What do the Paris terrorist attacks mean for French business sectors?

November 18, 2015 by Elias Goodstein Leave a Comment

13_Flight_0 The French stock exchange opened for business again Monday after ISIS militants killed at least 129 people in the streets of Paris. The attack was one of the worst human disasters in Europe since the end of World War II. While France recovers from the tragedy, many financial analysts expect the financial markets to take a small tumble.

This is not the first time a country dealt with a small financial crisis in the wake of violent attacks. According to USA TODAY writer Ryan Biek, Tunisia lost $515 million in the tourism industry. In 2004 and 2005, the BBC reported markets in Spain fell 2 percent and markets in the U.K. fell 1.5 percent after bombings occurred in both countries. However, the tourism industry in France represents about 7 percent of the GDP, which means this could be the section of the economy hurt the most by the actions of the terrorists.

However, the stock markets actually rose only a couple of days after the attacks, which suggests the potential for a smaller impact on the economy. Although the country seems to be recovering without too many issues, France might be facing some short-term changes in different business sectors, including tourism and defense.

In 2013, France had about 83 million foreign tourists, making it the global leader in the tourism sector. Since tourism remains a large part of the European economy as a whole, some countries might experience a ripple effect in the aftermath of the Paris attacks. NBC News says many travelers will steer clear of neighboring countries like Belgium, where some of the terrorists are allegedly hiding. The drop in visitors mainly comes from a psychological response to the attacks: People are afraid to travel through Europe, even if the fear might be temporary.

Airlines might also struggle in the next few months even as the holiday season continues. On Tuesday, flight officials announced two Air France flights heading from the United States to Paris were diverted due to bomb threats.

In contrast, defense spending might see a boost in investment. French president Francois Hollande declared war on the ISIS militants and commissioned airstrikes on major terrorists sites in Syria. He even proposed new laws to the French parliament, including 5,000 additional paramilitary troops and no reductions in defense spending through 2019. In addition, the prolonged state of emergency prompted French police to conduct raids throughout the country.

This week, defense stocks increased, with Raytheon, Lockheed Martin, and Northrop Grumman moving up 4 percent, 3.5 percent, and 4.4 percent respectively. Recent threats from ISIS against the United States have also forced congressional leaders to revisit the idea of increasing federal defense spending. According to the Baltimore Business Journal, the U.S. defense budget for the fiscal year 2015 reached a low point of $562.5 billion, in comparison to the 2011 budget which was $678.1 billion. It is unclear how sharp of an increase there will be in defense spending in the United States and Europe, but the upcoming meeting between President Hollande and President Obama may shed some new light on the direction the world is heading.

http://www.usatoday.com/videos/money/markets/2015/11/15/75830970/

http://www.nbcnews.com/business/travel/french-tourism-expected-see-short-term-downturn-terror-attacks-n464956

http://www.diplomatie.gouv.fr/en/french-foreign-policy/economic-diplomacy-foreign-trade/facts-about-france/one-figure-one-fact/article/france-the-world-s-leading-tourist

http://www.cnn.com/2015/11/17/world/air-france-flight-diverted/

http://www.cnn.com/2015/11/16/world/paris-attacks/

http://news.investors.com/business/111615-780978-delta-avis-sink-on-paris-air-strikes-boost-defense.htm

http://www.bizjournals.com/baltimore/news/2015/11/17/will-paris-attacks-accelerate-federal-defense.html

Is “ECFA” a good idea?

November 18, 2015 by Ying-Ying Lin Leave a Comment

On June 26th, 2010 in Chongqing, China, a crucial trade agreement called “ECFA” was signed between the People’s Republic of China (Mainland China) and the Republic of China (Taiwan). The general public in both countries believed that this agreement carried historical significance, being that the Chinese Civil War in 1949 had strained their relationship.

“ECFA” stands for “Economic Cooperation Framework Agreement”. According to the agreement, 539 categories of Taiwanese exports to China and 267 categories of Chinese exports to Taiwan will receive tax cuts in the following year. The agreement is expected to increase Taiwan’s GDP by 1.72%, which is more than 7 billion U.S dollars, in addition to creating more than 263,000 jobs.

Another important aspect of “ECFA” is the “Three No” negotiation principle that the Taiwanese government has brought into the trade agreement. The agreements outlined in the “Three No” negotiation are as follows: saying no to downgrading Taiwan’s sovereignty, importing China’s agriculture products, and China’s labor workers. The Taiwanese government looks forward to achieving economic development between Mainland China and Taiwan under one condition- Taiwan’s benefit must be protected.

