It’s not easy going green: the plight of SoCal drivers, gas, and electric cars

November 4, 2019 by dianap

The 1995 Mitsubishi Eclipse used in The Fast and the Furious by Brian (Paul Walker)

In 2001, it cost Brian, Paul Walker’s character in The Fast and the Furious, $24.674 to fill up his lime green 1995 Mitsubishi Eclipse. Gas cost $1.46 per gallon. The Mitsubishi has a fuel capacity of 16.9 gallons. As the Fast and Furious franchise grew, so did gas prices. According to AAA, California’s current gas prices are $4.075. In 2019, it would cost Brian $68.87 to fill up his Mitsubishi Eclipse.

Let’s pretend that even in a cinematic universe now defined by lucrative physics-defying crime, Walker’s character still owns that 1995 Mitsubishi Eclipse. If his character was still involved in the franchise (RIP Paul Walker), he would rather steal a Tesla than pay almost $70 for a full tank of gas.

In the real world, Californians may not be stealing Teslas, but interest in electric and hybrid cars has grown. This year, the California New Car Dealers Association found that electric car sales have increased since 2018 by 63.7%. Hybrid car sales are up 22.1%.

Gas prices are one of the reasons why. When filling up your tank makes a visible dent in your disposable income, being able to drive without worrying about gas becomes really appealing. The opposite is also true – when gas prices are low, alternatively powered car sales decrease. The Bureau of Transportation Statistics found that while electric and hybrid car sales increased rapidly from 2011 to 2014, sales decreased in 2015 “due to low gasoline prices.”

*Gasoline Hybrid and Electric Vehicle Sales: 1999 – 2015 (Photo: Courtesy of Bureau of Transportation Statistics)*

Despite California’s rising gas prices, the top two cars sold in the Golden State for the first six months of 2019 were the gas-using Honda Civic and Toyota Camry. Tesla Model 3 came in at third place.

Even though California’s gas prices are at $4.075, getting an electric is not an investment some Southern California drivers are willing to make for a variety of reasons.

NOT AS GREEN AS YOU THINK

Hanna Richter, a stable attendant at Disneyland, lives approximately 45 minutes from the Happiest Place on Earth in Riverside, Calif. Richter commutes on what she describes as a “heavily trafficked route.”

“It’s awful,” she said.

Richter drives a gas-using vehicle, a 2018 Toyota RAV4, and pays just under $200 per month for gas. She said she is on the fence regarding electric and hybrid cars. “I like the one hand of less gas and saving money by using said less gas,” Richter said.

What is stopping her is concerns about whether one of the main selling points of electric cars – that it is better for the environment – is actually true. “The batteries used to make electric cars cause a greater carbon footprint than just using a gas-powered car,” Richter said. “So I’d like to save money on gas, and use less gas. But I also want to lessen my carbon footprint.”

Many electric cars are powered by lithium-ion batteries. According to Amnesty International, making them is an energy intensive practice, and is primarily located in China, South Korea and Japan – countries where electricity generation is dependent on fossil fuels. Lithium-ion batteries are also linked to human rights abuses in the Democratic Republic of Congo.

Richter’s concerns were confirmed in a 2018 study by the International Council of Clean Transportation that found that making an electric vehicle produces more emissions than the manufacturing of a conventional car because of lithium-ion batteries.

“On the other hand, electric vehicles travel farther with a given amount of energy and account for fewer emissions through the fuel production and vehicle use phases,” the study said.

According to the ICCT, although the long-term environmental benefits of electric cars is not outweighed by emissions created by lithium-ion batteries, the emissions are still substantial. Without technological improvements, these emissions could become more substantial as electric cars increase in popularity.

For consumers like Richter who want to lessen their carbon footprint and spend less money on gas, striking the balance between an ethical decision and a logical financial decision is complex.

In addition, electric vehicles are generally more expensive to purchase than their gas-fueled counterparts. The manufacturer suggested retail price for a 2019 Toyota RAV4 is $25,650. The hybrid version of the car is retailed at $27,850 – an 8.2% increase from the gas version.

According to the Office of Energy Efficiency and Renewable Energy, the federal government and several states offer incentives to buy electric cars. California offers a rebate of $1,500 to $7,000 depending on the purchaser’s household income and the kind of electric car bought.

*California’s Vehicle Rebate Program (CRVP) Amounts (Photo: Courtesy of Moving California)*

CONVENIENCE

Richter’s boyfriend, Dan Grecu, works for a tile contracting company in Riverside, Calif. He lives in the same city he works in. Unlike his girlfriend’s 45-minute commute, his drive to work is only 10 minutes. His car – a RAM truck – consumes gas.

Going green did not factor heavily into his car purchase. “I wanted that car because it has plenty of room for passengers and storage,” he said.

Southern California’s traffic and high gas prices are a recurrent source of frustration for him. That, and the lack of rain, has made him consider moving to Canada or the Pacific Northwest. “Gas prices in California are and always have been too high. I spend about $250 a month on gas,” he said. Spending that much a month on gas for one year would be like buying a new pair of Apple AirPods Pro, which cost $249, per month.

Apple AirPods (Courtesy: Photo by Howard Lawrence B)

One of the reasons why California’s gas prices are so high is because of SB 1, colloquially known as the Gas Tax. Grecu is not a fan of the policy. “I think it’s ridiculous,” he said. “I would like to know where the money actually goes.”

Passed in 2017, SB 1 taxes gasoline to collect revenue for transportation infrastructure. California’s roads are one of the worst in the country, and were given a D grade by the American Society of Civil Engineers. With over 175,000 miles of public roads, ASCE estimated 44% are in poor condition. “A good transportation system enables efficient movement of goods and people and is critical to California’s economic well-being,” ASCE’s California infrastructure report card said.

Two years into SB 1, and officials estimate that $130 billion more in revenue is necessary to improve the state’s roads. The policy has found itself caught in a sort of catch-22.

A 2017 report by Next 10, a California-centric nonprofit organization focusing on the economy and the environment, found one of the reasons California’s roads are in poor condition is because “funding for repairs and improvements – which traditionally comes largely from motor vehicle fuel taxes – is declining as cars become more fuel-efficient and the state’s electric vehicle fleet grows.”

