At the highest levels of power in the finance industry, there is one gold standard, one unifying symbol that binds together all titans in the industry: the Patagonia vest with an embroidered corporate logo, also known as, “the Power Vest.”

The vest may now vanish to distant memory, similar to Gordon Gekko’s pinstriped suits, due to a shift in policy at Patagonia. This shift in policy was first reported by Binna Kim, president of the communications agency Vested, whose order of branded vests for a hedge-fund client, something her firm had done in the past through a reseller for Patagonia’s corporate sales, was rejected. 

“Patagonia has nothing against your client or the finance industry, it’s just not an area they are currently marketing through our co-brand division,” read a corporate statement Kim tweeted. “While they have co-branded here in the past, the brand is really focused right now on only co-branding with a small collection of like-minded and brand aligned areas; outdoor sports that are relevant to the gear we design, regenerative organic farming, and environmental activism,” it continued. 

The statement, which came not from Patagonia but from an unnamed retail partner, said the company’s shift in focus is meant to align with Patagonia’s new mission statement, “We’re in business to save our home planet.” 

The statement continues, stating that Patagonia is “reluctant to co-brand with oil, drilling, dam construction, etc. companies that they view to be ecologically damaging” and while orders are approved on a case-by-case basis, this includes “financial institutions.” 

Patagonia confirmed this change to its corporate program, saying the company “recently shifted the focus of this program to increase the number of Certified B Corporations, 1% For The Planet members and other mission-driven companies that prioritize the planet. This shift does not affect current customers in our corporate sales program.” 

The individual behind the Instagram @MidtownUniform, the founder of the term “Midtown Uniform,” which refers to the button-up, vest and slacks combination, stated, “In light of its big branding moves toward awareness of environmental issues, I was wondering when Patagonia would be putting the kibosh on outfitting the finance world. It was only a matter of time.” 

The Origin of the Power Vest

The Midtown Uniform appears to have taken hold post-2008, when many financial firms loosened their once-strict suit-and-tie dress code. The message was: We know your salary is down, but at least you get to dress casual on Friday. 

“The payouts regressed, so just like every industry that has payment difficulties, they find other ways to satisfy employees and dress is one of the easiest ones,” said a 35-year-old stock trader in New York City. He was on the floor during the 2008 recession and described how the sport coats and wool slacks gave way to vests and cotton chinos in its aftermath. 

Though midtown New York has now become especially associated with this new dress code, the vest’s roots lie in Silicon Valley. “If you go to the Whole Foods here, you’re going to see [the vest] everywhere,” said Christina Mongini, the costume designer for HBO’s parodic sitcom “Silicon Valley” and a Bay Area native. 

Jared Dunn, the show’s type-A COO, wears a fleece vest over a button-down in nearly every scene in which his character appears. “Jared’s style is really perceived as the normal basic understated business-casual attire,” said Mongini. 

Outdoorsy fleece vests match the youthful, countercultural Silicon Valley spirit in a way suits and ties never did. Bay Area C-suite executives, such as Apple’s Tim Cook, Facebook’s Mark Zuckerberg and PayPal cofounder Max Levchin have boasted of cycling or hiking during the work week. As Mongini said, “You can hop on your bike and throw your vest on and head over to Santa Cruz on your lunch break if you wanted to.” 

Across the nation, the vest was an easy sell. “It’s very difficult to just sit there and work in a suit jacket,” said the 35-year-old stock trader. In a vest, “I can sit at my desk and feel a little bit more comfortable.” Aiding and abetting the trend toward sleevelessness, a couple of years ago brokerage houses and trading platforms shrewdly started giving away the vests as a freebie to entice traders. The vests’ low cost was a way around financial regulations, which cap gifts to traders at $100, and the wearable promotions were more functional than the giveaways they replaced, such as candy tins and Nerf Footballs. These promotional vests, with “Equifax” or “Merrill Lynch” embroidered along the chest, are now a common sight in New York. 

The trend has become self-perpetuating: People wear the vest because it is what people wear. “Now it’s the new thing: It’s not suspenders and a Bengal-striped shirt,” said Will Crowley, a 25-year-old investment banker who lives in Hoboken, N.J. “It’s a Patagonia vest and a button-down shirt.” He added that the “bro culture” of finance has helped reinforce this look, with its scores of men following the same path from prep school to an Ivy League college to a job in finance. Looking like your peers is part of the package. “If you want to be successful, part of it is wanting to fit in,” said Crowley.

Patagonia’s Place Among the Vest Industry

Although many companies, including The North Face, make fleece vests, the Patagonia fleece vests quickly became, as Jeffrey Leeds, co-founder of Leeds Equity Partners and longtime fleece-wearer, said, “the Tiffany blue box” of the culture: an immediately recognizable visual sign of elite status. Part of this can be attributed to the co-branding – the Patagonia name on one side and a company name on the other. 

Patagonia became so linked to the financial sector uniform that one website poked fun at the whole thing by offering a “VC starter kit” for $499. “Nothing says SF VC casual like a Patagonia Better Sweater Vest paired with gray Allbirds runners. You’ll fit right into Demo Day,” the promo read. 

The Timing of Patagonia’s Decision

Patagonia’s shift in policy to focus on increasing the number of Certified B Corporations, 1% For The Planet members and other mission-driven companies that prioritize the planet seems to align with Patagonia’s brand, especially with its relatively new mission statement. However, it is interesting to note the macroscopic view of the timing of this decision.

In November 2018, Patagonia received $10 million as a result of what it called an ‘irresponsible tax cut” by President Donald Trump. The Activist Company, as Patagonia calls itself, promptly donated the money to environmental charities. 

Since 2017, Patagonia has also been sharply critical of President Trump’s decision to drastically reduce the size of some national monuments. In the case of Bears Ears National Monument in southeast Utah – shrunk an astounding 85 percent – the company has put up resources to fight in court.

“We have to fight like hell to keep every inch of public land,” Patagonia CEO Rose Marcario told HuffPost in 2017, shortly after the Bears Ears decision was announced. “I don’t have a lot of faith in politics and politicians right now.”

Although Patagonia’s history of environmental activism spans longer than its efforts in the Bears Ears decision, its relatively recent shift in focus to stop working with the finance industry in its corporate sales program seems abrupt in Patagonia’s macroscopic timeline. 

Jake Flanagin, a reporter for Esquire, wrote a piece about why all of these business bros were wearing the same vest. His article was released on July 9, 2018. When writing the article, he contacted Patagonia to inquire about their marketing relationship with the financial sector, and the response he received was less than enthusiastic. This was approximately 10 months before Patagonia’s shift in policy became publicized. 

In a rather terse email from Patagonia’s communications team, Flanagin was told they have “no idea” how or why the vests became so popular with the young corporate set – they build their products specifically for “environmentalists and laborers who work in the elements.”

In April 2019, Binna Kim then released a set of tweets that publicized Patagonia’s corporate shift in policy, which affected all of its retail partners and future clientele. Patagonia, however, never released an official statement announcing this decision prior to the tweets. Rather in response to Kim’s tweets and the conversation that ensued afterward, Patagonia confirmed its shift in policy to specific news outlets that asked about it. 

