A blog about business and economics.

July 22 2014 4:12 PM

This New Plane Seat Looks Horrifying. It’s Also a Great Idea.

At first glance, it would seem that Airbus is busy conjuring new ways to torment coach-class airline passengers. The aircraft manufacturer recently filed a patent application that would further reduce the amount of space between seats on an airplane, allowing airlines to cram more passengers than ever into economy class. The new “seating device,” which looks like a cross between a bicycle seat and an office chair, is mercifully designed for use in short-haul flights; as the Los Angeles Times pointed out, “it has no tray table, no headrest, and very little legroom.” Brian Fung of the Washington Post jokingly described it as a “medieval torture device.” Many commenters expressed similar revulsion, swapping horror stories from various flights gone wrong.

But not everything about the Airbus proposal is bad. In its patent application, Airbus helpfully acknowledges that “it is no longer possible to further reduce the seating width, particularly in economy class.” In other words, your terrible seatmate digging his elbow into your ribcage will not be enabled to dig any harder by his new bicycle seat. But passenger width isn’t the only conundrum that airlines face today. Airbus also addresses the pesky issue of legroom, stating, “it is difficult to further reduce [the] distance between the seats because of the increase in the average size of the passengers.” Tall people, that means you.


Current seating configurations are particularly painful for long-legged individuals, who shockingly don’t quite fit into a space designed to provide the bare minimum wriggle room possible for a person of average leg length. Even if you do fit, chances are the passenger in front of you will fully recline into the already-bruised flesh of your knees, igniting a murderous rage. At 6’4’’, I speak from experience: Shorter people have it easy when it comes to some forms of mass transit. What exactly are taller individuals (in this case meaning anyone above the average U.S. male height of 5’9’’) supposed to do with their knees? Put them in overhead bins? For many of us, the only answer is shelling out extra cash for exit-row or economy-plus seats, which are harder to come by.

Even in an exit-row seat, the foam-and-metal slabs we are accustomed to today are horrible: a 31-inch seat-pitch (a normal allotment for a seated person, butt-to-knee) is an insult to the vertically gifted passenger. In contrast, Airbus’ new seating “makes it possible to raise the seating further by comparison with the aircraft seats with a parallelepipedal seating.” Parallelepipedal refers to the three-dimensional parallelogram of despair in which today’s economy class passengers are confined. (It’s also satisfying to say aloud.) In turn, the patent explains how the height-adjustable seat “enables each passenger to adapt the seating height to his or her morphology, and this avoids providing an excessive necessary distance for passengers of large size by avoiding having them seated too low.” Much as bicycle seats and office chairs may be adjusted for height, seating that allows for height adjustment might spare tall passengers the indignity of clown-car situations.

And parallelepipedal seating isn’t exactly good for anyone’s posture, anyway. A flat rectangle of foam may look comfier than a saddle seat, but it does a number on your lower back. While the new seating looks Spartan, it simply provides support where it is most needed: the lumbar region. Similarly, the “motorcycle-saddle” style seat better supports the buttocks, even swiveling to provide rotational mobility in the lower back.

In order to reassure anxious travelers desperately clinging to what little space they have, a company spokeswoman emphasized the conceptual nature of the patent. A patent merely establishes the idea as Airbus’ intellectual property: something to build upon, tinker with, and improve before eventual implementation. (Seatbelts, for example, are probably a necessary step.) The new seats aren’t perfect, but they’re on the right path. And for the airlines, fitting more economy-class passengers on each flight helps keep prices down while still protecting the significant revenue stream from business and first-class tickets. For those of us who happen to be tall, the simple concept of a height-adjustable seat offers sweet relief in the skies.

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July 22 2014 2:04 PM

Why Comcast Sees Losing 144,000 Cable Subscribers as a Win

Comcast rose modestly this morning after reporting better-than-expected results for the second quarter. It was a pleasant about-face for the cable operator, which spent the past week taking flack for what might have been the worst customer service call of all time. Net income beat analysts' forecasts at nearly $2 billion, and Comcast also added 203,000 users to its high-speed Internet service in Q2, more than the 161,000 additions that analysts expected.