The “ECFA” trade agreement has been a controversial issue since it was introduced to the public. President Ying-Jeou Ma, current President of the Republic of China, and his administration believe that signing “ECFA” with Mainland China will provide advantages and affect Taiwan’s market in a positive way. Compared to other Asian countries, Taiwan will gain its advantages and priority to enter China’s market. Due to the tax cut on Taiwan’s exports to China, more companies in the United States and Europe tend to utilize Taiwan as its entry point to China’s market, thus helping Taiwan transform economically.

Four years have passed since the enactment of the trade agreement. Although the initial results showed that the total value of Taiwan’s exports to China increased 35%, many still cast doubts on whether “ECFA” has brought more benefits than harm to Taiwan’s market and economy. Looking at the data provided in the initial report, Taiwan’s exports to Mainland China have continued to lose their market share even when those exports received tax cuts benefits; on the other hand, Mainland China’s exports to Taiwan have increased their market share from 24% to 30%. According to the spokesperson, Ying-Chen Wang, “For the past few years, Mainland China has vastly developed its iron and steel industry and sold its products to Taiwan in a very low price.” In the years 2011 and 2012, Mainland China and Korea sold a particular stainless product that is used to produce elevators, windows, and electronics for a price that is lower than 30% of the market price.

From a BBC news article, several Taiwanese with various occupations were interviewed and gave their opinions on the trade agreement “ECFA”. Some favored the agreement and look forward to connecting with the global economy. “It’s good for Taiwan to sign trade deals with other countries because that’s the trend nowadays – economic integration, and Taiwan needs to be integrated with the global economy”, said Yao-Ting Lin, a building manager. Others cast their doubts on the actual execution of the agreement, and are concerned about intense competitions within local markets. “Chinese flowers might come here too. They say now they will keep out agricultural products, but I don’t think they will do that forever”, said Su-Chung Liu, the owner of a flower shop.

Every coin has two sides, and so does “ECFA”. Whether “ECFA” has proven itself to boost or decrease Taiwan’s competitiveness, as it relates to global economy the outcome is still a tossup. However, what can be said for sure is that “ECFA” has served as the first step in economic cooperation between Mainland China and Taiwan.

Homeless in Hawaii

November 18, 2015 by Kevin Lie Leave a Comment

Contrary to popular belief, Hawaii isn’t the perfect paradise that many people imagine it to be. In fact, it is more of a Land of Struggle to many Hawaiians living in the island. Hawaii has one of the worst rates of homelessness in the country. According to the governor’s spokesperson Cindy McMillan, there is currently roughly 7,000 homeless people in the state of Hawaii. While the number presented is not as large as the homeless population of bigger cities like Los Angeles, which has a whopping 100,000 homeless people in the city, we have to take into account that Hawaii’s population is only about 1.36 million (according to the US Census Bureau), as compared to 10.02 million in the city of Los Angeles alone. At 465 people per 100,000 citizens, Hawaii has the highest rate of homelessness per capita of any of the 50 states.

To add salt to the wound, Scott Morishige, The Governor’s Coordinator on Homelessness mentioned that as homelessness increased by 23 percent between 2014 and 2015, the number of unsheltered families almost doubled. The increase was driven by years of rising costs in the island. Moreover, there were low wages and limited land for the island which prompt homeless Hawaiians to spend their night on beaches and local streets as there was no place called home that they can go back to. The government dealt with this problem by doing what they do best – chasing the homeless away.

Hawaiian civic leaders felt that the problem with visible homelessness could lead to the financial downfall of the island state because the Hawaiian economy relies so heavily on tourism. They claimed that visitors will be turned off from seeing homeless people sleeping in parks and the beach which will then decrease the rate of tourism of the island. Honolulu officials report that they do a major cleaning session regularly by disposing off unclaimed property left in the parks and beaches of Hawaii, in order to maintain Hawaii’s public image of being a paradise. Officials regularly ticket the homeless with fines, and new public park hours have been implemented. On December 2nd, 2014, Mayor Kirk Caldwell signed a bill that bans people from sitting or lying down on public spaces between the hours of 5am and 11pm. Those who do so can be fined up to $1,000 and jailed for up to 30 days.

The Hawaii government has also allowed the spending of $1.3 million to expand services to homeless individuals and families. Apart from helping the homeless build new shelters, the money also would go to the state’s Housing First program.
The Housing First program is a nationally recognized best practice that is proven to be the most effective and efficient approach to getting chronically homeless people off of the streets. The program helps houses chronically homeless in permanent supportive housing which takes them off of the streets by providing them with a stable and safe home. The program has been proven as a success on many different cities in the country such as Portland and Los Angeles.

http://www.honolulu.gov/housing/ohou-first.html

http://www.csmonitor.com/USA/USA-Update/2015/1018/Can-Housing-First-help-Hawaii-s-homeless-crisis

http://www.foxnews.com/us/2015/10/18/hawaii-declares-state-emergency-for-homelessness-crisis/

Cost of cybercrime: does anyone actually know?

