PROHIBITION – A 20TH CENTURY ECONOMIC EVIL

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Prohibition officers raiding the lunch room of 922 Pa. Ave., Wash., D.C. ( Dewar’s Repeal / Flickr )

From 1920 to 1933, the Eighteenth Amendment of the United States constitution banned alcohol. The Eighteen Amendment, also known as Prohibition, has the honor of being the only constitutional amendment to be repealed with another constitutional amendment.

Although prohibiting alcohol is now seen as absolutely ridiculous, hindsight is 20/20 and Prohibition began with noble intentions. According to the Cato Institute, it was “undertaken to reduce crime and corruption, solve social problems, reduce the tax burden created by prisons and poorhouses, and improve health and hygiene in America.” 

Total Expenditure on Distilled Spirts as a Percentage of Total Alcohol Sales (1890-1960)
Source: Clark Warburton, The Economic Result of Prohibition (New York: Columbia University Press, 1932), pp. 114-15; and Licensed Beverage Industry, Facts about the Licensed Beverage Industry (New York: LBI, 1961), pp. 54-55.

Needless to say, that did not come to pass. Alcohol consumption dipped initially, it increased soon after, and led to the organization of crime. Demand continued, the legality of supply be damned. Prior to Prohibition, crime bosses such as Al Capone were relatively small-time menaces. The “noble experiment” made illegal alcohol a lush business opportunity. It also led to networking opportunities for these mafiosos, as the sourcing and distribution of alcohol often requiring crossing state lines. 

“Mobsters couldn’t work in isolation if they wanted to keep the liquor flowing and maximize profits,” said Dave Roos, a freelance journalist in History. 

 Per Capita Consumption of Alcoholic Beverages (Gallons of Pure Alcohol) 1910-1929
Source: Clark Warburton, The Economic Results of Prohibition (New York: Columbia University Press, 1932), pp. 23-26, 72.

A 2010 Congressional Research Service study found that organized crime in capable of weakening the economy with illegal activities because they can cause state and federal governments to lose tax revenue. Prohibition cost the United States government $11 billion in tax revenue. According to PBS, a long-term consequence of this was that multiple state governments, in addition to the federal government, would on income tax revenue to fund their budgets. 

Enforcing Prohibition also turned out to be a costly endeavor. In 1921, Prohibition enforcement began at $6.3 million. By 1930, it cost $13.4 million to enforce. 

During Prohibition, kingpins could make as much as $1.4 billion in 2018 currency. 

Meanwhile, other industries that were expected to rise as a result of Prohibition actually ended up struggling. Top industries with expected growth were clothing, chewing gum, grape juice, soft drink and theatre producers. Essentially, every non-booze industry that could provide a new way to entertain Americans expected an increase. According to PBS, theatre revenues declined and restaurants failed to turn a profit without legal liquor sales. 

Mug shot of Al Capone in Philadelphia, Pennsylvania, where he had been arrested and charged with carrying a concealed weapon. ( Pennsylvania Department of Corrections / FBI )

PBS found that “the closing of breweries, distillaries, and saloons led to the elimination of thousands of jobs, and in turn thousands more jobs were eliminated for barrel makers, truckers, waiters, and other related trades.

The repeal of Prohibition in 1933 ended gangster’s profitable bootlegging enterprises, and many returned to classic criminal operations like gambling and prostitution. The Great Depression, like Prohibition before it, provided mobsters with a golden opportunity: loan sharking. 

Unlike many Americans during the Great Depression, the gangs had cash in an economy that wanted in. Like with alcohol, the people had the demand and the gangsters had the supply. 

According to Howard Abadinsky, a criminal justice professor at St. John’s University, it became clear to many that if people wanted to do something that required cash, they needed to get in cahoots with the likes of Al Capone, Bugsy Segal and “Lucky” Luciano. The law of the land was irrelevant in many ways, and money-laundering techniques were extremely powerful. 

