Marketplace - American Public Media

Russia and London: The ties that bind

Mon, 2014-05-19 03:31

Banks, brokers, markets -- London has it all.

Add to that a sturdy legal system and you can begin to understand why it's the financial capital of the world. The city is loved by its locals and foreigners seeking a safe -- and profitable -- haven. 

Jamison Firestone, an American lawyer based in London, has years of experience helping American and European companies do business in Russia. Firestone, who previously lived and worked in Russia, fled the country after his law patner Sergei Magnitsky died in Russian custody when he was arrested on tax evasion charges. Magnitsky's supporters say he was beaten and killed by Russian authorities for calling attention to corruption, something Russian officials deny.

The whole affair is just one example of why Russians are looking to take their money out of Moscow and park it elsewhere, according to Firestone. Click on the audio player above to hear more.

 

Robots, the space program and innovation

Mon, 2014-05-19 02:39

A robotics competitions gets underway on Monday at NASA's Kennedy Space Center. College students have to build and design a robot that can dig lunar solid, for example, to be used during a mission to Mars.

Experts say competitions like these help foster innovation and can even help bring ideas to market.

 "That's one area where I think you might be getting neat ideas on the cheap," says Ross Mead, a doctoral student studying robotics at the University of Southern California. 

He says the competitions are exciting and also give companies, or NASA, the opportunity to see problems solved in different ways.

Given the deep budget cuts to NASA, competitions are an especially good idea for the space agency. 

"NASA's leveraging the budget they have with trying to stimulate people working outside of NASA to come up with things that could be really helpful to them," says Tom Kinnear, who teaches entrepreneurship at the University of Michigan. 

But perhaps the greatest reason competitions work Kinnear said, is that people love to win.

Campaigns versus coding

Mon, 2014-05-19 01:00

Congressional candidates sometimes come from surprising backgrounds. Former comedians. Former American Idols. Now, thanks the current race being held in New Jersey's 2nd district, you can add programmer to that list of resumes.

Dave Cole is a former techie who grew up in New Jersey before graduating from Rutgers University. After a stint in the White House, where he helped build whitehouse.gov, he moved into the private sector to work for a startup that specialized in online maps called MapBox. According to Cole, it's a move that helped him see what government could learn from startup culture:

"Working in the private sector gave me such an opportunity to see the contrast to the way things get done, but also, how there really are good solutions out there to some of the problems that the government is facing."

 Cole says his background in coding, and the transparency of the coding community, also has a strong influence on how he thinks Congress can be more effective:

"One of the ways running for Congress can be more open is if people who are running are just completely transparent about their platforms. It’s exactly the way the best software is built in the open source community."

Part of his belief in the values of technology comes from exposure at a young age; Cole says his mom bought him a computer when he was eight years old. It's a privilege that he wants to extend into the school system, teaching coding to kids at a younger age:

"I think of it like a foreign language -- It enriches your life, and it’s something that once people are encouraged and they can see all the creative possibilities that come from it, that creates jobs."

The British have solved unemployment, once and for all

Mon, 2014-05-19 00:47

I am anchoring Marketplace Morning Report from London this week. While on the road, I am scouting for big ideas and I may have found a doozy.

Some iconoclastic economic thinkers just over the river in the Vauxhall area of London have constructed a device that wipes out unemployment.

Roll this baby out into the economy and everyone who wants to have a job would get a job. If it works as promised, not just Britain but the rest of the developed world including the U.S., could have full employment.

Outsourcing of jobs to poorer parts of the world? No problem. Robots and algorithms taking away human jobs, not to worry. And what is this device that would solve what is one of the greatest and most persistent economic problems?

Well, it is not a device in the sense of an electronic contraption. But it is a mechanism, a policy mechanism that is being put forth by experts at the New Economics Foundation here in London, among others. The idea is quite simple (although implementation will be tougher; I'll get to that in a moment).

Here is the idea: the 21-hour work week.

The NEF's proposal allows people to choose to work fewer hours. For the purposes of my discussion, let's do it by official decree: the order comes down that people can only work about half the hours they work now. That means it would take two people to do what is now one job. I do six shows a day as we roll through the time zones, including our ever-popular podcast.

With a 21-hour work week, I might do three of them a day and leave early. That means we could hire one more anchorman. Two people have jobs instead of one. Sure, the boss might try to cut my pay nearly in half, but if every working woman and working man was being paid less, prices should eventually drift downward to compensate.

Think of the benefits. If I were only working 21 hours in a week, I would have more time to do volunteer work, write a book, read a book, ride my bicycle, clean the basement -- more time to be a more balanced human being.

