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Why Apple would want to buy Beats

Fri, 2014-05-09 13:40

Apple CEO Tim Cook recently said the company was going to go on a shopping spree and now it looks like the company is making good on that. Apple has reportedly made a bid to buy Beats Electronics for $3.2 billion. Beats was started by Rapper Andre "Dr. Dre" Young in 2008. It's best known for its headphones: they’re colorful, stylish and cost about $200.

"It’s certainly clear that this is a huge growth category within retail," says Ben Bajarin, a tech analyst with Creative Strategies. He says status headphones are big business. And Beats’ revenue reportedly topped $1 billion last year.

Not everyone agrees. "They certainly don’t need the headphone company, which makes second rate headphones based on marketing," says music industry analyst Bob Lefsetz. He thinks Apple would be a lot more interested in Beats’ music streaming service. Steve Jobs famously opposed the subscription music model and, instead, championed iTunes' current model, where you buy a song outright.

"The paradigm is shifting as I speak," says Lefsetz. "Apple iTunes sales are down, streaming revenue is up. Apple caught flat-footed, they’re trying to solve this problem by buying Beats."

But Apple doesn’t need to buy its way in to the streaming business says James McQuivey, a media and technology analyst at Forrester Research. "The subscription business is something Apple could have done by lifting a finger at any point during its history," says McQuivey. "This is not a unique skill set, industry relationship, technology, none of that."

McQuivey thinks the possible Beats buy would likely be part of a larger strategy. After all, Apple is sitting on $151 billion in cash and its shopping spree has just begun.

 

Publicis + Omnicom ≠ Merger

Fri, 2014-05-09 13:38

This was the first line of the press release—"Publicis and Omnicom agree to terminate proposed merger of equals." Big news if you care about the advertising industry. But even for those who could give a flip about the ad business, there's that "merger of equals" thing to think about.

The term sounds like an enlightened modern marriage. And in fact, when Publicis Chairman Maurice Levy and Omnicom CEO John Wren first announced their "engagement" last summer, there were flowers, adoring looks, and the arc de triumph in the background.

Publicis Chief Executive Maurice Lévy, left, and Omnicom CEO John Wren at a news conference announcing the merger in July. (Via Bloomberg News and the Wall Street Journal)

"They looked like best friends," says Larry Chiagouris, professor of marketing at Pace University's Lubin School of Business in New York. It was like a portrait for a wedding announcement. "Big smiles. Great scenery in the back."

The ideals driving a "merger of equals" really are noble, says Lawrence Hrebiniak, emiritus professor at the University of Pennsylvania's Wharton School of Business. The conversation between CEOs who want to embark upon one usually goes something like this, he says:

"We're both competent, we're both good, we're both capable, so let's, like adults, get together and decide how best to run this new large company that benefits from both of our sets of skills and capabilities."

But you can probably guess how this romance usually ends. "How do I put this," says Hrebeniak. "There's no such thing as a merger of equals."

Instead well-intentioned attempts often turn into a clash of cultures and battle for control. Our financial person's better than yours. Our marketing head is more aggressive than yours. "You have divisions, you have politics, people pushing for one person or another to lead the show," Hrebeniak says.

The only successful merger of equals that Sri Zaheer, dean of the Carlson School of Management at the University of Minnesota, can think of wasn't technically a merger of equals at all. And that helped, she says. "People don't start feeling that everything has to be absolutely split down the middle."

That was back in 1998, when Norwest bank acquired Wells Fargo, and took its name.

Weekly Wrap: Yellen's dark notes on housing

Fri, 2014-05-09 13:36

For a look at what's been happening on Wall Street and elsewhere Marketplace's David Gura talks to Cardiff Garcia of FT Alphaville and our own Lizzie O'Leary, who's recently been named host of our new show, Marketplace Weekend, which'll launch next month.

Up for discussion is Apple's rumored plans to purchase Beats Electronics, and Fed Chair Janet Yellen's Senate testimony on the housing market.

Click play above to hear more.

Want to buy a home? Better bring cash

Fri, 2014-05-09 12:28

If you're buying real estate these days, you should probably come with bags of cash. More and more people seem to be doing that at least.

Last quarter, a third of the existing homes sold in the U.S. were purchased entirely in cash.