“If you wanted to set up a legitimate business, [you] have to go to organized crime. Loan Sharking becomes a major industry,” Abadinsky said. 

Sources:

The Economic Impact of Mental Illness

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But first, a quick laugh. A few years ago, a story about one Ohio State student’s honestly went viral. After going through an unexpected break-up halted her productivity, she sent her professor this email. 

When she posted a screenshot of the email on Twitter, it immediately got the attention of the public and received  over 2,000 retweets and 15,000 likes. While the humor is endearing, the attention this post received attests to something else: we’ve all been there. 

Sometimes, life just gets in the way of our responsibilities and unexpected emotional distress makes it feel impossible to focus on school or work. That debilitating feeling, however, is even more intense for those of us with mental health issues.

To put this issue into context, a recent study by the  American College Health Association found that nearly 1 in 4 U.S. college students reported being diagnosed with a mental illness. Additionally, almost 9 out of 10 undergraduate students reported feeling overwhelmed by all they had to do and nearly half of all college students have felt so depressed that it was difficult to function.

Okay Gigi, college students are stressed. What else is new. While these statistics may seem like a non-starter, it is crucial to realize that a degree is not a cure-all for mental health issues. In fact, almost half of U.S. adults will experience a mental illness over the course of their lifetime and depression is the leading cause of disability for adults around the world. These numbers make it clear that we are in the midst of a mental health epidemic and that same sentiment is echoed by the economic impact of these mental health issues.

A breakdown of mental illnesses facing adults in the U.S.

As it turns out, mental health is one of the costliest forms of sickness for the U.S. economy.  One analysis of data from 2008 to 2014 found that “a single extra poor mental health day in a month was associated with a 1.84 percent drop in the per capita real income growth rate, resulting in $53 billion less total income each year” (ScienceDaily.com). To reiterate, that’s $53 billion lost from adding a single poor mental health day to workers’ normal schedules. And these numbers are only expected to grow. Researchers also noted that “the global economic cost of mental illness is expected to be more than $16 trillion over the next 20 years, which is more than the cost of any other non-communicable disease” (ScienceDaily.com). 

The Human Capital Approach

A study published in Science & Society breaks down these economic figures further, outlining the different approaches in which the economic impact of mental health issues can be evaluated. The approach I will zero in on is the Human Capital approach, which combines the direct, “visible” costs of mental illness and the indirect, “invisible” costs. “Visible costs” are what comes to mind when we think about financing illness; this includes things like medication, therapist visits, and hospitalization costs. The indirect or “invisible” costs account for “income losses due to mortality, disability, and care seeking, including lost production due to work absence or early retirement” (National Center for Biotechnology Information). This study found that the direct and indirect costs of mental disorders were estimated to amount to $2.5 trillion, where “the indirect costs (US$1.7 trillion) are much higher than the direct costs (US$0.8 trillion)” unlike other leading diseases such as heart diseases and cancer, which the graphs below illustrate (National Center for Biotechnology Information). Additionally, both of these numbers are expected to double by 2030. 

How the Costs of Mental Disorders Compares to Other Diseases

The Human Capital approach is just one way of quantifying the economic impact of mental illness, but the message is clear: mental health issues are costing the economy billions and will only continue to do so if nothing is done. This should be motivation for workplaces to implement mental health protocols and resources. If companies discussed mental health issues freely and provided their employees with adequate mental health resources, employees would presumably be happier, more productive, and more engaged with their work. Investing in mental health is key to solving the current epidemic facing the world’s adult population, and as someone who wants to be a therapist in the coming years, I can only hope that others are as serious about making this investment as I am.

The Box Office in the Blockbuster Age

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The economic story that the box office illustrates in a time when mega-blockbusters dominate ticket sales

In 2019, Avengers: Endgame, The Lion King, Toy Story 4, Captain Marvel, and Spider-Man: Far From Home have taken the top five spots for highest gross in the domestic box office (Box Office Mojo). 