Patagonia’s decision to shift the focus of its corporate sales program seems abrupt, and the lack of marketing Patagonia conducted for it seems like Patagonia was correcting what should have been occurring in the first place: the vest should have never been a part of the Midtown Uniform in the first place. 

Patagonia’s Intersection Between Ethics and Business

Patagonia’s shift in policy to increase the share of its corporate partners that make environmentalism a top priority only affects any new corporate clients that wanted to work with Patagonia and did not have any corporate social responsibility toward environmentalism. Therefore, the power vest will not be disappearing since its existing corporate customers will not be affected. 

Patagonia’s decision, however, does serve as an example of the various ways businesses are making their social stances part of how they operate and of how Patagonia in particular weaves its ethics into business. 

Before, companies would try to stay neutral on politics. Recently, that is not much of an option says Daniel Korschun, an associate marketing professor at Drexel University who studies corporate political activism. “Consumers and employees are looking for deeper purpose from companies,” he says, and Korschun calls Patagonia the “gold standard in corporate activism” because it has consistently aligned itself with issues that make sense for the brand and that its customers care about. 

Although Patagonia may be seen as the gold standard in corporate activism, it is not the only outdoor retailer weaving ethics into business. 

The North Face, one of the three most popular outdoor retailers among Patagonia and Columbia, recently refused to fill an oil company’s vest order saying, “There are times when we choose not to engage with other companies or organizations because they do not align with our brand values and mission to move the world forward through exploration.” 

Some industry watchers have criticized Patagonia for taking political stances that are too “uncompromising.” While Marcario admits that occasionally the company has heard from customers who disagree with Patagonia’s actions, she says the response for its unapologetically political stance has been “overwhelmingly positive.” When viewing Patagonia’s revenue and profit these past few years, this sentiment does reign true. 

Marcario took up the CEO role for Patagonia in 2014, and since then Patagonia has seen its revenue and profit quadruple. The company will not disclose its exact revenue, but the CEO said in March last year that sales were approaching $1 billion. Marcario has helped nurture new lines of business, including its Patagonia Provisions food line, used goods program Worn Wear, and the venture fund Tin Shed Ventures, which has at least $75 million to help environmentally responsible startups. 

As a result, the founder of Patagonia, Yvon Chouinard, has called Marcario the best leader the company has ever had. Since Marcario took leadership of the company, Patagonia has leaned further into its self-appointed role as the Activist Company.

Although the finance industry will not necessarily be left out in the cold without their coveted vests, Patagonia’s decision to shift its focus and lose a large market share of potential clients shows the importance of staying true to its brand identity in today’s times and how it pays off to do so. 

Sources

• https://www.inc.com/lindsay-blakely/patagonia-2018-company-of-the-year-nominee.html
• https://nypost.com/2018/04/25/viral-instagram-account-mocks-nyc-bros-midtown-uniform/
• https://www.vogue.com/article/year-of-the-bro-2016-new-york-city
• https://www.patagonia.com/the-activist-company.html
• https://www.buzzfeednews.com/article/katienotopoulos/patagonia-power-vest-policy-change
• https://twitter.com/binnaskim/status/1112731360244961283?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed&ref_url=https%3A%2F%2Fwww.buzzfeednews.com%2Farticle%2Fkatienotopoulos%2Fpatagonia-power-vest-policy-change
• https://www.cbsnews.com/news/midtown-uniform-patagonia-will-no-longer-sell-vests-with-finance-firms-logos-on-them/
• https://www.thecut.com/2019/04/patagonia-stops-selling-fleece-vests-to-finance-firms.html
• https://www.wsj.com/articles/patagonia-triggers-a-market-panic-over-new-rules-on-its-power-vests-11554736920
• https://www.esquire.com/style/mens-fashion/a22089261/midtown-uniform-vest-business-style/
• https://www.marketplace.org/2019/04/19/how-vest-became-wall-streets-bulletproof-armor/
• https://guestofaguest.com/new-york/instagram/finance-bros-beware-this-popular-instagram-account-is-mocking-your-midtown-uniform
• https://www.outsideonline.com/2394182/patagonia-fleece-vest-wall-street-controversy
• https://www.fastcompany.com/40525452/how-patagonia-grows-every-time-it-amplifies-its-social-mission
• https://www.marketwatch.com/story/why-are-patagonia-power-vests-with-goldman-sachs-and-jp-morgan-logos-selling-for-200-on-ebay-2019-04-23
• https://www.nytimes.com/2019/04/05/fashion/patagonia-fleece-fintech-banking.html
• https://www.huffpost.com/entry/patagonia-co-brand-vest-program_n_5ca4c058e4b07982402592ae
• https://www.huffpost.com/entry/patagonia-public-lands_n_59440a8ee4b01eab7a2d51e0
• https://qz.com/work/1586523/patagonia-thinks-finance-bros-arent-a-fit-for-its-fleece-vests/
• https://www.lamag.com/culturefiles/patagonia-vests/

The battle to obtain distribution rights is the most competitive it has ever been with the introduction of streaming services. It will only continue to get bigger.

Introduction

Since the establishment of the renowned “Best Picture” Oscar award in 1929, film studios have campaigned for their movie to compete for the award by spending millions of dollars each year to promote its candidacy. An Oscar nomination or win does not always correlate with further box office success, but studios continue to promote their films even with the risk involved. An Oscar “bump” has been known as the winner or nominee within the “Best Picture” category gaining more viewership through box office success following the Oscars award show. There hasn’t been more than a $7 million “bump” at the box office since the silent film “The Artist” won the award in 2012. Recent articles have stated that the economy and film industry are changing due to streaming service giants obtaining rights to critically acclaimed films. Now, the Oscar “bump” has to include viewing on streaming services to go along with box office success. So why do studios continue to spend millions if the Oscar “bump” does not directly relate to box office success? Because now these critically acclaimed films are being viewed on streaming services rather than in the theatre. Studios such as Netflix, Amazon, A24, Fox, Columbia Pictures(owned by Sony) know that to get the most viewers possible(and more importantly the most prestige and money), they have to continue to obtain rights to critically acclaimed films. Most recently, Netflix saw an increase in media attention due to having rights to four out of the five films nominated in the “Best Picture Drama” category for the Golden Globe awards. Netflix is now considered a quality film distribution company, and the Golden Globe nominations will surely get Netflix more critically acclaimed films and exclusive partnership deals. Netflix has already signed a contract with director Martin Scorsese to have his work distributed exclusively on the platform. In a crowded streaming service platform race, Netflix is hoping to prevail through not only owning the most content, but more importantly the most quality content. Gaining access to high quality films for a streaming giant could help them prevail in the streaming service war. Netflix’s recent awards season success has put even more pressure on other studios in the competition, especially independent film studios. Since Netflix is trying to create a monopoly to limit other studios(and other streaming services) from gaining rights and praise for critically acclaimed films. Even A24, a popular studio giant, is partnering with Netflix to share rights to critically acclaimed film,“Uncut Gems”. Netflix is credited as the international distributor, and A24 is credited as the United States distributor. Sharing rights to critically acclaimed films may also be a trend we continue to see as having any distribution will boost revenue and prestige. The economic incentive is simple: The more nominations and awards won by a studio, the more critically acclaimed movies the studio will obtain which inevitably makes them more money. The hard part is actually implementing a strategy to make that happen with longevity. The crowded streaming service war will turn into the streaming services battling for critically acclaimed films, which inevitably will lend them partnerships and more exclusive content. It will also push big studios like Columbia Pictures(Sony) and Fox(Disney) to be limited in gaining rights, or have produce their own content and/or partner with other studios to get a share of the profit and prestige.

