Exactly How Much Would It Cost to Make Public Colleges Tuition-Free? (An Update.)
President Obama has proposed a plan to make community colleges tuition-free. And, as I wrote yesterday, it's a good plan! At $60 billion for the feds over 10 years, it's also a pretty cheap one. But this brings up a related question: What if we wanted to go whole hog and zero out tuition at all of our public colleges? How much would it cost?
It's tough to say exactly. But for a couple years now, I've been making the following point: With what it spends on its various financial aid programs today, including money that goes to private and for-profit schools, the feds could cover the cost of tuition for every single public college student in the country. According to the State Higher Education Executive Officers, four-year state schools and community colleges took in $61.8 billion worth of tuition dollars, including money from federal loans and grants, in fiscal year 2013. Meanwhile, according to the New America Foundation, Washington currently dedicates $67.7 billion to grants, tax breaks, and work-study money. If you took the money out of the private sector and put back it into the public sector, it could cover all of today's undergrads, and then some.
Or could it? In FY 2012, the Government Accountability Office released its own analysis of public college funding and revenue streams. It found that students were paying a total of $76.3 billion in tuition—more than the feds could theoretically cover with today's aid budget. Why the difference? According to State Higher Education Executive Officers senior policy analyst Andy Carlson, it seems the $8.6 billion gap has a lot to do with how the two reports categorized money from state scholarships, such as Georgia's HOPE program. SHEEO classifies that cash as state funding, since it's not really coming out of a student's pocket. The GAO calls it tuition revenue, since undergrads take the money, then pay the college. Personally, I think SHEEO's approach makes a bit more sense, since it's state money in the end. But the argument is basically semantic. Either way you look at it, the federal aid budget should be enough to cover whatever today's college kids are paying out of pocket.
At the same time, that doesn't necessarily mean Washington would be able to make college free long term without spending more. For starters, college costs rise (and rise, and rise). Meanwhile, if you really did abolish tuition at public institutions, they would almost certainly attract more students, thus putting the feds on the hook for more money. You could cap admissions at the schools that don't already, but there'd probably be some strain on the system.
But in a sense, the exact dollar figures aren't important here. The idea that we already spend enough on higher ed to make public colleges tuition-free, at least for today's undergrads, is a fun policy talking point. (ThinkProgress certainly loves it.) But it's mostly just an illustration of how wildly inefficient our current system of funding higher education already is. Even if the arithmetic changes a bit, that basic reality won't.
The Founder of ShipYourEnemiesGlitter.Com Wants the Rest of the World to Feel His Pain
Yesterday, a Reddit post about an Australian website that allows customers to send envelopes full of glitter to their adversaries went viral. The site, ShipYourEnemiesGlitter.Com, quickly earned praise for tapping into something many of us probably feel but had never articulated: Glitter is kind of the worst. Or, as the site puts it succinctly, it’s "the herpes of the craft world.”
Perhaps predictably, the site crashed as it was bombarded by people looking to see what the fuss is about. (And, if they were lucky, pay $10 to glitterbomb their foes.) Luckily, Slate spoke with ShipYourEnemiesGlitter.Com’s founder, 22-year-old Australian Mathew Carpenter, to satisfy our curiosity.
Slate: So, why do you hate glitter?
Carpenter: I've received Christmas and birthday cards over the years from family and friends who put glitter in the cards. I hated it, and I wanted the rest of the world to feel my pain. So that's how the website was born.
Have you done this kind of thing before?
I'm 22 and have never been to university, but I am in Internet marketing and have worked on other sites before. The one I'll show you now is www.dickpicoftheweek.com. That said, I apparently have too much free time on my hands because now my plans for the next few weeks consist of sending stupid fucking glitter to terrible people.
Even though it seems obvious, run me through how this whole thing works. Do you have a glitter distributor or do you just walk down to your local craft store and buy a few hundred pounds of it?
Actually, I do have an Australian glitter supplier. People decide they want to waste money on sending someone glitter in an envelope, I get their recipient's information, hand-fill envelopes, and ship that stuff out.
Are you on your own or is anyone helping you with this crazy plan?
The website is 24 hours old and despite my cries for help I stand alone.
