They were the highest grossing retailer in the country, and they were here in Allentown. We were the major retail hub for the entire region.”
A city's troubled past
There’s a good chance the first thing that pops into your head when you think about Allentown is the song Billy Joel wrote about it. It’s a song about the coal and steel industries drying up and the city bleeding out.
But most folks in Allentown will tell you that song isn’t even about their city. It’s about neighboring Bethlehem, where there was a massive steel mill. If an autopsy was performed on Allentown, globalization and deindustrialization would just be footnotes.
The real cause of death would be the mall.
“When the malls got built, it sucked everything out like a giant vacuum,” Mayor Pawlowski says. Retail left downtown and people moved to the suburbs in hoards. “This city was like any other Rust Belt city in the Northeast and Midwest. Our economy was in the tank, we weren’t seeing growth and we weren’t seeing development. In fact, we would probably end up as the next Detroit, in bankruptcy.”
But in a span of only five years, that has all changed, the mayor says.
“We went from a multimillion-dollar deficit to a multimillion-dollar surplus. We’re seeing 4,000 new jobs come into the urban core and a billion dollars of new development," he said. "We’re now the fastest growing city in the commonwealth of Pennsylvania, and we haven’t raised property taxes in nine years.”
Allentown’s story of revitalization starts in 2008, when the gates of a brand new $50 million baseball stadium opened. Despite the city’s financial struggles and decades-long economic decline, Allentown has remained the third largest city in Pennsylvania, and because it’s less than 90 miles from the major media markets of Philadelphia and New York, Allentown city officials were able to lure in the Phillies minor league baseball team with some financial incentives.
Lee Butz is the president of Alvin H. Butz, Inc., a construction company named after his grandfather. The company built Coca-Cola Park, home of the team now named the Lehigh Valley IronPigs. The Butz family operated out of Allentown for generations, but when downtown drained, they left too.
“In 1972 we moved from Allentown to the suburbs,” Butz says. “At that time, it seemed like not that important of a move. It was convenient and closer to our homes. But the problem was, almost everyone was moving out of the center city and in a couple of decades it became so severe that many people thought Allentown would never survive.”
But when the city got the IronPigs, Butz says there was a shift in mentality. Suddenly a town that had gotten used to losing felt what it was like to win. “There were a lot of people who said the Lehigh Valley will never support minor league baseball,” Butz says. “Not only did the people support it, it has been the best attended minor league ballpark in the country for several years.”
Butz says the success of the IronPigs proved that Allentown could be a viable market, and it drew him back to downtown. Just after the stadium went up, his company built a new office in the city and moved in.
“We came back because the community has been so good to us. We just felt, what’s the best way we can pay the community back? Let’s go to downtown Allentown and see if it makes a difference, see whether a lot of people will follow us downtown.”
The first several years were rough. “We thought maybe we’d made a terrible mistake,” Butz says. “We occupied two floors of our six story building and we hardly had any other tenants. We thought, oh, gosh, we can’t make this work. But then along came the NIZ. It changed everything.”
The turning point
The NIZ is the whimsical shorthand folks in Allentown use for a plan called the Neighborhood Improvement Zone. The plan is the brainchild of Pennsylvania state senator Pat Browne. It gives developers who chose to build in downtown Allentown a special incentive.
“Any taxes they generate as a result of their operations in Allentown can be used by the developer to offset the costs of that investment,” Browne says.
The general concept of using state tax incentives and incremental financing is not new. Browne says the American railroads were built on the model back in the 1860s.
Construction workers put the finishing touches on the entrance way of the PPL Center in preparation for the arena’s first event, a sold out Eagles concert.Tommy Andres/Marketplace
What makes the NIZ unique is the word "any." “We’ve never been able to pull together an incentive that uses the entire state tax portfolio,” Browne says.
Here’s how it works: If a building is built in the NIZ, the developer can get back the sales tax on any purchase made in that building for 30 years. That developer can also collect state income tax from any employee who works in that building. Even the corporate tax on businesses can be tapped. The state and city oversee the distribution, and if the kickbacks exceed what the developer spent on the building, the rest of the money goes to the state.
The NIZ went into effect in 2012, and swept up around $14 million for developers that first year.
J.B. Reilly is one of those developers. He grew up in Allentown, then made his fortune in the suburban sprawl that led to Allentown’s demise. Now, he has come back to invest in downtown. “Not only did we see a financial opportunity,” he says, “We saw a community development opportunity.”
When it was commissioned for $50 million, Coca-Cola Park felt like a risky bet. But Reilly has raised the stakes immensely, putting down nearly a billion dollars on another sport: hockey. Reilly’s company, The City Center Management Company, is building the new home of the Philadelphia Flyers' minor league team, the Phantoms. His hope is that it will become the heart of a new city.
“There’s a million square feet of development in the arena block between the hotel, the office retail, the arena itself and around 900 parking spaces,” Reilly says.