Yet, what might employers say about this 21-hour work week device to rid the developed world of unemployment once and for all? They generally don't like the idea much. You see, if there are two people doing the work of one -- that means two health care plans, two company pensions -- which could be a huge expense.

This suggests the 21-hour work week is more likely to come first to countries (like those in Europe) that have universal health care.

Another criticism that comes to mind about chopping the work week down the middle in order to produce full employment? Possible effects on income inequality. People who live off their wages and salaries as their hours are cut would find their incomes dropping (and their free time rising). People who live off their assets, their investments, might not see the same kind of decline in income. This might widen the gap between the richest and everyone else.

It is not just the New Economics Foundation here in London pushing a voluntary version of this. Up the road in Scotland, a policy group called the Jimmy Reid Foundation is trying to make the case for Scots working few hours. And, with all due respect to our UK hosts this week, the idea has a tradition in the U.S. as well. Not a glorious tradition, but a tradition. In 1933, President Franklin Roosevelt apparently put a stop to a bid to cap the American work week at 33 hours.

Even with the mass unemployment of the Great Depression, shorter work weeks were seen as just too radical a notion.

One rich Londoner unconcerned by wealth gap

Sun, 2014-05-18 23:45

What is the collective noun for plutocrats? A plethora, perhaps? If so London has a plethora. And a big one.

According to the Sunday Times newspaper, the British capital is now home to 72 billionaires – many of them foreigners. Indian steel magnates, Russian energy oligarchs and Greek shipping tycoons. 

With 72 of them, London has more billionaires  than any other city on the planet. New York has only 48. That  abundance of rich people is not exactly fueling national pride in Britain. In fact it's stoking fresh concern about growing income inequality – especially in London.

Not that wealthy London residents see themselves as part of the  problem.

Yvgeny Chichvarkin – reportedly worth around $250 million -- does not even regard himself as a member of a  metropolitan elite. 

"Compared with people on the Forbes rich list, I'm rather poor," he says, while sitting in his business premises  in London's exclusive Mayfair district.

Chichvarkin made his fortune from the sale of the cellphone business he built from scratch in Russia before he settled in London. He claims that he does not flaunt his money.

"I drive an eleven-year old Porsche," he says. "And although I love good food and wine, if I'm busy I will buy a hamburger for lunch."

While he plays down his own wealth, the 39-year old entrepreneur is more than happy to cater to the extravagant needs of the super-rich. His main British business is an exclusive wine store called HEDONISM; located just off Berkeley Square.

It stocks some of the finest and most expensive vintages in the world. Chichvarkin is particularly proud of his Chateu d’Yquem 1811 Sauternes – for $160,000.  Yes, that's $160,000 for one bottle.

"I'm sure we will sell it," he says. "We have - two different customers – who are thinking about buying it."

Running a business in London’s richest neighborhood, rubbing shoulders with the wealthy, surrounded by opulence, Chichvarkon is not worried about London's growing inequality.

"It's not so terrible like in Russia or Venezuela," he shrugs. "Poor people in the UK have hot food, clear water, and a TV. And a mobile phone. They're not really poor, like Russian poor people."

The Russian begrudges paying what he calls "crazy taxes" to fund the benefits of Britain's "idle poor."

"A lot of them do nothing. But our shop creates a lot of taxes for them to do nothing," he says.

He says he's ticked off that if he sells that one bottle of Chateau d’Yquem, the sales tax alone will keep two or three people on welfare for a year.

Public college presidents get big paychecks

Sat, 2014-05-17 23:20

College grads might be having a tough time landing jobs these days, but college presidents are doing pretty well for themselves. That's according to a new survey from the Chronicle of Higher Education on executive pay at public colleges.

"Their pay seems to have been more or less impervious to the recent downturns we've seen in the economy," says Jack Stripling, lead reporter on the Chronicle's college president pay report.

The media group says the typical college president pulled in about $480,000 in total compensation in the 2012-2013 fiscal year. Nine presidents of the 256 public college leaders surveyed by the Chronicle had total compensation packages that topped $1-million. The highest-earning president was E. Gordon Gee, who ran Ohio State University during the period in question. His total compensation exceeded $6-million. Gee is now president at West Virgina University.

Such big pay packages may raise hackles at a time when schools are charging more for tuition and using cheap, adjunct faculty. Stephen Joel Trachtenberg, president emeritus at the George Washington University, says college faculty likely do need a pay bump. But he says that's a separate issue.

"You don't have to make the case that presidents are overpaid in order to make the case that faculty are underpaid," he says.

Trachtenberg argues that college presidents earn their big paychecks by bringing in lots of money in tough fundraising environments.

But Michael Dannenberg, director of higher education and education finance policy with the Education Trust, says public college presidents should have some relationship to graduation rates.