Who's buying them this way? Retirees, foreign investors and Americans who can, i.e. those who don't want to bother with trying to get a mortgage.

Something that's still tough.

Opinion: Of course P. Diddy should speak at graduation

Fri, 2014-05-09 11:14

Moguls, icons and millionaires like Steve Jobs and Bill Gates were also welcomed back to their unofficial alma maters after dropping out of school. But Sean Combs, who many readily accept to host a party or give a shout out, is somehow shelled out of the realm of successful individuals who have made it without higher education.

America, you can't be that selective. If we are to teach hip-hop in universities, we can certainly have one of its most successful moguls speak to our students, no?

What makes Combs' story so special wasn't his rise to the top as a drop out. It's his rise to the top as a black man…who dropped out. And frankly, if we're to compare Jobs, Gates and Combs, let's get one thing clear - their starting points were not the same. There's this thing called "privilege."

Combs perfected the art of business. His Sean Jean clothing line, the unprecedented Revolt TV, or popularizing the "Vote Or Die" campaign that bolstered the numbers of young voter registration (and led to Barack Obama's presidential win). Howard University is still at the helm of that success.

Isn't demonizing and excluding Combs from academia for his musical content, or because he didn't make his money as a lawyer or doctor, a nuanced way to say this subset of black culture isn't good enough for Howard University?

Howard does need someone suggesting to its African-American graduates that he couldn't have made it without the knowledge he acquired at the esteemed college, and, possibly, insight to navigating in this faux "post-racial" world as educated black people.

And for that, I'm certain Bill Gates or Steve Jobs couldn't provide any insight or advice.

The triple tax break of a Health Savings Account

Fri, 2014-05-09 11:13

Higher deductibles and rising premiums got you down? We’re getting hammered by the high costs of healthcare and even employers are feeling the pinch.

To help offset some of the costs, many employers are now asking their workers to take a closer look at health savings accounts, or HSAs. With an HSA, you can get a triple tax break while saving money on healthcare expenses.

But are they the right move for everyone?

Kimberly Lankford of Kiplinger’s Personal Finance says there’s not a one-size-fits-all approach. “But it is an option for many more people now that so many of us are dealing with higher healthcare deductibles,” Lankford says.

Who can qualify for an HSA? If your health insurance plan has a deductible of at least $1,250 for an individual and $2,500 for family, you’ll most likely qualify for an HSA. That covers a lot of the Silver and Bronze plans for sale on the insurance exchanges. You can open them up with a bank, brokerage firm and many employers are now offering them to encourage employees to choose a cheaper, higher deductible plan.

Some employers are even contributing as much as $1,000 themselves to get the ball rolling.

Lankford says the benefit is in the tax savings. “It’s a triple break,” she says. “It’s either pre-tax with your employer, or tax-deductible if you’re buying on your own. The money grows tax-deferred, and you can use it tax-free for any medical expenses.”

The money continues to grow and you don’t have to use it every year, unlike a flexible spending account (or FSA). Lankford recommends depositing money every year and letting it grow until retirement and using it for Medicare expenses or even long term care.

The cash can be used to pay for deductibles or Medicare premiums, and even for portions of long-term care costs.

"It's a great way to build a tax-free stash of money for future healthcare costs,” she says.

The best time to jump into an HSA is when you’re young and healthy without too many fixed medical costs. If you’re older with more costs or are dealing with a medical condition, you’ll really need to crunch the numbers to see what kind of plan will leave you better off in the long run.

"For someone with higher fixed costs like diabetes it might not be a great deal,” Lankford says. “You need to not just look at premiums but look at what are your regular expenses for medicine, for doctors. If you have a condition where you have similar medical expenses every year, do the math and add it up. In some cases you may come out ahead with lower premiums but sometimes the higher premiums might leave you with lower expenses at the end of the year."

Employers are excited about the plans because anything that encourages people to take on a higher deductible plan will save the boss some cash.

And who doesn’t want to save their company some money?

Quiz: Americans use HOW much electricity?

Fri, 2014-05-09 10:33

It's international quiz time on the Marketplace Morning Report. Stephan Richter, editor-in-chief of the online international affairs magazine The Globalist brings us a question that will test your knowledge of our energy needs in context. 

