FALL 2017 www.the-ifj.com
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Arvind Veluvali NETFLIX: CONTINUE WATCHING? Is the Streaming Giant in Trouble?
19 Katharine Jessiman-Ketcham COMPETING FOR SWAG What Happens When Fickle Consumerism and Job Hunting Meet
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Amanda Chow THE PRICE OF CORRUPTION How Corruption in the Government can Impact Nutritional Standards in Venezuela
FEEDING CITIES ONE “FARMSCRAPER” AT A TIME Will vertical farming fill the urban population’s demand for food? Page 29
THE IFJ TEAM
DESIGN & LAYOUT
EXECUTIVE BOARD
SHIRLEY LAU, ASHLEY MIN INFOGRAPHICS
MICHAEL JANIGIAN PRESIDENT
PAUL MEUSER HEAD OF DESIGN & LAYOUT
SOCIAL MEDIA & MARKETING
JULIA WATSON HEAD OF SOCIAL MEDIA & MARKETING ARTON DOKIC HEAD OF SOCIAL MEDIA & MARKETING EMILY WINSTON, ESTEBAN SAFRANCHIK INTERCOLLEGIATE EXPANSION
JONATHAN GOMEZ HEAD OF INTERCOLLEGIATE EXPANSION
RUJUL SINGH, VIKAS RAJESAKARAN, AARON SAM, SAM CAI, TEDDY BEAUDOIN
CAMPUS MANAGERS
CALVIN CHU UNIVERSITY OF CHICAGO MANAGER MIRZA UDDIN HARVARD UNIVERSITY MANAGER
BHAKTI VARMA NORTHEASTERN UNIVERSITY MANAGER
THOMAS ANDREWS UNIVERSITY OF NORTH CAROLINA MANAGER
YASH SANGHRJKA UNIVERSITY OF CALIFORNIA, BERKLEY MANAGER
KATHARINE JESSIMAN-KETCHAM PRESIDENT VANESSA ZHANG EXECUTIVE SECRETARY
ALEC FUJI HEAD OF OPERATIONS & EVENTS
MINGYI WU HEAD OF OPERATIONS & EVENTS
JORGE L. MARTINEZ HEAD OF WEB DEVELOPMENT
EMILY WINSTON HEAD OF MARKETING & PROMOTIONS ARTON DOKIC HEAD OF MARKETING & PROMOTIONS DHEERAJ NAMBURU HEAD OF FINANCE
PAUL MEUSER HEAD OF DESIGN & LAYOUT
JONATHAN GOMEZ HEAD OF INTERCOLLEGIATE EXPANSION EDITORIAL BOARD
TIFFANY CHEN EDITOR-IN-CHIEF GILLIAN LEE MARKETS EDITOR
BEN BOSIS TECHNOLOGY EDITOR
VARUN NARAYAN POLITICAL ECONOMY EDITOR BEN WINSTON ON CAMPUS EDITOR SAM CAI COPY EDITOR
OPERATIONS & EVENTS
SENIOR STAFF WRITERS
MINGYI WU HEAD OF OPERATIONS & EVENTS
RYAN MA, ARVIND VELUVALI, BENJAMIN WINSTON, EMILY WINSTON,
ALEC FUJI HEAD OF OPERATIONS & EVENTS
AMANDA CHOW, BILLY FUJI, HEDI XU, JENNIFER ZHANG, PRIYAL GUPTA, SHIBEI GUO
BUSINESS DEVELOPMENT & ADVERTISING
JONATHAN GOMEZ HEAD OF BUSINESS DEVELOPMENT & ADVERTISING ALEX RAFATJOO, WAYLON JIN, SHIBEI GUO MARKETING & PROMOTIONS
EMILY WINSTON HEAD OF MARKETING & PROMOTIONS ILAN BIGIO HEAD OF VIDEO PROMOTIONS
ARTON DOKIC, ESTEBAN SAFRANCHIK, AARON SAM, PRIYAL GUPTA, HEIDI XU, GISELA HOXHA, SIMRAN ARORA
BENJAMIN BOSIS, LIZZY DOYKAN, JAKE GOODMAN, AMANDA CHOW, HALLIE WOLFF
STAFF WRITERS
KIRBY BELMONTE, PRIYAL GUPTA, SALLY PAN, VIKAS RAJESAKARAN, ETHAN SHIRE, ALAN YU
FIRESIDE CHATS
VANESSA ZHANG HEAD OF FIRESIDE CHATS
TYLER LEVIN, NINA ZHAO, ALAN YU, MAX ALWEISS BLOG TEAM
BEN BOSIS HEAD OF BLOG
DIANA DANGOOR, AARON SAM, GISELA HOXHA WEB TEAM
BRENDAN WALSH WEB DEVELOPER ALAN YU WEB DEVELOPER
TABLE OF CONTENTS Markets 7
Arvind Veluvali NETFLIX: CONTINUE WATCHING? Is the Streaming Giant in Trouble?
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Sally Pan THE UNHEALTHY TRUTH BEHIND HEALTHY EATING How the “Clean Eating” Takeover Highlights the Growing Divide Between the Rich and Poor
12 Gillian Lee ORGANICALLY GROWING THE YOGURT MARKET Understanding the Rise of Organic Foods through the Yogurt Market
On Campus 15
Pichael Janigian SLEEP ON IT The Economic Benefits of Sleep
17 Ryan Ma RAIDERS The Raiders Leaving Oakland May be the Worst Thing for the City 19
Katharine Jessiman-Ketcham COMPETING FOR SWAG What Happens When Fickle Consumerism and Job Hunting Meet
Political Economy 21
Amanda Chow THE PRICE OF CORRUPTION How Corruption in the Government can Impact Nutritional Standards in Venezuela
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Ethan Shire LESS IS MORE Why the Trump Administration Needs to Reform Corporate Taxes
25 Michael Janigian THE HAUNTING OF THE GREAT RECESSION How the 2008 Financial Crisis Still Impacts Labor Markets
Technology 29
Emily Winston FEEDING CITIES ONE “FARMSCRAPER” AT A TIME Will Vertical Farming Fill the Urban Population’s Demand for Food?
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Jake Goodman LAST MILE DELIVERY AND URBAN INDUSTRIAL SPACE How to Capitalize on Shifting Urban Distribution Dynamics
34 Tiffany Chen HIDDEN BY DESIGN: THE UNEXPECTED IMPORTANCE OF HUMAN-CENTRIC PRODUCTS Modern Tech Unleashes the Power of Design
Illustrations Paul Meuser
More Than Meets the Eye If the events of this past year have taught us anything it is that it can be far too easy to read a headline, accept a fact, and keep scrolling through our News Feed. The knowledge we have today continues to situate us on an ever-brighter frontier, pushing the boundary of progress and innovating industry, especially in the fields of medicine, finance, and business. At the same time, technological pace and the speed with which news and information is dispersed and consumed can be impossible to keep up with. This is especially problematic when there is more than meets the eye. In this edition of the Intercollegiate Finance Journal, we will explore topics where things may not be as they seem. Taking you through these subject matters will help you appreciate and understand the various pieces that come together to make the whole picture. By digging deeper, we hope that you will take the time to slow down every once in awhile and uncover the driving forces behind individuals, institutions, and markets. We would also like to invite you to take a deeper look into our organization itself with some exciting new initiatives we will be starting this fall. We are particularly excited to announce that we have launched the IFJ Blog, now available on our website, which is part of an initiative to make the IFJ open to any student at any undergraduate institution in the United States. This curated content will focus on current events specifically as they relate to topics of Political Economy, Markets, Technology, and Startups & Careers. We would like to thank the founding team of the Blog: Ben Bosis, Diana Dangoor, Aaron Sam, and Gisela Hoxha. Their enthusiasm and commitment embody the entrepreneurial spirit the IFJ is built on. We will also continue to support engagement across all of our chapters. The Brown University chapter will be launching a lecture series (“Fireside Chats”) with selected professors on campus. We hope you will find this platform and discussion space to be an engaging, fun, and interactive way to have conversations both within the IFJ and with students who typically see the word “finance” and run. Current topics coming down the lecture pipeline include Public Choice Theory, International Political Economy, and Personal Finance. You may expect the first of the series with Professor Daniel D’Amico on October 18. We are proud to offer a platform for intellectual discourse and connection to a better-informed and inspired student body. Cheers, Katharine, Mike, and Tiffany
Netflix’s overarching problem is something that can be learned in any freshman economics class: in a competitive market, all players are price takers.
