A tribute to Maya

From Charles Blow, writing for the New York Times:

Hers was an enviable ability as a writer to lower the lens so that it was just above the ground, so that the reader could record the grit and the minutia and the places where the bodies fell and struggled again to stand.

Maya Angelou’s inspiration surely on display in the above excerpt.

Monopsony

Let’s say that I do indeed come up with a better mousetrap resulting in market dominance. Or perhaps I’ve begged, borrowed, and stolen kernels and fragments of existing software to produce a computer operating system that, for accidental reasons, becomes the default OS of choice. If I become so large that I can dictate the price you pay for a mousetrap or an operating system because I have no competitors, the federal government steps in. Monopolies are considered illegal in the U.S., even if some escape prosecution.

Now we’ll explore a different situation. I have in mind Amazon. It began with books. Remember? But that was so long ago. Today, Amazon sells almost anything. And it does so with such remarkable convenience to the consumer, that “going out shopping” has disappeared from the lexicon. Now we click, and click some more.

Amazon, if you hadn’t been paying attention, doesn’t make all that much money as the world’s largest retailer. Heck, it even sells many products at a loss (source for graph below):

Amazon net income 2009 to 2013

Yet, despite very modest net income, investors have actually bet large on the company. Why? I think it has everything to do with eventual, if not already present, monopsony.

The dictionary defines ‘monopsony’ as “a market with only one buyer.” While Amazon sells a whole lot of stuff, enough to make it the dominant player in book selling, for instance—by virtue of that dominance it is now in a position to dictate the terms and conditions with book publishers, since it has become the largest buyer of books.

Obama’s Justice Department, it seems, couldn’t grasp this phenomenon. Previous administrations went after Microsoft and, nearly a century ago, broke up the oil monopoly and giant holding companies. Obama, instead of paying close attention to Jeff Bezos, decided that Apple was the larger threat, when it championed an agency model patterned after iTunes and its App Store.

An attorney who wrote a brief friendly to Apple’s defense penned an op-ed for the New York Times. He argues:

…When a company has dominant market power and sells goods for below marginal cost, it is engaging in predatory pricing, a violation of federal antitrust laws.

What was to be done? Fortunately, in early 2010, a natural market solution presented itself: the introduction of the iPad and Apple’s entry into the e-book market. At Apple’s suggestion, the major book publishers were persuaded to change their e-book business model to reflect how Apple had been selling its popular apps for the iPhone. Under the app model, the publisher sets the price, not Apple or Amazon — with the e-retailer keeping a 30 percent commission. Here, price competition does not go away; it just moves from the e-retailer to the app developers, book publishers and authors.

All was well until the Justice Department, supported by a white paper supplied to it by Amazon, filed an ill-advised lawsuit against Apple and five of the major book publishers for antitrust violations. The publishers were charged with “price fixing” — but not for fixing prices: Not a single e-book price was fixed by the conspiracy contrived by the government. All the publishers did, as I argued in a friend-of-the-court brief at the time, was to move to the lawful app store model, which eliminated Amazon’s self-serving distortion of the e-book market [my emphasis].

Bob Kohn, the lawyer who authored the above excerpt, believes that Amazon created a monopsony in book selling, and that the publishers fought back using Apple and its purchasing model. But a judge sided with the Justice Department against Apple and the publishers, accusing them of conspiring to fix prices.

So, who benefits from the decision? Why Amazon, of course.

Consumers may now be enjoying convenience and low prices, but as the company grows and grows it threatens to establish multiple-sector monopsonies in which it emerges as the principal or even the lone buyer of wholesale merchandise. As such it will have the power to extract all sorts of concessions from producers.

Jeff Bezos says that he’s all about the consumer.  But Kohn begs to differ:

AMAZON has caused no small controversy of late by refusing to accept presale orders on books to be released by the publisher Hachette and by understocking Hachette’s titles. These punitive maneuvers, which follow a dispute between Amazon and Hachette about e-book contracts, have led to significant delays in shipments of Hachette’s books to Amazon’s customers.

Both consumers of Hachette books and the authors who wrote them are mad as hell. Kohn has an idea to break Amazon’s stranglehold:

So far, Hachette, to its credit, has been unbending. But Amazon still has its nuclear option. It would appear that unless Amazon backs down — through public pressure or government intervention — publishers will have no choice but to employ their own nuclear option: pull all their books from Amazon and throw their weight behind a law-abiding alternative. Perhaps the best solution would be an online marketplace controlled by the publishers — with the 30 percent commission being split 50-50 with the authors in addition to the author’s royalty.

I don’t think his idea will get anywhere because, as Amazon’s own history demonstrates, it takes an awful lot of time and money to first establish an online marketplace then nurture it through thick and thin. Nor will this administration likely intervene against Amazon, having already jumped into bed with the company, and utterly failed to grasp the implications of monopsony.

After Bezos conquers private retail, I wouldn’t be surprised if he went after the public sector, selling all sorts of goods and services now provided by governments. At some point we might even have an Amazon justice department.