More interesting is this line from Comcast's quarterly report: "Video Customer Net Losses Declined to 144,000; The Best Second Quarter Result in Six Years." Best second-quarter result in six years? Comcast must have seen some pretty brutal second quarters. To some extent, that's seasonal: Comcast customers include students who cancel their TV subscriptions at the end of a school year and summer vacationers who terminate their service before hitting the road.


At the same time, households cutting the cord on cable services is an industrywide problem. The number of Americans paying for TV through cable, satellite, or fiber services slid by more than 250,000 in 2013, according to data from research firm SNL Kagan. Though people have seen this coming for quite some time, the pay-TV industry had never suffered a quarterly subscriber decline before 2010.

Comcast might have lost 144,000 cable customers this time around, but that was better than the 162,000 it dropped a year ago, and followed two consecutive quarters of actually growing its TV subscribers. From Comcast's perspective, stemming the flow in the latest quarter might be enough of a win. Maybe those horrid policies it has for "retention" specialists are doing the trick after all.

July 22 2014 12:27 PM

The Ruling That Would Gut Obamacare Is an Amazing Advertisement for Obamacare

The fate of the Affordable Care Act is once again in question, now that a federal appeals court in Washington, D.C., has ruled that the government can’t subsidize private coverage for residents in states that refused to set up their own insurance exchanges. Without those subsidies, the law pretty much falls apart. Slate will have a bunch of coverage on the decision today (here's Dave Weigel), but for the time being, it's worth pointing out a glaring irony about this whole lawsuit: It’s actually an amazing advertisement for Obamacare.

Much of the case rests on the complaints of one David Klemencic, a West Virginia man who says he doesn’t want to buy health insurance, and that were it not for the government's generous subsidies, he wouldn't have to. Below is how the court describes his predicament:

The district court determined that at least one of the appellants, David Klemencic, has standing. Klemencic resides in West Virginia, a state that did not establish its own Exchange, and expects to earn approximately $20,000 this year. He avers that he does not wish to purchase health insurance and that, but for federal credits, he would be exempt from the individual mandate because the unsubsidized cost of coverage would exceed eight percent of his income. The availability of credits on West Virginia’s federal Exchange therefore confronts Klemencic with a choice he’d rather avoid: purchase health insurance at a subsidized cost of less than $21 per year or pay a somewhat greater tax penalty.

Let’s spell that out: This lawsuit has been brought by a man who, thanks to Obamacare’s subsidies, could purchase health insurance for $21 per year. That's about the cost of a 750 of Jack Daniel’s or a hardcover novel. I guess you can't accuse Klemencic of putting self-interest ahead of his principles.

July 22 2014 10:35 AM

Seoul Is Taking a Hard Line on Uber. Will Other Cities Follow?

So far, Uber has been unfazed in the face of opposition. When local regulators moved to ban it—starting in its origin city, San Francisco—the ride-sharing company turned a deaf ear and pushed ahead anyway. When thousands of taxi drivers choked streets across Europe to protest it, Uber responded by purchasing full-page ads in evening papers and offering steep discounts to customers in European cities. And when governments painted it as operating illegally, Uber retorted that such accusations were a last-ditch effort to protect a stagnant establishment industry.

But now Uber is facing a roadblock it might not want to ignore. On Monday, the Seoul city government said it would seek a ban on Uber and that the ride-sharing service was illegal under South Korean law. "Uber is charging customers while avoiding the regulatory process, which creates unfair competition for taxi drivers," the Seoul city council said in a statement.


Uber's response was typically self-assured: "Comments like these show Seoul is in danger of remaining trapped in the past and getting left behind by the global 'sharing economy' movement."

Seoul didn't stop there, though, nor does it seem interested in getting "left behind." Come December, the city said, it plans to launch an app that will provide similar functions to Uber for official taxis—geotracking data, driver info, and a ratings system. Seoul isn't trying to halt Uber. Instead, it's trying to eliminate the need for it.

Ever since Uber announced its staggering $17 billion valuation in early June, people have been asking the same question: Is Uber actually worth that much? No one can really know, as Will Oremus explained in Slate. And in part, that's because no one has the answer to an even more fundamental question: How big can Uber get?

