Marketplace - American Public Media

The numbers for November 10, 2014

Mon, 2014-11-10 10:18

Stakes have been raised in the fight for an open Internet.

President Barack Obama took a strong stance for net neutrality on Monday morning. In a recorded statement, Obama called for the Federal Communications Commission to reclassify broadband as a utility, like water or electricity, under Title II of the Communications Act.

The FCC, which is independent from Congress and the White House, actively sought comment from the outside on the issue. FCC Chairman Tom Wheeler said the Commission would add Obama's input to the 3.7 million-comment pile that they've already received.

The FCC was originally expected to introduce new rules by the end of the year, but Wheeler has said they will take more time.

Republicans hope to update the Communications Act for the first time since 1996, and net neutrality will play a role. Texas Senator Ted Cruz signaled further politicization of the issue by calling net neutrality, "Obamacare for the Internet," in a tweet after the president's announcement.

Here are the other stories we're reading and numbers we're watching: 

45

"Sesame Street" debuted 45 years ago, on November 10, 1969. For the occasion, The Atlantic dug up their initial review of the show, which praised the muppets but lambasted the show's potential, thanks in part to its "great stress on the alphabet." On "Marketplace," we've explored Elmo's dominance in toy sales, "Sesame Street"-branded schools overseas and where different characters fall on the economic spectrum. What does Oscar the Grouch care about most during the election? Stimulus spending.

8,019,763

That's how many people bought a health plan using an insurance marketplace under the Affordable Care Act. The Kaiser Family Foundation estimates there are about 20 million more potential buyers. The latest iteration of Healthcare.gov went live Sunday night and open enrollment starts this weekend. Vox breaks down what to expect from round two of the ACA.

1 percent

That's the portion of Internet time people spend on Twitter, according to a Morgan Stanley chart featured on Quartz. Compare that to Facebook, which accounts to about 15 percent of time spent online. It's no wonder the company wants to publish content directly.  

Stuxnet, Digital Weapons, and Countdown to Zero Day

Mon, 2014-11-10 09:29

Stuxnet is a computer worm that was discovered in 2010 and was used against Iran's uranium enrichment program.

Kim Zetter's book "Countdown to Zero Day: Stuxnet and the Launch of the World’s First Digital Weapon" goes deep into the discovery of Stuxnet, how it was used and discovered in the past decade and the future of digital weapons. 

Stuxnet was designed not to steal anything or harm computers, but for mere sabotage of physical equipment. While Zetter agrees Stuxnet may have prevented a "kinetic war," she suggests it also opened the possibility of damage to critical digital infrastructure in the not-too-distant future.

"There’s no going back," she says.

Read an excerpt from "Countdown to Zero Day":

Prologue

The Case of the Centrifuges

 

It was January 2010 when officials with the International Atomic Energy Agency (IAEA), the United Nations body charged with monitoring Iran’s nuclear program, first began to notice something unusual happening at the uranium enrichment plant outside Natanz in central Iran.

Inside the facility’s large centrifuge hall, buried like a bunker more than fifty feet beneath the desert surface, thousands of gleaming aluminum centrifuges were spinning at supersonic speed, enriching uranium hexafluoride gas as they had been for nearly two years. But over the last weeks, workers at the plant had been removing batches of centrifuges and replacing them with new ones. And they were doing so at a startling rate.

At Natanz each centrifuge, known as an IR-1, has a life expectancy of about ten years. But the devices are fragile and prone to break easily. Even under normal conditions, Iran has to replace up to 10 percent of the centrifuges each year due to material defects, maintenance issues, and worker accidents.

In November 2009, Iran had about 8,700 centrifuges installed at Natanz, so it would have been perfectly normal to see technicians decommission about 800 of them over the course of the year as the devices failed for one reason or another. But as IAEA officials added up the centrifuges removed over several weeks in December 2009 and early January, they realized that Iran was plowing through them at an unusual rate.

Inspectors with the IAEA’s Department of Safeguards visited Natanz an average of twice a month—sometimes by appointment, sometimes unannounced—to track Iran’s  enrichment activity and progress. Anytime workers at the plant decommissioned damaged or otherwise unusable centrifuges, they were required to line them up in a control area just inside the door of the centrifuge rooms until IAEA inspectors arrived at their next visit to examine them. The inspectors would run a handheld gamma spectrometer around each centrifuge to ensure that no nuclear material was being smuggled out in them, then approve the centrifuges for removal, making note in reports sent back to IAEA headquarters in Vienna of the number that were decommissioned each time.

IAEA digital surveillance cameras, installed outside the door of each centrifuge room to monitor Iran’s enrichment activity, captured the technicians scurrying about in their white lab coats, blue plastic booties on their feet, as they trotted out the shiny cylinders one by one, each about six feet long and about half a foot in diameter. The workers, by agreement with the IAEA, had to cradle the delicate devices in their arms, wrapped in plastic sleeves or in open boxes, so the cameras could register each item as it was removed from the room.

The surveillance cameras, which weren’t allowed inside the centrifuge rooms, stored the images for later perusal. Each time inspectors visited Natanz, they examined the recorded images to ensure that Iran hadn’t removed additional centrifuges or done anything else prohibited during their absence. But as weeks passed and the inspectors sent their reports back to Vienna, officials there realized that the number of centrifuges being removed far exceeded what was normal.