What do these successful titles have in common, besides the fact that you could meet all of the films’ characters at a theme park somewhere? 

Well, it’s just that–all of the films are based on existing intellectual property (IP) with established fan bases. Studios are betting on these tentpole films in the box office, because they draw audiences into a theater and away from the social media, streaming services, and video games that have, in recent years, made it much more difficult to attract eyeballs to cinemas.

Beyond garnering attention, mega-blockbuster films bring in multiple sources of revenue for a studio, making its parent company look favorable to Wall Street investors. When a viewer gets hooked on Avengers and its cinematic universe (because how could one not?), that person is likely to be back for the next film, coming out in a year or so. Furthermore, being an Avengers fan will make a $129.00 Disneyland ticket seem much more attractive. Here, one can experience a superhero meet and greet, and soon, the Avengers Campus: a space at the park explicitly dedicated to the Marvel universe. Oh, and of course, you’ve got to buy your child an Iron Man costume for Halloween. 

From just the movie ticket, theme park pass, and merchandise purchases made by one family, Disney is making several hundred dollars in revenue. Conglomerates like Disney seem to be doing all the right things to adapt to the rapidly changing marketplace, taking advantage of revenue streams left and right. However, studios that do not control lucrative IP are being struck hard by the age of mega-blockbusters. 

This year, Warner Brothers has released seven small and mid-tier budgeted films that bombed at the box office, including The Good Liar, Motherless Brooklyn, and Blinded by the Light. About five to ten years ago, the studio could have deployed star power, marketing dollars, and a suitable opening weekend date to mitigate the risk of a box office flop. But nowadays, it is almost impossible to find a weekend not taken by something popular, such as the newest Pixar film, or to beat negative ratings on sites like Rotten Tomatoes before the film has even been released. If there is an excuse not to make the trek out to the theater, people will take it. If it’s not something from the Star Wars franchise or a beloved animated film, is it worth the time and money?

Despite having several of its films bomb at the box office, Warner Brothers is doing alright with the $1 billion in worldwide ticket sales made by The Joker. And moving forward, the studio is not ridding itself of mid-budget films. Instead of having a wide release in theaters, a film such as The Good Liar will likely be released on the WarnerMedia streaming service, HBO Max. 

Box office sales are indicating a shift in consumer habits surrounding entertainment; people are choosing to spend their own scarce resources—their money and attention—in places other than the box office. There is a plethora of content available to society right at home and for a low price via social media, video games, and online streaming platforms. People have always had to choose how to spend their money on entertainment, but now more than ever, it’s also about where consumers choose to spend their time. 

The box office illustrates a landscape where the stakes are much higher for studios; audiences are less likely to spend their time and money on a mid-budget film that may or not be good. They can watch an Oscar-nominated film at home on Netflix instead. 

To adapt to the entertainment landscape in 2019, studios are learning from the box office that it’s now a game of “go big or go home.”

Low-Income Households: The Most to Lose, The Least Capable of Change in the Face of Global Warming

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One of the biggest concerns for the current American public is taking action against climate change. In recent years, more people have reported feeling the effects of climate change firsthand than ever before. Around six-in-ten Americans claim that climate change is affecting their local community in either a great deal or at some capacity. This is due in part to increasing global temperatures and rising sea levels effecting both inland and coastal communities.

Those most at risk are often low-income communities. Cheaper housing can be found in high-risk areas such as flood or fire zones as well as in decaying, older housing that can be equally or if not dangerous in a natural disaster. The latter is due to the fact that older housing is often not outfitted with updated building codes that implement fire-proof or flood-mitigating infrastructure. Even the streets themselves may be incapable of handling efficient transport of emergency services. The more likely a firetruck is to get stuck in a congested street, the more likely the building in an old urban district is to face irreparable damage or even get burned down. 

