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Why water conservation doesn't mean lower water rates

Wed, 2014-10-08 05:27

Tap water is still one of the cheapest things you can buy these days.

Of course, out West many households have to conserve water because of a drought. In other parts of the country, folks are using less water not only because they want to conserve, but also because appliances are way more efficient than they used to be. Still, many of those folks are finding that no matter how much water they save, their water rates still go up. They’re using less water, but paying more per gallon.

Why? Put simply, when water consumption drops, so do the main revenue streams for water and sewer agencies. But whether you use one drop of water or a thousand gallons, utilities still bear the cost of cleaning it and sending it to you. Those costs are mounting.

To get a quick sense of the success of passive household conservation, just walk into a store that sells toilets.

“We’re looking at a couple of models here,” says Sean Jones as we walk down through the Home Depot in Gaithersburg, Maryland. “American Standard, Glacier and we have Kohler.”

Twenty toilets in a gleaming row, and when all of them flush, they flush low-flow. Decades ago, toilets used five to seven gallons of water per flush. Now, every toilet here uses far less, to meet EPA criteria.

Jones says now it's “1.28 gallons of water flushes per flush."

It’s not just toilets, though the EPA says toilets are the main source of residential water use. Decades of federal standards have created a new normal: water efficient dishwashers, shower heads and washing machines that save thousands of gallons a year.

Water and wastewater utilities also urged conservation, including the Washington Suburban Sanitary Commission, or WSSC, in Maryland.

“We’ve had a 30-plus year message of conserve, conserve, conserve,” says West Laurel resident and WSSC customer Melissa Daston.

So, that’s just what she did.

“I’ve replaced all of my toilets to low-flow toilets,” says Daston, the past-president of her local civic assocation. “I save up all my dishes until I have a full load. I have stopped watering my lawn years years and years ago.”

The list goes on. If Daston’s water use has fallen, however, her water rates have not. She doesn’t find her bill unreasonable – and she’s not complaining – but, she’s noticed.

“They’ve gone up,” she says. “Point blank, they’ve gone up year, after year, after year, after year.”

In fact, WSSC’s acting CFO Chris Cullinan says rates have gone up about 95 percent (on a compounded basis) over the last ten years. That’s far higher than the rate of inflation.

The reason? WSSC is producing less water than it did twenty years ago, even though it’s added more than 70,000 customer accounts. Again, because of fixed costs, the less water people use, the more these public utilities have to charge for it.

“We make money when we sell water,” Cullinan says. “That’s our primary revenue source. And so while from an environmental standpoint conservation is certainly one of our objectives, from a business standpoint it certainly presents some challenges.”

The biggest challenge is aging infrastructure. WSSC has about 5,600 miles of water pipes and almost as many sewer pipes. 

“It’s from New York to LA and back, within a service area encompassing two counties,” Cullinan says.

He says decades of improper infrastructure investment mean it’s now time to catch up and do reactive maintenance. The utility is under court order to fix sewer overflows, which Cullinan says will cost about $1.4 billion.

The head of the American Water Works Association says rate increases like the ones in Maryland are happening across the nation, as decreased water use collides with the financial burden posed by buried infrastructure.

“Those pipes were put into ground anywhere from 70 to 100 years ago,” says AWWA’s CEO David LaFrance. “There’s massive needs for replacements. We estimate that over the next 25 years it’s a trillion dollar problem.”

The solution won’t all come in the form of rate hikes.

Like other utilities, WSSC wants to stabilize rate increases by charging higher fees. It has proposed a revamped account maintenance fee, which would include an infrastructure investment charge. It’s also proposed a changed customer affordability program, which requires state approval.

The utility sees recalibrated fees as a more stable, equitable way for all users to fund the infrastructure that brings them water and takes away waste.

Small users like Melissa Daston worry increased fees hurt the biggest conservers the most.

PODCAST: Laying transatlantic sea cables

Wed, 2014-10-08 03:00

We often have to go through security to get into work, but in some occupations this takes a while. Question: Are workers entitled to get paid for time spent doing the required screening? The issue is before the Supreme Court this morning. And the Federal Reserve reported yesterday that while credit card borrowing fell in August, consumers borrowed more through car loans and student loans, driving borrowing up overall. The burden of student loans on young people, age 20 through 29, is much heavier than it was for that age group a decade ago. Plus, the private company Space X with entrepreneur Elon Musk at the helm is spending this fall pushing for clearance to compete for satellite launching contracts. Now it's Boeing and Lockheed who get a lot of support from Russia for the rockets. But when it comes to communications, satellites are not the only way to go. Bjarni Thovardarson is CEO of a company called Hibernia Networks. As we speak, he's got a huge infrastructure project underway to link New York and London via Nova Scotia that's both cutting-edge and and old-school at the same time. 