Officially, the IAEA won’t say how many centrifuges Iran replaced during this period. But news reports quoting European “diplomats” put the number at 900 to 1,000. A former top IAEA official, however, thinks the actual number was much higher. “My educated guess is that 2,000 were damaged,” says Olli Heinonen, who was deputy director of the Safeguards Division until he resigned in October 2010.

Whatever the number, it was clear that something was wrong with the devices. Unfortunately, Iran wasn’t required to tell inspectors why they had replaced them, and, officially, the IAEA inspectors had no right to ask. The agency’s mandate was to monitor what happened to uranium at the enrichment plant, not keep track of failed equipment.

What the inspectors didn’t know was that the answer to their question was right beneath their noses, buried in the bits and memory of the computers in Natanz’s industrial control room. Months earlier, in June 2009, someone had quietly unleashed a destructive digital warhead on computers in Iran, where it had silently slithered its way into critical systems at Natanz, all with a single goal in mind—to sabotage Iran’s uranium enrichment program and prevent President Mahmoud Ahmadinejad from building a nuclear bomb.

The answer was there at Natanz, but it would be nearly a year before the inspectors would obtain it, and even then it would come only after more than a dozen computer security experts around the world spent months deconstructing what would ultimately become known as one of the most sophisticated viruses ever discovered—a piece of software so unique it would make history as the world’s first digital weapon and the first shot across the bow announcing the age of digital warfare.

Profits increase for luxury homebuilder Toll Brothers.

Mon, 2014-11-10 09:18

The luxury home builder Toll Brothers had some good news for shareholders today. Revenues for the quarter ending in October shot up by 29 percent.  Strong demand, especially on the West Coast, boosted the company's sales. 

This past year Toll Brothers has been aggressively expanding on the West Coast.  In southern California alone it’s developing five new communities.

But the strong quarterly showing from Toll may not say much about a wider housing market recovery. Toll focuses on the higher end of the homebuilding market, something that many homebuilders have been doing the past few years.

“Homebuilders have been serving the part of the market that’s been the healthiest, which has been older, move-up buyers that have home equity, that have more wealth,” says Robert Dietz, an economist with the National Association of Homebuilders.  

That trend has been reinforced by lenders chasing wealthy buyers, offering them surprisingly low rates on large “jumbo” mortgages.  The rates, in some cases, are even lower than those for standard loans. Housing economist Brad Hunter at Metrostudy hopes by next year, there will be signs of a broader recovery in the housing market.

“Our take is that rents are getting so high and job formations are getting better,” says Hunter.

What do CEOs do all day?

Mon, 2014-11-10 09:03

Corporate titans, leaders of Fortune 500 companies, wearers of starched white shirts, winners of enormous paychecks and occupiers of corner offices with imposing black desks and gleaming glass views. It's easy to conjure images of CEOs in offices... but what, exactly, is it that they do in there all day?

A CEO's job isn't one that's easy to categorize. It doesn't fit neatly into a one-slot job description like number-cruncher, analyst or ad-man. And when I contacted companies to try to coax out an answer, most said their CEO's time was too tight for a discussion about how they spend it.

Andrea Prat, a professor of economics at Columbia Business School, who studies this exact corporate mystery, says over 80 percent of a CEO's time "is spent in interactions with other people.”

To translate academic-speak into more conversational language: CEOs, says Prat, spend most of their days in meetings. And, he notes, most of the meetings are with employees inside the company. If you find yourself questioning this practice, concerned that meetings have a poor reputation as wasters of time, says Prat: “Surprisingly, that’s actually not what we find.”

Instead, he says, the more time a CEO spends in meetings with his or her employees, the better the company does.

"You can measure firm performance as productivity," he says. "You can measure it as return on capital employed, or you can measure it as growth over time. This strong correlation exists even when we control for everything we observe about the firm – the industry, the location, the size, the capital employed."

When CEOs aren't spending the majority of their time with employees, it can be evidence of a serious problem. It can mean, says Prat, a focus on maintaining outside visibility for the CEO – a hedging of bets. That he or she may be polishing up their resume and keeping an eye on the horizon for other job opportunities. CEOs need to be steering the ship from the inside, mostly, via meetings.

And meetings were what were happening at the two companies that agreed to let their CEOs talk to a reporter. First, at Happy Family, a maker of organic food for babies, tots and kids, 37-year-old CEO Shazi Visram has been so busy all day she's barely had time to – well....

“So I wanted to go to the bathroom like 20 minutes ago, but see, this is, that’s what happens."

Visram is talking about getting sidetracked by trying to check in with her 80 fulltime employees. Something she says she tries to do whenever she’s in her New York headquarters, like today. There's a group meeting to look at sketches of designs for product packaging, a one-on-one check-in about the design of the company website, a meeting to taste test new potential products. And in between, work on a charity project, an orphanage for kids overseas, writing an article, wrangling time zones and dialing codes to place international phone calls with Happy Family's parent company, Danone. And of course, email.

"I probably get close to 500 emails a day on average," says Visram.  "Not every one needs a response, but every one needs to be read."

