JUNE 2, 2009

After my last post went up, I got a few e-mails from friends and family (yeah, I send people my blog posts) wondering how the government could possibly “do something” about the nation’s food problems without raising costs for American families. And, unfortunately, the short answer is that they can’t - any successful government effort to reform America’s diet will mean higher costs for consumers. The reason? Modern management and scientific techniques have made our food industry insanely productive, yet those same techniques have led to the ethical, environmental and health problems I mentioned in my last post. Fixing the problems mean losing some (but not all) of the benefits of a productive food industry, which means higher costs for food. You can see this divide in the higher prices you pay for vegetables at a farmer’s market vs. those at a supermarket.

But, I’d respond with the fact that a reformed food industry ultimately means lower environmental, ethical and health costs. Incidences of diabetes and obesity, for instance, would likely decline if high-fructose corn syrup were not used to the extent it is today. And those two diseases account for a variety of other complications that cause health costs to rise, a serious threat to family budgets as well as the continued solvency of Medicare. It’s the same with the scarcity of fresh foods in poor urban areas. So ultimately, we’re paying for our Pop-Tarts and Coco-Puffs, but in a much less transparent and predictable way.

Economists call this an “externality” - a cost of a product not reflected in its price. Consider, for example, a hypothetical widget plant in Widgetville, VA. The total market value of the widgets produced there is $10,000,000, but, in the manufacturing process, the widget plant causes $1,000,000 worth of damage to Widgetville in the form of pollution. Those costs, under a strictly free market, are borne by the residents of Widgetville; they are not reflected in the price of the widgets everyone else buys. Not fair, right?

There are four ways to fix externalities: 1) make the external cost illegal - in this case, simply outlaw pollution in Widgetville; 2) pass tort legislation to allow lawsuits against the producers of external costs - in other words, allow Widgetvillians to sue the factory; 3) government provision - in other words, having the government take over the widget industry and set prices itself, to compensate for the external cost; and 4) taxes - in this case, creating a widget tax whose proceeds go to compensate for the external cost.

You can probably imagine that there are downsides to all of these. Making widget pollution illegal means no more widget business. Encouraging lawsuits means huge and unpredictable costs on widget producers, which would discourage the production of widgets, not to mention that damages paid would be ex post facto, requiring Widgetvillians to live in a polluted town. Government control of the industry means a lack of competition, which means poorer-quality widgets. Of these, only taxation manages to capture the true cost of widget production while spreading that impact out among the entire widget market. Widget buyers have to cope with a little additional cost, sure - but Widgetvillians are happy and compensated for their loss and the widget producers are still in business and profitable.

To cope with the external costs of the modern food industry, we’ve tried banning pollution and we’ve tried tort law. There are always loopholes in any pollution law, and the tort system would require someone to actually be poisoned by food before external costs can be imposed. Our political culture precludes attempting long-term nationalization of almost all industries, and it’s not a great idea in any case. What we haven’t tried, however, is a small tax that incentivizes local, healthy ingredients over mass-produced “food“. And with modern technology, we can easily create much more precise taxes that get closer to the true cost of a good - for instance, charging a 1-cent tax for every 25 miles an ingredient travels from its source to its retail outlet, which would help account for greenhouse gases released in the transportation process, or a small tax indexed to grams of saturated fat or high-fructose corn syrup - funds that could be diverted to Medicare or tax rebates to save people money on medical care. That way, people still have the choice to eat unhealthy foods, but at least those who do eat healthy wouldn’t have to pay for it down the line.

So, the long answer to the question is that yes, food prices would increase. But there are two important advantages in changing tax law to incentivize healthier foods - first, we’d have a dedicated revenue source to deal with unpredictable external costs, and second, families could opt out of paying those costs by making smarter choices at the supermarket.

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MAY 28, 2009

Like a lot of kids, I grew up in a convenience-oriented culinary environment: Pop-Tarts for breakfast, PB&J for lunch and hot dogs, macaroni and cheese, and a hated, tiny portion of canned vegetables for dinner. My mom’s a good cook, but because my dad usually worked late when I was a kid, she was responsible for most of the after-school hours. Between shuttling me and my sister around to all of our activities, it was a rare night when she was able to invest any serious time in cooking dinner. And since I was a pretty lazy kid, all things considered, it’s not a mystery why, upon high school graduation, I weighed around 250 lbs. Now, I’m a pretty tall guy, so it’s not like that’s morbidly obese or anything, but it’s still significantly overweight.  And so, when I moved out, I started to rethink my relationship with food. I came to the conclusion that it was probably best to avoid foods that couldn’t be replicated in a standard kitchen. So - no more Wendy’s (I don’t have a deep fryer, nor a square mold for hamburgers), no more soda, no more hot dogs and no more Pop-Tarts. It’s not a perfect rule - most kitchens don’t have a pasta maker, for instance, and I do use protein supplements - but as a rule of thumb, it’s not too bad.