What happened yesterday?
A couple of hours after launching, the website was getting pounded with too much traffic for the server to handle so it crapped itself. We had people buying every minute until I took the ability to purchase down.
In this case I think [traffic exploded] due to the combination of a unique idea, creative copywriting, and evoking an emotion in the user.
How many orders have been placed so far?
Over 2,000 of the world’s brightest people have spent money on this service. It's good for business, but bad for society.
Who, would you say, is your target consumer?
People with too much disposable income.
This might be a dumb question, but do you see this a long-term viable business plan?
God I hope not.
Michael Lewis’ The Big Short Is Being Made Into a Movie With Brad Pitt, Ryan Gosling, and Christian Bale
The Big Short: Inside the Doomsday Machine, Michael Lewis’ nonfiction thriller and tell-all about the financial crisis, is reportedly being made into a star-studded film. According to Variety, Brad Pitt, Christian Bale, and Ryan Gosling have all signed on for the big-screen adaptation by Paramount and Plan B Entertainment, Pitt’s film production company. Adam McKay, the longtime Will Ferrell collaborator known for Anchorman and Talladega Nights, will write and direct.
The Big Short tells the story of the housing bubble through the eyes of Michael Burry, a 32-year-old neurologist-turned-investor and one-eyed eccentric who spotted the subprime-mortgage crisis early and made a huge bet against it. While Wall Street sliced, diced, and bundled rotten assets, Burry pored over hundreds of prospectuses for questionable bonds. The big reveal at the end (spoiler alert!): Burry had Asperger’s syndrome and for a long time was totally unaware of it. “Only someone who has Asperger’s would read a subprime-mortgage-bond prospectus,” he tells Lewis.
Pitt also starred in and, through Plan B, produced the film adaptation of Moneyball, another nonfiction work by Lewis that chronicles the metrics-based efforts of Oakland Athletics General Manager Billy Beane to assemble a competitive team on a limited budget. The production timeline for The Big Short remains unknown, but Variety reports that Pitt has been “very passionate” about making it happen. In the meantime, we’ll wait to see which actor gets to play the half-blind hedge funder who took down Wall Street.
Chipotle Just Stopped Serving Carnitas at a Third of Its Restaurants
Chipotle is in the throes of a carnitas crisis. America’s favorite burrito chain has reportedly stopped serving pork at one-third of its more than 1,700 restaurants after suspending a supplier that violated its standards. Chris Arnold, a spokesman for Chipotle, told the Associated Press that the halt on carnitas marks the first time that Chipotle has stopped serving any topping for its burritos and bowls.
Arnold told the AP that Chipotle discovered the violation on Friday through a routine audit and that “it’s hard to say” how long carnitas will be absent from affected locations. While Chipotle has not disclosed the exact nature of the violation, Arnold told Reuters that the company has strict animal-welfare expectations for its suppliers and does not allow them to use antibiotics. He added that although Chipotle could fill its pork shortfall with so-called conventionally raised pork, the company is unwilling to compromise its standards in that way.
It’s quite possible that Chipotle’s decision to pull pork from its menu—while disruptive in the short term—could end up being a smart decision. Much of Chipotle’s success to date has come from its ability to distance itself from the consumer skepticism plaguing fast-food chains like McDonald’s and Taco Bell. To that end, Chipotle has embraced its “fast casual” dining label and marketed itself as a higher quality alternative to fast-food restaurants; promoting its “sustainable design” and “food with integrity” have been a key part of that. And as Business Insider CEO Henry Blodget told Yahoo! Finance, “if it had been discovered that [Chipotle] ignored an audit or some journalist did a story where they followed it and said it’s all a big sham and the pigs were being treated horrible, that would have been catastrophic.”
As devastating as this news might be to pork fans, carnitas actually make up a surprisingly small portion of Chipotle’s entree orders: 6 to 7 percent, according to the company. Chicken is the most popular order. People seemed much more upset back in March of 2014 when an annual report from Chipotle appeared to indicate that the chain would stop selling guacamole and some salsas if certain ingredients became too expensive. (Fortunately, that didn’t happen.) And anyway, while Chipotle sorts out its pork problems, it's all the more reason to try its tofu Sofritas option and earn a free burrito for when the carnitas are (hopefully) back on the menu.
