Moneybox
A blog about business and economics.

May 27 2016 6:58 PM

Homeowner Lives Matter, Say D.C. Residents Against Homeless Shelter

This week’s ill-conceived appropriation of the “X lives matter” formula comes to us from the leafy districts of Northwest Washington, DC. On Thursday, residents protesting the construction of short-term apartments for the homeless passed out flyers saying, “Homeless lives matter; the lives of community homeowners matter too.”

Homeowner lives matter. It’s not quite a slogan to chant at the barricades, but it makes its point.

May 27 2016 2:28 PM

Trash Hauling Is Dominated by Big Players. Can This Company Help Indie Trash Collectors Catch Up?

This post originally appeared on Inc.

Jimmy Contreras has started three waste-hauling companies. His most recent is called RJ Waste Recovery, which he co-founded with his wife, Ruth. Based in Charlotte, North Carolina, Contreras hopes the startup will help businesses cut their costs and recycle more. 

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"It's called an addiction—once you get garbage in your blood," says Contreras. His biggest challenge is winning clients in an industry that has long been dominated by companies like Waste Management and Republic Services, which have a combined market share of nearly 40 percent, according to data from IBIS World. ​Contreras, by contrast, employs 50 contract workers and counts roughly 200 accounts across North Carolina and parts of South Carolina. 

RJ Waste Recovery is one of the 5,000 haulers that have benefited from working with Rubicon Global, a broker of sorts that steals business away from industry giants, offering them cheaper rates to work with startups. The company's website and mobile apps connects haulers to customers, and can guarantee pickup within the hour. On average, Rubicon claims it can save its clients—which include 7-Eleven and Wegmans—about 30 percent of what they would otherwise spend. 

Rubicon claims it saves customers money because the incumbent players inflate prices, so businesses are often paying more than they need to be. The startup finds local alternatives, which typically face lower transportation costs. It helps that these haulers avoid landfills when possible, which charge dumping fees; they save money by composting, or using anaerobic digestion. 

"Typically, the independent hauler has been displaced, because it lacks the scale and the national footprint to compete," says Nate Morris, Rubicon's co-founder and CEO. By leveraging technology, Rubicon can give small businesses a better shot at success. (Morris has worked closely with Oscar Salazar, the logistics pro and former CTO of Uber.) In the waste industry, that's no small bargain: By 2020, trash hauling is projected to reach $2 trillion in global sales.

"Rubicon has the protection of an industry that's never going away," adds Morris. "And one of the places that investors like Warren Buffet and Bill Gates put their money in uncertain times is in the waste sector." 

To his point, as of 2014, the Bill and Melinda Gates Foundation owned about 18.6 million shares of Waste Management, or roughly 4 percent of the company.

Waste Management owns and operates landfills, and therefore brings in revenue through filling them up, explains Morris. A company like RJ Waste Recovery tries to avoid landfills where possible, diverting waste in other, more sustainable ways. "It's not profitable for companies like Waste Management to recycle," Morris says. "They lose money by taking trash to recycling facilities." 

Rubicon helps small companies achieve scale through Rubicon Pro, a suite of app-based tools that are becoming available to haulers this month. Rubicon can source discounted fuel, tires, insurance, and auto parts, for example, through partnerships with Fuelman and O'Reilly Auto Parts. The app can also help haulers find the quickest routes—in the event of construction, or an accident, say—and a geo-location tool will let them locate lost cans. 

Since partnering with Rubicon six months ago, Contreras estimates his business has grown by 45 percent (he charges between $150 and $300 per month to haul trash,) and he's since taken on 7-Eleven as a client.  

Last September, Rubicon Global raised $50 million in venture capital funding, at a reported $500 million valuation. Nima Capital led the round, joining previous investors including Goldman Sachs, and environmental activist Leonardo DiCaprio, bringing the total amount raised to $95 million. 

Thus far, Morris says he's been able to convert 5,000 businesses to use his software to book trash pickup. Rubicon takes revenues from what it's able to save those clients, as well as from the data subscription, management, and carbon reduction fees it charges.

Still, Rubicon remains a small player in the waste industry. Waste Management alone serves as many as 20 million residential clients, and captured $13 billion in sales in 2015. Analysts warn it's going to be an uphill battle for the eight-year-old startup to compete. 

"It's very hard for Rubicon at their scale right now to go toe-to-toe with the big companies," said James Thompson, president of the Waste Business Journal. "Waste Management and Republic are more sophisticated today than they used to be, and they're not going to like to see any erosion of market share. They have a lot of bodies and capital to throw at the problem."