"We have pretty high compensation levels at many institutions with disturbingly low performance when it comes to student success," he says.

The Chronicle of Higher Education's survey reveals that in many cases, presidents are not the top earners at public colleges. Its analysis finds that of the public college faculty earnig more than $1-million in fiscal year 2012-2013, 70 percent were coaches.

The new rules of internships

Fri, 2014-05-16 14:25

Summer's almost here, the traditional season of the internship.

 

But interns beware: in the last few years a series of lawsuits against employers offering unpaid internships have changed the rules of the apprenticeship game.

 

Rachel Feintzeig is a management reporter for the Wall Street Journal, and has been writing about the plight of the new internship.

 

In recent years, internships have become a near-necessity for college students trying to stand out in a brutal job market. And while some positions can provide valuable work experience and a glimpse into corporate life, critics maintain that the stints often amount to little more than unpaid labor.

 

A survey last year from the National Association of Colleges and Employers suggests unpaid internships don't help students land full-time jobs. Alums of unpaid internships had full-time job offers at nearly the same rate as those who had no internships at all—about 37%, compared with 62% for those with paid internships.

To read more about how internships are changing, read Rachel's article for the Wall Street Journal

Final Note: Peak Embarrassed

Fri, 2014-05-16 14:04

In our Final Note for Friday, May 16, I've flashed back to my teenage self: those awkward days when we felt we could do nothing right and mortification lurked at every turn, complete disgrace only a heartbeat away. For me, anyway.

Researchers apparently found the exact age when we're most likely to be embarrassed. "Peak embarrassed," they call it.

17. 2 years of age is that peak point when you're more likely to feel embarrassed by your own actions, according to a 2013 study in the journal Psychological Science.

And that's probably good news for adults, or at least anyone over the age of 17.2 years.

Who's at fault for credit fraud: Company or consumer?

Fri, 2014-05-16 14:04

We all know we're supposed to check our credit card statements every month to look for fraudulent charges.

But let's be real, we're supposed to do a lot of things.

We're slip up once in a while. And when we do, what safeguards are in place to catch these sneaky charges?

David Lazarus, columnist for the LA Times and frequent Money guest host, has been examining credit cards, and told the story of one woman's unidentifiable credit card charges for the LA Times.

When Kearns fell for AutoVantage's bogus check, the annual fee for the service was $119.99. Over the years it rose to $129.99 and then to $139.99.

Each time it appeared on Kearns' bill, it showed up in a cryptic fashion, usually "TLG*AutoVtg" and a phone number.

"Everything else had a name — CVS, Stater Bros., Best Buy," she said. "This was the only one that didn't."

Kearns mistakenly took the charge as auto maintenance paid for by her husband — an oil change, say, or tire rotation. It wasn't until this year that she finally realized she'd been paying over and over for something she couldn't identify.

To read more from David about credit card fraud, read his column for the LA Times

The Wrap: Keep chuggin' along

Fri, 2014-05-16 13:43

Things are generally well in the economy (key word = generally). Still, many people are leaving stocks and buying bonds behind, which is what they do when they are nervous about economic prospects. Why?

"The thing which is the risk to bonds -- which is inflation -- doesn't seem like it's going to turn up anytime soon," says Fusion's Felix Salmon.

We have to consider the relationship with inflation to better understand the bonds market. Here's the second question we want to know the answer to: Why is there no inflation in this dragging economy? 

"There's still so much slack in the labor market. People aren't getting hired. That's not pushing upward pressure on wages, the things people buy," Catherine Rampell from the Washington Post. "I think you really need to see a lot more activity in the economy before you really need to worry about inflation."

Inflation holding at low levels. People not getting hired. We've got that covered. We turn next to housing -- a key indicator of growth.

If you don't already know his name, Mr. Mel Watt is the director of the the Federal Housing Finance Agency, and this week, the oversight agency of Fannie Mae and Freddie Mac said they are going to make it easier for people to make mortgages and take out loans to boost the  housing market.

The third question on our minds at the end of this week: will the housing market ever recover, and how does that help the overall economy?

"I've always been suspicious about the U.S. government trying to boost the economy by making houses more expensive," says Salmon. "If you live in a country with 60-something percent home ownership, those policies always become very popular politically because people like to see the value of their houses go up."

But Watts wants to make Fannie Mae and Freddie Mac smaller: reform them, and maybe get rid of them.

"The administration has thrown its support behind a bill, that's kind of dead at this point, to wind down Fannie and Freddie. To replace them with something else. Hopefully something more permanent that would encourage more ownership. But it doesn't seem like that policy goal has turned around at all," says Rampell.