The heavy burden of student loans

Wed, 2014-10-08 02:00

According to a new report from TransUnion, the burden of student loans on young people, ages 20 through 29, is much heavier than it was for that age group a decade ago. Charlie Wise, a vice president at TransUnion, looks at what is called the “consumer loan wallet” – how debt shakes out.

“Certainly, that student loan piece is a much, much larger share of that overall wallet,” he says. “In fact, it has nearly tripled between 2005 and 2014.”

On average, a twentysomething today has about $25,000 in student loan debt. That is up about $10,000 from 2005. Older borrowers are also carrying more student loan debt, in part because they co-signed loans with kids and grandkids.

Mortgages are down, as a percentage of young American’s debt. “If you were to look at that as a graphic, a bar chart, you would essentially see that the decline in mortgages is almost exactly matched by the increase in the student loan piece,” Wise explains.

There are several reasons for that. According to Brent Ambrose, the Smeal Professor of Risk Management at Penn State University, “lenders have been tightening underwriting standards; so, it is more difficult to get a mortgage now.”

Today’s twentysomethings may have learned a thing or two from the downturn. Less of their debt is credit card debt.

A farmers market at your front door

Wed, 2014-10-08 02:00

Rob Spiro is the co-founder of Good Eggs, a Brooklyn startup that brings the local farmers market to your front door.

In order to deal with the demands of an inherently unpredictable food environment, the company is putting together a software engineering team that not only builds a website where you can shop for food, but sophisticated logistic systems throughout its locations.

Good Eggs is currently providing services to Los Angeles, Brooklyn, New Orleans, and the San Francisco Bay Area. And as Spiro points out, "If you look at the market in any given city, the inventory is 100% different." Which is why the company has designed small "Foodhubs," each one with their own unique supply chain.

Being able to centralize activity will help local farmers compete with industry giants. Spiro says the ultimate goal is to have 1,000 Foodhub's located around the world, serving 10,000 food producers, and millions of customers.

Click the media player above to hear Rob Spiro in conversation with Marketplace Tech host Ben Johnson.

Stock buybacks could be good for investors

Wed, 2014-10-08 02:00

The financial press has been sounding alarms over a trend toward more buybacks of stock by big, publicly traded companies. Stories in the Economist, the Wall Street Journal, and now Bloomberg have warned that corporations may be buying back too much stock with an eye to pushing up the price, at the expense of investment in their businesses. 

Michael Mauboussin, head of global financial strategies for Credit Suisse, takes a different view. He doesn’t think more buybacks means less investment.

"When you buy back stock, it’s not like the money disappears," he says. "It’s going back to investors, who themselves are re-investing it."   

So even if the company isn’t investing in its own business, shareholders can invest in somebody else’s.

That sounds like a great idea to Aswath Damodaran, who teaches corporate finance at NYU’s Stern School of Business. When he looks at the biggest companies buying back the most stock—companies like Microsoft, Hewlett Packard, IBM—he sees a pattern.

"I mean you look at that list," he says, "and every single one of them, you look at the last decade, have a history of destroying value— of investing in things where they have nothing to show for it 5 years out, 10 years out.  I look at that list, and I say: Thank God for buybacks."

In other words, if a company doesn’t have great ideas to invest in these days, then giving money back to shareholders could be the right thing to do. And the market may thank it with a higher stock price.

GM just issued its seventh recall... since Thursday

Tue, 2014-10-07 13:16

GM issued another recall this morning — its seventh since Thursday.

This one was for a bad transmission in about 7,600 Chevy Caprice police cars.

In total, the Wall Street Journal reported that GM has issued 75 recalls this year for more than 30 million cars.

When celebrities take over the fashion world

Tue, 2014-10-07 12:29

Celebrities have been selling fashion for just about as long as "fashion" has been a thing. According to fashion columnist Teri Agins, author of the new book "Hijacking the Runway: How Celebrities Are Stealing the Spotlight from Fashion Designers," the line between "selling" and "creating" keeps getting more fluid.

"Celebrities have actually taken over, and they actually now have their own brands. So they're actually competing with designers," said Agins.

Agins says the celebrity takeover of the fashion industry is a great way for said celebrities to monetize their brands and expand into a demographic that major designers overlook. A large part of the success of that strategy, she says, is being able to relate to the consumer, as Jessica Simpson did back in 2004. After her new line of jeans didn't sell terribly well, she launched a shoe line with the backing of Nine West founder Vince Camuto - ultimately creating a a billion-dollar business.

"It was a confluence of a lot of things," said Agins. "Even though she wasn't famous for being a singer or an actress - she was more famous for her relationships with Tony Romo,  and she had problems with her weight - that actually made her very relatable to consumers, because all women have either had problems with weight, or with relationships, and then she had the clothes that went with her look."