The World Economic Forum for Africa wrapped up in Nigeria today, and energy production was a central theme. Richter's question: How much electricity does the average Nigerian use each year compared to an American? The equivalent of:

  1. A. One American's air conditioner running in the U.S. all year long.
  2. B. One American's refrigerator running all in the U.S. all year long.
  3. C. One American's microwave oven running in the U.S. all year long.
  4. D. One American's coffee maker running in the U.S. all year long.

Scroll down the page to see the answer -- and click play on the audio player above to hear our report about electricity. 

 

 

 

 

 

 

 

 

 

ANSWER: C. The average American uses 13,000 kilowatt-hours (kwh) per year. That's quite a bit. A microwave oven consumes 135 kilowatt hours per year. That is 1/100 of the average US energy consumption per person. 

Gear up for Bike to Work Day

Fri, 2014-05-09 10:09

From the Marketplace Datebook, here's an extended look at what's coming up the week of May 12, 2014:

In Washington, a look at the nation's balance sheet. The Treasury Department is scheduled to release its monthly statement for April.

Here's a tourist opportunity. The Washington Monument reopens to the public. It's been undergoing repairs for earthquake damage since August 2011.

On Tuesday, the Commerce Department reports on retail sales for April.

National Police Week continues with a candlelight vigil at the National Law Enforcement Officers Memorial.

The Senate Budget Committee discusses, "Expanding Economic Opportunity for Women and Families.

And America will be spending some late nights with him in the future. Stephen Colbert turns 50.

That brings us to Wednesday. The Labor Department releases the Producer Price Index for April.

And thanks to him you are now obligated to publicly acknowledge the birthdays of people you may hardly know. Mark Zuckerberg turns 30.

On Thursday the Federal Reserve releases its monthly report on industrial production.

Friday is the anniversary of the first Academy Awards ceremony held in 1929. "Wings" took top honors for best picture, the only silent film to do so.

And put your high heels in your backpack for your daily commute. Friday is Bike to Work Day.

A possible deal worth billions, but no billionaires

Fri, 2014-05-09 10:00

The sound of a reported $3.2 billion is music to Dr. Dre's ears, and not just because his company, Beats Electronics, deals in high-end headphones and sound equipment. If it happens, it would also make him the richest mogul on the Forbes' list of hip hop's wealthiest artists, surpassing Puff Daddy by $100 million.

Though, Forbes' Zack O'Malley Greenburg points out that while the rappers and producers on the list are very wealthy, none are actually billionaires. The rumored sale of his company to Apple would then bring Dre's net worth up to $880 million.

Here's a look at some of the wealthiest people in hip hop if the Beats buyout were to happen (with accompanying lyrics):

1. Dr. Dre - Net Worth: $880 Million (projected)

Chelsea Lauren/Getty Images for BET

"You gotta get it - get it. Get it playa. Count all the cash up. You gotta get it, get it, get it."

                                                                                                                                      - Dr. Dre, "Get Your Money Right"

2. Puff Daddy - Net Worth: $700 million

Kevin Winter/Getty Images for Clear Channel

"Still got cash to blow, raps that flow. Still them cats that know, pack ya flow. That's fo' sho'"

                                                                                                                                                      - Puff Daddy, “Bad Boy For Life”

3. Jay-Z - Net Worth: $520 million

Frederick M. Brown/Getty Images

"We push the hottest V's, peel fast through the city. Play Monopoly with real cash"

                                                                        -Notorious B.I.G. featuring Jay-Z, “I Love the Dough” 

4. Bryan “Birdman” Williams - Net Worth: $300 million

Amanda Edwards/Getty Images

"Vroom on a Yamaha chromed out 11 hundred. What I'm doin'? Gettin' money. What we doin'? Gettin' money."

                                                                                                                                                 - Bryan "Birdman" Williams, Stuntin' Like My Daddy

5. 50 Cent - Net Worth: $100 million

Jamie McCarthy/Getty Images

 

"Startin to feel like there's nothin left to talk about but the, money, money."

                                                                                                                                               -50 Cent, “Money”

Apple + Beats = More Dr. Dre, less earbud?

Fri, 2014-05-09 09:51

Apple could be on the verge of its first multi-billion dollar acquisition. The Cupertino-based tech goliath is reportedly in talks with Beats about a $3.2 billion purchase of the company.