Independent Studios have been pushed out and even household names are losing rights to streaming giants such as Netflix and Amazon.

Streaming giants Netflix and Amazon have tried to make the jump in attaining high quality films to compete with big theatrical-partnered film studios. Netflix took a big loss at the awards last year, when they spent $15 million promoting “Roma”, but the film got upset by “Greenbook” in the “Best Picture” category.  This season, Netflix stocked up by obtaining and heavily promoting four Oscar candidate worthy films and they all seem to be getting tons of praise. Netfllix and Amazon are still competing against Columbia, Fox, and A24, unless they have a partnership with those studios to distribute the picture. I mentioned before that the competition is so cutthroat and competitive that A24 had to partner with Netflix to gain rights to Oscar contender “Uncut Gems”. Obviously, studios would want to promote and distribute a critically acclaimed film alone, but if only twenty films in a given year (usually) have a chance at an Oscar nomination, then it is inevitable that studios will partner with each other (including streaming services) to gain credibility if that film is in fact nominated. Together, these studios can spend an absurd amount of money promoting “Uncut Gems”. Columbia, Warner Bros, and Fox Searchlight are household names in the industry with a track record of multiple net picture wins each, so they have enormous amounts of money to spend each year on attaining rights and promoting critically acclaimed films. With the competition heating up between Warner Bros, A24, Columbia, Fox, and Netflix and Amazon, there is little room for independent studios to make a name and join this list in the competition. Especially with Netflix having four of five “Best Picture Drama” nods at the Golden Globes, and probably three to four of the seven to ten Oscar nominations for “Best Picture” when they are revealed, it is leaving little room for even the big studios like Fox, Columbia, Paramount…etc. However, it is not impossible for an independent studio to enter the competition as A24, a once small, independent company, now film studio giant, hit the lottery after their film Moonlight won “Best Picture” in 2017. Moonlight catapulted A24 into a powerful distribution studio and since 2017, not only has A24 received the rights to huge box office successes such as “Hereditary” and “The Lighthouse”, but also critically acclaimed films that are supposed to be up for multiple Oscar nominations such as “Waves”, “Uncut Gems”, and”The Farewell. Moonlight did not have a huge “Oscar Bump” with box office success or streaming services until late 2018 when it appeared on Netflix. Although Moonlight did not garner an extreme amount of box office success or streaming service recognition immediately after its “Best Picture” win, it catapulted the smaller/independent studio in A24 to a household name that will continue to gain rights to critically acclaimed films in the competitive field for years to come. However, in 2017, Netflix had 0 nominations for the Oscars and Columbia, Fox Searchlight, and Universal Pictures combined for 0 nominations. Paramount Pictures and Lionsgate were the only two big studios that got Oscar nominations for the “Best Picture” category. The rest of the films were distributed by independent film companies. Even Amazon got its first “Best Picture” nod in “Manchester by the Sea” that year, but more importantly, independent studios had more of a chance in 2017. At the 2019 Oscars, only one independent studio got a best picture nomination as Fox, Universal, Netflix, Columbia, and the other big studios received the other “Best Picture” nominations. Since Netflix is expected to receive 35 percent of “Best Picture” nominations for the upcoming 2020 Oscars, and they have already purchased big name films to distribute for next year, many people are worried that the streaming giant could be creating a monopoly. Gaining more and more critically acclaimed films would boost Netflix’s stock, viewers, revenue and help them with their enormous amount of debt. The better argument now is that big studios have a monopoly in the industry and independent studios’ Oscar nominations are down each year. It will be interesting to see in the coming years if this gaining rights to critically acclaimed Oscar films continues to be dominated by Netflix and other big names as a monopoly, or if more independent companies make a surge and make it more competitive. If Netflix is spending $10’s of millions per year to promote each of their movies, the bigger question is how an independent studio who has nowhere near the money or prestige to buy rights or promote the film, is going to compete with them. 

The competition is heating up!

   Since independent studios have odds against them with bigger studios continuing to expand and take advantage of the competition, the competition right now is streaming services (Netflix, Amazon) vs. household studio names (Fox, Paramount). This year, according to GoldDerby.com(the most valued prediction website for award and talent shows), household studios Universal, Paramount, and Columbia are predicted to receive zero Oscar nominations for the “Best Picture” category, while Netflix is expected to receive four. Amazon bought a numerous amount of critically acclaimed material, hopeful to make a splash in this years nominations, since they haven’t had a Best Picture nominee since 2016. Unfortunately for Amazon, the two films they promoted the most from their batch of critically acclaimed material in 2019: “Honey Boy” and “The Report”, have been ruled out of Oscar territory according to many experts including GoldDerby.com. Even though Netflix is in tons of debt, it’s promotions of critically acclaimed films for this upcoming Oscar season has payed them dividends as they will have the most Oscar nominations of any other studio. Hulu did not even try to compete in this years award season because they are owned by Disney, which is working on multiple original films(to go along with the box office giant Marvel films) to put on Hulu and Disney Plus in the next couple of years to compete in the already stacked field. It also helps that Disney owns Fox, and of Colombia, Fox, Paramount, and Universal, Fox is the only one expected to receive an Oscar nomination this year in the “Best Picture” category.  Furthermore, Amazon being shut out and Hulu and Disney Plus waiting on their original films, Netflix(even with their debt) has won the streaming service race for this year. However, all of the streaming services know that a strategy to win the streaming service war in the long run is to monopolize quality content to the best of their ability or just buy everything(like Disney is trying to do). Disney has bought Fox and Marvel Fox Searchlight promoting high quality films and Marvel promoting box office successes), CBS owns Paramount Pictures and is going to introduce a new streaming service soon, and Sony owns Columbia Pictures and is trying to buy A24(which is still independently owned and private). Even though Netflix has won this award season so far, other streaming services(Disney Plus and Amazon) will continue to partner with other companies and studios(or again in Disney’s case just buy them) to gain as much quality content as possible in the near future. It does not help Netflix that they do not have a parent company supporting them, considering Fox Searchlight, Hulu, Columbia, Warner Bros, and Paramount, all have parent companies supporting them. Amazon is so rich off of their e-commerce and shipping business that they can support their own streaming service and do not need a parent company to continue to spend money on obtaining and promoting films. Even though Netflix won not only the streaming service battle, but the studio distribution battle as well this year, it remains to be seen if they can keep it up, considering more streaming services and studios have partnerships and are buying more exclusive content to compete. 

Conclusion!

