Conservance

Social, Economic, Enviromental Responsibility

Tag: Economics

Pocket Monopoly


The idea of a pocket monopoly is one that has existed in everything but name for quite a long time. In many cases it is entirely benign and ultimately harmless.

The single grocery store in a small town is a prime example of a pocket monopoly. At the “main street” level of a society there is no other form of competition, and the residents of that city must all shop at said location or find other means. In this situation it is entirely non-harmful to the residents affected by it because it is a simple fact of life. The town is only large enough to support one store.

To give a clear definition of a pocket monopoly it is essentially, the existence of a monopoly that is intentionally locked and defined by some certain parameters, usually geography. Beyond those defining parameters a monopoly does not exist, and the market is competitive.

In a more complex form, a pocket monopoly can and on rare does become financially disastrous.

The most heinous example of this of course is the “company stores” from many Appalachian coal towns. Where the entire town was beholden to a single company that provided everything for them. It was a modern day fiefdom. At the larger national level, there was fierce competition between the coal companies, but again for the individual towns, no such competition existed. When the mines closed, the towns died.

Both of those are very cut, very dry, illustrations that rarely occur anymore. A more convoluted, and I would argue slightly more sinister, form of pocket monopolies do exist.

The best illustration of a modern day pocket monopoly can be found in the text book industry. At the national level, there is fierce competition between textbook publishers, made all the more so, by the dwindling of the market. This dwindling most likely fueled the initial move towards pocket monopolies.

What occurs is simple: A professor or department chooses a specific text to use for their courses. They look at a variety of books from different publishers, and then chose one. That book is the required text for the course and no other text book can be used. A pocket monopoly has been born.

A student can not use a trigonometry book from another publisher for Trig 101, the homework would be wrong, the chapter order different, and ultimately the student would fail. With the questionable practice of shifting towards online homework, even the weak competition of used textbooks is being quickly eliminated.

The price of these textbooks, reflecting the complete lack of competition, have steadily increased in value with little to no increase in quality. It is no surprise now to see prices of $100, $125 and even $200 on certain textbooks. With used books being marginally less expensive.

While there may be several bookstores catering to students, they are all selling the same book, and the difference between the prices is not significant enough to be considered real competition. And this supposed “competition” obscures and confuses the reality that for the student, they are caught in a monopoly.Even with the price reducing nature of the internet, the student must purchase a specific textbook sold by a single publisher.
Used textbooks also confuse the issue. While they provide a minor decrease in price, but those textbooks are only valid so long as that same edition is employed in the class. With publishers releasing new editions every few years, the competitive force that could be applied is checked. In both cases, the competitive force that might be applied has been negated.
There are many reasons for the development of pocket monopolies. In the case of textbooks, it is a combination of factors, including the shift towards viewing academic institutions as businesses, the supposed rise in available money for students, the propaganda surrounding college education, and the fact that many college professors are incapable of actually teaching (For many professors, who are not given any educational training, the textbook becomes a crutch). It is especially evident in the sciences, and it is no surprise then that science and mathematics text books are the most expensive.Compare college text books to those of a grade school. Especially a grade school from a poorer district. The pocket monopoly is broken by the simple fact that those text books are purchased by the school and then used for the next five to ten years. A variety of factors dictate the choice, including cost and quality. The school, because of how much money it is going to spend, is able to leverage a better deal, and benefits from access to the market.The concept of a free market, with sensible oversight, is a solid one and it works incredibly well. From the smallest level to the largest level. Any time competition is forced out or eliminated in an intentional manner, the consumer suffers. Whether that is at the national or state , or even at the campus level.

 

Economics


The major thought behind a free market is that everyone’s wants will check each other. Greed is good, because greed works against everyone’s greed.

This would work well, provided greedy people never ever became intelligent or powerful. Intelligent greedy people can figure out how to stay one step ahead of any free market checks, and powerful people can just smash through them.

Smart, greedy people have figured out that hiring their employees as independent contractors to keep from paying taxes.