The strategy worked, and is causing fashion designers to rethink the way they design their clothes, says Agins.

"Last week in Paris, the Kardashians basically took over. Nobody remembers what was on the shelves at Chanel or Lanvin, we all just remember Kimye and the little daughter sitting in the front row at all these shows. This is a modern way to market," she said.

Listen to the full interview in the audio player above.

The first electric cars weren't 'manly' enough

Tue, 2014-10-07 11:59

Today's energy world continues to be dominated by fossil fuels in cars, in planes and in power plants. One reason is that crude oil used as a transportation fuel packs an awful lot of energy in a tiny package. It's a concept known as "energy density," and it helps us understand why crude became king over time.

In the last four centuries, humans have gone through several so-called "energy transitions." Each step up has involved a superior product in terms of energy density – in other words, concentrated energy in smaller and smaller packages.

Let's start in 16th and 17th century Holland. The Dutch burned something called peat, which is moss, very dead moss. Peat played a big role in human development, says historian John McNeill of Georgetown University.

"They burned it in energy-intensive industries," he said. "Beer brewing. Glass making. Sugar refining."

Peat, though, doesn't burn as long or as hot as what came later: Coal.

In the late 18th and 19th centuries, coal-powered steam engines took ships and trains farther. Coal also brought new industrial possibilities, like turning iron ore into steel.

"Coal has an energy density [worth] a couple of multiples of wood, charcoal, peat," McNeil said." You can't, for example, do metallurgical work with a peat flame. You can't get it hot enough. Coal, you can.

Then, oil was found. Once again, the new fuel offered a higher energy payload for its size and weight. Ever since, oil-based gasoline and jet fuel have dominated much of our energy lives.

Because of carbon pollution, of course, some car drivers instead are driving on electric batteries, which by energy density, are an inferior product. But history shows technology doesn't always equal destiny.

Let's go to 1900. The Old Car Festival at the Henry Ford Museum in Michigan is America's longest-running antique car show.

There are plenty of gas-powered cars from that era. There's also a 1902 car that runs on steam... 

 

..and an electric car from 1903...

Yes, electric cars go back that far, and they are so quiet you can't hear them over the noise of the festival.

So why did electric vehicles lose out a century ago? It's probably not for the reasons you'd think.

Curator Matt Anderson of the Ford Museum says electrics weren't manly enough for the times.

"Electrics were thought to be the ideal 'women's car,' if you will," he said. "You don't have to crank it, so it doesn't require as much physical strength to get it running and operating. They're much cleaner than a gasoline automobile, they don't emit the kind of fumes or exhaust we associate with those cars."

Which sounds great. Except consumers back then didn't want that. They wanted a messy adventure machine.

"It made noise, it broke down," David Kirsch, an automotive historian at the University of Maryland, said of the gas-powered car.

"It was relatively easy to fix," he said. "So a man could take his girlfriend out into the woods and do what they will. And if he were very lucky the vehicle might break in a way that he could fix it."

Masculinity, displayed.

Kirsch's point is that culture becomes an important wild-card in technology history. It was back then, and could be going forward in ways we can't predict.

Today, with car sharing, Uber, Zipcar-ing and more automated driving, the nature of travel is slowly changing. Like a century ago, new people are placing new bets on rival fuels. And energy density may not necessarily be the deciding factor this time, either.

Why you may not know if your data has been hacked

Tue, 2014-10-07 11:52

The latest data breach was a big one. Hackers got into JPMorgan’s computer network, and the bank says that has put 76 million households and 7 million small businesses at risk. 

Because it is a public company, JPMorgan is required by law to tell federal regulators about anything that could affect its share price, and that is what it did. JPMorgan notified the Securities and Exchange Commission last Thursday. But other companies don’t have to notify the government when their servers get hit.

When it comes to data breaches, the U.S. has a confusing patchwork of laws. It may surprise you there is no overarching federal law.

“From the very beginning of digital technologies and the Internet, the federal government took the view of 'keep its hands off,'” says Fred H. Cate, who heads the Center for Applied Cybersecurity Research at Indiana University.

So, the states stepped in. California was the first to pass a data breach notification law. It has been on the books there since 2003. Forty-six states followed, along with Puerto Rico and the District of Columbia, and each one has a different law with different requirements.

“I think that everyone assumed that once you got a bunch of conflicting state laws, congress would step in and provide some clarity by providing a single federal law,” says Cate.

That hasn’t happened. Proposals have been held up in Congress, and an executive order President Barack Obama signed last year is voluntary.

Tina Ayiotis, who teaches law at The George Washington University, says after a string of high-profile attacks at Home Depot, Target and JPMorgan, we are starting to suffer from “breach fatigue.”