In conclusion, the economic incentive for studios to promote critically acclaimed films is to obtain rights to even more critically acclaimed films that will continue to make them money. Whether they distribute the films themselves(Columbia and Fox), or share the films(A24 with Netflix), getting as much high quality content as possible within a year is always the goal for studios. Considering only roughly twenty films have a shot at receiving a “Best Picture” nomination, studios scramble throughout the year to get distribution rights to those films. With the economy and film industry shifting to streaming services, competitors such as Netflix and Amazon have entered the already loaded race. Netflix has gained so much Oscar praise and nominations in so little time that other studios are fearing they will have trouble competing with Netflix. Independent studios have virtually no leverage anymore in obtaining critically acclaimed films since they do not have the money that Netflix has to by and promote high quality material. As Disney Plus, HBO Max(owned by Warnermedia), and possibly even Apple Plus enter the race to obtain critically acclaimed films, the pie will only get smaller. Obtaining distribution rights to critically acclaimed films may be the way to win the streaming service war. Even though Netflix has made a comeback (after spending $10 million promoting “Roma” for it not to win) with highly praised Oscar material this year, the competition will only get harder for them with Disney owning Fox and Disney Plus, which will spend enormous amounts of money in the next couple of years to obtain rights to critically acclaimed films. Not to mention that Sony, Universal, and Warner Bros will continue to partner with different streaming services and companies to gain critically acclaimed material in the years to come as well. Since the economy and film industry will continue to adapt to the streaming services and content war, it will be interesting to see if independent films can get back into the competition(A24). It will also be interesting to see if big studios can make a push to obtain rights to critically acclaimed films over the new competitor streaming services, or if the streaming services will take over completely and create a monopolizing business. Netflix has won the streaming service and content war in the short term(2019/early 2020), but it remains to be seen who will win in the long term and the effects it may have on the film industry and the economy. 

Sources:

1. GoldDerby.com 
2. CNBC.com – https://www.cnbc.com/2019/12/09/netflix-dominates-golden-globes-nominations-with-17-nods.html
3. Indiewire- https://www.indiewire.com/2019/06/movie-exhibition-distribution-future-1202152832/
4. The Verge- https://www.theverge.com/streaming-wars
5. CNBC.com – https://www.cnbc.com/2019/11/16/disney-plus-streaming-wars-just-warming-up.html
6. Time- https://time.com/5736490/streaming-wars-disney-plus-apple-tv/
7. New York Times – https://www.nytimes.com/2019/01/17/business/media/paramount-pictures.html
8. The Atlantic- https://www.theatlantic.com/entertainment/archive/2019/03/disney-fox-merger-and-future-hollywood/585481/
9. The Observer- https://observer.com/2019/11/disney-fox-apple-netflix-media-merger-acquisition-predictions/

On a recent evening, Xiaofeng Li followed her usual routine, heading to the beach near her Playa del Rey apartment for an after-dinner walk. Lee used to make the five-minute drive to the beach in her car, but when the motorized scooter craze reached her neighborhood, she decided to give it a try. The ease and convenience of a scooter for the short trip hooked her immediately. On this evening like most others, after coming home from her job as an office engineer in a construction company, she grabbed a shared e-scooter from the stand near her front door, hopped on,  and pointed it beachward.

This time, though, things went terribly wrong. As Li coasted downhill toward a busy intersection, she tried to engage the break but got no response. Instead the scooter continued to accelerate until she lost control, forcing her to leap off before colliding with traffic. Still in motion from the speed of the scooter, she tumbled to the asphalt, suffering gashes on her knees, arms and hands. The accident gave her a shock.

“I was desperate when the brake failed,” Li said, speaking in her native Mandarin Chinese. “The only thing I could do was jump. It was the first time I realized that the scooter is not safe.”

Since September of 2017, startups including Bird, Lime and Spin have introduced thousands of shared e-scooters to the streets in and around Los Angeles. The internet-connected scooters are managed through apps on smartphones and the steps are simple Download an app for a scooter company, use the map to locate the nearest scooter, enter the credit card information, upload driver’s license photo, scan a barcode to open a scooter and then you can ride it. Park the scooter and end the trip on the app.

Shared e-Scooters in Santa Monica | Photo by Yuming Fang

The scooter startups market their products as a cheap, easy and environmentally friendly way for riders to reach last-mile destinations in cities with traffic jams and gaps in public transportation. It costs a flat fee of $1 to ride a scooter plus 15 cents per minute using a pay-as-you-go financial model.

The shared e-scooters have been in people’s sights fewer than two years, but the safety problem has become one of the most serious issues that scooters encounter. Cities have limited the total that each operator can have on the streets. In Santa Monica, each operator is capped at 2,000. In L.A. the maximum number of e-bikes and e-scooters per vendor is 2,500. But even with these caps, critics say other problems with the scooters have not been addressed. Certain stretches of Santa Monica or L.A. can seem overwhelmed by scooters, which riders can simply deposit anywhere, and which often wind up scattered randomly on the sidewalks. And concerns are mounting that scooters present a range of unaddressed safety hazards, both in their regulation and design. Since Oct. 18, 2017, a total of 60 scooter related incidents in Santa Monica have required an Emergency Medical Services response, according to the Santa Monica Fire Department. Incidents included scooter rider and vehicle collisions, as well as pedestrians tripping and falling over abandoned scooters strewn on sidewalks.

“My opinion, get rid of them,” said Julian Zermeno, Santa Monica’s EMS paramedic coordinator, in an email. “We have been on many scooter medical calls due to the riders falling down, crashing into people and getting hit by other vehicles.”

In addition to the safety problem, critics say dockless scooters block sidewalks, disability access ramps and green spaces, and rampage through the streets, which affect both pedestrians and vehicle drivers. As scooters are dumped in public places, people who don’t like them have easy access to abuse them. An Instagram account “birdgraveyard” says it is “a place for people to show their frustration” with the scooters, and features images of scooters that have been vandalized and discarded in the ocean and in dumpsters and shopping carts.

Credit to @birdgraveyard

Now, a class-action lawsuit filed in Superior Court of California has accused Lime, Bird, Xiaomi as well as other scooter firms of “strict products liability”, “gross negligence” and “aiding and abetting assault.” The plaintiffs of the lawsuit include a scooter rider, a motorist with a disability who was unable to access a parking space because it was blocked by scooters, and seven pedestrians injured by electric scooters.

Lawsuit File | Photo by Yuming Fang

Also, Lime, one of the leading scooter startup, was reported that their scooters would break apart when using. However, the problems didn’t block their growing speed for the nature of capital to pursue profits. The scooter craze has captured the heart of Silicon Valley and attracted billions of dollars of investment from venture capitalists. According to Bloomberg, Bird’s evaluation has reached $2 billion in June at an astounding pace. And the new fundraising round of Lime in June has valued Lime at a $1.1 billion. There is no authoritative statistics to show how many scooters the startups have distributed to the streets. But statistics from Lime and Bird show that Bird has worked out to 98 markets while Lime has had 149 markets within one year. With the powerful push from capitals, scooters startups cannot slow down their pace but expand their scales and markets at home and abroad, thus resulting in negligence in product quality and operational management.

Looking back the past three years, e-scooter is not the first shared micromobility launched for last-mile distance. From 2016, bike sharing took off in China’s cities, with lots of companies flooding the city streets with millions of shared-bikes. Time reports that around 60 companies have dumped between 16-18 million bicycles on Chinese streets. Similarly, shared-bikes can be unlocked when riders use the app to scan the barcode on bikes, charge riders with lossmaking low rental fees based on the time length per ride, and be parked at the roadside for the next customer. However, over the three years, China’s bike sharing project has experienced mania, then from bad to worse. What has happened to china’s shared bikes and will American’s shared scooters encounter the same experience?