% of respondents who use the folowing services to access TV content online Netflix
63%
TV Network Website
49%
Hulu
35%
Amazon Prime
28%
iTunes
25%
HBO GO
24%
XFINITY
14%
Hulu Plus
11%
TV Links
10%
Sidereel
6%
The Pirate Bay
3%
Other
9% 0
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
International Netflix Subscriptions Surpass U.S. 120
International
INTERNATIONAL
100
UNITED STATES
80 60
U.S.
40 20 0 2013
2014
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2015
2016
2017 1000logos.net
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Arvind Veluvali
NETFLIX: CONTINUE WATCHING? Is the Streaming Giant in Trouble?
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here is no doubt that Netflix has fundamentally changed the way we consume content. From its beginnings as a DVD shipping business (remember those red envelopes?) to its current form as a streaming behemoth, Netflix has transformed the entertainment industry. Netflix’s innovative spirit, coupled with its massive subscriber base, makes its stock (NFLX) an enticing buy for investors. However, Netflix may be standing on far weaker ground than it appears, and investors should anticipate a costly reworking of the business model if the company is to remain on top.
The original content approach is considerably riskier for Netflix. When the company licenses content from others, it can be selective, picking shows and movies that have garnered critical acclaim or have established fan bases. This in turn makes buying Netflix an attractive value proposition for new subscribers: to revisit old favorites, or to discover new ones. However, this model flips with original content. Shows are expensive to produce, and very hit-or-miss: they either find an audience, or they crash. Dozens of new shows are cancelled every year, and Netflix isn’t immune to this. Girlboss, Sense8, Marco Polo, and The Get Down (the latter three cost in excess of $100 million apiece to develop) are some of the numerous Netflix originals to get the axe, with several executives citing the need to get a better return on investment.
A Content Problem “There ain’t no party like a Liz Lemon party, because a Liz Lemon party is mandatory.” Evidently not. 30 Rock is just the latest show to be leaving Netflix (on the heels of favorites like How I Met Your Mother and Scrubs), not to mention all of the movies that have come and gone over the years. Netflix has acknowledged this problem, replacing the lost shows and movies with original content. Plugging the leaks in content, however, is easier said than done.
A Specious Indicator This year, Netflix is aiming to spend $6 billion on original content. To some, this might not seem to be a problem. Netflix has 104 million subscribers, and that number is only growing; 5 million of those came
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Netflix’s business model is like an ouroboros: it needs subscribers to finance its operations and acquire new content. This, in turn, allows it to gain new members, and the cycle continues. As is evident from the graph, however, domestic subscriber growth is down from around 25 percent in the fourth quarter of 2012 to just 7 percent in the first quarter of 2017; international subscriber growth has leveled off from around 230 percent growth to around 50 percent growth in the same period. This decline means that Netflix will invariably have insufficient funds to pursue new content in the future,
and as a result will level off or even decline in subscribers. The Free Market Decides There is a reasonable alternative that one might suggest: rather than adding new subscribers to fund growth, Netflix could simply raise the fees paid by its existing members. However, the market has changed since Netflix entered, making this move virtually untenable. When Netflix established itself as a streaming service, it was the first of its kind. Since then, the market has expanded substantially, with competitors including Hulu, Amazon Prime Video, Showtime, HBO Now, Sling TV, to name just a few. Disney, which just backed out of a deal to put its catalog onto Netflix, is coming out with its own streaming service. The sheer amount of competition is a disaster in the making for Netflix. If, in 2010, a network like NBC wanted to stream its shows, it could go only to Netflix; now, it has dozens of alternatives,
resulting in bidding wars between streaming companies over licensing agreements. Netflix’s overarching problem is one that can be learned in any freshman economics class: in a competitive market, all players are price takers. Pricing power has been severely restricted in the face of its newfound competition. Without control over prices, Netflix can no longer afford to do the things that have traditionally made NFLX stock lucrative for investors: garner new subscribers, invest in original shows and movies, and maintain its existing catalog. NFLX stock is currently trading over $180. However, this constitutes a severe overvaluation of the stock. Investors will not shoulder losses over content indefinitely, and when stock price finally reflects the fundamentals of the business and not flashy statistics like the astronomical subscriber base, Netflix will be in for a rude awakening.
showboxcaptcha.com
last quarter. If subscriber growth could offset the cost of producing new content, one could make a strong case for Netflix’s exorbitant spending. However, while the subscriber base is expanding, it is doing so at a diminishing rate. Indeed, the original-content approach is causing Netflix to hemorrhage money, as original content costs far outpace subscriber growth.
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Sally Pan
THE UNHEALTHY TRUTH BEHIND HEALTHY EATING How the “Clean Eating” Takeover Highlights the Growing Divide Between the Rich and Poor
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ncome inequality in the United States is a glaring issue, and as the gap between rich and poor
has widened over the years, so has the divide in the way they eat. On the surface, data shows that Americans’ diets have been improving overall. However, it is becoming evident that the growing obsession with clean eating may only be improving diets for a few. Those who are able empty out their pockets for freshly-pressed juice, kale salad, and the latest fitness trends, while low-income Americans show relatively little progress in their diets. The prices for healthy food have become exorbitant, leading the
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average American to view “clean eating” and new nutritional guidelines as luxuries they simply cannot afford. Eating Clean for the Insta Much of the “clean eating” craze can be attributed to the rise of food photography and widespread celebrity endorsements on social media. These posts involve photos of fruit, acai bowls, salads, and the occasional motivational quote. The phrase itself originally implied the concept of
eating whole and unprocessed foods, such as vegetables, fruits, and whole grains. It also emphasized cooking at home with wholesome ingredients. Today, however, the term finds itself associated with health fads and weight-loss diets such as juice cleanses, and weight-loss bars. With this new definition, the concept of “clean eating” became increasingly elitist. Companies market healthy food by glamorizing plates of salmon and ancient grains, toting organic, vegan, and gluten-free products, and emphasizing low caloric content. However, many of these healthy food choices are unaffordable to a large portion of Americans. In a study from University of Washington, researchers conclude that diet costs directly affect socioeconomic disparities in diet quality. The focus on eating clean as the only way of achieving a healthy lifestyle further exacerbates those disparities. Income Inequality
Brown University’s campus. The replacement of Johnny Rockets by B. GOOD on Thayer and the construction of by CHLOE where Au Bon Pain once stood are demonstrations of the evolution of consumer culture. Fancier chains capitalize on the the media’s obsession with health and wellness. Rather than focus on how to make unaffordable healthy food more accessible for the low-income bracket, companies are instead devising newer trends to earn more profit. Furthermore, the rising popularity of fancy workouts, training programs, and speciality gyms, such as CrossFit, Pure Barre, and SoulCycle are intensifying the emphasis on spending money as the only means to be healthy. Based off a report from the International Health, Racquet, and Sportsclub Association (IHRSA), high-end boutique fitness studios occupy 35 percent of the $25.8 billion fitness market. Specialized classes can range between $20 and $40 per class, while monthly passes exceed the membership prices at typical gyms. For those who are burdened
According to Hilary Seligman, an assistant professor at the University of California, San Francisco, “Almost 15 percent of households in America say they don’t have enough money to eat the way they want to eat.” With prices rising as the focus on clean eating intensifies, “recent estimates show 49 million Americans make food decisions [primarily] based on cost,” Seligman said. The reduction of options for this group can be seen with the rise of healthy fast food chains and expensive fitness trends, as more and more companies market their food as a status symbol. The increased presence of high-end fast food can be observed even on
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with bills to pay and mouths to feed, splurging on fitness classes is often of reach. For those who do decide to shell out, the commitment to fitness often means making sacrifices to meet basic fitness goals. The days of signing up for an affordable membership at the local recreation center are fading away as carrying a card to the fanciest gym in the neighborhood says much about your social status. B-A-N-A-N-A-S Although expensive “healthy food” is very prevalent today, some large companies and grocery chains are taking measures to make clean eating attainable for everyone. Whole Foods started taking into account the availability of healthy food in lower-income communities as part of their process to determine where to open new locations; it is also pursuing its plan to open new 365 stores that feature both organic produce and more affordable in-house-label items. Aldi, another grocery chain, upped its healthy, organic, and
low-cost offerings in recent years by opening locations in “food desert” areas.