It’s no contest that failing to address climate change early has contributed to an increasingly burdensome cost on mitigation efforts. Firefighters are subject to increasingly longer overtime hours, FEMA applications in flood zones have skyrocketed, and local governments, including California and Texas state governments, are looking to buy out housing in high-risk areas to prevent further housing in those regions. The costs are also looking to increase in the next few years. 

Many Americans are electing preventative measures to combat climate change. This includes choosing eco-friendly brands who are changing manufacturing practices to reduce carbon emissions to conserving resources including energy and other utilities. This conservation of utilities is also a cost-saving benefit to many households. However, there is a glaring issue in terms of the infrastructure of utilities provided for by both public and private companies that negatively affect low-income households‘ ability to participate in eco-friendly activity and economic conservation: infrastructure. 

In a study that analyzed socioeconomic status and energy consumption, New York University urban planning researchers Constantine E. Kontokosta and Bartosz Bonczak and the University of Pennsylvania urban planning professor Vincent J. Reina found that the highest consumption was found in both the lowest and highest income neighborhoods in the study. 

While the consumption levels for the higher-income bracket is attributed to an average increased use through more appliances, electronics and other behavioral choices, the same could not be said for the low-income bracket’s use. 

Public Housing Projects in NYC.

As stated before, much of low-income housing is often found in regions with aging buildings that fail to upgrade its infrastructural components to fit current standards found in new housing. As a result, new technology that provides more efficient systems in conveying utilities is never implemented. No matter how hard these households attempt to conserve resources on a behavioral level, they ultimately end up using and paying more because of their outdated systems. 

The same can be said for subsidized housing units, where often the cheapest option for utility conveyance is placed in rather the most efficient. This leads to small short-term costs at the expense of the developer, but large long-term costs at the expense of the resident, who must outfit the monthly utility bills. 

This places an extra burden on low-income households, who already pay an increasingly larger  portion of their income on utility bills overall—up to 20 percent of their wages as opposed to wealthy families who pay between 1.5 and 3 percent of their income. Thus, this infrastructural issue is both at a significant cost of low-income communities as well as the environment.

Energy Cost Burden in relation to minority populations, an aspect of the 2019 study on energy consumption on metropolitan regions.

Currently, there is little incentive for private housing units to provide upgrades to their aging structures without placing the expense on their tenants. On the other hand, public housing is beginning to see promise in the form of legislation—particularly the Green New Deal. 

The ambitious bill proposes seven different grant programs to completely replace the energy systems of public housing nationwide within 10 years. The replacements would either consist of renewable or sustainably carbon-neutral systems, addressing the issue of aging infrastructure as well as carbon-emission reduction. 

While the initiative shows promise, the bill is still in contention in Congress and has yet to be enacted. If we wish to see both alleviation of the burden and stress of low-income living in the nation as well as protecting the most vulnerable population from climate change, more investment on sustainable infrastructure and utilities needs to be made. 

China’s video game live streaming duopoly

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China’s Douyu is one of China’s largest live-streaming sites that focuses on gaming and esports content. By out-fundraising rivals and poaching top streamers, it survived China’s live streaming war in 2016 to become an industry giant. 

Douyu is the second Twitch-like service backed by Tencent to go public in the United States. The other one is Huya, which signed a deal with Western competitive esports organization Team Liquid, one of the world’s most valuable esports teams according to Forbes.

But Douyu is more focused on the growth in its hometown. “As one of the first game-centric live streaming platforms to make the foray into eSports, we are strategically positioned to benefit from the proliferation of the eSports industry in China,” Douyu said on its corporate profile.

Huya and Douyu control over 60% of the Chinese game streaming industry. And this number is expected to grow even higher with further consolidation. Huya went public in May 2018, while Douyu recently IPO’ed in July 2019, both in the US. 

Huya is more than 80% larger than Douyu with a $4.9 billion valuation, and Douyu has a $2.7 billion valuation as of August 26. Moreover, compared to Douyu, Huya has a slightly higher tilt towards game streaming with over 50% revenue derived from gaming, compared to 45% for Douyu.