Reilly says Coca-Cola Park may have helped the city’s outlook and image, but it didn’t do much to spur growth. “It ended up being built on the fringes of Allentown and really didn’t have a benefit to downtown.” Reilly is confident the new PPL Center hockey arena downtown will be different because it’s more than just an arena. The stadium is encapsulated by the new offices of the region’s largest employer, the Lehigh Valley Health Network. It also houses a membership gym and a brand new Marriott Renaissance hotel.
“We really had to approach this differently,” Reilly says. “We had to look at this as a kind of master-planned opportunity to redevelop an urban area and really started thinking about this as creating a place.”
The NIZ allows Reilly to charge cheaper rent, which has been attractive to prospective tenants. Reilly’s office is across the street in a new building called Two City Center, which is also the new headquarters of National Penn Bank, the first bank to call Allentown home in four decades. A new upscale restaurant called The Hamilton — one that never could have survived in the area five years ago — opened on the ground floor in July.
“There will be 3,000 more people working here [in September] than there were a year ago,” Reilly says. “And for a city like Allentown, that’s just extraordinary. Some may say it’s an expensive project, and there’s a lot of state subsidy in it. And there is, but what’s it worth to turn around the third largest city in the state of Pennsylvania?”
Still a tough road
In the shadows of all that new development, just four blocks up 7th Street, is the neighborhood where Julio Guridy grew up. Guridy was born in the Dominican Republic and was among the first of several waves of immigrants to move to Allentown almost four decades ago.
Row houses on 7th Street in downtown Allentown are now mostly home to first and second generation immigrants. At the end of the street is one of The NIZ’s new buildings.Tommy Andres/Marketplace
Allentown is now nearly 50 percent Hispanic and Latino. Most of those residents are from Puerto Rico or the Dominican Republic, and most moved from New York and New Jersey, not because of job prospects, but to escape rising costs of living.
"The big influx came about ten years ago,”Guridy says. “It's still a fairly new community. Many of them transferred from some other place with a Section 8 voucher. Some of them transferred with a welfare check."
Allentown’s population never stopped growing. As suburban sprawl drew the locals away, immigrants moved into downtown. Many are first generation and don’t speak much English. The result is a poverty rate in Allentown that is nearly ten times the national average.
So how will the NIZ help this burgeoning portion of the city?
“That’s the multimillion-dollar question,” Guridy says.
The residents on Guridy’s old street have all seen the new development and most have heard about the NIZ. And most believe it will bring in more people and more foot traffic. Zack Alali is from Syria and moved to Allentown from New York in the wake of September 11. He says the city knows what it's doing when it comes to big business.
“You think they’re going to spend $200 million on nothing? They’re not stupid,” he says.
But Alali also believes the city is ignoring small business owners in favor of the big developers, and says the feeling that he is an underdog is palpable.
“I applied for a loading zone in front of my shop. It took them three years to approve it,” he says. “The arena people changed the collection of the trash for the whole city in one week. So that tells you everything.”
Edis Farmin moved to Allentown from New York a decade ago. She owns a building and runs a salon in it called Dominican Beauty, just up the road from Alali’s store. She says the development that’s going on at the end of her street is for other people, not for her. She’s also upset because today she got a letter saying her taxes are going up. They aren’t city taxes — they’re state and county taxes — but she sees the new development and can’t help but link the two.
“That’s not fair,” she says. “They want Hispanic people to go back to New York. That’s all they want.”
Guridy says he’s not surprised at the mixed response from the changing neighborhood. “I think there has to be an opportunity for all,” he says. “And I think that opportunity is open. I think the issue is, are we as a Hispanic community and a small business community prepared to take on those projects? It’s going to be difficult at the beginning. It’s not impossible.”
Mayor Pawlowski says his city will never be able to build away all of its problems, but he’s happy with the city’s success so far. “Before, we were dealing with not being able to get anyone to invest in the city of Allentown,” he says. “It was a place where no one wanted to be. Now we’re dealing with the issue of maybe we’re gentrifying our community too fast. I’d rather have that problem. That’s a problem I can deal with and we can address.”
The mayor says that because of the NIZ, his city has pushed forward 20 years in two. “For years, I was like Sisyphus, just pushing that boulder up the hill. And every time we seemed to be getting to the top, it would roll back down. I think the boulder is now over the top of the hill.”
Allentown as a trend-setter?
It's too early to gauge success in Allentown. The city is only two years into a 30-year plan. But whether six square blocks of development can ripple through a city of 18 square miles doesn't seem to matter to Allentown's neighbors. The cities of Lancaster and Bethlehem each have their own state-funded development plans in the works. They call theirs "The City Revitalization & Improvement Zone," or CRIZ.
If all goes according to plan, Allentown’s change in tune will debut on Sept. 12, when The Eagles open up the city’s brand new hockey arena with a sold-out concert. Sen. Pat Browne says he’s got tickets, but he’s more interested in the show outside.