A stressful prospect for any employee – C-Suite level or not. Luckily, at Sealed Air, a New Jersey-based company, with 25,000 employees, there is a special option available for the relief of nerves. Among the many products the company produces is bubble wrap. Enough, says Ken Chrisman, president of product care at the company, "to reduce the whole level of stress worldwide by at least 1 degree.”

Jerome Peribere, 59, is the company's CEO. After a tour of the Secaucus, N.J., plant he pulled out a printed itinerary of his schedule for the day.

Arriving around 7:15 a.m., Peribere caught up on emails, had a phone meeting, spoke to employees in New Jersey at a town hall meeting - and the schedule for the rest of the day? More meetings.

Sealed Air has over 100 manufacturing sites around the world, and Peribere estimates he spends 60 percent of his time traveling to visit customers, plants and offices.  

At Happy Family, Visram says she does a little bit of everything – sales, marketing, management. Being a CEO, says Visram, requires a certain personality type – someone with a strong vision for the future.

Yeah, I’m a little bossy – but in a good way. If a corporate culture is all about collaboration, and there’s no one person who can say, 'you know what, this is great, but we’re going to do this and this is why,' you’re asking for chaos.”

Andrea Prat says CEOs put in just over 11 hours at work every day. But he says it's probable they work even more. His study is limited to the hours a CEO was observed working, or had been scheduled for work activities, by her or by her personal assistant.

"So if, for instance, after dinner they make phone calls or they do emails, we don’t observe that," he says.

Being CEO, says Peribere, is more than a full time job, and isn't limited to five days a week.  "The good thing about the weekend is that you can spend quality time working," he says.

 

Visram is not only CEO of Happy Family, but also the company's founder. She recalls putting in epic hours during its start-up phase. She was also pregnant.

"And I would literally think, 'I’m not going to drink too much water right now, because I’m going to be on the phone for an hour and a half, and I don’t have the time to go and literally walk all the way down the hall,' because the restroom was really far away."

Visram would get so busy, she says, she used to sleep on the floor of her officewith a little blue blanket and a yoga mat, until an employee felt sorry for her and splurged on a $100 fold-out bed. She still keeps the yoga mat in a corner of her office. So when people bring up the touchy subject of high CEO pay, Visram says that while she's not familiar with the workings of banking institutions, "the CEO pay scales that really get critiqued"– she is quick to voice her opinion about the pay scale of other corporate leaders:

“I believe that for the folks who are in that position, many of them have really earned it, and they’ve paid their dues,” she says. "I was the CEO for four years of this business, and I was making $36,000 a year, living in New York City, and I had an MBA from Columbia. So, I think it all balances out."

Peribere, who is originally from France, says he applauds the American practice of publishing the salaries of top executives of public companies.

"I like very much this transparency with the concept of being paid for the value you create," he says. "You have CEOs who have created zero value during their tenure. I think it is unfair to have very high salaries for people who have created zero value."

He takes out his phone and pulls up a chart of Sealed Air's stock performance dating back to before he started with the company.

"It was at $13 the day before my nomination has been announced," he says. "And it is today at $35."

Peribere says the company has done well, so the executive team should be rewarded – reasonably. And, he notes, not everyone is cut out to be CEO. A company's leader has to be able to see the light at the end of the tunnel, he says, as well as to lead their team there. Like when employees use overly complex language in presentations, and he asks them "what do you mean?"

"And then the person tells you oh, what I meant is, 'this is where we are, this is where we’re going and these are the five things we need to do to get there.' And my answer systematically is – just say so. Business is simple; people make it difficult.”

PODCAST: Natural gas, naturally

Mon, 2014-11-10 07:40

What does it mean when buying stocks in China gets quite a bit easier?  Andrew Batson, China Research Director at Gavekal Dragonomics, joined us from Beijing. Plus: Wholesale natural gas prices spiked last week, and they're back up this morning on news of a new polar vortex. Finally: natural gas production, however, shows no sign of abating - the question now is what to do with all of it.

Wall Street bonuses as economic indicator

Mon, 2014-11-10 05:45

It’s that time of year again: Wall Street bonus season. 

A survey Monday from Johnson Associates suggests this year will bring good news and bad news to different sectors of the financial industry, providing a mixed indicator of the health of the American financial industry, as well as the economy as a whole. 

The survey has bad news for some of finance's risk takers: Hedge funds and traders of stocks and bonds are predicted to see bonuses drop by as much as 10 percent from last year.

 "The first question is: 'Why are the trading bonuses lower?'" says Wallace Turbeville, senior fellow at Demos and former Goldman Sachs investment banker. "That could be a lot of reasons."

Turbeville thinks it could be due to lower stock market volatility or an increase in automation. "But the real question is whether the traders are changing their behavior and putting less risk on the books at the banks and hedge funds," he says. "That kind of risk can blow up, of course, that's what happened in 2008."

The Johnson Associates survey projects other sectors of the financial industry to see bonus increases. Investment bankers and private equity employees working on mergers and acquisitions are predicted to see increases of up to 15 percent.

"The picture is really quite bright, or it is getting brighter, for investment banking," says S.P. Kothari, deputy dean at MIT's Sloan School of Management. 

This is in part because of a number of big mergers and acquisitions this year, like Comcast's acquisition of Time Warner and AT&T's acquisition of DirecTV. This year's M&A activity is on track to be one of the biggest, in dollar value, of all time.

