Many Americas

Recently I was up in Detroit, gassing up the car at a service station at an exit just off one of the freeways, when I noticed this provocative sign on a tire business across the street.

Commerce doesn’t lie.  The business owner obviously thinks that theft of wheels from parked cars is a sufficiently widespread problem that advertising about the ability to help victims of the thefts will generate additional sales and revenue, and you have to assume that there’s a factual basis for that belief.  I thought:  “Really?  Wheels on cars parked on public streets are being stolen, and police haven’t caught the perpetrators of such brazen criminal activity?”  The sign, and the real message it was sending, made me uneasy.

The sign was just one more bit of tangible evidence that we don’t live in one America any more, if we ever really did.  Instead, there are lots of different Americas, dealing with lots of different issues.  Where I live, we thankfully don’t have to worry about coming out to our car and finding all of the wheels taken by wheel theft gangs.  In this particular neighborhood of Detroit, however, there is obviously a different reality.

This shouldn’t be a revelation, of course.  Read the news and you quickly understand, intellectually, that there are pockets of the country where the heroin epidemic is raging and leaving families devastated, where the local economy has been bottomed out and there are no jobs to be had, and where the relations between police and the local populace has been poisoned, and there are parts of America where people are concerned because housing values are too high, where companies are concerned because they just can’t hire enough high-tech workers, and where people are lining up to spend a thousand dollars on a new cell phone.  And don’t get me started about how different places like Hollywood, or Washington, D.C., seem to be from the rest of the country.

And yet, when you live in your own world, it’s easy to view everything from your own personal experience, and wonder why people could possibly have different perspectives on the issues of the day.  The next time I feel that kind of self-absorbed conceit, I’ll think about that unsettling sign in Detroit and try to remember that there are a lot of people in this country dealing with lots of issues and problems that I’m not even aware of — much less affected by.  America is a diverse place not only in terms of its population and demographics, but also in terms of personal experience.  We shouldn’t forget that.

 

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Flippy’s Takeover

Out in California there’s a “fast casual” restaurant called Caliburger.  As the name suggests, hamburgers are one of the staples on its menu.

448b016b00000578-4905576-image-a-2_1505977728222Caliburger’s Pasadena location has a new worker called Flippy.  Flippy is a quiet, methodical, highly reliable worker who doesn’t take up a lot of space, because Flippy is actually a robot.  Made by Miso Robotics, Flippy’s design is simple — it’s a robot arm, bolted to the floor in the restaurant’s kitchen next to the grille.  Flippy has a spatula where his hand should be, and he’s programmed to flip burgers and then put the cooked burgers onto buns.  A human assistant puts the meat down, Flippy does his burger-flipping thing, and then the human worker finishes dressing the burgers to fit the incoming orders.  The fact that Flippy has only a spatula hand make it easy to clean and maintain.

Flippy sells for $60,000.  Caliburger was one of the investors in the company that manufactures Flippy, and it got one of the first devices.  It has pre-ordered others, and it plans to install them in a number of its restaurants.  And, of course, Miso Robotics will look to sell Flippy to other burger-oriented restaurants.

Each burger-flipping robot will be performing a job that used to be done by a human being.  At about $60,000 a pop, Flippy seems expensive — until you figure that, with many states and cities raising the minimum wage, it wouldn’t take many months of operation before Flippy starts to pay for itself.  And Flippy is never going to miss work, or show up late, or complain about its hours, or become distracted by talking to a co-worker.  And Flippy is not going to need health insurance, or file a claim against his restaurant employer for violating a federal or state statute, or advocate for wage increases, either.  Until legislators start legislating about treatment of robots, Flippy is a lot easier for employers to deal with.

Welcome to the future.  And good luck finding that entry-level job that pays the ever-increasing minimum wage that is supposed to be an economic panacea and allow a fast food restaurant worker to support a family of four!

Amazon Primed

Amazon — that massive, gushing river of deliveries that has fundamentally and forever changed the modern retail business — has announced that it is looking to build a second corporate headquarters somewhere in North America.  Cities like Columbus are jockeying for position and hoping that they get picked to host the Amazonians.

amazonLanding Amazon and its “HQ2” has got to be tempting for just about any city.  You can look at what Amazon has done for Seattle, where its corporate headquarters is located, and see what having Amazon might mean.  Amazon employs 40,000 people on its Seattle campus, it uses an enormous chunk of the available Seattle commercial real estate, and it calculates that, since 2010, it has contributed $38 billion to the Seattle economy.  The proposed “HQ2” is being presented as a similarly enticing proposition for job-hungry municipalities.  It is supposed to create as many as 50,000 jobs paying an average of $100,000, and also produce $5 billion in capital investment in the first 15 years.