November 17, 2015 by Dale Legaspi Leave a Comment

Massive data breaches at Target and Home Depot. Edward Snowden and WikiLeaks. Anonymous a war with ISIS. Whether it’s the outright fraud of people stealing information from networks or the type of cyber vigilantism espoused by information leaks or “hacktivist” groups, cybercrime is all over the news.

But what does it all cost?

As much as $65 million per year for some organizations in the U.S., apparently.

So said the recently released 2015 Cost of Cyber Crime Study, produced by research house Ponemon Institute. The range for this year spanned from $1.9 million to that $65 million number—an average of $15 million per organization. The study also indicates that since 2009, the average per-organization cost of cybercrime has risen 82 percent.

Per HP Enterprise study

Given the fact that this study was also an advertisement for sponsored by HP Enterprise Security, the veracity of the survey methods may be debatable, but it’s not difficult to believe the number is significant—even if the data is not exact.

I was hoping to cross-reference by looking at other studies, but the only other one I could find that wasn’t outrageously expensive was not put together by an independent analyst firm either. It came from Intel Security brand McAfee and estimated the global cost of cybercrime to be between $375 billion and $575 billion.

Apparently the best we can do globally is to get within $200 billion of an actual value. (Students everywhere wish we were afforded that kind of margin for error.)

While the cost per organization in the U.S. and the total aggregate cost to the global economy are completely different, cybercrime is a huge issue with massive economic ramifications however you slice it.

Despite this dearth of objective information, businesses of all sizes acknowledge that cybercrime is a growing concern. It’s only logical in today’s digital era that as networks continue to advance and become more pervasive, threats do as well. Unfortunately, the threats have become more advanced than the network safeguards developed to keep them out.

The old model required a threat to be defined in order for a program to find and neutralize it, but as malicious code and network intrusion techniques have become more advanced, threats embed themselves into networks and simply reside undetected. Once they’re activated and recognizable as a defined threat, it’s too late for the threat to be neutralized before data is stolen.

Advanced techniques are more proactive in nature and are able to root out some of these dormant threats and patch vulnerabilities, but the arms race between cybersecurity professionals and hacker collectives is on. And the growing costs associated with this ongoing battle are not likely to slow down anytime soon.

Airbnb Faces Safety and Insurance Challenges

November 17, 2015 by Yujia Zhang Leave a Comment

Airbnb is facing steep challenges surrounding insurance and safety issues as fatal incidents occur.

Zac Stone’s father, a user of Airbnb, attracted by the rope swing on the pictures, rented a cottage in Texas on Airbnb. Rather than having a good time with the swing on Thanksgiving morning, the trunk the swing was tied to broke and directly fell onto Mr. Stone’s head, “immediately ending most of his brain activity.” Accounted Zac Stone.

Accidents like this are inevitable. The rise of Airbnb offers travelers from all over the world a new approach to traveling and discovering different places; however, despite appealing pictures online, users’ experience with Airbnb can often be disappointing, even threatening. Stories that tell horrible guest experiences with Airbnb can be found easily online. Now that Airbnb faces the challenges with safety and insurance problems, it is important that the app start to think of doing something for its users, not only its hosts but also guests.

Currently, Airbnb offers “free, automatic secondary coverage for liability, in case a host’s insurance company denied a claim.” (New York Times) Airbnb states on its website that its Host Protection Insurance program now “provides primary coverage for Airbnb hosts and landlords…against liability claims up to $1 million USD that occur in a listing, or on an Airbnb property, during a stay.” (airbnb.com) The Host Protection Insurance program is provided through Lloyd’s of London, one of the providers of direct and indirect insurance policies covering many types of risks.

Ever since the enforcement of its Host Protection Insurance, Airbnb announces receiving less than 50 claims filed in the US. Compared to number of fatal accidents that occur in traditional hotel industry annually, the public has yet developed severe concerns for the safety aspect of Airbnb . The downside of Airbnb, compared to hotels, is that when unfortunate accidents happen, there is no one around responsible for immediate rescue.

In addition, under the “Help Center” section, guests will find some “Safety Tips” on airbnb.com that specifically provide safety advice for travelers during their stays. Although guests are encouraged to look for listings that emphasizes safety features including he insurance provided to hosts are not likewise applicable to guest/travelers. Unfortunately, the protection for those who pay for their stays on the website remains missing from the company’s insurance policies.