Healthy eating should not be defined simply by how much money you can spend on your own health. The current emphasis on health trends and the marketing of expensive diets make health appear to be a one track path, making it difficult for average Americans to afford organic and “clean” foods. Although Americans are more aware of their health and well-being, the increased demand for healthy foods will continue to inflate prices until more individuals realize it just might be ok to pass up the avocado.
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This summer, Amazon shocked the world by announcing its 13.7 billion acquisition of Whole Foods. Amazon and Whole Foods recently announced in a joint statement that “the two companies will together pursue the vision of making Whole Foods Market’s high-quality, natural and organic food affordable for everyone.” One of the goals of Amazon’s acquisition of Whole Foods is to continue to lower prices at Whole Food stores, as well as offer special discounts and in-store benefits to Amazon Prime members. A few days following the close of the deal, Amazon began slashing prices on popular organic produce items. For example, organic whole trade bananas dropped from 99 cents a pound to 69 cents a pound. With the prospect of lower prices and the emerging grocery delivery market, the acquisition seeks to redefine the process of purchasing food. By doing so, the two companies can help make organic and fresh produce more accessible, using their innovations to benefit more levels of consumers.
As a new generation continues to change its tastes, large dairy companies need to adopt the
organic trend or else risk entirely losing a brand and a reputation that took decades to build.
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Gillian Lee
ORGANICALLY GROWING THE YOGURT MARKET Understanding the Rise of Organic Foods Through the Yogurt Market
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n 2002, Yoplait launched a TV commercial set to the tune of “Itsy Bitsy Teenie Weenie Yellow Polka Dot Bikini”, which featured a woman eating Yoplait yogurt as she prepared to slip into a yellow polka dot bikini. Back then, it was hard to turn on the TV without hearing the tune at least once. Yoplait was a king of the U.S. industry. Yoplait and Dannon were two brands that every household was likely to consume, and their products were loved by adults and children alike. Over a decade later, Yoplait and Dannon are struggling to keep themselves relevant in an era marked by millennials obsessed with healthy, organic food. As a new generation continues to change its tastes, dairy companies need to adopt the organic trend or risk entirely losing a brand and reputation that took decades to build. Yogurts of the World As the health conscious trend has taken off in the past few years, the products that have garnered the
most attention on popular media have been the leafy kale greens, cold pressed juices, and bowls of grains and granola. The growth of the yogurt market, however, has been greatly passed over on Instagram, perhaps due to yogurt’s less photogenic nature. Yet, walk down the yogurt aisle in the grocery store and it becomes evident that the selection of yogurt has exponentially grown over the last few years to include a variety of brands that all claim to be healthier organic alternatives to the likes of Yoplait and Dannon. Thought there was only one type of yogurt? Think again. Now you can try Greek yogurt, Icelandic yogurt, and French yogurt, all of which can be found at not just fancy natural food stores, but at all supermarkets. According to Siggi Hilmarsson, founder of Siggi’s, which is known for its Icelandic-style yogurt called skyr, his yogurt is thick, creamy, and richer in protein and lower in sugar than any of their competition. Hilmarsson began his brand because he was tired of the sugary taste of American yogurts, and it appears that the rest of the population is getting tired of it too. In 2007, just three years after he started making his own yogurt, Hilmarsson was invited to pitch his yogurt to Whole Foods. He was able to get his product placed on the shelves of a few select regional Whole Foods. Today, Siggi’s Dairy is one of the fastest-growing national yogurt brands, and is available in over 11,000 grocery stores including Target, Wegmans, and of course, Whole Foods. Siggi’s isn’t the only yogurt brand tapping into changing consumer preferences for thicker, healthier
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alternatives to yogurt. Noosa, another yogurt brand gaining immense popularity, claims on their website that they use the freshest milk, pure clover alfalfa honey, and farm fresh fruit in each tub of yogurt. Yoplait has even attempted to hop onto this trend by introducing Oui, a French style yogurt that is thick and subtly sweet and comes packaged in a delicate glass jar. Within school dining halls, the yogurt brands students can choose from are either Chobani greek yogurt or a fresh, local brand of yogurt. This is certainly a departure from the tried and true plastic Yoplait containers with the red and blue aluminum foil lids. Consumers now have an incredible number of yogurt choices, and unless the conglomerates innovate, they will lose the market share. Falling for Organics While brands such as Siggi and Noosa were breaking out onto the scene and experiencing incredible growth in sales and revenue, the age-old household brands, such as Yoplait and Dannon, found themselves falling behind. One way they’ve attempted to regain footing in the market is by becoming trendy and going organic as well. The traditional yogurt giants have had to embrace organic products in an attempt to stem the flowing tide of customers. Acquiring an organic system is an incredibly expensive process that involves numerous inspections from the USDA before receiving the official certification. Rather than start from scratch, corporations seeking to include organic food in their portfolio of products are acquiring small
Rather than start from scratch, corporations seeking to include
organic food in their
portfolio of products are acquiring small organic food
companies – essentially purchasing a readymade organic
ecosystem in the process.
organic food companies – essentially purchasing a ready-made organic ecosystem in the process. In April 2017, Dannon, a dairy giant known for the brands Activia and Actimel, acquired WhiteWave, a Denver based packaged food company known for brands such as Horizon Organic Milk, and Wallaby Organic Yogurt. The deal was valued at $10 billion, and was strategically done, as purchasing the company was the cheapest way to integrate in new product lines. Similarly, General Mills, which is known for Yoplait, has suffered from falling sales as customers change their eating habits. In response to declining numbers, General Mills acquired Annie’s Homegrown, known for its organic meals and snacks, for
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$820 million in 2014. With the acquisition, General Mills could then claim that it offers products completely devoid of artificial flavors, synthetic colors, and preservatives, which had become a growing concern amongst consumers. But simply acquiring an organic system is not enough for traditional yogurt giants to regain market share. As millennials fall further and further into the craze for eating healthy and organically, these companies will have to continue evolving their strategy in order to stay afloat. Activia was certainly a novel product for Dannon, but in order to compete with the Siggi’s and Noosa’s of the yogurt world, a new, revolutionary yogurt will have to be developed.
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Pichael Janigian
SLEEP ON IT The Economic Benefits of Sleep
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Assuming there are diminishing marginal returns to hours worked in a day, it is possible that trading an hour or two of work each day for more sleep could actually increase worker efficiency, particularly in time-demanding jobs (such as investment banking and consulting).
he most successful men and women in the world routinely wake up extraordinarily early. Apple CEO Tim Cook reportedly wakes up to check his email every morning at 3:45am; that’s the same when some college students are heading to sleep! While she was former first lady of the United States, Michelle Obama woke up at 4:30am to work out and kick start her day. While you may think that these people are just superhuman and can run on almost no sleep, you would be wrong. In fact, many of these world leaders understand how important a full night of sleep is and the significant impact it can have on school and workplace productivity.
Being Tired Could Get You Fired Many people across the United States feel as though they don’t get enough sleep and admit that it affects their work life. An interesting study at Harvard Medical School actually found that serious sleep deprivation had such a negative impact on one’s mood, ability to focus, and memory that inebriated individuals outperformed sleep deprived ones in completing basic tasks. Moreover, a Sleep in America poll found that 29 percent of people said they had fallen asleep at work in the previous month and 12 percent were late to work because of sleepiness. Individuals also reported getting one less hour of sleep per night than they feel they should. Prioritizing sleep may save you from getting chastised at work and give you an advantage over your sleep deprived workmates.
Putting a Price on Sleep Everyone feels better after a good night of sleep, so imagine how you would feel knowing that it can increase earnings potential. Researchers from Williams College and the University of California at San Diego have found that a one-hour increase in weekly sleep was associated with an increase in wages by about half as much as an additional year of education (or about 5 percent in the long run). To be clear, however, it is not true that if you sleep more you will magically start earning more money. The relationship between sleep and earnings is much more complicated and subtle. Nevertheless, this study points out the importance of including sleep as a determinant of productivity.
