A blog about business and economics.

Nov. 25 2014 3:42 PM

Where Have All the Canadian Cowboys Gone?

Bloomberg has an interesting take today on Canada's oil boom. In addition to fueling cheap gas prices, the boost in crude output is also creating a shortage of cowboys.

Here's the logic behind that. As oil production and energy investments have taken off, jobs in that industry have started to pay two-thirds more than those in livestock. According to Bloomberg, specialized livestock workers in Alberta were making about $39,700 last year, while petroleum workers were earning $65,000. Nearly three-quarters of farm employers said they had trouble hiring:

"It’s impossible to find workers," said Tim Stewart, 57, who has four unfilled jobs and is considering selling the 4,000-head ranch in Rockglen, Saskatchewan, that his family has owned since 1910. "If someone came along with a big fat checkbook, we’d probably walk away."
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The Canadian cattle herd is at its smallest since 1993 with 13.3 million livestock as of this July. One analyst told Bloomberg that meat packers are expected to slaughter just 2.4 million cattle in 2015—the smallest number since 1963. Meat packing plants are operating at their lowest capacity since 2008.

In the U.S., the cattle situation isn't any better. The U.S. Department of Agriculture has described the current cattle herd of 87.7 million as the smallest since 1951. Beef prices have been on a tear, boosting everything from the steak costs in your local grocery store to the sticker price on the beef burrito options at Chipotle. A recent report in Reuters noted that beef prices, predicted to rise 11.5 percent this year, could add another 5 percent in 2015 on drought and disease.

A bit of Thanksgiving cheer though: Despite the lift in beef prices, all poultry costs fell 0.9 percent in October and the subcategory that includes turkey dropped even more. Give thanks that you're not supposed to buy roast beef for Thursday.

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Nov. 25 2014 1:31 PM

Amazon Wants to Sell, Deliver, and Now Install Your Air Conditioner

Amazon already sells and deliver things. Now it wants to add installations to its roster of tricks. Starting this week, Amazon is rolling out Amazon Local Services, a sort of handyman platform, in New York, Los Angeles, and Seattle. The goal is to help customers connect with local service providers who advertise and contract out through Amazon's marketplace. According to the Wall Street Journal, it's another way for Amazon to edge onto the turf of brick-and-mortar retailers.

In an effort to differentiate itself from other home-service providers, Amazon plans to offer a money-back guarantee to customers. That makes sense for a company that built itself on the promise of exceptional customer service but that some feared had strayed from that mission lately. Installations and repairs also seem like an obvious target for Amazon to take on—there's plenty of room to improve those hours-long installation windows and no-show deliveries that frustrate customers routinely. The Journal also notes that Amazon will show customer reviews of the service providers on its website.

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According to Amazon's site, businesses and service providers will have to undergo background checks and pay monthly subscription fees to list on "Selling Services" beginning in July 2015. Amazon will take a 20 percent cut of services up to $1,000 and 15 percent of services over $1,000. The fees will be "segmented by service profession," but so far the ones listed apply to handymen, plumbers, electricians, computer technicians, auto mechanics, car electronics specialists, home media specialists, and appliance technicians.

The local services rollout comes about a month and a half after Amazon took another big step to compete with traditional retailers: deciding to open a physical store. The space is planned for 7 West 34th St. in Manhattan and, according to reports at the time, was set to open for the holidays. While there hasn't been much word on the effort since then, Vornado Realty Trust did say last week that Amazon had signed a lease for the 470,000-square-foot spot. It's good for 17 years.

Nov. 24 2014 6:07 PM

Barnes & Noble Has a Plan to Make Physical Books Popular This Black Friday

Instead of competing head on with Amazon this Black Friday, Barnes & Noble is looking to offer something that the online retailer can't. The bookstore announced today that come this weekend, it will sell 500,000 signed copies of the latest works from 100 prominent authors. On the nonfiction side, authors include George W. Bush, Hillary Clinton, Malcolm Gladwell, Neil Patrick Harris, and Amy Poehler. In fiction, Dan Brown, Jodi Picoult, and Donna Tartt are among those taking part.

