CORNELL BUSINESS REVIEW FALL 2017 ISSUE
(NOT) LIVING IN COLLEGETOWN Featured Article by Christina Xu, page 19
AMIT BHATIA Exclusive & UNEMPLOYED DENIM Interviews
CORNELL BUSINESS REVIEW FALL 2017
LETTER FROM THE EDITOR
with Amit Bhatia, renowned entrepreneur and founder of Swordfish Investments, discusses a lifelong journey through entrepreneurship. Our interview with Sydney Izen, founder of Unemployed Denim, is an inside look at the ever-changing world of fashion.
Since its inception in the Fall of 2010, Cornell Business Review has brought together creative and entrepreneurial students to provide readers with timely, investigative articles. We focus on both Cornell and business around the world to realize goal from the start has been to encourage students, faculty, and the Cornell community to “Join the Conversation.”
We would like to thank Cornell for its financial support, our advisor Deborah Streeter for her consistent guidance, and our Alumni Board for their continued involvement. Further, we greatly appreciate Amit Bhatia and Sydney Izen for giving our readers thought-provoking and insightful interviews.
Welcome to the Fall 2017 Issue of Cornell Business Review. It is my honor to present our best issue yet. I wrote that last semester, but with this semester’s finished product in front of me, I am compelled to write it again.
More than ever, our work this semester has reflected that continued pursuit. With 40 members divided into Business, Editorial, and Design teams, we completed an issue with insightful, nuanced pieces, all while working on CBR Now, a weekly newsletter with interviews, articles, campus events, and more. In the 15th issue of the Cornell Business Review, we cover a myriad of topics, including the rise of medical tourism, bikesharing’s viral spread across the globe, and Cornell’s involvement in the historic housing issues on and around our Ithaca campus. This semester, we had the honor and privilege of interviewing two prominent alumni. An exclusive interview
Finally, I would like to extend my gratitude to our wonderful members. I owe the organization’s continued success to their irreplaceable talent and drive. As my tenure as Editor-in-Chief draws to a close, I am filled with optimism for the publication’s future and look forward to reading CBR’s work for years to come. In the meantime, enjoy the Fall 2017 issue!
Bjorn Bjornsson Class of 2018 Editor-in-Chief
Editor-in-Chief: Bjorn Bjornsson Managing Editor: Hunter Bosson Design Director: Grace Lucia McBride Business Manager: Rhea Somaiya Business Team: Kathleen Curtin, Kathryn Fanelli, Nicole Johnston, Adam Khatib, Hayan Lee, Hamish MacDiarmid, Karim Naguib, Michal Pisarek, Emily Shiang, Mike Sosa, Ruoshui Shen, Catherine Wei
Design Team: Kathleen Curtin, Michelle Huang, Alessandra Piccone, Grace Santarelli, Elena Setiadarma, Daye Shin Editorial Team: Arslan Ali, Nikhil Dhingra, Isaac Greenwood, Cameron Griffith, Leora Katzman, Jeremie Mutolo, Matthew Peroni, Katherine Pioro, Eric Reuben, Rija Tayyab, William Wang, Ethan Wu, Christina Xu, Sonya Xu, Matias Zorrilla Yep Associate Editors: Hyun Ho Lee, Sanjana Sethi, Josh Thompson, Sam Torre, Avirook Upmanyu
TABLE OF CONTENTS 01 03 05
LETTER FROM THE EDITOR TABLE OF CONTENTS
FINE PRINT FOOTBALL Leora Katzman
07 AMIT BHATIA 10 CLOUD CITY Eric Reuben
BRAZILIAN SOCIAL (IN)SECURITY
13 A BAD SIGN FOR HOLLYWOOD
14 STRING OF PEARLS Rija Tayyab
OBAMACARE IMMERSED IN FOG Ethan Wu
17 UBER'S 99TH PROBLEM Sonya Xu
19 BLOOD, SWEAT, & BIG DATA Matthew Peroni
21 (NOT) LIVING IN COLLEGETOWN Christina Xu
24 THE BYPASS Cameron Griffith
25 SYDNEY IZEN 27 FRENCH PAYCHECK, ESTONIAN PAY Nikhil Dhingra
DERIVATIVES, DETRIMENT, & DEREGULATION Matias Zorrilla Yep
SINKING OR SWIMMING
THE SAME OLD NEW NORMAL
BEYOND BITCOIN Katherine Pioro
FOOTBALL by Leora Katzman
Last year, the NFL witnessed a sharp drop-off in both viewership and attendance. While overall revenue has yet to drop, a decrease is inevitable. The decline of cable, as viewers ‘“cut the cord,” has played a major role in the decline of viewership. In regards to attendance, analysts blame two key issues: a decline in the number of kids playing football, attributed to mounting concussion fears, and the sentiment surrounding the “Take a Knee” campaign. However, these concerns are mostly secondary contributors to the overlooked longterm ticket pricing issue: the personal seat licenses (PSLs). PSLs entitle the holder to the right to buy season tickets for a certain seat, similar to an option in finance. Without a PSL, it is impossible to purchase season tickets. Over the past decade, PSLs have become increasingly popular as steady revenue generators for teams to expand and build new stadiums. Unfortunately, the average football fan cannot afford to own a PSL, which has led to frustration and consequently less dedication. Many devoted fans who purchased these exceptionally overpriced PSLs have seen a significant drop in their licenses’ value and have found themselves trapped in a declining resale market. The story of how the PSL became a marketing tactic and how sports have become a monetized business exemplifies professional sports’ disjointed connection with the loyal fan. Max Muhleman, the creator of the PSL, had opposite intentions when he created the license; it was meant as a thank-you gift to fans who pledged their support for a new team, not a future investment. In 1987, Muhleman was hired to run a campaign to place an NBA expansion team in Charlotte, North Carolina, which was an underdog against bids from larger metropolitan areas such as Miami and Orlando. Muhleman organized a season ticket drive where prospective fans paid a non-refundable $50 to $250 deposit. When the NBA’s expansion committee issued their recommendation, Muhleman had already sold 10,000 season tickets, and Charlotte acquired the Hornets franchise. In order to thank these fans for pledging their money to support a new team, Muhleman suggested giving fans ownership of their seats through licenses. In the years since the creation of the PSL, Muhleman has helped dozens of teams adopt PSL pricing structures. While previously teams offered the mere right to be on the season-ticket holder waitlist for free, the creation of the PSL has since monetized this privilege.
Today, nearly 20 NFL teams have instituted PSL pricing structures in order to fund the construction of their stadiums. Most recently, the Golden State Warriors became the first NBA team to institute broad use of personal seat licenses. In order to purchase season tickets at the team’s new privately financed $1 billion Chase Center, which is set to open in 2019, fans will have to purchase a license for the right to buy those tickets. However, these PSLs will differ slightly from those in the NFL, in that they are called a "membership" and act as an interest-free, tax-free loan to the team for three decades (the Warriors have promised to return the money to the fans after 30 years). While the membership will be transferable, like in the NFL, if a fan sells the membership for a price below the full price paid minus the payments already made, then the Warriors have promised the original owner that they will make up the difference at the end of the 30-year period. This unique payback program has allowed the Warriors to resist some of the recent criticism in regards to the PSLs and the declining resale market. In the early years of the PSL, fans resold their PSLs on the secondary market for a profit. Over the last decade, team owners have jacked up the initial prices for the PSLs, and the licenses have consequently become much riskier investments for fans. For instance, both the Jets and Giants used PSLs to help fund construction of the $1.6 billion MetLife Stadium. In the years following the opening of the new stadium, Giants fans’ PSLs have gone up in value while Jets fans have seen their investments fall short. Since the Jets miserable 2012 season, the secondary-market websites have been flooded with thousands of PSL bargain offerings as disgruntled season-ticket holders desperately try to unload their PSLs. In 2012, Jets fans who tried to sell their PSLs on the secondary market lost an average of $3,233 per seat. This situation has infuriated fans, as seen in this November 2016 comment left by an angry Jets disciple on an independent blog site: “The NFL has finally gone too far with the PSL. They got greedy and spit in the faces of the fans who helped build the league into what it is. If anybody is being logical, they will realize that the best course of action is to consider PSL money already spent to be sunk cost and move on. There is no longer any good reason to make that sort of commitment to the team. Not when you can buy tickets to any game you want on the secondary market.”
The frustration with the team ownership and management has led these fans and customers to develop a sense of animosity towards their once beloved teams. In regards to the decline in NFL viewership, according to Sports Illustrated, 2016 NFL ratings were close to an all-time low from the previous year; Monday night football was down 24 percent; Sunday night football was down 19 percent; and Thursday night football was down 18 percent. The two major factors that have contributed to this significant drop-off in viewership are the commercial-free RedZone channel and Fantasy Football. The RedZone has saturated the airwaves, eating into broadcast ratings because the old-timers are tired of the numerous commercials, and the young fans happily consume the NFL from nonbroadcast sources. Furthermore, the rise of Fantasy Football paired with the decline in NFL attractiveness has led fans to care more about their fantasy team than they do about actual teams. PSL pricing structures have only fed into the appeal of RedZone and Fantasy Football. The PSLs have caused fans to feel disillusioned by their home teams and have consequently turned fans’ attention to their fantasy teams. The NFL made a strategic mistake by neglecting their loyal fans in pursuit of the new casual fans. The league changed the content of the game to prioritize scoring in an effort to attract these new casual fans and boost ratings. Now the NFL can only blame themselves for their lost source of revenue – network broadcasts. As of the 2017 season, the NFL, which has for years been the survey leader in the annual Sports Fan Loyalty Index, has fallen to third place behind the MLB and NBA, first and second place respectively. These total loyalty results are based on four key survey indicators: history and tradition, fan bonding, pure entertainment, and authenticity. The NFL plunge to third place in the Sports Fan Loyalty Index reflects the aversion trend as fans reject a league that has been neglecting them over the past decade. After years of staunch devotion, many of the old-timer fans view the exorbitant PSLs as a smack in the face. While fans want to feel as if they are an integral part of their beloved team, these pricing structures have led them to feel like cheated customers who are being exploited for profit. The NFL owners successfully manipulated the blind devotion of their most passionate fans, and now the League must deal with the consequences.
EXCLUSIVE INTERVIEW WITH
Between your parents, your university friends, your Cornell professors, your M&A managers, and recently your father-and-law, you’ve been very fortunate to have supportive and qualified mentors. What role have they played in your life over time? Amit Bhatia: I have been extraordinarily lucky, of that there is no doubt. Buffett often talks about the “ovarian lottery” – the pure chance and luck by which we are born into a particular family, in a particular country, at a particular time, with particular opportunities. I am so lucky to have been born into a loving and supportive family that gave me every opportunity to pursue my dreams and have been a constant source of encouragement and inspiration. I am also very lucky to have been given the opportunity to attend and be educated at a school like Cornell, where I met incredible people who challenged me intellectually and supported me with their unwavering friendships. The same is true of the places I’ve worked, the jobs I’ve held, and the bosses I’ve worked for. And of course, as you correctly point out, I’m incredibly lucky to have married an extraordinary woman who is smarter and funnier than I’ll ever be, and her amazing family who have given me extreme amounts of love, opportunity, responsibility, and support. All of these people have played a huge role in my life, and I’m a very lucky boy. When you were younger you wanted to be a cricketer. Who was your childhood role model? Amit Bhatia: Oh that’s easy – Sachin Tendulkar! Like every other Indian schoolboy at the time, I idolized Sachin and dreamt of being able to play cricket like him. As luck would have it, today my wife and I are friends with Sachin and Anjali. We play golf together and have meals together a few times a year. He actually mentioned me in his autobiography as his friend which was very special and very humbling. You started your fund at 24. How did you convince investors to place their trust in you?
Amit Bhatia: I draw back to what we just discussed: some amount of everything in life is timing and luck. By the time I was 24, I had held positions at 3 investment banks; I had worked at Merrill Lynch and Morgan Stanley in New York, and then I came to London and worked at Credit Suisse First Boston. While at Cornell, I ran a pretty successful business importing and exporting sterling silver from India into the United States. I would import sterling silver from India; I would often drive it down to pawn stores in Ithaca, Rochester, New York, or wherever else I could. There was this great arbitrage that existed in 1998 and 1999: a gram of sterling silver in India cost ten rupees a gram and would sell for between 80 cents to a dollar a gram in the United States. At that time the dollar was at 40 rupees, so it was a 4 times uptick if you could bring in and sell sterling silver. I was on financial aid at Cornell, so I looked at every opportunity I could find to try and make money. Not only for the sake of making and having money, but I genuinely loved being entrepreneurial. I knew that in the future I wanted to run a business, I knew that I enjoyed the challenge of matching capital with opportunities and therefore I had always hoped to have the opportunity to launch a fund. I was fortunate and lucky that friends and family saw potential in me and put their trust in me which gave me the opportunity to launch Swordfish Investments in 2004. What was the moment where you decided you wanted to take a more entrepreneurial route? Amit Bhatia: My family spent all of our summers in London. My mom’s family was based here, and so each year we would travel across Europe and America. And every place that I travelled to I would make sure to buy things that I could take back and sell at home – airline stickers, confectionary, toys, sunglasses, hats, pranks, pencil cases – anything I thought someone who didn’t travel would be interested to buy. Inevitably, my brother and I would sell everything and be so
excited and proud of our profits.