Thompson says it's feasible that a company like Waste Management might look to acquire Rubicon Global down the line: "Ultimately, they might decide that these guys are enough of a threat to buy them," he said, adding that it's more likely a hedge fund would buy them, and then sell them to Waste Management. 

May 26 2016 5:48 PM

The IMF Just Admitted That Neoliberalism Isn’t All It Was Cracked up to Be. Thanks, Guys!

The word neoliberal often gets bandied about as an all-purpose slur for anybody to the right of an Oberlin Socialists for Sanders rally. But in theory, it's supposed to sum up an ideology that says the best recipe for economic growth, especially in developing countries, includes a combination of deregulation and modest government—an embrace of free trade, free flows of money across borders, low budget deficits, and private industry on the home front. Back in the 1980s and 1990s, there were few preachers who spouted the neoliberal religion with the same fervor as the International Monetary Fund, which gave loans to struggling nations on the condition that they undertake a whole lot of neoliberal reforms.

The IMF has been slowly backing off some of those ideas for several years now, partly thanks to the financial crisis and its aftermath, which made government budget-slashing look like a singularly bad course of action. (The IMF has actually played the voice of reason in Europe's dealings with Greece, pushing for more debt reduction, for instance.) But it's still a bit amazing to see a new paper from the organization titled ”Neoliberalism: Oversold?” The subhead is pretty blunt, too: “Instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardizing durable expansion." Which, damn. Bernie fans are going to have a field day with this one.

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Well, much of it. The paper isn't a full-fledged assault on the old neoliberal agenda, of which it says there's “much to cheer.” The growth of free trade “has rescued millions from abject poverty,” and privatizing state-owned companies “in many instances led to more efficient provision of services and lowered the fiscal burden on governments,” the authors write (which I'd say is not wrong). However, they single out two big areas of failure.

The first: free capital. A large piece of the neoliberal consensus said that people and companies should be able to move their money internationally without interference from the government, thus making it easier to invest in foreign countries (Americans are more likely to plunk their funds in, say, Brazil if they aren't worried about getting it back out). This, theoretically would be a win-win. People would get a higher return on their funds by investing in potentially fast-growing developing nations, and developing nations would attract the investment necessary to grow. Thus, the IMF tended to discourage capital controls like limits on currency exchange.

But while great in theory, free capital hasn't always worked out so hot in practice. It turns out that letting panicky investors plow their money into a country then pull it out the second something looks to be going awry has a way of ending in tears. “Since 1980, there have been about 150 episodes of surges in capital inflows in more than 50 emerging market economies ... about 20 percent of the time, these episodes end in a financial crisis,” the authors write. This has been a somewhat obvious danger for a while: Look back at the 1997 Asian financial crisis. Or just Google the phrase “hot money.”

Issue No. 2: small government. While the researchers acknowledge that there's still a case for smaller countries limiting their budget deficits so that markets don't eventually turn and cut them off from borrowing, the argument is a lot weaker for major economies like Britain, the United States, and Germany. Moreover, they note that austerity policies like tax hikes and spending cuts can kneecap growth. 

“In sum, the benefits of some policies that are an important part of the neoliberal agenda appear to have been somewhat overplayed,” they conclude. Thanks for the update, guys. 

May 25 2016 5:41 PM

Bartenders Are Winning Cuba’s Embrace of Capitalism, and Doctors Are Losing

Cuban state employees are abandoning their jobs for high-paying, private-sector gigs—in Cuba. As bartenders, bellhops, and taxi drivers.

The growth of the Cuban private sector over the past two decades has created some serious imbalances between skills and pay: A bartender with some generous foreign customers could make more in tips in a weekend than a doctor, all of whom are employed by the Cuban government, does in a month. 

A new reform could exacerbate that issue. 

May 24 2016 4:22 PM

This Is One of the Saddest Passages You’ll Ever Read About a Developed Country

Remember Greece? The country's economic crisis has largely been out of the headlines since late 2015, when leaders there agreed to a new bailout deal that kept it in the eurozone. Back then, it was obvious that Greece's immediate prospects were bleak—the austerity measures its creditors insisted on in return for a new batch of loans all but guaranteed years more of depression and high unemployment. But how long could the misery last?