Barnes & Noble says the effort has been in the works for more than half a year, with each author signing thousands of copies of their books for readers. "Some went beyond their signature to personalize the books," the chain notes in its release. Mo Willems, a children's book author and illustrator, sketched the head of one of his characters in signed editions. Mary Amicucci, Barnes & Noble's vice president of adult trade and children's books, told MarketWatch that authors weren't paid for their efforts but were "hugely enthusiastic" about the plan.

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The key to this particular Black Friday deal is that it's available in stores only. In that way, it's a pretty obvious ploy to get book lovers off of Amazon and into Barnes & Noble's physical locations, but it also seems like a savvy one. After all, if you come in to snag an autographed copy of The Goldfinch or The Polar Express—the kind of thing you can't just download onto your Kindle—you might also decide to pick up that copy of Pride and Prejudice you'd been meaning to get instead of ordering it online.

Barnes & Noble is under significant pressure to perform well this holiday season; its same-store sales have sunk for seven straight quarters, though its stock is up 60 percent year to date. Signed copies alone might not be enough to reverse that decline. But if nothing else, the amount of foot traffic and sales they generate should be a good test of whether big-name authors still have enough fan power to make a physical book worth its often hefty price.

Nov. 24 2014 4:06 PM

A List of Tech Internship Salaries That Will Kill Your Sense of Self-Worth

In case you were feeling a bit too content with your life and career choices today, here's a list of the pay packages that tech firms are apparently offering software engineering interns these days, which has been making the rounds this afternoon thanks to Twitter. Between salary and housing stipends, $9,000 to $10,000 a month isn't abnormal, apparently. The lowest number on the list: $7,000 a month, which annualizes to $84,000 per year.

About the source: This is a list tweeted out by the friend of an anonymous intern-to-be. So, you know, it's not quite up to Woodward and Bernstein's standards. But the salaries aren't much more outrageously high than what's previously been published. Given the never-ending competition for top talent in the tech world, it's not surprising to see market rates escalating.

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And aside from the slight sting of knowing a Fitbit intern is probably earning more than you, that's not such a terrible thing. There are lots of people in the world whose pay should be a matter of public concern. Corporate CEOs. Wall Street types who will risk blowing up the financial system in pursuit of a bonus. Unpaid interns who do real work for free while real entry-level jobs disappear. It's fine to fret about all of them. But if anything, we should celebrate the fact that tech companies are paying their interns in line with normal employees. And, as I've written before, it's not uncommon for summer recruits in other high-pay, high-competition industries like law and finance to make significant amounts of money. In fact, the highest paid internship on that list isn't at a traditional tech company at all; it's at Jane Street Capital, a proprietary trading firm. (Think of a hedge fund without clients. Instead, they just trade their own money.)

Anyway, not every intern is getting paid pennies to fetch coffee. And that's a good thing.

Nov. 24 2014 1:39 PM

Are We Actually Facing a Chocolate Shortfall?

Chocolate, in case you haven't heard, is in danger. According to a recent report in Bloomberg Pursuits, by the year 2020 there could be a gap of 1 million metric tons between how much cocoa the global population wants and how much farmers produce. By 2030, that gap could widen to 2 million tons. "Here, now, as you read these words, the world is running out of chocolate," Bloomberg Pursuits direly declares.

In 2013, the U.S. alone spent $20.1 billion on chocolate, data from Statista shows. By 2017, that sum is expected to reach $22.4 billion. Global chocolate consumption has also grown steadily since the 1990s and is predicted to hit 8.5 million tons in 2020. At least part of the chocolate crunch has been chalked up to the rising popularity of dark chocolate, which can take significantly more cocoa to produce. Other concerns include dry weather and "frosty pod," a fungal disease that has crippled an estimated 30 to 40 percent of cocoa production.

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The chocolate fears have reached such a frenzy that last Thursday, even Stephen Colbert addressed them. "Soon we may run out of chocolate completely—it'd be the cocoa-geddon," he told Colbert Nation.