Airbnb may advise that travelers be responsible for their own safety, but what measure it will take to prevent future incidents from happening remains questioning.

https://www.airbnb.com/help/article/241/i-m-a-guest–what-are-some-safety-tips-i-can-follow

http://www.nytimes.com/2015/11/14/your-money/death-in-airbnb-rental-raises-liability-questions.html?ref=your-money

http://www.huffingtonpost.com/entry/a-death-at-an-airbnb-rental-puts-the-tech-company-in-the-hot-seat_5640db66e4b0b24aee4b18f7

Breaking down Income Inequality

November 17, 2015 by Alexa Ritacco Leave a Comment

By Alexa Ritacco

“Income inequality” is a phrase that has been popping up all over the place lately. Personally, I’ve been hearing it pretty frequently in the current race for the White House. It has been brought up in multiple debates, democratic and republican, and it’s clearly something that the public is concerned about. Of course by just looking at the two words, the average person could probably guess what it means. There’s something unequal about incomes in the U.S. Despite having heard the phrase so many times, I still don’t quite understand what it is, what it means, why it exists or how/if it can be fixed. So I decided to begin to delve into these questions for this week’s blog post.

So first and foremost, why has it become such a hot topic? Well, as I discovered, it all dates back to the 1970s. Around then is when, after decades of stability, income inequality began to increase significantly, meaning that higher income households began receiving a higher share of the nation’s total income. The gap between the rich and everyone else has grown steadily by every statistical measure over the past 30 years or so. And just to clarify, income encompasses revenue from wages, salaries, interest on a savings account, dividends from shares of stock, rent, and profits from selling something for more than you paid for it.

30+ years of rapid growth equates to a whole lot of inequality, especially when you compare the US to other countries. Currently the US ranks around the 30^th percentile in global income inequality. This is pretty bad. 70% of countries around the world have a more equal income distribution than the United States. I personally find this shocking.

Of course The Great Recession of 2007-2009 had negative impacts all across the board, with everyone from the richest man to the poorest man taking a huge hit from the crash. The increases in income inequality most definitely slowed, but post-2009, things began to increase at an even faster rate. As the effects of the recession reversed, the gap only grew wider. In 2012, the wealthiest percentile saw incomes rise around 20%, while the income of the remaining 99% rose only 1%.

People are frustrated. People are angry. People want to know why this is happening and how it can be stopped. So naturally, it has become a partisan issue. Democrats tend to believe that action can be taken to slow this growth and potentially redistribute some of the wealth of the 1% among the other 99%. Republicans tend to be more skeptical, arguing that redistribution would interrupt the natural flow of the economy. But in a recent effort to connect with more middle class voters, republicans have taken a more vest interest in the income inequality gap. This, as well as more about the democrat views on the issue, is something I plan to explore more in my personal presentation, so stay tuned!

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html?countryname=United%20States&countrycode=us&regionCode=noa&rank=41#us

https://www.cbo.gov/publication/49440

http://inequality.org/income-inequality/

What Retail Looks Like this Holiday Season

November 17, 2015 by Tera Novy Leave a Comment

Since holiday shopping is about to begin, it’s important to know that consumer spending accounts for about two-thirds of GDP. This demonstrates that American consumers are a powerful force for the economy. However, large retail sectors are seeing shares crash. The occurring situation makes the holiday spending season a must needed event, even though it does not look that positive.

An article from the Business Insider called Here’s a Simple Explanation for Why the Retail Business is Brutal went into detail about the recent stock drops in high end retail stores. Macy’s stock fell 14% on November 11^th and Nordstrom’s shares were down as much as 16%. Both these company’s earnings widely missed expectations and the future outlook is disappointing.

So why are these drops occurring? Well the retail business is a tough one to maintain and retailers are having to fight harder than ever for their share of consumer dollars this holiday season.

The article also mentioned why retail is a brutal business. “Retail has high fixed costs, high working capital intensity, fickle customers, low barriers to entry,” they wrote, calling the sector a case study for the worst-possible business”. It also mentioned that fixed cost are numerous for retail companies. It has to have the physical space, inventory, personnel, and supply chain to keep the whole system running.

Over time these costs change, usually becoming more expensive. In order to maintain a company profit, it needs to keep moving profits back into the business.

It mainly depends on the consumers and what they want to buy. It could be American Eagle one year and H&M the next.

On a positive note, another article from the Business Insider called 5 Retailers that will Dominate this Holiday Shopping Season lists five retail stores that are ready to strive on sales this holiday season.

Victoria’s Secret- This store is buzzing for the holiday season thanks to innovative products like a new push-up bra. Also, the store is not seasonal because women need under garments all year long. This puts Victoria’s Secret ahead of other retail stores that rely on sweaters and coat sales like Macy’s and JCPenney.

Lululemon- The high end sportswear company is expected to grow sales as much as 12% this holiday season, according to Morgan Stanley. The new brand’s designs differ from other athleisure brands. Menswear is also beginning to gain attraction from Lululemon.

Ross Stores- The discount outlets Ross provides makes consumers and their wallet happy. According to Morgan Stanley, the decline in gas prices will give the middle class more spending power, which will benefit the brand.