According to the report, the displacement of gasoline as a revenue source could lead to $572 million in losses in state gasoline taxes by 2025 without new, sustainable transportation funding solutions. SB 1 may not be doing enough – and in fact, with increasing gas prices driving up electric vehicle sales, may be ineffectual at fixing California’s roads and very effective at irritating people who drive gas-powered cars.

*California leads* *the United States in electric vehicle sales / (Photo: Courtesy of CleanTechnica)*

SB 1 does not expire for 10 years and is designed to grow over time to fall in line with the cost of living. The most recent increase occurred in July 2019.

Despite rebates, rising gas prices, and lower operating costs of an electric car, Grecu said he is not considering one because the technology is not where it needs to be to make sense for him.

“I would consider electric if I lived in a house with solar panels as electricity is still expensive,” he said. “I don’t think there are enough charging stations, yet. Once the batteries are built for longer trips, it would be more convenient.”

NOT THE RIGHT TIME

Vicki Ghines, a resident of LA’s Koreatown neighborhood, drives approximately 120 miles five days out of the week to her job as an account manager in the Inland Empire. She drives a 2017 Honda Accord. She said that getting an environmental or hybrid car is not something she is considering right now. “My car is fairly new and I know it would be years before I get another one,” she said.

Ghines said she got her new Honda under protest. “I had to replace my 2001 Honda Accord. It had 345,000 plus miles on it, and since I had been going home late at night from work, my sister was so afraid that the car may break down, especially at night,” she said. “So she kept ‘nagging’ me, asking when I will get another car.”

Her average consumption of gasoline per month is around $300.

A car is a significant purchase – a purchase consumers want to last them years. For consumers like Ghines who bought new cars recently, buying an electric car is not feasible. It’s a decision they can afford to procrastinate on.

Ultimately, a car is a personal choice – an economic expression of identity. In California, having a car is an almost inescapable purchase. According to Hedges & Company, over 84 percent of California’s driving age population is a licensed driver. Perhaps because it is so ubiquitous, a car choice matters all the more.

SOURCES

Brands in the Digital Age: How Glossier Revolutionized E-commerce

November 2, 2019 by anushkaj

Breaking Into the Beauty Industry

The beauty industry is valued at $532 billion and is still growing (Business Insider). Traditionally, the industry is driven by companies that tell consumers who they should be and how to achieve beauty. The companies and the products they sell supposedly hold the power to transform our looks to become the best and most presentable version of ourselves. High-end makeup brands set the tone and make beauty exclusive and unattainable–whether it is because of the values they market or the high product price points. Beauty is marketed as something to aspire to, rather than a quality one already possesses. The marketing from these companies was anything but real life as, according to a report on Glossier by Jumper Media,”Beauty brands lacked the context of real women and real experiences, focusing instead on the illusion of perfection” (Jumper Media). To be as profitable as it is, beauty has become a limited and exclusive commodity. Glossier, the skincare and makeup brand, dug into the market and democratized the beauty industry by building an affordable product with the consumer, not just for the consumer. Glossier revolutionized the industry by flipping the traditional beauty narrative and filled in the gaps where the beauty conglomerates were lacking.

Currently, 182 companies in the beauty industry are owned by 7 major leaders: L’Oreal, Unilever, Johnson & Johnson, Shiseido, Coty, Procter & Gamble, and Estée Lauder Companies (Business Insider). As a young and independent company, Glossier was provided the freedom and flexibility to reach its audience in a relevant and innovative manner, against the traditional business processes. Glossier used digital tools to create its brand, rather than communicate its brand. According to Megan Quinn, a partner at Glossier’s latest investor, Spark Capital, “Beauty consumers increasingly want to interact with brands and purchase products online. The industry’s conglomerates are ill-equipped to retrofit their businesses to this new reality” (Reuters). Born in the digital age, Glossier’s advantage was staying connected to its customers at every phase of the business process.

The rise of digitization increased access to information. People were able to share their opinions online and subsequently form niche communities. Beauty bloggers and vloggers filled in the gap of information between brands and consumers, and the conversation surrounding beauty expanded. The popularity of the “Get Ready With Me” vlog became the new model for advertising. In this style of vlog, influencers would take their viewers through their daily routine, and advertise the products they swore by in the process. Consumers learned about new products from their favorite vloggers and bloggers that they began to trust. The dispersion of information from other beauty lovers (rather than brands) began to give more power to the consumer rather than the brands. 75% of Americans look at reviews before making a purchase (Cave Social). Glossier created products based on the information from these independent communities and became the first beauty brand that people saw as a trusted friend.

The New Direct-to-Consumer Model

Glossier was raised alongside other direct to consumer brands like Warby Parker, Dollar Shave Club, and Casper. All of these companies found gaps in long-standing industries. They understood the pains that had developed within existing industries, and remedied them. These brands are also based on emotion, inclusivity, and accessibility. Warby Parker made trying on glasses at home accessible, and brought down the price of traditionally expensive prescriptions. The Dollar Shave Club changed the narrative of the homogenous razor blade ad, and captured vulnerability while selling a subscription to shaving razors. Casper took the tiresome experience of buying mattresses and turned it into a trendy brand by using marketing methods such as social media influencers and Twitter memes.

All of these brands capitalized on digitization to create a brand with and truly for the customer. The story and brand values are more important than the product itself. Businesses first turned to social media as a platform for marketing, but social media is as much for listening as it is for sharing. They used digitization to not only market their products, but to also capture the ethos of their products. Brands like Glossier sell consumers on their ideas, and from the start have an empowered relationship because of prioritizing the customer’s values. These new brands have used their independence to their success as they are able to find innovative ways to reach the customer rather than operating under the traditions of a conglomerate.

Marketing and Customer Acquisition

In the digital space, the best way to stand out is to fit in. Glossier does a phenomenal job of marketing itself as a best friend or older sister, passing down advice in the form of selling products. It’s approach to Instagram is to mimic the coolest it-girl, simultaneously chic, yet down-to-earth. Glossier changed the narrative on marketing make-up. Glossier contradicts the traditional makeup advertisement that projects a dark and sultry image. Weiss is driven by the value that, “Snobby isn’t cool, happy is cool” (Buzzfeed). The marketing of Glossier was not intended to intimidate people into trying its products, but rather appear as approachable as possible.