So, is it time to start stocking up? Not quite, according to the International Cocoa Organization. Late last week, the ICCO put out a statement aimed at quelling the cocoa agita. A million ton deficit in cocoa production, it said, was "overstated in the extreme" and "in no way" borne out by its own projections. As prices for chocolate increased, the ICCO explained, farmers would be incentivized to produce more of it, causing supply to rise. "There is no immediate cause for concern about the supply of cocoa for the next five years," the group stated. "While our projections show that supply deficits are likely to occur during the next several years, stocks of coca beans should cushion this development before production growth accelerates."

That's not to say prices won't rise some. Chocolate is considered price inelastic, which means demand for it tends to stay the same even as its price rises and falls. One potential explanation for this is that chocolate doesn't have an obvious substitute—if the price goes up, you can't just swap out all your chocolate needs for another good. So if you see a good chocolate sale, maybe take advantage of it. Or just ask yourself: What would Willy Wonka do?

Nov. 24 2014 12:38 PM

Americans Now Drink More Craft Beer Than Budweiser

Here's a very cool graph from today's Wall Street Journal that says an awful lot about America's changing taste in alcohol. Americans now buy more craft beer than Budweiser. (Not Bud Light, mind you. Just Bud.)

budweiser_craft_beer

On the one hand, this chart is a reminder that craft brewing is still a niche—albeit a fast-growing one. According to the Brewers Association, craft labels make up about 14 percent of the U.S. beer market. Take Allagash, Lagunitas, Dogfish Head, and all your other favorite little breweries, toss them together, and they barely outsell the third most popular brand in America.

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On the other hand, it's also a very specific testament to the decline of Budweiser, which these days is basically a beer without a purpose. Twenty years ago, when Americans were less health-conscious and had more homogeneous tastes, selling a mass-market, midpriced lager designed to appeal to the largest possible demographic made lots of sense. But now, it's a brand without a natural audience except for older Americans who drink it out of habit and maybe a nostalgic sense of brand loyalty. If you walk into a bar, there will almost always be a cheaper beer, a less caloric beer, and plenty of tastier beers on tap. And so it's not totally shocking that, by Anheuser-Busch Inbev's account, 44 percent of Americans between the ages of 21 and 27 have never tried a regular old Budweiser. It's not as if they're missing anything.

This isn't to say Budweiser is in immediate peril. Again, thanks to all those old fans, it's still the third most popular brand in the country. But it's obviously a bad sign for the future, which the WSJ reports is why AB-Inbev is starting a new marketing effort to rehab the beer's image with young drinkers, in part by getting rid of the Clydesdales in its commercials and substituting relatable twentysomethings. Per the paper:

The marketing push is accompanied by an effort to get Budweiser back on tap. Theory being: If Levi’s and Converse can end years of sales declines by winning over young consumers, so can Bud.
“This is a very considered, long-term view of what will turn around the brand,” said Brian Perkins, AB InBev’s vice president of marketing, Budweiser.

But this analogy strikes me as a bit flawed. Levi's could change up the look of its jeans. Fashion loves to go retro. But Budweiser can't radically change its formula, and its not obscure enough to be rediscovered (not that Chucks were ever totally obscure). Bland, midpriced, beer is bland, midpriced beer. Budweiser is stuck in the middle, and some new commercials aren't going to pull it back out.  

Nov. 21 2014 6:03 PM

It Took 12 Trucks to Haul Away All the Cash This Corrupt Chinese General Hid in His Home

The Chinese government has been making a great show of cracking down on official corruption, and in the process, finding some truly mind-boggling stashes of bribery money. Today, the Financial Times reports this incredible tidbit:

When investigators searched the Beijing home of Xu Caihou, one of China’s highest-ranking army generals, they found so much cash and precious gems they needed a week to count it all and 12 trucks to haul it away.
The cash was neatly stacked in boxes, each with the name of the soldier who had paid the bribe in exchange for promotion up the chain of command. Many of the boxes, each containing millions of renminbi, had never been opened, said people familiar with the case.
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In total, the cash weighed more than a ton, which according to the FT suggests it was worth at least $16 million. What's more, this is apparently not the largest cash hoard investigators have come across.