When I was at Cornell, I bought a Polaroid camera, and in my sophomore, and junior years, I would go back to campus for orientation week. I would walk up to parents who were dropping off their kids, and I’d say, “can I take a photo of you guys dropping your kids? It’s such a momentous moment. It’s a memory you will cherish as a family forever!’’ I had cardboard frames made in India that read “My First Day at Cornell.” Then I would place the Polaroid picture in the frame and sell it for 10 bucks a pop. I remember getting into trouble my sophomore year because you can’t really use the Cornell logo without University permission because it is trademarked, but I decided to ignore the warning because it was too lucrative and too much fun. I sold a lot of those photographs and made a very exciting amount of money! I loved buying and selling stuff and noticing the difference in value of things, so really I guess business was always going to win over cricket. What steps do you usually take when you recognize an opportunity? How do you go about knowing that this will sell or people want this? Amit Bhatia: We have a philosophy at Swordfish Investments which states, “back the jockey, not the horse.” It speaks to the fact that good people, when given the support and opportunity to succeed, most likely will and present a better investment case than simply a good idea. Partnering with, or investing with, smart, driven, dedicated and passionate people has held us in good stead over the years. What advice do you have for students to develop and maintain relationships like you have? How do you go about doing that? Amit Bhatia: I try to surround myself with people whose company I enjoy and people who I can learn from. The Dalai Lama says “when you talk, you repeat what you already know, but if you listen you learn something new.” Almost all my friends, everyone in my family and my wife’s family are smarter than me, so I tend to learn a ton when I’m around them and listen
to them. If your question is how you maintain business relationships, I’d like to think we’ve built ours on a mutual enjoyment of each other’s company, on a mutual respect for each other’s capability, on transparency, and on trust. What convinced you to start your own fund just three years out of university? Amit Bhatia: We’ve discussed the fact that the the journey was always entrepreneurial. I knew and I continue to know that this is what I enjoy doing, so it was going to happen eventually at some point in time. The timing just happened to be 3 years out of college for numerous and varied reasons. It wasn’t important whether it happened the day after I graduated, 3 years, 5 years or 10 years after. The timing was right and the rest is history. What would you say is Swordfish’s competitive advantage? Amit Bhatia: As I said before, we are very much reputationally led. I like to think that the people and entities we have worked with notice that in our ethos, in how we treat people, and how we conduct business. Our hope is that it therefore gives us goodwill in the marketplace, which in turn allows opportunities and great deal flow origination; it’s given us a great network. On the execution and management side, in pretty much all the businesses that we have a controlling interest, we have a smallbusiness mindset. We are owner operators; we work directly alongside management in order to support them, in order to give them confidence, support, guidance and motivation. In one of my recent companies, we had an annual budget set aside for any senior manager who wanted to pursue professional development. It could be a month-long course at Harvard or Cornell, or weekend courses in HR, Accounting, Leadership, Negotiation, Skills, or People Management at the London Business School, and it didn’t
matter if the manager was 30 years old or 50. We did that for anybody who wanted to improve themselves. Our belief is that in this journey we all benefit if the people around us get smarter. Perhaps that helped us attract a better caliber of talent and people than our competitors. We want to build an environment where people are empowered, where they have responsibilities. If you were 24 again looking to set up your own fund, would you choose to found it in London or would you change the location? Amit Bhatia: Yes, definitely. London is a truly great city. It has everything that a great city needs: great public spaces, restaurants, sports teams, infrastructure, public health services, safety and connectivity. I miss India of course and visit as often as I can for work and to visit my parents, and I spend a considerable amount of time back in America, but London is a wonderful place for us to raise our family and work, so I would definitely do it again. What are some of the greatest rewards and challenges associated with owning a professional sports team? Amit Bhatia: Have you ever been on Space Mountain at Disney? Yes, it’s one of my favorite rides there. Amit Bhatia: Well owning a sports team gives you the same myriad of incredibly passionate and intense feelings. There are so many emotions associated with that ride. It’s awesome and exhilarating and can also feel sickening from time to time, even scary. We never got involved in sports from a business perspective. We look at our involvement in Queen’s Park Rangers as a reflection of our love for the game. Football is massive in the U.K. Among the first three questions someone might ask you when meeting you for the first time at the local pub
are “what’s your name?”, “what do you do?”, and “what football team do you support?” It’s so ingrained in our culture and as a family we’re very proud to be involved. It has been one of the most rewarding experiences of our lifetime. We view ourselves as custodians of the franchise and hope to return it back some day in better condition than we received it. The club predates us: it’s more than 125 years old. We are just a small part of that history, but hopefully we can do it justice, and hopefully the fans will be proud of what we’ve done. It may come with its highs and lows, but it’s been an incredible experience. You’re probably best known around campus for your donation to create the Amit Bhatia Libe Café. What made you decide to donate to this particular project, and how did you hope to impact student life? Amit Bhatia: My favorite memories whilst at Cornell involve times that I’ve been with groups of people. My roommates and I met in 1997 but continue to communicate as a group on Whatsapp where we share laughs, thoughts, views, and news. I’ve discussed also the importance of relationships and listening, being curious, discussions and debates. In many ways, much of my time at Cornell, when I wasn’t in a bar on College Avenue, was spent with groups of people. So when the opportunity for the Libe Café was presented to me, I thought it could potentially be a place for people to laugh, to come together, to have fun, eat, and drink. It’s in a library, so maybe people will go in and have interesting discussions, and maybe interesting presenters will visit, and ideas will be born. I hope that’s how it’s used and cannot wait to visit again.
CLOUD CITY Smart buildings have emerged as a major trend in the real estate industry and will continue to revolutionize the way assets are developed and managed. The term “smart building” is a loose categorization; a building is considered “smart” if it utilizes the Internet of Things (IoT). Common features of smart buildings involve using sensors and sharing data related to distinct processes. Sensors track motion, humidity, air pressure, plug loads, lighting, and water flow, enabling the automation of processes traditionally carried out by a building engineer. For instance, if a sensor detects that a room has been unoccupied for several minutes, the lights may automatically dim, and HVAC (heating, ventilation, and air conditioning) settings may be lowered. Interconnectivity of building systems generates data that can connect to cloudbased systems. Property managers may use this data when making decisions related to the building’s operation. This can improve multiple functions of the assets’ operation including sustainability (higher LEED or Energy Star Rating), reduction of operating costs, increased security, enhanced tenant experience, and improved fire safety systems. In real time, managers can track pedestrian flow, energy usage, battery life, air quality, and power demands from remote locations. Any preventative maintenance requirements and other critical information regarding a building’s facilities are also recorded. Faulty machines can receive attention prior to causing any serious damage or negatively impacting the tenant. For food and beverage operations, refrigeration temperatures can be recorded in the cloud to help avoid spoilage. Smart buildings can improve building security. A building can have security cameras centralized to one device, an alarm system connect to the cloud, and facial recognition at the building entrance. These developments can reduce operating costs as fewer building security staff are required. The ability to track building occupancy will help decision-making regarding capital expenditures and future developments. Sensors can track occupant movement in offices and shoppers’ traffic patterns in retail centers. This generates information useful for improving service flow and determining ideal retail outlet locations and office seating arrangements. Employee flexibility is a major trend in office spaces, especially among younger tech companies. The most common example of increased employee freedom is the elimination of assigned desks and offices. Occupancy reports generated in flexible, free-seating spaces indicate which work spaces are most popular. This information can lead to better utilization of space in future designs and help architects achieve the most efficient desk-toassociate ratio. Commercial Building Energy Consumption estimates 40 percent of the
world's total energy consumption comes from commercial or residential buildings, representing a major financial burden. Around 50 percent of a building’s energy use comes from lighting, space heating and cooling, and ventilation, all of which can be regulated by smart building capabilities. Annually, U.S. offices average 15.9 KWh of energy per square foot at an average rate of 0.1058. Energy costs hover around $40 per square foot. Buildings have the opportunity to reduce costs greatly by using sensors to monitor the way buildings are illuminated, cooled, ventilated, and heated. State and local governments may continue to develop mandates to decrease energy usage, encouraging the use of smart buildings. With smart buildings, the opportunities to reduce energy levels are endless, and the cost reductions are substantial. By aligning lighting controls, implementing LED lights with ballasts, and utilizing motorized window shades, lighting energy usage in the 52-story New York Times building was reduced from 1.28 to .4 Watts per square foot. Smart building features have the potential to decrease total energy by around 30 percent.
The Edge in Amsterdam is an example of how smart building features can be successfully implemented within an office building. An iPhone app serves as the core of the system, connecting the building with its tenants and operating managers. The app guides tenants to a designated parking spot and allows for control of building systems, including temperature and lighting. The smart building records employee temperature preferences and makes adjustments depending on where each occupant is seated in the building. There are no set desks, and the app displays present occupancy of different work spaces and meeting rooms. A dashboard is displayed on the app which is connected to the cloud. Here, data, including energy and water usage by appliance, occupancy reports, and maintenance information, are recorded. With a 98.4 percent rating by BREEAM, a British rating agency, the structure is extremely energy efficient. The Edge is equipped with 28,000 sensors which improve sustainability and operational efficiency.
10 by Eric Rueben
Some sensors are attached to ultra-efficient LED lighting panels while others track motion, natural lighting, CO2 levels, and temperature. HVAC and lighting systems are automatically shut off when a room is not in use, saving energy. Security features have also been implemented in the building design; the parking garage analyzes license plates and matches the numbers with registered employees. An incremental increase in smart building use has started a positive feedback loop that will lead to exponential growth. Sources such as Cisco, Gartner, Ericcson, IBM, and IHS predict 30 billion devices will utilize connected devices by 2020. Gartner also predicts that smart commercial buildings will be the largest user of the IoT; sensor deployment in commercial real estate is projected to increase 78.8 percent from 2015 to 2020. Prices of sensors and data storage centers have also decreased and will continue to decline. These products are also highly scalable. While smart building features will undeniably become more ubiquitous, implementation of features should be analyzed on a per-asset basis, and buildings’ financials will serve as the major limiting factor to growth. When deciding the implementation and scale of smart building features, the project’s IRR (Internal Rate of Return) must be determined. If the increase in expected rental income and decrease in operating expenses (primarily from energy and maintenance) from having smart building features are more substantial than the increase in the initial investment for the installation of smart components, the project should be pursued. As younger office tenants, primarily tech companies, continue to place greater value on the office space experience, their willingness to pay for smarter offices increases. This increases rent roll, which flows into Net Operating Income and generates higher IRRs. The substantial decrease in operating costs associated with centralized facilities is factored into building appraisals. Tenants and property managers will see these systems as standard, not a perk. Commercial real estate owners ought to be forward-looking and recognize that failure to evolve will generate a negative brand reception, impact an asset’s classification, and harm the bottom line. Groundbreaking leases signed by tech giants in the past few years indicate that the trend is set to continue. Facebook signed a 436,000 SF lease and Salesforce signed a 714,000 SF lease in the Salesforce Tower, both in San Francisco. Features of these developments include a whole floor dedicated to amenities, flexible office design, a groundbreaking outdoor air intake system, and integrated motor shades. Factors such as increased government regulations regarding a building’s energy usage, more demanding tenant requirements, and a decrease in the cost of connected systems will make smart building mainstream by the end of the decade.
(IN) SECURITY by Arslan Ali
12 As Michel Temer prepares for the day, his body is consumed by anxiety. The country that he has assumed responsibility for is in the midst of one of the worst recessions in Brazilian history. His denizens look to him to fix it. Fully aware of his insurmountable unpopularity, he, like many others, hopes that one day Brazil will once again be heralded as one of the greatest economic successes in the world. Unfortunately for Mr. Temer, those aspirations have been slipping away for years. Since Temer took office in 2016, Brazil’s already anemic economic growth has only deteriorated. Its economy fell by 3.6 percent last year and 3.9 percent the year before. To make matters worse, the nation’s leadership is caught in a multitude of corruption scandals which have cut Brazil’s international aid, incapacitating its ability to integrate with the international economy. In the face of this gargantuan problem, many wonder what can be done to put Brazil back on the path towards recovery. Herein lies one of the major hindrances to the Latin American country’s problem: over-spending. More specifically, the government has exhausted most of its fiscal resources to provide its citizens access to highly generous pensions, allowing them to retire in their 50s and still make about 80 percent of their pre-retirement income. What started as a seemingly harmless social welfare program is now the greatest contributor to the nation’s economic distress. Although many people enter the workforce praying for their retirement day to hurriedly arrive, Brazil is a perfect example of why it is worth it to wait a little longer to stop working. The average age of retirement is around 58 years— eight years younger than that in America and fourteen years younger than Mexico. While many citizens are delighted by these benefits, they have yet to consider how the government spending about 47 percent of total expenditures solely on social security will affect their posterity and the long term wellbeing of their country. While Brazil’s elder citizens can enjoy life after working, other age groups have not fared as well. The copious amounts of money spent on social security have detracted from key sectors of the economy such as healthcare and education, causing economic inequality across different age groups and making it more difficult to escape poverty from a young age. Many speculate that Brazil’s dire economic situation will grow worse absent any reform. Thirty-eight percent of its population is going to be over the age of 65 by 2050, and, according to IMF estimates, this will cause pension spending to reach 26 percent of GDP absent any legislation. Furthermore, the current pension system requires benefits to be worth at least the minimum wage. With the Worker’s Party vigorously pushing for minimum wage increases, it seems that retirement spending will only increase. Michel Temer, along with the rest of the Brazilian leadership, ought to do more to take action and reduce this overbearing burden on their economy. That is not to say that the Temer administration is idly letting Brazil’s economy plummet. His party has taken steps in proposing legislation to reduce spending. Temer’s proposed bill seeks to officially raise the retirement age to 65, increasing output from each worker and easing required government spending. Furthermore, the legislation makes citizens pay into the system for 21 years, six years longer than the current system requires. These policies would put Brazil on the right path towards economic rehabilitation, but cutting back on pension spending is not the sole solution. While decreasing spending should certainly be a goal for the government, it also needs to
be a conduit towards establishing better spending guidelines. Once the government passes such legislation, it should act to increase subsidies for other important sources of economic growth, such as education, health, and public utilities. These would help redistribute economic wealth across all age groups, which would foster an equitable society, alleviating both Brazil’s economic woes and Michel Temer’s devastated popularity ratings. Such measures would also encourage Brazilian citizens to save more, thus reducing the country’s high inflation rate and prompting greater potential for economic growth. Although remedies for Brazil’s economic turmoil do exist, passing them will not be so easy. Not only do citizens distrust Temer for his involvement in corruption, but they are also fundamentally opposed to pension reform. The current Worker’s Party, led by former president Dilma Rousseff, has publicly condemned Temer’s proposals, equating them to an attempt to destroy the welfare state that former leaders fought so hard to establish. This destructive rhetoric presents a clear challenge to reform; the terrifying reality is that it actually resonates with citizens. Throughout the past year, the nation has seen uprising after uprising among workers, demanding that Temer not mess with their retirement programs. Such vehement public disapproval of the current leadership’s policies serves to make the passage of regulatory legislation even more difficult. For now, the country is going to stay in shambles. Social security spending seems to be a problem unique to Brazil, but it is a major indicator of the experiment that many Latin American countries such as Venezuela, Argentina, and Columbia are trying to pursue. As the largest economy in the region, Brazil’s success will determine the fates of its neighbors. If Brazil’s economy fails, the entire region could descend into chaos. People would lose their homes, their jobs, and would be left in total destitution. Beyond that, many of the country’s neighbors will fragment, decreasing regional cooperation and creating missed opportunities to increase the region’s economic prowess. There needs to be more regional accountability, and the first place to start is with reform across South America. Nations such as Venezuela and Argentina have set up generous welfare systems as well, but they also face spending problems which are accelerating hyperinflation and social unrest. Spending for public utilities has decreased in both countries, making it harder for people to have access to basic necessities. Brazil’s neighbors, including the United States, should avoid the same mistakes. America is at a pivotal time in economic policy, where congress is looking to diminish its debt. While spending in general is a necessary part of any nation’s economic growth, all powers in the region need to be cautious about falling into the same trap as Brazil. Certainly, Brazil cannot stop spending on welfare programs altogether, but it needs to balance welfare goals with regulatory reform to ensure that it can maintain growth and carry out its vision for a successful future. Notably, though, the public seems to disapprove of any deviation from the current system; many note that this is due to fear of reversion back to the 1980s military rule. This begs the question of how far the country and its South American counterparts are willing to go to maintain their new national identity, and if that quest is worth it. This is a question that Mr. Temer needs to keep in mind as he proposes solutions to the Brazilian Congress. How he deals with tough times in Brazil now will define the economic and security dynamics of the region for years to come.