Caffiends Since sleep is perceived to be such a valuable, yet expensive, asset, it makes sense that people try to find a way around it. And what’s the most popular drug
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to cure your sleepiness? Caffeine of course! Unfortunately, caffeine is not a perfect cure for sleep deprivation. When you fall asleep, your brain works hard to rid itself of toxic proteins that are built up throughout the day. These proteins impair your ability to think and raise stress levels. Caffeine cannot rid the brain of these proteins, only sleep can. Additionally, having one to two cups a day may not seem like much money in the short run, but over the long haul it adds up to a significant amount of money. The average American will spend about $1,100 on coffee annually. Binge Netflix, Not Sleep Another potential solution that people turn to is binge sleeping on the weekend. While it is better than not gaining back the sleep you have lost, it will still cost you the following week. Sleep operates by something called a circadian rhythm. The circadian rhythm refers to your body’s internal clock for knowing when
to go to sleep and when to wake up. By binge sleeping on the weekend, it throws off your body’s clock and changes the rhythm. When you go back to work on Monday, it may make the day extra difficult to get through. Health and Wealth Most importantly, sleep deprivation can have serious health repercussions, like an increased risk of heart disease and high blood pressure, which is not typically discussed in United States’ society. Though everybody requires different amounts of sleep to feel well rested based on specific biological characteristics, it is typically between seven and nine hours a day. The bad news is that there is no way to cheat the system—if you want to be like Tim Cook or Michelle Obama, the only answer is to go to sleep earlier and wake up earlier. The good news is that not only will getting more sleep mean you will feel better, but there are sizeable economic benefits to go along with it.
IFJ Editor Team at its finest
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Ryan Ma
The Raiders Leaving Oakland May be the Worst Thing for the City
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n March of 2017, National Football League (NFL) team owners agreed to relocate the Raiders from Oakland to Las Vegas by 2019. The Raiders, disgruntled by their current home at the Oakland Alameda Coliseum, abandoned their loyal fan base in lieu of greater economic prosperity in Las Vegas. Though the anticipated increases in stadium revenue, total viewership, and television advertising revenue will greatly benefit the Raiders, the NFL, and the city of Las Vegas, one group could be left in ruins: the city of Oakland. Setting the Stage For Change Surprisingly, this is not the first time the Raiders have moved home stadiums. For twelve years, the Raiders endured great success in Oakland
with ten consecutive winning seasons, one Super Bowl championship and one of the largest fan bases in the NFL. However, with a deteriorating stadium and no foreseeable renovations on the horizon, the Raiders opted to move to Los Angeles and fill the Rams’ old stadium. In order to persuade the Raiders to return home, the city of Oakland spent $220 million on stadium renovations, which included increased seating and a new training facility. Wooed by stadium renovations at the Oakland Coliseum, the Raiders returned to Oakland in 1955. In March 2017, the Oakland Raiders proposed to move stadiums again, this time to Las Vegas. The move was partly for strategy and partly for the glamour; after all, an upscale stadium was being built in Las Vegas. The Raiders’ current stadium, known as the Oakland Alameda Coliseum, is a multipurpose stadium. It hosts both the Raiders and the Oakland Athletics, Oakland’s professional baseball team. The outdoor stadium seats just over 56,000 fans, still has Bermudagrass, and was last renovated in 1996. In comparison, the new Las Vegas Raiders stadium will be a domed complex, with a turf playing surface with seating for approximately 65,000 fans. Even more appealing, the city of Las Vegas has agreed to provide $750 million in funding for the construction of the $2 billion stadium. It’s clear that this move will greatly benefit Raiders owners, Raiders players, and the city of Las Vegas. The new luxury stadium will rebrand the Raiders and may even attract better players to the team who are eager to play in a new facility, amongst a new
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football crowd. Las Vegas may soon begin to attract a different type of tourist- one drawn to the stadium over the casino. Effect: Gentrification, Marginalize the locals, Crowding Out Beneath the facade of economic prosperity and market expansion, however, there are indications that this relocation could financially and socially threaten the stability of the city of Oakland. By pulling out of Oakland and relocating, the Raiders will socially and economically ruin the city of Oakland. The Raiders stadium is located in East Oakland, which is notorious for housing numerous gangs and drug wars, and is ranked the third most dangerous city in the United States. This region is much more impoverished than west Oakland and is home to many blue collar workers. According to Almeida County Public Health Department, over 48 percent of residents have a yearly income of less than $30,000 a year and almost 45 percent of adults did not graduate high school. By relocating the Raiders, hundreds of blue collar and minimum wage earning workers would lose their jobs as the Coliseum provided numerous minimum wage and low paying jobs to the area. The relocation of the Raiders may be beneficial, however, in the prime real estate up for grabs. California currently is home to numerous tech companies, including those such as Apple and Google. According to CNN, it is possible that one of these companies may take advantage of the vacancy and establish a campus in Oakland. Currently, Oakland, which is situated across the bay from
San Francisco, is approximately ten times the size of San Francisco but only has fifty percent less people. In addition, property value is much lower in Oakland. A $1.1 million home in San Francisco would run you closer to $787K in Oakland, for the same exact house. At first glance, this may seem beneficial for companies and the city as it will bring in higher paying jobs, diversify the population in terms of background and education and allow for companies to minimize costs. However, large multinational corporations establishing offices in Oakland could lead to a crowding-out effect for the city’s residents. Rather than create jobs for the blue collar locals left unemployed from the Raiders move, these corporations will employ individuals from other regions of the country and cause an increase in real estate prices and consumer prices. Neighborhoods may also be gentrified, marginalizing locals. Although changing the city to be more progressive and tech focused may seem like a smart and innovative idea, the subsequent gentrification may lead to hundreds, or even thousands, of unemployed individuals falling into the welfare safety net or turning to crime, further destroying the social structure and economy of Oakland.
be paid overtime to work detail. But as it should be, hard work is rewarded. According to Forbes, the Raiders brought in $321 million in revenue in 2016. Although much of this money goes to paying players and coaches salaries, stadium costs and other administrative debts, a small portion of this is rolled back into the city in the form of taxes. This money can be used to pay for expenses related to games, such as aforementioned police detail, and all excess funds can be kept to pay for other city expenses, such as textbooks for schools or teachers’ salaries. Because of lower team revenue, less money gets poured back into the city to cover operating expenses and may actually cost the city money as game days become increasingly more and more expensive. However, this excuse is becoming less valid by the day. Per Pro Football Reference, 2016 was the first winning season for the Raiders since 2002. According to Bleacher Report, the Raiders are projected to have another winning season on the back of quarterback Derek Carr and finish the regular season 11-5 and make a push for the playoffs for the second year in a row. If the Raiders improve and become a team that regularly sees the playoffs, team revenue will increase. Tickets prices will rise, concession
prices will rise, the volume of merchandise will rise and games will become more and more likely to be broadcasted nationally. Don’t Stop Me Now One of the more commonly overlooked facts is that the city of Oakland is still paying off bonds used to finance the Coliseum’s renovation in 1996. The current debt total to still be paid is around $83 million. If the Raiders continue to generate more revenue through winning seasons, money poured into the city can be used to repay outstanding debts, rather than burdening taxpayers. Staying in Oakland may also prove to be cost effective for owners in the long run. There is already a stadium in place, so start up costs are nonexistent, and Oakland will benefit from the increased team revenue that will cover the cost of games, while leftover funds can be used to improve the city as a whole. An honorable captain never abandons his ship. Rather than leaving and economically crippling the city of Oakland, the smartest move for the Raiders would be to stay put and watch the organization grow after weathering the storm for years.
It’s no secret that having a sports team is a lot of work for both its owners and the city. For starters, you have to build and consistently renovate a multimillion dollar stadium. In addition, you have to staff the stadium with hundreds, if not thousands, of workers. On game days, traffic patterns are negatively affected for hours and police have to
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http://www.mercurynews.