As Seattle’s experience demonstrates, these don’t appear to be pie in the sky numbers.  Instead, Amazon has a proven track record of doing what every city wants from a leading corporate citizen — it creates good jobs that are filled by people who pay their taxes and it injects money into the area, which in turn creates jobs at the companies that provide the services that Amazon and its employees need.  Sure, there might be some drawbacks — Seattle real estate has become pretty expensive — but most cities would gladly accept that problem in order to tap into the Amazon river of tax revenue.

Amazon has released a list of detailed criteria that will be applied in its search for the right location for HQ2.  It’s looking for a metropolitan area of at least 1 million people, close to an international airport, with good roads, schools, and mass transit.  Oh, and it also needs up to 8 million square feet of office space.  And the modern world being what it is, we can expect Amazon to look for competing cities to produce packages of tax incentives, tax deferrals, and available development funds designed to entice Amazon as it makes its choice.

Columbus, where several Amazon data and distribution centers have located in recent years, is expected to compete for the prize, and Richard has written about San Antonio’s hope that it wins the crown.   We can expect the big boys, like Chicago and Dallas, to put in significant bids, and struggling cities like Detroit would no doubt see the Amazon initiative as a chance to really turn things around.  And don’t forget that Canada is part of North America; Toronto is said to be interested, too.  In all, about 50 metropolitan areas meet the 1 million population cut-off and would be in a position to compete for the prize.  Bids are due by October 19.

Hey, Amazon!  Come to Columbus!  You’d like it here!

A Tale Of Two Jobs

The New York Times published an interesting story over the weekend that compared two jobs, and in the process provided some insight into how the economy is changing and what it means for workers trying to get ahead.

The two jobs were janitorial jobs:  one held by a woman working at Kodak in Rochester, New York in the 1980s, and the other by a woman currently working at the Apple headquarters in Cupertino, California.  The two women earned about the same amount, adjusted for inflation, and performed the same kinds of work.

mop-and-bucketThe Kodak worker, however, was a full-time employee of the company.  She received more than four weeks of paid vacation annually as well as a bonus payment, and the company also reimbursed some of the tuition she paid going to college part time.  When the building she was charged with cleaning closed down, the company found her a different job.  The janitor at Apple, on the other hand, doesn’t work for Apple at all; she works for a service that Apple contracts with to keep its buildings clean.  She can’t afford to take a vacation because she can’t afford any lost pay, and there are no opportunities for bonuses or transfers to different work at Apple.

Although the Times article veers off into the unusual story of the Kodak worker — who ended up taking computer classes, getting transferred to a professional job in information technology, and ultimately becoming the chief technology officer at Kodak — the more interesting point is the macroeconomic lesson.  As the Times describes it, American companies have “flocked to a new management theory:  Focus on core competence and outsource the rest.”  The Times article notes that the outsourcing approach has made companies “more nimble and more productive, and delivered huge profits for shareholders,” but “has also fueled inequality and helps explain why many working-class Americans are struggling even in an ostensibly healthy economy.”

There’s no doubt that outsourcing has been a huge trend in the American economy.  But what the Times presents as a kind of optional management theory designed to reap windfall profits for shareholders while shortchanging working-class Americans seems to me to be more of the inevitable consequence of the cold hard reality of global competition.  The business world has changed, and companies that want to compete with low-cost providers overseas have to keep their intellectual capital while cutting costs wherever they can.  Outsourcing is one result of that reality; the disappearance of company-funded health care benefits and pensions, the rise of employee-funded retirement plans, and movements of company headquarters to the states and cities that offer the most favorable tax abatement schemes are some of the others.

The proof of the cold hard reality is in the outcome:  Apple is thriving, while Kodak — which once was one of the most successful, innovative companies in America — has gone through bankruptcy, laid off thousands of workers, and repurposed itself into a much smaller concern.  Kodak may have paid a price for its generosity.  And for workers, the lesson is clear:  do what you can to become one of those intellectual capital assets that companies want to keep around.

Profiting From Others’ Misfortune

I’m a big fan of capitalism.  it’s by far the best, fairest, most rational, most efficient economic system — in normal times.  But when disaster strikes, and the “Invisible Hand” and the law of supply and demand entice some businesses to engage in rampant price-gouging, it makes capitalism look bad.

price-gouging-2That’s what’s happening in Texas right now.  Hurricane Harvey has proven so devastating, and the likelihood of continuing devastation and economic disruption is so great, that supply and demand, which together are supposed to regulate pricing, are completely out of whack.  As a result, some people in Texas are charging the people trapped in the hurricane zone outrageous, grossly inflated prices — like $99 for a case of bottled water, gas for sale at $10 per gallon, which is about three times as much as it sold for prior to the hurricane, and marginal hotel rooms rented at Ritz-quality rates.