Nike- With $28 Billion in annual sales, the company is the biggest player in athletic apparel market. Nike wants to focus on a few key demographics, such as women, runners, and student-athletes, which will help the company grow even larger. Morgan Stanley analysts expect the holiday season to drive growth.

Best Buy- New technology is growing and it is more popular than ever. Some new products will drive sales up. Best Buy has better customer service than others, which benefit the company.

The Trans Pacific Partnership and what it means for the econonmy

November 16, 2015 by Sally Huang Leave a Comment

The world had not seen a big multinational trade pact for over 20 years. After 7 years of negotiations, United States and eleven other Pacific Rim nations reached a final agreement on 5th October 2015. Now after all the meetings between world political leaders, the final step lies in Obama’s hands: Securing approval from Congress.

Obama has pledged that the TPP would open new markets for U.S. goods and services and establish rules of international commerce that give “our workers a fair shot at the success they deserve.” Congress however is more skeptical. The deal now faces months of scrutiny in Congress, where some bipartisanship opposition was immediate.

Assuming that all goes well and Congress approves the TPP, what would be the likely effects of the new trade agreement on the economy and on America’s influence throughout the world?

The Economic Impact on the TPP is Exaggerated

Progressives and labor unions rally against the bill think that it will be the end of manufacturing jobs and worker protections in the United States. Conservatives and corporations think that the bill will drive tremendous economic growth in the country. Neither is correct.

Two of the nation’s leading economists, Paul Krugman (left) and Nicholas Gregory Mankiw (right), both agree that the trade agreement will increase domestic income of all the nations involved by 0.5% by 2025. In the United States this amounts to little over $80 billion, certainly nothing to irrelevant, but nothing that will spark tremendous economic growth. The problem is that trade is relatively free throughout much of the world. Borders have been liberalized. The average good traded between these twelve countries has only a 1.4% tariff on it There just isn’t a whole lot to be gained by removing these tariffs.

Growth prospects might be limited however there are other aspects to consider — primarily the interests of US businesses and multinational corporations.

First, intellectual property rights. The US is trying to enhance protections for pharmaceuticals drugs and Hollywood movies. In many of these developing countries that are part of the TPP (Vietnam, Malaysia, Bruinei) knock-off drugs and films are sold to consumers. The TPP would put stricter regulations in place in these countries, ensuring this does not continue.

Agriculture producers also have a lot to gain from this deal. The United States currently produces a surplus of food, and much of that food goes to waste. Opening up international markets could be a huge boon for the agricultural industry.

Against China’s Power

Many of the potential benefits from the trade agreement concern the relationship the United States has with China. Importantly, China is not part of this trade agreement, but they are working on their own trade agreements in the region with many of the same countries in the TPP. China also won’t push for the same environmental regulations and worker protections the United States is currently pushing for.

This is an opportunity for the United States to expand it’s influence in the South Asian region and prevent these countries from falling under China’s influence.

Sharing is the new buying

November 16, 2015 by Sally Huang Leave a Comment

Why pay excessive prices for goods and services when you can rent it more cheaply from a stranger online? That is the principle behind a range of online services that make it possible for people to share accommodation, household appliances, cars, bikes and other items, connecting owners of underused assets with others who are willing to pay for them. A growing number of businesses, such as Uber, where people use their car to provide a taxi service to paying passengers, or Airbnb, which lets people rent out their spare rooms, act as matchmakers, allocating resources to where they are needed and taking a small percentage in profits in return.

Such peer-to-peer rental business is beneficial for several reasons. Owners make money from underused assets. Airbnb says hosts in San Francisco who rent out their homes average a profit of $440 (after rent) some neighborhoods snagging upwards of $1900 a month. Car owners who rent their vehicles to others using RelayRides make an average profit of $250 a month; some make more than $1,000. Borrowers, meanwhile, benefit from the convenience and pay less than they would if they bought the item themselves, or turned to a traditional provider such as a hotel or car-hire firm. And there are environmental benefits, too: Renting a car when you need it, rather than owning one, means fewer cars are required and fewer resources must be devoted to making them.

The internet plays a vital role in this business. It makes it cheaper and easier than ever to provide accurate supply and demand information. Smart phones with global tracking services can find a nearby room to rent or car to borrow. Online social networks and review systems help develop trust; internet payment systems can handle the billing. All this lets millions of total strangers rent things to each other. The result is known variously as “collaborative consumption,” the “collaborative economy,” “peer economy,” “access economy” or “sharing economy”.

The model of the sharing economy works for items that are expensive to buy and are widely owned by people who do not make full use of them. Bedrooms and cars are obvious examples, but you can also rent fields in Australia, washing machines in France and camping spots in Sweden. As proponents of the sharing economy like to put it, access trumps ownership.

How Did We Get Here and Why Now?