A BAD SIGN FOR by Isaac Greenwood Amidst high-profile scandals and executive shake-ups, the traditional film landscape has changed drastically over the past five years. In a whirl of prequels, sequels, remakes, and spin-offs, box office flops are increasingly prevalent as evidenced by failures this summer such as The Great Wall, Ghost in the Shell, and King Arthur: Legend of the Sword, which all featured ensemble casts and big budgets. Annual movie theater attendance, as measured in billions of tickets sold, has decreased by over 200 million to 1.296 billion since 2007 as inflation-adjusted box office revenues continue to fall. A multitude of factors contribute to the slow demise of the once-dominant movie studio industry. With the rise in popularity of independent film, traditional studios have faced increased competition; 78 Oscar nominations for 2017 were produced outside of the six major studios, up from 58 in 2015. Furthermore, large movie studios face pressure from providers like Netflix and Amazon who produce viable content across the globe. Beginning with series like House of Cards and Orange is the New Black in 2013, Netflix moved into the movie sphere in 2015 with Beasts of No Nation and has since produced dozens of award-winning films, notably from the British Academy of Film and Television Arts. The company recently announced it would release over 80 new movies next year and license its original content for sweaters, shirts, and similar. These services offer competitive salaries to notable actors and directors like Robert Redford and Eli Craig, who help attract audiences with ease of access anywhere in the world. As part of the traditional complementary set to film, movie theaters have also been forced to adapt to changing consumer preferences. Small chains and large chains alike now offer incentives like $5 Tuesdays, frequent visitor perks, and luxury seating. Founded in 2011, MoviePass offers patrons unlimited screenings at participating locations for just $9.95 a month. Outside of markets like New York City and Ithaca that enjoy increased ticket pricing, the former due to high demand and the latter low supply, subscriber growth in the company has surpassed analyst expectations and sits at over 600,000 today and is expected to grow to an estimated 2.5 million by August 2018. Similarly, studios like Warner Brothers and 21st Century Fox are reportedly looking to offer in-home rentals for recent releases within 15 to 45 days after debut. However, these programs fail to address the fundamental problem gnawing at the industry
which has compounded its losses to digital competition: poor films. The widespread failure of films this past summer, traditionally one of the strongest seasons for new releases, demonstrates the riskiness of big-budget films against digital competitors with lower costs and easier methods of distribution. Seeking to create fan bases similar to those of Star Wars and Marvel, studios have increasingly turned to “tent pole” films with costs ranging from $120 to $150 million that are intended to launch multi-movie franchises. While just 10 years ago such films cost an average of $80 million to produce and market, these films now account for an overwhelming amount of studios’ profits who continue to rely on them despite high costs which have incurred significant losses. Like The Mummy, however, many tent pole films have bombed in the box office despite carrying names like Tom Cruise and Russell Crowe, with critics noting the film’s “dreary actionblockbuster template” and “considerable lapses in narrative” in what was intended to launch Universal’s Monster Universe. The recent Pirates of the Caribbean release is another example of a poorly-written film which failed to even revive a once-popular series. The success of films like Get Out demonstrates that studios should focus on socially relevant films with original content rather than rely on the boom-bust franchise model. Moonlight, which won the Oscar for Best Picture in 2017, demonstrates shifting consumer preferences toward films which capture America’s changing social landscape. Even here there have been missteps; the expensive and critically-acclaimed Blade Runner 2049 missed box office expectations by $15-20 million, largely given the failure to successfully market the film to female and younger audiences. Within the on-demand sphere, even giants like Netflix are subject to intense competition from the growing number of entrants like Apple, who joined the fray earlier this year and is expected to release over 10 original shows in 2018 on its Apple Music platform. Netflix recently announced a $1 increase in monthly subscription fees for new and existing customers alike, signaling the growing marketing and production costs the company must incur to remain relevant. The company is no stranger to price hikes, having introduced the first in 2014 and an additional one in 2016 with the removal of “grandfathered” plans for original subscribers. In a recent survey, 79 percent of millennials
chose Netflix as the provider of the best original content, and, coupled with continued growth in international markets, these hikes are expected to continue into the future alongside the company’s growing market share. To survive, Hollywood must address rampant racial and gender problems which have plagued studios for decades. The downfall and ousting of Harvey Weinstein, reported to have sexually assaulted dozens of women during his tenures at Miramax and the Weinstein Company, is likely the first of a cascade of increasingly public cases. Netflix even postponed final season filming for its hit House of Cards in wake of recent sexual assault accusations against Kevin Spacey, demonstrative of the rippling effects these scandals can have for both traditional and digital studios. However, many of these accusations have been known within the industry for years, but instead of blacklisting accusers as was done to Courtney Love in 2005, public sentiment and Hollywood machinations now appear to encourage the truth. Thus, studios and executives aware of these issues must address them on a preemptive rather than reactive basis. Diversity issues too must be addressed. Films should cast actors to reflect the rapidly changing American demography rather than continue to “white wash” characters and perpetuate Western stereotypes. Finally, while Chinese investments and partnerships in Hollywood have grown considerably over the last decade, studios should stay wary of the influence of the Chinese Communist Party. Chinese investment in Hollywood, both through studios and theaters, reached several billion dollars in 2016 but has slowed significantly since August as a result of Chinese regulatory scrutiny on such deals. Hollywood should not reduce or filter the quality of their content to attract such investments especially given the recent slowdown in large deals which provided much-need funding in the past five years. Although unprecedented, a Netflixor Amazon-produced movie may one day snag an Oscar while studios continue their slow and painful projected demise. While diverse and complex, the threats Hollywood faces are nonetheless solvable. Rather than purge executives for box office flops, studios should cut ties with known sex offenders and release films outside of the traditional action box office hit, as well as explore pricing and viewing methods to challenge on-demand competition.
STRING OF PEARLS by Rija Tayyab
China may not have invented climate change, but they are focused on building a new economic and social order. The rapid growth of the Chinese economy in the last three decades remains an enigma; its economy has grown exponentially, currently second only to the United States. China has acquired enough economic and political power to use a more colonialist approach in their dealings with developing countries. States such as Pakistan, Sri Lanka, Angola, Kenya, and Brazil that are in desperate need of capital for economic stability have seen increasing Chinese intervention. Local governments broker massive deals that allow Chinese private and state investment and acquisition of resources within the country, often causing devastating long-term consequences for the countries involved. China tends to invest especially in politically strategic countries, sometimes at the expense of its apparent economic interests. The China Pakistan Economic Corridor (CPEC) is one such example. CPEC is a part of the “One Belt, One Road Project,” seeking to connect China to Europe through Central and South-East Asia. The beginning of the project dates back to 2001, when the Chinese government agreed to assist in the rebuilding of the deep-water port of Gwadar in Baluchistan. Despite the subsequent unprofitability of the port, the Chinese government persisted, and in 2013, the China Overseas Port Holdings Company was awarded a 40-year contract to run the port. The company is now in charge of the development of the port, making it the major recipient of its revenues. Pakistan, on the other hand, will make little use of the port for trading purposes, nor will it be collecting any major revenue from it. China has great strategic interest in the port: it opens up trade routes and new markets for Chinese firms and allows the forming of a “string of pearls” of Chinese-influenced ports in the region that provide naval security and economic routes to China. Most importantly, since it cannot be made profitable without other large infrastructure projects throughout Pakistan, it is the seed that allowed China to come up with China Pakistan Economic Corridor that allows Chinese influence to branch out into almost all sectors of the Pakistani economy. The details of CPEC have not yet been officially released to the public, so most publicly available information is based on documents leaked by the Pakistani news group Dawn. The contents of these documents were not denied by the Pakistani government but rather clarified as “aspirations of both sides” and open to modification and revision. Nonetheless, it delineates what China hopes to achieve through this large-scale investment. Gwadar’s brief mention lends credibility to the idea that Gwadar was more of a small-scale test run leading the way to CPEC.
Some major investments and market loosening could occur, surprisingly, in the agricultural sector. Previous public statements on CPEC had little to no mention of this sector and painted it as a primarily infrastructural project. This changes the nature of the project as its shows that China does not only see Pakistan as a pathway to the rest of the world, but a destination itself. By controlling the agricultural-dominated Pakistani economy, China can ensure that its growing industrial population does not run out of basic necessities and avoid the Malthusian trap. Thus, the role of Pakistan’s nascent economy will be that of a facilitator to China’s industrial economy. The report also highlights Chinese ambitions to influence Pakistani society and culture. The maintenance of law and order in major cities does not seem an unreasonable expectation, but China goes as far as to demand 24-hour surveillance in these cities. Coupled with closed-off Chinese “towns” already seen in industrial hubs such as Taxila, Chinese involvement in matters of national security will be tough to reign in. The project even offers plans to lay down new fiber optic cables throughout the country, which can be used to present Chinese media to the public. The actual effects of media messages on the general populace are debatable, but it is clear that China aims to influence Pakistan’s social and cultural life. These measures may seem innocent separately, but actualized together, they make it extremely difficult for the Pakistani government to act
autonomously. The financial aspects of this project are noteworthy. A large part of the project is to be financed by Pakistan through Chinese loans. China has promised to provide low interest loans and in turn asks the government to protect the rights of their creditors. According to some estimates, Pakistan will still be required to pay $100 billion to China by 2024 against these loans. Pakistan’s workforce and GDP is unlikely to benefit as much as its government projects due to factors including a lack of skilled workers, the use of Chinese workers, and the focus on acquisitions in the agriculture and industry projects. Pakistan may find itself in a cycle of debt to China very soon. China’s global economic policy increasingly focuses on the most vulnerable economies and governments. Cash-strapped governments like Pakistan are taking up Chinese offers of investments and loans, which may be beneficial in the long term—leading to more businesses, infrastructure and GDP growth—but leave them in a cycle of debt. Any form of repayment will lead to even more Chinese economic and political influence in the country. In the near future, this will have huge implications in the international economy. It will be easy for China to form an economic and political bloc forged from countries indebted to them and those that have lost significant economic sovereignty due to the ever-growing Chinese presence vital to their economies. As the United States looks inward, China looks to fill the vacuum even more ambitiously.
The body heat of 3,000 rally-goers, packed snugly into the SeaGate Convention Center in Toledo, made the frigid October evening a bit more bearable. With the election a month away, an especially caustic campaign season was finally nearing its end. The shock and awe of Donald Trump’s ascendance to the Republican nomination had faded long ago. Tonight was about sticking it to the failed establishment and crybaby liberals. After taking the stage, it took Mr. Trump no more than two minutes to diagnose America’s most conspicuous ailment. “Real change begins with immediately repealing and replacing Obamacare. What a mess,” he barked. “It never worked from day one. It was never destined to work. There was no way it was going to work.” Earlier in the week, there had been bleak news: monthly premiums in the Obamacare health insurance marketplaces had risen by 25 percent. Mr. Trump, it seemed, was winning the argument. More than a year on, Mr. Trump is president. His party controls both chambers of Congress. They are united, at least theoretically, in ridding America of Barack Obama’s signature health law. How is it, then, that the Affordable Care Act (A.C.A.), more commonly called Obamacare, remains the law of the land? And more importantly, will it stay that way? Obamacare’s health insurance “exchanges” (i.e., state marketplaces for private insurance plans) are best explained through a metaphor: the so-called “threelegged stool.” The Obamacare exchanges are propped up on three “legs” that together aim to create a robust health insurance market. Leg one is the “individual mandate,” a federal requirement that all people enroll in an insurance plan—or pay a hefty fee. The second leg—“means-tested refundable tax credits”— is cryptic health-wonk speak for “subsidies based on income.” In essence, working-class folks receive substantial subsidies, while the middle class receives skimpier payouts. Leg three bans insurers from discriminating based on health status, otherwise known as “preexisting conditions coverage,” ensuring the sick are offered the same rates as the healthy. The individual mandate reels the uninsured into the exchanges. The subsidies keep them there. Pre-existing conditions coverage ensures all Americans get care. Legs one, two, and three—we have ourselves a threelegged stool. Shrewd readers will notice that the exchanges are designed to provide subsidized—not free—health insurance. So, then, what to do for the poor? Since 1965, the American government has supplied health insurance to the poor via the Medicaid program. Before the A.C.A., the scheme only provided coverage to certain categories of low-income Americans, such as pregnant mothers. Working-age, able-bodied— but still poor—individuals didn’t qualify for Medicaid. The solution: expand Medicaid to all low-income people. An income threshold is set at 138 percent of the federal poverty line; all below the threshold can obtain coverage through the “Medicaid expansion.” Obamacare’s subsidies phase out at 100 percent of the poverty line, meaning poor Americans can get low-cost insurance from either the exchanges or the