Are we stuck in the past? We ended our wrap with a callback to the past, as former Secretary of Treasury Tim Geithner released a memoir on his role supervising President Barack Obama on the Great Recession. Something which we're very slowly recovering from.

What Apple and a convenience store have in common

Fri, 2014-05-16 13:40

There’s a new study out from eMarketer that measures how much profit stores squeeze out per square foot.  Apple leads the pack, at $4,551 a foot.  Most of the retailers at the top of the list sell expensive stuff. 

“Clearly the high-end consumer has more discretionary dollars to spend, driving strong sales per square foot," says Ken Perkins, president of Retail Metrics. "You don’t see many discounters on here, or department stores.”

But you do see Murphy USA, which runs a chain of gas station convenience stores.  It came in second.  Weird, right?  Maybe not, says Gary Rosenberger of EconoPlay, who follows these kinds of trends. We spoke while he was on a roadtrip and had, ironically enough, filled up at a Murphy location in Dillon, S.C.

Rosenberger says the place was packed, with about ten people in line ahead of him.

“And everybody there was in line basically either to buy lottery tickets or cigarettes,” he says.

Rosenberger says Murphy sells lots of people lots of stuff, but there’s another reason the retailers on this list are profitable:  Most of them don’t have to worry about online competition, and they’re making their stores a destination.   Take Restoration Hardware, for example. 

“They’ve been fairly explicit about that saying we want people to come in, spend time here, hang out here,”  says Nicole Perrin, the executive editor of eMarketer.

They’re adding restaurants and rooftop gardens to some stores. Anything to squeeze out one more dollar, per square foot. 

 

Why Darden ditched biscuits and not breadsticks

Fri, 2014-05-16 13:38

Red Lobster is getting tossed overboard. The parent company, Darden Restaurants, announced that it’s selling the seafood chain for $2.1 billion. Both Red Lobster and Darden’s other big chain, Olive Garden, have been losing customers for years.  

Casual dining faces two problems, says David Henkes of the food-industry consultancy Technomic.  “It’s certainly getting squeezed at the higher end by more of a ‘polished-casual’ as we would call it,” he says. Think Cheesecake Factory. “And then at the lower end, you’ve got an extremely high-quality fast-food segment that we call fast-casual.  You think Panera, Chipotle.”

Panera and Chipotle give consumers two things, says Harry Balzer, who looks at food and drink for the consumer-research firm NPD. “It’s time and money,” he says. “Save me time, save me money. And this country has been under pressure, for its income, for a number of years now.”  

Consumers have been eating out less often, he says, to save money. Minding the size of the bill counts, too: An average check at Red Lobster is about twice the average tab at Chipotle.  

Increased global demand for seafood has made it harder to contain costs, says Andy Brennan, a restaurant analyst at IBIS World. "Seafood is one of the foods that you can't substitute out for cheaper products," he says.

That's the money side. With time, casual-dining restaurants like Red Lobster fare even worse, compared with their fast-casual competition, says Alex Susskind, a professor of food and beverage management at Cornell University’s School of Hotel Administration.

Compared with fast-casual, an average party spends more than twice as long at a Red Lobster: 45 minutes to an hour. Even for family dining, that’s a stretch. “When I go out with my family— I have two young kids,” he says, “And if we could get out in 35 minutes, that’s better.”

Olive Garden has all the same problems, but Susskind says Red Lobster has an additional burden: demographics.  “It’s still perceived as a restaurant your grandma went to.”

Even attempts to update the decor— like putting the bar front and center— haven’t helped with that. "It's just that older demographic— that is the bread-and-butter, I guess, of their existence— that prevents that younger demographic from moving in," he says. "In terms of problems, they probably saw that as something insurmountable, given the number of years they've been trying to adjust it."

 

An end to vulgar bankers

Fri, 2014-05-16 13:25

Exec to bankers: stop being jerks

I always read All Staff emails.  Especially the ones about a misplaced umbrella somewhere on the West Coast (I’m in NY) and definitely the ones about free cookies in the lunch room in Minnesota (I’m still in NY).

Some people ignore all staff emails.  So Colin Fan, co-head of Deutsche Bank’s investment banking unit, made his into a video.   

“This is an important message. You need to pay close attention,” he begins. 

“You may not realize it, but right now, because of regulatory scrutiny, all your communications may be reviewed.  This includes your emails, your conversations, and your conduct.  All of this is open to scrutiny.  Some of you are falling way short of our established standards. Let's be clear.  Our reputation is everything. Being boastful, indiscreet and vulgar, is NOT OK.  It will have serious consequences for your career.  And, I have lost patience on this issue.”

Fan concludes ominously with “Think carefully about what you say, and how you say it. If not, it will have serious consequences for you personally.”