The world is at a turning point. The urbanization of populations continues to rise, and Millennials, are beginning to impact the economy as they enter the work force and start making economic decisions. These changes are most prevalent in big cities and new business have already begun to adapt.

The consumer is changing. The Millennials generation, born in the 1980s to early 2000s, experienced incredible uncertainty, having lived through the 2008 – 2009 financial crisis and struggles with increasing student debt. These financial pressures lead to demand for a more efficient allocation of resources – and that, means they want to own less, be more connected with others and be a part of something bigger than their individual selves.

Social media and social connection is an important aspect of the new lifestyle. A significant percent of modern day free time is spent browsing the social media accounts of our friends, family, celebrities, etc. Now, instead of seeking advice from our personal networks, we have access to the world. Trust and dependency in strangers and technology is a crucial aspect in the success of the shared economy, without the two, we would be stuck in the past

While the classic American dream is to own everything, the millennial’s version is to move to an “asset light” lifestyle. These trends have sparked massive innovation, created new marketplaces and potentially holding the keys to the future.

Premium on Ownership Disappears

Let’s travel back to 1999, when the millennials were still children exploring the internet. Many children took advantage of Napster, a website that enabled users to download songs for free. Illegal? Sure. But no one, except record companies, really cared. There are profound differences between the millennial peer-to-peer downloading and that of their parents or even people five years their senior. From the very beginning the experience of acquiring and consuming media content was based on the premise that access to content should be easy and free.

Now, back to 2015, access to media content is essentially free. Want on-demand access to whatever music you want? Spotify has got you covered. On-demand access to movies and TV shows? Netflix. On-demand access to videos of anything you want to watch? Lose a few hours on YouTube. Of course some of these services require a subscription fee so they are not truly free.

But this is what happens in the shared economy. It emerges when the access to goods and services, such as media streaming, becomes cheap, satisfactory and reliable enough that the premium on physical ownership has disappeared. There is hardly any reason to purchase these goods and services aside from personal habits (for example collecting vinyl) or peculiar requirements.

Ten years ago, to watch a movie released on DVD, there were two options: purchasing or renting.

Of those options, renting was the inferior. Even though it was more expensive to own these DVDs, it was preferred since people had the freedom to watch movies whenever they wanted and prized their DVD collections.

Today, that premium has disappeared. Streaming a movie on Netflix isn’t inferior to owning a DVD the same way that renting was. And ever since then, the extensive access to cheap and easy media content, has lead to new kinds of behaviors have emerged like binge-watching. Similarly, the rise of music streaming services has enabled behaviors such as sharing playlists, a process that used to be time-consuming and effort-intensive. When nobody buys music but still has access to it, social sharing of music emerges as a natural and human behavior.

Obstacles on the road to Success

To truly grasp the scale and greatness of the sharing economy, consider the following data. Airbnb averages 425,000 guests per night, totaling to more than 155 million guest stays annually – nearly 22% more than Hilton Worldwide, which serves 127 million guests in 2014. Five-year old Uber operates in more than 250 cities worldwide and as of February 2015 was valued at $41 billion – a figure that exceeds the market capitalization of companies such as American Airlines and United Continental. According to PwC’s projections, the sharing economy (including travel, car sharing, finance, staffing and music streaming) has the ability to increase global revenues from $15 billion today to around $335 billion by 2025.

It is not hard to find evidence of successful sharing economy but not everyone is as delighted by the rise as its participants and investors. Taxi drivers in America and now Europe have complained loudly (and in the case of Paris, violently) about the intruders who, they say not only are unqualified but also under insured.

Uber has always been plagued with problems with regulation and taxi unions around the world. In 2014, a court in Brussels prohibited drivers from from accepting passengers through UberPOP or face a €10,000 fine.

It is not just car-sharing services that have run into legal problems. Apartment-sharing services have also fallen victims of regulations and other rules governing temporary rentals. Many American cities ban rentals of less than 30 days in properties that have not been licensed and inspected. Some Airbnb renters have been served with eviction notices by landlords for renting their apartments in violation of their leases. In Amsterdam, city officials point out that anyone letting a room or apartment is required to have a permit and to obey other rules. They have used Airbnb’s website to track down illegal rentals.

On top of legal regulations, issues with customers have also become obstacles for sharing businesses. In 2011, Airbnb suffered a rash of bad publicity when a host found her apartment trashed and her valuables stolen after a rental. After some public relations, Airbnb eventually covered her expenses and included a $50,000 guarantee for hosts against property and furniture damage.

Peering into the Future

The sharing economy can be compared to online shopping, which began in America 15 years ago. In the beginning, people were not too sure about the vendors and didn’t trust the services. However with time and perhaps a successful purchase on amazon or two, people felt safe buying from other vendors too. Now consider Ebay, a company started as a peer-to-peer platform, now is now dominated by professional “power sellers” (many of whom started as ordinary Ebay users).