“Leading up to the event, I’m not going to spend my time in the arena,” Browne says. “I’m going to spend my time outside looking at the waves of people coming downtown and seeing something I haven’t seen in 30 years. And it’s going to feel real good.”
Drivers in Detroit, Michigan, pay the highest auto insurance rates in the country, with annual premiums costing 165 percent more than the national average, according to a new study by InsuranceQuotes.com.
The study claims Michigan's unique regulations on how insurers cover medical expenses are the cause for the state's higher rates.
From the study:
The reason for this is quite simple, says Lori Conarton, communications director for the Insurance Institute of Michigan.
According to Conarton, Michigan is a no-fault auto insurance state, which means each insurance company compensates its own policyholders for the cost of injuries regardless of who's at fault in the accident. This benefit is known as personal injury protection (PIP).
What's wholly unique about Michigan, however, is that state law provides unlimited lifetime coverage for medical expenses resulting from auto accidents, making insurance very expensive.
"No other state in the country provides lifetime medical benefits, which means the cost of medical treatment plays a big role in what people pay for auto insurance in Michigan," Conarton says.
Other factors that could contribute to Detroit's higher premiums include the large number of uninsured drivers in the region, with 20 percent of drivers lacking car insurance in the state of Michigan, and 60 percent of drivers in Detroit driving without insurance, according to estimates from a different study earlier this year by Quadrant Information Services.
The study also looked at car insurance rates that were significantly higher or lower than the national average in other metropolitan regions throughout the country, including New York, Miami and Los Angeles, which all had higher-than-average premiums.
On the opposite end of the spectrum, Charlotte, North Carolina, and Cleveland, Ohio, have the lowest insurance premiums in the country, compared to the national average.
Per tradition, the 2,983 names of the people who died in the terrorist attacks on September 11, 2001, were read at the World Trade Center site Thursday morning. The 9/11 Museum has attracted nearly a million visitors since opening in May.
Here are some other stories we're reading and some numbers we're watching Thursday:$363.8 million
That's RadioShack's revenue for its second quarter, which ended last month — a 22 percent drop from a year ago, as The New York Times reported. The troubled electronics retailer has tried rebranding and closing stores, but most analysts say it's headed for bankruptcy nonetheless.6
The number of college and university police departments that have received mine-resistant vehicles from the Department of Defense since 1998, according to data published by the Chronicle of Higher Education. That total could still grow: The Chronicle's data isn't complete; they're still waiting on information from 11 states and the District of Columbia.800 million
The estimated number of iTunes accounts that "purchased" the new U2 album, "Songs of Innocence," as part of an Apple promotion announced Tuesday. Many users were not pleased at the record's sudden appearance on their phones and computers. For comparison: Business Insider pegs U2's total album sales before this week at a measly 150 million.$62 million
That's how much cash Los Angeles police seized during a raid in the city's Fashion District on Wednesday. The "fast fashion" industry provides an easy route for drug cartels to launder money, Quartz reported, and L.A. is a hot spot.
The Food and Drug Administration has approved a new weight-loss drug therapy. The drug, Contrave, is a combination of drugs used to treat depression (bupropion) and addiction (naltrexone).
It’s approved for adults with a body mass index of 30 or higher (considered the threshold for obesity) and adults who are overweight (BMI of 27) but who also have a weight-related health condition.
In one trial cited by the FDA, 42 percent of patients treated with Contrave lost at least 5 percent of their body weight, while 17 percent of patients treated with a placebo did.
It has taken two attempts, four years, and several delays to get Contrave approved. In 2011, an FDA panel voted to approve the drug, but the agency declined and asked Orexigen, the drug’s maker, to pursue longer-term cardiovascular studies. When those studies were completed, the agency delayed approval again as it reviewed labeling and marketing requirements.
“I don’t know what’s tougher, losing weight or getting an anti-obesity drug passed by the FDA,” says Robert Goldberg with the Center for Medicine in the Public Interest. Goldberg says obesity is linked to the central nervous system, and so are the drugs that treat it, so the FDA is extra-cautious. “The FDA is also worried that people will take these medicines and use them just to get an eight pack after their insanity workout,” when they are otherwise healthy. “Does it have a different bar? Absolutely.”
And yet, despite concerns about widespread use or abuse, sales of existing drugs on the market have proven disappointing.
“The weight-loss drugs are not completely accepted as standard therapy, even for patients who are obese,” says Dan Mendelson, CEO of Avalere Health. He says getting doctors and patients comfortable with these drugs has proven difficult.
Another challenge for any weight-loss drug is how and whether insurance companies cover it.
“If a drug is approved and not widely covered, it’s not gonna get adopted,” says Mendelson.
There are at least three more weight-loss drugs under development.