According to People’s Daily, the state-run media in China, China has 400 million registered bike-sharing users and the daily number of riders peaks at 70 million. Also, Seventy-seven shared-bike companies have emerged in China over the last two-plus years, with a combined total of 23 million bikes distributed in China’s cities, towns, and even villages.

However, China’s bike fever has reached its saturation under unlimited blind competition. For the purpose of expansion, bike-sharing companies continuously purchased bikes from suppliers and distributed bikes on the streets. For one time, people can see eye-catching colorful bikes in every corner of the streets, resulting in an overcrowding of public spaces specifically in areas centered around public transportation such as sidewalks, metro stations, and bus stops. Also, without timely inspection and maintenance, dozens of bikes are broken and left casually in corners. In order to manage the situation, local municipalities have collected the bikes and dumped them in landfills. On the outskirts of leading Chinese cities, rows of brightly-colored bicycles are packed like trash in the tight formation after they are reclaimed. In August 2018, China’s national-level Ministry of Transportation issued a formal regulation, after which 30 Chinese cities passed regulations to guide shared bikes’ production, operation, and maintenance. The pace of bike production and distribution has slowed down and accordingly cooled down the cash-burning bike-sharing trend.

Shared Bikes Landfills in China | Source: Reuters

From June this year, several sharing-bike companies experienced capital chain rupture and stopped operation. Even Ofo, one of the two dominant dockless bike-sharing companies in China, got into trouble that it quitted overseas countries and cities from June and its domestic users could not get in-app deposit refunds because the refund button became grey and the customer service didn’t work. China’s media reported that “Ofo is getting into the capital chain problem and struggling for survival.”

According to the China Business Network, an employee of Ofo said the bike-sharing companies’ trouble is due to their lack of management. “It invested heavily in rapid market expansion, leaving less money for refined management, and operation and maintenance,” the employee said. Bike sharing companies should have focused on operation and maintenance details such as product optimization, scheduling and repair, and products’ revenue and costs. However, these companies didn’t stop to solve management problems but constantly asked for fundraising for speedy scale expansion. Also, the governments didn’t carry out regulations timely until they cannot ignore the problems shared bikes have brought to the society.

In comparison with shared bikes, e-scooters in the U.S. are experiencing similar situations. But we couldn’t conclude that the fate of shared e-scooters in the future would be similar to shared bikes in China. The lessons we could learn from shared bikes in China is that don’t let capital control the company’s development; in other words, scooter startups should focus more on user experience and products upgrading rather than pursue venture capitalists’ investment. Now, at first, the safety problem should be the top priority to resolve for scooter startups.

To most of us living in this day and age, late-night television really is not anything new. Anyone with a digital device and access to the web, and there is a lot of them, would have at least seen a few clips of shows and learned the names of the hosts and their shows. And because there is such a vast selection of them these days, people get to pick and choose. And usually, it is not the network or the program they are choosing, but the clips and segments they want to see. Thanks to the wonders of the internet, people get to do just that. However, younger viewers have no way of knowing, and more experienced viewers tend to overlook, or simply forget, that late-night talk shows used to mean something completely different, and has always been evolving throughout the past few decades. The business model of late-night talk shows, naturally, has changed with it too.

The late-night talk show has come a long way. Ever since television overtook radio as the primary medium in the 1950s, worldwide and in the United States, late night talk shows have become one of the signature features of American television. While television was in its infancy, the amount of original programming was quite limited, and networks had to fill most of niche hours with reruns. NBC became the first to venture into unknown territory in an attempt to prove there was a profitable market after 11 pm. The Tonight Show Starring Steve Allen was launched in September 1954, and it would turn out to be the beginning of NBC’s pioneering and dominance of late-night television in the following half century and more.

Though The Tonight Show Starring Steve Allen would eventually be moved to Sunday night under a different name to combat CBS’ The Ed Sullivan Show in 1957, what it had done was monumental for the future of late-night television – it proved that there was a place for original programming after 11 pm, and paved the way for all future shows and hosts. The format became the blueprint of the mainstream late-night talk show format that would be used by most network shows to the current day. It did not, however, establish a huge following at that time. This was made evident by two facts. Neither CBS nor ABC, the two competing networks, had come up with their own late-night program in the two and half years the show was on the air. And perhaps more of a judgment on the time slot than the show itself, NBC must have deemed the late-night time period expendable to move Allen to primetime on Sundays.

However inconsequential late-night was in comparison with Sunday night, NBC stuck with it, and mainstream success followed. After Steve Allen’s in-house relocation, NBC lined up Jack Paar from CBS to carry on the Tonight name. The highly emotional and unpredictable Paar became an audience favorite. In his heyday, Paar would occasionally draw 7 million viewers in the early 1960s. (Grimes) Little information regarding the competition can be found, but based on the fact NBC was the only network with original programming in late-night, it is safe to assume the competition was practically nonexistent. Considering the show was 105-minute long, and ran from 11:15 pm to 1 am during this time, the number was even more significant than the modern hour-long 11:35 pm shows numbers. At such a late hour, the shorter the runtime, and the earlier it ends, the more ratings will benefit, since the later it gets, the more people will turn off the television set and turn in. As he was popular, Paar was dramatic. At the height of his success, aged only 43, he abruptly announced he would be leaving the show on the air in March 1962, leaving his audience with endless emptiness, and many more questions than was ever answered.

They would not have to live with that emptiness for long. NBC once again called in a young host from another network to resurrect the late-night success Paar had. The young man named Johnny Carson did not disappoint, as he warmed up in the role in no time at all, and, all of a sudden, NBC was having monolithic success in late-night again. Paar and Carson were so popular that ABC and CBS would come up with their own late-night shows in hope of shadowing NBC, and taking away their monopoly. The likes of Joey Bishop, Merv Griffin, Dick Cavett, and Alan Thicke all came and went like shooting stars, unable to gain any traction opposite Johnny Carson in their futile effort.

As Carson swept away the competition as effortlessly as his signature golf swings, his leverage ultimately grew as well. In the first six months after he took over, he was averaging 7.5 million viewers per night. A decade later, the number was 11.5. In 1977, it became 17.3, having more than doubled his audience in 15 years. (Tynan) At this time, he was bringing NBC $50 million in profit per year, (Bushkin and Lewis) which mounts to roughly $1.8 billion in today’s money. In 1980, he got the ultimate deal with NBC: the runtime would go from 90 minutes to 60, he would be on only 3 nights per week, Tuesday through Thursday, his salary would be $25 million per year, and he would be taking 15 weeks off every year. (Bushkin and Lewis) As ridiculously lucrative as it sounded, NBC could not afford to see their monopoly fall apart.

As Carson established his empire in late-night, the scene seemed set for a long time. The first disruptor to surface came from, consequently, not from a rival network, but within NBC. Since The Tonight Show Starring Johnny Carson featured countless young comics over the years, many rose to stardom from their appearances. David Letterman, a former weatherman and radio host from Indianapolis, had set the record as the fastest comic going from being a guest to guest-hosting The Tonight Show, and was given a morning talk show by NBC in 1980. Though the show did not get good ratings in the early hour, it received critical acclaim, winning 2 daytime Emmys. In 1982, NBC decided to give him another shot in the time slot after The Tonight Show, 12:35 pm, and cancel broadcaster Tom Snyder’s interview program The Tomorrow Show, the previous occupant.