"The merger activity is a harbinger of good prospects for the economy," says Kothari.

 For the financial industry, the good and bad prospects more or less average out: With bonuses factored in, take-home pay at commercial and investment banks is expected to be about the same as last year.

Electricity as utility. A model for the internet?

Mon, 2014-11-10 04:00

 

Update 11/10/2014: President Obama made a statement this morning calling for "free and open Internet," citing the 4 million comments sent to the FCC regarding net neutrality.  

For context, read on.

As Federal Communications Commission chair Tom Wheeler moves closer to releasing new rules on net neutrality and internet "fast lanes," many open internet advocates have been calling for the FCC to reclassify internet service providers as "common carriers."

Doing so would effectively turn them into public utilities like power, gas and water services, and thereby subject them to more strict regulation.

But some of those utilities themselves started out as products sold on the open market, just like internet service. So how did they get regulated as public utilities? For the best comparison with the internet's current situation, look at how another "new" technology went from market good to public good: electricity.

In the case of electricity, it starts with Edison.

With a patent for the first practical light bulb in 1879, Thomas Edison needed an actual market of people who could use his invention, meaning a way to get power to his customers. In 1882 his Edison Illuminating Company constructed the first central power plant in the United States, the Pearl Street Station in New York.

The catch with early direct current power plants, however, was that they couldn't generate power at very high voltages. The power couldn't travel that far along the copper wires without weakening the further it went. But as electricity gained popularity and more appliances were created to use it, numerous companies began building power plants to supply electricity to individual neighborhoods, each station selling power to customers within a small radius.

This is where goverment regulation entered the picture, in the form of municipal franchise agreements. Those agreements allowed the companies to dig up streets and build infrastructure. In exchange, they had to meet certain price caps and service standards. These controls, usually administered by city governments, were in fact very weak.

The large investment costs usually prohibited one company from owning all the power stations in a single city at first, but the different firms would often compete over customers in areas where their services overlapped. As companies were able to expand their reach, customers in large cities like New York and Chicago actually experienced a sort of golden age of price wars with many local companies competing against each other.

The competition was short lived, however, as single companies gained monopolies over large cities and increasingly advancing technology made for high barriers of investment in infrastructure needed for a new competitor to enter a market. The market for internet service providers is kind of at the same point right now in terms of barriers to entry, as telecom and cable companies have consolidated to a certain extent, buying up smaller regional ISPs. This has made it pretty much unfeasable for new competitors to get in the the game without considerable resources.

The old municipal franchises that governed electric companies also became prone to corruption from city politicians. In the early 1900s, an entrepreneur named Samuel Insull who had exploited the economies of scale to dominate the Chicago market argued along with other electric utilites that they were "natural monopolies," that resulted from the inherent barriers to competition in large markets.

State governments attempted to regulate these monopolies with legislation, but power barons like Insull were able to outmaneuver the efforts by restructuring their businesses with holding companies that were not covered by the reforms. By the late 1920s, the Federal Trade Commission was investigating the holding companies for market manipulations.

It wasn't until the onset of the Great Depression, and the strong reforms of the New Deal that power over electric utilites was taken away from the holding companies in the form of the Public Utility Holding Company Act and the Federal Power Act of 1935, transferring much of the regulatory power over eletricity over to the federal goverment.

This was significant not because power utility monopolies were split up, but that the "natural monopolies" were in fact legitimated; they could exist, but they had to be under government control. The federal legislation, along with other New Deal legislation, actually provided for the creation of a number of government monopolies over public goods.

As it stands now, internet service providers are sort of stuck in between being a wholly private good or a heavily-regulated public utility. Until recently, the FCC has successfully imposed on ISPs to treat all content the same in terms of speed of access, but they haven't set caps on how much they can charge or set standards for quality of service as are required of utilites like water and power.

The federal government has also subsidized ISPs to the tune of $200 billion to build a fiber broadband infrastructure for schools and low-income regions, which many activists contend they never completed. Following the model of electic utilites, further government investment could hypothetically result in internet infrastructure owned by the government itself.

It's unclear whether the internet will go along the same route to regulation as a utility, but with nearly a third of Americans having no choice for their internet service provider, the circumstances are starting to look very similar.

What it's like to drive a car powered by natural gas

Mon, 2014-11-10 03:00

America’s natural gas production shows no signs of abating. And increasingly, the question is: What to do with all of it?

One proposed solution is to drive cars on it, which is possible. But likely?

Marketplace’s Scott Tong conducted a test drive on a recent reporting trip to Michigan:

As soon as I land at the airport, the dual-fuel truck is waiting. This Ford F-150 burns gasoline and natural gas. The vehicle drives the same, except there’s just one switch to flip on the alternative fuel.

The benefit of natural gas? Let’s talk a bit of chemistry. Natural gas is one of several hydrocarbons: ethane, propane, butane…

“Natural gas is the simplest one,” says John DeCicco of the University of Michigan Energy Institute. “It’s just one carbon atom with four hydrogen atoms. And because it just has one carbon, it burns very cleanly.”

When it’s burned, natural gas emits half the amount of greenhouse gas CO2 than gasoline.

DeCicco joins me as we drive to a nearby gas station. There, commercial driver John Duffiny is filling up at a special pump for his natural gas van.