In May, investigators detained Wei Pengyuan, the deputy head of the National Energy Administration’s coal department. It took 16 machines to count the more than Rmb200m he had stashed in his home, according to Xinhua, the official news agency. Four of the machines reportedly burnt out due to the workload.

It's possible that these corruption charges are being trumped up or exaggerated by the Chinese government for public-relations purposes. But if the stories are true, Chinese officials are managing to execute acts of official corruption on a scale and with a degree of meticulousness that crooked American pols haven't been able to pull off in a long, long time. Just think: In the United States, everybody got excited when FBI agents found $90,000 stored in Congressman William Jefferson's freezer. Why, that'd barely be low-level-bureaucrat bribe money these days in China.

Nov. 21 2014 11:56 AM

[Corrected] How Not to Disrupt Women’s Bodies

Correction, Nov. 24, 2014: Despite the claims of Austen Heinz and Gilad Gome, the founder of Sweet Peach Probiotics later told Inc. that the men had misrepresented her company's mission. This post reflects an impression based on a misrepresented understanding of the company. The company’s mission is to promote reproductive health in women by identifying microorganisms in the vagina and supplying probiotic supplements to help prevent infections. The original post remains below.

This article originally appeared in Inc.

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There is, you may have recently read, a new biobro startup project in Silicon Valley. It's called Sweet Peach. (Not a Snapple flavor.) Its mission, apparently hatched by a couple of 11-year-old boys still in the "ew, girl cooties" stage, is to make sure women's vaginas smell "pleasant."

I have so many questions about this!

Why would the people behind this idea—male biotech founders Austen Heinz and Gilad Gome—fix on "feminine odor" as a pressing problem to solve? What terrible smells must these men have been exposed to, in their intrepid startup bro-ing, to make them devote their serious intellectual heft to solving this very important problem? How many women did they consult in their extremely selfless quest to fix gross vaginas?

And, perhaps most important for any straight women they hope to convert into customers (if indeed any such women exist): When will Sweet Peach turn its attention to the problem of male odor and stinky manly genitalia? Will Sweet Peach be followed by Rugged Mist or Leather Smoke?

Sadly, that last question is the only one I actually know the answer to, after reading my colleague Jeff Bercovici's interview with Messrs. Heinz and Gome. Smelly testicles don't appear to be a priority; the next item on their agenda is a probiotic to make cat and dog feces "smell like bananas."

Yep, you read that correctly: These dudes rank women's bodies up there with pet poop. 

I think my favorite part of this pitch is the attempt to position Sweet Peach as "personal empowerment" for women. It's a great marketing line; it's just not very original. Since time immemorial, beauty and feminine hygiene companies have used the promise of personal empowerment to help sell equally reprehensible, if much more subtle, campaigns based around negging women and then offering the solution to all of their bodily imperfections. Or smells. Especially smells. Poor Sweet Peach, trying to put a "probiotic supplement" gloss on what's essentially the boring old douche market. (Pun intended; indeed unavoidable.)

So I'm not particularly surprised by Sweet Peach or its creators' stupendous obliviousness. They're startup bros, after all, pitching their product to a likeminded audience, during a year and in a particular week when the noise surrounding Silicon Valley's respect issues concerning women's bodies is almost deafening.

I still wonder: Who is giving these men the time of day?  Why on earth would the DEMO conference (tagline: "New tech solving big problems") consider the issue of women's bodies—which are, as if this needs to be said, not grosser than any other humans' bodies, and which are possessed by 51 percent of the U.S. population—a "big problem" to solve? Who's giving these men advice or approval of their quest to solve this nonproblem? And, to borrow a line from an adjacent issue, can they please keep their peachy bullshit far, far away from my uterus?