My decision came at about the same time writer Michael Pollan wrote this brilliant essay summarizing his dietary advice in seven words: “Eat food. Not too much. Mostly plants.” The first clause, while seemingly the most banal, is actually the most revolutionary. Pollan does not consider many American staples as “food” as such, instead categorizing them as food-like substances, packed with exotic chemicals that do a lot to improve the efficiency of the supply chain but not much to improve our health. Not only that, he believes that many American diets are fraught with ethically-questionable foods, from beef (cows are a non-trivial source of greenhouse gases) to coffee (often grown under exploitative circumstances in developing countries).

There seems to be some evidence that people are agreeing with Pollan.  For example, stores like Whole Foods, which sells predominantly organic ingredients, are outperforming the recession, and Food Network’s viewership is way up, especially among young people. Anecdotally, the number of my friends interested in cooking serious meals at home has skyrocketed.

One wonders, though, when our government will catch up to this groundswell. We have two easily-fixable food problems in the United States: first, our existing food system is heavily biased towards corn, and subsidies provided by the federal government are what make things like high-fructose corn syrup - a calorie-dense sweetener added to thousands of foods - economically viable. And, as recounted in this great piece in The Washington Post, countless urban neighborhoods have no easy access to full-service grocery stores and are forced to eat the kinds of chemically-loaded “foods” Michael Pollan wrote about in his essay. Ultimately, we will pay for what we eat (and do not eat) in the form of increased medical costs and higher taxes to pay for healthcare - it’s time we addressed these kinds of problems head-on.

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JANUARY 15, 2009

It’s a topsy-turvy world out there, according to an interesting piece by Kathleen Parker in the Washington Post discussing the new face of unemployment: young people with higher levels of education.  As Parker points out, a college degree no longer guarantees job security.  What’s an up-and-comer to do?

Consult, apparently.  Instead of falling back on unemployment checks and looking for another permanent position, many of these younger workers are jumping into free-lance opportunities or launching consulting jobs.  Sometimes the work even comes from their recently severed employer.  Tina Brown of the Daily Beast calls this “gigonomics” because these newly-minted independent contractors shift from one gig to another rather than proceed on a straight career path.

I was struck by this trend because I know someone who was laid off and is now “consulting” for her former company.  This would not have been her choice, but what else can she do?  While the insecurity and lack of benefits characterized by gigonomics is certainly a downside, I wonder if these arrangements might actually be a catalyst for great change and innovation in this country.  Yes, the younger generation already expects to change jobs numerous times throughout their careers, but that is not quite the same as having to scramble to make ends meet or to hawk individual talents piecemeal to put a monthly paycheck together.

While just a year ago the story was how to keep Generation Y happy in their jobs, this new environment may prove the spark to tap into their inner entrepreneur, where they might find surprising and unexpected ways to contribute to a new economy.  I read on YPulse about a new book coming out: “Upstarts!: How GenY Entrepreneurs are Rocking the World of Business and 8 Ways You Can Profit from Their Success“by Donna Fenn.  This only confirms to me that the abilities of the upcoming generation are just beginning to be tapped, and perhaps having to scramble to prove themselves won’t necessarily be a bad thing. Innovation is the key to keeping our competitive edge in a global environment, and much of the burden to provide those breakthroughs rests on the shoulders of this generation.

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DECEMBER 22, 2008

With Christmas a few days away, I (like many) have been shopping more than usual these days. And as I’ve been browsing through the stores, I’ve become more aware of the “made in China” sticker stamped on the bottom of nearly every vase, teapot, scarf, and candle I pick up. I suppose these three little words have stood out to me more recently because of the current economic crisis that the United States is facing; like it or not, they have forced me to think more about things like importing, exporting, and outsourcing of jobs, and they’ve made me curious about the whether China is experiencing the kind of financial troubles that we are or not. After a little research, it seems that China’s economy is, in fact, also struggling.

According to Newsweek, China has been a contributor to global expansion for a long time, fueled mainly by export factories that send products over to the United States for retail sale; however, China’s export growth is slowing down dramatically and fell for the first time in seven years last month due to the global economic crisis. Bad news for China, considering exports now account for about 40% of their total output. Much like Americans, the Chinese are not spending the way they have in the past and are planning more for “emergencies”. Experts say that it may be years before they feel like its safe to start spending again. And so it seems that the Chinese economy is weakening right alongside the U.S. economy - further proof that globalization is alive and well.

I wonder what things will be like next year at this time. Will those three little words stamped on the bottom of my purchases be just as easy to find, or will they be a little scarcer? Given that Chinese goods are cheaper than their domestic counterparts, in most cases, I doubt that the volume of imports will decline.