Big corporate companies dominating the market are getting involved too. Avis, a car rental firm has shares in Zipcar, its car sharing rival. So do GM and Daimler, two car manufacturers. In the future, companies may follow a hybrid business model, listing excess capacity on Peer-to-Peer websites. In the past, new ways of doing things online have put the old ways out of business. But they have often changed them.

We will have to wait and see which on-demand services start to gain traction with mainstream markets and which wont’t. It is not likely that in thirty years time our whole lives will be on demand and we won’t hold ownership. But a major possibility is products and industries most likely to be disrupted by the sharing economy would be things that we possess but not necessarily own. An example would be Airbnb. It has disrupted the demand for owning vacation homes (something you possess) and tourist hotels (something you don’t possess but is still “yours” in a way that an Airbnb isn’t).

Uber takes a bite out of the Big Apple

November 10, 2015 by Alexa Ritacco Leave a Comment

By Alexa Ritacco

As a college student in LA, Uber has become an essential way to get around, especially when it comes to nightlife. It even has its own verb now: “Oh yeah, let’s just uber.”

Founded in 2009, Uber now exists in sixty countries, and over three hundred cities. In just six years Uber has become a globally used and extremely well-known app. But global success does not necessarily mean global acceptance. Resistance to the ride sharing service has come about from all angles. Some consumers think the service is sketchy.

There have been numerous reports of harassment, extortion, and sometimes even robbery, and Uber’s response to such reports have been pretty mixed. In a few cases, in response to reports of sexual harassment, Uber offered users a small credit. They typically do not release any type of statements in response to reports against them, and have been criticized in their slow response to release names of drivers in said harassment scandals. But some view Uber as the lesser of two evils.

“I would much rather hop in an Uber than a taxi cab,” said NYU student Elizabeth Gurdus, “Taxi drivers are so incredibly rude, and never take the route that I want to go. Uber drivers have a rating incentive to make the experience at least somewhat pleasant, and generally, that’s been the case in my experience.”

While consumer perception has been an issue, the most resistance to Uber has come from city taxi cab drivers, as well as local city legislation. New York City, a place known for its thriving taxi sector with the instantly recognizable yellow cabs, has seen quite a bit of controversy surrounding Uber and other ride-sharing services.

Uber launched in New York in May of 2011. Since then, the service has exploded, having given millions of rides to New Yorkers, and employing over 30,000 drivers. And it has been driving the NYC taxi drivers absolutely insane. Many drivers claim to be taking a hit financially, and feel that it is completely unfair that Uber just waltzed in one day and began stealing customers. They feel betrayed by New York City for letting this go on.

For so long, they were the only ones on the market for private transportation around the city. If a New Yorker wasn’t taking the subway, bus or personally driving themselves, chances are they were taking a taxi. And really, that was their only other option. Now, suddenly, the consumer has quite a few options when they’re strapped for a ride. Rather than stepping out onto the sidewalk and hailing a cab, they very well may be whipping out their phone and calling for an Uber or a Lyft. The transportation market has changed completely, and now taxis are dealing with some very hungry competitors.

For decades, New York City has controlled the number of taxis by limiting the number of medallions, which is required to legally operate a taxi. Introduced in 1937 by Mayor Fiorello H. La Guardia, the medallion system was created to remedy the overflow of cab drivers that the city was facing at the time. It set limits to the number of cabs licenses that could operate in the city.

This caused prices for medallions to shoot through the roof over the years, seemingly posing as what would prove to be a good investment for anyone who acquired a medallion. The price of medallions has gone as high as one million dollars, and currently, medallions listed for sale online range from about $500,000 to $700,000. Generally, people that own the medallions do not drive the taxis; the medallions are leased to drivers who are then responsible to pay money back to the owners, or the company of the owners.

One of the reasons that the price of medallions has risen so high in the past is because of scarcity. For so long, this is how the taxi market survived and prospered. But the rise of ride-sharing services like Uber and Lyft have totally threatened this. Taxi drivers and taxi companies are required to pay heavy taxes and fees in order to operate legally. Uber has managed to get around this, creating a completely uneven playing field. Medallion owners are essentially watching their investments plummet as Uber rises in the ranks. The question of fairness in the market has become a big issue. Most taxi companies, medallion owners and drivers feel completely blindsided. The entire industry is being threatened.

Taxi medallion owners have put a lot of pressure on Mayor Bill de Blasio’s administration to help them and act in their favor. Satwinder Singh, a NYC Taxi Medallion owner gave this analogy in a New Yorker article, “The city is the father and mother. They created the yellow cab as the baby. Now they’re refusing to take care of it!”