Texas, like other states, has laws against price-gouging in times of emergency or natural disaster, but it’s hard for the price police to keep up with the businessmen who see a catastrophe as a way to make an easy buck and pad their profits.  For every gouger who is caught, there undoubtedly are many others who make a lot of money selling at exorbitant prices to people who don’t know enough to raise an issue about it.  It’s an old, time-honored story, because price-gouging is as old as economic activity itself.

Natural disasters like hurricanes often bring out the best in people.  We’re seeing a lot of that in Texas, with people selflessly heading out to try to rescue those who are stranded, or opening their homes and their wallets to help those who have suffered terrible losses.  It just makes you sick to your stomach that, mixed in with the many Good Samaritans, are greedy people who take advantage of the unfortunate and put money ahead of simple human kindness and decency.  How do the gougers sleep at night, knowing that they are profiting from the misery of others?

Condemned To Repetition

George Santayana memorably observed:  “Those who do not remember the past are condemned to repeat it.”

Hey, does anybody here remember 2008?

isantay001p1A report released yesterday by the Federal Reserve discloses that Americans have just set a new record for accumulated credit card debt.  The grasshoppers among us had saddled themselves with a total of $1.021 trillion in outstanding revolving credit in June, just edging out the previous record of $1.02 trillion set in April 2008.  Total household debt in the U.S., which totes up housing, auto, student loan, and credit card debt, reached a new record of $12.72 trillion in March, which also passes its 2008 peak level.

Of course, those of us who do remember the past recall what happened in and around 2008 — banks failed, the subprime mortgage bubble burst, and the economy was thrown into the Great Recession.  For a while, Americans reacted by tightening their belts, paying down their credit card debt, and getting rid of some credit cards — but those days of responsible consumer behavior apparently are long over.  Recently, credit card debt has been growing at an annual rate of 4.9%, and more consumers are getting access to credit cards.  More than 171 million consumers had access to credit cards in the first quarter of 2017, which is the highest such number since 2005, when about 162.5 million people had access to credit cards.  And some banks have made the conscious decision to provide credit cards to people with subprime credit scores.

Gee, what could go wrong with this scenario?

It’s all not-so-vaguely and scarily familiar, but a lot of people apparently just don’t care.  They think times are good now, and therefore times will always be good — so why not use that credit card to buy another impulse purchase consumer good that they don’t really need?  The problem is that, in our interconnected economy, the irresponsibility of the grasshoppers can pull down the ants among us, too.  If the heavy credit card borrowers start defaulting on their debts en masse, and banks and businesses start feeling the pinch, we’ll feel the unfortunate results, too.

If Santayana were still with us, maybe he’d change his famous statement to read:  “Those of us who remember the past but are unfortunate enough to live with other people who do not remember the past are condemned to repeat it, whether we want to or not.”

Another Potential Cultural Shift

The U.S. Census Bureau recently announced that a greater percentage of Americans are renting than at any time in the last 50 years.  According to the Bureau, in 2016 36.6 percent of the heads of households rented their place of residence — the most since 1965.  43.3 million heads of household are renters, and the percentage of renters among heads of household has increased from 31.2 percent in 2006 to 36.6 percent.

120301_24b_forrent-crop-rectangle3-largeWhy are we seeing these shifts?  The authors of the Census Bureau study attribute the movement toward renting to lingering concerns about owning a home stemming from the Great Recession, rising house prices, and young people who are so burdened by student loan debt that they simply can’t afford to purchase a home.  Millennials are the most likely to rent their place of residence:  in 2016, 65 percent of heads of household under age 35 are renters.  And there may be other factors at play, like the potential difficulties of selling a home in an economy where you might need to pick up stakes and move to another city in order to advance in your career.  Who wants to be saddled with a house, and fretting about whether you can sell it, under those circumstances?

I’ve got no doubt that these factors, and others, are contributing to the movement toward renting.  In my experience, young people these days are a lot more thoughtful and analytical about their housing decisions than was the case with people of my generation.  We were raised on concepts of the American Dream in which owning your own home was a fundamental part of the puzzle, and as a result the decision to buy a house was almost a reflexive, automatic act.  Now it seems that people generally, and young people specifically, are more carefully weighing their options and concluding that, for many, renting makes a lot more sense — whether it is because of a desire to be flexible, or because renting often allows them to live closer to their workplaces and areas that offer lots of social activities, or because living in an apartment building can provide a kind of ready-built community, or because of concerns about getting stuck with an overpriced house, or something else.  It’s one of the reasons why, in Columbus, the rental market is exceptionally hot and people are building new rental units left and right.

We may be seeing a shift in cultural norms, away from defining success as owning a tidy home in the suburbs and mowing your lawn every Saturday during the summer.  If, like me, you’re not a fan of suburban sprawl and would like to see our existing city areas revitalized, the movement toward renting is not a bad thing.