“It drives great,” Duffiny says. “Just like a gas motor. You punch it, you get to 80 miles an hour in [a]  minute. I shouldn’t say 80 … 70 miles an hour.”

And on this day, the fuel costs 30 percent less than gasoline, per unit of energy.

Now here’s the rub: First, I can’t work the natural gas station hose. It looks different. It goes into a different place in the vehicle. And the pump has a problem with its compressor.

To fill a natural gas tank, the fuel has to be pushed in, or compressed. Hence the term “compressed natural gas,” or CNG. It’s like filling a tire with air. Natural gas is similarly gaseous. It’s not a liquid.

“Think about filling up a balloon,” DeCicco says. “You have to blow it up. And what this pump is doing is the same thing.”

Another trade-off: the tank is really big. See, the fuel is less dense, less concentrated.

“The vast majority of people who want pickup trucks aren’t going to want to lose a bunch of their bed space,” DeCicco says.

Today, many buses and large trucks figure all these trade-offs are indeed worth it. They have space for extra-large fuel tanks. And since they often drive long distances, the savings add up.

But the rest of us, not many are sold on the idea yet. Of a billion vehicles in the world, 1 percent or so burn natural gas. 

Winter is coming: Why forecasters love a good vortex

Mon, 2014-11-10 02:00

The polar vortex is back. It hit the northern U.S. on Sunday, is sweeping down through the Midwest, and will then move out to the East Coast. Temperatures could drop by 40 degrees and bring some all-time daily lows. 

Directly in the path of this cold air mass is the city of Brainerd, Minnesota. City administrator Patrick Wussow is not panicking. When I called him, he was actually chuckling. 

Wussow had not yet heard that the area would be struck by a vortex. The city had not made any special preparations for the cold weather, nor did people in town seem overly concerned. He says: “It's business as usual, preparing for the weather whichever way it comes—cold or warm.” 

When similar weather patterns brought on historic cold temperatures in December and January last year, the media popularized the phrase “polar vortex,” and for good reason. It makes for a big weather story, and that buzz creates revenue for weather news outlets. This vortex is a top story on sites like Accuweather.com. CBS News tells readers to prepare for “the sequel.” The NY Daily News calls it a “scary weather phenomenon.” 

Dave Changnon is a professor of meteorology at Northern Illinois University. He says one of the reasons forecasters love a good vortex is that it is predictable, so it makes for an easy story. “It's not like a snow storm,” he says “where forecasters sit there and say, 'oh, we are going to get buried with two feet of snow' and then all the sudden it misses.” If the weather patterns show a polar vortex is coming, it is coming. 

People have pretty short weather memories says Changnon, so they forget that these vorticies are nothing new. They are a reoccurring and documented part of the weather pattern, and he says people in their 40s should remember similar cold weather in past Novembers. 

This vortex is a little unusual, Changnon says, because it is appearing earlier in November than most. But for that reason, he says it won't be anywhere near as cold as last year's vorticies. Changon says people in the affected areas should just prepare for temperatures that feel more like January instead of November. 

 He, for one, plans to wear a scarf and coat.

The cost of freezing your eggs

Fri, 2014-11-07 15:11

Apple and Facebook offered to pay, to different degrees, for employees to freeze their eggs. Citigroup says they too will provide coverage for egg freezing.

I thought, OK, I'll talk about it. Marketplace Weekend is about how the economy collides with real life. Here's how it collided with mine.

A few years back, I got sick. I have a condition called endometriosis, where uterine tissue grows in places it shouldn't. And it can make it hard to have kids. So, in between surgeries bookending a few years of my life, I froze my eggs.

It cost me $7,000, insurance covered the drugs, which were $1,800. The rest, I paid out of my own pocket. Storage runs about $300 a year.

It was scary. Painful. Expensive. And I still don't know if all that money and effort will ever be worth it, because the science is pretty new.

But, I do know that I bought myself maybe a little confidence to go forward in my career, and not worry late at night that I'm throwing away my chance to be a mother, because I love my job.

And if more companies are going to pay for women to have this expensive chance, what does that mean? Maybe greater freedom to work in your 20s and 30s?

And that brings us to this weekend's number: 4.4 percent. American women's earnings at work decrease 4 percent for every child they have, according to a study at the University of Massachusetts.

And yes, it controls for education, hours, and different types of jobs.

Weekly Wrap: Jobs report

Fri, 2014-11-07 14:45

Joining Kai to talk about the week's business and economic news is Nela Richardson from Redfin, and John Carney of the Wall Street Journal. The big topic this week: The unemployment report.

Click play on the audio player above to hear the whole discussion.

Ralph Peer: The man behind the modern music industry

Fri, 2014-11-07 12:40

The mythology of the early music industry in this country is filled with enterprising A&R men -- that stands for "artists & repertoire"-- men who scoped out new talent all over the country, sign contracts and make a little money. Some made piles of it. 

Ralph Peer, whose career started with wax recording cylinders and ended with vinyl LPs, was one of them. Peer was a major force behind popularizing what was then known as roots music: country, gospel, blues, and later, jazz. Those staples of American music weren't really a part of the popular music scene in the early 20th century. 

The literature on Peer is thin, though, according to Barry Mazor, limited mostly to brief mentions in the biographies of country greats he helped discover. When Peer's family approached Mazor, he got access for the first time to royalty statements, Peer's papers and letters. His ensuing book is Ralph Peer and the Making of Popular Roots Music. 