“At this point, the pain is not enough to really make it so that it becomes a priority,” she says.

What could change that, says David W. Opderbeck, a professor at Seton Hall University School of Law, is a cyber-attack on infrastructure, “like a power grid or a water supply, or the markets shut down for a few days.”

“When that kind of thing happens, then maybe we’ll see some action,” he says.

Until then, the action continues to be at the state level, keeping lawyers, consultants and compliance officers busy, and consumers confused.

'Twin Peaks' is just the latest cult TV comeback

Tue, 2014-10-07 11:20

Not to be outdone by Netflix's latest volley in the Screen Wars, Showtime gave its own surprise announcement Monday. The network will air new episodes of "Twin Peaks" in 2016, a full 25 years after ABC pulled the plug.

The move is unusual in some ways — typically only war horses like "Dallas" come back back after that long of a break — but it's far from the first cult hit to get a second chance on a new network. In fact, with the rise of premium channels and streaming services, it has become a low-risk way attract an audience — albeit with mixed success. Here are four more recent revivals and how they did.

Arrested Development

Probably the highest-profile resurrection on this list, if only because the fourth season of "Arrested Development" become the "Detox" of groundbreaking sitcoms. Before Fox canceled the show, its characters dropped references to HBO, Showtime and a potential movie. The rumors churned for seven years before Netflix released 15 new episodes all at once in 2013.

The new "Arrested Development" played with the binge-able format by focusing on one or two characters per episode and slowly revealing the plot as their storylines intersected. Some critics loved this puzzle box style of storytelling, but others were lukewarm, even calling the season a "noble failure." But that hasn't stopped even more speculation about a fifth season.

Friday Night Lights

After successfully adapting the nonfiction book "Friday Night Lights" into a movie, Peter Berg developed a TV version that would let him explore more ideas left out of the movie. But after a successful first season and a panned, shark-jumping second, the show was on the chopping block at NBC.

DirecTV swooped in, offering to help bankroll more episodes, which would air first on satellite, then later on broadcast. NBC agreed, and the show bounced back for three more critically-acclaimed seasons. DirecTV also brought back the Glenn Close legal drama "Damages," but only "Friday Night Lights" has gone down as an all-time classic.

The Killing

Against all odds, "The Killing" was actually brought back from cancellation twice. After huge success with "Mad Men" and "Breaking Bad," AMC tried adapting the Danish series "Forbrydelsen" in 2011. The dreary crime drama started strong but lost viewers quickly, limping into a second season before being canceled.

After renegotiating contracts, AMC resurrected the show for a third season last summer before canceling it again. Netflix picked "The Killing" back up for an abbreviated final season in August, but most critics weren't interested by then. The streaming service did something similar with Cartoon Network's "Star Wars: The Clone Wars" this spring, giving the show a send-off after Lucasfilm's sale ended the series abruptly.

'Twin Peaks' is just the latest cult classic to come back to life

Tue, 2014-10-07 11:20

Not to be outdone by Netflix's latest volley in the Screen Wars, Showtime gave its own surprise announcement Monday. The network will air new episodes of "Twin Peaks" in 2016, a full 25 years after ABC pulled the plug.

The move is unusual in some ways — typically only war horses like "Dallas" come back back after that long of a break — but it's far from the first cult hit to get a second chance on a new network. In fact, with the rise of premium channels and streaming services, it has become a low-risk way attract an audience — albeit with mixed success. Here are four more recent revivals and how they did.

Arrested Development

Probably the highest-profile resurrection on this list, if only because the fourth season of "Arrested Development" become the "Detox" of groundbreaking sitcoms. Before Fox canceled the show, its characters dropped references to HBO, Showtime and a potential movie. The rumors churned for seven years before Netflix released 15 new episodes all at once in 2013.

The new "Arrested Development" played with the binge-able format by focusing on one or two characters per episode and slowly revealing the plot as their storylines intersected. Some critics loved this puzzle box style of storytelling, but others were lukewarm, even calling the season a "noble failure." But that hasn't stopped even more speculation about a fifth season.

Friday Night Lights

After successfully adapting the nonfiction book "Friday Night Lights" into a movie, Peter Berg developed a TV version that would let him explore more ideas left out of the movie. But after a successful first season and a panned, shark-jumping second, the show was on the chopping block at NBC.

DirecTV swooped in, offering to help bankroll more episodes, which would air first on satellite, then later on broadcast. NBC agreed, and the show bounced back for three more critically-acclaimed seasons. DirecTV also brought back the Glenn Close legal drama "Damages," but only "Friday Night Lights" has gone down as an all-time classic.