Glossier was so spot on with the branding and creating products for its target audience because it listened to what the customers had to say. Glossier employs 150 of its most active customers on a Slack channel for quick focus group feedback (Quartz). Glossier posted the question, “what’s your ideal face wash?”, to the internet and 382 comments and a year of development later–Milky Jelly was released (Buzzfeed). Glossier’s social-media marketing strategy was not just to share and promote content, but to also listen to and engage with its following.

Glossier and its cult following established a mutual loyalty to one another. For as long as Glossier vows to give them what they want, its followers will continue to be brand evangelists. Glossier created a brand that people were excited and proud to represent. Engaging with Glossier on Instagram is like getting recognized by your favorite celebrity on the internet. People upload their photos using the products or tag Glossier in their selfies–to be recognized by the brand, but also to let their following know that they are a part of this “It-Girl” cult.

By fostering this sense of community, Weiss somehow convinced millions to purchase cosmetics without even trying it on–further revolutionizing the traditional makeup shopping experience. From readers to followers, followers to product advisers, advisers to the community, community to a customer, customer to a promoter (Buzzfeed), Glossier’s growth is attributed to their relationship with their audience.

Glossier’s commitment to the consumer is so strong that instead of selling through larger channels like department stores, it sells direct to consumers–only ever online or at one of the few stores. Glossier pop-up stores are not to be experienced without a line that wraps around the block. Once you enter the store, Glossier’s Instagram comes to life in the form of a playroom. Customers are encouraged to try on the product and snap a selfie–for some free marketing of course–before making a purchase.

The future of e-commerce is emotional commerce. Technology not only allows businesses to access consumers, but their thoughts and minds as well. While all of these companies utilize social media to reach their customers, the brands that will truly reach their customers are the ones built with them. Glossier disrupted the market and is an example for many companies to follow. It put the customer above the product and catered to the beliefs of a generation. It was innovative because it valued emotion and connectivity, and built a community instead of a business hierarchy.

Glossier’s Story

While the conglomerates are pivoting to catch up to the new e-commerce model, Glossier was born from the internet. Glossier sprung from a blog called Into The Gloss. The founder of the two brands, Emily Weiss, was working as a fashion assistant at Vogue when she founded Into The Gloss in 2010 and focused on sharing beauty tips and tricks online. In her featured column “The Top Shelf” she sat down with celebrities like Kim Kardashian and Karli Kloss and interview them on their routines, favorite products, and would learn more about their insecurities. These moments led her to find gaps in the beauty industry where people felt let down, and also what they couldn’t live without. She read every response that came through Into The Gloss’s blog and Instagram to understand what it was that people loved, and what they felt they were missing. Into The Gloss became her focus group for customer discovery, and from that community, Glossier was born.

In 2014, Glossier launched with four products– a cleaner, priming moisturizer, lip balm, and misting spray. The brand intention was to create products for the everyday girl–not the creative makeup artists as other brands such as MAC cater to. The brand has now developed into a line of 40 products ranging from fragrance, skin and body care, and a thorough makeup line. As the range of products grow, Glossier returns to the idea of producing a brand and product based on the needs and opinions of its customers.

Economic Impact

During the Series D funding round in March 2019, Glossier raised $100 million from investors led by Sequoia Capital (Bloomberg). The company was then valued at 1.2 Billion, earning its status as a Unicorn. From 2014-2019, over 5 rounds of investment Glossier has raised $186.4 million in funding (Crunchbase). In 2019 they raised the most money following a year in which their sales had doubled. At the end of 2018, the company had grown to $100 million a year in sales, which was double the revenue from 2017 (Forbes). With the rapid expansion of its product line, and the additional $100 million in funding from 2019, Glossier expects unprecedented growth in the coming years.

Silence of the canaries

October 31, 2019 by huntera

The news over the past few months has been riddled with updates regarding the possibility of a recession. The yield curve has proven itself to be a reliable signal, as it successfully predicted the past seven recessions. However, viewing one part of a large, complex machine may not tell the whole story. Many other indices and sources of information should be taken into consideration when deciding whether or not a recession is likely.

US Trade Balance

The tensions between the United States and China are an integral part of this puzzle. Greg Ip, chief economics commentator for the Wall Street Journal, explains that from 2000-2017 import tariffs were below 2 percent, but President Trump’s tariffs bring that figure close to 6 percent.

This has direct implications on the international logistics industry, too. Fewer goods being made due to higher prices leads to less demand on the delivery of such goods.

On September 18, 2019, Fedex announced reduced earnings and reduced forecasted profit and revenue. As a result, shares took a 13 percent dive in their prices to $150.91. This fall was the largest decline in share price the company suffered since 2009, as it lost $6 billion in market capitalization. CEO Frederick Smith attributed this loss to decreases in shipping volume to China, while CFO Alan Graf pointed at Europe.

The Trade Balance chart above details that the US is importing more than it’s exporting – hence the negative signs by the digits. Here, the farming industry is a rather large factor to these statistics.

According to the United States Department of Agriculture, the US’s largest agricultural export to China is soybean. Soybean accounts for $12.3 million in export revenue and 63 percent of agricultural exports.

Since China implemented tariffs on US soybeans, the price and export of soybean has plummeted. In September 2012, soybean prices reached an all-time high of $17.36 per bushel. The price of a bushel of soybean as of October 7, 2019 is $9.15.

Prior to the trade war, the US and Brazil had roughly the same amount of market share in terms of agricultural goods to China: approximately 40 percent. As of May 2019, the US has only 10 percent market share due to the tariffs imposed by China. That explains some of what is happening in the current negative trade balance.

Farmers are suffering as a result. It is predicted that farmers will lose $130 per acre after rent as a result of the tariffs. If they can’t sell their products, then they can’t pay for costs of any kind such as: rent, equipment, maintenance, sustenance, power. If farmers who don’t own their own land can’t pay rent, then they will have to relocate. That on its own is devastating to any farmer. To think that if farmers were evicted from their rented land in droves, one can easily think that agricultural real estate prices would crumble, unemployment would rise, and GDP would drop.

Purchasing Managers’ Index

While US exports decrease, new purchase orders have come to a screeching halt, as shown in the chart above. The editorial board of the Wall Street Journal says “uncertainty about demand, prices and tariffs is causing business to scale back new equipment purchases.”