When he got into the music industry, the focus was on sheet music and songs fresh off Broadway. Genres like blues and gospel got little-to-no attention outside of churches and local dives. Then in 1920, Peer recorded Mamie Smith singing "Crazy Blues." 

 

"It was the first recording of blues sung by an African-American ever," Mazor said. "It hadn't been done."

And the record went on to sell 1 million copies. It bears repeating: this is 1920. 

"He saw something early on," Mazor said. "The reason he would bring Jimmie Rodgers or the Carter family... they were strong personalities with songs. The personality would sell the song, and then the song would sell again."

In other words, every new recording of the song, by new artists, benefitted everyone who worked on the originals. They made money off the royalties. Peer set the standard for that game. The blurbs for Mazor's book include everyone from Chuck D to Bob Dylan, Ry Cooder and Donovan. 

"Their business wouldn't be there if he hadn't been there first," Mazor said. 

Robert Gates: 'We have to be more engaged' in Iraq

Fri, 2014-11-07 11:43

President Barack Obama announced Friday that he will send up to 1,500 troops to advise and train forces in Iraq.

Marketplace's David Gura asked former Defense Secretary Robert Gates about the possibility of further deployments. Plus, how another across-the-board spending cut would, in his view, blunt military effectiveness. Listen to the full interview (or read the transcript below):

 

 
David Gura: President Obama said today he’s going to deploy up to 1,500 more personnel to Iraq to fight against ISIS. Do you think that move was inevitable? We see these numbers climbing up. Will they keep climbing?

Robert Gates: I understand the President’s desire not to re-fight the Iraq War. I don’t think there are very many Americans who want to do that either. The challenge that I think he faces is to draw a distinction between having a substantial advisory presence there and sending in battalions and brigades who are going to be the primary combat forces. So I think as long as the mission and role of these troops is constrained, I think you can keep the numbers to very small numbers.

I personally believe that you cannot achieve the President’s objective of destroying ISIS without having embedded trainers and advisers with the Iraqis and with peshmerga and some of the Sunni tribal leaders and so on. I think you need forward air controllers, spotters, and we need some special forces. But I think -- I think we’re talking in terms of hundreds of troops, not thousands or tens of thousands. So, I think to be able to achieve his objective we are going to have to be more engaged on the ground, below the brigade level.

But I think that you can constrain this so that it isn’t just an inexorable march back to having significant numbers of combat troops. The key will be, that if we have these embedded advisers, and even that is not working, to be able to say, okay, now what’s the alternative? And the alternative is not going back into Iraq with a large ground force of American troops.

So there’s more here than just a semantic distinction when we’re talking about trainers and advisers. They really are doing something different.

Oh yeah, there’s a difference between being a trainer and adviser at the brigade level, or at the division level – which puts you way back from the front, if you will, from the fighting – and having somebody who’s embedded with an Iraqi company or an Iraqi battalion that is out there on the front lines. There is risk associated with that. There’s no two ways about it. And that’s why you have to limit the forces that are doing that.

But it’s hard for me to see how they retake ground from ISIS – for example, to retake the city of Mosul – without some pretty close-in, Western, including American, assistance, advice and training.

While there’s this ramp up, how hard is it to execute these missions when there’s the threat of these automatic spending cuts due to take effect in 2016?

I’ve said publicly, there may be a more stupid way to cut the federal budget than through sequestration, but I can’t imagine what it might be. This is absolute madness because it requires us to cut the most important things that we are doing at the same level, or at the same percentage you’re cutting the stupidest things we do.

At the same time as we’re cutting perhaps some bureaucracy and overhead, we’re cutting the money that has been set aside to take care of wounded warriors and their families, family counseling programs, as well as modernization programs, maintenance and operations, so I think that this Congress and the President have a “must have,” as a very high priority, getting rid of sequestration.

If they want to cut the budget, then do it through the regular budget process, and set aside this crazy plan that even they didn’t want to enact.

Your Wallet: Profiting on passion

Fri, 2014-11-07 11:18

This week, we're exploring how you've tried to make money our of your passion.

Whether the arts, music, theatre, basket-weaving, how'd it go? How much support did you get?

We want to know. 

Send us an email, or reach us on Twitter, @MarketplaceWKND

How the U.S. might get to wage growth

Fri, 2014-11-07 11:00

The economy added 214,000 jobs last month, and the unemployment rate ticked down to 5.8 percent, according to Friday's federal jobs report

The fly in the ointment was the same fly that's been in the labor market ointment for years now: Wages are stuck.

Average hourly pay rose three cents last month. And to some extent this all makes perfect sense. Economists say after a recession there’s a natural order to a recovery.

Wharton economist Kent Smetters says to think of a recession like a monster fire that burns down the forest where,“you get a lot of job growth, that’s the trees growing up. But as they get taller they are competing for sunlight and that’s kind of the wage growth.”

Smetters says in this most recent jobs report wage increases are barely keeping up with inflation. But in some industries that’s changing.  

“Trucking and manufacturing as well as some of the professional services like lawyers and accountants you are seeing higher wage growth,” he says.