So why the... gentle reminder?  Because a lot of financial firms have an enduring problem. 

Text not lest ye be judged. And email not. And gchat not.

“We’ve seen time and time again these  emails, which are meant to be private, don’t stay private,” says Kevin Roose, author of Young Money

As investigation after investigation has turned up documents and texts and even recorded conversations, these communications have not been flattering.  Some were illegal, others crass, plenty were both and ALL made the firms look terrible.    You can see some juicy ones here.  

“Not just during the financial crisis but also things like the LIBOR scandal last year,” says Roose.  “Traders were emailing back and forth about fixing a key interest rate in exchange for bottles of champagne and calling each other nicknames.”

“What’s astounding,” says Roose, “is that people are still doing this kind of thing.”

In part, it’s the same mistake that anyone can make: what you put in writing can come back to haunt you.  But it’s also cultural.

A culture of high stress and hyperbole?

Henry Blodget is currently the editor of Business Insider, but he spent a decade working on Wall Street

“On trading floors in particular, and among people on Wall Street in particular, there’s a lot of tension, a lot of jocular communication, yelling and screaming, gamesman ship.  It lends itself to the very colorful emails and texts we have seen,” says Blodget.   It’s akin to other hyper masculine cultures, like that of the military.  “As an analogy, if you were to put a microphone on the side line of a football team, you would hear many things that in isolation would sound terrible – ‘our coach is an idiot!’ and  ‘That’s the dumbest play ever’ – imagine that in a deposition.  Imagine a prosecutor asking you on the stand ‘so clearly, you think your coach is an idiot?’  It’s hard to explain yourself later.”

And yet, says Blodget, in the case of the financial industry, the jocular, aggressive culture is increasingly subject to withering scrutiny: “Because even conversations are recorded on the trading floor, you can’t even engage in normal banter that you normally would.  It’s hard because you want to talk to people who you want to be friends with, you want to talk the way people talk.”

...Or a culture that promotes recklessness?

That scrutiny is well deserved, says Karen Ho, an anthropologist at the University of Minnesota who has spent years studying, working, and socializing within the finance industry and on Wall Street in particular.  “These folks have undue influence in our social economy, in our institutions, on interest rates.”

Moreover, the jocular culture is far from harmless, argues Ho. “The boasting and vulgarity help to create a perverse motivational environment where traders through their talk their texts their emails their yelling are egged on” to be more transgressive.

Transgression and aggression become “a sign of not just one-upmanship, but masculine achievement,” Ho says.  Blaming Wall Street excesses on greed lets culture off the hook.  Ho is basically saying that Wall Street culture as it stands reinforces an unholy marriage between masculinity and prowess, and aggression and transgression.  “We need to delink these things, which I think the Deutsche Bank video begins to do,” says Ho.

 “The good news is that if it’s cultural, and folks are socialized into it, then hopefully they can be socialized out of it,” she says.  Canadian bankers don’t seem to have the same problems.

Cultural shift is easier said than done

“I think it’s extremely challenging to imagine that people closely working every day on the phone and instant messaging and email will ever be able to communicate in the boring stilted corporatese that sets lawyers at ease,” says Blodget, regarding the effort to reign in distasteful communication. 

But some financial firms are nevertheless trying very hard to do a la DeutscheBank.  Goldman Sachs installed a filter to prevent people from sending emails with cursewords.  “You can’t even send ‘wtf’” says Roose.  “They installed willpower via software.” 

Roose says a shift in culture has to come from the top.  

And to really make its mark, it will probably require people getting fired.  From the tone of that Deutsche Bank all-staff memo - that sounds pretty likely.

 

In Indian elections, it's the economy, stupid

Fri, 2014-05-16 12:19

In India on Friday, Narendra Modi claimed victory as the country's next prime minister. It's a big win for his Bharatiya Janata party, which is expected to take control of Parliament.

India's long-ruling Congress party is out: it has been swept away, says Sruthijith KK, by a new wave of pro-business sentiment.

"The [Bharatiya Janata] used to profess a very different kind of economics early on," says KK, the New Delhi-based Indian editor for Quartz, "which focused on self-reliance and boycotting American products, but Modi has completely changed that economic philosophy. He has modeled himself off Reagan or Thatcher, and that is very reassuring to business men."

Modi's origin story is straight out of a Horatio Alger novel. Growing up he sold tea at railway stations to make ends meet. KK says his rise from obscurity is an inspiration for India's urban youth, fed up with a lack of jobs and stagnant economic growth.

"The changing demographics of India is precisely what has delivered a thumping victory to Modi... His pitch has been we need to get rid of Welfarism. Growth will pick people up from poverty."