Last April, Douyu filed with the U.S. Securities and Exchange Commission as it prepares to raise up to $500 million on the NYSE less than a year after its archrival floated on the same stock market.

However, looking at Douyu’s quarterly financial results, it is noticeable that the company’s performance in the third quarter of 2019 is not as good as expected. “The Company expects its total net revenues to be in the range of RMB1,950 million to RMB2,000 million in the third quarter of 2019,” while the real total net revenue increased by 81.3% to RMB1,858.5 million (US$261.0 million) from RMB1,024.8 million in the same period of 2018. 

For the third quarter, Douyu’s net loss was RMB165.4 million (US$23.2 million) compared with RMB220.5 million in the same period of 2018, implying a net loss margin of 8.9% compared with 21.5% in the same period of 2018.

However, these streaming platforms also face other challenges like ethical guidelines and piracy concerns. When a gamer live-streamed on Douyu three days before a Nintendo Switch game’s release date,  viewers were quick to realize they were watching someone flagrantly play a pirated copy of an unreleased game. 

The streamer faced immediate backlash from Nintendo fans. Eventually, Nintendo also appeared to respond. A screenshot of a cease and desist letter said to be from the company started circulating online. The letter was said to be sent to a number of Chinese websites where users were sharing pirated copies of Switch games.

We were unable to verify the authenticity of the letter, but some Chinese websites were quick to respond. Some websites and forums known for hosting pirated games have now stopped allowing users to download Nintendo Switch ROMs.

Nintendo has a complicated relationship with China, which has long been a hotbed of game piracy. This isn’t even the first time a Chinese hacker has publicly flaunted a pirated Nintendo game ahead of its release.

With strong financial support and a large audience base, China is catching up with the world on its eSports and game live streaming services. With its unique duopoly model, each platform needs to find its distinctiveness and has to deal with other concerns along the way.

The Decreasing Clout of Black Friday

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For many, the week surrounding Thanksgiving is filled with eating, drinking, treacherous travel and reconnecting with family. And for millions of Americans, waking up early and traveling far distances to score crazy Black Friday deals is the immediate objective following Turkey Day. While Americans are projected to spend even more money –$29 billion to be exact– on Black Friday this year, Black Friday retail sales are anticipated to take a hit this year. With the popularity of online shopping and Cyber Monday only increasing, consumers are less motivated to actually shop in-store. Now, consumers are browsing, comparing prices and hunting down deals from the comfort of their own home. 

In the past, large department stores like Macy’s, Kohl’s and JC Penney held the largest power when it came to retail in the 70’s and 80’s. Around this time, the allure of black friday and retail sales in general came to the foreground. Thus, when it came to Black Friday, these department stores relied on and drew in more dollars than any other retail companies. 

Nowadays, however, the reality of the retail industry couldn’t be more black and white. Due to the disruption of Cyber Monday and online shopping in general, large retail chains like Macy’s and Kohl’s are having a hard time drawing shoppers to malls. As a direct result, their sales are in a slump. The model of Black Friday is essentially crazy deals for a limited and short amount of time. However, as Coresight Research CEO Deborah Weinswig stated, “Black Friday no longer represents a narrow window of opportunity in which shoppers have to wait in the cold and sprint into stores to get unmissable deals.” Holiday shopping begins much earlier in the season and now, actually occupies most of the month of November. While Black Friday is still expected to be the busiest shopping day in respects to foot traffic, Cyber Monday is expected to surpass Black Friday sales this year. That being said, Macy’s shares are down 47% this year and Kohl’s shares are down 27%. 

Thanksgiving 2019 shopping projects. Source: CNBC

While the days of Americans trampling each other in a race to get a deal on a flat screen TV are decreasing, Cyber Monday and online holiday shopping sales, as previously stated, have lucrative projections. This year, online shoppers are expected to spend $143.7 billion in November and December combined, according to Adobe Analytics annual calculations. This is a 14% increase in comparison to last year’s holiday shopping period. 