Another owner, Lal Singh, continued the analogy citing, the fifty cent tax that is charged on cab fares that goes directly to the MTA. “We’re giving them eighty-five million dollars a year! And yet everybody accepts Uber is the stepfather and all the politicians are the stepsons!” he said.

After much badgering, de Blasio pushed to start regulation and capping on Uber in NYC in the late Spring of 2015. The legislation would basically limit the amount of Uber drivers that could be in New York City at all times, and prohibit any further growth of the company in the city.

This launched Uber into full-on defense mode. They put out countless adds dissing taxi cabs, attacking their well-known racist stereotyping practices, as well as pushing all of the different types of services they offer, ranging from Pool to Lux. They rallied support from consumers in the form of petitions and protests, and even got a few celebrity endorsements via Twitter, including Kate Upton, Neil Patrick Harris and Ashton Kutcher.

It came as no surprise to many when de Blasio decided to halt his efforts to place a cap on Uber while further studies were conducted to see really just how hard Uber is hitting the transportation market. Obviously, this infuriated NYC cab drivers and launched them into a series of protests. Some of the leaders of these protests have gone as far as to suggest emulating what cab drivers in Paris did in response to Uber, which included blocking major intersections and entrances to airports. But until something drastic happens, for now, it looks like Uber will not be leaving New York anytime soon.

Since Uber is still a private company, it is pretty difficult to tell just how much of an impact hey are having on the transportation market. But by looking at employment numbers, leaked reports and the cab side of things, it is pretty easy to tell that Uber has made a giant mark on the Big Apple. A New York Post article reported that as of October 2015, 30,000 Uber drivers are employed in New York, and that they could be making an average of $40 per hour. Forbes reported that the number of Uber drivers has nearly doubled every six months over the last two years. The growth of the company, from every angle, appears to be unstoppable. In November of 2014, it was leaked that Uber was set to generate $350 million in revenue for that year. It could have only grown since then.

Business Insider recently noted that the number of abandoned taxi cabs in Brooklyn outside of dispatcher offices has been on the rise. Many drivers have reported that they jumped ship for Uber. By doing this, they lose the worry of paying the lease on their cab, and the countless other fees that cab drivers that do not own their own medallions have to pay.

The next step in this big move from taxi driver to Uber driver is purchasing a car. The question of cost comes into play. In a Neon Tommy article where a Los Angeles based cab driver who switched to Uber, it is illustrated that car payments end up being way lower payments than leasing a cab. Plus, they are getting a personal vehicle out of the deal.

Based on all of these factors, there is no doubt that Uber has taken a large bite into the transportation market in New York City. So will this mean the end of taxi cabs in NY? Of course not. But this situation has forced taxicab companies to start thinking towards the future. It has been reported that they have been developing apps similar to Uber for cab drivers to being using. Features would include GPS based fares as well as a possible rating system.

Uber has awoken what was otherwise a sleepy transportation market in New York. It is most definitely worth recognizing some of the disparities in the fairness of the situation in this war between Uber and taxis. While Uber may be the cool new kid in town, taxis are still an integral part of the city, and most likely will always be. Only time will tell what will come of the industry, and if these two competitors will ever be able to peacefully coexist.

Sources:

http://www.forbes.com/sites/briansolomon/2015/05/01/the-numbers-behind-ubers-exploding-driver-force/

http://www.neontommy.com/news/2014/03/why-did-l.a.-cab-driver-switch-to-uberx

http://money.cnn.com/2015/07/21/news/companies/nyc-yellow-taxi-uber/

http://www.theatlantic.com/technology/archive/2015/04/he-said-she-said-how-uber-relied-on-data-in-an-assault-dispute/389811/

https://www.washingtonpost.com/news/wonk/wp/2014/06/20/taxi-medallions-have-been-the-best-investment-in-america-for-years-now-uber-may-be-changing-that/

http://www.businessinsider.com/uber-revenue-rides-drivers-and-fares-2014-11?op=1

http://www.businessinsider.com/proof-that-uber-is-obliterating-new-york-citys-taxi-industry-2015-8

http://www.newyorker.com/magazine/2015/08/03/revving-up

http://newyork.cbslocal.com/photo-galleries/2015/09/17/medallion-taxi-drivers-rally-against-uber-drivers/

http://www.capitalnewyork.com/article/city-hall/2015/09/8577153/uber-fight-city-hall-overshadows-congestion-hearing

http://nypost.com/2015/10/07/there-are-more-than-30000-uber-drivers-working-in-nyc/

https://nextcity.org/daily/entry/number-of-uber-drivers-in-nyc

http://www.nydailynews.com/news/politics/n-y-taxi-drivers-rally-uber-article-1.2363707

http://www.cbsnews.com/news/uber-defends-surge-pricing-with-nyc-case-study/

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Money Marks & Media - Spring 2014