One especially soul-crushing prediction comes to us from the International Monetary Fund, which is out with a report analyzing whether Europe's plans for making Athens repay its debts are sustainable over the long term. Its answer, in brief, is no. On the country’s current path, the IMF thinks Greece would have to spend more money financing its old debt than any country could realistically manage. (Specifically, it projects that budget deficits and debt financing will consume almost 60 percent of the country's gross domestic product by 2040, which, Jesus.) And the job market?

Greece will continue to struggle with high unemployment rates for decades to come. Its current unemployment rate is around 25 percent, the highest in the OECD, and, after seven years of recession, its structural component is estimated at around 20 percent. Consequently, it will take significant time for unemployment to come down. Staff expects it to reach 18 percent by 2022, 12 percent by 2040, and 6 percent only by 2060.
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This is one of the saddest passages I've ever read about a developed nation. You could maybe debate the idea that Greece's unemployment is “structural”—which typically means a mismatch between the skills of the workforce and the types of jobs available—and how that affects things, but 40-year high joblessness sounds a whole lot like an economic death sentence. “For Greece’s young people currently out of work, that is all of their working life,” economist Frances Coppola writes at Forbes (bolds hers). “A whole generation will have been consigned to the scrapheap.”

I somehow doubt that frustrated Greek voters—who've already started electing neo-Nazis to Parliament—are going to passively accept that fate. At some point, another political standoff with Europe is coming. Or maybe something much darker.  

May 24 2016 3:19 PM

San Francisco Tried to Rent Out the Grass in a Public Park. It Did Not End Well.

Update, 3:40 p.m.: Well, that was quick. San Francisco has already suspended the grass-reservation program amid public outcry. Original post on this ill-advised initiative below:

Please don’t step on the grass—without a reservation. 

In a move that can only be interpreted as a fifth-column scheme to incite class warfare in San Francisco’s desirable Mission neighborhood, the city’s Recreation and Parks Department will start renting small sections of Dolores Park to groups of picnickers who reserve online, including corporate groups.

May 24 2016 10:30 AM

Could Airports Really Shorten Those Hellish Lines by Privatizing Security?

Time was, our airports were kind of like malls, each with its own security team managed by airlines or local administrators. After 9/11, airplanes became the most highly secured public space in American life, and a new federal agency—the Transportation Security Administration—was created to implement uniform screening measures.

Following a month in which lines at security checkpoints were longer than the flights themselves, administrators at some of the country’s biggest airports are considering returning to private contractors to screen travelers and baggage.

May 24 2016 10:00 AM

Twitter Just Changed How It Counts to 140

Twitter is making a series of changes that will affect how people tweet, how much they can fit in a tweet, and who will see it when they do. The company announced the moves in a blog post Tuesday morning and said it will roll them out over the coming weeks and months.

First, as some had anticipated, media attachments such as photos and videos will no longer count against the 140-character limit for a tweet. Allowing people to add images for free (so to speak) should encourage the continuation of a trend that has turned Twitter from a text-heavy platform to one nearly as visual as rival social media services such as Facebook, Instagram, and Snapchat. It’s growing increasingly rare to see a tweet that’s text-only, and this will make it rarer still. 

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However, contrary to the Bloomberg report that predicted this change, links to articles or other web pages will still count against the 140-character limit, just as they do today. 

The second change is that replies to another Twitter user will no longer begin with that user's Twitter handle. As a result, the handles of the people you're replying to will no longer count against the 140-character limit, either. Instead, Twitter will indicate in small text above the tweet that it is a reply and will note the name of the person you're replying to. This should help solve the Twitter canoe problem, in which the names of the users you’re talking to take up so much space that you can barely say anything. That is, unless you think the real problem is the very existence of Twitter canoes, in which case, this change will exacerbate it by making multiparty conversations more feasible. 

devbrief_replies
Twitter’s new reply format.

Twitter

It’s worth noting that the change applies only to replies, not “mentions.” That is, if you mention another user in the body of the tweet, his or her handle will still appear in the tweet and count against the character limit.

The third change Twitter announced Tuesday is that people will be able to retweet or quote-tweet themselves. That will make it easier to resurface tweets you’ve made in the past, adding context or commentary. (Before, the best you could do was copy a link to your old tweet and paste it into your new one.) 

The final change is that tweets that start by mentioning another user, but are not direct replies, will now be treated like normal tweets, rather than like replies. That is, they will no longer be seen only by people who follow both the tweeter and the, um, tweetee. Instead they’ll be seen by all of the tweeter's followers. This removes the need for the awkward construction in which users had to put a period or some other mark before a user’s handle if they wanted the tweet to be viewed more widely. 