Even the Ruble Is a Better Investment Than Bitcoin These Days
In December, when the ruble crisis was really revving up, a small number of panicked Russians appeared to start moving their money into bitcoin. Even though the cryptocurrency was technically banned in the country, the volume of ruble-denominated trades shot up 250 percent, CNBC reported.
Bad call. While the ruble has had a wild ride lately, it's down just 3 percent against the dollar over the past month. Bitcoin, meanwhile, is in the midst of an epic collapse, having lost 44 percent of its value since Dec. 14, according to Coindesk. Russia might be in the midst of the crisis, but its currency has still been a safer bet than everyone's favorite online currency/speculative investment opportunity/digital fetish object for techno-liberterians.
What, exactly, is causing the plunge? Earlier in January, some people were blaming short-sellers. But now, the consensus seems to be that bitcoin is, as Business Insider's Rob Wile puts it, "stuck in a self-fulfilling downward spiral." The problem has to do with bitcoin miners—companies whose computers unlock new batches of the currency by solving complicated math problems. Mining takes money—computing power and electricity aren't free, you know—and because bitcoin's price has fallen so low, it may no longer be profitable. So miners are now selling off bitcoins in order to cover their dollar costs. But the further bitcoin's price falls, the more they need to sell in order to pay the bills.
Now, with a real national currency, this might be the point at which a central bank swooped in to the rescue. Russia, for instance, has tried to prop up the ruble by buying it with dollars (I don't think that's a permanent solution, thanks to falling oil prices, but that's neither here nor there for the moment). Bitcoin has a slightly different safety mechanism. Essentially, the network can make it easier to mine bitcoin, which should also bring down the cost of doing so. The problem is, as Coindesk notes, the adjustment doesn't happen immediately. And the fewer people mining, the longer it will take. Meanwhile, once the difficulty level does drop, more miners could come back online. That should push the difficulty level up again and make mining unprofitable again. Wash, rinse, repeat.
A lot of bitcoin's fans like to argue that these day-to-day price movements aren't particularly important, because the real appeal of the cryptocurrency is its underlying technology. But having people willing to mine bitcoin is essential to the entire system; it basically powers the giant online ledger that tracks bitcoin trades. If mining becomes financially unappealing, it would undermine the whole project. But we're getting ahead of ourselves at the moment. Today's main lesson is really just that some Russians apparently can't catch a break.
Pizza Hut’s Newest Trick Is Gluten-Free Pizza
Back in November, Pizza Hut announced the first major rebranding in its 56-year history. The new Pizza Hut would offer spinach and banana peppers, balsamic and buffalo “drizzles,” and sriracha—lots and lots of sriracha. It would replace stale and tired combinations of pizza toppings with a list of fresh-sounding ingredients that appealed to consumers’ growing desire for customization. It would also try to appeal to health-conscious eaters, with 250-calorie “Skinny Slice” options.
Now, in what appears to be an effort to bolster its efforts in that last category, Pizza Hut says it is introducing cheese and pepperoni gluten-free pizzas at select restaurants in the U.S. starting Jan. 26. (Dining side note: This is also the day that you can earn a credit for a free burrito at Chipotle.) The gluten-free menu items are being offered in collaboration with gluten-free food brand Udi’s and the Gluten Intolerance Group. The 10-inch pizzas will start at $9.99 and be cut into six slices. To ensure as best as possible that the pizzas are truly gluten-free, their ingredients will be stored in a “designated gluten-free kit” and the employees preparing them will wear “gloves, bake the fresh-to-order pizza on parchment paper and use a designated gluten-free pizza cutter,” Pizza Hut explains.
Yum! Brands, the parent company behind Pizza Hut, Taco Bell, and KFC, is scheduled to release its Q4 2014 earnings in early February, which may contain some clues as to whether Pizza Hut’s rebrand and image improvements are carrying over to its bottom line. In the meantime, it’s anyone’s guess how real customers (and not the old Italian people Pizza Hut recruited for an ad) are feeling about its new offerings.
Instacart Has a $2 Billion Valuation. Here’s Why That Might Not Last.