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NOVEMBER 20, 2008

Warren Buffett once said, “My favorite holding period is forever.”  Apparently, James Altucher, President and founder of Stockpickr, agrees with him. He wrote a book called “THE FOREVER PORTFOLIO: How To Pick Stocks That You Can Hold for the Long Run“, and during an interview on CNBC yesterday, Altucher suggested investing in companies providing services in the following areas:

• Obesity: 33 billion dollars are spent each year on services for the obese.

• Dirty Water: Developing countries are finding it much harder to deliver clean water to their growing populations, and companies that sell clean water treatment technologies will thrive.

• Luxury: The rich are recession-proof, and the stocks of luxury producers make a great hedge against any slowdown in the global economy.

Now I’m no financier, that’s for sure, but from a New Persuasion point of view, his advice makes perfect sense. The future looks a lot more predictable when you actually take the time to pay attention and study the trends/issues that are presently hidden in plain view.

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OCTOBER 3, 2008

In case it hasn’t been obvious in my previous posts, I like to write about innovations in public policy. The idea that small changes in rules and practices can produce big benefits for society is fascinating to me.

For awhile now, I’ve been meaning to pick up Cass Sunstein and Richard Thaler’s Nudge, a book about simple policy changes that can be made by governments and employers to encourage people to make better choices. The book is based on two papers authored by the pair in 2003 (sorry, you’ve got to pay for the second one!).

Backtracking a little bit: traditional economics - you know, the Adam Smith stuff - infers that people in general are “rational actors” - that we collectively make decisions based on our own personal interest. That makes sense in a lot of ways, and many think it’s the basis of how human beings act. For instance, I made a rational decision to come to work this morning because I know that: a) I won’t get paid otherwise; and b) I like what I do.

But in the past few decades, a new field has emerged called behavioral economics that investigates people’s irrational desires and actions, and how they affect the larger economy. Some examples of this can be seen in the poor understanding we human beings have of risk - a concept Kelly Stepno works on here at TMG - as well as the current economic crisis, which some believe was caused by an asset bubble driven by media hype rather than actual value.

The goal of Sunstein and Thaler’s work is to change people’s “choice architecture” by introducing policies that gently correct our tendencies toward irrational behavior. For instance, the authors identify savings rates as one area in which humans do not act rationally, and did a study of ways employers could help their employees save more money. They found that businesses who automatically enrolled their employees in 401(k) plans and offered an opt-out provision had dramatically higher savings rates than employers who had opt-in 401(k) plans. Thaler also experimented with a plan called “Save More Tomorrow” that allows employees to set aside parts of their pay raises toward their savings. The principle here is that people are irrationally loathe to give up any of their current income, but don’t have as much of a problem forgoing future gains. In this program, too, he saw the savings rates of participating employees more than triple.

The authors also discuss smaller policy changes, like removing key lime pie from a buffet line, that could help all sorts of pressing issues like obesity, indebtedness, and global warming. The basic theme is that changing people’s “choice architecture” is a way to deal with the irrational aspects of our behavior.

Like I said, I haven’t read the book yet, but I find a lot of the themes very intriguing. Of course, there are objections to this philosophy - who are you to tell me I shouldn’t have key lime pie? - but it’s refreshing to see people thinking outside left-right paradigms when it comes to public policy.

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AUGUST 29, 2008

High gas prices and a global recession looming have changed our buying behaviors… or have they? I know I’ve been more conscientious lately by cutting out a few habits, but it appears that many others have not. The little things that brighten up our days - coffee in the morning, eating out for lunch, online shopping  - can all add up pretty quickly. But the Londoners in this article say, “Eat, drink, smoke, and be merry,” and apparently that’s exactly what we’re doing.

Despite the economic downturn, companies like Hershey Co., Anheuser-Busch, and Philip Morris have all been profitable this year. I guess candy, beer, and tobacco are items we just won’t quit. The luxury items of yesterday have become the bare necessities of today. When the Desert Sun asked Coachella Valley residents what they would not give up during an economic recession their answers included: pets, cars, fitness, dining out, coffee, and chocolate.

During a recession, what are some of your must-have items and which one are first on your chopping block?

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JULY 14, 2008

It’s easy in tough economic times like these to flip on CNBC and just watch everything collapse - connecting the dots from housing crisis to credit crunch to energy prices to food and material costs and wonder exactly how our country plans to get itself out of this mess. It’s also easy to feel powerless before a torrent of awful news streaming to your computer, television, and Blackberry 24 hours a day. We talk a lot about saturation here at TMG - but what role has it played in the economic run-up and subsequent correction?