The PMI has steadily decreased from 2018 and even more so in 2019. Using the data on the chart, 2018 averaged a PMI of approximately 58-59.

This year has, so far, seen the most contraction since the Great Recession.] January rang in the year with 56 percent. September registered a PMI of below 48 percent. This is a relative decrease of 15 percent.

When the months of 2019 are compared to the respective months of 2018, the difference is striking. August 2018’s PMI registered above 60 percent while this year’s August PMI registered below 48 percent – a 20 percent relative decrease.

Domestic logistics are feeling the pinch. As trucking companies nationwide feel strapped for cash, orders for new heavy-duty trucks fell by 79 percent. Since July 2019, the trucking sector has also slashed 9,600 jobs.

ACT Research president and senior analyst, Kenny Veith, said, “…there will be layoffs up and down the truck manufacturing supply chain as a result of falling demand.”

Manufacturing Production Index

Above is the latest Manufacturing Production Index. Declining over the past year, September was “the steepest month of contraction for the manufacturing sector since June 2009” due to the effects the US-China trade war had on imports, exports and the prices of raw materials.

While the US is facing contraction in manufacturing, purchasing and a trade imbalance, automotive manufacturing has been in the news recently. United Auto Workers’ strike has been an on-going disaster for nearly a month.

The strike started on Sept. 16, 2019, as a result of the expiration of its labor contracts with American automotive manufacturers. The union demands higher wages, healthcare, opportunities for temporary workers and profit sharing – General Motors (GM) achieved record profits of $2.4 billion in second-quarter earnings (a 1.6 percent increase from the previous year).

When 46,000 union workers go on strike, the cars won’t make themselves. GM is losing as much as $100 million per day as the strike continues. The effect of the strike is not limited solely to GM. It is destroying its home, Michigan. As the strike goes on, state income-tax revenue drops $400,000 per day.

The latest data shows the US produced 2.55 million units in August 2019, which was a drop compared to July’s 2.67 million units. The US automotive manufacturing industry reached its bottom point of 1.29 million units in January 2009 – the Great Recession. The disparity between the amounts of units produced in 2009 and 2019 is narrowing, and the US hasn’t officially gone into a recession yet. The Federal Reserve Bank of Atlanta estimates a 1.8 percent growth for the third quarter. The Bureau of Economic Analysis released its estimate on October 30: 1.9 percent.

Oil & Geopolitics

While the US-China trade war is an intertwined battle of politics and economics, geopolitical matters also have huge sway on markets. Above is a chart from www.oilprice.com that displays Brent Crude oil prices over the past month. The beginning of the chart shows a spike in prices from approximately $60 to $67.50 per barrel during mid-September. This spike was a result of a supply shock after Saudi Aramco’s facilities were attacked by foreign agents. These attacks disrupted 5 percent of global production. Ip claims that “investors and economists see supply shocks as a threat to growth.”

Brexit is another international matter that has American investors on-edge. Nobody can see the future or reliably predict the outcome of Brexit – whether deal or no-deal. Brexit has serious implications to supply chains and financial markets. Goods won’t transport as easily and people can’t travel as conveniently, and that affects overall production and output.

As Jon Hilsenrath and Josh Zumbrun of the Wall Street Journal, say, “businesses react to uncertainty by pulling back on investment and employment, and a slew of economic data in recent months strongly suggest the theory has become reality.”[

Hilsenrath and Zumbrun go into detail about this data in their article. August 2019 saw a fall in job openings of 7.5 percent. They also mention truck and heavy machinery orders facing a decrease, which was briefly explained in the PMI section. British demand on American goods has decreased by 2.6 percent in the past year, which was made evident by US export data.

On top of the US economy’s internal contraction, international disruptions of this magnitude send the US economy into a panic mode. This psychology further affects the economy, as everyone believes that it’s going awry. As mentioned above the Federal Reserve Bank of Atlanta estimates third-quarter results at 1.8 percent. The BEA estimates third-quarter results at 1.9 percent. Seeing as both those number are lower than Q2’s 2.1 percent, it seems as though all indicators officially point to a recession.

Brain Drain: the Spiraling Issue

October 30, 2019 by alyar

In our current era, more countries are entering stages of industrialization and development to compete with already developed countries. This process of development has many growing pains, some of which can hinder or discourage continued progress and can cause problems that lower rather than raise the standard of living and life expectancy.

One of the more prominent growing pains is brain drain: a process by which the growing educated elite of a region or country emigrate to typically more-developed countries with better opportunities, thus removing the skilled labor workforce from the country’s population.

This reduction in the skilled labor population often translates to a vacuum in necessary services required for development, including education, healthcare, and engineering, among others. This can ultimately decelerate or even stagnate growth. If left unaddressed, brain drain can compound and lead to worse problems.

When a portion of the educated elite leave, there is a higher stress on the remaining skilled workforce to fulfill the demands in services those emigrants were meant to fill. This worsens working conditions and increases the disparity between the actual value of the service provided and the compensation service-providers are ultimately given. These problems then push more of the workforce to emigrate elsewhere, accelerating the rate of brain drain.

This is the case in Nigeria, where improved education has created a swathe of healthcare professionals ready to enter the workforce. In recent years, however, a majority of this workforce has left for developed countries such as Canada, Australia, and the U.S. after completing their education. Of the 72,000 doctors and dentists registered under the Medical and Dental Council of Nigeria, over half of them work outside of the country. This has left the medical industry with one doctor for every 5,000 Nigerians.

Why are Nigerian’s health professionals leaving?

Many health professionals cite a lack of resources—including basic utilities such as water and power— poor working conditions, and poor compensation. They criticize the Nigerian government for allocating only 4 percent of their national budget to healthcare despite the desperate need for such services.

PHCs, or Public Healthcare Centers, are the lifeblood of Nigerian healthcare. They face a litany of issues in basic services, which then affect the quality and capacity of the service provided. Infographic c/o: Premium Times Centre for Investigative Journalism.

This is despite the fact that, according to Onwufor Uche, consultant and director of the Gynae Care Research and Cancer Foundation in Abuja, “eight of 10 Nigerians are presently receiving substandard or no medical care at all”.