This year, the holiday shopping period is 6 days shorter than normal, seeing as there’s only 22 days between Cyber Monday and Christmas. Alas, Adobe Analytics projects ecommerce sales will exceed $1 billion for for every day of November and December. This will be the first year ever that this is the case. Thanks to online shopping companies like Amazon Prime and “BOPIS” (buy online, pick up in-store) services, online shopping is just that much easier. This year, smartphone purchases are projected to account for 36% of online sales this holiday season. This statistic is up 20% from last year. 

With the ability to complete our holiday shopping needs from the 4 inch device that sits in our pockets, the odds continue to stack up against the power of Black Friday retail sales. While Black Friday has yet to occur, these statistics and projections prove that retail shopping finds itself in a very interesting cross road. As large department and retail chains are closing down nationwide, I personally am very interested to see where the future of in-person retail sales lies. 

Hog Crisis in China

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  • A pig farm in Yiyang, Henan. China has culled 1.2 million pigs to control a deadly swine fever . (Credit to New York Times)

China’s pork prices hit record levels after an epidemic of African swine fever killed millions of pigs, triggering a severe meat shortage in the world’s top pork consumer.

Pork prices in China surged past 50 yuan ($7.1) per kilogram. According to the data from the Ministry of Agriculture and Rural Affairs in October, pork prices rose more than 100 percent in October from a year earlier, contributing 2.43 percentage points to the CPI rise, and accounting for nearly two-thirds of the year-on-year increase.

For more than a year, China has been trying to contain a vicious epidemic of African swine fever, a highly contagious disease that is harmless to humans but kills almost all infected pigs. The Chinese government announced the first outbreak of the disease in August 2018, and since then, outbreaks have been reported in several provinces across the country.

In response, the authorities banned farmers from feeding swill to pigs. Leftovers are seen as the main channel of transmission to healthy herds because the virus can live for days in feces and raw meat. Officials have imposed quarantine measures and transportation restrictions in areas where the disease has broken out.

However, safety and hygiene standards have been difficult to enforce in China’s millions of small backyard pig farms, which feed most of the country’s pigs. The government says 1.2 million pigs have been culled so far to try to stop the spread of the disease, which is a tiny fraction of the 700 million pigs slaughtered in China last year.


In a supermarket located in Beijing, the pork counter reads jokingly “pork supports installment payment”. (Credit to Abuoluowang.com.)

Analysts estimate that pork prices could double by the end of 2018. As officials prepare for bigger price increases, Beijing will be faced a growing number of challenges.

To offset the surge of pork prices, officials subsidized about 3.2 billion yuan ($452 million) to low-income families who are struggling to afford pork.

Chinese authorities have also asked local governments to free up money that could be used for artificial insemination technology, a way to encourage farmers and producers to breed more hogs. The Chinese government has also drafted plans to increase subsidies, loan support and insurance coverage for the pig industry in the country.

Moreover, the Chinese government released 1,500 metric tons of pig meat in the past two months, and the majority of those were frozen pork reserves. China set up a national strategic pork reserve in the 1970s as a way to deal with emergencies and stabilize pork prices.

Although the Chinese government hasn’t released a report on the amount of frozen pork in its reserve yet, experts warn that the Chinese government may not be well prepared enough to deal with the pork crisis.

“China’s pork shortage will worsen in the rest of the year, but the government doesn’t have effective methods to fill the gap in the short term,” said Chen Wen, the Wanlian Securities analyst.

Chen estimates that China will face a shortage of about 10.8 million tons of pork this year. She added that China’s supply of frozen reserves isn’t enough to make up for that.

Goodbye Black Friday

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With more shopping moving online, Black Friday is dying at a rapid rate. 