The narrative around Twitter has been that it has failed to improve its service in the ways necessary to attract a broader base of users, like Facebook's. For the most part, I don't buy it: Twitter's product is fundamentally different from Facebook's, and even Snapchat's or Instagram's, in ways that limit its mainstream appeal. Yet those same features—its speed, its brevity, its essential publicness—make it especially powerful for a smaller segment of the populace. Reinventing Twitter around the least common denominator would likely ruin it.

That said, it's true that the company has been remarkably slow to make simple changes like these that could make it easier to understand and use without altering its core purpose. Yes, Twitter was created 10 years ago, in the pre-smartphone era, and designed to work via text message. Twitter is fond of pointing that out. But 10 years is an epoch in the tech world, and it's no longer an excuse for a hacky, jury-rigged product. Facebook is only three years older and yet it has evolved so much that it barely resembles its original incarnation.

The good news is that the pace of product improvements appears to have quickened under the leadership of CEO and co-founder Jack Dorsey. Give him another year or two and Twitter might actually start to look like a fully modern social media platform.

May 20 2016 5:42 PM

California’s Housing Crisis Is Drowning Renters. Houston’s Housing Boom Is Flooding Everything.

Million-dollar homes are popping up across coastal cities like a case of golden chicken pox.

According to an analysis by Trulia, San Francisco made the most dramatic vault into the seven-figures. One in five SF homes were worth $1 million in 2012; today it’s three in five. In San Jose, the percentage of million-dollar homes rose from 17 to 46. Rounding out the top 10 cities where the percentage jumped: Oakland, Orange County, Los Angeles, San Diego, Ventura County, New York, Seattle, and Honolulu. It’s a good group of cities to support the argument for geography’s influence on housing prices.

Or, equally, California’s influence on housing prices: Of the 10 housing markets with the greatest percentage increase in million-dollar homes, seven are in California.

May 20 2016 5:34 PM

Apple Stores Are Replacing the Genius Bar With a “Genius Grove”

On Saturday, 15 years after Apple opened its first two retail stores, the newest flagship Apple Store will open its doors in San Francisco’s Union Square.

Those doors are not messing around: They’re 42 feet high and they open 40 feet wide, at both the front and back of the building. (The back opens onto a public plaza, open 24 hours, where Apple will host acoustic music concerts.) TechCrunch’s Matthew Panzarino tweeted some of the company’s illustrations:

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But the doors aren’t the only change represented by the new Union Square location, whose design is meant to point the way for future Apple Stores around the world. The most surprising might be the replacement of the company’s iconic Genius Bar with what it calls a Genius Grove. I can think of an even more accurate name, based on my recent experiences at Apple Stores in New York, but I guess “Genius Cattle Pen” wouldn’t focus-group very well.

Here's how Apple described the new concept in a press release: "'Genius Grove' invites customers to get support working side-by-side with Geniuses under the comfortable canopy of local trees in the heart of the store."

The ficus-studded grove will offer “more room to sit and more Apple customer service specialists,” according to the New York Times. Each tree is “encircled by a leather bench, where customers can wait or sit next to Apple’s ‘geniuses’ as they work on the customers’ gadgets.”

It sounds lovely, really. As successful as the Genius Bar concept was, bars in general are more suited to activities that can be accomplished in a matter of a few minutes, such as, I don’t know, buying a drink. Anything more involved than that, and you’re probably going to be more comfortable sitting in an actual seat.

That said, if Apple really has figured out a way to make a space less crowded without either adding space or subtracting people, I think its triumph over the laws of physics is the real story here. Maybe it can file a patent for that, right alongside the one for the gold in the Apple Watch that’s twice as hard as normal gold.

Other noteworthy features of the new store include the Forum, a “vibrant gathering place” centered around a giant video screen, and the Boardroom, where Apple will host groups of developers and business customers. Many of these features will likely be replicated in other Apple Stores, although some will be reserved for the company’s “most significant” locations.

The point of all the design tweaks is to make Apple Stores feel less like a place to shop and more like a destination, Apple executive Angela Ahrendts told the Times. “We didn’t want it to feel like a store. We wanted it to feel like a town square—very open, and everyone invited.”

I can still think of some differences between Apple Stores and town squares, such as how tolerant they tend to be of protesters and how much lighter they’re likely to make your wallet. That said, Apple Stores have always been more than just a place to buy stuff, especially early on when the concept was still novel and the stores themselves relatively rare. It’ll probably take more than super-tall doors and some ficus trees to get people as excited about the experience as they once were, but at least it’s a start.

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