Late Monday night, grocery-delivery startup Instacart confirmed reports that it had raised $220 million in a funding round led by Kleiner Perkins Caufield & Byers. The new financing values the company, which facilitates same-day shopping orders from local grocery stores like Costco and Whole Foods, at $2 billion.
So, the big question: Should Instacart be worth $2 billion? Apoorva Mehta, Instacart’s CEO, told the New York Times that part of his company’s value lies in its flexibility. “We don’t hold inventory, we don’t own warehouses, we don’t own trucks,” he said. “The changes we make are software changes.”
Like many other companies in the emerging “on-demand” or “1099” economy, Instacart relies heavily on contract workers to stay competitive and make thin margins viable. Instacart employs about 100 people but has more than 4,000 contractors who make its shopping and delivery services possible. That’s thousands of people whom Instacart doesn’t need to furnish with salaries and benefits and everything else that makes running a company expensive.
In May 2013, Fast Company wrote in a “most creative people” blurb on Mehta that Instacart “takes advantage of two peculiar things about cities in 2013: the ubiquity of smartphones and persistently high underemployment.” Matt Yglesias offered a similarly optimistic view on delivery services in Slate that September when former anything-you-want-on-demand platform and glorious dot-com-bubble bust Kozmo announced it was relaunching. “Kozmo [first] launched in the middle of an awesome labor market boom,” he wrote. “The current environment is just the opposite. Lots of young people aren’t entering the labor force at all. Wages haven’t risen in forever. This is terrible news for America, but great news for a company looking to hire a bunch of guys to run around town delivering stuff.”
The problem is it’s unclear how much longer that economic environment might hold. Wages are still mostly stagnant, but the unemployment rate is falling. The number of people employed part-time for economic reasons (who would prefer to be working full time) also ticked down ever so slightly in the latest jobs report. Some economists, like the Upshot’s Justin Wolfers, are even optimistic that slow wage growth means we will continue putting people back to work and that the so-called natural rate of unemployment is lower than previously believed.
All of that would be good news for the U.S. economy, but less promising for Instacart and startups like it, whose workers for the most part don’t seem to love their jobs. On Glassdoor, an online jobs database, Instacart contractors give it an average of 2.9 out of five stars and complain that the company doesn’t pay enough to offset out-of-pocket costs like gas or make up for insufficient customer tips. If the economy continues to gain strength and more full-time jobs become available, who’s to say those Instacart employees won’t depart for a better employment situation?
In terms of logistical challenges, it’s possible that Instacart has learned from the failures of Kozmo and Webvan Group and other instant-delivery services of the early 2000s. Online shopping and same-day or rapid delivery is much more common now than it was back then. Companies like Seamless and Uber and Amazon have trained us to expect instant service with nothing more than the touch of a button. More than ever, Instacart is a service that people want.
That said, the grocery business is notorious for its tiny margins, and Instacart still isn’t profitable—even now, with its contract-work-heavy structure, in the current, still mostly Instacart-favorable economy. When you think about it like that, a $2 billion valuation feels like a big bet.
Taxi Apps Are Thinking Seriously About How to Compete With Uber
As Uber continues its formidable march across the globe, to the tune of $3.3 billion in funding, other on-demand ride apps are taking a close look at how they can compete. Individually, it’s a tough battle. Which is probably why one idea that is being floated, according to BuzzFeed, is for regional Uber competitors to band together against Uber as part of a global network:
Ride-hailing apps around the world may soon work together to compete against Uber by forming a global alliance of regional players, according to two executives at companies involved.
The executives also suggested that the venture capital firm Softbank Capital has helped to create this potential global taxi alliance. Softbank recently invested in two of Uber’s biggest competitors: It invested $250 million in funding to Southeast Asia’s GrabTaxi in December and $210 million in India’s OlaCabs in October.
The details on this prospective partnership are, for the most part, quite fuzzy. Brian Cu, a co-founder of Philippines-based GrabTaxi, told BuzzFeed that such an alliance might include “knowledge sharing and maybe cross-booking” between apps. Oneal Bhambani, chief financial officer for San Francisco–based ride company Flywheel, added that there may be “a global alliance to unify all these regional markets and unify taxis across the globe in other markets.” Uber declined to comment to me on the BuzzFeed story or any rumblings of a “global taxi alliance.”