The Winningest Winnings Yet
Katharine Jessiman-Ketcham
Desperate to attract new employees, even the
COMPETING FOR SWAG
glittering facade to attract the cream of the
What Happens When Job Hunting and Fickle Consumerism Meet
L
eaves turning to shades of red, scents of pumpkin spice in the air, and the sound of a printer spitting out six copies of your resume...it could only be time for the fall Career Fair. We get it: career fairs are lame and incredibly nerve-wracking. But recent evidence suggests that while your palms are sweating in anticipation of having to introduce yourself to a future employer, your competition may not be as competitive as you once thought. Or at least, they’re not competing for the same thing you are. In fact, there is a recent trend sweeping college Career Fairs in this nation and it has to do with one thing only: SWAG. How’d We Get Here? What is one thing that prospective employers have to offer that is not immediately obvious? Free totes, t-shirts, and pens (and apparently even pajamas and speakers in the case of one particular Wall Street Hedge Fund). As you stand next to your fellow classmates and hear them introduce themselves with all the confidence and poise you tried
job process itself has become a spectacle, a crop no matter the cost.
to channel in your bathroom mirror this morning, you marvel at their confidence. The laidback, eager-eyed junior who you are sure is there to snag the internship is actually a senior with post-graduation plans all mapped out. They are making introductions and dishing out their elevator pitch, but for many that is just their cover. They have come for the coveted and free paraphernalia on the table that stands between you and the recruiter in front of you. My Mama Made Me When asked later, that senior may reveal her true identity; she may even divulge the reason for her mission. You’ll be surprised because it’s not dissimilar from yours: she came because her parents made her. Let’s be clear, her mom wanted the free t-shirts that companies hand out. Her Dad asked for anything that could be hooked up to Bluetooth. And for herself? She had lost the tote that she usually uses to haul books to the library; she left ecstatic to have found one at the booth of a Blockchain tech startup. And it’s not just seniors. The sophomores who can’t apply for those junior summer internships are also getting in on this free-for-all. After visiting the sole booth relevant to them, two sophomore roommates work
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the room, leaving with a haul that even Blackbeard himself would have marvelled at: flashdrives, sunglasses, sweatshirts, Microsoft t-shirts, pens, candy, water bottles, foam wallets, keychains, bottle openers, keychains that are also bottle openers...you get the picture. So, when did Career Fairs turn into Christmas mornings? In a job market where technology continues to outpace industry—where Google offers you not just a salary, but lunch, play, and friends to hang out with— careers have turned from vocations that support our aspirations and duties into consumer commodities themselves. In a world in which competition has never been so near the edge of mutual combustion, where banking is losing out to technology and startups are snatching up the future engineers, U.S. companies across the board are scrambling to maintain their share of the talent market. Desperate to attract new employees, the job process itself has become a spectacle, a glittering facade to attract the cream of the crop no matter the cost.
http://www.todayonline.com/
Venezuela’s corrupt government has a far more insidious effect than a tumultuous political climate: its citizens’ health and well-being are being impacted as well.
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Amanda Chow
THE PRICE OF CORRUPTION How Corruption in the Government Impacts National Health in Venezuela
I
n Caracas, the capital of Venezuela, the streets are thronged with hundreds of thousands, their shouts echoing for miles. Protesters bearing the Venezuelan flag clash with police. There are many voices, but the voices carry one refrain. The people are furious, and they demand change. Equally massive demonstrations have taken place across Venezuela throughout all of 2017. Large crowds of Venezuelans have taken to the streets to voice their deep discontent with the current regime, headed by President Nicolas Maduro. Maduro’s illegal actions have resulted in a constitutional crisis and a series of widespread anti-government protests. But Venezuela’s corrupt government has a far more insidious effect than a tumultuous political climate: it is even impacting its citizens’ basic ability to feed themselves.
shortages, and increased homicide rates. President Nicolas Maduro succeeded Chavez on March 6, 2013. Maduro has since disregarded the constitution by asserting his rule over the democratically elected legislative body, the National Assembly. He has unconstitutionally passed a resolution allowing him to strip the National Assembly of its powers and grant himself immunity from the law. Millions of citizens have protested against this unconstitutional seizure of power and these major demonstrations are still ongoing. The problem of food shortages has only been exacerbated since then. Amid the political disruptions, food is scarcer than ever before, and Venezuelans are becoming increasingly malnourished as they are forced to eat fewer meals. Everything is Fine on the Surface
A Gathering Storm
At first, it appears that Venezuela has experienced a period of relative prosperity despite its corrupt regimes, and the issue of national hunger seems to be absent. From 1999, when Chavez took office, until present, the gross domestic product (GDP) per capita of Venezuela actually increased overall. It has begun to decrease in the past four years, but the GDP per
In its recent history, Venezuela has been plagued with political turmoil and corruption in the government. Hugo Chavez, who took office in 1999, led the country into a period of growth and increased standards of living thanks to oil revenues. However, his controversial rule ultimately ended with poverty, food
21
capita is still higher than it was in 1999. When one considers GDP data alone, it would appear as if Venezuela has experienced prosperity and relative stability over this period. Unfortunately, this GDP data only reveals an incomplete picture of the state of the country. This illusion stems from the fact that GDP does not fully reflect the conditions in a country’s society; though it sometimes correlates with increases in the standard of living, it is still an imperfect measure of a country’s well-being. Venezuelan GDP growth belies the serious food shortage that has persisted and worsened in Venezuelan society. This correlates not with GDP, but with increasing levels of corruption in the government. Something is Rotten in the State of Venezuela Benchmarks of social welfare such as inflation and the availability of food have fared far worse than GDP; one metric that this trend correlates with is the level of corruption in the government, which the Corruption Perception Index quantifies. Published annually by Transparency International, the corruption index measures the abuse of the public sector for private benefit, on a scale from 0 to 100. A score of 100 indicates an ideally “clean” and fully transparent government, and a score of 0 indicates that corruption is rampant. The index in Venezuela has been on a steady decline since 1999, a trend which reveals that the Venezuelan government has been plagued with increasingly serious levels of corruption. In the initial few years of Chavez’s presidency, the corruption index reached its peak of 28,
Venezuela’s best score on the index. But this period of relatively little corruption soon ended and the index has either decreased or remained nearly the same in every year since 2001. Nicolas Maduro, Venezuela’s current president, took office in 2013, and the corruption index has plunged since then. Currently, the index is 17, Venezuela’s worst score in 18 years. Food Shortages Venezuela’s skyrocketing corruption has coincided with decreasing food supplies, and it is the proliferation of corruption that is responsible for much of the problem. In 2014, Venezuela faced its first food shortage crisis, and to address the issue, the government began implementing rations. Across the nation, long lines stretched from the doors of markets and shops, where people queued for hours on end before receiving their rations. This rationing system has been in effect since then, and is exacting a severe toll on public health, leaving much of the country malnourished. In 2015, 11.3 percent of Venezuelans ate two or fewer meals per day, and this number rose to 32.5 percent in 2016. 72.7 percent of Venezuelans surveyed reported that they
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lost weight in the past year, and this weight decrease was, on average, 19 pounds (8.7 kg). While the government has promised to take steps against food shortages by using biometric scanning to deter theft and smuggling, such words are hollow. In actuality, Maduro has appointed the military to control food distribution, and the process is rife with corruption. Military leaders have been taking bribes and trafficking food; one anonymous businessman admitted to the Associated Press that he obtained a contract from the government under the condition that he would give kickbacks to government officials. Unless the fundamental problem of deeply rooted corruption is addressed, the persistent food shortages will not be resolved. Out of Reach Even when food is available in private markets, it is prohibitively expensive for all but the wealthiest. Adding to the food shortage crisis, Venezuela has also experienced hyperinflation, and prices have more than doubled in the past year. The average yearly salary in Venezuela is 97,531 bolivars—a bottle of maple syrup alone costs 95,230 bolivars.
Source: Juan Barreto / AFP - Getty Images
Venezuela Corruption Index
30 28 26
Points
The same product only cost 10,000 bolivars in 2016. Caught between inadequate provisions from the government and outrageous prices at private supermarkets, millions of Venezuelans have no choice but to go hungry for another meal.
24 22 20 18 16 1998
2001
2004
2007
2010
2013
2016
Venezuela GDP per Capita 15000 14000
12000 11000 10000 9000
1998
2001
2004
2007
2010
2013
2016
Inflation Rates in Venezuela a from 1999-Present 200
150
Points
Caught between the Scylla of inadequate provisions from the government and the Charybdis of outrageous prices at private supermarkets, millions of Venezuelans have no choice but to go hungry for another meal.