Smetters thinks wages haven’t come around yet, in part because the recession left so many without a job. Smetters bets it could be another nine months before enough people flood back into the workforce to push wages up. If that does happen, “profits would not rise as fast in the future as they have in this economic recovery,” says Brookings Institution economist Gary Burtless.

And remember, Burtless says, business profits have hit record highs almost every quarter. Maybe it’s time for a bigger share to go to workers, he says.

“If they had more spending power that could boost consumption and boost the reason for employers to add to their pay roles because they can sell more stuff, more easily,” he says.

Burtless says while plenty of folks in Washington keep banging the job growth drum, voters sent an altogether different message when they supported every minimum wage hike on the ballot.

Former Trader Joe's CEO dies but legacy lives on

Fri, 2014-11-07 11:00

John Shields, who led the grocery company Trader Joe's from 1988 to 2001 and took it from a small Southern California chain to a nationwide retailer, has died. He was 82.

When Shields took over the business from his fraternity friend and company founder Joe Coulombe, Trader Joe's was a chain of 27 stores in Southern California.

He engineered a plan to reinvigorate the company and expand it nationally. There are now some 400 stores across the country, most recently in Idaho and Colorado.

"They have almost a cult-like following," says David Livingston of DJL Research. "They don't try to compete with big chains, ... they grow very slow and methodically, because they're very conservative financially and they're extremely cautious."

Those are values John Shields instilled in the company. But he also invested heavily in the Trader Joe's brand by asking his small team of buyers to becoming Research & Development experts - to travel the world seeking out new and interesting foods. He also branded those foods with the Trader Joe's logo.

"Much of what they sell is their own... label stuff," says Jon Springer, retail editor at the trade publication Supermarket News, "You can't buy Trader Joe's brand tortilla chips in any store."

That exclusivity has given the grocery chain an edge and it was very much a deliberate part of John Shields' strategy.

"We set our own rules on how we were going to run our company. We were going to develop the product, put our names on them. And these are the kinds of decisions that differentiate yourself from your competition," Shields said in a 2010 speech at the Corporate Leaders Breakfast Series at California Lutheran University.

In the last decade, the expansion that Shields began has continued. The company — which is private and notoriously secretive — is estimated to generate about $11 billion in revenue, according to Supermarket News.

"Today, they're the kind of company that... communities that don't have Trader Joe's have Facebook pages urging them to come," says Springer, "there's a lot of excitement when they do come to a city."

After all, how many grocery chains do you know with their own fan-written song?

Take the jobs report with a grain of salt

Fri, 2014-11-07 11:00

The jobs report today announced 214,000 new jobs last month. The unemployment rate dropped to 5.8 percent.

Except maybe not.

The Bureau of Labor Statistics tells us the jobs report is accurate to within 90 thousand jobs plus or minus, and 0.2 percentage points on the rate.

So maybe it's 124,000 new jobs and a 6 percent unemployment rate. Probably not, but maybe.

Low gas prices: exciting. Global warming: borrring.

Fri, 2014-11-07 11:00

As economic actors, we all act in accordance with costs and benefits, right? Gas prices are down 30 percent, there’s benefit there.

But what of the long-term environmental costs of climate change? We tend not to be urgent about that. And economists and social scientists are entirely not surprised by this.

There are countless examples of people failing to plan long-term: smoking, grabbing that third doughnut, failing to save for retirement, burning fossil fuels.

The cost or benefit is too far away.

“Imagine somebody offered you some investment,” says behavioral economist Dan Ariely of Duke, author of Predictably Irrational. “And they say here’s an investment you can pay now. And you can win 1,000 times more. But in 200 years. Would you invest in that? And people are just not designed to do this."

People do react when emotions are stirred. Imagine an enemy burning the globe.

“If we thought that the Martians were trying to bake us, imagine there was a conspiracy theory that global warming was not manmade but these Martians were really trying to cook us and they have these devices,” Ariely says. “We would have spent a tremendous amount of money creating spaceships and so on to fight them back, because there was a way to direct our emotions.”

It’s not that scientists aren’t loud about climate change. The latest report warns of “irreversible impacts” of global warming, and 95 percent confidence that humans are the main cause.

Courtesy of IPCC

"Temperature Rise"

We just don’t listen to them.

Courtesy of Yale/George Mason University

Global Warming's Six Americas.

“If you’re green, you’ll trust Bill McKibben. And if you’re brown, you’ll trust George Will,” says risk perception consultant David Ropeik, author of “How Risky Is It, Really?” “It doesn’t matter what the facts are. It matters whether you trust who is giving them to you, because you want to be true to the tribe.

In fact, some go so far as to argue there’s too much science out there.

“We’re well past the point where messaging the science or trying to communicate about the science more effectively is going to change anyone’s opinions,” says Northeastern University communication scholar Matthew Nisbet. “If anything, that’s going to move people to the poles.”

That’s poles, not polls. In this year’s midterm, climate was hardly an issue. According to a Pew poll, voters ranked it eighth in importance out of 11 issues.

Many people have written it off as faraway problem.

“People have been hearing about climate change for a couple decades now,” says environmental scientist Ezra Markowitz of the University of Massachusetts Amherst. “The earliest messages that were put out there about this issue was it was an issue that was going to affect other people, other species, not us today. It’s very difficult, if not impossible, to just get rid of the things that people already know and think about an issue, especially a complex issue like climate change.”