Should such an organization emerge, it will be interesting to see what information and technology the different companies choose to share with one another, and how they use it. Too much teamwork among apps that compete in the same markets would probably raise flags as anti-competitive. But if the companies in the so-called alliance all operated in different areas, then their decision to link up to offer customers global coverage and better compete with Uber would be fine, several experts on antitrust law said. “A global taxi alliance could be a good thing,” Eleanor Fox, a professor of trade regulation at New York University School of Law, told me in an email. “They might be adding competition to the market.”
Perhaps more importantly, the fact that several companies are thinking of creating an alliance around on-demand rides to fight Uber, instead of battling it through regulation, could mark an important turning point in how we think about these services. “This looks like a different reaction to Uber than the traditional taxi industry’s current reaction, which is to try to use the regulatory system to push Uber out the market,” says Harry First, co-director of the competition, innovation, and information law program at NYU Law. “Maybe there’s a change in tactics in the industry where they realize they have to compete with Uber, not just block Uber from markets. That recognition is a positive one.” In terms of keeping Uber from becoming the only player in ride services, it might be a more sustainable strategy as well.
Burger King Hopes You’re Lovin’ Its 15-Cent Chicken Nuggets Promotion
To kick off 2015, Burger King is falling back on a basic: super-cheap chicken nuggets. Starting today, Burger King will sell its 10-piece chicken nuggets for $1.49, or 15 cents per nugget. That’s about half that item’s regular price of $2.99, according to Bloomberg, and also cheaper than the rate that McDonald’s sells its 50-piece chicken McNuggets at ($9.99 for 50 or 20 cents per nugget).*
Burger King’s promotion is obviously designed to undercut its direct fast-food competitors. “They’re competing aggressively with McDonald’s, and they’re doing it as a very low price to draw people in,” Darren Tristano, executive vice president at food and restaurant research firm Technomic, told Bloomberg. “The goal is to steal share from the other burger brands around them.”
Just as important, though, is for chains like Burger King to draw back foot traffic and interest from rapidly growing fast-casual restaurants like Chipotle. The red-hot fast-casual sector has pulled customers away from both traditional casual dining chains—think Red Lobster, Olive Garden—and cheap fast-food options. The promise of Chipotle (other than rice, beans, and guac) is a fairly good, quick meal, with more ambiance than you’d get in a McDonald’s or Burger King, but only a slightly higher price tag.
So far, the fast-casual formula has proven incredibly popular and left the likes of McDonald’s struggling to dispel widespread consumer skepticism and appear more transparent about the healthiness of their food. But Burger King, for its part, seems to be hoping that with certain core diners, cheap calories will still win out.
*Correction, Jan. 12, 2015: This post originally misstated that Burger King’s 10-piece chicken nuggets were selling for $1.49, or 10 cents per nugget. $1.49 for 10 nuggets is about 15 cents per nugget.
Company Run by Man With Fabulous Hair Will Finally IPO
Box, the cloud storage service that filed to go public back in March, is finally moving ahead with its long-delayed offering. According to amended paperwork filed with the SEC on Friday, Box said it is looking to raise up to $162.5 million by pricing its shares at $11 to $13 apiece. At the middle of that range, Box would achieve a valuation of about $1.4 billion, the New York Times reported.
Box’s market debut stalled out in May after a broad-based selloff sent shares tumbling across the tech sector. As of June, word was that the IPO remained “weeks, not months” away, but time has proven quite the opposite. Toward the end of 2014, the market for tech began to perk up again, and peer-to-peer finance platform Lending Club stepped forward to make a strong debut; Box is likely hoping to catch the same wave of enthusiasm among prospective shareholders.
While the market may have perked up, Box’s challenges from several months ago remain the same: Cloud storage is becoming a commodity and both startups like Box and incumbents like Google and Microsoft are vying to win it. Box also has yet to record a profit. According to its latest filings, it lost $121.5 million for the nine months ended Oct. 31, 2014. The previous year, it lost $125.2 million over the same period.