Beats, founded by Jimmy Iovine and rapper Dr. Dre, is known for its candy colored headphones and its new music streaming service, Beats Music.

If this deal goes through, it would be Apple’s largest acquisition to date. The second biggest was the 1997 purchase of Next software for $400 million -- the deal that brought Steve Jobs back to Apple.

“That is Apple’s history of acquisitions, they always do small, as we call tuck-ins, just to fill gaps in their technology or their product line, says Mike Levin, with Consumer Intelligence Research Partners. “So you would have to ask the question: What kind of gap does Beats fill?”

Levin says it’s highly unlikely Apple is interested in high-end headphones.  It’s the subscription based music streaming service, Beats Music, that’s potentially most valuable to Apple, whose existing music empire is built on 99 cent downloads. “The iTunes store, after growing explosively for several years, has kind of stagnated," says Levin.

Apple did create iTunes radio, but it’s not subscription based, and services like Pandora and Spotify have been much more successful. 

PODCAST: Apple goes shopping

Fri, 2014-05-09 07:36

Apple is not a company that has bought its way to success through big acquitions. But today there's word of a change in strategy. Several published reports today, starting in the Financial Times, suggest Apple's about to buy Beats, the headphones and music streaming company. Beats was founded by record producer Jimmy Iovine and rapper Dr. Dre. Michael Levin is with onsumer Intelligence Research Partners and joined us to discuss.

Meanwhile, this weekend, college seniors and their families will hear a lot of stirring words from commencement speakers as graduation season gets into full swing. What comes next for many will be a little less stirring: the job hunt.

And, the World Economic Forum for Africa wraps up in Abuja, Nigeria today. Energy production was a central was a central theme, which is the frame with today's Marketplace Morning Report Quiz.  In the roll of Quizmaster: Stephan Richter, editor in chief at the Globalist.

What common food buzzwords actually mean

Fri, 2014-05-09 05:56

If you're seeking ways to make your diet just a bit healthier, you've probably heard the classic argument that organic food is better for you, and that you shouldn't touch GMOs with a ten-foot-pole.  

But as New York Times columnist Mark Bittman argues, you're probably focusing on the wrong ideas.

"With 'organic,' I think the word is ill-defined," he says. "There's nothing wrong with the desire to eat organic food, but focusing on the word 'organic' as if it were a panacea is a problem. With GMOs, it's the opposite--there's nothing particularly good about them, but on the other hand, to be afraid of them is a way stronger reaction than necessary."

Bittman argues in his latest column that it's not about how the label describes the food we put in our diets.

"Eating organic food is maybe preferable--whether it's nutritionally superior is questionable--but it's a secondary consideration," he said. "The primary consideration is what's in your diet. It's not about whether you can afford to eat organic, it's about whether you can afford to eat better. And for 80 or 90 percent of the people in the United States, the answer to that is yes."

But Bittman, who supports going fully vegan before 6 p.m. in his new book, cautions against lumping "veganism" into the same "healthy" category.

"Veganism implies healthy, but you can eat Oreos and Coke and still be vegan," he said.

Class of 2014 isn't celebrating the job market

Fri, 2014-05-09 02:47

This weekend, college seniors and their families will hear a lot of stirring words from commencement speakers as graduation season gets into full swing.

What comes next for many will be a little less stirring: the job hunt.

"The Class of 2014 is a little bit better off than the few classes who came before," says researcher Alyssa Davis, co-author of a report, 'The Class of 2014: The Weak Economy is Idling Too Many Young Graduates,' for the Economic Policy Institute. "Since the recession, this has become the new normal, with a weak job market, stagnant wages, high unemployment and underemployment."

Unemployment for young college graduates is 8.5 percent, compared to 5.5 percent in 2007. For young high school graduates, the comparison is 22.9 percent to 15.9 percent.

Employers do plan to hire more than last year—an increase of 8.6 percent is projected in a survey of employers by the National Association of Colleges and Employers (NACE). But still, rates of involuntary part-time work, unskilled and low-wage work are up for college graduates. And, according to EPI's research, many more young people are now out of the labor force entirely—unemployed and not looking for work or attending school—than before the recession.