Medicaid expansion. But in 2012, the Supreme Court ruled that the federal government couldn’t force states to expand Medicaid, which is jointly funded by federal and state governments. As it stands in early November, 19 states have not yet expanded Medicaid. Shortly before the Cornell Business Review went to press, voters in Maine approved a ballot measure expanding Medicaid, which will, if implemented, bring the number of non-expansion states down to 18. Anyone who paid attention to the 2016 campaign remembers the universal Republican oath to “repeal and replace Obamacare.” Indeed, opposing the A.C.A. allowed the Republican Party to paper over its internal divides with one unifying clarion call. The prospects for repeal were bright, too, with Republicans controlling all branches of government after Mr. Trump’s victory. But it was all for naught. Congressional Republican efforts to repeal Obamacare failed on no less than four occasions. They even invoked an obscure rule which allowed a repeal bill to pass the Senate without any Democratic votes. None of it—neither repeated attempts nor legislative finesse—was enough to repeal, much less replace, Obamacare. It is a claim that evokes images of working families paying sky-high prices for shoddy insurance plans. As Paul Ryan, the top House Republican, declared, “Obamacare has failed.” Not so fast. Policy experts tend not to concur with Mr. Ryan, instead pointing to the law’s myriad successes and failures. Of course, a dull but correct “it’s complicated” isn’t a great talking point. Still, Obamacare’s flaws shouldn’t be downplayed. First, premiums (the upfront cost of an insurance plan) and deductibles (the amount an insured person must first pay toward a medical bill before the insurer will contribute) for plans on the exchanges certainly have risen, largely due to a deficit of young, healthy people. To see why, recall Obamacare requires insurers on the exchanges to charge sick and healthy people the same rates. But it’s more expensive to insure the sick than the healthy. If young, healthy people flee the exchanges, insurers now must cover a sicker— and thus pricier—pool of people. To avoid heavy losses, insurers are forced to defensively raise premiums and deductibles for everyone. Second, small businesses, firms with 50-100 full-time employees, have been pinched by the “employer mandate.” This provision of Obamacare requires businesses to provide their employees with health insurance, as many already did prior to the A.C.A. Advocates predicted the employer mandate would inflict minimal costs on businesses, which mostly held true for larger firms. For small businesses, the picture is less rosy. The employer mandate discourages smaller firms from hiring since each new employee also entails increased health insurance expenses. Because the mandate doesn’t apply to employees working less than 30 hours, it incentivizes firms to cut hours, lowering take-home pay for workers. Moreover, as the Brookings Institution’s Robert Pozen has argued, various taxes and regulations in the A.C.A. make it far cheaper for small businesses to take on health-insurance risk, rather than hand it off to an insurance company. While
larger corporations usually have a diverse staff (in terms of health status) and ample funds, smaller firms lack both. As Mr. Pozen notes, “One big claim can wipe out a small company.” Third, the explosive competition that was supposed to undergird the exchanges hasn’t materialized. This year, Alabama, Alaska, South Carolina, Oklahoma, and Wyoming have lost all but one insurance provider. In 2016, only Wyoming was in such an untenable position. One explanation for the underwhelming exchanges is that the individual mandate is enforced inconsistently, letting young people squirm out of the exchanges. A shortfall of young people drives up insurance prices for everybody. Further, rural states like Alabama cannot absorb higher costs in the way that, say, California can, since health care delivery is cheaper in populated, urban areas. In that sense, health insurance isn’t too unlike real estate—location, location, location. These are but three of the numerous ways Obamacare has fallen short. But the above limitations are a far cry from Mr. Ryan’s bold claim of failure. Its difficulties aside, the law’s upsides are hard to ignore. The A.C.A. is a smashing success in getting over 20 million Americans enrolled in health insurance plans, chopping the uninsured rate in half. The bulk of the coverage gains have come through the Medicaid expansion in conjunction with changes to an insurance program for poor children. Fewer uninsured means wider access to preventive care, which is a boon to patient health and lowers medical expenses over the long haul. Some research even suggests that simply having insurance can improve mental health. A much-debated
IMMERSED IN FOG by Ethan Wu
study of Oregon’s Medicaid expansion found that among new Medicaid enrollees, depression rates fell by 30 percent. To those enrolled through it, Obamacare is a hit. A Commonwealth Fund poll from 2016 says 82 percent of people who obtain insurance through the exchanges are satisfied with their plans. Pre-existing conditions coverage is immensely popular, as is a provision which lets children stay on their parents’ insurance until age 26. In several of their Obamacare-repeal bills, Republicans endeavored to maintain these two provisions, underscoring their popularity. So no, Mr. Ryan, Obamacare has not “failed.” But neither has it entirely succeeded. The A.C.A.’s legacy now rests in the eager hands of Donald Trump. Say what you will about him; Mr. Trump knows how to ignite controversy and set culture-war kindling aflame. Even still, his Twitter bark often outstrips his policy bite. Health care is an instance where Mr. Trump’s 140-character effusions have realworld consequences. Take the case of the “cost-sharing reduction” (C.S.R.) subsidies— payments to insurers for lowering out-ofpocket expenses for low-income people. A pending lawsuit gives Mr. Trump the power to remove these subsidies. In July, he tweeted, “If a new HealthCare Bill is not approved quickly, BAILOUTS for Insurance Companies [the C.S.R.s] … will end very soon!” His tweet sent health insurance companies into a panic. They began drafting contingency plans for if Mr. Trump were to pull the C.S.R. payments. Insurers across the country cited the uncertain future of the C.S.R.s as a top concern. Some
insurers pre-emptively raised prices. Others projected steep premium hikes. This October, Mr. Trump announced he would no longer make the C.S.R. payments, presumably for the month of November. As the Cornell Business Review went to press, it was not clear whether Mr. Trump would follow through on his proclamation. Regardless, premiums are already rising. On October 16th, the UPMC Health Plan in Pennsylvania bumped up its 2018 projections from an 8 percent average rise in premiums to a whopping 41 percent. And in a bizarre twist, congressional numbercrunchers predict nixing the C.S.R.s will cost the federal government an additional $194 billion over ten years. (This has to do with legal caps on deductibles and Obamacare’s premium subsidies.) Ditching the C.S.R.s will only weaken Obamacare, not sink it. Yet it demonstrates the extent to which the law’s future rests in the Trump administration’s hands. The C.S.R.-payments snafu aside, Mr. Trump’s executive branch is taking a dizzying array of steps to undermine the A.C.A. The Department of Health and Human Services (H.H.S.) halved the duration of the open enrollment period when consumers may purchase new plans via the Obamacare exchanges. H.H.S. slashed the Obamacare advertising budget by 90 percent and the inperson outreach budget by 40 percent. In a baffling display, it launched a social media campaign against the A.C.A., posting antiObamacare infographics on the official H.H.S. Twitter account and uploading disparaging personal accounts of the law on YouTube. That the Trump administration continues to chip away at Obamacare is as
toxic as it is absurd. Such efforts hurt everyday Americans, whose insurance premiums will rise even more swiftly as the exchanges weaken further. The administration’s justification is inexplicable, beyond heeding Mr. Trump’s cynical desire to impair the A.C.A. no matter the cost. That is not conservative health care tinkering; it is callous mismanagement. The irony is that the people most hurt by Mr. Trump’s negligence are the same rural, working-class Americans who turned out for him in droves. Two senators, one Republican and one Democrat, have proposed a compromise bill that aims to stabilize the exchanges by ensuring the C.S.R. subsidies for two years— something Democrats want—in exchange for giving states broader latitude to customize their own exchanges—something Republicans want. House Republicans have labeled the bill dead on arrival. A counter-proposal put forth by two Republicans would also ensure the C.S.R.s for two years, but it includes controversial abortion restrictions and a five-year repeal of the individual mandate. Senate Democrats have labeled the bill dead on arrival. The uninsured rate has ticked up 1.4 percentage points since Mr. Trump’s election victory. In mid-October, he issued an executive order calling on federal agencies to consider expanding low-cost, deregulated insurance. More news is soon to come. But the future of the Affordable Care Act is as murky as it has ever been. Insurance may offer protection against risk. Uncertainty, however, is an entirely different matter.
It isn’t unusual to see a white bike zoom past on the way to class. Like hundreds of cities around the world, Cornell’s campus participates in one of the many bike-share programs that have impacted millions of commutes already. Since 2010, commuters all around the world have made over 88 million trips. Thanks to the GPS tracking of bikes and artificial intelligence, people are now returning to this older, more environmentally friendly method of transportation. Bike sharing has not only reached Cornell but also prevails in international cities and even New York City. Despite the growing popularity, investors are concerned about the increasing number of bikes that are littering cities. Right on campus, Big Red Bikes allows students to easily rent bikes from five different locations: Balch Hall, Kennedy Hall, Stocking Hall, Grumman Hall, and between Olin Library and Stimson Hall. After downloading the Big Red Bikes app, students enter the bike’s number into the app, which then gives a code to activate the bike. The fleet includes 32 bikes. Membership options vary from hourly to monthly to annually. The hourly plan is $3 per hour for up to $30. Meanwhile, the monthly membership is $10 each month. Trips under 1 hour are free for monthly membership holders.
After the first hour, fees are $3 per hour for up to $30. The Cornell Annual Membership is the same as the monthly membership except the annual fee is $30. The general public also has the opportunity to use these bikes. However, their annual fee is $60. In an interview with The Cornell Daily Sun, Susan Powell, the active transportation coordinator at Cornell, said, “bike share is one of the key things to really building an accessible campus.” Big Red Bikes is a collaboration with the largest bike share provider in the United States: Zagster. This collaboration began in the spring of 2017 and involves the efforts of Cornell Transportation as well as the Big Red Bikes student organization. Co-president of the Big Red Bikes student organization Erin Tou ’18 sees the usefulness of the bike share. Big Red Bikes “fill[s] the need for students who don’t have bus passes but want a more efficient means of getting around both on and off campus,” she said in an interview with The Cornell Daily Sun. Internationally, bike sharing is extremely prevalent, especially in Beijing and Shanghai. In the past few years, Chinese investors spent considerable amounts of money in bike share companies. These programs are especially attractive because they mean less traffic
and pollution, both issues plaguing many Chinese cities. Similar to Big Red Bikes, users download an app for the respective company, and then use the app to scan a QR code to unlock the bike. Currently, Ofo and Mobike are China’s largest bike share companies, raising over $1.3 billion in funding this past summer. They boast 50 million rides per day with over 100 million users each. Not only are bike shares accessible, they are also cheap. Rides are priced at 0.5 Yuan to 1 Yuan for every half hour of bike riding, which is equivalent to 7 to 14 cents. Dai Wei, founder and CEO of Ofo, told China Daily that their goal was “improving the environment globally by introducing low-carbon transportation to urban dwellers." Unlike Big Red Bikes, companies like Ofo and Mobike adopted a dockless bike sharing system. With this model, users can freely park bikes wherever they choose. Although this increases flexibility and mobility for the user, Ofo and Mobike face considerable challenges as a result. With over 12 million bikes in their fleet, bikes are oftentimes aimlessly scattered. To discourage such behavior, users can report bikes and even receive discounts and gift certificates for picking up strewn bikes. Companies also started dispatching carts to relocate these bikes. Too many bikes cause traffic
UBER'S 99TH PROBLEM
by Sonya Xu
congestion and are a safety hazard as well. On Aug. 18, the Shanghai government sent a notice to bike share companies demanding they stop adding more bikes to the streets. Currently, there are 1.5 million bikes in Shanghai alone, equating to 1 bike for every 16 residents. Moreover, Beijing has 2.35 million shared bikes. Not only are Ofo and Mobike pervasive in China; they play an international role as well. Mobike is present in 170 cities around the world with over 7 million bikes in circulation. Mobike’s co-founder and President Hu Weiwei told the media, "we are focused on market expansion” over making shortterm profit. Meanwhile, Ofo is in 150 cities and 5 countries, with a goal of reaching 200 cities and 20 countries by the end of this year. However, this increase in cycling may lead to increased regulations and rules in major cities. Wang Chenxi, an analyst at Internet Consultancy Analysys in Beijing, said, "The influence on major players Mobike or Ofo is limited, but it's a matter of life and death for small bikesharing companies, as it is inevitable that some of them will be knocked out." Bike shares are close to home for many of Cornell’s students. In New York City, CitiBike dominates the bike share atmosphere. CitiBike, like the name implies, is sponsored by Citi, and in
2012, they signed a $41 million, five-year contract. There are two options for renting these CitiBikes. The first consists of a day pass for tourists: 24 hours of access for $12 or a 3-day pass for $24. The second is an annual membership for $163 per year. CitiBike circulates 10,000 bikes and uses a model that incorporates docks, similar to that of Cornell’s; currently, there are 600 stations in 55 neighborhoods. Unlike Cornell and New York City, Seattle utilizes a model similar to that of Shanghai and Beijing, where docking stations are not needed, making it the first city in the United States to try dockless bike sharing. Between two Bay Area startups, Spin and LimeBike, 500 bikes are on the streets of Seattle. Some believe that the market in Seattle is oversaturated. Nonetheless, Coatue Management, GGV Capital, and The Durant Company invested $50 million in LimeBike. By the end of this year, LimeBike plans to expand to over 30 cities around the United States. With the expansion of bike shares into even more cities and schools, taxis and Ubers for short distances will likely be eliminated. Biking allows us to avoid surge pricing and traffic and may even get us to our destinations faster. Not only is it more efficient, but we also help the environment and our bodies. However, an issue arises with the price of bikes. Last year, Ofo’s premium
bikes reportedly cost about $435. If Ofo charges 14 cents per 30 minutes, that’s about 3,100 trips to break even. Companies must start using cheaper bikes in order to make profit. For now, bike sharing is an accessible and cheap way of getting around in both campuses and cities worldwide. To achieve maximum efficiency, cities must institute bike lanes as well as laws, such as only docking on public sidewalks if dockless stations are used. On Cornell’s campus, dockless stations would not improve ease of use because the fleet is relatively small. However, with a larger fleet, students could easily find bikes to ride and drop them off wherever they find convenient. Over time, the bike sharing industry will become an oligopoly, with a few companies dominating the industry due to the high costs for small companies to sustain their bikes. Many small companies have already gone out of business due to pressure from larger companies with bigger fleets. More companies may use bike sharing as a form advertisement, like Citi has already done, in order to generate profits. If not, they will continue to struggle. Granted, bike sharing is and will only be successful in dense, already extremely walkable cities. Only in these places will bike sharing continue to boom.