The Killing

Against all odds, "The Killing" was actually brought back from cancellation twice. After huge success with "Mad Men" and "Breaking Bad," AMC tried adapting the Danish series "Forbrydelsen" in 2011. The dreary crime drama started strong but lost viewers quickly, limping into a second season before being canceled.

After renegotiating contracts, AMC resurrected the show for a third season last summer before canceling it again. Netflix picked "The Killing" back up for an abbreviated final season in August, but most critics weren't interested by then. The streaming service did something similar with Cartoon Network's "Star Wars: The Clone Wars" this spring, giving the show a send-off after Lucasfilm's sale ended the series abruptly.

Why education tech needs to get student privacy right

Tue, 2014-10-07 11:14

Like everything else these days, education runs on data. Our kids data.

Every digital move they make in school, on homework websites, and apps can be tracked. And it's not always clear where that information is going or how companies are using it.

Parents want better protections; the multi-billion dollar education technology industry wants to keep growing.

So today some big name ed-tech providers announced a voluntary privacy pledge.  It says ed tech companies won't sell a kid's data. They won't use it to target specific ads to specific kids.

"We are aware that policy makers and education leaders and parents are looking at this issue," said  Mark Schneiderman with the Software & Information Industry Association, "this is the industry effort to show that industry is aware of those questions."

At least part of the industry.

Microsoft, Houghton Mifflin Harcourt, Amplify and several other companies have signed the pledge. Notably absent on the list are classroom giants like Google, Apple and Pearson.  
"Thankfully for Houghton Mifflin, we’ve been 100% in alignment with the pledge and all the different parts inside the pledge document," said Bill Bowman, Vice President of Information Security for the education company.

Same story for Amplify—and the rest of the pledges.  They’re already doing all these things.

So what’s the point?

"You can look at this glass half full,  or glass half empty," said Joni Lupovitz, Vice President of Policy for the advocacy group Common Sense Media.

She says its good for an industry to adopt a list of best practices. It might pressure ed-tech companies that aren’t protecting student data to do more.

There's also the glass half empty bit. "A lot of this they will be required to do under California law," said Lupovitz "And, it's a private pledge, it doesn’t have the same teeth or enforcement."

Lupovitz the industry needs the trust of parents and teachers.

It’s the only way to keep the booming industry booming and bring the real promise of tech to the classroom.

 

"Twin Peaks" returns to a TV landscape it helped create

Tue, 2014-10-07 11:14

It’s been almost 25 years since Americans first saw the opening credits to "Twin Peaks," David Lynch’s strange and violent TV series set in a small town in a Pacific Northwest forest. It debuted on ABC in 1990 and captured a staggering audience. More than 34 million viewers tuned in to watch Special Agent Dale Cooper search for Laura Palmer's killer.

Now Showtime has announced it will produce a third season of "Twin Peaks" in 2016. Creators David Lynch and Mark Frost will pick up the story 25 years later.

After "Twin Peaks" ended, Lynch followed it up with the feature film "Twin Peaks: Fire Walk with Me." The opening credits appear in front of TV static until  someone smashes the screen with an ax.

“Some people took that as David Lynch saying, 'I’m never going back to TV,'” says Greil Marcus, a critic who wrote about "Twin Peaks."

Back in 1991, Lynch worked in a television industry wildly different than it is today.

“People would look you right in the eye and say, 'I don’t watch television.' And that was supposed to be shorthand for 'I’m too smart to watch television,'” says Los Angeles Times critic Mary McNamara.  

"Twin Peaks" helped change that. Lynch was a highly regarded filmmaker, and the huge audience he attracted watched TV in a new way.

“When 'Twin Peaks' originally aired, it created — in a lot of respects — the concept of watching a television show closely and analyzing it for clues,” says Indiewire TV editor Liz Shannon Miller.

The show found a new audience in young people on Netflix, making a revival more attractive to studios. And "Twin Peaks" had planted a seed.

“A show like 'True Detective' would obviously never exist without David Lynch moving into television,” Marcus says.

Because it's airing on Showtime, Lynch is free from many of the constraints he faced in the '90s.  Showtime says it’s giving Lynch and co-creator Mark Frost carte blanche. That seed that Lynch planted has grown into a Lynchian forest of new TV shows with dark themes and mysteries that aren't always revealed.  Now Lynch will return to the forest.

 

Why you always see the same ad while binge-watching TV

Tue, 2014-10-07 09:59

I recently curled up with some back episodes of "Scandal," ABC’s rather addictive show about crisis manager Olivia Pope, who often works for and is generally in love with the president of the United States. 

Toward the end of season three, there was some high drama with the first family, right before a big live interview  – when we paused for a commercial break.