More politics of dirt

Two trends bother me. On the one hand, scientists have increased their confirmation that human-caused greenhouse gas emissions have raised and will continue to raise global temperatures. On the other hand, public opinion about climate change has entered the realm of “so what?” Were it up to the scientists, bold steps would be taken. Leaving matters to the political process virtually guarantees inaction.

Stymied by Congress, President Obama directed the Environmental Protection Agency to devise strategies to reduce carbon emissions. So the EPA will implement a cap-and-trade program that promises to cut emissions by 20 percent, according to the New York Times.

The expected announcement follows the release of a U.S. Chamber of Commerce report whose headline intended to scare but whose substance minimized projected costs of combatting climate change. The Chamber, strongly tethered to the Republican Party, will do its part to resist the Administration. Surely coal states will fight to the death, quite literally.

The Times includes an interactive chart of the United States, depicting coal-dependency. We in the Pacific Northwest consume relatively small amounts of electricity generated from fossil fuels. The Midwest, especially, relies on coal for most of its energy.

Screen Shot 2014-05-29 at 9.50.32 AM

I occasionally ask myself a counterfactual: Would my views be different if I lived in Kentucky?

Kentucky, of course, is a coal state. Would I defend the use of coal to the point that I would deny climate change and re-elect conservative politicians beholden to coal companies?

I’ll never know, certainly. But I, a citizen of the Northwest, may be rightly accused of self-righteousness in condemning Kentuckians, or any resident of the dark brown states in the above chart.

Yet, since I have no reason or ability to dispute the climate scientists, whose warnings become increasingly apocalyptic, I believe that something should be done to reduce greenhouse gases. Since coal-burning is the most carbon-intensive form of electrical generation, the logical place to start would be states like Kentucky.

The soon-to-be released cap-and-trade plan expands on the existing program in the Northeast, which had then-Governor Mitt Romney’s fingerprints all over it. (He’s since renounced his own creation, as he did his Massachusetts health care plan.) The Times:

People familiar with the drafting of the rule said that after it is unveiled they expect many states to comply by joining the northeastern program, in part because the system has already been designed and tested.

“It’s a plug and play,” said Kelly Speakes-Backman, a commissioner of the regional program. “We’re finding that’s attractive to people. We’ve had states from all over the country calling up and asking, ‘How does this work, and how can it work for us?’ ” The regional program has proved fairly effective: Between 2005-12, according to program officials, power-plant pollution in the northeastern states it covered dropped 40 percent, even as the states raised $1.6 billion in new revenue.

So, a successful program, right? Not so fast say the diehard Republicans, including New Jersey governor Chris Christie, who withdrew from the northeast plan. Politics.

But an expanded program should have broader appeal. Here’s an Illinois public official:

…joining a larger, multistate program, we’ll be able to spread out the risk, to mitigate the economic impact.

Sounds reasonable. Ah, reason.

Downtown living

The years take their toll on the body. In my case, it’s arthritis everywhere, though I feel it most acutely in the knees and spine. Navigating stairs has become a painful challenge rather than a trivial means to get up and down. So, my wife and I live in an apartment these days, abandoning the big two-story house on the hill.

We are not alone in our preference for horizontal living space. After all, the population is aging, with more and more of us old farts whining about this or that. Above all, we desire to live in close proximity to amenities and, of course, medical facilities.

Ironically, we baby boomers share some likes and dislikes with the younger crowd, many of whom disdain car-dependent suburban living. They, too, wish to be close to the action, though they are far more active than we codgers.

Such thoughts, while omnipresent in my brain, came to the fore upon reading this piece in the New York Times about a downtown Minneapolis project, which includes a new football stadium for the Vikings. The paper calls it “a blueprint for a bustling downtown.”

The five-block project, called Downtown East, includes plans for two 18-story office towers for Wells Fargo, a six-level parking ramp, about 24,000 square feet of retail space, 193 apartments and a four-acre urban park near the stadium’s northwest corner.

The blueprint for a bustling downtown stands in stark contrast to the status quo: crumbling asphalt parking lots, tired buildings and limited housing…

Well, you might say, nothing novel here. Lots of cities launch such plans, some more successful than others. For me, it was the accompanying comments that precipitated this post. Take this one, for example:

For Governor [Mark] Dayton, reviving the downtown means making good on a childhood lesson. “My father and his brothers were retailers, and they preached the downtown,” he said. “If left to its own, development goes to greenfield sites on the outlying areas and you end up with a doughnut hole. Once you get behind the eight ball with a downtown in decay, it’s very, very difficult to turn that around.”

Consider that last sentence. My wife and I happen to live in downtown Everett, once designated by late 19th century U.S. plutocrats as the future commercial and political center of Washington state. The only legacy of their blink-of-an-eye romance are street names, which include Rockefeller, Hoyt, Rucker, Wetmore, and Colby. Yep, that Rockefeller. After leaving town and taking their money with them, Everett reverted to a marine-based industrial hub, dominated by wood, water, and rails. For good reason the place was dubbed ‘Mill Town.’