BLOOD, SWEAT, & BIG DATA by Matthew Peroni
Regardless of profession or personal interest, it has become almost impossible to avoid the buzzwords circulating the tech industry. Artificial Intelligence, the Internet of Things (IoT), Drones, and Big Data are all common and largely misused or misunderstood terms meant to sound important. Cornell’s department of Computer and Information Science (CIS), like similar departments across the world, has invested time and money into the advancement of these technologies, as evident in the creation of Gates Hall. Recently, these technologies have found remarkable success in one of the oldest and most familial industries to the Cornell community: agriculture. The emergence of “Smart Farming” is coming at a time when human population growth projections estimate a 70 percent increase in the next thirty years. Given the growing world population, and the upward trend in urban living the next decade’s farms will need to be increasingly efficient. This efficiency can only be obtained through the application of modern technologies to farming. Emerging technologies and rigorous engineering research are kickstarting a Green Revolution that will stabilize as it is challenged by the flow of workers to urban living spaces and a growing world population. Farming, as an occupancy, saw its peak in the United States during the
1930s. During this decade, there were over six million farms in the states, averaging about 155 acres per farm. Since then, farming has seen a sharp drop in participation. In 2012, there were approximately 2.1 million farms in the United States, with an average size of 430 acres. As the number of farms has dropped by over 75 percent, the remaining farms have acquired the land left behind by the others, resulting in the emergence of massive farms owned by one family or company. Of course, any given farm can now be more profitable than it could have been eighty years ago, but the managerial responsibilities of such large farms is daunting. Enter Smart Farming. The scope of Smart Farming is quite broad, so this writer caught up with Professor Kifle Gebremedhin of Cornell’s Department of Biological and Environmental Engineering to discuss the topic. The intriguing strangeness of his work is immediately apparent upon seeing his office walls decorated with research papers donning titles such as “The Thermal Equilibrium of Goats.” Originally a civil engineer, Dr. Gebremedhin has found bioengineering to be extremely rewarding because “innovation is at interface of biology and engineering —bringing engineering to life.” While the statement may seem like a bit of haughty hyperbole, Dr. Gebremedhin provided a strikingly convincing argument
regarding the relevancy of his field of study. “The human heart, on average, successfully pumps blood through the body for about 80 years, that’s billions of beats,” he began, “if we try to make a machine to do that, it will break in less than five years.” To understand and model these cellular processes, then, seems immediately relevant to our own engineering design processes. Dr. Gebremedhin’s work falls under the first primary category of smart farming: sensors and continuous data analytics. For example, Dr. Gebremedhin recognized that, in prior research, the sweating rate of cattle has been recorded rather poorly, with measurements being taken every hour or every few minutes. Instead of following this method, his graduate students created a sensor that could be attached to a cow’s skin that would measure the sweating rate continuously. The data collected from this experiment showed something previously undocumented—the sweating rate under constant heat source exposure was periodic. This can potentially impact the way farmers try to cool their herd, making it more efficient, cost effective, and conducive to milk production. Sensors and data analytics are the backbone of precision agriculture. Instead of using the data to design better systems, as in bioengineering, precision agriculture aims to create
devices that rely on large data streams to distribute resources only where and when necessary. One of the most effective recent examples of this technology is the Yara N-Sensor. This real-time variable rate nitrogen sensor, when attached to a tractor distributing fertilizer, can measure a crop’s nitrogen requirement and adjust the fertilizer application rate accordingly as the tractor passes through the fields. Case studies of the N-Sensor have shown nitrogen savings of up to 14 percent and crop yield increases of around four percent. This technology is not dissimilar from the work done at Cornell CIS, and it is already improving the efficiency of many farms in the United States and United Kingdom. Within the same vein of precision agriculture, positioning systems are becoming increasingly relevant to farming as drones become more accessible and capable of taking high quality images. By combining aerial photography with data from satellite records, a farm can predict future yields based on the current levels of field biomass, where biomass represents the total mass of organic material in a given area. These aggregated images can create contour maps to track where water flows, determine variable-rate seeding, and create yield maps of areas that were more or less productive over some given time. One case study that focused on the OCEALIA Group, a french farming
cooperative, noted a 10 percent crop yield increase with the implementation of drone data. Again, a general technology that has reached a high level of public awareness is providing farms with information that can significantly improve the efficiency and yield of their land. Some examples of smart farming technologies involve the active creation of new sensors and data collection systems, such as Dr. Gebremedhin’s work or the N-Sensor, but farms have relied on sensors and a large number of data streams for a few decades now. Integrating this information into a single platform and “letting farmers see everything they need to know right on their phone,” as Dr. Gebremedhin said, seems to be a logical next step. OnFarm, a company founded in 2012, recognized, as they mentioned in their mission statement, that “having data in multiple locations made it hard for growers to use.” OnFarm provides software for data visualization and analytics specifically geared towards agriculture. Unlike the other technologies discussed, this product does not have an immediate impact on the daily functions of a farm. Instead, it aids in upper-management decision making by providing broader insights and trends. Given the size and commercialization of modern farms, there now exists such a thing as upper-level management in their company structures, which suggests that this technology will
be readily used by industry in the coming decades. For Cornell and similar research institutions with strong agriculture, computer science, and engineering departments, it is in the best interest of domestic consumers and the global community to foster and fund collaborative research between these departments. Each of these departments has its own respective research and knowledge bank, but as it is being displayed in very modern farming strategies, the combination of the work conducted in these fields has the potential to make a lasting impact on food production. Even if the estimates are wrong, and the global human population grows by only a fraction of what the projections predict, we are still looking at billions of new mouths to feed, many in developing countries that are unlikely to adapt to modern farming technologies anytime soon. So sure, roll your eyes at the exorbitant use of tech buzzwords. In this case, however, the Internet of Things, Big Data, and Drones all have a very real impact on feeding the world, keeping food prices down, and saving an industry that is plagued by a diminishing participation rate.
(NOT) LIVING IN COLLEGETOWN
by Christina Xu
One of the hallmarks of the Collegetown housing market is the unusually fierce competition for off-campus housing. Students camp outside popular apartments in order to claim lodging, sign contracts more than a year in advance, and often pay for 12-month leases with semesterly rent submitted upfront. Fifty-eight percent of undergraduates living off campus reside in Collegetown, resulting in an extremely constrained supply of housing that grants landlords significant leverage in pricing and negotiating contracts. However, campouts for apartment leases and the unequal bargaining power that Collegetown landlords hold are merely indicators of deeper flaws in the structure of Cornell’s on- and off-campus housing markets. On the supply side of the equation, Cornell’s remote surroundings and the scarcity of university-affiliated housing severely limit students’ housing options. Meanwhile, the relatively high median family income of the average Cornell student allows demand for increasingly expensive Collegetown apartments to remain high. As a result, Collegetown housing costs have been steadily increasing for over a decade—a phenomenon with far-reaching consequences for the broader Ithaca community. A preliminary examination of U.S. Census data highlights a significant upward trend in the cost of renting homes and apartments in Ithaca. In 2000, median rent across Ithaca was $574 per month, and median annual income was $21,441; Ithacan residents spent around 32 percent of their income on rental payments per month. In comparison, median rent in 2015 was $1,071 per month, and median income for renter-occupied housing units was $33,632, according to estimates by the U.S. Census Bureau’s American Community Survey. Ithacan renters spent approximately 38 percent of household income on rental payments in 2015. For reference, the U.S. Department of Housing and Urban Development (HUD) deems housing costs of 30 percent or less as affordable. Certainly, Ithaca’s rental market is far from standard. According to the 2015 Tompkins County Comprehensive Plan, 73 percent of Ithaca residents are renters, compared to a nationwide average of 44 percent. In 2015, the rental vacancy rate was 1.93 percent in Ithaca, pointing towards the significance of student renters in the broader Ithacan housing market and supply-side drivers of housing price growth. Rent growth has been particularly protracted in Collegetown; between 2000 and 2014, median gross rent has increased at an average annual rate of 1.8 percent in Ithaca and 2.8 percent in Collegetown. A closer evaluation of the Collegetown housing market provides a
more nuanced understanding of the upwards trajectory of housing costs for Cornell students. In 1990, the Cornell Law Review released a comprehensive overview of housing in Collegetown that drew a comparison between Cornell’s off-campus housing market and industrial company towns. With American industrial development in the late 19th and early 20th centuries, companies constructed towns in remote rural locations for their industrial laborers. Due to the isolation of the company towns, workers had little choice but to live in the company-controlled residences. Moreover, as a result of the oftentimes transient nature of the workers’ residencies, property owners were not incentivized to maintain homes or preserve positive relationships with tenants. Many of the problems that arose from the company town layout are replicated in the Collegetown housing conundrum. One notable similarity between Collegetown and the company towns is the demand for temporary living situations. Like transient workers, students make housing decisions on a yearto-year basis, bearing an array of behavioral implications for their decision-making processes and landlord relationships. Housing has fairly inelastic demand, and, on a yearly basis, an increase of 20 dollars per month does not seem as significant as it would across a fiveor ten-year time horizon. Students are also less likely to care about damaging their temporary lodging, pushing repair costs onto landlords; in turn, landlords employ harsh standard form contracts uniformly across their properties and use reckless student behavior to justify price increases from year to year. The Review notes that the decline of the company town coincided with increasing popularization of the automobile. As inexpensive vehicles became more widely available, workers’ reliance on housing close to the company diminished significantly, and workers were able to seek more affordable housing farther from their worksites. However, even Cornell students who have cars and can transport them to Ithaca find their options limited by Cornell parking lots, which are both sparsely spread and pricey to access. In an effort to preserve green spaces on-campus and stem development and maintenance costs, Cornell has kept the number of lots to a minimum. SC Commuter Permits for off-campus students are $752.86 per year and only provide access to two parking lots on north campus: CISER on Pine Tree Road, Route 366, and designated lots along Campus Road. Key areas for students, including much of Central Campus, are left virtually untouched. TCAT buses, meanwhile, are often crowded and delayed, have limited nighttime operation, and are bound by Stewart Avenue to the west and A
lot to the north. The lack of easy and quick transportation to campus renders real estate location even more crucial. Proximity is key for students; according to the Cornell Housing Master Plan Survey from spring 2016, the average maximum walk to campus that undergraduate respondents would consider was 16 minutes, and the average walk to class reported by undergraduate students in an October 2016 study was 12 minutes. According to the October study, over 90 percent of undergraduate students cluster within five to ten blocks of campus. Of the 52 percent of undergraduate students that live off-campus, only 12 percent live in University Village, 9 percent in Belle Sherman, and 9 percent in Cornell Heights; other off-campus options house 1 percent or fewer of off-campus residents. Given the inaccessibility of offcampus housing options outside of Collegetown, perhaps the most crucial component of the supply-side problem is the scarcity of Cornellaffiliated housing. In January 2016, Cornell launched a Housing Master Planning process in order to increase capacity for both current and future students. According to the plan’s working group, Cornell currently only has the capacity to house 7,100 (less than half) of its undergraduates and 800 (approximately 10 percent) of its graduate students. Students are only ensured on-campus housing until sophomore year, and, even so, securing a desirable spot on campus can be difficult. West Campus housing is contingent on a fiercely competitive housing lottery that pushes some students to engage in bribery to be “pulled” into a more optimal time slot and others to seek housing off-campus instead. The insufficient supply of on-campus housing options offered by Cornell drives many upperclassmen into the off-campus market by default. Left with few appealing choices, students must contend with rundown accommodations, steep prices, and minimal bargaining power in Collegetown. The close relationship between the cost of Cornell housing and Collegetown housing prices underscores the lack of other options in the Cornell student housing market. In 1990, the price of a room and average meal plan at Cornell was $5,000. In 2010, this figure was a staggering 143 percent higher at $12,160, having increased at more than double the annualized inflation rate between 1990 and 2010. Somewhere in this timeframe, Collegetown became a much more appealing option for students, and rental prices for Collegetown soared. According to Cornell estimates, a one-bedroom apartment in Collegetown currently averages $1,300 per month, or $13,000 for a ten-month lease, whereas the average cost for a room and meal
"Left with few appealing choices, students must contend with rundown accomodations, steep prices, and mimimal bargaining power in Collegetown."
plan in 2017 is $14,554. As the rising room and board for Cornell housing boosted demand for Collegetown apartments, the supply of Cornell dormitories remained tight; as a result, costs and competition for both rose. In order to alleviate the clear shortage of student housing, the Cornell Housing Master Plan projects the construction of at least two new residence halls and one new dining hall. The plan is still in its nascent stages, however, and many important budgetary questions remain. For instance, the plan deems $147.8 million in deferred maintenance of older residential buildings and $25.9 million in deferred maintenance of residential community centers as a top priority. Furthermore, while Vice President of Student Life Ryan Lombardi has emphasized that costs should not increase student tuition, neither he nor the 89-page Master Plan presentation outlined how the construction, furnishing, and staffing of the new buildings would be financed. Cornell does offer other universityaffiliated housing options, but their capacities are limited. The cheapest alternatives by far are cooperatives such as Watermargin, Prospect of Whitby, and Triphammer. Annual costs range from $5,030 to $8,730 including a meal/staples plan. Students can only join “co-ops,” however, after a “mosey” process for extremely limited space—Cornell co-ops only have the capacity for 163 undergraduates. Greek housing, both Cornell and chapter-owned, is another option. To give an idea of pricing, across Cornell’s thirteen sororities, the average cost for housing and a dining plan is $10,718.92, not including membership fees or dues. However, not all students are interested in joining Greek life, and those who join generally do not continue living in the house past sophomore or junior year. With limited on-campus alternatives for upperclassmen, students are driven towards Collegetown, where landlords have taken to renting out basements and unconventional spaces as cheaper “rooms” for tenants. Often, problems arise such as fire code violations that require renovation or unaddressed health hazards. A Cornell senior who asked to remain anonymous signed a lease with O’Connor Apartments in the fall of 2017 for the basement of one such Collegetown house. After a few weeks of living in the basement, she began to notice both the prevalence of mold in the apartment and the gradual deterioration of her health. She obtained a positive mold inspection result and notified her landlord, but instead of a refund, she was handed an eviction notice and was told to find new housing within 48 hours. Though she was able to obtain some advice from Cornell’s Office of Off-Campus Living,
she noted that a lack of available legal support was a significant detriment in her ability to understand her legal rights and pursue any action against O’Connor Apartments. In most scenarios, potential tenants sign lease agreements without entirely knowing the condition of the house or apartment and without understanding the legal contracts they are entering. Though viewings and apartment walkthroughs are offered to most potential renters, inexperienced students may not know which amenities to expect or problems to look for. Furthermore, students can end up spending exorbitant amounts of money on hidden costs (such as parking, which can cost between $900-$2,000 per school year) for dilapidated and occasionally unsafe living conditions. The fact that students continue to pay exorbitant costs and fees for poor or risky living situations points to an unusual consumer base. Many Cornell students enjoy financial backing from their parents and can increase their combined purchasing power by seeking Collegetown housing in groups. Furthermore, Cornell students are willing to pay a high premium to live near friends and for the convenience of restaurants and stores; senior Eason Recto noted that many students would prefer paying upwards of $1000 per month for a rundown apartment on College Avenue over paying $700 per month for a much nicer home on Stewart Avenue. Whereas budgetary constraints would normally push students to search for cheaper alternatives elsewhere, Cornell students can afford and thereby support rising Collegetown rents when on- and other off-campus options are limited. The same cannot be said for the typical Ithacan. In 2014, Ithaca was featured as #11 on the New York Times list of top 20 cities where rents are highest relative to median gross income—right behind New York City. Housing in Ithaca has been dubbed as a crisis by many locals, particularly for middle-class families and residents searching for affordable housing; the Cornell and Collegetown markets have been cited as principal driving forces. College students in Ithaca almost outnumber year-round residents, and, as a result, the housing market often caters to students. When the median family income of students attending Cornell is $151,600, a student-centered housing market can become quickly inhospitable to lower-income residents. A housing market centered around students supported by higher-income families proves particularly problematic when it comes to the supply of lower-income housing in Ithaca. For many developers in Ithaca, constructing housing for middle-income Ithacans is cumbersome and carries a high
opportunity cost. Developers and city officials cite high taxes, high construction costs, and stringent Ithaca planning board requirements as disincentives for any kind of construction. Building in Ithaca in particular can be difficult as the relative density of downtown Ithaca requires vertical construction using steel and cranes, both of which are relatively expensive. Developers are not willing to invest in big-ticket items such as steel, roofing, plumbing, windows, and elevators for potential middle-income tenants when they could charge a high premium for luxury apartments simply by adding in nicer floors and countertops. Furthermore, financing agreements for these projects typically take place between public, private, and non-profit organizations, often relying on grant funding and complicated legal and tax structures; they are oftentimes so complex that most developers won’t even attempt to undertake them. As a result, while there have been an increasing number of options for high-end housing in the Ithaca area, affordable housing for lower to middleincome Ithacan residents has been stagnating for years. More high-end condominiums will not help families searching for reasonablypriced homes; without an adequate supply of affordable housing, low- and middle-income Ithacan households could be pushed out of their own town. Certainly, the effects of the supply shortage of convenient and modern housing on campus and outside of Collegetown are frustrating to Cornell students who end up paying city prices for rundown rural houses and apartments. Graver, however, are the implications for lower-income students and local Ithaca residents who are squeezed harder by rent increases. The question is: what can be done? The Cornell Housing Master Plan suggests creating a sophomore village on North Campus and explores requiring twoyear residency for undergraduates to reduce the number of students competing for offcampus space. Meanwhile, the City of Ithaca has approved four anticipated Collegetown development projects for 2017-2020. However, until concrete funding is approved for Cornell’s projects, and until steps towards formulating an incentivization scheme for middle-income housing developments are taken, we will continue to see rents creep up year by year in both Collegetown and the broader Ithaca market.