An instrumental version of Billy Joel’s “My Life” played and this took over the screen:

At first, I barely noticed Larry or the blue-eyed woman in ads for the prescription eye drops Restasis, but both ads and a handful of others kept rotating through every commercial break across nearly four straight episodes.

“That’s a very common experience these days,” says Jim Nail, an analyst with Forrester Research. “That when you’re watching TV programs that are streamed either from the network streaming app or some other service, that you see the same ads over and over and over again.” 

Nail says part of the problem is that the services and advertisers haven’t caught up with the way viewers binge-watch shows online – seeing Larry a few times in one episode isn’t a big deal, but, as I found out, string a few shows together and his presence can become irritating. 

Nail says a bigger reason for the repetition is that there’s still a shortage of online advertisers. That's because ratings and demographic data about digital audiences doesn’t yet mirror the kind of data available for television audiences.

“There aren’t enough advertisers comfortable buying [online] to follow the model of broadcast television, which is 17 minutes of commercials an hour, which means 34 advertisers, give or take,” says Nail.

In contrast, an online show might only have a handful of advertisers, which keeps Larry and his online peers busy.

The growth in online video content also means lots of work for Larry, says Larry Chiagouris, a marketing professor at the Lubin School of Business at Pace University.

"You've got this volume of video that's just extraordinary," says Chiagouris.

Digital video advertising dollars are also climbing — 20 percent in 2013 — but "the amount of video that's available to be sponsored is probably five times that." 

While there’s tons of content available online these days, Anna Bager, with the Interactive Advertising Bureau, notes that the amount advertisers actually want to buy is still relatively small.

In other words: Larry has standards. He probably doesn’t want to be next to someone’s shaky homemade YouTube videos.

“The inventory is scarce so advertisers tend to want to buy all of the inventory,” she says. This can include sponsorships, where ad spots might be sold to one or a limited number of advertisers.

However, Bager and Chiagouris agree there’s another reason for at least some of the repetition. Advertisers want to make sure their message gets through to distracted viewers who might be checking email, clicking around the internet or generally trying to avoid ads.

“Advertising is usually annoying, I think we kind of know that,” says Bager. “We may be incredibly annoyed with Progressive because their ad keeps showing up and it’s kind of an annoying ad in general, but when we want to buy insurance, we know that Progressive is an insurance company.”

Similarly, viewers might remember Larry and decide to open an account with Merrill Edge if they’re in the market for a similar product in the future.

Of course, they could also retain negative feelings toward Larry and decide to go with one of his competitors instead.

"I think generally advertisers instinctively believe that over-exposure to the same ad, the same night, with the same hour -- things like that -- run the risk that people are just going to feel completely bombarded and their attitudes will turn negative," says Forrester's Nail.

What you need to know about the AIG trial

Tue, 2014-10-07 08:39

There's a star witness in a big trial today.

You've heard of him: Timothy Geithner. The case: AIG shareholders, including former CEO Maurice R. Greenberg, are suing the Feds, saying they feel cheated by the terms of the bailout in 2008.

Didn't Henry Paulson testify yesterday?
Yup. Then-Treasury Secretary Paulson testified. He said the AIG bailout deal was "punitive." AIG made risky bets, he said, and its shareholders deserved to be punished for them. The key was to send a message to Wall Street: "Just so you know, we are not the Santa Claus of easy bailouts. If you come and ask for one, the terms will be harsh." Okay, that's a made-up quote.

So why does this testimony matter?
Because Paulson was not the key player in regards to details of the AIG bailout. Geithner, then-head of the NY Fed, was. He's the big witness this morning, says Columbia law professor John Coffee, and the guy Greenberg's lawyer (one David Boies) really wants to grill.

Oh yeah, the bailout.
Recall: in the fog of the banking crisis, the Feds realized AIG was in big money trouble. Why? AIG was the insurance company for banks that bought risky subprime loans. If those loans defaulted, AIG was on the hook. (five-dollar word: credit default swaps).

What's the AIG shareholder beef?
The Feds were overly mean, they say, and they punished us too harshly. Or, in legal-speak, they took control of AIG without "just compensation" - a Constitutional no-no.
The details:

  •  In return for $192 billion in loans, we got hit with a 14 percent interest rate. Beltway loan sharks.
  •  The feds took an 80% stock share in the company.
  •  We got these harsh terms, but the banks got paid back 100 cents on the dollar for their risky investments. How come only we sat in the barber chair for the haircut?

What do AIG shareholder want?

Led by former CEO Greenberg, they are suing for $40 billion in compensation.

What's the counter-argument against AIG?
We needed to punish you, because you took bad risks. But we needed to save the banks because the financial system was on life support. That's the job of the Federal Reserve.

What role did Geithner play?
He ran the NY Fed, which engineered the details of the whole bailout.