Clint Grant | The Dallas Morning News

“I think the traditionalists will have a hard time stomaching that Black Friday is dying,” Josh Elman, a consumer and retail analyst with Nasdaq Advisory Services, told Business Insider. “But I think at the end of the day, the whole idea and concept of Black Friday deals in store will diminish over time.”

He continued, “Ultimately, consumers really want convenience, and they want to get their item and get out of the store quickly. They don’t want to wait in long lines. They don’t want to wait for a store to open anymore.”

Frederic J. Brown | Getty Images

According to the National Retail Federation, 99 million people said they shopped in stores on Thanksgiving weekend last year. This was a 3 million drop from the year before, and according to Elman, this number will only continue to fall. 

Meanwhile, 108 million people shopped online on Thanksgiving weekend the same year. This was a five million increase from the year before. 

Other than the shift to e-commerce over in-store purchases, another issue arises. People are becoming used to having deals available all year round. 

Tory Ho | Getty Images 

There is no longer a single day – the day after Thanksgiving – that retailers offer amazing deals. These deals are now spread out throughout the holiday season and the rest of the year, and they now appear online and in stores. 

However, Black Friday still helps to kick off a critical period for retailers. But, Elman mentions that the holiday season start date is inching earlier and earlier since companies are desperate to survive the “retail apocalypse.”

Offering Black Friday-like sales before Thanksgiving may assist retailers in boosting their business compared to rivals, but it also dilutes the importance of Black Friday as a single day for destination shopping, which affects the entire retail market.

“It’s a little sad. But it’s just a sign of the times,” Elman stated. “It’s really the paradigm shift that’s occurring. I think retailers understand what’s transpiring, and ultimately are doing everything in their power to meet customers’ needs.”

Sources

From gasoline to electric

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Last week the world saw yet another one of Tesla’s creations, the Cybertruck. This electric pickup truck that looks like a prop from a futuristic science-fiction film can accelerate from 0 to 60 mph in 2.9 seconds and boasts a driving range of up to 500 miles. Besides its peculiar design, it’s hardly a surprise for an electric vehicle to surpass some gasoline cars in performance and price nowadays. That wasn’t the case a couple of decades ago. 

In the early 1900s, the first electrically powered cars gained quite a bit of popularity in the United States, especially in urban settings. However, the popularity was short-lived and as gasoline cars became cheaper the electric vehicle market became extinct and remained that way until the 21stcentury. Although there were several attempts to revive the electric cars market, it wasn’t until 2008 that electric vehicles started gaining a new momentum. Tesla Motors, headed by Elon Musk, has made the necessary leap into the EV market and introduced its first model, the Roadster, that was praised for an unprecedented performance and charge range at the time it was released. With a price tag of over $100,000, it has established itself as a luxury car brand and spurred the automaking competition. Over the years the cars have become cheaper, more convenient, and the infrastructure has begun adapting to satisfy consumer demand however, the infrastructure currently poses barriers for entry in some regions. 

Since Tesla unveiled Roadster the EV industry has grown tremendously. Just in the U.S., the number of electric cars on roads has grown from barely a dozen thousand in 2011 to over 1.1 million cars in 2019. The following chart demonstrates a steady increase in electric cars in the U.S. 

The promising growth of the EV industry and attractive car options have extended the market from the U.S. to an entire world. In fact, the sales of electric cars in the U.S. accounted for only 17% of global EV sales in 2018 with the most lucrative market in China. 

Tesla still leads the industry in terms of sales even outselling established luxury gasoline-powered car brands such as BMW in the United States. However, other brands such as General Motors, Nissan, Ford, Volkswagen, and BMW are not lagging behind in expanding their EV fleet. Volkswagen is spending billions of dollars to reshape its factories for electric car production. The company has already revealed its first electric car model, ID. 3 1ST, which will start deliveries in 2020. It will offer free battery charging for a year and the cost of the vehicle will be less than $45,000. Additionally, according to CNN Business, Volkswagen Group, which owns luxury car brands such as Porsche and Lamborghini, will spend $34 billion over the next half a decade to develop an electric or hybrid model of every car currently in production. Given that Volkswagen and other established brands have an advantage over Tesla in terms of revenue, these companies will put up a significant competition to it.