In a piece for Wired earlier this month, Marcus Wohlsen outlined Uber's "brilliant strategy to make itself too big to ban." Uber's current business strategy, he argued, is textbook Silicon Valley: Grow first, worry about profits later. Uber CEO Travis Kalanick has taken drastic steps to reduce passenger fares and undercut the taxi industry, even when that means losing money on every ride. It's the story of Amazon, Wohlsen argues, retold through the transportation sector:

A startup led by a brash, charismatic CEO catches a creaky old industry unaware. It grows quickly, and its popularity explodes as its brand becomes nearly synonymous with the disruptive service it’s offering. Amazon grew—and is still growing— because it’s not afraid to lose money. Low prices and free shipping deals eat away at profitability, but they also keep customers coming back.

Every other time a city has challenged Uber, Kalanick has plowed ahead, because he knows that even if regulators don't want the service, tons of consumers do. Uber's potential market, as Matt Yglesias wrote in June, is much bigger than the existing world taxi market. It's the people who normally wouldn't take a cab but decide that Uber is more affordable, convenient, or comfortable. It's the folks who decide to call Uber on vacation instead of renting a car for a few days. And ultimately, it's the individuals and families who opt to rely on Uber and public transit instead of purchasing a car.

Until now, the biggest challenge Uber has seen to its long-term vision is Lyft, a ride-sharing service similar to UberX that is rolling out across the country. Seoul poses a different kind of threat. Instead of simply resisting Uber's advances, it might keep Uber out while also giving its people the parts of Uber's service that they most want. Of course, a government-run app wouldn't necessarily provide the competition that a private company like Uber could offer. But it's a start.

And if cities around the world start following Seoul's lead, Uber could lose what might be its biggest weapon—the perception that regulators are the bad guys, and that resisting them is the only way to give the public the transportation options it deserves.

July 21 2014 1:48 PM

Google May Make New York City Pay Phones Actually Useful

Instead of bulldozing its pay phone booths, New York City wants to outfit them as free Wi-Fi hot spots. It's an idea that was first tossed around by the Bloomberg administration in 2012 as a way of turning the city's thousands of largely unused phone booths into something of general use. Two years later, Mayor Bill de Blasio has rekindled interest in the plan and outlined an ambitious vision for transforming the outdated technology into "one of the largest free Wi-Fi networks in the country."

Rather than divide the hot spots up piecemeal, the city is looking for a single firm or partnership to run the entire system. Now Bloomberg reports that Google might be looking to get in on the action. According to documents from the New York City Department of Information Technology and Telecommunications, Google attended an informational meeting in May about the project. Cisco, IBM, and Samsung were also present.


Google's interest in the city's phone-booth Wi-Fi, as Bloomberg points out, fits with the Internet giant's larger efforts to bring fast and efficient connectivity to various regions of the world. Google Loon, perhaps its best-known venture in this arena, is an ambitious effort to create "Internet for everyone" (and perhaps to collect the kind of data only heard of in science fiction) using huge balloons that float in the stratosphere. Google Fiber, another such project, is bringing ultra-high-speed Internet to a handful of cities and metro areas across the U.S.

New York expects whomever wins the proposal to pay it a minimum annual compensation of $17.5 million or 50 percent of gross revenues, whichever is greater. The selected provider will not be allowed to charge for Wi-Fi but will be able to attach fees to traditional phone service (excepting 911 and 311 calls). Most of the money generated would come from advertisers, who love seeing their billboards plastered along streets and sidewalks at eye level for passersby.

At any rate, the important point is that this proposal has sat around for so long that people feared it might never happen. But with tech firms like Google showing interest, it just might get off the ground after all.

July 21 2014 1:36 PM

Is Congress Guilty of Mansplaining to Janet Yellen?

While I was off on vacation last week, the Huffington Post put up a brief video titled, “Congress Fawned Over Bernanke, But It Mansplains to Janet Yellen, the First Woman Fed Chair.” The clip juxtaposes Bernanke’s fairly cozy final briefing before the House Financial Services Committee—Chairman Jeb Hensarling, a Texas Republican, called him “one of the most able public servants I have ever met”—with some of the snide treatment Yellen received last Wednesday. Much of it consists of Rep. Bill Huizenga of Michigan, who in a past life ran a family gravel-making business, talking over her and implying that she hasn’t read enough about the pros and cons of rule-based monetary policy. Nothing quite like watching a congressional backbencher half-coherently lecture America’s most powerful woman, eh Bill?