Geithner argues – in his recent book, "Stress Test" – that the government had no choice. If they hadn't bailed out AIG, it would be ruined the economy. His NY Fed has also been accused of hiding the terms of the 100% payments to the banks that bought AIG default insurance.

How could Geithner's testimony impact?

“If the evidence that comes out in the case shows that there was a big misfire at the fed, then congress may react and change the way that the Fed does business,” says Georgetown finance professor Jim Angel.

Public reaction to the government's bailouts of large financial institution during the financial crisis was so negative says Angel, that when congress passed Dodd-Frank it reduced the fed’s ability act. New restrictions, he says, could be key in a future crisis.

Why do we care, again?

In litigation, there's this thing called discovery where each side has to "open its kimono" to the other.  Lawsuits are all about getting to the bottom of things. And observers are hoping that this lawsuit could get to the bottom of the financial crisis. Angel says “There’ve been a lot of studies of the financial crisis, but do we really know what happened?”

His answer: not really. He hopes this lawsuit could reveal facts that we don’t know, we don’t know about how the crisis and the bailout of AIG occurred, as well as a potential answer to the “Watergate question” -  what the Fed knew and when it knew it.

That sounds pretty exciting, but John Coffee, director of Columbia Law School’s Center on Corporate Governance, isn’t so sure he agrees with Angel.

“I don’t think you’re going to learn dramatically new information," he says. "You may hear snippets, emails anecdotes that support both sides." 

There are two opposing points of view on how the government handled AIG’s bailout, notes Coffee.

“One side said it was done to prevent financial contagion and panic. The other side says it was done to achieve a backdoor bailout of large banks you wouldn’t dare to fund directly and publicly,” he says. 

Coffee’s opinion: the court won’t decide to oversee or restrain financial regulators. Those new regulations, he says, already exist – thanks to Dodd-Frank. But Georgetown’s Angel takes a different view.

The numbers for October 7, 2014

Tue, 2014-10-07 08:13

The International Monetary fund is dialing back its predictions of global economic growth for 2015, revising its projection to 3.8 percent, down from 4 percent a few months ago. In its World Economic Outlook report, released Tuesday, the IMF blamed sluggish growth in part on the Eurozone, which it warns has a much higher probability of re-entering recession than it did earlier this year.

Tempering expectations further, the Wall Street Journal notes that the IMF's predictions are often "overly optimistic."

Here are some other numbers we're watching Tuesday:

300 lumens per watt

LEDs are able to give off far more light for the amount of energy they use — compare that figure to 70 lm/W for fluorescents and 16 lm/W for incandescent bulbs. That efficiency won the blue LEDs inventors the Nobel Prize in physics Tuesday, CNET reported. It's a break from past years, which awarded much larger and abstract discoveries like universal expansion and the Higgs boson.

77

The number of travelers stopped by stepped-up exit screenings from the Centers for Disease Control and Prevention in countries most affected by Ebola. President Barack Obama said Monday the U.S. will reexamine its practices here and abroad, the Washington Post reported, as several Republican lawmakers push for travel bans.

1984

The IBM Model M keyboard has been around 30 years, and for many tech writers, IT professionals, programmers and even the guy who created "Minecraft," it's still the standard to which all other keyboards are measured. The Verge has an extensive piece exploring the Model M's history and enduring popularity.

Inflation to a twenty-something

Tue, 2014-10-07 07:00

As Marketplace celebrates its 25th birthday this year, we are looking at the surprising, sometimes delightful and sometimes destructive ways that prices have changed during that quarter century.

And like many of the twenty-something variety, we decided to mark the occasion by taking a selfie...of our spending. Enter the Consumer Expenditure Survey.

Rather than looking at costs and pricing, the CE looks at how much consumers spent, on average, on any given item or service that year. It's compiled from two sources: the Interview Survey, and the Diary Survey. The former checks in with consumers on quarterly basis, monitoring larger expenditures (like rent and costs related to vehicles), while the latter asks people to keep a spending diary over a shorter period of time to catch smaller, day-to-day purchases.

Together, they create a picture of the spending habits of consumers during a given year. Among other things, the CE is used to revise the Consumer Price Index by looking at goods and their "relative importance." And as we've explored elsewhere, putting together that "basket of goods" that determines inflation is a tricky process that some feel hasn't been handled well in the past.

Regardless, looking at CEs from two years provides interesting comparisons of how much and where we spend our money.

So now that Marketplace is in its twenties, how does our spending compare to a twenty-something from 1989?

Adjusted for inflation (think 2013 dollars), here's how much income consumers 25 to 34 years of age made versus how much they spent on rent, food, alcohol, clothing, and shoes in 1989 and 2013.