Management consulting firm Accenture recently surveyed Class of '14 members about their post-college expectations. Managing director Katherine LaVelle says, at least today's college students are prepared—having come of age as teenagers and early-twenty-somethings in an unforgiving economy that hasn't improved quickly or dramatically. She says many have picked their majors and internships with job prospects in mind.

"They've done their homework, they understand the marketplace they're in, and they're ready to tackle it," says LaVelle.

Still, says LaVelle, they're full of unrealistic expectations. Eighty percent think their first employer will provide a formal training program, and roughly the same percentage think they'll make more than $25,000-a-year. But the Accenture survey finds that only half that many graduates from the classes of 2012 and 2013 actually got training or earned that much.

And 46 percent of recent graduates consider themselves underemployed, working in jobs that don't require the education and training they received in college.

Why China and Vietnam are bumping boats

Fri, 2014-05-09 02:32

There's a battle brewing in the South China Sea. Ownership of territory near the Paracel Islands is disputed, and after China moved an oil drilling rig into the area, Vietnam sent ships to investigate.

The Chinese rammed the Vietnamese crafts and shot them with water cannons, but this fight is a lot bigger than one Chinese oil rig.

"It involves not just China and Vietnam, but also Taiwan, the Philippines, Brunei and Malaysia," says Taylor Fravel, a professor of political science at MIT. Fravel notes that border disputes in the area have been going on for decades and this is China's way of trying to demonstrate its claim to the territory.

"China is desperate for domestic sources of energy," says Ernie Bower, senior adviser for Southeast Asia Studies at the Center for Strategic and International Studies.

Bower says there's potentially more gas under the waters in the disputed territories than in the Gulf of Mexico, and more oil than in Alaska. The U.S. Geological survey says it's likely there are 2.5 billion barrels of oil, yet to be tapped in the area.

"People have been shot at and killed before between these two countries on these very waters," Bower says, noting the fight is also about fish, a source of protein to feed enormous populations.

It's a very real dispute for the Vietnamese, says Bowers, with the location where the Chinese attacked the Vietnamese ships just 120 miles off its shore.

"And the Vietnamese are rightly concerned about their sovereignty."

The best conversations happen over brunch

Fri, 2014-05-09 01:37

Here in the New York Bureau of Marketplace, we're getting ready for brunch. We even have the fixings for mimosas.

Yes, in the middle of the week. And, yes, in the middle of a work day.

But brunch, or really "Marketplace Brunch" is one of the segments we're trying out for our new show, Marketplace Weekend. The idea is to take some of the really smart and creative people inside the Marketplace family, and have the kind of conversation you might have over a meal with your friends... but do it on the radio.

So I'll be gathering in the studio with people like Stacey Vanek Smith, Sabri Ben-Achour and Mark Garrison, to talk about what they're covering. And probably more importantly: what's on their mind as they look ahead to the week that's coming up.

All this is part of how you create a new show: You come up with ideas for segments, try them out, and see how they sound. Earlier, we tried a segment that took responses from Twitter and Facebook, and folded them into a personal finance conversation. I'll let you into a secret: it sounded awful! Nobody (even my mother) wants to listen to me reading a bunch of tweets. So we reworked it, with a listener calling in to talk about her student loan debt. And that version was great!

We want to make sure that Marketplace Weekend is fun and dynamic, and that we never lose sight of where human experiences fit in economic stories.

A while back, we did a story on Marketplace Money that examined gentrification. It's a model for where we want to go with the new show.

We introduced listeners to Britty Krone, a lifelong Harlem resident. She took me on a tour of her neighborhood and told about the changes that were happening, and what it felt like to live through them.

Gentrification is a huge story: it touches on policy, politics, housing prices, race, and the changing nature of our cities. But at its heart, it's really a story about human beings. Brittny's example was a good reminder of that.

As we create this new show, we want to keep doing stories like that: complex, multi-layered, and demanding a little extra thought and care.

We also want your input. So keep it coming! Tell us what you want in Marketplace Weekend. The kinds of stories and sounds that you want to listen to when you have your own... well... brunch. 

A very tech-y Mother's day! A new Silicon Tally

Fri, 2014-05-09 01:00

It's time for Silicon Tally. How well have you kept up with the week in tech news?