And a prince was born. Late Night with David Letterman caught on big-time, especially among younger viewers. Because Carson’s production company owned the show and specified the ways in which Late Night had to be different from Tonight, and partly due to the later hour, Letterman would experiment with wild stuff that people had never seen on television. It created a cult-like cultural and social sensation among the youth, and the advertisers took notice. An uncanny phenomenon occurred: for the first time ever, advertisers would go to NBC with something other than The Tonight Show as their top priority. In fact, many brands with a more youthful outlook, coca-cola and tennis sneaker companies for instance, even went as far as securing commercial time of Late Night first, and then buying The Tonight Show commercial time merely as an add-on thanks to Letterman’s much younger demographics.

In 1992 Carson walked away from it all. After intense negotiations and some bitter conflicts, Letterman did not eventually get the top job. It went to his comic friend Jay Leno, who had gained national fame by appearing on Late Night, and was Carson’s permanent guest host in the years before his departure. Letterman, eager to prove himself at the earlier time slot, 11:35 pm, left for CBS the following year to create The Late Show With David Letterman, and the nation had, consequently, been divided. For the many decades prior, NBC was as good as synonymous with anything associated with late-night, and had enjoyed a huge monopoly in the category. For the first time ever, America would have a viable late-night option outside NBC, and, more importantly, an alternative to The Tonight Show.

Having signed Letterman for over $14 million per year, a figure over twice Leno’s salary (Carter), CBS proved to be right with their investment. Not only did Letterman build a late-night franchise out of nothing at all, he would become the only saving grace CBS had in a particularly difficult time for the network. The entire network was at a complete loss after it gave up the rights of NFL football to FOX in 1994, and had nothing going for them in the many years afterwards, except The Late Show. The poor lead-in performance caused Letterman to lose his ratings edge on Leno, and he was never able to beat Leno in the ratings again.

Despite several changes in the 12:35 pm time slot, the 11:35 pm was a mano-a-mano battle for two decades, until ABC decided to puteir name in the race as well. After Jimmy Kimmel Live! moved up from 12:05 to take Nightline’s time slot, the monopoly that NBC had was now completely turned into a oligopoly.

That meant the already shrinking network late-night talk shows market – between 2011 and 2012, every network late-night talk shows’ total viewer count went down, except that of Jimmy Kimmel Live! – was now divided into even smaller pies. Though there are new platforms of revenue such as YouTube, the profitability of these platforms does not hold a candle to that of traditional television. On another note, the revenue generated by the internet is seldom firsthand. Often, hosts today want to get a high number of hits on the internet because they hope that will drive the viewers to watch their shows.  The role that the internet plays in generating revenue is more subtle than it seems, since the idea is less driven by direct revenue than by building up the audience.

As longstanding late-night host in the hour-long format, Conan O’Brien, transitions into a half-hour format, he proposed the refreshed and shortened show as “smaller cookie, more chocolate chips”. This is perhaps the way to move forward, as the viewers have gotten increasingly short attention spans and more and more at-home with entertainment consisting of mostly soundbites . If you cannot pique someone’s interest within a few minutes, or even seconds, in this world full of smartphones and Xboxes, chances are not good they will sit through a whole hour of the show.

Sources:

https://www.nytimes.com/1991/12/19/arts/jack-paar-the-carson-of-his-day-looks-back-with-the-usual-chuckle.html

https://www.hollywoodreporter.com/news/how-johnny-carson-quit-tonight-644508

https://www.newyorker.com/magazine/1978/02/20/fifteen-years-salto-mortale

https://www.nytimes.com/1993/01/15/arts/going-head-to-head-late-at-night-letterman-on-cbs-leno-on-nbc.html

Inside Conan O’Brien’s Digital Reinvention

By Roy Pankey

I don’t like to throw away my money. But in late October of this year, after the California Mega Millions jackpot topped $1 billion, I bought a handful of lottery tickets. I even waited in line with dozens of other hopefuls for half an hour at Bluebird Liquor in Hawthorn, where the lottery tickets are rumored to be extra lucky. Needless to say, I didn’t win.

Neither did California schools.

The state lottery is practically printing its own money. Though California Lottery hasn’t made public its total revenue for the 2017-18 fiscal year, the California Department of Education (CDE) projected total sales of $6.75 billion for this period, an historic high. That’s more than total revenue of Fortune 500 companies like Ralph Lauren, Ulta Beauty, Harley-Davidson, and Hasbro.

This sum comes after several years of increasing sales for the California Lottery, which sounds like a win for the state’s schools. Yet even as the lottery is selling more tickets than ever before, California schools aren’t receiving any additional funding. In fact, lottery payouts to education are essentially the same from a decade ago.

How can this be? Eight years ago, state legislators changed the requirements of the lottery system.

When 57.9% of voters passed the California State Lottery Act in 1984, they mandated that 34 percent of total lottery revenue be paid to public education. This law withheld until lawmakers abolished that requirement in 2010. The new law requires that the lottery “maximize revenues for public education by operating as efficiently as possible.”

Ticket sales dragged during the Great Recession, and legislators loosened reigns on the lottery to increase jackpots and sales overall. They knew the percentage of each dollar paid to education would fall but hoped the increase in revenue would lead to an increase in total payout to schools.

It’s not happening.

In its public education contribution report for the 2017-18 fiscal year, the California State Lottery indicated that it raised just under $1.7 billion for schools.

At first glance, that sounds like a huge, great number. (First graders shall never want for colored pencils again!) However, education payout represents just 25 percent of the $6.75 billion in projected sales for the year. In past years, the payout percentages were much higher. The lottery is making more money than ever, but schools aren’t seeing any of it.

Lottery revenue dramatically increased after 2010, but payout to schools did not. (Source: LAist)

Zahava Stadler of EdBuild, a non-profit that closely studies education funding, told The Press Democrat, “The fact that education dollars have remained pretty flat tells you that more and more what the state is doing here is running a casino, rather than funding public schools.”

Funds raised by lottery ticket sales account for less than 1.5 percent of all education funding in California. Money is distributed among K-12 schools, California State University, University of California, community colleges, and various other educational institutions. About 80 percent of payouts go to K-12 education.

In a statement on its website, the CDE says the money it receives from state lottery ticket sales “represents only a small part of the overall budget of California’s K-12 public education that alone cannot provide for major improvements in K-12 education.”

Since its inception in 1985, the California State Lottery has contributed more than $32.5 billion to education. Its all-time biggest expense—a whopping $53.8 billion—has been awarded to lucky prize winners.

Distribution of Revenues (in billions) October 3, 1985 – June 30, 2017 (Source: California State Lottery)

Distribution of Revenues (in billions) October 3, 1985 – June 30, 2017 (Source: California State Lottery)

In October 2017, officials who run the Mega Millions game were concerned that frequent, smaller jackpots—say, $100 million or less—would result in fewer ticket sales. They thought people would become too familiar with prizes like these and would be discouraged from buying any tickets at all. Gordon Medenica, head director of the Mega Millions Group referred to this phenomenon as “jackpot fatigue” in an interview with The Washington Post.