Let's start with a sign of weakness in the job market that may have an acute cause; we'll consult Diane Swonk, chief economist at Mesirow Financial in Chicago. Plus, one of the oldest of America's supermarket chains has figured out how to stay ahead of the fresh-faced competition. Kroger of Cincinnati reported today that its profits went up 9 percent last quarter and its stock is up about 1 percent. Kroger recently bought Harris Teeter and already owned Ralphs and Food 4 Less. The company's also doing a lot of hiring. And by one projection, the United States needs about a million new teachers in the next five years or so, as more Baby Boomer–aged instructors retire. A national recruiting campaign is underway, but holding on to those budding teachers may be tough.
Outside the Newseum in Washington, D.C., high school students and their teachers check out a bright green RV parked on the sidewalk.
“What do you do, you just kind of bring your knees up?” one woman comments, eyeing a small bunk where passengers sleep.
Three aspiring teachers have spent the last four weeks in these close quarters, traveling cross-country. Along the way they talked to educators, policymakers and entrepreneurs to learn about the many forms a career in education can take.
“I’m being educated right now and I hope that we can educate other people and really change the perspective of what being an educator means,” says Nadia Bercovich, a recent graduate of the University of Massachusetts and one of the road-trippers.
The road trip is part of a national campaign to elevate the status of teaching. A study a few years ago by consulting firm McKinsey & Company found that most top college students simply aren’t interested in teaching, because of the lack of prestige and low pay. High school teachers make, on average, about $55,000 a year.
In a panel with the road-trippers, U.S. Education Secretary Arne Duncan urged high school and college students to consider the other rewards.
“If you want to have real impact, if you want to have meaning in your life, I can’t think of a better place to do it than in a classroom,” he said.
But even those who choose teaching often don’t stay. Nearly half of new teachers leave the profession within five years, says Liam Goldrick, policy director of the nonprofit New Teacher Center. He says many don’t feel respected or supported at work. Tenure is under attack and performance standards keep changing.
“I think some folks want to make it a lot about compensation, and while that certainly is an issue and a concern, if you listen to what the teachers are saying, it’s these other factors,” says Goldrick.
Rafael Silva, a 21-year-old UCLA student, ended the road trip certain he wants to start out in teaching, but he’s not sure for how long.
“It hasn’t confirmed — and I don't think this road trip was meant to do this — that it would be something that I would do for the rest of my life,” he says. “Obviously that’s not something that people really do anymore with careers.”
If he’s right, raising the status of teaching won’t be enough to keep teachers in the classroom.
Thirteen years ago Thursday, the world was rocked by the terrorist attacks on New York City and Washington, D.C. While none of us will ever forget that day, for one industry the anniversary casts a shadow on the bottom line: the airlines.
“In the immediate aftermath of the 9/11 attacks, air travel dropped dramatically, and that’s not surprising,” says David Clark, a professor of economics at Marquette University who studied the economic impact of the attacks on U.S. airlines. According to his model, domestic air travel in September 2001 was down by more than half.
As the months passed, fear of another attack faded and people began to return to the air. “But as you got closer to the one-year anniversary there was a rather substantial decline,” says Clark. According to his model, 24.4 percent fewer people were flying than expected.
This kind of anniversary effect appears to have dissipated. Airlines for America, the trade association of the largest U.S. airlines, says it doesn’t see any particular 9/11-related changes in flights this year.
“I figure it’s probably the safest day to fly now,” says Bianca Cribbs, who is flying from Toronto to New York on September 11. The main reason she thought about the date was a line on her receipt: “The September 11th U.S. Security Tax which is $5.44.”
That’s the tax that helps pay for the biggest post-9/11 change to air travel: the Transportation Security Administration, which screens and scans the millions of passengers and bags that fly each day.
Spokesman Ross Feinstein says that from the TSA’s perspective, “The 13th anniversary is no different than any other day.”
Cincinnati-based Kroger, the world’s fourth-largest retailer, is firing on all cylinders these days.
The stock price is way up, and so are sales. Last year, Kroger pulled in $98 billion in sales. That’s almost double the business it was doing in the early 2000s.
Business is so good the supermarket chain is hiring 20,000 more workers.
Jim Hertel, managing partner at Willard Bishop, says that’s quite a feat, considering the fierce competition in the grocery business.
“They are surviving better than any of the traditional supermarket competitors relative to Wal-Mart,” says Hertel.
The company has kept pace with the competition by cutting prices on grocery staples, building its own private brand “Simple Truth” into a near $1 billion business and boosting customer loyalty with personalized coupons, thanks to its sophisticated data analytics.
The commercial banking industry made $32.5 billion in fees last year, according to data from the Federal Deposit Insurance Corporation. But the banking industry isn't making as much off overdraft charges and other fees as it used to.
“The banks are making lots of money on their fees, but it’s significantly less than it was a handful of years ago,” says Jefferson Harralson, associate director of research at the investment banking firm Keefe, Bruyette & Wood.
In 2009, banks made almost $8 billion more in fees.
Harralson says financial regulation played a big role. "There’s been new rules to limit when you bounce a check," he says. "If you go slightly below zero, you don’t bounce now.”
Banks also don’t charge as much for debit card transactions these days.
But not everyone agree that banks are making that much less.