This week we're joined by Adrienne LaFrance, an editor and technology reporter at The Atlantic. var _polldaddy = [] || _polldaddy; _polldaddy.push( { type: "iframe", auto: "1", domain: "marketplaceapm.polldaddy.com/s/", id: "silicon-tally-may-9", placeholder: "pd_1399585051" } ); (function(d,c,j){if(!document.getElementById(j)){var pd=d.createElement(c),s;pd.id=j;pd.src=('https:'==document.location.protocol)?'https://polldaddy.com/survey.js':'http://i0.poll.fm/survey.js';s=document.getElementsByTagName(c)[0];s.parentNode.insertBefore(pd,s);}}(document,'script','pd-embed'));

The tech of DJ-ing with DJ Rekha

Fri, 2014-05-09 01:00

If you head downtown to (le) Poisson Rouge on the first Thursday of the month, you'll find yourself transported to another country. The Punjab region of South Asia, to be exact.

That's because Rekha Malhotra, a.k.a. DJ Rekha, has spent her entire career as a DJ championing the sounds of Bhangra and Bollywood in the states.

These days, you can find her at Basement Bhangra, a monthly dance party that celebrates the music and dance of Bhangra.

Bhangra music is, in and of itself, a kind of remix - a melding of folk tunes with Western styles of music.

It just so happens that the style and form of the music lends itself to having a dance beat added underneath. 

It is this kind of embrace of the new as it relates to the old that Malhotra remembers as being a significant part of the Indian-American community she knew growing up:

“Every Indian American household had a VCR first, because the movies were important, watching the Bollywood films. And in the 90s there was a huge Indian Bollywood remix scene. Taking Bollywood records without getting the original parts and putting beats on them.”

For her part, Malhotra says technology is both a help and a hinderance to her life as a DJ.

She laments the loss of craft when it comes to the art of physically picking out records and matching the rhythms of tracks for seamless transitions. She also points out, however, that the ability to quickly purchase and download a requested song that she doesn't have on a record or a CD is a blessing, and allows her to better serve her audience.

At the end of the day, Malhotra says being a DJ is about being able to read an audience and react, and no amount of technology can give you that talent.

Listen to a Spotify playlist built by Ben Johnson featuring artists from our Playing With Machines series, and others: 

Medicaid's new patients: healthier, and maybe cheaper

Fri, 2014-05-09 00:37

Since the launch of the Affordable Care Act last fall, some five million more Americans have enrolled in the nation's healthcare program for low-income people.

With only half the states expanding their Medicaid programs under the Affordable Care Act, researchers believe that number would double if all 50 states moved ahead, and several new reports suggest it may be cheaper for states to go ahead than previously estimated.

Cost is one of the top reasons politicians cite to explain why they're against expanding the program.

A recent Congressional Budget Office report said the cost for states would be nearly a third less than expected. Why the cut?

The CBO over-estimated the number of people eligible for Medicaid pre-ACA who would come out of the woodwork – an effect known in the industry as "woodworking" – as efforts got underway to recruit newly-eligible folks to sign up for Medicaid. And because fewer of previously-eligible people signed up, the bill for states is lower, because states pay a vastly higher share of costs for the previously eligible.

And there are other signs that Medicaid's expansion may help the bottom line.

"We improved care. We improved outcomes and we reduced costs," says Dr. Randy Cebul, who runs the Center for Health Care Research & Policy. He's also the one keeping tabs on the data from a Medicaid pilot project in Cleveland involving nearly 30,000 low-income residents.

Cebul says in this test case for Medicaid expansion in Ohio, health providers helped cut ER use, increased primary care visits and kept spending 25 percent below projections.

"There are probably half of the states that have not expanded Medicaid," he says, "and I think this should be a reason they want to reconsider their decision."

And new Medicaid patients are generally less depressed and not as heavy as people already enrolled, according to a study from Steven Hill, an economist with the federal Agency for Healthcare Research and Quality.

"I think some people were concerned that the people who will be newly eligible might be very unhealthy," he says. "But that's not what we found. And so they may need even less care than current enrollees," he says.

Edwin Park with the left-leaning Center on Budget and Policy Priorities believes the growing body of information strengthens the proposition that states can afford an expansion.

"All this evidence continues to undermine that it's too costly for the states to take up," he says.

There's just one thing.

Many health policy people, including Park and George Washington health policy professor Sara Rosenbaum say state opposition isn't driven by economics as much as philosophy.

