Inflation is here — it’s just not evenly distributed. When we say “inflation is virtually flat these days,” the truth of those low numbers hides a more complex reality. Actually, plenty of prices are rising, while others are dropping (The Washington Post) — averaging out to a nearly flat decade. What’s costing more? Education. Childcare. Healthcare. Food. And of course housing. What’s costing the same or less? Cars. Furniture. Clothing. Electronic stuff. Software. And toys. As you may notice, the first list is dominated by services, the second by goods. Also: The first list is full of necessities, the second is mostly optional or luxuries. The economists who performed this study say that technological efficiencies and international trade keep whittling down the price of manufactured goods, while services don’t benefit from those cost-cutting pressures. In other words, as long as people plan to keep eating and sleeping and raising families, their cost of living will probably rise. These numbers tell us a lot about today’s political passions — and also underscore where the business opportunities lie.
Stock options for cooks and drivers, too. Startups are expanding the spectrum of ownership. At one end of this range, there’s the conventional world of corporate ownership (invest your money, get your share). At the other end lies the idealistic world of worker cooperatives. Somewhere in between you’ll find Silicon Valley’s hybrid model: share stock options with employees. Startups have traditionally used rich option packages to reward founding employees or to lure key talent. Now some NewCos in the platform economy are trying to expand that model by offering equity to their contractors (Fast Company). Josephine, the Bay Area startup that offers homemade meals from neighbors’ kitchens, plans to share 20 percent of its equity with its cooks, starting next year. And Uber competitor Juno has reserved half its shares for its drivers. Option-spreading is no panacea — worker-shareholders might find themselves facing novel conflicts (higher wages or higher profits?). But these ownership experiments are worth watching: At the least they’ll yield valuable data and map how to look for better results the next time we try to solve this problem.
We set the rules of business’s game. We can change them. As new tech and new ideas restructure our economic world, Tim O’Reilly writes, we shouldn’t just sit back and assume that the “laws of economics” will assure an optimal outcome for all. For example: Uber has designed an amazing new transportation system around the needs of consumers, business, and investors — but by failing to take into account the needs of its drivers, it’s not only making their lives harder, it’s assuring backlash down the road. The Uber world needs, among other things, drivers who can deliver good rides, and it’s not going to get them unless it treats them fairly, as stakeholders. Systems that assume humans are expendable can’t succeed in the long run: that’s a “failed rule.”
Court to FCC: If states block public internet access, you can’t stop them. A federal appeals court has just made it a lot harder for cities trying to promote municipal broadband alternatives to the cable monopolies (Washington Post). The Federal Communications Commission has tried to give these public-sector options a chance, but many states have passed laws to hold them in check, and now the courts say the states, and not the FCC, should call the shots. The ruling is more about arcane principles of federalism than the practical needs of internet users. But that won’t help people still waiting for faster speeds and better service. The FCC can still appeal the decision (Ars Technica).
Tokyo knows something San Francisco doesn’t. Housing prices in San Francisco and other booming American cities have become ludicrously out of reach for many. Tokyo is booming too, but not the price of its housing (Vox). How’d that happen? Turns out Tokyo tends to issue a whole lot more building permits than typical American cities (Financial Times) — and increased supply keeps prices more reasonable. Both these articles blame local activists in the US for fighting development that could lower prices, and urge us to set pro-building policies nationally, as Japan does. But maybe we shouldn’t aim to cut local residents out quite so fast. Neighborhoods might embrace more construction, and help it happen more organically, if they could trust that new housing would actually bring rents down.
Doing the math on Flint’s water bill. To save $5 million, the city of Flint, Michigan, decided to switch its water supply, with well-known disastrous consequences. The total estimated bill for its error: $458 million — $58 million in direct outlays, the rest in the long-term social costs of lead poisoning via lost productivity, welfare expenses, and costs to the criminal justice system. The Columbia scholar who arrived at these numbers (The Atlantic) says he hopes such data would help decision-makers think more clearly about the costs of action vs. inaction. Typically, taking action now incurs upfront and painful costs, and that gets our attention, while the bill for inaction is easy to ignore and defer — but ends up biting back much harder. That’s a good principle to keep in mind whether you’re making choices for a city, a company, or a family.
Just Mayo in hot water. Newco Hampton Creek, maker of the eggless Just Mayo beloved by vegans, stands accused of buying its own product to goose demand and impress potential investors. According to a Bloomberg story, the startup paid contractors in 2014 (and maybe 2015) to buy jars of its stuff from Safeway, Costco, Walmart, Whole Foods and other markets. CEO Josh Tetrick says the purchases were mostly to check product quality, and the whole $77,000 program represented a tiny fraction (0.12 percent) of its total sales. But anonymous contractors tell Bloomberg they bought lots of Just Mayo and were free to eat it or toss it. Maybe the company was trying to win bigger orders; maybe it was just overzealous about quality control. This kind of “growth hacking” is seen across the startup world, but the line does get drawn at buying one’s own product. Fast-moving startups don’t always document everything as well, or manage contractors as carefully, as they should. But they’d better be prepared to explain their practices to their most important stakeholders: the customers who trust them, and the investors who backed them.