“The perception is there’s been this massive decline in service charges. I don’t think that’s been the case. I think the growth has slowed down,” says Christoper Marinac, a research analysts at FIG Partners. “What’s happening is that banks are finding other ways to make fee income.”
Analysts say that’s why some banks have scaled back on things like free checking accounts.
Richard Hunt, CEO of the Consumer Banking Association, argues some financial regulation was needed. But he says Congress went too far when it decided how much banks can charge for services.
“Yes, we’re in the business of making money. Yes, we should charge for our services, as long as it is reasonable and transparent," Hunt says.
In other words, bank fees are here to stay.
Tony Beran is standing in the kitchen at the Lake Avenue Restaurant in Duluth, Minnesota, with a head of romaine lettuce in one hand and a clump of curly lettuce in the other.
"They're beautiful," he says.
Beran's the executive chef, and one thing he likes about these bunches of lettuce is how clean they are. "They're grown aquaponically instead of in dirt," he says. "Which is wonderful in the kitchen. It's less labor for us."
Another thing he likes about this lettuce is that it was grown just up the road. The restaurant features local ingredients, and Beran serves locally grown lettuce all year, which is a bit of a trick in a place like Duluth. Last winter, the temperature was below zero 23 days in a row.
But it's always warm in the greenhouse at Victus Farms, where Beran's lettuce came from. It's about an hour's drive from Duluth in a little mining town called Silver Bay.
"These are all our babies," says Mike Mageau, as he shows off his latest lettuce crop. He runs the place, and he's an unlikely looking farmer. He's wearing cargo shorts and a backwards ball cap and he's barefoot. He's an unlikely looking professor, too, but that's his job: professor of geography at the University of Minnesota Duluth. He runs a program in environment and sustainability, and this indoor farm is a research project.
Universities and private businesses across the country are experimenting with aquaponics.
"It's kind of fun," Mageau says. "It's like the electric car. It's almost a race to come up with the method or the model that really works well."
Most of Mageau's lettuce is floating. Each plant is stuck into a hole in an inch-and-a-half-thick sheet of polystyrene foam. The foam rafts float in pools in the greenhouse, and the lettuce roots dangle through the foam into the water.
The fish live in a neighboring room. They're tilapia, and they swim in nine round plastic tanks, each one about six feet tall. Waste from the fish gets pumped over to fertilize the plants in the greenhouse, and some of the pools in the greenhouse grow algae and duckweed that come back into this room to feed the fish.
"Which means you grow fish and plants sort of in concert, one living off the other," Mageau says.
Two years into the project, Victus Farms sells all the fish and vegetables it can produce to local restaurants and stores. Now the goal is to get more efficient.
Mageau and his crew built floor-to-ceiling racks made of PVC pipe, an idea they got online and spent six months refining. Each rack looks sort of like a ladder. On the horizontal pipes, they drill holes in the top and stick a plant in each hole. Then they run nutrient-rich water from the fish tanks through the pipes, bathing the roots of the plants.
"It's all trial and error," Mageau says. "You know, 'I wonder if we can grow tomatoes in four-inch pipe?' Yes! You try it, and it works! I mean, look at these tomatoes, there's millions of them."
One wall of the greenhouse is covered with ripening tomatoes and strawberries growing out of white, plastic pipes. And the fruit looks good.
Mageau's banking on this vertical gardening scheme for the future. It will let them make use of some of the empty vertical space, and it will allow them to move the fish into the ponds in the greenhouse, making the second room for fish unnecessary.
"Then we can grow probably 10 times the plants per unit surface area, which means our greenhouse needs to be one-tenth the size, " Mageau says.
He wants to pilot a small, hyperefficient version of Victus.
"Every small town could have one or two or three of them," he says. "And the food could literally be produced in the backyard of the restaurants or whatever."
Mageau says aquaponic operations will never replace farming in dirt, but they could give a big boost to the amount of local food that's available, especially in places with short growing seasons.
The Victus building cost about $2 million, but Mageau thinks a self-sustaining version could be built for a small fraction of that. It really could be built in someone's yard.
So that's what he's doing next.
Mageau's right-hand man at Victus is Baylor Radtke, a former student. The two of them pooled their money and on their own they're building a much smaller and simpler fish and vegetable operation in Radtke's yard in Duluth.
"The whole point of it is to allow people to grow as much as we did in that $2 million facility in a facility that costs under $100,000," Radtke says.
The cost has come out way under. Radtke and Mageau say the new operation will take only $20,000 to build because they're doing all the labor. The annual energy costs will be comparable to a single-family house, and they're cutting those even further with solar panels on the roof of the greenhouse.
They figure they'll bring in $50,000 in the first year, from a building the size of a four-car garage, about 24-by-52 feet. They plan to be completely up and running by this fall.
If it works in northern Minnesota, they say, imagine how well it could work someplace warm. Like Iowa.
With the announcement of Apple’s new iPhone 6 Tuesday came a flurry of new cell phone plans from carriers hoping to capitalize on consumers’ excitement about a new device.