"It's a belief that somehow when you help the poor with governmental assistance you are encouraging bad behavior, laziness," says Rosenbaum.

Josh Archambault with the right-leaning Foundation for Government Accountability says there's some truth to that.

Ultimately though, he says the problem is that you're expanding a broken program that doesn't work for people currently enrolled. And why, he asks, would you just expand something like that?

"Not only does it hurt the people you are adding, but it already hurts people who are on the boat," he says.

But what some conservatives want – and they've begun to get it – is more flexibility in how the expansion program is designed. Even with that, full acceptance could take years. Don't forget, Arizona adopted the original Medicaid program in 1982, 17 years after it was first introduced.

An insider's look into Alibaba and its quirky founder

Thu, 2014-05-08 23:55

In 1995, Alibaba founder Jack Ma was an English teacher. He was visiting Seattle when a friend introduced him to the internet. Ma quickly typed "China" into the search engine. The result? "No data found" appeared on the screen.

Weeks later, Ma was in Beijing, on a Quixotic quest to convince China's government to create the country's first internet site.

The film "Crocodile in the Yangtze" shows grainy footage of a floppy-haired Ma delivering his pitch to a skeptical bureaucrat: "Nowadays, foreigners can use computers from any desktop to find products from around the world," says Ma to a confused-looking senior level official. "They can order directly from Hong Kong, Taiwan, Singapore. But they can't order anything from China, because right now there's nothing from China on the Internet."

The official politely asked Ma to take a hike. The film's director Porter Erisman says none of the officials Ma visited on that trip had even heard about the Internet. "You can just see in the footage, the people who are looking at him, they just think he's crazy."

Erisman got the footage from a reporter for state-run television, who thought it'd be funny to follow Ma around as he got kicked out of one government office after another. "The reason the woman was filming Jack was because she thought here's this crazy guy who's clearly not going to go anywhere -- we should record this as an example of how not to behave."

Five years later, Ma started Alibaba, which would become the world's largest online marketplace, and Porter Erisman was hired as the company's first American employee.

At the time, eBay set its sights on China – and Erisman said Jack Ma used his background as a student of martial arts to engage the Western giant.

"One of the key principles in martial arts is you can use an opponents strength against them," says Erisman. "So when we looked at eBay with their big advertising campaign, we realized we could use that campaign to help promote Taobao."

Taobao, Alibaba's shopping site, was launched to fend off eBay.

Alibaba embarked on an aggressive media campaign, attacking eBay and questioning which company was better for China. The strategy worked -- every time eBay ran a local ad, it got people thinking about this new Chinese shopping site Taobao. eBay eventually pulled out of China, and Taobao -- with its hundreds of millions of users -- is a big reason Alibaba is expected to raise billions from investors when it goes public.

That's despite Jack Ma's attitude towards Wall Street, which he shared with Alibaba empoyees at a company gala in Porter Erisman's film.

"Let the Wall Street investors curse us if they want," Ma shouts from a stage in front of thousands of employees, "We will still follow the principle of customers first, employees second, and investors third."

The nuances of the "1 percent"

Thu, 2014-05-08 15:33

Last week, we did a story about how likely it is that anyone in the United States will spend even a little part of their lives in the 1 percent. We got a lot of feedback —comments, questions and discussion about income inequality vs. wealth inequality, about the 1 percent vs. the 0.1 percent and about economic mobility. There's so much interesting stuff to talk about, we decided to dive back in to the issue and answer some of the questions you raised.

Q. The story looked at some new research by Mark Rank and Thomas Hirschl that suggests one in eight americans will make it in to the "1 percent" of earners for at least a year of their lives, to which Andrew Tong responded on Facebook: "Perhaps in income. But most certainly not based on net worth!" 

So what’s the difference between income and net worth?

Andrew brings up a good point. Rank and Hirschl's research looks at the 1 percent in terms of income. In this case “income” means the money a household makes in the course of a year, mainly through working a job and getting a paycheck.  (The data did also count money a family might have inherited in a given year. It did not include capital gains.) 

In dollar terms, a household would be in the 1 percent of earners today if it makes more than about $360,000 in a year. 

But as Andrew and others pointed out--- income is just part of the story. If you’re interested in the way economic resources in the U.S. are distributed, you have to look at income but also about wealth or net worth. That is, the total money you have in the bank, plus the value of your home(s), car(s), investments; minus all your debts.