During the first few decades of the 20th century, Everett was bustling, with a vibrant downtown of stores and shops, replete with electric trolleys. Photographs of the period depict lots of people buzzing about.

But over time Everett became the doughnut hole. Boeing expanded its operations west of the city, and its tens of thousands of employees chose to live in rapidly growing suburbs like Marysville and Lake Stevens. Eventually, Everett officials declared that downtown would be the region’s financial district—with low employment numbers. Simultaneously, they established a retail zone miles from the city center, inducing stores to move operations into the new mall-cum-parking-lagoon. Bye-bye, downtown pedestrians.

Now that the last waterfront mill has closed, what does the future hold? Is it too late for the city to turn around? Can public officials and business leaders overcome the chicken-and-egg conundrum of amenities and people? If dwelling units are built, will consumers follow?

Several years ago Everett’s leaders determined that a sports facility would be built downtown. It would attract people and restaurants. It might even serve to revitalize a doughnut hole. The Times:

Many cities have tried to generate urban renewal around a big project like a new stadium with mixed success over the years. It is often hard to persuade those who left for the suburbs to return.

Comcast Arena, the name of the Everett complex, has failed “to persuade.” Now what?

A couple of developers are responsible for adding hundreds of apartment units to the downtown housing stock. However, one building remains virtually empty. Yet, the developer of that property is constructing a massive new project a block away. It will host a hotel, a several-stories-high apartment complex, and a promised year-round farmers’ market. Can you say “huge”? A half-block to the east, another local developer is busy pouring concrete for yet another apartment building.

The latter developer seems concerned about re-creating a vibrant downtown, judging by his quotes in the Herald. He’s recently offered a “downtown card” to his renters. The holder will enjoy discounts at local establishments. In the promotional literature, he writes:

Living in Downtown Everett means it’s all right there. Whether you’re running errands or looking for experiences with the arts, dining or shopping, in downtown Everett you’re in the center of Everett’s urban experience.

At the moment, that may be just wishful thinking. As a downtown resident, I hope it becomes more. But what will it take?

One problem confronting the city is lack of money. Aside from the current municipal budget woes and a bow wave of unmet obligations, those who now live here don’t have nearly as much income as their suburban counterparts. The image below is taken from a slide presentation (pdf) by Everett’s planning head.

Screen Shot 2014-05-28 at 10.41.38 AM

Seattle, just 30 miles to the south, truly is bustling, with a dozen or so cranes helping build new apartments and office towers galore. It is now the fastest growing city in the country. And its residents have much higher incomes than Everett’s. After paying for their housing needs, Seattleites have money left over to support a myriad of restaurants. (They do seem to avoid Safeco Field, however.)

Unfortunately, rents in Seattle are about double what they are in Everett. Being the aforementioned old farts, my wife and I live on fixed incomes, as they say. We could pay the Seattle rents, but would then be forced to eat beans and bread at every meal. The Emerald City has essentially told us to stay away.

And so we remain in the doughnut hole, hoping with the developers that something will eventually click to recapture the hustle and bustle of yesteryear.

Remembering what?

The media are filled with stories. Young men and women performing the ultimate sacrifice so that America can be free, or some such rubbish. Not the sacrifice part, for heaven’s sake. But surely we all have to wonder what getting killed in Iraq has to do with my freedom to buy a car or watch a Mariners game.

Don’t take my word for it. Here’s a veteran of that war with an op-ed in the New York Times. The title of his essay is “Thank You for Being Expendable.” He writes:

…Soldiers are expendable in war, and veterans are expendable and forgotten about when they return. That’s just the way it is. This recent V.A. “scandal” over prolonged wait time for veteran care doesn’t surprise me one bit. Politicians and many hawkish Americans are quick to send our sons and daughters to go off to fight in wars on foreign soil, but reluctant to pay the cost.

Once, nearly homeless and plagued with thoughts of jumping off the Golden Gate Bridge, I showed up at a V.A. hospital and told them I was in bad shape and needed some help. I was holding a coffee cup. The doctor asked me how much coffee I drank in an average day. I told her; she then advised me to cut down to one cup a day. When I asked if she could possibly prescribe any medication to go with that one cup a day, she refused. “We used to prescribe drugs all the time,” she explained. “OxyContin, Percocet, Dolophine, Methadose, Vicodin, Xodol, hydrocodone.” But veterans were getting addicted, she said, even dying, from overprescription so doctors had been told to cut back on prescribing. Go down to one cup of coffee day, she told me again, and see how you feel.

I think this recent scandal may be the best thing ever to happen to our veterans and hope some change will take place because of it. God knows it’d be nice for veterans to just call or walk into a V.A. hospital and see somebody and be taken care of the same day. I don’t think that’d be asking a lot. There might be a lot more of us alive today if that was the case. Sadly, it’s not. Even on Memorial Day, the wait at the V.A. goes on.

Oh, and it should not be lost on us that Obama’s “surprise” visit to Afghanistan had everything to do with deflecting attention away from the VA mess he vowed to repair when running for office. Golly, there seems to be a pattern here.