“The carriers are really looking to take advantage of marketing blitz that comes with a new Apple product,” said Weston Henderek, with NPD Group. “So, they’re all looking to come out with some of a catch to really grab a consumer’s attention.”
Sprint is being particularly aggressive, offering a plan for unlimited service at a discount when customers lease the phone. With this “iPhone for life” plan, Sprint will also give out upgrades every two years, similar to a car lease.
Smartphone plans are a highly competitive market for carriers, says Ramon Llamas, the research manager for IDC’s mobile phones team.
"Mobile phone subscriber growth is leveling off," he says. "Without much more green space to grow into, it’s a game of, ‘How do we steal customers from the other guy?’"
Following a move by T-Mobile a few years ago, many companies are dropping plans that force customers into a multi-year contract. They’re also increasingly abandoning the subsidies that heavily discount the phone but tend to come with higher monthly fees.
“The cost of service has been separated from the cost of a handset,” says Colin Gibbs, with GigaOm Research, though some companies, including Verizon, still sell subsidized handsets with a contract.
Bottom line, if you want the new iPhone, there’s lots of companies competing to sell it to you.
Remember those photos stolen from celebrities' iCloud accounts that wound up on the Web last week?
Well, links to those pictures showed up on Reddit. According to Wired, "In just six days Reddit earned enough money... to power its servers for roughly a month."
The money came about through the sale of memberships. However, it's likely the site made even more from ads.
Wired says those photos, in total, led to a quarter-billion page views on Reddit in the full week it took for the site to ban them.
We’ve heard for years about how the Affordable Care Act — Obamacare — could make it near impossible for businesses to keep offering health coverage to their workers.
Well, the Kaiser Family Foundation’s annual employer health benefits survey — which is widely considered a benchmark in the health care industry — came out Wednesday. Like everybody else, Kaiser Family Foundation Vice President Gary Claxton wanted to know: Did the new health care law upend employer-based health insurance, the market where 150 million Americans get their coverage?
“The first read for 2014 is that the ACA has had no real impact on premiums, nor did it lead to employers not to offer coverage,” he says.
You read right: No ACA-inspired premium spike.
Instead, there has been a modest 3 percent increase. Nearly the same number of employers are offering coverage; nearly the same number of workers are enrolling.
A critical question the survey doesn’t answer, however, is whether employers have begun cutting hours. Starting next year, people working 30 hours a week at firms with 100 employees or more must be offered insurance or face a penalty.
While Kaiser’s Year 2 survey may come to a different conclusion, the bottom line to this year’s report is that the ACA has had a small impact on employers... with one possible exception: “There is no doubt that the Affordable Care Act’s exchanges have brought a lot of attention to the concept of retail health insurance,” says PricewaterhouseCooper’s Ceci Connolly.
Connolly says there’s something executives like about the exchange concept that the ACA has popularized. (If you aren’t familiar with exchanges, think Travelocity for health insurance.) The consulting firm Accenture predicts private exchange enrollment will top public enrollment by 2018.
Rosemarie Day with Day Health Strategies says more and more Americans are becoming smarter health care consumers.
“That’s kind of the notion of exchanges, is that you have to put something in to get something out. It’s not a benefit that’s just handed to you,” she says.
Day likens this potential shift to when companies moved away from pensions and towards 401k contributions. For workers, it meant more choice, and more responsibility.
Among the defense-contractor set, there’s an expectation that the war against extremist group the Islamic State in Iraq and Syria will cost an extra $6 billion next year. That would pay for things like warplanes, drones for surveillance, listening to enemy phone calls and training rebels.
The corporate winners among defense contractors include familiar names. “Boeing and Raytheon make smart munitions,” says Guggenheim Securities aerospace and defense policy analyst Roman Schweizer. “Lockheed Martin or ATK are certainly also in the mix. Northrup Grumman and General Atomics are the two primary drone manufacturers.”
For context, this is war on the cheap. Put the $6 billion estimate next to a defense and war budget of around $560 billion, and it’s a rounding error. Or, consider the price of one laser-guided JDAM smart bomb dropped on an ISIS target.
“The unit price of those is $25,000–$40,000,” says Byron Callan of Capital Alpha Partners. “Now, that’s the price of a car. But in the context of companies that may have revenues of anywhere from $25–80 billion, you have to drop an awful lot of those to really start impacting the bottom line.”
The bigger impact of all this may be political. The current budget environment of strict spending caps — remember the term “sequestration”? — squeezes all contractors. But now, with a new enemy, the appetite for spending on war could grow.
“I think the calculus may be starting to change,” says Yair Reiner of the investment firm Oppenheimer. “With the rise of ISIS, Americans — and I think not just the political class — may be willing to contemplate intervention.”
Further on, winning this fight could mean winning the peace: soldiers, body protection and armored vehicles. Down the road, if the mission creeps, that would be real money.