Doctors themselves are payed N200,000 monthly ($560)—a paltry sum compared to the compensation in Canada. With more doctors leaving, the disparity of how much value doctors bring to the economy versus how much they are compensated becomes even greater.

The government of Nigeria has attempted to remedy this situation by providing education subsidies to generate more health professionals. This naturally creates an incentive for more to enter the healthcare industry, but it doesn’t exactly address why people emigrate in the first place.

It is not as if Nigeria’s economy is struggling to generate the funds necessary for a proper compensation program either. As an OPEC country, Nigeria’s profits from petroleum have boomed since the 1970s. Yet, governmental corruption has failed to allocate and invest those economic resources into infrastructure, basic utilities, and key service industries such as healthcare. Many also cite that, while education may be sufficient in creating a healthcare workforce, getting residency and certification from the government is such a grueling process that lead many to either give up or move abroad.

How do we tackle the core issues that lead to brain drain?

Taking on the process of developing infrastructure and industry is a big task– one that is often not done on the government’s participation alone.

Several decades ago, China was in a similar situation as Nigeria is currently. Despite its burgeoning population and the leading regime’s incentives and directives to increase industry in the form of factories, China saw its educated elite fleeing for other developed countries. This was in part due to the oppressive measures in censorship by the government that discriminated against the educated in China.

This discrimination hindered the education system and the emergence of entrepreneurial exploits, particularly in the STEM field. Frustrated by the blocks and the lack of support, particularly during the technology boom of the 1990s, many left China for the U.S. and Japan to participate in the research and development opportunities there.

As China began to experience the effects of this exodus in the stagnation of its industries, particularly in competing in the technology landscape, the Chinese government decided to use the opportunities abroad as leverage. They began a subsidy program which would help Chinese nationals study abroad. Over the next ten years, they focused on generating capital through their exploits in industry and exports. In the early 2000s, the government created economic opportunities competitive to those in other developed countries to entice Chinese nationals back. They specifically targeted sectors they wanted to stimulate, such as solar power.

The number of returning nationals shot up from 1 million in 2001 to 4.8 million in 2017. Chinese nationals who went through this program were dubbed “sea turtles”, as they would bring innovation and education from other sources to enrich China’s economy.

Now, however, some ‘sea turtles’ are struggling to compete with China’s own locally educated youth. Research innovation and infrastructure were built up in such a way that have since made them also educationally competitive on the global stage. Perhaps it is in these conditions that China is can be considered a “developed” nation.

What if developing countries have not acquired enough capital to offer such competitive opportunities?

The development process for a country’s economy may take years, and the effects of brain drain slowing that process only further drains resources (including capital) and time.

The mass emigration of the Filipino workforce, particularly in the nursing and hospitality sector, is a case in which the country of origin simply does not have the resources necessary to remain competitive enough to retain their skilled population. In 2013, the Philippines deployed approximately 1.8 million workers– about 10 percent of its population— to other countries. In that sam year, the country itself was ranked number one for exporting nurses and number two for sending doctors overseas.

Poor working conditions include temporary contracts which lead to unstable career path, high nurse-patient ratio, a lack of resources, and understaffed hospitals and clinics. Infographic c/o: Filipino Nurses United.

Such high statistics are a result of poor working conditions juxtaposed with a remarkably strong nursing and healthcare service education system. Essentially, the Philippines is an example of the extreme implementation of Nigeria’s current plan.

Healthcare in the Philippines continues to suffer the same problems as that in Nigeria– where there is a deficit of healthcare workers for Filipino citizens and infrastructure is still poor. The government attempted to counter such issues by “overproducing” skilled professionals through its highly specialized nursing and healthcare programs.

The large population of abroad workers, however, also has made the remittances those workers significant enough to contribute to the economic growth of the country– up to $25 billion annually. This contribution has led the Filipino government to further encourage migration. This is in part due to the fact that remittances is a steady income that is often unaffected by the regional economic fluctuations. Despite how beneficial remittances have proved for the Filipino economy, there are concerns about the dependency these transactions bring to the country as a whole.

As a means to combat that potential risk, the Filipino government is looking to begin return programs much like China’s “sea turtles,” but face little progress due to the fact that their resources and compensation remain noncompetitive and unstable compared to opportunities abroad. Whilhe the Philippines may still suffer through the growing pains of economic development, they have crafted a way to utilize its brain drain to boost economic development and mitigate the process’ larger problems. This ultimately can encourage its continued development and the aspiration towards a better standard of living.

While these strategies may have worked for China and the Philippines, it is unwise to assume that they will be the save-all for Nigeria. By looking at these examples, however, we can begin to gauge how governmental powers may target one aspect of infrastructure or policy to lower the barrier and reduce push factors.

The Popcorn Index—What Box-Office Sales Tell Us About the Economy

October 27, 2019 by caseyf

Traditionally, recessions result in higher unemployment rates, lower incomes, and downturns in business opportunities. The exception to these trends is unexpected—movie theatre ticket sales. The entertainment industry accounts for a significant portion of consumer spending in the United States. According to Statista.com, the United States film business will generate $35.3 billion in revenue in 2019. In times of financial crisis, box-office sales increase and the entertainment industry reaps the benefits of the United States’ economic turmoil. Historically, the entertainment industry has performed better than other industries during financial downturns. A 2019 Variety Magazine article notes that box-office sales increased during five of the last eight recessions and set domestic records in 2001 and 2009, both of which were years of significant recession in the United States.

Photo Courtesy of The Hollywood Reporter

The surge in box-office ticket sales during economic downturns seems counterintuitive, but the logic behind the sales boosts is sound. Economists have surmised that this trend likely occurs because going to the theatre is one of the cheapest forms of entertainment available in times of economic uncertainty. When Americans want to escape from the dreary reality of financial instability, the movies provide a cost-effective solution. The entertainment industry tends to lean into this concept when producing movies during times of economic hardship, opting for feel-good content rather than somber, depressing films.

In the most recent United States recession that spanned from December 2007 to June 2009, Hollywood thrived, with both movie ticket sales and attendance increasing. According to The New York Times, box office sales increased 17.5 percent, to $1.7 billion in sales, and attendance jumped up 16 percent within the first few months of 2009. Meanwhile, the general economy struggled to stabilize and most other business’s profits steadily declined.