Nov. 20 2014 5:07 PM

Pizza Hut Asked a Bunch of Old Italian People to Judge Its Pizza

Pizza Hut has just started a major rebranding effort. Headlined the “Flavor of Now,” the campaign aims to give a much-needed boost to Pizza Hut’s U.S. business by wooing customers with dozens of new pizza options. Why have plain crust when you can make that toasted Asiago? Pepperoni is so boring—how about spinach and a drizzle of honey sriracha sauce?

As part of its marketing push, Pizza Hut has rolled out a series of ads by creative agency Deutsch L.A., the same firm that put together those memorable Ronald McDonald ads for Taco Bell. For the new ads, Pizza Hut is taking its new menu all over—to a bingo night in Boring, Maryland; a softball game in Bland, Missouri; and even to Sorrento, Italy.* (And yes, Boring and Bland are real places.)

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The best of the lot is probably the one set in Sorrento, where we watch as a bunch of older Italian people express shock, indignation, and just plain confusion at a variety of Pizza Hut’s new pizza offerings. The group also tests out “other new world” things, like mobile ordering, jeggings, and EDM. “Participants were paid, but still don't like change,” the ad notes in tiny white text.

Sure, Pizza Hut is poking a bit of fun at these people, but it’s also poking some fun at itself. Pizza Hut knows it’s not offering a gourmet product here, and it’s nice to see it embrace that. Then again, Pizza Hut isn’t going all out on the honesty. When Domino’s launched its own turnaround campaign a few years back, it decided to come completely clean. It admitted Domino’s pizza was terrible.

*Correction, Nov. 21, 2014: This post originally implied that Deutsch handled Pizza Hut campaigns in Boring, Bland, and Sorrento. Deutsch is neither that boring nor that bland, and only did the Sorrento ad.

Nov. 20 2014 4:29 PM

Uh-Oh: Administration Overcounted Obamacare Enrollees by 380,000

The Obama administration has acknowledged that it overcounted the number of Americans currently enrolled in health insurance purchased through the Affordable Care Act's online exchanges, Bloomberg reports today. Earlier this month, Department of Health and Human Services announced that 7.1 million individuals were still paying for coverage they bought on the marketplaces last year, down from the 8 million who originally signed up. However, that number included 380,000 people who only bought dental plans. The actual number of Obamacare health-insurance enrollees was closer to 6.7 million.

“A mistake was made in calculating the number of individuals with effectuated Marketplace enrollments,” HHS spokesman Kevin Griffis told Bloomberg. “Individuals who had both Marketplace medical and dental coverage were erroneously counted in our recent announcements."

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The error was first uncovered by the Republican-led House Committee on Oversight and Government Reform, and conservatives are, of course, having a field day with the discovery. Obamacare opponents have long argued that while the program beat expectations early on by signing up more than 7 million individuals for coverage, many customers simply wouldn't pay for their plans. Now, they have a bit of vindication on that front, as well as just enough evidence to accuse the White House of a cover-up. Oversight Committee Chairman Darrell Issa—who the last time you heard from him was probably ranting and raving about Benghazi—called today's revelations evidence of "concerted effort to obscure a heavy dropout rate" on the exchanges.

Two points to make here: First, 380,000 sounds like a large number, and it did conveniently push Obamacare's enrollment figures over the Congressional Budget Office's projection of 7 million sign-ups. However, 380,000 also only amounts to 5.6 percent of the real tally, and the 7 million figure was never particularly meaningful to begin with (nothing particularly magical happened if Obamacare reached that milestone, and nothing tragic will happen because the program missed it). And, as Charles Gaba of ACASignups.net told Bloomberg, even with the lower total, Obamacare's attrition rate was still in line with what experts like him predicted. This new news shouldn't especially change anybody's opinion about whether the exchanges have succeeded or not.

On the other hand, this certainly doesn't look good for the administration politically. This seems more like garden-variety incompetence than anything. But that won't stop the GOP from crowing about a conspiracy to make Obamacare look more successful than they think it is.

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