To be in the top 1 percent in terms of wealth there is a much higher bar. You'd have to be worth more than roughly $8.4 million. 

Q. What do we know about wealth inequality versus income inequality?

@Marketplace So income inequality isn't so much the problem. It's WEALTH inequality.

— Sammy Saber (@SammySaber) May 5, 2014

The short story is that wealth inequality is growing right along with income inequality, especially at the very top. The Economic Policy Institute estimates that in the early 1960s, the wealthiest 1 percent in the U.S. had 125 times the wealth of a median household. In 2010, that ratio had doubled, reaching 288 to 1.

It’s worth noting that data on wealth and wealth inequality is harder to come by than data on incomes. The census measures income, not wealth. Tax returns don’t paint a full picture of a person’s net holdings. Surveys like the Federal Reserve’s Survey of Consumer Finances have trouble capturing the super-rich.

Part of what makes the work of Thomas Piketty and his colleagues Emmanuel Saez and Gabriel Zucman so ground-breaking is that they have developed new ways to measure private wealth and wealth inequality over time.  Their method involves taking tax returns, which record the income generated from assets (in dividends, interest payments or rental income), and teasing out the underlying value of those assets.

Q. Does the 1 percent even matter? Or, as Kevin Tyler put it on Facebook, “The 1 percent people are complaining about are probably only about the .01 percent!”

Yes, “We are the 99.99%" might have been a less catchy but more accurate chant for Occupy Wall Street. (Shout out to Carl Swanson for making this point on Facebook). 

That’s because the most intense rise in incomes the U.S. has seen in the last forty years isn’t among the top 1 percent, but the top 0.1 and 0.01 percent.  Check out this graph, that the Atlantic’s Derek Thompson built out of data from Thomas Piketty and friends’ World Top Incomes Database:

 Chart by Derek Thompson, Data from World Top Incomes Database

It’s also important to note that the kind of income the tippy top of the 1 percent is earning is mostly not the wage or salary kind that most Americans earn. It’s capital gains-- money made from investments in real estate or in the stock market. And that money is taxed at a lower rate than the plain old “income” you get from a pay check at a job.

There are also growing disparities within the 1 percent of households as measured by wealth (as opposed to income).  The rise over the last few decades in the share of total wealth these households own has been almost completely driven by a rise in the wealth of the top 0.1 percent (households with a net worth of more than $20 million today). Those at the “bottom” of the 1 percent have seen their wealth relatively stagnant.

And yet, as critical as the 0.1 and 0.01 percent are to our understanding of wealth and income inequality, we shouldn’t entirely ignore the plain old 1 percent. Even if people at the bottom of this percentile don’t always “feel” rich, it’s worth remembering that if your household makes more than $360,000 in a year—even just a single year—you’ve got things pretty darn good compared to 99 percent of the rest of America. 

Q.  What about economic mobility? How does the fact that one in eight Americans might join the 1 percent of earners for a year at some point in their lives fit in to the larger question of how possible it is to move up the economic ladder over the course of your life?

This is a really important question.  We love our rags to riches stories, but it's a mixed bag here in America. Rank and Hirschl’s research suggests that more Americans than you might expect jump in to the 1 percent of income distribution at some point in their lives, but very few stay there for very long. And it’s more than seven times more likely for a white person to reach the 1 percent than for a person of color. 

Then there’s the fact that Americans have a greater chance of living in poverty for a year than living for a year in the 1 percent.  In earlier research, Rank found that  40 percent of American adults will spend at least a year below the official poverty line. 

When it comes to overall rates of economic mobility, new research from Harvard economist Raj Chetty shows that it’s about as hard to climb the economic ladder in the U.S. as it was 20 years ago. The good news is that today most Americans will live in households with higher incomes than their parents (even after adjusting for inflation).  But that’s largely due to the rise in two-earner homes. 

And when you look at economic mobility in the U.S. compared to other industrialized democracies, we don’t fare so well.  It’s harder for Americans to climb in to a different part of the income distribution than the one their parents were in— say, from the bottom 20 percent to the top 20 percent.   If you were born in to poverty in America, the chances of escaping it are half as good as they are in a country like Denmark.  

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