Now, the Mega Millions pools are paid out much more infrequently, allowing them to swell and swell to unprecedented amounts. Adding to the paucity of payouts was an increase of numbers to choose from on each ticket, as more numbers decreases a player’s odds. Another change that powered tickets sales was the increase in the price of the tickets themselves. They now cost $2, double the prior price.

The California Lottery estimates that more than 19 million people played last year. That’s more than half the state’s population old enough to gamble. In California—like in most states with a lottery system—vendors sell a majority of tickets to low-income individuals.

An analysis by LAist of two years of lottery ticket sales in California found that:

• Most tickets are purchased by the poorest fourth of census tracts in virtually every county.
• Most tickets are purchased in Southern California census tracts with high Latino and Asian-American populations.
• Most tickets are purchased in Southern California’s Los Angeles, Riverside, San Bernardino, Orange, and Ventura Counties.

Dr. Timothy Fong, director of the gambling studies program at UCLA, told the publication, “The lottery does seem to be more harmful for, as you can imagine, lower economic communities, ethnic minorities.” Communities spending the most on lottery tickets are the same communities who are in most need of the system’s education funding.

That disparity hasn’t happened by chance. With the help of high-powered advertising agencies, the lottery markets to California’s diverse populations.

2018 Lunar New Year scratcher advertisement in Chinese.

To reach Asian-Americans, the lottery has developed products like its Lunar New Year ticket, whose jackpot is $888. The number eight is associated with wealth in Chinese culture.

In October, marketing agency David&Goliath placed the winning bid for California Lottery’s $295 million account as part of a five-year contract. Together, the two will continue marketing to California’s diverse communities and working toward the Lottery’s goal of becoming “the largest lottery in the U.S.” (It trails only New York.)

Of all California cities with populations over 50,000, Westminster, located in northern Orange County, sells the most lottery tickets per capita. The city sold $668 worth of tickets to each resident in 2016 and 2017. The median household income in Westminster is $55,287, while the median household income for the state is considerably higher at $67,739.

Some other California cities selling the most lottery tickets include Huntington Park, Inglewood, Hawthorne, and Compton at $392, $359, $330, and $323 per capita, respectively. All of the median household incomes in these cities are even lower than that of Westminster.

The Mega Millions used to work like this: Players chose five numbers from 1 to 75 and a Mega number from 1 to 15. Odds of winning the jackpot were 1 in 258,890,850.

Since officials altered the Mega Millions tickets, players now choose five numbers from 1 to 70. They still choose a Mega number, but the range increased to 1 to 25. Now, odds of winning the grand prize are 1 in 302,575,350, meaning my chances of getting rich decreased by more than 16 percent.

Odds that schools will win big? Still unclear.

While waiting for hours to get called for a shift outside the dispatch hall at Wilmington, Calif., Rafael Ochoa, a 37-year-old freelance or “casual” longshore worker at the Port of Los Angeles, remained uncertain about the future work volume amid the headline-grabbing trade dispute between China and the U.S.

“It is all about the economy, if the economy f*&%s up, we are not working, that is just how it goes.” Ochoa said. “We are already struggling.”

The neighboring ports of Long Beach and Los Angeles are a key entry point for goods imported to the U.S., with 40 percent of all imports coming through the gateway of San Pedro Bay, Nick Vyas, executive director of the Center for Global Supply Chain Management at the USC Marshall School of Business, said. “We are a huge network entry point of the Asia Pacific, especially stuff coming from China,”

Even though the two countries have reached a truce after the 2018 G-20 summit in Buenos Aires, Argentina, official announcements regarding the timeline and de-escalating plans are yet to be published. Currently, the White House has imposed tariffs on $250 billion worth of Chinese imports – 25% on $50 billion worth and 10% on the rest. To retaliate, Beijing levied tariffs on $60 billion of American goods.

According to the Port of Los Angeles, it handled $284 billion in trade during 2017, while trade with China and Hong Kong accounted for more than half of its total cargo.

As the largest container port in North America, it generates colossal economic activities: 147,000 jobs in Los Angeles, 1.6 million jobs throughout the country, 41 percent of West Coast’s market share, and 18 percent of the national market share, according to statistics published by the port.

If the head-to-head trade confrontation continues, the Port of Los Angeles is expecting to see negative impacts on up to 20 percent of trade values in the fourth quarter, Philip Sanfield, a spokesperson of the port, said.

Besides financial losses to the port, the trade war could result in potential human toll for workers on the waterfront.

After his 12-year journey of being a part-time longshoreman, Ochoa is still far away from earning his chance to be part of the union. By getting three to four shifts on a weekly basis, Ochoa could bring home between $35,000 to $55,000 a year, depending on how much he works and what job he gets. “The pay here is good, plus if you don’t show up they don’t get mad at you.”

However, the everyday wait is horrendously long. “It could be three hours in the morning, three hours at night.” he said. “We have no life outside this, we just have to be here.”

Without the union’s shield, casual workers secure far fewer shifts than full-time workers. Seven days a week, they queue up for a chance to get leftover assignments that are not taken by the union members. “We don’t get to choose, they get to choose,” Ochoa said.

In the face of the ongoing trade-war tensions, Ochoa expressed his frustration over the uncertainty in a profanity-laced response to questions about his future.

Ochoa said the job amount in the upcoming months could be reminiscent of the situation in 2009. He and his colleagues had no choice but to leave the dispatch hall with no jobs when the economy went into a tailspin. “We would show up for three months straight, and finally we took three months to get out once,” he said.

Despite the holistic impact on economic activities on the dock, casual longshoremen would bear the brunt of the tug of war between the U.S. and China as they are at the bottom of the dispatch system. “Definitely all the casuals, but I think some regular will also be affected.” Ochoa said.

Regarding the massive trade with China, the endless uncertainty about the trade war could have huge implications on the entire country, not just Los Angeles.

Vyas said consumers would start to feel the slings and arrows of tariff ramifications in six months. “The cost of goods will be much higher because obviously of the companies continue to produce goods in China, they will get higher taxes.”

However, since tariffs became the hot-button issue for manufacturers and distributors earlier this year, the Port of Los Angeles has experienced some good months compared to 2017.

With Chinese shippers pushing hard to swarm products into the U.S. before the tariffs were in place, the volume of total imports coming through the port rose 2.8 percent and 6.3 percent year-on-year in June and July respectively, port statistics show.

Although import volumes recorded a 0.5 percent year-on-year dip in August following the onset of retaliatory tariffs between the two nations, the numbers jumped 8.3 percent and 26.7 percent in September and October respectively from a year prior, according to the data published by the port.

Vyas does not think the trade volume at the port will be affected under the tariff pressure as Chinese manufacturers are quickly investing and divesting out of China in response to Trump’s trade policy.

“This dispute creates an urgency to open up factories in different parts of the world, and stuff that was made in China is now made in Malaysia. It is very easy for them to create the capacity and start manufacturing.” he said.

