Category Archives: Economics

Your Device’s Afterlife

We are far enough into the digital age that massive electronic waste is a pervasive problem for even the developing world.

The churn of new and discarded personal phones, tablets, computers, TVs, navigation devices, etc. means the average person is generating toxic trash on a regular basis, and there are no indications of a slowdown.

Recycling of glass, metal, and paper has been a long-term success because there are manufacturing buyers for those materials (one aluminum can is worth about 2 cents). The market can support not only the costs of collection and cleaning, but also efforts to educate the public and to advertise for the desired action of using bins and cooperating with local governments.

According to the EPA, in 2016 recycling created:

  • 681,000 jobs
  • $37.8 billion in wages; and
  • $5.5 billion in tax revenues.

As for electronics, CDs can be shredded into polycarbonate plastic, but buyers are hard to find. Still, businesses exist for collecting old and unused electronics. Many also perform data wipes and so offer a security benefit.

OEMs (Original Equipment Manufacturers) are obligated to help with cleanup in the life cycle. This is enforced by Extended Producer Responsibility laws, which are administered mostly by states; for manufacturers to sell in that state, they must take some responsibility for end of life recycling or disposal. The amount of assistance required is usually determined by market share.

Collections are even moving to the developing world; phone manufacturers use revenue from new phone sales to collect and ship phones from places like Africa to be properly disposed of elsewhere.

Closing the Loop is a Dutch company working on e-waste in Cameroon, Ghana, Rwanda, Uganda and Zambia:

Initially, the idea was to generate revenue entirely from the value of commodities recovered from phones in Ghana, Nigeria and Uganda. But the economics of that approach didn’t work because it was so costly to try to set up new collection networks. “We lost money there,” said (founder) De Kluijver. “Let’s just call it ‘learning money.’” In 2016, the business pivoted toward the current offset model with corporate backing.

Closing the Loop partners with local stores and churches.

“(Large corporations) funding the initiative can then promote the fact that for each new product they put on the market, an old one has been collected and processed through proper channels. (As of early 2019), the effort has collected roughly 2 million devices...

“I believe the telecom industry is the first global industry that could really become waste free,” De Kluijver said. “The more customers we support, the more waste we can collect. And that allows us to become more and more a metal producer – an urban mining one.”

We applaud the electronics manufacturers practicing corporate responsibility AND maintaining brand integrity. Furthermore, we recognize that EPR laws are an example of positive government oversight, happening in the US at the state level — much preferable to federal. Without these regulations, the tragedy of the commons would result in dystopian metal waste dumps all over your neighborhood and in your water. Happy shopping!

The Light Ahead

Assuming you believe income inequality to be a problem (economically, socially), then we must next turn our thoughts to alternative methods for economic mobility besides a four year degree, benefits of which do not always justify the costs. One such company creating an alternative is Pursuit in Queen’s, NY. Pursuit is a trade school for software development. It is also partly funded by bonds, where graduates pay back a share of income. “I believe tech can be a road to the middle class for large numbers of Americans,” said (Jukay) Hsu, a co-founder and the chief executive of Pursuit, a nonprofit social venture. “But there’s real skepticism about that among people who see the winners in technology as a small network of the privileged.” Pursuit’s success can likely be attributed to its adherence to high-demand, high-paying job skills, however, the model is worth replicating.  Construction, medicine, nursing, graphic design or art…what fields can you imagine creating a bond system?

Book Review: Sway; The Irresistible Pull of Irrational Behavior

Ori Brafman and Rom Brafman, 2008.

These brothers offer an attractive read that is notably more compelling than most pop-psychology fare. While the book does not clearly delineate a list, MC has bucketed the irrational factors referenced in the book. They include:

1. Loss aversion — the tendency to overemphasize what will be lost, at the expense of what may be gained.

2. Commitment — aka sunk cost. Similar principle to the above, but with time and reputation.

3. Value attrition — favoring preconceived traits and circumstances over objective facts.

4. Diagnosis bias — our reluctance to change our minds once we have decided on someone or something.

5. Rose-colored glasses — dismissal of info that contradicts our hopes.  Overestimating our objectivity.

6. Chameleon effect — predilection to act as we are treated / perceived.  Self-fulfilling prophecies–how your behavior can change an outcome.

7. Procedural justice –the value of a fair process. Willingness to punish someone at our own  expense.

8. The disincentive of money to altruism. Paying people for certain sacrifices can backfire as repulsion.

9. Dissension, and the value of blocking — even incompetent and erroneous blocking.  Breaking the spell of groupthink.

Which one sways you the most?  Write to us!

You Don’t Own Me

Apple’s lockdown on modifications to its products.  Netflix for DVDs. Uber/Lyft for auto transportation. Kindle for books (no, you do not own your purchases according to the fine print).