Points
13000
100
50
0
2001
23
2004
2007
2010
2013
2017
Ethan Shire
LESS IS
MORE
WHY THE TRUMP ADMINISTRATION NEEDS TO REFORM CORPORATE TAXES
T
hroughout his campaign, President Trump promised to serve the American worker and bring back American industries that have fled abroad in recent decades. In order to reinvigorate American businesses, the Trump administration has stated their commitment to slash our present corporate tax rate of 35 percent, one of the largest in the developed world, to 20 percent, which would put the U.S. below the average global corporate tax rate. However, the administration is facing numerous political obstacles in addressing these cuts and the viability of such a proposal in Washington is still unclear. Simply put, the corporate tax rate is defined as the tax on capital earned by businesses and corporations. A more competitive corporate tax rate would benefit the labor market by increasing both wages and employment rates. A reduction in the corporate tax rate by 15 percent, which the Trump administration is proposing, would result in a 2-10
percent reduction in long term unemployment, and a near 12 percent increase in income . There is a misconception that corporate tax reform would benefit executives and CEOs and leave workers by the wayside; in reality laborers bear the brunt of the corporate tax burden, not shareholders. According to an August 2006 Congressional Budget Report, 70 percent of the corporate income tax is imposed on laborers. Comparative data on corporate tax rates for other advanced economies bolster Trump’s argument that the U.S. needs to restructure its current policy. The corporate tax in the United States today is 35 percent, but that figure increases to 39.2 percent after state taxes are accounted for; putting United States significantly behind the worldwide average of 22.5 percent. Ireland, for example, where Apple’s European headquarters are located, sports a corporate tax rate of 13 percent, with which the U.S. currently cannot compete. A lower tax rate would provide corporations with greater profits after tax and incentivize businesses abroad to move to the United States and hire American workers. Home Investment Corporate taxes are the third largest revenue source for the federal government, and members of Congress across party lines are rightfully concerned that a serious slash in the corporate tax rate, if not met with equal cuts in spending, will lead to an increase in our $19 trillion national debt. These concerns are merited and ought to be taken seriously. By cutting the corporate tax rate, however, the U.S. can expect to
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increase investment, offsetting at least a portion of the lost revenue. Moreover, we can look to our friends across the pond to see how a reduction in corporate taxes does not necessitate a decrease in government revenue. The British cut their corporate tax rate from 29 percent to 18 percent in 2010, and have since courted major international businesses including Fiat, Snapchat, and McDonald’s, which has broadened their tax base and recuperated a significant portion of the revenue lost to the 11 percent decrease in corporate taxes. FK DJT
A reduction in the corporate tax rate coupled with a simplified tax code and elimination of the estate tax will afford the Trump administration the opportunity to curry favor with congressional Republicans and validate a key campaign promise. In the wake of the recent failure of the Graham-Cassidy bill, the Senate Republicans final attempt to repeal and replace the Affordable Care Act prior to the expiration for reconciliation on September 30, a robust tax reform would allow Trump to demonstrate that he is working toward effective legislation and bringing back American jobs.
Michael Janigian
THE HAUNTING OF THE GREAT RECESSION HOW THE 2008 FINANCIAL CRISIS STILL IMPACTS LABOR MARKETS
O
n the first Friday of each month for the past year, news reporters all across the United States have praised the numbers coming out of the Bureau of Labor Statistics (BLS) and have repeatedly told us that certain indicators demonstrate the economy is healthy. Labor numbers are almost universally seen to be some of the most fundamental and accurate measures of an economy. However, the Great Recession in 2008 had a considerable impact on the labor market, with the rippling effects still impacting us today. So how do so many people get it wrong? Easy to Digest and Politically Nourishing Whenever labor statistics are discussed in the news, there are two major indicators that get the limelight: the unemployment rate and the number of jobs added. These two receive the most attention primarily because they are easy for everyone to understand. If one was to look only at these two numbers, it would look like the labor market is in fantastic shape. The BLS reported that the unemployment rate stayed extremely low throughout the summer, hovering between 4.3 to 4.9 percent. Analysts have predicted that the economy is reaching “full employment,” which means that this is just
about the lowest the unemployment rate can naturally be. In addition to these phenomenal unemployment numbers, the economy has added over 1.2 million jobs since January, which is more than expected. Politicians in power love to boast these numbers and use them as evidence of good policy, which is evident from President Trump’s tweets when the numbers are favorable. However, the fact still remains that these are two extremely crude measures of the health of the labor market. Half of the Time, None of the Benefits Let’s first take a look at those individuals who are employed in the United States. One of the big lingering issues with the labor market lies in parttime employment. Before 2008, part time workers constituted roughly 17 percent of the total employed population. During the recession, the number skyrocketed to 20 percent. While this number has been trending down since 2010, it still has not returned to pre-recession levels. The issue with this rise can be identified when looking at the number of people who are employed part time for solely economic reasons. This is the group of people who say they are working part time jobs either because they cannot find full time employment or need the additional income. The pre-recession numbers were at roughly four million people, and jumped to nine million in 2010 but are now around five and a half million. These statistics help us break down the blanket term “employed” and identify the good and the bad within it. Having a part time job can be problematic particularly for individuals who seek more employment. What is not shown in the numbers is the monetary value that one receives from working additional hours and receiving benefits. Many businesses can avoid paying for benefits if their workers are part time. The question that should be asked is, are people pursuing part time jobs because they
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want to or because they have to? When looking at the numbers, one might come to the conclusion that the Great Recession’s impact has not fully been wiped away. Snap, Crackle, E-pop! The employment to population ratio (E-pop) is another commonly used, but less prominent, statistic that can help identify the health of the labor market. The E-pop ratio is a straightforward measure: it takes the number of employed persons divided by the total adult population of the United States. Unfortunately, this measure hasn’t been doing great either. Pre-recession levels were at about 63 percent, falling to 58.5 percent post-recession, and is now about 60 percent. Though five percent may not seem like a lot, the number comes to 12 million people when thinking in nominal terms. The failure to even come close to the pre-recession levels indicate that many people who were forced out of the labor market in 2008 either didn’t return or are unemployed. As we know, the unemployment level is low right now so signs point to a complete exit of the labor market. Again, one must ask, did those who lost their jobs from the recession stop looking because they were going to leave anyway or because they tried and eventually gave up? Losing Participation Points Perhaps the most concerning trend has to do with the labor force participation rate (LFPR). The labor force consists of all adults who are either employed or unemployed. Thus, the LFPR is the percent of the population in the labor force. The LFPR still has not recovered from the recession. It went from a bit over 66 percent to its lowest point of 62.5 percent in 2016. It continued to trend downward for eight years. Even worse, it has not yet showed signs of improving; it has only increased by a fraction of a percent since its lowest point. The unemployment rate outwardly shows progress and improvement in
the health of the economy, but the number itself does not tell the full story. There are two ways the unemployment rate can go down. One, people who are seeking a job reach employment—or two, people who are seeking a job stop looking. It is extremely likely that the unemployment rate is low in large part because people have left the labor force. With such a low LFPR and knowing that the E-pop ratio hasn’t recovered, one can only reach the conclusion that the low unemployment isn’t because people are getting jobs but because they stopped trying. So next time you hear a politician take credit for a healthy labor market, take it with a grain of salt. These labor trends have been continuing consistently since about 2010, so it is difficult to say that one party’s policies has affected it more than the other. More importantly, ask yourself if the labor market is as healthy as the politician claims it is.
The LFPR still has not recovered from the recession. It went from a bit over 66 percent to its lowest point of 62.5 percent in 2016.
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Civilian labor force participation rate
Percent 69.0 68.0 67.0 66.0 65.0
August 2017 62.9Percent
64.0 63.0 62.0 61.0 1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Employment Population Ratio
Percent 65.0 64.0 63.0 62.0 61.0
August 2017 60.1 Percent
60.0 59.0 58.0 57.0 1990
1992
1994
1996
1998
2000
27
2002
2004
2006
2008
2010
2012
2014
2016
i.pinimg.com
With half of the world’s population currently living in cities, an amount of land the size of South America would be needed to adequately feed everyone.
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Emily Winston
FEEDING CITIES ONE “FARMSCRAPER” AT A TIME Will Vertical Farming Fill the Urban Population’s Demand for Food?