I do think that Yellen’s term atop the Fed is going to be an interesting experiment in gender politics. While there are somewhat substantive reasons why Republicans may dislike her more than they did Bernanke—she’s arguably more vocal about the central bank’s role in combating unemployment, which grates on the conservatives who would prefer the central bank to focus monomaniacally on minimizing inflation—she’s largely continued his policy approach. If Congress consistently treats Yellen with less respect than her predecessor, it’s going to look like sexism at work


(Worth noting: Huizenga’s attempts to score points off Bernanke seem to have been far less aggressive. Then again, the man is serving only his second term. He may just be learning that condescension is a good way to fake fluency in economics.)

That said, some of what’s going on in the video is just garden variety grandstanding, which contrary to what the clip implies, Bernanke was subjected to regularly. Here, for instance, is Rep. Keith Rothfus during Bernanke’s last testimony trying to get the Fed chair to admit that quantitative easing is just reckless money printing (shockingly, Bernanke thought differently).

Sometimes, a blow-hard politician is just a blow-hard politician.

July 18 2014 5:42 PM

With Kindle Unlimited, Amazon Makes Bid for Amazon Prime Customers

Starting today, you can sign up for Amazon's Kindle Unlimited, a new service that grants access to 600,000 e-books and several thousand audiobooks for $9.99 a month. Contrary to what you might think, the subscription isn't stuffed with self-published titles at the expense of acclaimed books. All the King's Men, The Hunger Games, The Handmaid's Tale, Life of Pi, and the Harry Potter and Lord of the Rings series are just a handful of the more popular and well-known titles that are currently available.

Amazon does not publicize the number of e-books available through its online store, making it difficult to know exactly what fraction of the company's electronic shelves Kindle Unlimited will open up to subscribers. In 2010, Amazon said in a press release that its U.S. Kindle Store had more than 630,000 books for sale. The following year, the New York Times reported that Amazon's wares had grown to 950,000 Kindle books. So it seems reasonable to assume at least that the company's stock of e-books long ago surpassed 1 million.


Perhaps most interesting about Amazon's Kindle Unlimited announcement is its timing. As everyone now knows, Jeff Bezos and his company are embroiled in a feud with publishing house Hachette over the terms of its contract for physical and electronic book sales. The unusually public dispute has included Amazon delaying shipments and removing preorders of Hachette titles. There has also been plenty of mudslinging from both sides, with Amazon most recently attempting to go around the publisher entirely by making a direct offer to authors and agents.

Kindle Unlimited will add a new layer of complexity to negotiations between Amazon and publishers. So far, it seems that most of the big-name publishers haven't agreed to let their titles onto the subscription platform. Books published by HarperCollins and Simon & Schuster aren't offered and those from Penguin Random House are notably absent. Amazon has not said how authors and publishers will be paid for participating in Kindle Unlimited, but it's unlikely that the models currently used for e-book sales through its store will do the trick.

From a customer's perspective, is Kindle Unlimited a great deal? Pricewise, it's more or less on par with similar services such as Oyster ($9.95 a month for access to more than 500,000 titles) and Scribd ($8.99 a month for access to more than 400,000 titles). In fact as Gizmodo astutely points out, the biggest competition for Kindle Unlimited right now might be Amazon itself. Current members of Amazon Prime can check out one book a month from the Kindle Owner's Lending Library (selection: more than 500,000). Prime, of course, also includes free two-day shipping, streaming movies and TV shows, and streaming music. At $9.99 a month, or about $120 a year, Kindle Unlimited is $20 more expensive than Amazon Prime. And while it might have a slightly bigger selection of books, it comes with a lot fewer other perks.

July 18 2014 11:14 AM

Microsoft Layoffs Would Be the Fourth-Biggest in Tech’s Modern History

On Thursday, Microsoft announced its biggest round of layoffs in its history. As many as 18,000 employees—or up to 14 percent of Microsoft's workforce—are on the line to lose their jobs. More than 12,000 of those cuts are expected to come from the Nokia mobile phone business, an unpopular investment made by former chief executive Steve Ballmer last year. It's the first major step by current CEO Satya Nadella toward turning the lagging tech corporation around.