BYPASS by Cameron Griffith
Medical tourism–traveling abroad for medical services–has existed since the times of the ancient Sumerians when villagers would travel for miles to enjoy the health benefits of natural hot springs. During the past several decades, medical tourism has shifted from a luxury afforded only to the affluent seeking the best services available to a necessity for millions of Americans without access to affordable medical care. Last year, as many as 1.2 million Americans traveled abroad to receive medical care, driven by the prohibitive cost of health insurance, prescription medications, and medical procedures in the United States. Not only do these high costs have adverse effects on Americans who cannot afford care, but they also harm the citizens of developing countries who must share limited medical resources with an influx of medical patients. In the past, wealthy individuals in developing nations traveled to the United States to receive top-notch medical service. In recent years, the flow of medical tourists has reversed. Due to rising domestic medical costs and improving medical care abroad, a majority of medical tourists worldwide are now American. This trend highlights the ongoing flaws in the American medical system, a system which unnecessarily costs Americans hundreds of billions of dollars every year. In 2016, the Global Wellness Institute estimated global medical tourism to be a $563 billion industry. The institute predicts that, driven by increasing healthcare costs in the United States, this number will reach $3 trillion by 2025. Today, the United States spends 18 percent of total GDP on healthcare each year, more money than any other nation. In addition, the World Health Organization estimates the total healthcare expenditure per capita in the United States has more than doubled in the past 18 years, from $4,788 in 2000 to $10,435 in 2017. These costs are rising at a faster pace than both wages and GDP in the United States and show no signs of slowing down. Couple these rising costs with the improving standard of foreign medical care, and it is easy to understand why medical tourism has become so attractive. There are now numerous medical tourism travel agencies which handle every aspect of the experience for their clients, from booking the flights to pairing patients with the best medical centers abroad. These companies have legitimized this industry by encouraging foreign medical centers to invest heavily in catering to medical tourists through online consultations and providing caretakers who speak the client’s language. There are even several accreditation agencies, such as the U.S.based Joint Commission International, which review medical centers abroad to ensure they
meet standards similar to those in the United States. These services come together to ensure lower costs without sacrificing quality. Americans pay more for their healthcare services, while receiving inferior care, due to a misalignment of motivations between healthcare providers, insurance companies, pharmaceutical manufacturers, and patients. The current system pits hospitals against insurance providers, who haggle over the price of everything from preventative tests down to the tissues in the operating room. This has resulted in stories of hospital bills comprised of unbelievable charges for simple things including a $100 icepack, a $53 pair of sterile gloves, or a $15 pill of Advil. Hospitals know that insurance companies will negotiate these costs down, and because of the enormous purchasing power these insurance companies have, they are often successful. Meanwhile, doctors administer redundant and expense medical tests to patients to protect against malpractice lawsuits. There is little incentive for doctors to be cost-effective because the patient does not see the price of these tests upfront, and the patient is insulated from most costs by virtue of their insurance. These inefficient practices drive up the costs of services ranging from complex surgeries to blood tests, with no clear end to the cycle in sight. This means that, in certain conditions, it makes financial sense for Americans to travel abroad to purchase a prescription. For instance, for the price of a one-month prescription of Advair in the United States, a patient in France could purchase a seven-month supply. This disparity drives many Americans to cross international borders to purchase their prescription at a great discount, despite the inconvenience of the process. To get a better idea of the financial motivations behind medical tourism, consider the cost of coronary artery bypass surgery for an American with an average insurance policy. The American Heart Association published a report which concluded that, with doctor’s fees, hospital stay, and rehabilitation, the average cost of this procedure in the United States hovers around $117,000. Assuming $1500 deductible, and coinsurance of 30 percent (both typical in many health insurance policies), this procedure costs the patient around $30,000 if performed in the United States. However, Frankit, an Indian medical tourism agency, advertises the same surgery for just under $10,000 total. Even after airfare and lodging expenses, the cost of having the procedure done in India without insurance is less than half the total cost in the United States with insurance. With a flexible insurance policy, patients may pay even less by having the surgery
performed abroad. Several insurance providers have begun to offer coverage plans for medical services obtained abroad. The big insurers are realizing that it is more cost effective to pay for international travel and surgery abroad than to pay for the same care domestically. It can be argued that medical tourism gives American patients access to more affordable options while providing foreign hospitals and medical tourism agencies with additional business. However, this view ignores the negative effects that the industry has on citizens of popular medical tourism destinations. Governments have limited finances to spend on medical care. In recent years, developing nations have chosen to divert resources away from existing medical programs, preferring to spend on ad campaigns aimed at promoting medical tourism or state-of-the-art medical centers which cater to incoming waves of medical tourists. Government officials claim these efforts help bolster tourism revenue, improve quality of care at home, and slow the emigration of medical professionals to more developed, higher-paying countries. While these efforts bring in more foreign patients, the policies do so at the expense of those living within the country’s borders. Money spent abroad attracting international patients could have gone to renovating existing hospitals or improving patient care at government-run medical facilities. What is more, doctors and nurses from public sector hospitals and rural facilities are being drawn to work in high-paying, prestigious corporate medical centers which cater strictly to medical tourists, decreasing the number of doctors available to local patients. In developing countries like India, with roughly one doctor for every 1,300 people, this represents a substantial and growing threat. The U.S. spends far more than any other country on healthcare, yet the WHO ranks it 31st in terms of average life expectancy. Unfortunately, none of the recent plans proposed by Congress alter the fundamental nature of the American healthcare system; around half of Americans still receive coverage through private insurance paid in part by their employer, while more than a third depend on the government for their healthcare through Medicare, Medicaid, or other government programs. Insurance companies are still at odds with medical providers, and big drug companies still spend upwards of two hundred million dollars every year to encourage policies which drive up costs for consumers. Until these issues are fixed, healthcare costs will continue to rise, and many Americans will choose to outsource their treatment to countries which cannot handle the medical needs of their own population.
EXCLUSIVE INTERVIEW WITH
during the summer and started fulltime at Unemployed Denim on October 1st.
What was your original vision for Unemployed Denim when you first created it in your dorm at Cornell? How has that vision changed since?
After being in such a competitive, cutthroat environment at Cornell where everyone’s getting offered jobs from big companies, did you feel any pressure that you also have to do that before you decided you’ll work for yourself full-time?
Sydney Izen: When Unemployed Denim first started, I never expected it to be my full-time job. It was a hobby that I was exploring, something that I liked to do in my spare time. I eventually turned my hobby into a full-time job and a business. The vision for Unemployed Denim still stands true to how it was started. Some of them being: making one of a kind, individual pieces customized to each customer to show their individuality and personality.
Sydney Izen: Definitely, the environment at Cornell is extremely competitive, and everyone has jobs and are doing amazing things. It stressed me out and that’s where the name “Unemployed Denim” came from. Your company’s slogan is “Wear clothes that turn heads, and start conversations, not to blend in and match others.” How does Unemployed Denim fit in today’s society for having a strong identity?
When you first started, did you start making it for your friends on campus? What was the moment that made you want to turn your hobby into a business? Sydney Izen: I made a pair of shorts for myself that was featured on the Nordstrom blog and a lot of other media channels. At the time, a lot of festival-goers were taking pictures of my shorts, and that was when I realized that people actually liked my creations. Afterwards, I made a jacket for myself at Cornell to wear around campus; my friends and classmates wanted me to start making some for them. This all started happening the spring of my senior year, when I didn’t have a job yet, although I was going through the recruitment process. This is where the word “Unemployed” from “Unemployed Denim” came from, as it was very relevant to my stage in life. After graduating,
I got a job immediately and worked at a social e-commerce platform while doing Unemployed Denim at night. I was doing my business whenever I had free time. Simultaneously, I started an Instagram where I began to get customers from friends of friends who were direct messaging me on the app. About midway through summer, I was getting a lot of orders, and it sparked my interest that if I had more time, I could develop it into my own company and do a lot more with it. I was thinking about it a lot
Sydney Izen: Now more than ever, society encourages everybody to be oneof-a-kind and show their individuality, especially on social media. People look for different things to talk about and share on social media. Also, the importance of customization and personalization has taken a huge leap in the past year. Companies are looking to offer experiences and customization aspects to grab consumers, which has greatly helped Unemployed Denim. It’s exciting to meet random people because of what you’re wearing. Tons of people stop me and ask, “Oh My God, what brand is that?” It’s a great way to start a conversation and meet new people.
How long does it take to customize a jacket?
when designing new pieces?
Sydney Izen: It varies. Whenever a customer orders an item, we always send a mock design of what they ordered, so that they can make adjustments if they want. They can move the patches, change the color of the letters, and change the size of the jacket. Some people really get into it, and it might take hours to come up with their final design. Others pick a few patches and trust us to do our “thing.” That is what is so cool about Unemployed Denim – we really do get personal with every customer, and it’s almost like we know them by the end. They instagram us, they comment on our posts, they direct message us, and we get tons of texts and emails about how happy they are with their item.
Sydney Izen: We have a bunch of collaborations coming up, which I really enjoy about Unemployed Denim. It has been an amazing way to meet people and companies. It all starts organically. This summer there was a bracelet pop-up at a restaurant I was at, and I started talking to the founder, and we really connected. Now, we are coming out with a whole line of collaborative products that match both of our brands. I think that it is really exciting to be able to work with other entrepreneurs and hearing other people’s stories.
How do you want people to feel when they wear Unemployed Denim? Sydney Izen: We hope that the customer feels like they are wearing something that’s made for them in every aspect. We let them customize the wash, the size, the fit, the kind of lettering, and the types of patches. We just really hope that when our customer wears their Unemployed Denim jacket, it feels like it was made for them and embodies their personality. Do you have international customers? Sydney Izen: Surprisingly enough, yes. I don’t know if it’s through Instagram or searching on the web, but we’ve had customers from Switzerland, Mexico, Canada, Norway and more! How have you leveraged social media to promote your brand name? Sydney Izen: A recent Cornell graduate, Meredith Keller, really loved our product and message. She reached out to ask if she could get involved and suggested ways that she could help us. Meredith came on, and now she’s been working with Unemployed Denim for over a year and a half, and she runs all the social media and website. She’s the best! Our goal is to have a few different patterns for people to look at. We mix customer pictures along with our own lookbook pictures. We use social media to promote our pop-ups, our partnerships with philanthropies, and highlight our brand ambassadors. The world is so reliant on Instagram, and we use it as a tool to get our information and our viewers engaged. Also, we do Instagram stories showing the behind-the-scenes of the company. It is evident that you guys have expanded your collection far beyond custom denim products. What is next for Unemployed Denim? Where do you draw inspiration from
I get inspiration for new designs from patches and vintage items. Also, scraps in the office that I leave around after I cut up denim jackets or military jackets. For example, recently I began putting half of a denim jacket with half of a military jacket. I pull inspiration from tons of designers, but I wouldn’t say I look at one or two designers and aspire to be them. I do not want my designs or my company to be comparable to anything else. Unemployed Denim sells on the patch trend. Do you think this trend will remain? Would you want to rebrand Unemployed Denim to keep up with other trends? Sydney Izen: I think patches are definitely a trend, but we have also incorporated a lot of other things into Unemployed Denim, so I wouldn’t say we rely solely on patches. However, people continue to like them, so we will definitely continue to use them. We have started to incorporate a lot of bandanas, fur collars, and we now have a graffiti artist and painter artist in-house who do graphics on the jackets. What kinds of fashion collaborations do you hope to create in the future from Unemployed Denim? Sydney Izen: I like challenging Unemployed Denim and doing collaborations with companies that aren’t necessarily clothing companies. For example, we did a collaboration with Betches. We are onto our second one right now, where we are doing sweatshirts and two different joggers. I think it is fun working with other companies that have different business models since it allows you to bring your side to it. Same with the jewelry company – they are bringing such different ideas and skills to the table. Where do you see the brand going 5 years from now, and would you ever want to sell in department stores or remain online? Sydney Izen: Right now, we’re in some boutique stores. We do wholesale accounts and are part of a bunch of pop-ups. There is a pop-up in New
York called The Bulletin, and they curate about 30 brands to be in the space from November to January, which we are in. In 5 years, I hope to have some Unemployed Denim free-standing stores in the city. We have a studio in the city where you can make an appointment and come in and design. It’s all going in the right direction! What is your favorite piece that Unemployed Denim currently sells and why? Sydney Izen: I think my favorite piece right now is on the website. It’s called “Hillside Boys,” a half military, half denim jacket with a detachable fur collar and stars on the sleeves with another denim patch. This was one of the first pieces where I really went outside of my comfort zone and didn’t follow the old trend of Unemployed Denim with just patches, so that got me really excited. I love the different elements of it. I think combining the denim with the military is great, and, along with the detachable fur collar, I think it adds the winter element to it. People have really started loving it. What advice do you have for other aspiring entrepreneurs at Cornell? Sydney Izen: I would say if you have an idea or an interest, definitely work at it. You don’t need to necessarily quit your job or not get a job or drop out of school, but definitely work on it when you have free time and be motivated to see it become successful. Then one day, if the time’s right, you can do it full-time. I just think not shutting down your dreams saying, “Oh, I’d never be able to do that.” I never thought I could start a clothing company without a lot of money, a lot of experience, or other people helping me, and I think my story shows that you can. Now, with Google and social media, everything is right there for you. I would also say not to be afraid to talk to other students or teachers at school or alumni who are involved in your work. Reach out to them, have a conversation with them, get advice or just talk through your ideas. I’ve started to do that more and more and been more comfortable asking people, and the responses have been great. People want to be involved and help. So I definitely think it’s important to reach out and not just shy away and think that they won’t be interested.