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raditional farming conjures up bucolic images of crop fields with acres of arable land. Though the Agricultural Revolution optimized the process of obtaining food beyond subsistence farming, the food supply was still subjected to environmental forces. External factors such as a drought, flooding, or inadequate sunlight, as well as internal factors such as plant disease or pest infestation could destroy a village’s food supply. Threats to the food supply have always existed; they just change with the times. Today, engineers, farmers, and scientists look for innovative methods to efficiently and effectively grow crops that can feed a rapidly increasing population. Population Growth Pressures Food Security While the world’s population resided primarily in rural communities during the days of the Agricultural Revolution, today bustling metropolitan areas are densely packed with people. Urban environments, ranging from what the United Nations classifies as “medium-sized cities” of 1 to 5 million inhabitants to “megacities” of 10 million or more, foster population growth. Of the projected 2 billion increase in world population in the next 30 years, a full 80 percent of them will reside in urban centers. Population increases strain food security. With half of the world’s population currently living in cities, an amount of land the size of South America would be
needed to adequately feed everyone. Today there are nearly 800 million people who are chronically hungry and by 2080 approximately 600 million more will be as well. While traditional farming enables food to be mass produced, new methods of food production are transforming the food industry in efforts to improve efficiency. Farms of crops grown outdoors on swaths of land in soil and water are simply not environmentally or economically ideal. Start-ups such as AeroFarms are exploring vertical farming - a technique incongruous with typical standards of farming but promising for the imminent future. High real estate and facility costs, however, suggest the price of vertical farming yields a large reward only when certain crops are grown. The question that remains now is whether these high tech start-ups can be transformed into an entire sustainable industry. Reaching New Heights with Vertical Farming Vertical farming, as its name indicates, is farming in which plants are grown vertically in an indoor facility. Plants are not grown in soil but rather in trays which contain a reusable cloth and a nutrient mix of potassium and nitrogen. Plant roots are misted with these nutrients in a process called aeroponics, which not only provides better oxygenation but also reduces the water consumption that typically occurs on farms
29
by 95 percent. Additionally, growing plants indoors protects them from pests, eliminating the need for pesticides, herbicides, and fertilizers. As a substitute for natural sunlight, specialized LED lighting is applied to the plants. Wavelengths, frequencies, and intensities of the LED lighting are adjusted to control the taste, texture, and color of the plants. Through vertical farming, plants can be grown during all seasons and in practically any environment. Start-up companies around the globe embrace the idea of vertical farming and are making the practice their own. In London, farming occurs below street level in a former WWII air-raid shelter at Growing Underground. In Brooklyn, Square Roots Urban Growers grows plants in shipping containers. In Germany, Agrilution’s PlanCube farms in cubes that can be tracked through a mobile device. Warehouses, old facilities, and even city skyscrapers are some of the ordinary but unusual places where vertical farming occurs. The freedom to grow crops in these spaces, often in populated city centers, reduces both crop loss and the emission of fossil fuels due to a decrease in transportation of the final products. AeroFarms At the Top of the Ladder AeroFarms, headquartered in Newark, New Jersey, is a vertical farming industry leader. Home to the world’s largest vertical farm stacked over 30 feet tall, the company has double the funding of any other indoor farming company, with over $100 million in investments from Goldman Sachs, GSR Ventures, and Prudential.
Through data analysis, scientists extract and analyze temperature, humidity, CO2 and oxygen levels, and the resulting algorithms enable AeroFarms to grow crops with desired qualities in large quantities and in half the time. AeroFarms currently has 9 farms and plans to increase to 25 within the next 5 years. Old facilities including a steel mill, a paintball center, and a nightclub house these indoor farms which grow crops ranging from carrots to cucumbers to potatoes to baby greens. After crops are grown in AeroFarms they are sold by grocers including Whole Foods, ShopRite, and Fresh Direct, and even in the dining halls of Goldman Sachs and the New York Times offices.
be easily grown quickly with limited light and space, bulkier plants like corn, potatoes and tomatoes are limited by floor space. International start-up companies revolutionize the concept of farming and transform the way crops are grown. Technology has afforded these companies the chance to provide locally grown food for consumers in metropolitan areas during all seasons. While the practice of vertical farming is profitable for those leafy greens and crops that can be grown quickly, it must be adapted to meet the needs of a growing population that requires other types of food. High costs may stunt the growth of vertical farming, but the seeds have been planted for the future.
A Sustainable Solution that Seeks Support While vertical farming turns leaves in the agriculture industry, it needs support to provide sustenance for the growing world population. High real estate and facility costs in cities deter the progress of vertical farming. Engineers predict that total building costs for vertical farms cost anywhere from $80 to $100 million, an amount daunting for start-up companies that lack sufficient financial backing. Construction, energy infrastructure, facility, maintenance, and operations costs are all accounted for in the entire cost of the practice. Electrical infrastructure, especially LED lighting, significantly contributes to that initial price tag.
To be sustainable in the long run, vertical farming needs to operate on a larger scale. Though leafy greens can
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Start-ups such as AeroFarms are exploring a unique method of producing food through vertical farming - a technique incongruous with typical standards of farming but promising for the imminent future.
Jake Goodman
LAST MILE DELIVERY AND URBAN INDUSTRIAL SPACE How to capitalize on shifting urban distribution dynamics
E
-commerce has fundamentally altered the retail industry, but it is also ushering in a fundamental change in supply logistics. As consumers begin to demand same-day delivery, supply chains are transforming into a last-mile delivery format, resulting in an increased need for adequate delivery sites in and around cities. To evaluate this trend, it is necessary to investigate how e-commerce logistics have changed supply chains, how the demand for industrial real estate is shifting, and how to best capitalize on such changes.
which replenished their inventory on a longer schedule. When e-commerce was in its infancy and deliveries existed on a longer timeline, this model was fairly successful. As consumer expectations have changed, however, e-commerce has shifted the supply chain model away from a few distribution centers to many distribution centers near densely populated areas. In part, this is a result of growing customer demand for faster delivery. Distributors are altering their supply chains to augment the traditional regional logistics platform with one that utilizes an urban logistics schema, serving consumer hot spots. The diagram below demonstrates such a change: Last mile delivery has also initiated some shifts in the distribution of the supply chain. In the U.S., the transformation has shifted occupier focus away from the big-box facilities that have traditionally dominated demand toward smaller, light-industrial properties, which now comprise about 65 percent of warehouse stock. These properties are typically smaller than 200,000 sq. feet and are usually located in or near infill locations. They also feature lower ceiling
What is Last Mile Delivery? Last mile delivery refers to the process of moving goods from the last point of distribution to the final destination at a home or business. In the past, a few national distribution centers located across the country and region could serve as a reasonable supply chain. This form of supply chain was effective when retail shopping mostly occurred in brick-and-mortar stores,
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heights, fewer loading-dock doors, and smaller land sites to accommodate trailer and employee parking. Popular in East Asian and European markets, some of these distribution properties include multi-layered warehouses that offer vertical logistics in densely populated cities. It’s also interesting to note some of the data behind the change in consumer demand and how this has driven the new last mile supply model. According to a McKinsey survey in China, Germany, and the U.S., almost 25 percent of consumers are willing to pay significant premiums (up to EUR 3, RMB 20, and USD 3 in the respective region) for the privilege of same-day or instant delivery, a share likely to increase as more millennials join the workforce. The remaining 70 percent still prefer the cheapest option, but innovation in supply chain logistics is making faster delivery cheaper. For now, sellers or senders will most likely bear the burden of additional delivery costs for instant delivery to expand their share of last mile volume. McKinsey predicts that instant delivery and same-day delivery will likely reach a combined market share of 15 percent and may grow significantly higher thereafter,
Instant 70 fulfillment centers in the United States, including 26 that were added in 2016 alone. According to Avison Young, a real estate services firm, Amazon industrial properties have been trading at a price premium – a 70 to 80 basis point advantage in cap rates compared to FedEx facilities. This indicates that the market is apparently accounting for the future value of last mile delivery industrial facilities. Delivery Entrepreneurs — Coming Soon While major corporations like Amazon have been instrumental in the development of last mile delivery, entrepreneurs have also played a vital role in its rise. Six noticeable early-stage startups dominate the niche last mile drone market. Flirtey and Matternet are two Series A funded startups that build aerial drones. Their drones focus on low-cost delivery solutions meant to simplify small parcel delivery services as well as transport aid to rural areas and disaster zones. Starship, Dispatch, Marble, and Robby all aim to build fleets of autonomous groundbased robots for last mile delivery services. These startups demonstrate how entrepreneurship is shaping the last mile process. Technology will be increasingly used to bring parcels directly to the consumer. Entrepreneurs have also stepped in to make last mile delivery more efficient. Fetchr, what3words, and OkHi all offer e-tailers ways to find delivery
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5 ~2 addresses for customers without traditional street addresses. These startups have aided the spread of last mile delivery in emerging markets, where e-commerce is growing rapidly but locations are not as well defined. Uber has even stepped into the delivery services market with its UberRush service, which connects users with a delivery partner to make a delivery. The service is only available in New York City, San Francisco, and Chicago, but its existence hints that Uber is eager to enter the last mile delivery market.