Powerful, greedy people simple control the economy (or a particular industry) through their size. Oil companies have an incredibly valuable resource and they can charge whatever they want. Since all the oil companies work together, there is no real way to get around the pricing.

What ends up occurring is the creation of:

ECONOMIC DISINCENTIVES

For example, no bank wants any person to pay off their debt. It makes for “feel good” press and lets them dodge any real penalties or regulations, if they have programs to “help.”

Think about it: If a person pays their credit card off every month, they avoid any penalty fees.

Penalty fees are 100% profit for a bank. Paying off ones debt, is a lost revenue stream.

Basically, what a bank really wants is to keep the majority of their customers in a cycle. Where the customer is just a bit behind on their payments every few months. That will minimize the threat of default, and maximize the profit margin per customer.

Why is this important to sustainability?

Because clean tech and sustainable practices are economic disincentives to certain companies. MPG standards are an economic disincentive to oil companies, renewable energy is an economic disincentive to coal companies, recycling is an economic disincentive to manufacturers and miners.

Shai Agassi illustrated it best in his talk at TED. A finite commodity will become more and more “unstable” as the supply runs out and demand stays the same. Unstable equals wildly fluctuating, ever-increasing prices. That benefits a small, powerful, greedy group of individuals. And in this situation, there is no other greed to check. So in this scenario, the free market has failed.

Not to be too Marxist, but in this situation following the money shows precisely who stands to lose the most. It also reveals who is fighting back against the necessary changes.

Oil Prices? Going Up


According to Chase and Merril Lynch, oil prices are most likely headed for the $100.00 mark again.

This is good and bad. When gasoline gets expensive, people drive less, use mass transit and walk more.

The bad however is that the last time oil reached these prices, it put the squeeze on cash strapped citizens and helped to trigger our current recession.

Picasso and the Environment


“No ma’am; it took a lifetime.”
-Pablo Picasso

With that one sentence, Picasso justified demanding an exorbitant sum of money for a quick sketch.

This story has been told repeatedly to highlight how much time it takes to become a master. Picasso’ quick sketch, easily made; was the product of a lifetime of dedication. Such an input surely justified the cost.

Or did it?

The mindset illustrated above is precisely why no mainstream company has truly leaped into the environmental/clean-tech arena. Eventually every prototype and working concept is nothing more than a pipe dream.

There seems to be this bad interpretation of “mastery” that is embodied by the above Picasso quote.

Try this:

Picasso, having seen the woman’s admiration asks her what she would pay for his work.

“Twenty-five dollars!”

The money is paid, and Picasso resumes his stroll through the park. The woman mentions to a nearby person that Picasso just sketched this portrait of her to a passer by for only $25!

Word soon spreads and before to long Picasso has made one hundred unique portraits, all of which showcase his mastery, and a cool $2500.

There is an ancient legend, of a master who is in such command of his craft, that he does it for one reason: love.

Imagine if AEP; instead of worrying about profit margins, invested heavily in clean energy and efficient transmission without visiting the cost to consumers. Word would get around that AEP delivers cleaner power, better and cheaper than any competitor. With a deregulated market, more consumers would choose AEP. More money would be made over longer periods of time. And the increase in customers would offset the lower profit margins.

Fortune favors the bold in war, in love, and in business.

Short Term Versus Long Term


Our current economic woes are a direct result of short term thinking. The desire for immediate profit over long term growth. CEOs, investors, and others involved sacrificed entire companies and even our economic progress to increase their personal net worths.

This is nothing new. For some reason, our brains are unable to contemplate long term processes. Unfortunately, there is no more short-term “wows” left in the sustainability theater. It’s all long term planning and execution.

Perhaps then, we’re facing something larger than just an environmental movement. Perhaps we’re on the precipice of a transformation. An epoch for the human race.

If we can come together and rise above our current short-sightedness, we could usher in a new age for humanity.