Although the electric vehicle industry is widely discussed, especially given the climatic circumstances and policies all over the world, gasoline cars are far in advance. It is estimated that non-electric passenger vehicles sales in 2018 exceeded 85 million units worldwide while electric vehicles only sold 2 million units. Furthermore, it is projected that electric passenger cars will outnumber gasoline-powered cars only in 2038. As for now, we can expect significant retrofitting of the automotive industry for the next two decades and predominantly more expensive EV models in the near future. 

Sources:

https://www.cnn.com/interactive/2019/08/business/electric-cars-audi-volkswagen-tesla/

https://edition.cnn.com/2019/05/09/business/volkswagen-id-electric-car-reservation/index.html

https://www.britannica.com/topic/Tesla-Motors

https://www.energy.gov/articles/history-electric-car

https://qz.com/1618775/by-2038-sales-of-electric-cars-to-overtake-fossil-fuel-ones/

https://www.eei.org/issuesandpolicy/electrictransportation/Documents/FINAL_EV_Sales_Update_April2019.pdf

https://www.tesla.com/cybertruck

Sneaker Startup Allbirds is Learning Amazon’s Role in The Retail Game

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In the past few years, there has been a brand of sneakers that has taken the country by storm. A sneaker based startup that began with crowdfunding and a $200,000 development grant from a New Zealand wool industry research group has grown into a $1.4 billion-dollar company. This brand of sneakers that is seen being worn by many notable Silicon Valley CEOs is Allbirds. But what this rookie retailer is learning is that just because they broke out in a largely saturated retail market, they are still going to need to face the internet behemoth that is Amazon.

Tim Brown, a former professional soccer player, launched Allbirds in 2016 alongside co-founder Joey Zwillinger. The goal of the company was to create a sneaker that isn’t designed in the same flashy way as Nike or Adidas sneakers but to instead make a sleek shoe that also is produced in a sustainable fashion. Last year, Allbirds introduces a sole made of SweetFoam which is a renewable, sugar-cane based replacement for ethylene-vinyl acetate which is a substance that is made from fossil fuels.

Similar to Warby Parker, an investor of Allbirds, the company was able to break out in an already saturated market. According to MSNBC, the brand has found itself receiving $50 million in funding from T. Rowe Price, $80 million in revenue last year with a total of $77.5 million from outside investors.

The company has been extremely successful at creating ad campaigns that resonate with younger generations and have used social media for their benefit. The company decided to have a direct to consumer model with e-commerce. This essentially means that they decided to not use Amazon as a distributor of their shoes. Nike, the largest sneaker company, has decided recently to pull their shoes off of Amazon for similar reasons. But when you are as powerful as Amazon, you don’t just let this type of business go unsettled.

Since Amazon acts as the gatekeeper for consumer data across almost all retail industries, they are able to track consumer trends and use it to their advantage. Once the company saw the high search results for Allbirds on their platform they decided to design a similar-looking show called the “206 Collective”. The Amazon version of the shoe is also slashed in price to $45 for a pair compared to the $95 Allbirds.

Allbirds CEO, Joey Zwillinger, came forward to CNN on this and doesn’t have an issue with the competition but rather how Amazon is making their knockoff version “If we share that openly with everyone, it’s fantastic for the planet,” he said. “It’s also good for business, it drives cost down … So sharing this is altruistic but also quite pragmatic.”.

A spokesperson from Amazon responded by saying “206 Collective’s wool blend sneakers do not infringe on Allbirds’ design. This aesthetic isn’t limited to Allbirds, and similar products are also offered by several other brands.”

Going forward the company plans to try and stay on the path and hopes that if competitors are going to copy their design, they should copy their model of production as well.