E-commerce share of retail sales (%) 25
2010 2015 2020
20
15
10
5
0 Latin America
Reliability e.g. time window
~70
~23
China
Amazon has clearly dominated same-day delivery industrial spaces. Its website notes that is has more than
Same day
Japan
Retailers in the past typically processed their e-commerce sales at their own brick-and-mortar locations. However, retailers are now utilizing fulfillment centers or revamping existing distribution centers to focus on an instant gratification approach for e-commerce shoppers. Supply chains are under increasing pressure to deliver consumer goods and perishables into cities in narrower timelines than the past. In turn, this has created a need for distribution sites around and inside of cities to accommodate consumers demanding faster deliveries.
Cheapest from home delivery
Western Europe
E-Commerce Logistics – The Urban Model While e-commerce accounted for only 8.5 percent of total U.S. retail sales in the first quarter of 2017, online sales are growing faster than overall consumer spending, according to the Commerce Department. Online retail sales are expected to total at $436 billion in 2017, up about 10 percent from 2016, according to FTI consulting Inc. The real growth of e-commerce shows up in the immense impact it has had on industrial real estate expansion. According to JLL, a real estate investment management company, a full 30-40 percent of demand for industrial real estate has some type of connection to e-commerce. Industrial real estate as a whole has been expanding with the warehouse availability rate in the United States decreasing for 27 consecutive quarters through Q4 2016, according to CBRE.
Share of consumers choosing different delivery options (% of X2C volume)
United States
especially if the service is extended to include rural areas.
The market has also been crowded by food delivery startups, such as Blue Apron, which just completed an IPO. These food delivery startups rely on fast delivery service to deliver fresh, perishable foods. The expansion of the food delivery market will no doubt rely more and more on last mile delivery. In fact, McKinsey reports that new ventures dealing with the integration of local commerce and delivery of prepared food are receiving the greatest support in the form of seed investment while also being the youngest in the industry, signaling an acceleration of activity. Over the past five years, food delivery companies operating in the last mile market alone have attracted funding just short of $10 billion. The Future of Last Mile Delivery McKinsey identifies seven models for parcel delivery that could represent the future ways that parcels are distributed – today’s delivery person model, drones, bike couriers, semi-autonomous ground vehicles, crowdsourcing, autonomous ground vehicles with lockers, and droids. McKinsey believes its vision of last mile delivery models, a combination of these seven methods, will become
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a reality within the next ten years; the speed of adoption across different countries will largely depend on variations in opportunity cost, regulation, and public acceptance. Amazon already seems to be planning for the future. In December of 2015, the e-commerce giant filed a patent for a beehive, cylindrical-shaped building, that would offer drone delivery to city dwellers. Amazon also filed a patent in April of 2016 for blimps stocked with drones to increase the speed of its deliveries. As crazy as that sounds, the company completed its first drone delivery in England as part of its Prime Air initiative in December of 2016. On July 27th of this year, Amazon was granted a patent to allow its drones to analyze customers’ homes as they make deliveries and try and sell them products and services based on the data they collect. Amazon, however, is not the only company to experiment with drone delivery. Google has been developing a drone delivery project, called Wing, through its Google X research arm. The Chinese e-commerce giant Alibaba began drone delivery services around select cities in China in February of 2015. Overall, major corporations are investing in a future that uses drone technology to achieve distribution goals in urban centers.
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Alongside these technological innovations, it’s also possible that struggling brick-and-mortar retailers will be replaced by distribution facilities. As retail centers have been struggling, developers have been searching for ways to repurpose properties that are located in higher per-capita income and distribution areas. In the near future, we may see distribution centers fill up empty retail lots to fulfill the demands of last mile delivery. Amazon has already begun implementing this strategy, creating distribution centers within malls in Ohio and Maryland. Distribution centers may prop up some of the decrease in cash flows from retail properties as this trend grows. How to Capitalize on Last Mile Delivery Last mile delivery is a growing trend that is continuously shaping supply chains globally. Investors can best capitalize on the growth of last mile delivery by seeking investments in new urban industrial space. Such assets will continue to appreciate in value as e-commerce grows and innovation accelerates the speed of last mile delivery services. Investors should expect different forms of last mile delivery to become more commonplace, satisfying consumer demands for speedier delivery and thriving off its symbiotic relationship with e-commerce. While the forms it will take are far from certain, investors should remain cognizant of the rise of last mile delivery and position themselves to benefit off its near-certain appreciation.
Tiffany Chen
HIDDEN BY DESIGN: THE UNEXPECTED IMPORTANCE OF HUMAN-CENTRIC PRODUCTS Modern Tech Unleashes the Power of Design
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echnology’s current triple threat comes in a well-rounded package: an individual who can develop mobile applications, pitch a product idea, and create delightful experiences is both the software engineer, CEO, and designer in any given situation. While the first two roles boast a strong lineup of successful figures within the tech sphere, it is the final one that has most recently drawn attention for the high impact and success that it brings. For tech companies to truly succeed in creating adored products and generating consistent profit, they need to focus more on that which can’t be quantified, only viscerally felt: design.
While in some aspects very true, an inclusive lens to design lends itself to a product that fluidly accommodates many individuals of varying backgrounds. Whether a person’s disability is permanent or situational, whether the user is a boy without his left arm or a mother carrying her daughter in her right arm, and whether the ability itself is visible or invisible to the eye, designing for extreme situations ultimately results in products that cover more boundaries than are typically covered when someone designs only for the average user. Similarly, a software engineer who only creates applications based on his or her own preferences rather than the desires and needs of the customer segment runs the risk of alienating an entire user group. As touted by IDEO and their human-centered design initiative, the ability to empathize beyond one’s own wants is crucial to creating products that impact more than a handful of people. Without a design-focused, user-prioritized product, a tech company runs the risk of alienating its
Designing for One is a Design for None It is often assumed that the best design for a product is the one that targets the average user of the product.
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products from important and enthusiastic users. Even disregarding the immediate impact of an unsuccessful product, the traces of negative experiences can be enough to deter not only the users from never using the product again but also their family and friends. Again, poor design can result in a disastrous audience reception. Positioned for Success While mediocre design results in lower user engagement and greater distress, the introduction of design in technology has huge potential to reduce inefficiencies and generate more value to society. From a monetary standpoint, the difference in placement of the Pay button on the right or left side of the screen could mean the difference in several hundred-thousand dollars per hour if users suddenly start noticing it more often. On the capital side, a poor design decision that took under five seconds to think about and dismiss can also manifest later as a terrible user experience that demands five weeks of developers’ attentions. In one particular instance, the lack of foresight from
a designer’s connection with their product users resulted in a confusing user interface for an online shopping website. While many users were excited to proceed with their checkout and complete their online purchases, it was simply not possible because the designer had forgotten to add the line for credit card purchases in the checkout form. Users themselves also benefit greatly from better designed technological products, since in a day and age where most individuals live within an ecosystem of different technological devices, the experience and flow can be vastly impacted by differences in interface. As someone talks to their friend on the phone, moves onto their computer to do work, and then browses social media on their tablet, careful design can create an intricate dance of seamless experiences across the ecosystem while still giving users the autonomy to do whatever they want to on their different devices. With systems well supported by design, users are empowered to spend their time more
wisely and be more productive as they perform their daily online tasks. You Can’t See It, but You Can Experience It While certainly a little abstract in concept, design contributes to the experience of a product more than any other aspect of its production. The current generation of young adults is moved by a myriad of experiences, memories, and emotions that combine together to leave lasting impressions of the people and products they encounter throughout their lives. While material goods can come across as aesthetically pleasing and haptically comfortable, they are remembered when they give users feelings of happiness, laughter, and pleasure. By cultivating more joy and delight in their users, tech companies not only feed the excitement of an audience that is dedicated to their product but they also generate greater brand loyalty and company following than they could possibly have made solely
While certainly a little abstract in concept, design contributes to the experience of a product more than any other aspect.
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through advertising and marketing. As a result, it is the design or a product that makes the greatest (or worst) impression on its users and owners. Initiatives for human-centered design and design-centric products in the tech industry are still on the rise. From Microsoft’s Inclusive Design team to Stanford’s D-School pioneer efforts, it is unsurprising that more and more companies are beginning to recognize the equally important role that design plays in a predominantly software engineering and computer science world. For a product to truly be deemed successful, tech companies must focus in on imagining success for their users. Only then will they begin to witness increased engagement and positive reviews – and that, without a doubt, is the best possible sign.
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