Americans now own less stuff, which leads Tyler Cowen to wonder if this phenomenon of surrendering the rights of ownership is a negative for society.  Many individuals find copious ownership to be out of reach, at least for the lifestyle that is both desired and readily available “for rent.” Housing is now just one piece of that trend.

We at MC do NOT think this trend of transient proprietorship is a harbinger of a collectivist state, but instead, represents the sum of individuals’ rational cost-benefit decisions in the internet-based economy. Would you agree?

Kmart, Sears, and the Kidnapping That May Have Sealed Their Fate

This rare profile of Eddie Lampert tracks the the troubles of Kmart, Sears, and their 2005  consolidation.

Despite valuable land holdings and iconic brands, the companies have not been able to find a foothold between Walmart and department stores.  Investments in online sales cannot compete with Amazon.  Sears brands such as Kenmore have been divested in what many see as indication of an imminent bankruptcy.

Before the merger, on January 10, 2003, Mr. Lampert was kidnapped and held for ransom.  There was also a conversation about a mob connection with Kmart’s finances.  To this day, the lead criminal says he wishes he had killed him rather than released him.

Lampert says this event was significant and life-changing.  Professionally, it seems to have made him even more driven, daring, and risk-taking.

In summary, the personal and professional dramas here are Shakespearean and ongoing, and MC will be keeping an eye on how things play out–as they may surely reveal truths about human nature both micro and macro.

Does This Market Issue Call for Govt Intervention?

Foreign purchases of real estate are driving up home prices in major American cities, therefore separating it from local wages.  Urban white-collar workers are getting priced out to the suburbs, leaving a semi-ghost town: many of these properties are used for part-time living, if at all–many condoes are for investment only.  The cultural implications of this expensive emptiness have not been good.

A possible remedy from the NYT’s Upshot: “a property surtax tilted toward high-end homes that would be deductible against the owner’s income tax. Local residents paying income taxes would effectively owe no surtax. Out-of-town investors, foreign or domestic, who don’t work in the local economy would be hardest hit (with some concessions for resident retirees).  The elegance of that idea is that it doesn’t require local governments to figure out who is foreign and who is not, or which homes are vacant and which are occupied,” thus sidestepping allegations of xenophobia or racism.

What do you think?

Where Have All the Gay Bars Gone?

Many long-running, successful gay bars around the world have been closing over the last few years, and the rise of homosexual online dating apps are supposedly to blame.  However, the prevalence of straight dating apps has exploded as well, and yet the business of traditional, heterosexual bars remains stable.  In fact, many straight bars are finding new life as safe meet-up places for first dates, even for non-drinkers.

Gay bars provide purposes the dating apps cannot entirely replace, such as spaces to hold fundraisers and political events, plus a safe and organic way to make friends, network, and date within the same sex.

So if not for apps, then why are these centers of civil rights disappearing?

The theories include:

  1. Gays are more accepted in general and can congregate more freely in “normal” establishments.
  2. Gays have more straight friends than in the past, and so often spend social nights out with them.
  3. Gay clubs are stuck in an EDM and drug-based loop, which is very unappealing to gay professionals.
  4. Gentrification: rising rents are pricing the clubs out.

#1 is the most supported by evidence.  While points 2 and 3 are based on published anecdotal accounts, and also by nature cannot be easily quantified, #4 gentrification has been well-documented.

Most gay bars have survived for years in second-tier parts of the urban landscape, and so join many other businesses that are getting caught in the cycle of economic progress.

The placement of gay bars is determined by the residency  of gays.  Up until the 1980s, gays were liable to face loan discrimination, and so often chose places “less-desirable” to live that were cheap enough to be paid for in cash.

According to an article by the UK’s Guardian,
(Gays) choice of where to live is not limited by money alone. As Michaels, a transplant to New York from rural Oregon who still subsists on a below-average income, puts it: “I didn’t leave the country[side] because I wanted to, I was pushed out. As a queer person in America growing up in the country, I did not find rural areas to be safe, welcoming or financially viable – it was only in the cities where I was able to make a stable income.

Some say LGBT residents, especially gay men, cause most gentrification, bringing with their residencies artisanal food and coffee, expensive furniture and boutiques, and remodeled apartments.

In addition to their vulnerable geography in the face of gentrification, gay bars are also less likely to be able to adjust to the rising rents.  By only seeing business at night, they cannot diversify like traditional bars can with food and happy hours, to draw some daytime revenue.

Yet, if cost is such a concern for a struggling gay bar, and existence so crucial, then why not relocate to another part of town, even knowing the cycle may repeat in a couple decades?

This brings us back to point #1: while gay bars are an endangered species, that fact indicates a promising phenomenon: the declining need for such exclusivity and protection.  More bars are now “gay-friendly,” and can serve as meet-up spots for any gender combination of couple.  Just as sexual orientation no longer defines a person, so patrons no longer define an establishment.