In looking for a Prime Minister, KK notes that Indians put a premium on someone who could cut through the country's enormous amount of red tape.

"In Gujarat Modi showed he could make the bureaucracy work...the size of mandate that the people have now given him gives him so much stature that people expect he'll be able to push through things. He'll get the bureaucracy to deliver what needs to be done."

Do millionaires pick up stray coins on the street?

Fri, 2014-05-16 11:09

From the Marketplace Datebook, here's an extended look at what's coming up next week:

Students from around the country are in Washington to compete in the annual National Geographic Bee championships getting underway Monday.

Look over your financial plans because Tuesday is Be a Millionaire Day. Something I think most of us like to think about. At least how we'll spend it.

Also on Tuesday, the Senate Health, Education, Labor, and Pensions Committee holds a roundtable discussion on economic security for working women.

And 60 years ago, Bill Haley and His Comets' "Rock Around the Clock" was released as the B-side of the single "Thirteen Women." It still sounds totally rockin'.

Toward the end of the week, we get some reports on housing for April: Thursday, the National Association of Realtors reports on sales of existing homes. Friday, the Commerce Department issues data on new home sales.

And before you vanish into your three-day odyssey of BBQ, beaches and beer for Memorial Day weekend, let's land face up on National Lucky Penny Day.

That's right, pick that lucky penny up: you're working toward being a millionaire, after all.

Five big stores that are moving online

Fri, 2014-05-16 10:49

To no one's surprise, online sales in the U.S. are continuing to steal a larger and larger share of the consumer market, and expected to hit $370 billion by 2017. Even though the overwhelming majority of stuff is sold offline, where you shouldn't shop for the latest Game of Thrones novel in your underwear, brick-and-mortar retailers are still doing everything they can to move into that still growing market. Here are five big stores that have said they are moving to become a bigger presence in the online market:

Staples

Staples is really feeling the pinch from online retail. According to its chairman, Ronald L. Sargent, online retail is the main reason Staples will close nearly 225 stores by the end of 2014. And with the closing of so many physical stores, Staples is trying to make sure it dominates the online office supply market. Already, online orders make up nearly half their business, and Staples now offers 500,000 products on its website, rather than the 100,000 offered just a year ago. It even acquired Runa, a tech company specializing in e-commerce personalization. However, investors might be wary of Staples' new direction, as its stocks fell 15 percent in one day when the company announced it would close stores.

Wal-Mart 

Amazon is still the king of selling everything you could possibly want over the internet, but Wal-Mart, known for its gargantuan stores in real life, could be closing the gap. In 2013, Wal-Mart’s online sales grew faster than Amazon’s for the first time. Wal-Mart’s had to invest heavily to catch up to Amazon, acquiring 12 tech companies and building a presence in Silicon Valley. But even though Wal-Mart is growing faster than Amazon, it’s still a world away. Just look at the numbers: While Wal-Mart racked up $10 billion dollars in online sales over 2013, Amazon took in $67.8 billion.

Apple

The Apple Store might be the shiniest place in the mall, but Apple’s online store might be even shinier -- metaphorically, that is. That’s because Apple is the second largest online retailer in the U.S., right behind Amazon. Factoring in the App store, iTunes, and sales of Apple’s hardware at Apple’s website, Apples pulls in $18.3 billion in online sales. It’s not that Apple doesn’t still value it’s retail stores; they’re doing very well. But for the first time in Apple’s history, one person is being put in charge of both the online store and the retail stores, which is supposed to bring more collaboration between the two entities. As it is now, Apple’s online and retail aspects are both extremely successful, leaving Apple in a pretty sweet spot.

Best Buy

According to its CEO, Best Buy is now an “online first” retailer -- as opposed to being a "showroom" when shoppers would browse Best Buy first, and then actually buy their electronics online. They’ve even hired a handful of tech people to update their decade-old (yup, decade old) website. They’ve also instituted a loyalty program that works with their website and started a big-data mining project called Athena to get customer information for a more focused experience. Perhaps most notably, they’re using innovative methods to attempt to get products to shoppers faster than Amazon. This is all in an effort to double their online sales, and hopefully compete in a market that may have left them behind.

Target

With the public relations fallout from a huge data breach as well as an employee rant going viral on Gawker, Target is in a pretty bad place right now. But the company is hoping a push toward online retail could help turn things around. It’s experimenting with Google to deliver same-day shipping, and it’s significantly expanded its online subscription service. However, if the anonymous employee rant is anything to go by, they have a long way to go.