Robert Shiller, professor and author of the bestselling Irrational Exuberance, argues that the first economy-wide “bubble” - the tech stock run-up of the late 90’s - was fueled in part by real-time stock prices and 24/7 business networks. The constant availability of information, as well as the economic cheerleading encouraged by the networks themselves, made it easier for investors to focus on minutae like price fluctuations and ignore big-picture variables like actual earnings. The irrational decisions made on the basis of too much irrelevant information helped fuel the unsustainable rise in stock prices.

Now that the financial networks are blasting bad news through every conceivable media, how many investors and business leaders are irrationally spooked about the unsteady market? How many have taken a fatalistic attitude towards their business, willing to simply ride the market conditions out to their end - whatever that end may be? What’s more, how many are listening to half-cocked pundits suggesting nice-sounding but potentially disastrous courses for their sector? My guess is quite a few.

I think we, as communications professionals, have two roles to play here:

1) We must find new angles to sell stories to an increasingly-skeptical marketplace. Exuberance for new products will be in short supply for the next few years, and to serve our clients well we must be on top of trends before everyone else and help them capitalize accordingly.

2) We must act internally, and use media monitoring to help our clients cut through the noise surrounding their business. As outsiders, we should be the ones absorbing the torrent of news and passing on what’s important, while clients should be focused on creating solid products and services. Helping our clients maintain perspective on the fundamentals amid swirling economic bad news is key to keeping morale high and eyes focused on the prize.  

I’d really like to start a dialogue here on Undercurrents about how communicators can help companies weather what may be a transformational economic crisis. If you’ve got thoughts, please comment below. If you’ve got a longer thought, e-mail me and I’d be happy to post it on this blog.

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JULY 11, 2008

I am always in a hurry when I am driving to get somewhere.  But while I want to travel fast, at the same time I also would like to help the environment, save on gas, and get my exercise.  What better solution than the bicycle?  If we stop to think for a moment, isn’t that the obvious solution to high gas prices, global warming, and obesity?

The obstacles are obvious, however.  You can’t take your kids to soccer practice on your bike.  The postal service may not be impeded by ”snow nor rain nor heat nor gloom of night”, but I am.  And unless I only have to travel a short distance, I won’t even consider it.

Something needs to happen to make the bike more user-friendly.  First, why not make it electric? Next, make it semi-recumbent with a roof.   Finally, add a passenger attachment for my child.  As it appears, all these things are currently possible.  It won’t be long before someone thinks to put them all together.

If the design is perfect, and I have the will to do it, what will make me take the leap from car to bike?  Peer pressure.  If I look around, and I see that using a bike for everyday transportation is becoming trend-setting, cutting edge, statement-making behavior,  it won’t seem so formidable.  It doesn’t hurt if your favorite celebs are seen setting the stage for the transformation.  Look at Barack Obama - one of the first things he did after clinching the Democratic nomination was to go ride a bike.   

Right now it seems unlikely that I will ever make this transition to a new mode of transportation.  Yet, I hope some day we can emulate the Chinese and make room for both cars and bikes in our lives.  Who knows, maybe someday my electric bike will be parked in my driveway next to my electric car.   

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JULY 9, 2008

Given the contributions that innovations have made to our society, it always surprises me when there is a backlash against an innovative product.

Take for example a new gallon milk jug that has been popping up in the dairy aisles at Wal-Mart and Costco.  The redesign of the jug has many redeeming qualities, but my personal favorite is that this jug is better for the environment.  What sold me on this improved container was learning how absolutely filthy the old milk crates were from birds roosting on them and the 100,000 gallons of water per day that was needed at one dairy simply to clean the remnants of the roosting.  (Need I say more?)  Switching to the new jug has cut water use alone by 60 to 70 percent and has eliminated the need for the crates.  To me, this sounds like innovation at work for the greater good of our society.

Moreover, in her New York Times article, Stephanie Rosenbloom looks at the jug’s innovation from a broader perspective:

The redesign of the gallon milk jug…is an example of the changes likely to play out in the American economy over the next two decades.  In an era of soaring global demand and higher costs for energy and materials, virtually every aspect of the economy needs to be re-examined…and many products must be redesigned for greater efficiency.

But all this innovation doesn’t stop people from complaining about the jug.  Grumblings from “I hate it” to “[i]t spills everywhere” are being heard ‘round the dairy aisles.  However, it seems that companies are listening – at a Sam’s Club in Ohio, a demonstration showed shoppers how easy the new jug is to use.  With or without the demonstration, the negativity won’t stop me – I am keeping my eyes peeled for these gallon milk jugs at my local store.

While changes like the milk jug positively enhance the world around us, some innovations are seen as merely superficial and needless change-for-the-sake-of-change.  In your life, when has innovation been a rewarding experience?  When has it been merely tinkering with something that wasn’t broke and didn’t need fixing?

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