FRENCH PAYCHECK, ESTONIAN PAY by Nikhil Dhingra
Two months ago, French President Emmanuel Macron came out against one of the largest labor exploitation practices in continental Europe: social dumping. Through this practice, companies send workers to different EU member states for temporary work, allowing companies to hire sub-contractors in lower-wage member states and “post” them in costlier economies. Since their stay is temporary, these workers can be paid less than the minimum wages of their new country, as they are not fully integrated into its labor markets. While the practice was created based off the principle that EU members are permitted to work in any country within the EU, it creates a cheap and effective way for employers to exploit their workers in the country of their choosing. While the practice is widespread across Europe, few world leaders have done much to stop it. European labor regulations, especially in France, are notoriously rigid and strict. While there are leaders who have tried to ease regulations, most have curbed their efforts due to public backlash. Attempts by previous French presidents to curb labor regulations through loosening the 35-hour working cap and cutting taxes on overtime work have been met with massive public protests, preventing the legislation from
moving forward. However, loosening labor regulations was a major campaign promise of Macron’s, and many now look to him to curb a practice which, despite public support, has hurt France’s economy. France suffers more than other EU member states, as it takes in more workers at lower wages despite a significantly higher unemployment rate than other European countries. However, Macron has already begun making headway to address this issue. Macron and his labor minister, Muriel Penicaud, want to provide companies with a voice on wages and working hours, merge an extensive amount of workers councils together, and limit unpredictable court-imposed severance pay. He has already met with various unions and business leaders to discuss terms of acceptance. As of now, he plans to ask parliament for permission to change France’s labor law by executive decree with these considerations in mind. While this issue has been traditionally difficult for French leaders to address, Macron is at a unique position to combat social dumping due to xenophobic attitudes which have resonated with much of the European population. Despite the fact that xenophobia has been commonly utilized by populist campaigns in Western Europe as a tactic to stoke fear through an irrational hatred
of immigrants, Macron has the opportunity to take advantage of this divisiveness in order to benefit the immigrant community. Macron’s ability to loosen labor regulations centers around public support which has plagued past leaders. While the Left supports him for moral and practical reasons, the Right has traditionally been the hardest to convince due to their connections to big corporations. Even though moderate xenophobes exist solely due to fear or misinformation, the ideology’s utilization in European politics has bred individuals who view immigrants as inferior human beings, which is why Macron should not condone xenophobic viewpoints in any shape or form. However, the rise of nationalistic attitudes in Western Europe will allow him to pursue his political agenda with fewer roadblocks than usual. Macron’s commitment to loosening labor regulations and ending social dumping in France seeks to address a larger trend of mistreatment of immigrant workers by the labor market, which is notoriously unfavorable to new entrants. According to recent studies, immigrants in France are more likely to be employed in low-skilled jobs or unemployed than their native peers. Past French presidents who have attempted to curb these trends tend to focus more on cultural rather than socioeconomic integration. Policy leaders have also tried to address this issue, but these
efforts tend to focus more on disadvantaged neighborhoods as a whole rather than individualized problems related to immigrants. While foreign workers are given French benefits and social services, specialized training for immigrants is virtually non-existent. All of these factors contribute to the high prevalence of social dumping. Since it is so easy to send workers to France and save thousands of dollars in looser wages and benefits, why would employers not capitalize on the opportunity? This idea of exploitation of immigrant workers within France speaks to a larger European trend concerning public attitudes towards immigrants. Shortly after the fall of the Nazi party, Germany’s new government signed a treaty with Turkey to establish a relationship of guest workers to help revitalize their booming postwar economy. They opened up a labor office in Istanbul to recruit Turkish workers and permitted a two-year mandated stay until they were expected to return home in replacement of new workers. The treaty was later altered to allow workers to stay for longer. While Germany desired the labor of these immigrants, it was clear that this was the extent of their relationship. By mandating that workers only stay a certain numbers of years before returning home, they were not considered German citizens. In fact, 22 percent
of Turkish citizens still live in Germany without being recognized through German citizenship, a process which involves revoking their Turkish citizenship since no dual citizenship program is offered. As a result, exacerbated social conflict occurred between the local population and immigrants. It did not take long for these Turkish workers to realize that they, like countless other immigrants across Europe, were welcomed into European economies rather than their communities. Despite the populist ideologies resonating across Western Europe, Macron might actually be able to benefit from this wave of nationalism. Campaigns such as Britain’s “Leave” movement emphasized how a rise in the non-British population has continued to bother older residents, who worry about losing national values and culture. Many of these residents are concerned that immigrants are willing to work for lower wages (such as the ones affected by social dumping) and are subsequently taking their jobs. As a result, many of these residents were willing to give up numerous economic benefits solely in return for immigration reform. While it may not be for the reasoning his party supports, the rise of anti-immigrant attitudes in Europe creates a unique opportunity for Macron to rid France of “post” workers and social dumping while facing little
public backlash. The issue of immigration has already personally affected Macron’s approval rating, and removing immigrant “post” workers would not only curb a major social problem but could also increase his popularity. As Macron stated in an interview on the issue of social dumping, “Do you think I can explain to the French that businesses are closing in France to move to Poland while construction firms in France are recruiting Polish workers because they are cheaper? This system does not work right.” Macron acknowledges that social dumping is both an economic and moral issue that needs to be urgently addressed. Using this popularity, which has often inhibited past French presidents from moving forward with labor regulation reform, Macron could take concrete action against social dumping. Loosened labor regulations would still benefit far-right supporters who fear an influx of immigrant labor into their country. While public support for the measure might have morally questionable grounds, terminating the practice of social dumping would go a long way to end the exploitation of immigrant labor in France.
DERIVATIVES, DETRIMENT, & DEREGULATION by Matias Zorrilla Yep
Although 2017 may seem to be the year of crypto trading, a more discrete financial product is now benefiting from the meteoric rise of Bitcoin and its cousins like Ethereum: the Contract for Difference (CFD) derivative. Being a derivative, the CFD extracts its value from an underlying financial asset. Therefore, the growing macro trend of crypto trading has also inadvertently contributed to the popularization of the CFD. Recent partnerships between CFD brokerages and major European soccer clubs, such as Real Madrid and Liverpool, have helped to put these intricate financial products in the eyes of the public. Tales of CFD traders breaching 295 percent yearly returns have only fueled the demand for these financial instruments. Yet CFDs have faced recent criticism from the world’s governments, who have become disillusioned with the product and its adverse history. This bearish outlook on the inconspicuous CFD has put to question its future viability in global marketplaces. A CFD is a contract, traded on margin, between a client and a CFD broker which exchanges the difference in an underlying security’s value from when the CFD is purchased and sold. Profits or losses are realized on this change. When trading CFD derivatives, the client does not receive ownership of the security that the CFD tracks. Take the following example using Apple stock. At its current price, one share of Apple trades at approximately $169. Assuming that an investor enters a CFD trade covering 100 shares of Apple, the CFD would have a total value of $16,900. However, since CFD trades require margin, the amount of equity
contributed by an investor would only be a percentage of the CFD’s full value. Assuming a 5% initial capital outlay from the investor, the investor would only have to contribute $845 of the required $16,900 to execute the trade. The remaining amount would be paid by the broker as a loan to the investor. If the trader were to bet bullishly on the stock, and the value of the stock were to decrease by 1 percent, or $1.69, the CFD’s value would subsequently decrease by $169. As a result, the investor would be at a loss of 20 percent, losing $169 of his initial $845 investment. CFDs are like traditional securities in that they can be traded short as well as long. They differ from other contracts, however, because they have no fixed contract size or expiration date. Interest from trading on margin serves as the limitation for CFDs, decreasing the value of profits or magnifying the value of losses the longer the CFD is held. Perhaps the most controversial aspect of trading CFDs is the dependence on margin. All CFDs have a margin requirement, typically between 2 percent and 20 percent, which is much lower than that of more commonplace securities. For reference, stock traders typically utilize a 2:1 leverage. Using a CFD’s level of margin allows a client to leverage 50 times his or her initial capital outlay. Companies in Europe, like Instaforex, even allow for a maximum leverage of 1000:1. This is where the fundamental problem of CFDs lies. Like all other securities, CFDs face certain risks due to the intrinsic volatility of financial markets. Such risks include an investment risk: the risk that an investment moves against the investor’s position. In the
case of CFDs, however, even minute market fluctuations against an investor’s bet may mean burdensome trading losses due to the highly leveraged nature of the CFD. Heavy deficits may subsequently result in margin calls, demands by brokers requiring investors to deposit more money into investing accounts as a means of offsetting equity decreases. Margin calls ensure that trades remain open, and failure to fulfill them may lead to the sale of the CFD at a loss, either with the investor’s consensus or without it. The unregulated nature of CFDs in European markets, however, also warrants the financial product unique disadvantages. CFDs are over-the-counter (OTC) securities, meaning they are not traded on an exchange. As a result, the credibility of the brokers that offer these products is based on their reputation, lifespan, and financial position; a dearth in said credibility can lead to counterparty risk. Due to a lack of accountability to any formal infrastructure or exchange, the CFD provider may fail to process trades, make payments owed to the investor, or credit any proceeds from profitable trades if the financial position of the CFD provider or its other clients falters. There is also an underlying issue with client money. Under current laws, CFD brokers are allowed to pot their clients’ money in a collectively pooled account. In addition, the law permits the broker to withdraw money from the pooled account for initial margin, causing the money to cease to function as “client money.” As a result, if one client’s investment goes awry, and dues are not repaid in full, the cumulative client account faces deficits, decreasing the amount of money every other client may recover.
The largest threat from CFDs is their high leverage. Retail investors are often undercapitalized and subsequently abuse the unreasonably sizable loans available through CFDs. Not understanding the risks and ramifications of trading on leverage, retail investors often face calamitous losses, entrenching themselves in a fury of debt. In a four-year quantitative study conducted by the Autorité des Marchés Financiers (AMF), a panel of 14,799 active CFD and forex traders was assessed by its ability to invest in these financial instruments. By the end of the study, 89 percent of clients had lost money with an average loss of €10,887 per client and a median loss of €1,843. Even in the hands of professional traders, CFDs are very vulnerability to volatility. In the hands of retail investors, CFDs are a nearly unconquerable financial instrument. It its undeniable that CFDs have great potential for toxicity, particularly amongst retail investors, but this financial product’s growing popularity is an indication of the benefits that it may provide. For one, leverage inherent in CFDs acts as a double-edged sword; while exponentially increasing the potential for destructive capacity, leverage also gives traders access to quick financial gains. It is mutually pernicious and productive in its generation and redaction of capital. Ultimately, CFDs are feasible and easy to access to the common European investor. CFD brokers offer clients a diverse range of global financial products for CFDs to track, allowing consumers to invest in all the world’s markets under one portfolio. A lack of a minimum capital requirement and limited commission fees for CFDs means investors
can place as small of an investment in a CFD trade as they want. CFDs are constructed in a way that encourages mass use, and to this end, CFDs have been overwhelmingly successful. CFDs, like other over-the-counter securities, are highly regulated by the SEC, and as a result, trading in the CFD market is not an option for the average American citizen. Growing evidence against CFDs has also forced European governments, including those of Ireland, Spain, and the U.K., to consider tightening oversight for or outright banning the financial product. Growth of CFDs since 2010, especially as unregulated and ultra-volatile cryptocurrencies continue to popularize, presents a particularly complex situation for financial regulators across the globe. Two deregulated and erratic securities compounded together is an inevitable hazard for the common investor. Are CFDs good products? Frankly, no. CFD trading presents a bleak reality for retail investors. It would be naïve to be blind to this fact. However, they should still be available in the American marketplace. Stated best by crypto economist Jon Matonis, “Marketplaces like the CFD market and the private shares secondary market are alternative free-market solutions to a financial world rife with favoritism and increasing regulatory chokeholds.” All investments have an inherent risk; it should be up to the consumer to understand and mitigate the risks associated with CFDs and allow the markets to self-regulate. While regulations are set to protect constituents from poor risk management, to save investors from themselves, the prohibition of OTC securities like CFDs acts as both a
physical and metaphysical limitation to the freedom of choice. With the growing fintech industry, the average consumer has never been able to consolidate so much personal influence in the management of financial products. Retail investors are beginning to bet on themselves over traditional funds for their financial future. As a result, these traders want greater control over the way they manage risk and the financial instruments they can invest in. While CFDs aren’t publicly traded, they have continued steady growth since 2007, increasing by $53 billion in daily trade volume (from $22 to $75 billion). Aite Group LLC speculates that daily trade volume may increase to $94 billion in 2019. This indicates that there is indeed a consumer base rife with the desire to venture into these riskier securities. Being conscientious to the need for CFDs, however, is different than being complacent to the dangers they present. To minimize future calamities, regulation should be implemented to limit the leverage capacity for CFDs, learning model from modern governance on Forex trading. Furthermore, governments can work to change the method in which CFDs are traded, from OTC to over a formal exchange. Australia provides a clear example, implementing CFDs into the Australian Stock Exchange. CFDs are complex products, and there is no simple solution to setting their longterm feasibility. But in a world of restriction and complacency, what the growing generation needs more than anything is fiscal liberation and affordability of choice.