Economists find same-sex marriage gives a boost

Fri, 2014-05-16 09:03

This week marks ten years since the first legal same-sex marriages took place in the U.S. At 12:01 am on May 17, 2004, the state of Massachusetts started issuing marriage licenses to gay couples. Since then, more than a dozen states have followed suit, and still more are in the middle of legal battles over whether they should.

Setting aside for a moment the debates around justice, personal freedom, and religion, there are also plenty of economic dimensions to the legalization of same sex marriage. While the research is limited, there are a number of studies that show that legalizing same sex marriage is a net good for the economy. A few years ago, researchers at the William’s Institute at UCLA conducted surveys and combed through state- tax records, and found that during the first years of same-sex weddings in Massachusetts, the local economy got a boost of more than $111 million. Studies of other states have shown similar benefits.

The benefits extend from a family budget to a state budget, says Lee Badgett, an economist at the University of Massachusetts, Amherst, who is behind much of the research.

At the personal level, for couples who live in a state that recognizes gay marriage, legalization has “probably saved them a lot of money,” she says. “It gives people security to be treated legally as a family and to have access to health care benefits, social security benefits,” she says.

Across the country about 150,000 same sex couples have gotten married in the last ten years according to Badgett. Meaning, a bump in business for the companies that make those weddings happen. A survey from TheKnot.com found that the average same-sex couple spends about $10,000 on their wedding.

“That’s millions and millions of dollars that are being pumped in to local economies and small businesses, like florists, caterers and hotels,” Badgett says, pointing out that all this business has come at an important time-- during an otherwise gloomy economy.

“Our business keeps tripling every year,” says Michael Jamrock, the founder of EnGAYgedweddings.com, a national clearinghouse where LGBT-friendly wedding services pay to advertise their businesses to same-sex couples about to tie the knot. When Jamrock started the company six years ago, Massachusetts and Connecticut were the only states where same-sex marriage was legal. “Whenever a new state becomes legal, the traffic to the website is just absolutely phenomenal,” he says.

Legalization can also boost state revenue, says economist Badgett. States see more sales tax dollars—from couples spending on their weddings, and guests who travel from out of state to celebrate. There can also be a rise in income tax revenue from couples filing jointly.

Badgett says legalizing gay marriage can also mean less government spending on social safety net programs, as married couples pool financial resources often rely on less public assistance.

“When marriage strengthens families in terms of economic security, that's also good for state budgets,” she says.

Legalizing gay marriage can also bring some extra costs. Spouses of state and private employees may qualify for more retirement and health-care benefits. But economists who’ve crunched the numbers say on net, those costs don't outweigh the overall revenues.

A report in 2004 from the Congressional Budget Office, then headed up by Doug Holtz-Eakin (who now runs the conservative American Action Forum) estimated that if same-sex marriage was recognized in all fifty states and at the federal level, the federal budget’s bottom line “would improve the budget’s bottom line to a small extent: by less than $1 billion in each of the next 10 years.”

How we measure the poverty line(s)

Fri, 2014-05-16 08:23

Until the mid-1960s, the U.S. didn't have an official, federal poverty line.

In 1963, the Social Security Administration asked one of its researchers, Mollie Orshanksy, to report on child poverty. Orshansky quickly realized there was no way to tell exactly how many children were living in poverty, and devised a simple calculation to determine who was poor. 

She took the the U.S. Department of Agriculture's "thrifty food plan," which estimated the minimum amount of food that cash-strapped families could survive on, and still be healthy.

In 1963, that food cost $1,033 dollars for the year. Data from surveys at the time showed the average family spent about a third of their income on food, so Orshanksy took that $1,033 and multiplied it by three. Any family earning less than that amount was below the poverty line. Fifty years later, that is still how the federal government determines who is in poverty: the minimum you need for food, multiplied by three.

Many poverty researchers find that problematic, because these days, the average family spends about one-seventh of its income on food, not one third. But other costs, like housing, medical care, childcare and commuting have risen.

For the past few years, the Census Bureau has published a Supplemental Poverty Measure, which takes those rising costs into account, along with whether people live in low-cost or high-cost areas. The Supplemental measure also adds in the benefits that many low-income people recieve like SNAP and subsidized housing.

Many poverty researchers agree the supplemental measure paints a more accurate picture of who is in poverty, but the government still uses Orshanky's original formula to determine its official measure.

The cookie factory that balances profit with progress

Fri, 2014-05-16 07:55

Through the 1960’s, companies felt social responsibility was part of their culture. That all changed after a 1970 essay by Milton Friedman in the New York Times –“The Social Responsibility of Business is to Increase its Profits."  But recently a new type of corporate status has become popular, the Benefit Corporation, which requires companies to do social and environmental good.