Markowitz and others say the key is to bring a long-term issue closer to people’s lives and everyday thoughts. One bank website even takes your photo and ages you electronically, to make your future more real.

If that doesn’t work, events will eventually focus people’s minds, perhaps first in low-lying areas and those with more irregular weather patterns.

“In the summer of 2010 there was a horrible heat wave in Moscow,” says Matthew Kahn, UCLA economist and author of Climatopolis. “And it killed thousands. Nobody in Moscow had an air conditioner. In the aftermath of that event, thousands of people have purchased air conditioners there. The people have adapted and changed their lifestyle to be ready for the next shock.”

Adaptation may come too late for some. But self-interest is a true climate-change motivator.

Social scientists weigh in on why we don't care about climate change

 

 

A crash course in climate change sociology

Social scientists understand that people aren't that concerned about climate change. And yet they still see climate change as a huge issue. Here are some tools to help get inside the mind of a social scientist and see things from their perspective starting with some key concepts and terms.

Availability heuristic: people think of immediate examples when evaluating a topic, concept, method or decision. Things that come to mind easily are thought to be more common and accurate reflections of the world. This can cause people to make bad assessments of risk.

Free-rider effect: individuals in a population who consume more than their fair share of a common resource, or pay less than their fair share. Or a person who gets something without effort or cost.

Cultural Cognition: the tendency of individuals to conform beliefs about disputed matters to values that define a cultural identity. People conform their beliefs with the group they are in.

Identifiable Perpetrators: the tendency of individuals to offer aid or punishment when a specific identifiable person is observed, rather than a large, vague group.

Population of Mister Spocks v. Homer Simpsons: I think this one speaks for itself.

Your Twitter follower count doesn't mean a thing

Fri, 2014-11-07 10:55

Kevin Ashton created an internet celebrity named Santiago Swallow for 68 dollars.

He blended three faces from portraits from Google images to create Swallow’s face using a free trial of Adobe Lightroom. He made a website. He bought Swallow 90 thousand Twitter followers online.

As part of his social experiment, Ashton used an online application called Status People. The website claims to tell you how many of your Twitter followers are real, inactive or what they call fakers, also known as Twitterbots.

I was suspicious. How can Status People actually differentiate between a bot and a real person?

For example, according to Status People only about 40 percent of Justin Bieber’s Twitter followers are real. So that would mean 33.6 million (give or take a point million) of his 56 million followers are fake or inactive.

Social status today is defined in part by social media. The difference of a few million or even a few thousand Twitter followers is huge. It determines your Twittersphere hierarchy, your social media power ranking, your on and offline reputation.

So I started thinking: who else? What about Lizzie O’Leary?

 

 

 

Turns out, according to Status People, Lizzie’s Twitter followers are 21 percent fake, 29 percent inactive and 50 percent real, active, contributing members.

And what about the official Marketplace Weekend account?

 

 

 

And of course, what about me?

I am far from a Twitter celebrity: At 188 followers (more or less depending on the day) and only about 300 tweets, I realize that by Twitter standards I’m not exactly a big deal. But come on, I had to know.

 

 

 

According to Status People only 1 percent of my followers are fakers and 23 percent are inactive. That’s pretty good—or at the very least better than Bieber. But mid-gloat I hit a snag.

When the site analyzed my followers, its metric determined that two of them were fakers. This whole time, I thought this app was weeding out robots, but both of my “fakers” are real people. Like, I-know-them-in-real-life, real people. One of them is my grandma.

So my suspicions were confirmed: Status People isn’t guaranteed to differentiate between bots and humans.

On Status People’s website, they list part of their methodology like this: “On a very basic level spam accounts tend to have few or no followers and few or no tweets. But in contrast they tend to follow a lot of other accounts.”

So it makes sense why Status People thought my grandma was a bot. She has zero tweets, zero followers and she is following one person—me.

 

 

The process of telling the difference is tricky, according to Dr. Steven Gianvecchio, co-author of the paper “Detecting Automation of Twitter Accounts: Are You a Human, Bot, or Cyborg?”

“I think that one of the problems you run into with Twitter is there are a lot of shades of grey,” he said.

Dr. Gianvecchio said sometimes accounts are partially automated, like if someone auto-tweets their blog. And most people don’t have a problem with that sort of automation.

Profiles like my grandma’s, however, would be considered unwanted, according to Gianvecchio.

“Those accounts, most people would consider to be unwanted because for the most part you really want to be interacting with other people,” Gianvecchio said.

So while Status People isn’t perfect at differentiating between bots and humans, it does weed out these unwanted followers who aren't interacting.

This is what I labeled the “grandma paradox.”

On one hand, my grandma serves no purpose on Twitter. She’s not a contributing member of social media, so there’s really no reason for her profile to exist. Sorry grandma, you might as well be a robot.

But on the other hand, my inner narcissist says, go ahead, grandma! In fact, tell all your grandma friends to make useless profiles and follow me too. The more the merrier, as long as my follower account is high.

And that’s probably how Justin Bieber feels too. It doesn’t matter that millions of his followers are robots, or might as well be, as long as some of his followers are real and interacting.

Gianvecchio emphasized quality over quantity. “I think that the number of followers that someone has is a meaningless metric at this point,” he said. 

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