From a defense perspective, $6 billion could seem like chump change, but this graphic by Marketplace's Marlena Chertock puts the number in perspective:
The iPhone release schedule has grown pretty predictable over the past seven years. Usually, the latest phone goes on sale for $199 with a two-year contract, the old model’s price gets cut in half to $99 and the (now ancient) model from two years ago is thrown in the trash offered for free.
But as Apple has started introducing multiple phones each year and the smartphone market becomes more competitive, that pricing structure has been upended. At its announcement yesterday, Apple provided an offer similar to those in previous years: With a two-year contract, you can get an iPhone 6 for $199 or the larger iPhone 6 Plus for $299.
On Wednesday morning, as the reality distortion field cleared, major carriers were all clamoring to buy old iPhones and get a leg up on each other with some interesting deals.
Let’s take a look at what carriers are offering as of Wednesday afternoon:
Sprint: An iPhone for "life"
The cost: $70/month for a new phone every two years(Courtesy:Sprint)
Sprint wants you to lease a phone like you would a car, with no money down and an extra $20 per month on top of their $50 unlimited plan. Every two years you can trade up for the new iPhone “for life.”
(Or as long as iPhones actually exist — keep in mind the original iPod was discontinued Tuesday after 13 years.)
All of this means you’ll pay $480 for a phone every two years, and if you break it, you buy it. If you don’t want to lease, you can still buy the iPhone 6 from Sprint for $199, with that same unlimited plan costing $85 per month.
Overall, the lease is cheapest in the short-term, but the long-haul winner is Sprint. Plus, if you own your phone, the company is already offering to buy it back for up to $300, claiming to match any other buyback offers. If they keep that up, leasing is really a bad deal.
Cost: Matching trade-ins plus an extra $50; $50–80/month for plans(Courtesy:T-Mobile)
The self-proclaimed “un-carrier” — which also insists on calling smartphones “superphones” — is also offering to match any of its competitor’s trade-in offers, but it’ll throw in another $50.
That said, T-Mobile’s plans are more expensive, with their $50 plan capping 4G LTE use at one gigabyte. Getting everything unlimited will cost about $80.
Cost: Trade in a phone and a get an iPhone 6 for free; $60/month for a planCourtesy:Verizon
The most straightforward deal comes from Verizon, who will give you an iPhone 6 for free when you trade-in your old phone and sign a two-year contract. So there’s no opportunity to make a little extra money off your trade-in, but there’s also no haggling or pitting other carriers (or “un-carriers”) against eachother.
The other compromise is that while Verizon’s single-line plan is pretty cheap at $60, they’ll cap your data no matter what.
Overall, each plan will end up costing almost the same over two years, depending on your data needs, and with nearly everyone (including Wal-Mart and Target) offering comparable trade-ins, the whole thing ends up being a wash.
Welcome to the hypercompetitive world of superphone smartphone shopping.
Hey, teachers, do you have low-performing students who have trouble paying attention? The solution could be video games.
That’s according to a survey of nearly 700 teachers* who use games in the classroom, conducted by the Games and Learning Publishing Council. (Potential self-interest noted). Forty-seven percent of teachers said that low-performing students were the main beneficiaries of gaming in the classroom, and 28 percent said students with emotional or behavioral issues benefited most.
Also from the survey of teachers:
- 55 percent use gaming in the classroom at least once a week; 9 percent use it daily.
- 55 percent said the games were most valuable as motivators of low-performing students and special education students.
- 30 percent have students use games individually; 20 percent have kids work in small groups; and 17 percent play as a class.
- Teachers rely most on other teachers for game recommendations.
- Why aren’t more teachers using games? Most cited not enough time. But cost and lack of tech resources were also popular answers.
- The Games and Learning Publishing Council is a coalition of game developers, industry leaders, investors, scholars and education experts focused on expanding game-based learning.
Among the options that appear on both lists is Minecraft, a game that has more than a few teacher devotees. A whole library of Minecraft-based learning games created by enthusiastic educators can be found here.
Earlier this week, U.S. Rep. Rick Nolan stood behind a podium outside the Capitol and unveiled legislation that would make Congress do something radical: Stay in Washington five days a week.
Nolan first served in Congress from 1975 to 1981. More than three decades later, the Minnesota Democrat ran again — and won.
A lot has changed since then on Capitol Hill. For one, political pros now tell members of Congress they need to spend 30 hours a week raising money when they’re in Washington. Nolan says they never had to do that before — they were in Washington Monday through Friday.
Now, Nolan says, members breeze in for just three days, usually Tuesday through Thursday.
“With everybody flying in and flying out for three nights and a day and a half of work, I mean, it’s an absurdity,” he says.
There is no shortage of important business in Washington right now: Lawmakers are weighing what to do about the militant group known as Islamic State, how to keep the government funded come October 1 and whether to keep the Export-Import Bank up and running. And that doesn't even count the other big stuff, like immigration or tax reform. It's a lot to tackle in a short workweek.