Social responsibility has a warm, chocolatey, toasty fragrance. It's what the air inside Greyston Bakery in Yonkers, N.Y., is perfumed with, and it's enough to stop a reporter in her tracks.

"That would be remnants of brownies," says Mike Brady, the company's CEO. 

Greyston turns out 30,000 pounds of brownies a day for Ben and Jerry’s Chocolate Fudge Brownie Ice Cream. The bakery sold almost $10 million of brownies last year. But Greyston isn’t a typical company. It’s what's called a Benefit Corporation. That means in addition to normal  requirements, Greyston also has to create a “material positive impact on society and the environment.”

Brady can provide a substantial list of positive projects the company has undertaken: solar panels on its roof, buying sustainable cocoa and sugar, providing social support for workers who need extra help outside of work -- and when jobs open up, anyone gets the chance to work, no questions asked. The company even keeps a sign-up sheet in its reception area.

Companies can now become benefit corporations in 22 states, but how do you reconcile a social mission with a bottom line?

“I could spend 100 percent of my time trying to figure out the solutions for selling a good product." Brady says. "But I dedicate my time and the time of my team to trying to focus on how we can figure out the environment and the community, ultimately hoping that that’s going to lead to us selling more products, and that’s been the case so far.”

Erik Trojian, director of policy for B Lab, a non-profit that certifies benefit corporations, says that traditional corporations are limited by their duty to maximize shareholder profits, rendering them unable to focus on other missions.

"The unique thing of a benefit corporation is it deregulates the purpose of a corporation by saying, you can consider other factors than profit," he says. "You can consider society and the environment. In addition to profit."  

Trojian notes that because benefit corporations have to report and answer to shareholders, just like traditional corporations, unlike traditional corporations they can be held accountable for doing good.

"If the only goal of a corporation is to maximize profits, these investors don’t have a right to say, well, I have a mission-oriented fund, I invested in your company, you said you were going to consider society and the environment, but you stopped doing that. You have no recourse," he says, "but to sell your stock and get out or take what’s given."

Reporting to shareholders, he says, means a benefit corporation keeps operations transparent -- unlike a traditional corporation, which may focus on a specific, targeted social or environmental project like cleaning up a polluted waterway but isn't necessarily held responsible for its achievement in that area.

"That doesn’t mean the company isn’t polluting out the front door," says Trojian, "while it’s cleaning the back door. So that’s the dilemma with that,  it doesn’t really provide the consumer with a complete understanding of what the totality of the company’s operations are."

Lynn Stout, a professor of corporate and business law at Cornell Law School, says the misunderstanding lies elsewhere. The purpose of a corporation, she wants to make clear, is not to maximize shareholder profits.

"It turns out the purpose of the corporation is to do, and I’m taking this right from what the vast majority of corporate charters say," she says, "they say the purpose of the corporation is to do anything lawful.”

Stout notes that companies do often focus on shareholder value. One of the biggest reasons for this, she says is that tax law requires executive pay to be tied to a metric and very often that metric is share price. "So we shouldn’t be surprised that if we pay executives to bump up the share price, that’s what they do," she says. "But that’s not required by the law in the sense that you can’t sue managers for making decisions that reduce profits, or perhaps don’t move the share price up as far as it can go."

Stout says we don't need benefit corporations.

"I don’t think we do," she says, "if what you want to do is create legal space for managers to run companies in a socially responsible fashion."

But she notes, when it comes to focusing on social and environmental goals, there are some benefits, to having benefit corporations, such as the inherent appeal, to some consumers, that comes along with the label of benefit corporation. 

"It’s very much a marketing thing," she says.  "For example, Patagonia is a benefit corporation and they make a line of clothing suited to outdoor activities. A lot of people who like outdoor activities are very concerned about the environment. And they might be willing to buy Pataonia instead of another brand, because it’s a benefit corporation."

Then Stout  says there's the requirement to report to shareholders about social and environmental impact.

"The benefit corporation is supposed to provide information that’s available to shareholders and others, to show that they’re actually making progress towards that objective," she says. "And that requirement, that you provide information, may be very, very important."

"There’s a saying in business," Stout says, "that what you measure, is what you manage. And if all you’re measuring is profits, that is naturally  going to be your focus."

PODCAST: Some (temporary) relief at the pump

Fri, 2014-05-16 07:53

After a steady rise since February, gas prices are leveling off, and even dropping in parts of the country. But the relief is only temporary.

Europe's biggest construction project is currently underway in London: a new 73-mile long rail link passing underneath the British capital.

It's the time of year when TV networks try to get audiences -- and advertisers -- excited about their upcoming season. One genre that's now a tough sell to both is music.

ON THE AIR
Faking Friday
Next Up: @ 09:00 pm
Blues, Etc.

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