Photo Courtesy of The Hollywood Reporter

The economy is currently showing signs of a potential upcoming recession. As the country considers the possibility of an economic downturn, many industry insiders are nervous about box-office performance moving forward. According to a 2019 article posted by The Hollywood Reporter, the average price of a movie ticket has increased from $8.97 in 2017 to $9.11 in 2018. In addition to this median cost, many theaters charge extra for premium seating, 3D and 4XD showings, and additional amenities. At LA Live Regal Cinema, the theatre closest to USC campus, adult tickets cost $17.50. For context, the cost of a standard subscription to Netflix for a month is only $12.99, according to Business Insider.

As movies begin to present a greater price barrier, the idea of going to theatres as a cost-effective entertainment avenue is becoming more far-fetched. Entertainment conglomerates such as Comcast and Disney continue to accrue debt through company and content acquisitions, which could result in financial strain if this economic indicator fails to hold up during a future recession. According to Variety Magazine, industry leaders such as Adam Aron, CEO of AMC, and Jeff Goldstein, head of domestic distribution at Warner Bros., maintain that regardless of shifting factors, the movie industry will continue to prosper in recessions and prove to be a steadfast economic indicator in years to come.

Sources

Cieply, Michael, and Brooks Barnes. “In Downturn, Americans Flock to the Movies.” The New York Times, The New York Times, 28 Feb. 2009, https://www.nytimes.com/2009/03/01/movies/01films.html.

Fuller, Steve. “Topic: Movie Industry.” Www.statista.com, https://www.statista.com/topics/964/film/.

Griffith, Lou. “Data.” NATO, 24 July 2018, https://www.natoonline.org/data/.

Johnson, Dave. “’How Much Does Netflix Cost?’: All of Netflix’s Subscription Plans, Explained.” Business Insider, Business Insider, 30 May 2019, https://www.businessinsider.com/how-much-is-netflix.

Jones, Candice Lee. “10 Quirky Economic Indicators.” Www.kiplinger.com, Kiplingers Personal Finance, 13 June 2009, https://www.kiplinger.com/ article/business/T019-C000-S001-10-quirky-economic-indicators.html.

Lang, Brent, and Rebecca Rubin. “Recession Fears Grip Hollywood: Can the Movie Biz Survive a Downturn?” Variety, 2 Jan. 2019, https://variety.com/ 2019/biz/news/recession-hollywood-movie-business-trump-1203096883/.

L.A. Live, “Movies.” L.A. LIVE, https://www.lalive.com/movies.

McClintock, Pamela. “Average Price of a Movie Ticket Rises to $9.11 in 2018.” The Hollywood Reporter, 23 Jan. 2019, https://www.hollywoodreporter.com/news/average-price-a-movie-ticket-soars-911-2018-1178410.

Endeavor Pulls out of IPO: How the Plan Failed

September 28, 2019 by josieb

Super-agent and Co-CEO of Endeavor, Ari Emmanuel, was bucked off the Wall Street bull on Thursday when he decided to withdraw his company’s initial public offering just hours before it was to begin trading.

Last week, the company planned to sell an estimated 19 million shares, priced at $30 to $32 each. However, the investor demand turned out to be weaker than anticipated, and the expected share value dropped to $26 to $27 the day before trading was to start.

**Ari Emmanuel, Co-CEO of Endeavor Holdings Group.**
Credit: Photo by Stewart Cook/Variety/Shutterstock (9071719y) Ari Emanuel 48th Anniversary Gala Vanguard Awards, Show, Los Angeles, USA – 23 Sep 2017

Emmanuel grew Endeavor from the bottom-up when he left ICM Partners to create his own talent agency, also titled Endeavor. In 2009, the company merged with the William Morris Agency to form William Morris Endeavor (WME). Since the merger, Emmanuel has grown the company into a mega entertainment corporation, buying sports and fashion agency IMG, mixed martial arts company UFC, The Miss USA and Miss Universe pageants, along with several other media-driven subsidiaries.

Emmanuel is known for his ruthless drive in the competitive business of Hollywood, and an initial public offering for his company would have made Endeavor the first agency-driven business to be traded publicly. Endeavor planned to use the public investment funds to pay off debt accumulated from purchasing its subsidiaries while also gaining fresh capital to continue growing.

With an excellent track record of growth and a diverse portfolio of successful subsidiaries, why did Endeavor’s valuation drop in the eleventh hour?

In recent weeks, the IPO market has been closing the door on unprofitable companies. Last week, the parent company of WeWork, the We Company, withdrew its IPO after investor interest turned out to be weak. WeWork filed its IPO paperwork in mid-August and was hit with intense scrutiny from investors when it showed to be unprofitable with concerns regarding its path to profitability. Investors are looking for a return on their contributions to a public offering, and they did not see a likely gain in the near future with WeWork.

The same goes for Endeavor: investors became concerned while gauging whether or not it was work the risk of investing in an unprofitable company. In its pre-IPO filing, Endeavor disclosed that it had made $2.05 billion during the first two quarters of 2019. However, it also reported an operating income of $10.3 million with a net loss of $223 million. On top of that, Endeavor is burdened with over $4.5 billion in debt from purchasing its various subsidiaries.

In the end, investors found Emmanuel’s vision for Endeavor to grow into an entertainment behemoth to be too far-fetched; they found Endeavor’s IPO to be too risky to partake in at its original valuation.

With the last-minute slash in expected share pricing, Emmanuel decided to withdraw the offering.

In a statement to Endeavor employees on Thursday, Emmanuel expressed that the company would continue to “observe market conditions” and potentially find a time more fit for a public offering.

Until then, how will Emmanuel bounce back from this flop? How will he create value in his company that makes it worthy for investment?

One can only imagine that he will, quite literally, “endeavor to persevere.”