Setting aside the cuts being made to Nokia staff, some 5,500 people are expected to lose their jobs from Microsoft. That's roughly on par with the 5,800 employees that Microsoft axed in the wake of the financial crisis. The Wall Street Journal reports that some were even hoping for a more drastic move from Nadella in reshaping the company's sprawling operations. That said, 18,000 is a lot—especially in the technology industry. According to data from outplacement firm Challenger, Gray & Christmas, Microsoft's layoff announcement is the fourth-biggest* at a U.S.-based firm since it began tracking such things in 1989:

  1. IBM: 60,000 employees (July 1993)
  2. Hewlett-Packard: 27,000 employees (May 2012)
  3. Hewlett-Packard: 24,600 employees (September 2008)
  4. Microsoft: 18,000 employees (July 2014)

Fifth on that list is Hewlett-Packard again, which announced that it would cut somewhere between 11,000 and 16,000 employees this May. When you add in all industries, Microsoft's cuts aren't all that bad—dwarfed by reductions implemented at banks, automakers, and in the U.S. Postal Service. But for a tech industry not accustomed to mass layoffs (except at Hewlett-Packard, it would seem) trimming 18,000 employees is a significant step.

*Correction, July 18, 2014: This post originally misstated that Microsoft's layoffs would be the fourth-biggest ever in tech. It would be the fourth-largest at a U.S.-based tech firm since 1989, the first year Challenger, Gray & Christmas began collecting data.

July 18 2014 6:30 AM

What I Learned From My Quarter-Life Crisis

This article originally appeared in Inc.

Not long ago Meredith Bronk, 43, the president of Open Systems Technologies, was having a beer on the rooftop of OST headquarters in Grand Rapids, Michigan. With her were two app developers, young employees in their 20s. “I asked them a ton of questions,” she recalls.


After “Want a beer?” most of the questions focused on their professional development. Bronk estimates that OST, a seven-time Inc 500 company with $108 million in 2013 sales, has hired about 30 under-30 app developers in the past six months. So the question of their professional development is vital for obvious reasons (employee engagement, employee retention).

But it’s important to Bronk for one more reason, which has to do with what her own life was like between ages 25 and 30. She remembers making career decisions and feeling as if she had to justify them to certain people in her life. “I felt judged mostly for decisions that were right for me,” she says. 

Back in the '90s

When she finished high school in West Bloomfield, Michigan, Bronk initially hoped to go to Notre Dame. It mattered to her for all of the usual reasons, and two more: Notre Dame was her father’s alma mater, and Bronk was born in South Bend.

She didn’t get in. So she happily attended Alma College, staying in Michigan. After college, she left the region, taking her first job in Arizona as an accounting clerk for American Stores. “She worked there for four years and was promoted almost every year,” writes Mike Nichols, who recently profiled Bronk in the Grand Rapids Business Journal. “But by the summer of 1995, an ended relationship and a sense of dissatisfaction led her to return to Michigan to be with her family, who had moved to Grand Haven.”

Bronk told Nichols she suffered through a “quarter-life crisis,” living with her parents in a new city. In returning to Michigan, she made what she calls “a sharp left turn.” Many people in her life wondered what on earth she was doing. They couldn’t see why someone getting regular promotions in the sunny southwest would just up and leave. “I didn’t handle myself in the best possible manner,” she says. “I still feel sadness for people that I hurt.” But what she remembers, too, is that people questioned her decision. They questioned it because she appeared, on the outside, to be successful. They questioned it without deigning to ask her what was really going on on the inside. 

Gratitude for Getting a Chance

In her first years back in Michigan, she continued to work as an accountant. She felt hemmed in and underused, as if her abilities in leadership and management ranged above the sometimes limited purview of non-executive accounting functions. She came to OST in 1998 as the seventh employee. (Today, the company has 155 employees).

At the time, she was 28. Co-founders Dan Behm and Jim VanderMey were eager to find a project manager. Someone, Bronk recalls, who could be “a single point of contact for all our customers.” The company’s key techies were so busy at client sites, they were hard for clients to track down. The company needed a communicator-coordinator for its full plate of projects.

Talking to Bronk, one gets the feeling she’ll never forget the way Behm and Jim VanderMey allowed her to flourish as a manager and a leader, in those early years. They took a chance on her in the role, even though she’d never done something quite like it. They walked the walk of empowering employees.

And they really walked the walk when, in 2002, they allowed the employees—there were still only seven—to buy out the company. Today, 37 employees own a piece of OST. The shareholders “all treat this like this is our company,” Bronk told me late last year. “There’s a huge pride in ownership.”