It's worth noting that the CE gets incredibly specific. For example, this same age group spent $174 on "cereals and cereal products" in 2013, whereas their 1989 counterparts spent $233 in the same category. Amounts spent on health insurance are also available ($601 in 1989, $1,334 in 2013), which will be an especially interesting comparison to revisit when the CE for 2014 is released, as the Affordable Care Act will have been in effect for this demographic.

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PODCAST: LinkedIn goes to college

Tue, 2014-10-07 03:00

First up, we could hear a lot more about manipulation in the foreign currency markets as the year wears on. The U.S. Justice Department is reportedly preparing a new pile of charges against some of the biggest Wall Street firms and, significantly, individuals who work at the firms. One focus: possible collusion in the buying and selling of dollars, euros, pounds sterling, and beyond. We talk with Ben Protess who co-wrote the scoop for for the New York Times Deal Book section. And Linkedin is the social media network targeted at our professional lives. Now, Linkedin is entering the already-crowded "college rankings" field with an interesting algorithm: LinkedIn ran the numbers on its over 310 million members to see where they went to college and what they're doing now. Plus, in the U.S., it's fair to say that there's a long tradition of corporations embracing what originally was a religious observance: Christmas. In India, the calendar is packed with a kaleidoscope of religious festivals, many involving elaborate processions and decorations, which business are often pleased to underwrite. But some in India say corporate sponsorship of these events may be going too far.

Being human in the age of automation

Tue, 2014-10-07 02:00

In Nicholas Carr’s new book, "The Glass Cage – Automation and Us," he describes an academic study in which researchers discover a key difference between how we feel at work versus at home. At work, people can’t wait to clock out, whereas at home, they dread returning to work.

But surprisingly, the study also found that by many metrics, people are actually happier on the job. And in a world where the main goal of technology seems to be to reduce the work we do, Carr thinks maybe we should take a different tack:

“I think most of us, if we really thought about it, know that it’s really when we’re being challenged and when we’re really immersed in a task or a job…that’s when we feel like we are experiencing life in some better, more fulfilling way.”

In the book, Carr offers one example of how the video game, Red Dead Redemption, helped him realize that games can be a good model for software designed to engage and challenge us in an activity. Carr argues that if we are simply more mindful of how technology influences our experience of life, we can make better decisions about the things we buy, even if it’s as small as a video game.

Click the media player above to hear Nicholas Carr in conversation with Marketplace Tech host Ben Johnson.

In a robust labor market, more people say 'I Quit.'

Tue, 2014-10-07 02:00

Update: The JOLTS numbers are in. According to the Bureau of Labor Statistics:

"There were 4.8 million job openings on the last business day of August, up from 4.6 million in July... The hires rate (3.3 percent) was down and the separations rate (3.2 percent) was essentially unchanged in August. Within separations, the quits rate (1.8 percent) was unchanged and the layoffs and discharges rate (1.1 percent) was little changed.

See you again next month, quits rate.

The Bureau of Labor Statistics issues its Job Openings and Labor Turnover Survey—also known as JOLTS—for August on Tuesday. Back in July, the report showed 4.67 million job openings, and economists expect a healthy increase to 4.71 million job openings in August. That would be consistent with labor-market improvements reported in September’s employment report, with 248,000 jobs added to the economy, and the unemployment rate falling to 5.9 percent.

However, one data point in the JOLTS report has been consistently underperforming the rest of the labor market: the quits rate. This indicates how many people are leaving their jobs voluntarily—because they got a better offer, or think they can look around for a while without becoming long-term unemployed (People can also be classified as ‘voluntary quits’ if they leave a job to go back to school, to care for a family member, or to leave the workforce; retirement and disability are not counted as 'voluntary quits'). A higher quits rate is seen as a sign of job-market churn and flexibility for both employers and employees.

Since the recession, the quits rate has remained stubbornly low. In July, there were 2.5 million quits; the level of quits consistently topped 3 million in the years before the recession.

The quits and layoffs and discharges numbers starting from January, 2004.

Bureau of Labor Statistics

John Challenger, at outplacement firm Challenger Gray & Christmas, thinks the quits rate will eventually catch up to other improvements in the labor market. But right now, he thinks many workers are still recession-scarred. “Even if I might get paid more money,” he said, characterizing the mindset of a typical worker, “safety is still of high value. Better to hold onto the job I have than to take something new.”

Elise Gould, a labor economist at the Economic Policy Institute, said workers don’t think they have much bargaining power with employers. So many are reluctant to risk quitting and looking for a new job. “The fact that we’ve seen sluggish wage growth, workers see that," she said. "They know they can’t bid up their wages because there are so many people waiting on line—on the unemployment rolls or out of the labor force.”

Gould said even as jobs become slowly more plentiful, workers fear that they’ll face stiff competition if they jump ship and go job-hunting right now.

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