Sources:

https://www.bloomberg.com/graphics/2019-unprofitable-ipo-record-uber-wework-peloton/

https://www.hollywoodreporter.com/news/endeavor-lowers-estimated-share-price-ipo-1241851

https://www.latimes.com/entertainment-arts/business/story/2019-09-26/endeavor-lowers-it-ipo-price-range-ahead-of-its-market-debut

https://www.investopedia.com/terms/i/ipo.asp

https://variety.com/2019/biz/features/endeavor-ipo-investors-debt-losses-capital-1203231982/

Kweichow Moutai becomes the first 1000-yuan stock in China

September 26, 2019 by jiajun

The iconic baijiu produced by Kweichow Moutai.
(Photo credit to Kweichow Moutai’s official website)

After exceeding 1,000 yuan ($145) per share, Kweichow Moutai, the Chinese liquor giant’s share became the most expensive stock in China’s A-share market on June 27, 2019, aided by ever-growing demand.

While investors and analysts were not surprised by the strong performance of Moutai. Analysts from both Bloomberg and China International Capital Corp. Ltd. were optimistic about the continuous growth of Moutai’s share and raised their expected price of the stock.

A last-year forecast from Bloomberg predicted that Moutai’s share would hit the 1,000-yuan mark in 2019. Moreover, Tingzhi Xing, an analyst of China International Capital Corp. Ltd., also forecasted that 1,250 yuan would be the target price within 12 months.

Kweichow Moutai is a distillery from Moutai town in southwestern China’s Guizhou province. Moutai is famous for its iconic premium baijiu, a sorghum-based liquor, and it is usually used to serve at business meetings and official banquets. In 1972, Moutai was used to entertain President Richard Nixon on his historic visit to China.

President Richard Nixon and Prime Minister Enlai Zhou were tasting Moutai at the reception dinner in 1972. (Photo credit to news.ifeng.com)

Just as the western world’s obsession with premium wines, Chinese consumers are fond of baijiu. Thus, the consumption of high-quality baijiu in China is vast and still growing. As a representative of high-end baijiu, Moutai creates considerable profits.

According to the data cited by China Daily, an official Chinese English-language newspaper, the total revenue was 75 billion yuan, and its net profit was 34 billion yuan in 2018. Both its total revenue and net profit increased 23% over the previous year. Furthermore, the sales of Moutai rose 14% over 2018 to 100 billion yuan in total, and its net profit achieved by 45 billion yuan.

Another report released by China’s Guizhou province shows that the overall GDP of Guizhou province is 1.48 trillion yuan, and Moutai’s value now attained 1.24 trillion yuan in 2018. It means that the value of Moutai dominates nearly 85% of provincial GDP.

Besides being the most valuable stock in China’s A-share market, Kweichow Moutai also surpassed Diageo in 2017 and became the most valuable liquor company in the world, according to Refinitiv, a financial technology and data company based in London. Diageo is a British multinational drinks company and the owner of Johnnie Walker.

Due to the generous profits and ever-increasing demands of Moutai, analysts foresaw that the price of Moutai’s share would keep going in the future. “I can’t see any growth cap on the company in the long run, unless the Chinese don’t drink one day,” fund manager Dai Ming told WARC, the global specialist information company, in a marketing report. “The liquor culture is deep-rooted in China, and when you do business here, you drink. It’s a product with demand outstripping supply, so growth is quite visible.”

The Repercussions of Trump’s Fed Tweets

September 26, 2019 by edward

Over the last three years, President Trump has become quite infamous for a variety of things: his combover, the spray tans and his “build the wall” mentality. He’s also notoriously known for loving Twitter. Trump has garnered quite a reputation on this social platform, seeing as he’s the most Twitter-active president the U.S. has ever had.

President Trump’s tweets are, for the most part, immature, poorly informed and aggressive. However, to our country’s dismay, these 140 character-long posts have garnered the ability to impact the U.S. economy and the central banking system. Recently, Trump’s public criticism of the Federal Reserve on Twitter has cast doubt on the independence of the Fed from President Trump.

The tweets

Chairman of the Federal Reserve, Jerome Powell, is currently keeping interest rates much higher than President Trump feels is appropriate. Trump feels as though the Fed’s current monetary policy is pushing up the dollar and as a result, causing the U.S. to be less competitive on a global scale.

To voice his disapproval and frustration with the Fed’s recent decisions, Trump has essentially begun to cyberbully the Fed via Twitter. Shocking, no? In these string of tweets, Trump has accused the Fed of having no guts, sense or vision. He even deemed Powell a “terrible communicator!”. In the tweet pictured below, we see that Trump has gone so far as to suggest that the Fed raising interest rates is insensitive to other current events.

It’s important to note that in November of 2017, Trump himself nominated Powell to the position of Chairman of the Federal Reserve. Powell’s decisions that don’t properly mirror Trumps desires has caused Trump to publicly say, “Where did I find this guy Jerome?!”

As we know, the Federal Reserve operates independently from the President. This lack of control clearly has frustrated Trump’s and his dreams for an expansionary monetary policy. Like most rational adults, Trump has used Twitter as his emotional outlet. However, these exclamatory and bitter tweets are almost indirectly granting the President with a sense of command over the Federal.

The repercussions and findings

Economists from the London Business School and Duke University have come forward to report that Trump’s tweets have had a “statistically significant and negative effect on markets.” As a result, investors are now anticipating that central bank to give in to these political pressures and consequently, lower interest rates. A study performed by the National Bureau of Economic Research (NBER) has discovered these findings.

Economists and scholars have come to this conclusion by closely analyzing the shift in Fed funds future contracts, over both short and longer terms, in conjunction with their reaction to Trump’s tweets about Powell and the Fed. (The Fed funds futures are defined as the financial contracts that indicate what the market’s opinion of where the federal funds rate will be at the time of the contracts expiration)

CNBC explains that within the Funds Market, traders essentially bet on or predict where the Fed’s benchmark overnight lending rate will end up. Policy makers and economists have watched closely for changes in how the markets view where interest rates are heading. They have found that the 30-some-odd tweets about the Fed have lowered the Fed funds futures contract by 10 basis points.

Basis points are a common unit that are used in relation to interest rates and other types of financial percentages. 1 BPS is equivalent to .01%, 10 bps means .10% and so forth. Economists have noted that Trump’s tweets have knocked the Fed funds future by 10 bps, or as we now know, .1%. If we look at this not in the context of the Fed funds rate, this appears to be a pretty miniscule percentage. However, the Fed generally adjusts its rate by 25 bps and currently, the target fed funds rate is somewhere between 1.75% and 2%. So in reality, this .1% is a pretty substantial percentage.