While no solutions to the trade disputes are being seen in container shipping companies, Sanfield said negotiable settlement instead of tariffs would be good to global trade, not only for the Los Angeles port.

“I think it is interesting to see who is going to blink first and who is going to say it is time to stop this childish game and adopt discussion on the table and finalize it,” Vyas said. “There will be give and take.”

A handful of tater-tots coupled with pizza the size of your palm (with two whole pepperoni slices!) on top of a disposable styrofoam tray was considered a really good day at the cafeteria. On other days, students were in for more of a surprise: a mystery meat accompanied by chocolate or strawberry milk would be received differently by everyone. Very few are satisfied with the lunches but it is too late to revamp the American public school lunch system. This is not simply an issue to bad food, but really a problem of money. The health of this generation is at stake, but corporations are not interested in the health of kids, but only profits.

Courtesy to DoSomething

Regardless of the menu, school lunches in American public schools often elicit an image of a soggy, plastic-y, hot (or sometimes cold) mess. Part of this is due to the vague definition of vegetables from the United States Department of Agriculture (USDA). Our nation’s nutrition standards that guide public school lunches describe potatoes as a vegetable, and, by association, french fries are classified as vegetables. The tomato paste in the pizza, pickle relish, and ketchup all qualify as vegetables in the confines of American lunchrooms and pass as “healthy” food.

Why are the health guidelines for school lunches so confusing? And what does that have to do with the bad food? In 1947, Congress passed the National School Lunch Act, which aimed to ensure all kids in America that could not afford lunches at school would still be fed, even if the government had to subsidize their meals. Even with the suspicious standards for food, the intentions of the government were good—they wanted to keep kids from going hungry at school. But today, the American public school lunch system tells a revealing story of Federal budgeting and how policy actually plays out from the Congressional floor to elementary school lunchrooms and beyond.

Budget Food

1935 was the first year Congress set aside money in the school lunch program. The government initially used the surplus food from farmers like dairy, wheat, and pork to make these meals. As more children started eating government-funded lunches, the budget steadily increased because the lunch programs needed even larger quantities of food, no longer utilizing surplus food, but created a demand. But in the 1980s, the Reagan administration faced the difficult problem of cutting the Congressional budget. From the overall $615 billion of the 1981 fiscal year, the school lunch program became the victim of the budget cut. President Reagan reallocated $1 billion from the lunch subsidies, reducing the U.S. government spending to a reported $3.6 billion overall for school lunches. This 24 percent decrease in lunch funding led to creative ideas from the Reagan Administration to pinch pennies. Controversially, ketchup was presented as a vegetable during this time, and these bold classifications of vegetables have continued. Even today, within Congress and the administration, there is a constant struggle to keep the budget as small as possible because the spending on child nutrition programs grows at exponential rates. According to the Congressional Budget Office, the spending more than doubled since the 90s and is projected to rise continuously in the future. Despite the increase in budget, nutritional programs often grow at similar or faster rates, resulting in a shortage of money.

The money to provide these services and food gets tighter every year, so do the health standards. The demand for low- and no-fat foods has surged since the 90s. Today, the meals schools serve have a calories limit ranging from 650 to 850, depending on the age range of the children. Not only that, the minimum servings of fruits and vegetables doubled, “dark green and orange vegetables” now replace the previous potatoes and tomato paste as vegetables, offering a wider variety of real vegetables. Meals are now served with less sodium, less saturated fats, and a reduced amount of added sugars. No more sugary drinks or unhealthy snacks… the list goes on.

The stricter health guidelines are largely due to two things. The first is the Free and Reduced Lunch program, which derived from the initiative to feed every child in our schools. The National School Lunch Act guarantees lunch for everyone. These lunches play an important role for many children; President Obama once noted that, for many children, school lunches are “their most nutritious meal—sometimes their only meal—of the day.” Last year, a whopping 4.9 billion lunches were served. If we break this number down to a daily basis, American public schools served 30 million lunches in one day: 20 million of which are free, 2 million were at a reduced rate, and 8 million were paid in their full price. If over two-thirds of lunches served receive their food at a reduced or free price, it’s a good indicator that many children are indeed dependent on these school provided lunches.

The other reason the USDA began to enforce tighter health guidelines was due to the obesity epidemic the media extensively covered in the early 2000s. From the University of Michigan, Dr. Kim A. Eagle’s research study identified school lunches as another risk for childhood obesity. One of most jarring statistics stated that “those who regularly had the school lunch were 29 percent more likely to be obese than those who brought lunch from home.” Eagle attributes this to the fact that school lunches rely on high-energy, low-nutrient-value food, which was usually centered around corn and potatoes, because of their lower costs. The First Lady Michelle Obama created the Healthy Hunger-Free Kids Act, an initiative to combat obesity, promoting not only exercise, but also pushed for stricter health guidelines for students.

The constant shaving of the Federal budget alongside strict health standards had left America with very few options. Processed foods were on a rise in response to this situation. The opportunity to turn Federal dollars into a lucrative business propelled companies such as Tyson and PepsiCo to capitalize on this opportunity. These companies began lobbying efforts to ensure their products were used in lunchrooms.

Graphic from School Nutrition Association

In these conversations where the decision making for school lunches take place, there are two other major players: the SNA or School Nutrition Association and the National School Boards Association who represent the interests of students and as advocates of schools, and organizations such as the Food Research and Action Center and the Center on Budget and Policy Priorities who examine the nutritional value of food.

Though SNA is supposed to advocate on behalf of schools, the School Nutrition Association’s website shows that lobbying groups such as Tyson and Pepsico are listed as partners. While the processed foods are not a good thing, it’s all the schools can realistically afford. Such high health standards with a significantly low budget from the government is a tall order to fulfill.

When asked about the amount of processed foods in school lunches, the SNA stated, “While many school are working to increase the amount of freshly prepared and scratch-made menus items, those with limited equipment and labor resources rely on healthy pre-prepared foods to ensure students receive balanced meals each day.” Even if there is enough money to assemble all the ingredients for healthy, unprocessed meals, there is not enough to employ kitchens to cook and serve children.

A myriad of factors are all complex layers to the problem of American public school lunches: the shrinking Congressional budget, the high reliance on free and reduced lunch, the intricate health standards, and lobbying groups of processed foods. The system has ballooned so much and fallen too deep to fix.

SOURCES:

https://www.cnbc.com/video/2018/11/14/heres-who-gets-rich-from-school-lunch.html

https://www.cnbc.com/2018/11/14/how-big-brands-like-tyson-and-pepsico-profit-from-school-lunches.html

https://www.ers.usda.gov/topics/food-nutrition-assistance/child-nutrition-programs/national-school-lunch-program.aspx

https://www.cbo.gov/publication/50737https://firstfocus.org/wp-content/uploads/2017/06/Nutrition-Budget-Fact-Sheet-FY18-PDF1.pdf

https://www.weforum.org/agenda/2015/08/how-to-scale-up-healthy-eating-in-schools/

https://fraser.stlouisfed.org/files/docs/publications/usbudget/bus_1981.pdf

https://schoolnutrition.org/AboutSchoolMeals/SchoolMealTrendsStats/#1

https://www.fns.usda.gov/nslp/history_5

https://www.scientificamerican.com/article/new-nutrition-standards-for-school-lunches/