Learning to Ask, Not Assume

So there she is, drinking beers on the roof with two young app developers. She asks them how they’d feel if their day-to-day managing consultant, who works with them most frequently, were also tasked with overseeing their career development. After all, who’d know their talents and workloads better?

“They totally disagreed,” Bronk says. The developers told her it would be better to let Rob—their manager at OST who is more big-picture focused—handle their development, and let the managing consultant focus on project success.

The point here is not that the employees preferred their career development to be in the hands of a leader with a big-picture focus. That’s not unusual. But what’s all too unusual, even in 2014, is company presidents like Bronk actually asking employees what their preference would be (rather than unilaterally assigning someone, or altogether sidestepping the touchy-feely topic of talent development). 

Following the rooftop chats, Bronk met with several other young app developers, pursuing a similar line of inquiry. They, too, preferred the Rob approach. It was a fascinating moment for Bronk. She explained it recently to OST’s marketing intern, who is one of her mentees. “I told him, 10 people in app development told me I was wrong,” she says, laughing. 

Coming Around Again

It’s not hard to trace Bronk’s flexibility and humility with young employees—and her investment in their development—to her own time as an under-30 employee in the workforce. “Professionally, as I lead young people in their 20s, I want to show them that we aren’t making any assumptions,” she says. “I’m very conscious of my own experiences.”

You can argue, of course, that an employee’s development never ends. There’s always more to be learned, especially in the realms of coding, technology and software. Bronk herself recently role-modeled the concept of continuing education by attaining her long-sought degree from Notre Dame, completing the school’s executive education program.

For her, the degree was just another step in developing her own talents to the fullest extent, and not allowing one’s previous job roles—or on-paper credentials—to serve as a limitation.

July 17 2014 8:21 AM

Marco Rubio Has Introduced an Awesome (and Bipartisan!) Student Loan Bill

Here’s the good news: A bipartisan bill has been introduced into the Senate that might just solve the single most pressing problem with student debt.

Now the bad news: One of the sponsors is Florida Sen. Marco Rubio. And as Jonathan Chait once so succinctly put it, “Everything Rubio touches has turned to shit.”


But let’s focus on the positive. I’ve made the case before that student loans would be a dramatically less hellish burden if Washington just tweaked the way borrowers repay their debts. Instead of the standard 10-year plan, everyone should automatically be enrolled in a program where they just pay a percentage of their income every month. Options like this already exist to help troubled borrowers, but they’re poorly publicized and signing up is a stupidly complicated process. And as a result, millions of Americans needlessly default on their education debt, even though help is technically just a bit of paperwork away. (To be precise: About 15 percent of borrowers default within three years of starting payments.) Making income-based repayment the baseline option would cure all that financial pain.

Today, Rubio and Virginia Democrat Mark Warner debuted a bill to do just that, called the Dynamic Repayment Act. (The name is terrible. What does "dynamic" mean here?) It looks pretty solid overall. All federal loan borrowers would be enrolled in an income-based program where they paid 10 percent of their earnings each month, with a $10,000 annual exemption. Meanwhile, the government would collect the money directly from workers’ paychecks, just like tax withholding. One potentially controversial part: It would forgive up to $57,500 worth of loans after 20 years, but anything above that amount wouldn’t be forgiven for 30 years. (The current Pay as You Earn repayment program forgives all debts after two decades.) But borrowers who don’t like the income-based option could opt out and set their own payment timetable.

Again, the virtue of this bill is that it would ensure pretty much every student would face a reasonable monthly payment while eliminating the vast majority of defaults. It’s not a plan to reduce student debt. But it would make loans far safer, which needs to be the immediate priority while we solve the much harder problem of making borrowing less necessary to begin with.  

Back to Rubio: As you may recall from the sad demise of immigration reform, Rubio doesn’t have a sterling track record of selling his own party on bipartisan policy proposals. And while I can’t think of a principled reason why the House GOP would undercut this idea (one of their own, Tom Petri, has been proposing a similar concept for decades, but he’s notoriously moderate), I wouldn’t put it past them. I can only hope that as Rubio gets closer to a presidential run, his Republican labelmates might feel less apt to sabotage his pet projects.

Or who knows—maybe Democrats won't get on board with the idea. There are a million ways for legislation to die in the Senate.