The study done by the NBER infers that because of these findings, economists are reporting that the impact of these tweets will cause the Fed to give into external political pressure, which will thus tarnish the central bank’s autonomy. While Trump can not directly influence the Fed, his publicized pressure is indirectly changing market expectations of the Fed which in turn, can most likely influence their next move.

Why it matters

So why does this matter? The Central Bank is not a government agency and in turn, they operate autonomously from the President. It’s rights and privileges are guaranteed by the law. However, these findings show that the market expectations can and have a high chance of influencing the decisions of banks. When it comes to calculating monetary policy, the Fed may end up looking at market expectations to help decide on policy.

Additionally, these reports and predictions create a perceived lack of independence between politics and the Fed. Potential investors might feel as though this political influence and perceived interference in our central banking system might make investing in our economy too unpredictable and risky. This might in turn cause them to invest their money in foreign markets, therefore detrimentally impacting the U.S. economy.

Sources

Bezos breaks corporate responsibility pledge

September 26, 2019 by sarahm

Jeff Bezos — *Photo courtesy Associated Press*

By Sarah Montgomery

Last month, almost 200 major corporations signed a pledge to prioritize their workers, customers, suppliers, and communities over shareholders. Jeff Bezos is already defecting.

Bezos is the owner of Amazon, which owns several other companies, notably Whole Foods. This is important because recently Whole Foods announced that, coming Jan. 1, employees working 20-30 hours per week will lose the company health plan. This is contradictory to the pledge.

Whole Foods told Business Insider that the decision was made in order to improve efficiency within the company. They also claim that they are providing their affected workforce with resources to find alternative healthcare or to explore positions that are healthcare-eligible.

The Business Roundtable, a large corporate lobbying organization, wanted this pledge to serve as a new approach to the “purpose of the corporation.” The goal was to get rid of the prevailing idea that the maximization of shareholder value is what businesses should strive for. This concept, propagated by conservative economist Milton Friedman, has been the commonplace corporate ideology since the 1970’s. Though this pledge is a welcome change, it is important to know that there is no mechanism in place for supervision or enforcement—nothing is committing these CEOs to the pledge other than their word.

Many economists doubted that companies would hold true to the pledge in the first place. Nell Minow pointed to the lack of substance in the pledge and its inherent contradiction to capitalism, amongst other reasons, as to why she does not trust these CEOs. Some pointed out that corporations have a responsibility to pay taxes, which many have avoided— also under the guise of helping their employees, but in reality done in the interest of lining their own pockets. Jack Kelly, Senior Contributor at Forbes, writes “signing the agreement to be better was the perfect public relations stunt to earn kudos for their supposed new ‘woke’ view.”

Stanley Litow, an expert on corporate social responsibility, argues that corporations do not need to neglect the needs of shareholders in order to produce good behavior. After all, shareholders do not want to be part of an abusive company that will inevitably be burned by regulators.

This shareholder-first mentality has been so pervasive in the corporate culture for so long that it seems like an essential component. “No one is quite sure how to rebalance corporate priorities so that greater shareholder value is seen as a byproduct of socially responsible behavior rather than the primary goal,” LA Times journalist Michael Hiltzik writes.

Other high-profile CEOs include Tim Cook of Apple and Ginni Rometty of IBM, amongst dozens of other influential business leaders. Only time will tell if they follow Bezos’s path.

The BOOming Business of Halloween

September 26, 2019 by anamf

Looking around my living room, my heart floods with excitement as I regard my sparkly pumpkins, fall floral arrangements, and witchy decorations. I typically consider myself a conservative spender, but when it comes to All Hallows Eve, my body finds itself possessed by the demon of retail.

Source: Women’s Day
*https://www.womansday.com/home/decorating/g1902/painted-pumpkins-ideas/?slide=18*

And I’m not the only one. When I was young, my family had shallow pockets, yet my mother splurged on Disneyland tickets and expensive costumes every Halloween. My friends’ parents kept boxes upon boxes of Halloween decorations, adding to their collection every season from the likes of Micheals, Home Goods, Target, etc.

Buckets of funds are poured into products with hair-raising price tags, seasonal shops like Costume Castle reaping enormous benefits. Do I spend on multiple new costumes every year? Yes. Do I feel bad? Absolutely not. Why? It’s fueling the economy like B Positive fuels a vampire.

Spooktacular Spending in 2019

According to the National Retail Federation (NRF), Americans collectively are expected to spend about 8.8 billion dollars, simply on the spooky night in question. On average, each human (transparent ghouls excluded) will average $86.27 of Halloween spending, with 172 million people planning to participate in the festivities. In case you were wondering, that’s a haunting amount of consumers trick-or-treating themselves.

The NRF also reported an interesting new trend. Social media has greatly affected consumer spending decisions. More and more people are looking to platforms such as Pinterest, Instagram, and Twitter for their next purchases. As individuals attempt to imitate celebrities, they tend to choose costumes with higher price tags. Gone are the days of homemade outfits that don’t offer impressive social media pictures. This is detrimental to our pockets, but beneficial for the Halloween business, with consumers predicted to spend $3.2 billion on costumes alone.

Source: Harper’s Bazaar Arabia
*https://www.harpersbazaararabia.com/people/the-a-list/the-best-celebrity-halloween-costumes*

Broader Economic Effects (Ghoulish GDP)

Like I said before, all of this spending is fueling the economy. Businesses like pumpkin patches and candy corporations are thriving, and many seasonal employees have an institution to work for. In 2018, spending records reached an all time high, and this year the robust numbers remain unchanged. This is extremely positive, because Consumer spending is the largest contributor to the nation’s GDP, driving the economy as a whole.

While the holiday season is short-term, Halloween serves as a great little BOOm for the nation’s economy. So have a fangtastic celebration, and don’t feel guilty about all of those spooktacular splurges.

Source:

Jordan, Thomas, et al. “Social Media Influencing near-Record Halloween Spending.” NRF, 25 Sept. 2019, nrf.com/media-center/press-releases/social-media-influencing-near-record-halloween-spending?utm_medium=Homepage%2BHero&utm_source=Website&utm_campaign=Halloween&utm_content=Release%2B9-25-2019.

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Money Marks & Media - Spring 2014