SINKING OR SWIMMING? by William Wang
Back in 2016, the website Entrepreneurship at Dyson interviewed Felix Litvinsky, who at the time had been invited to serve as managing director at Cornell’s Blackstone Launchpad site. His role was to ensure the organization’s success in its mission —namely, increasing entrepreneurship activity on college campuses by providing professional mentorship and access to a wider pool of resources. He had been a career-long entrepreneur in Eastern Europe, but had been recently drawn to the college entrepreneurship scene. He gave his reasoning for his move, saying: “Startups are risks. College is a safe environment to take risks, and even if you fail you’re not a failure. When you follow certain processes, build a great team, find a problem to solve, look for
customers, have exciting technology, and work hard and then for some reason you don’t get market traction or you’re at the wrong place at the wrong time, the worst thing that happens is you learn”. Blackstone Launchpad is just a small part in the recent explosion of Cornell’s entrepreneurship scene. Cornell Startup Tree, an online platform that helps connect Cornell students with positions at Cornell startups, listed in 2007 that there were only 72 startups that had Cornell alumni, faculty, or student involvement. Today, Cornell Startup Tree boasts 555 startups of that kind. New initiatives such as the eLab business accelerator, Life Changing Labs, and Blackstone Launchpad have given aspiring entrepreneurs more opportunities and funding to carry
out their projects. Meanwhile, social media and online sites such as the aforementioned Cornell Startup Tree have made it easier for startups to recruit personnel. It’s easy to see why Cornell has been a fertile ground for startups. It has, among other things: an undergraduate population of around 14,000, a strong alumni network to provide guidance, and students with diverse interests. For startups to succeed, they need a cosmopolitan group of employees, ranging from business students to technically skilled ones. With 7 colleges that encourage students to specialize in their own personal interests, Cornell is an ideal place for entrepreneurs. But entrepreneurship cannot thrive through favorable circumstances
alone; so, in recent years, Cornell has invested in providing budding entrepreneurs with more opportunities to make it to the big leagues. In 2008, the eLab business accelerator, a program that provides funding and mentorship for a select group of on-campus startups, was founded. In 2013, LifeChanging Labs, another incubator for startups, started mentoring its first batch of companies on campus. By 2015, the aforementioned Blackstone Launchpad was founded, a program that has its own space at Kennedy Hall, where students can come in to discuss startup strategy and receive mentorship. In 2016, a collaborative space was provided for aspiring entrepreneurs when eHub opened in both Kennedy Hall and Collegetown. Throughout these changes, Cornell professors who have taught entrepreneurship courses have recognized this remarkable surge in interest. Professor Fleming, who teaches “HADM 4130: Entrepreneurial Management,” noted that her class was consistently full with a mix of grad students, seniors, and juniors. Meanwhile, Professor Streeter, who teaches “AEM 3249: Entrepreneurial Marketing and Strategy”, said of the change: “15 years ago, if you asked a group of incoming freshman, ‘How many people here think they will start a business’? You might get a couple of hands. But now, if you ask, ‘How many of you think entrepreneurial ventures are somewhere in your future?’ Almost everybody would raise their hand.” While she is cognizant of the efforts on behalf of Cornell, Prof. Streeter is convinced a generational shift in how to approach life itself was also crucial in the rise of entrepreneurship at the school. The millennial generation, in her eyes, gravitates towards concepts such as autonomy, independence, and wanting to make meaning as well as money in one's careers. Naturally, entrepreneurship was the perfect call for this desire. So, with this meteoric rise in activity in the Cornell entrepreneurship scene, another question was raised: had the entrepreneurship gold rush at Cornell paid off? A simple scan of startups listed on the Cornell Startup Tree site led to a decidedly mixed conclusion. While the 555 startups listed on the website was a significant improvement over previous years, it wasn’t a full 555; rather, a number of the startups had long been abandoned, left twisting in the wind. A common problem with a number of the startups listed on Cornell Startup Tree is a failure to endure. For instance, startups such as “2 Guys
Uncorked” and “1903 Labs LLC,” while promoting interesting ideas (2 Guys offered accessible wine reviews and 1903 Labs LLC made easy to use event creators), have shuttered operations and deactivated their web page. Others that have followed suit in similar fashion include: Bionic Sight LLC, Korean Youth Model Nations, Deal Angel, Atmospheir, Everest, Hypernet, HubVR. All of these companies, while developed on an interesting premise, have failed to survive. On the other hand, there are stillrunning startups that are underwhelming, despite earning recognition from Cornell. Matador Finance is one of these. Despite winning the “Big Ideas Competition” in 2017, earning a cash prize and a spot in the Life Changing Labs Summer Incubator, the entire sum of its business is a short online course that aims to increase financial literacy. Despite being successful in its mission, it doesn’t do much to move the proverbial needle. A similar one is CladNetwork, which is a news website that shares news taken from other websites and aggregates it into one location. While currently running, it offers little in original content, and its premise of aggregating news has been stolen by apps such as New 360 and Pulse. Still, it would be wrong to say that the entrepreneurship program has missed the mark because Cornell startups hold a high attrition rate. Professor Fleming pointed out that, along with the fact that startups in general did not hold a high success rate, there was an obvious reason for the high rate of failures of startups at Cornell: a lack of experience. Having evaluated a string of startups during a previous career in private equity, she had found that the greatest predictor of success for startups was the experience the entrepreneur possessed. As she put it, “The vast majority of entrepreneurs fail in their first venture.” Only through failed experiences can entrepreneurs learn from their mistakes. That experience, however, was in short supply amongst Cornell students. It’s commendable when Cornell student startups do make a significant impact and become profitable. The list of the success stories includes: DAKA, a program that helps Chinese students find schools abroad; Ancillare, a company that increases cost efficiency for pharmaceutical companies; PureSpinach, a grower of fresh spinach through hydroponics; and RedRoute, an app that makes travel more efficient through AI technology. There is another point to
consider; simply judging the success of the Cornell’s entrepreneurship programs by the success and failures of startups is rather one sided. What about the students who never engaged in startups? Professor Streeter raised an interesting argument when she pointed out that most of the students who took her entrepreneurship classes would not go on to create their own startups; rather, they would take, as she called it “the good job track.” She laid out this hypothetical: “You go to your parents, and you’re like, ‘I just spent four years at Cornell; I could go to a startup, or I could start at this company in marketing, management, or consulting which would pay me now.’” For most of her students, the good job track was hard to resist. That didn’t mean her teachings had fallen on deaf ears; in her eyes, quite the opposite happened. When her students went to a corporate setting, they would work on identifying a business opportunity, understanding a customer’s problem, derive a solution, and figure out a business model – in other words, exactly what an entrepreneur would do. Her classes, and on a larger scale, the Cornell entrepreneurship program, was not aimed solely at the students who wanted a career in entrepreneurship. Rather, the goal was to educate students on the entrepreneurial mindset and send them off into their respective careers more dynamic employees. That kind of impact is hard to measure. It’s why trying to gauge the success of the Cornell Entrepreneurship program doesn’t come down to just successes and failures of the startups; instead, it comes down to what students took something away from it. Did future entrepreneurs gain valuable experience with their first startup to prepare them for their next one? Did students heading off to work at a corporation gain skills to prepare for their careers? Cornell, in recent years, has looked to answer both questions in the affirmative. From its investment in startup accelerators to its expansion of the entrepreneurship curriculum, it has hoped to provide a more dynamic element to its educational experience. There hasn’t been a Facebook-like breakthrough yet on campus, but that shouldn’t be the focal point. Cornell’s Entrepreneurship Program, instead of booming, is on a gradual upswing: a rising tide that lifts all students.
THE SAME OLD NEW NORMAL by Jeremie Mutolo
A quick glance at any major news publication will give the impression that stability is a foreign concept. With current events rife with political corruption, global military conflict, and unpredictable weather, each day seems to launch us into a new twist or turn. Yet stability, tranquility, and a sense of optimism in today’s world can be found in the unlikeliest of places: the stock market. As of this writing, the CBOE VIX, an index which tracks implied volatility within the S&P 500, is hovering around 10 points, its lowest level since 1990. At one point earlier this year, the S&P 500 went 13 consecutive days moving less than 0.3 percent in either direction, a streak that has not happened since 1927. What’s more shocking is that, despite this low volatility, we are currently watching the second-longest bull market in history. Near the height of the financial crisis in 2007-2008, the Dow Jones Industrial Average was as low as 6,400. This past summer, the DJIA continuously struggled to hit 20,000, a milestone that it had never reached. Yet over the span of four months, the Dow Jones has managed to climb over 3,000 points and continues to charge forward. But the extended duration of this peacetime has created skeptics out of many investors who question just how long this can last; many seem to believe that a low volatility environment is simply setting us up for a potential crash in the near future. The biggest issue many investors face in adjusting to low market volatility is figuring out what exactly is responsible for it. Here are three potential causes. Correlation between stocks has been diminishing since the 2008 financial crisis. In a report from BMO Capital Markets, individual stock correlations have dipped below both their pre- and post- financial crisis averages. Furthermore, the CBOE S&P 500 Implied Correlation Index has fallen roughly 65 percent since the start of the year. The decline in correlation amongst individual stocks, as well as across sectors, has reduced the likelihood of a market downturn being caused by a dip in one security or industry, contributing to the overall low volatility climate. However, this sentiment is not shared by Marko Kolanovic, head of Derivative and Quantitative Strategies at J.P. Morgan, who earlier this year released a note citing the high resemblance between low levels of correlation now with those of 1993 and 2000, both of which preceded massive stock sell-offs. Stock correlations were also at similar levels in 2007, prior to the financial crisis. ETFs have contributed greatly to the lack of correlation among stocks. As more investors pour capital
into ETFs, they reduce their exposure to individual stocks. If the price of a stock were to drastically fall, holding a position in an ETF reduces its impact on an individual’s portfolio, and consequently diminishes the likelihood of a market sell-off. The past several years have seen enough political turmoil to roil the markets, so the lack of volatility in the face of unstable geopolitics has raised numerous eyebrows. Many believed Brexit would be the cataclysmic event to finally end the raging bull market and push indices over the edge. This, combined with growing populist sentiment in Europe, sparked fears among investors as to whether the European Union would continue to exist. Around the time of the Brexit vote, the Dow Jones toppled more than 600 points, or 3.4 percent, while the S&P 500 also fell drastically; it appeared as though the era of low volatility had come to an end. However, the markets eventually reverted back to their prereferendum levels and continued their upward trend. Even though the day immediately following the Brexit vote saw the VIX jump 49.3 percent (the fifth-highest one-day spike in history), the S&P 500 was up 3 percent at the end of the following week, and the VIX had returned to its pre-Brexit levels. Across the pond, with almost a year passing since the election of Donald Trump, market volatility still remains at its lowest levels in years. Given that Republicans, who have a more explicitly pro-business platform, gained majority control over the House, Senate, and White House, many investors believed this administration would enact policies that would create a growth-friendly environment for companies. Yet in the twelve months that have passed since the election, Washington has failed to enact any meaningful business legislation. This is reflected by the recent lack of correlation between Economic Policy Uncertainty and the VIX. The two indices normally move in tandem with one another, but recently volatility has remained low despite high uncertainty regarding economic policies. There have, however, been early rumblings regarding the restructuring of the tax code, including slashing the corporate rate down to 20 percent. Perhaps the reason investors have not reacted heavy-handedly to the lack of action over the last year is because they are placing most of their confidence in the Republican-controlled Congress, not the President himself. The growing risk of military conflict across the globe has generated little volatility.
North Korea has conducted 15 missile tests this year, the most in a single calendar year in the country’s history. However, markets are failing to react to the growing frequency of these tests. An August 29th test saw the Dow Jones open more than 100 points lower and the VIX shoot up 19 percent. Yet by the end of the trading session, the Dow closed 56.97 points higher, and in the month following the tests, the VIX continued to trend downwards toward 9 points. In the first three missile launches held by North Korea this year, the VIX regressed to its previous levels within the span of two days. Investors are simply shrugging off these tests as insignificant. While the war of words between Trump and Kim Jong Un has heated up in recent months, investors are not truly afraid of the prospect of war occurring anytime soon, and the launches have simply created dips that allow investors to enter positions in highlyvalued stocks. Since the start of 2007, central banks around the globe have pumped more than $1.5 trillion into the global economy through the purchase of mortgage-backed and Treasury securities. This high level of central bank stimulus has pushed interest rates down and forced investors into riskier investments. These easy-money policies have also increased the amount of money available for businesses to invest and grow, and, as a result, earnings growth has expanded rapidly over the past several years. The general consensus is that an elusive underlying factor is responsible for market stagnation. The above factors are not generating the same level of market fluctuation that they have in the past, and the current market climate has emboldened investors to take positions in relatively unsafe investments (high-yield corporate bonds, REITs, cryptocurrencies, etc.) The issue is that the VIX is not an entirely reliable measure for determining when the next market crash or recession will occur. Market volatility, while a good general indication of a potential downturn, must also be assessed in combination with economic indicators. GDP growth, while not stellar, has been consistently growing. Unemployment has reached historical lows, and consumer spending has steadily increased. While it may appear as though we are in a bubble, so long as the fundamentals remain steady, it will require a cataclysmic event to spur volatility and deter this bull market.
BEYOND BITCOIN by Katherine Pioro
J.P. Morgan Chase CEO Jamie Dimon recently labeled bitcoin a “fraud,” adding that those “stupid enough to buy it” would soon pay the price. Dimon’s characterization of the currency is in stark contrast to the laudatory titles bitcoin was given after its development in 2008, when it was praised as the currency of the 21st century. While concerns about instability and risk may prove a challenge to bitcoin’s future utility, the underlying technology bitcoin relies on shows great potential. Despite his harsh criticism for bitcoin, even Dimon praised blockchain technology, the underlying mechanism that allows bitcoin to exist. While bitcoin is perhaps better known than blockchain, bitcoin would not exist without blockchain technology to back it. Bitcoin operates by keeping a record of transactions between bitcoin wallets. The publicly shared ledger where each transaction is recorded is called a blockchain. More technically, a blockchain is a distributed database that maintains a constantly growing list of records called “blocks.” Blockchain has many potential applications beyond the financial sector, including digital security, healthcare, and government. These applications have the capacity to fundamentally change the way individuals within these industries interact with one another. One of the many promising applications of blockchain technology beyond the financial sector is in distributed cloud storage. Currently, cloud storage services are largely centralized, meaning that users must place their trust in one cloud storage provider. One of the most compelling features of blockchain technology is that it is decentralized and features client-side encryption; in the case of data storage, only users then would have complete access to all their data. Companies are already disrupting the cloud storage space using blockchain. One such company is Storj, a cloud storage company based on the blockchain that allows only users to have access to their data. When not in use, their data is encrypted and decentralized, making it virtually impossible for anyone to access it. The combination of encryption and decentralization, which is at the core of blockchain technology, has applications beyond data protection. Blockchain technology is also being used to develop smart contracts. A smart contract is code that facilitates the secure exchange of money, property, shares, and anything else of value. A program is given control over the item being exchanged and, once an encoded condition is met, the item is
transferred to a new recipient or returned back to the original owner. This exchange scheme exists in many variations, but the basic idea remains the same. While a legal contract is a set of conditions agreed upon by two or more parties enforceable by law, a smart contract uses cryptographic code to ensure that an agreed upon set of conditions is enforced. Smart contracts can be built on Ethereum, a popular blockchain platform. Ethereum is more flexible than bitcoin because it can support many different decentralized applications, while bitcoin is limited to the transfer of currency. Smart contracts are attractive because parties involved can maintain anonymity while still recording the contract in a public ledger. Ethereum and smart contracts have the potential to transform how property and money is transferred between individuals by removing the need for third parties such as lawyers and government entities that enforce contracts. Despite the promise of smart contracts, critics argue that they are unlikely to completely replace the entire legal system. This is because contracts sometimes must be ambiguous because both parties cannot foresee the future and plan for every possible outcome. This ambiguity cannot be translated into computer code and necessarily requires a human mediator. In addition to potential disruption in the legal sector, blockchain technology has many applications in healthcare. One healthcare application is the potential for data security in managing health records and protecting patient identities. A challenge medical researchers often face when convincing patients to participate in clinical studies is ensuring that personal data will be properly de-identified. Blockchain technology de-identifies data which researchers can use to persuade more patients to participate in clinical studies. Blockchain has the potential to make data more easily accessible to clinicians and researchers. The increase in information could allow for greater innovation and increased efficiency within the healthcare sector. A final potential application of blockchain is within government, specifically voting. During the past U.S. presidential election, many questioned the integrity of the current voting system. Speculations of tampered votes and foreign government interference raised major concerns. Recording votes on a blockchain would make altering ballots extremely difficult given that blockchain permanently records transactions. Currently, the non-profit organization Democracy Earth
is testing a blockchain-based voting platform called Sovereign. Sovereign is not constrained to governmental voting; rather, it is intended to serve as a decentralized governance protocol for any kind of organization. Blockchain-based voting can increase voting credibility and restore trust in government elections. While blockchain has great positive potential, there are still many features of the technology that could use improvement. Because blockchain was developed as an experimental technology to support bitcoin, blockchain was not originally designed to support as many users as it does today. For instance, since the number of users on the bitcoin blockchain has increased to over 14 million in the past decade, bitcoin confirmations are not instant anymore, typically taking 10 minutes and sometimes up to an hour. In order to keep the speed of transactions in the acceptable range, bitcoin miners must come up with new innovations to speed up the transaction process. A recent innovation that sped up processing speed was the decision to split bitcoin up into bitcoin and bitcoin cash. Additionally, blockchain is a foundational rather than disruptive technology; while blockchain supports disruptive applications, it does not facilitate change directly. Businesses need to first develop methods to use blockchain effectively. As such, the application of blockchain, though promising, will likely take years and maybe decades to become fully functional. Blockchain technology has immense potential to fundamentally change the way individuals and businesses interact with each other by decentralizing data and permanently recording transactions. Where else and how effectively the technology can be applied next has yet to be discovered. But one fact is certain, according to Nvidia CEO Jen-Hsun Huang, “Cryptocurrency and blockchain are here to stay”.