India creates one tax to rule them all. As Britain — along with, maybe, a trade-pact-shy U.S. — pulls back from the world, India is charging in. It just reformed its vast, tangled tax system — replacing a patchwork of 17 different taxes with one national Goods and Service Tax. That should make a huge difference to the country’s startups and e-commerce businesses (Quartz India), who will no longer have to contend with conflicting and overlapping tax regimes. Instead, they’ve got a “reverse Brexit” — an integration of the entire Indian nation into a single regulatory environment.
When Wall Street is at the wheel of your ambulance. Private equity firms — the investors formerly known as “corporate raiders” — are operating ever bigger chunks of what we used to call the public sector, shaping our daily lives (New York Times/Dealbook). There’s a logic behind handing emergency services, transportation infrastructure, housing, or utilities to efficiency-minded investment groups: Theoretically, hard-nosed management can squeeze waste out of public services, striking a better deal for local governments. But these companies specialize in “cost cuts, price increases, lobbying and litigation” — so don’t be surprised when their touch turns out to be rough. Maybe there was a point to hanging a big “public” sign over part of the economy?
Airbnb, community disorganizer. When you take a hot neighborhood and turn chunks of its housing into Airbnb rentals, hosts can make money, economists cheer the efficient resource use, and travelers enjoy a quirkier-than-Marriott experience. But turn enough homes into short-term rentals, and that unique neighborhood could lose its character or even disintegrate (Next City). That’s why it makes sense to think twice before swapping too many full-time residents for drop-ins: Community isn’t community when the members are all gone.
Fourth in our Shift Dialogs Series — Full Transcript and Video
I first posted about Rana Foroohar back in May, when her timely and well-received book Makers and Takers: The Rise of Finance and the Fall of American Business came out. That interview was one of our most-read pieces back then, but in the last few months, tens of thousands of new readers have come to NewCo Shift, and Rana was kind enough to come into the Nasdaq studios and shoot a fresh interview with us.
This twenty-minute conversation lays out not only the core argument of Rana’s book, but also ties today’s extraordinary social shifts to a long term trend of financialization in our economy. Along the way she has some choice words for Apple and Uber, and some deep insights on today’s political circus (she notes that Trump voters have not had an increase in real income since the 1970s, for example).
We Can Handle the Truth. One of the key attributes of a NewCo is that it makes decisions based on data, on facts. So it’s particularly distressing when we see truth denigrated in the public arena, whether it’s Brexit advocates refuting their claims hours after they won the referendum or two American presidential candidates having, to different degrees, complicated relationships with truth-telling. Katharine Viner’s long read in The Guardian details how we got into this mess (she blames the imperatives of Internet publishing); more important, it offers some ideas on how we might get out of it by puncturing the filter bubble, modulating the clickbait, and other actions. Her argument is that technology got us into this mess and it’ll be technology that gets us out of it. “The truth,” she writes, “is a struggle,” but it’s a struggle worth undertaking so citizens, like NewCos, can make smart decisions about their future.
Microsoft’s Privacy Victory. As discussed in our recent Shift Dialogs talk with Microsoft president Brad Smith, the Redmond giant is involved in some serious litigation with the US government, this time as plaintiff. Yesterday the company won an appeal on overseas data searches (New York Times). An appeals court “reversed a lower court’s ruling that Microsoft must turn over email communications for a suspect in a narcotics case stored in a Microsoft data center in Dublin.” Microsoft argued that the earlier ruling would make it increasingly difficult for companies to resist attempts by less savory governments to obtain customer data. Plenty of news organizations filed briefs supporting Microsoft; the Department of Justice released a statement saying it is considering options. For now, though, domestic searches stay domestic.
Tech Execs Line Up Before Republican Convention. Peter Thiel, one of the best-known and most-controversial tech investors, is speaking at the Republican Convention in Cleveland next week, but there are plenty of prominent tech voices that won’t be joining him. In this open letter from technology sector leaders on Donald Trump’s candidacy for President, which we’ve published, more than 100 inventors, entrepreneurs, engineers, investors, researchers, and business leaders (among them executives at Google, Qualcomm, Slack, Twilio, and Yelp) lay out the case against Trump’s “divisive” candidacy and, instead “embrace an optimistic vision.” Whichever side you’re on (and we’re not playing false equivalence here; John Battelle, our founder and CEO, signed the letter, as did Ev Williams, founder of Medium, which hosts our website), it is welcome to see tech moguls focus on issues bigger than their own companies.
This week we introduce the Shift Dialogs, NewCo’s new video series featuring in-depth conversations with the leaders driving significant change across business, culture, and society. Our first episode features Brad Smith, President and Chief Legal Officer of Microsoft. We’ve also released the second episode, featuring Max Ventilla, founder and CEO of AltSchool.