But some members of Congress say those long weekends at home in their districts are necessary for holding meetings with constituents.
Deb Detmers, the district director for Congressman John Shimkus, a Republican from Illinois, says sometimes, when she’s driving the congressman around the district, they listen to talk radio and roll their eyes.
“You’ll hear something on the radio about, you know, 'these guys are the do-nothing Congress,' or 'they’re back home on vacation,' and you picked him up at 6:30 that morning and it’s 7 o’clock at night,” she says.
Nolan says district work is important, but why not come to Washington for three weeks straight, then take a week in your district?
If Congress were a company with these types of conflicts, it would turn to someone like corporate efficiency expert Daniel Markovitz, president of Markovitz Consulting. Markotvitz says if Congress were his client, “I would throw up my hands in despair.”
But after he gets over the shock of imagining the government as a corporation, Markovitz has a recommendation: more face-to-face time for warring Republicans and Democrats.
“If I were running a business that had two factions — whether it’s the East Coast and the West Coast office — if I were trying to bridge a divide like that, I would think that face-to-face time is absolutely essential.”
Markovitz says maybe members of Congress could even socialize with each other.
Nolan says he did go camping and hunting with other representatives back in the day, but he doesn’t have anybody to hang out with now.
“You hear people say, 'The members of Congress need to go out and have a pop or a beer together,'" he says. "Hell, we just need to come and work together, to start with.”
But you have to remember, the writers of Congress’ corporate charter — the constitution — didn’t want Congress to be efficient. They wanted Democracy to be messy and slow, with lots of debate — not exactly what a lean corporation needs.
One of the hardest-hit centers following the 2013 Colorado flood was the 2,000-person town of Lyons. Key pieces of the town's infrastructure, like sewer, water and gas lines, were severely damaged. Fast-forward a year, the town is still working on a list of 87 projects ranging from park and riverbank repair to bridge rebuilding.
You wouldn't be able to tell by taking a walk down Main Street. In the town's busiest corridor, you can barely see signs of the flood. But almost everyone in town has a story — including Connie Sullivan, owner of the St. Vrain Market.
"We essentially lost nearly 100 percent of our inventory," said Sullivan, who either lost or gave away food from the St. Vrain Market during the flood.
When the water receded, she found a foot of mud in her shop. With destroyed roads, water and sewer lines, many residents couldn’t even return home for two months. Sullivan said that put a wrinkle in her recovery plan.
"You didn't have electricity and then you had to figure out when your customer base is going to be returning, and what types of products you would be able to sell even once they did return," she said.
One big change? Lyons lost about 20 percent of its available housing — and Sullivan’s business now looks different. The town has made a big push to have more people visit and boost sales tax revenue. Her sandwich sales to the increasing number of tourists are up. Sales through Colorado’s Food Assistance — or food stamp — program are down.
"We served that niche of the community," said Sullivan. "It's sad to see that those customers are some of the ones that haven't returned."
Those residents have moved to nearby towns like Longmont or Berthoud. Some moved to outlying counties, while a few left the state.
The housing shortage in Lyons becomes apparent a few short blocks from Main Street in the Confluence neighborhood. Nearly every home on one block of Park Street is in the midst of repairs or demolition.
Lyons mayor John O'Brien points to a pile of rocks and debris. “You can see this cobble; you can see where the stream was. During the flood this became really another rivulet,” he explained.
Nearby are the remains of a home that's expected to be bought by the Federal Emergency Management Agency's Hazard Mitigation Grant program. O’Brien said it’s too dangerous for the homeowner to move back.
"… because we know when the next big flood comes, it's going to come right through here," O’Brien said.
In the weeks immediately after the flood, the first priority was to repair downed sewer and water lines. But O’Brien said the work is still far from complete, with work still needed to repair parks, streams and bridges.
One year after the flooding, Colorado's Chief Recovery Officer Molly Urbina said it will take homeowners and businesses many more to rebuild.
“It’s not really a sprint. This is a marathon for a recovery,” she said.
While both federal and state agencies have pumped millions into repairs, Urbina said there will still be a shortfall for some communities.
“There was way more damage than there is going to be for grant funding. So the local communities have to look at their own budgets and see how this all fits. You know: What’s the gap and how do we get there?” said Urbina.
The gap in Boulder County is expected to be $56 million. To soften the financial blow, the county is asking voters to approve a Flood Recovery Sales and Use tax this November.
While there is a long list of repairs ahead, Mayor John O’Brien said a key concern is the lack of affordable housing.
“We’ll be concerned with replacing the housing that we lost — that 20 percent which was substantially damaged,” he said.
The town lost both of its two trailer parks, which held about 50 homes.
“It’s going to be difficult. I mean, because Lyons is the last best place in Boulder County it means that housing values continue to rise,” said O’Brien.
Town officials expect to hold public meetings on when, where and how to build affordable housing in the coming months. But completing the project will take years. O’Brien said flood recovery won’t be complete until everyone who wants to move back to Lyons can return home.