It’s The Economy… Stupid


I’m not calling you stupid. Just getting your attention.

Economics is a complex and near mystic thing. Like alchemy.

When an organization attempts to influence the economy, we have no idea what is going to happen. The Great Recession? It wasn’t supposed to occur. Seriously, the combination of events that were necessary to trigger that fall out, were thought to not be able to happen in conjunction. Surprise!

So, with our economy in a shambles, growth has slowed, and jobs aren’t returning. Why are we rebuilding the same exact system?

We have the opportunity to do something radically different, and yet… Nothing.

Quick Fix


President Obama was touted as the Capitalist-in-chief for the United States in an article on BusinessWeek (here). Specifically he’s been pushing money into the clean tech sector.

This is a quick fix to a serious problem.

Our current system, was built on ideas and assumptions from the 1940s and 50s. Back when smoking was healthy and gasoline wasn’t polluting. But since that time, we’ve learned that pollution is a serious issue and smoking causes cancer.

Electric and hydrogen powered vehicles are nothing more than ways to prop up old world ideas.

Look at our stimulus package: $300 Billion to the establishment. It didn’t actually stimulate the economy, nor did it trickle down to Main Street.

Look at health care reform: No one answered the question “Why have health care costs sky rocketed?”

The question with clean tech must be “Why are we trying to preserve a dying, antiquated way of doing things?”

We like to fix things, we aren’t good at solving problems.

Consumer Rebellion


I was talking with my brother yesterday and he made the comment “I’m surprised there hasn’t been a consumerist revolt.” A light Sunday afternoon discussion I know!

He was talking about free markets, and how in many cases they don’t seem to exist. He highlighted urban apparel; companies like Sean John, FUBU, and others sell clothes at ludicrously high prices to a demographic that, on paper, can’t afford it.

Or take gasoline prices. Volatility doesn’t encourage economic growth, in fact quite the opposite, in encourages a bunker mentality. Yet everyday it’s a new price, with swings of $0.50 a day not uncommon.

What has developed is a legal trust or monopoly. And in the face of this, voting with one’s wallet has no impact. Like quitting Facebook because of privacy concerns, it doesn’t send any message whatsoever; it only affects the individual.

It is effectively a captive market, with a few companies doing similar things for similar prices. It is the appearance of a free market, the illusion of one.

Has anyone stopped to wonder why MPG standards have decreased since the 80s? An 80s BMW gets better mileage than a Smart Car. According to the plans laid out before, we should have at this point in life:

Cars with 30 mpg city as the norm.

Clean, renewable energy for everyone.

Ultra efficient homes, and smart cities.

But what has happened? The mega players in captive markets have used lobbyists effectively, dragged their feet, cited “free markets” and “competition,” and in some cases ignored outright government demands and regulation.

And people still believe in a free market as though it were a personal benefit. The current system benefits a small slice of Civilization. And the other 90% believe it benefits them.

At what point do we realize that we are the market, and that we can’t bear what is occurring any longer?

Rare Earth, Mining And More!


My good friend Joe recently sent me an article highlighting China’s stance on rare earth magnets. It also highlighted some great points in the environmental debate.

Point one: “The green road always starts with black earth.” In order to manufacture high-tech, ultra efficient devices. We have to get dirty. Like Mike Rowe dirty, and then some!

Our dependence on China was fueled in large part by misguided efforts of other environmental groups to stop all mining. The idea was that advances in technology would immediately take up the slack. This is just silly, it’s like passing a health care reform bill without having a way to pay for it…

Let’s get creative: A scientist figured out that one of the by products of making paint is rare earth material. How many more waste products could be harvested and used? Let’s get our brains moving on those problems people!

Last point: There’s no reason for human activities to be so destructive. Why is mining so “dirty?” Is it because of mining itself? I don’t believe so. Is it because of human laziness? Yes

First Design Ever


This is the first ever Conservance designed shirt. Crafted from style, substance and ink these are shirts designed to look good and make a difference in the world around you.

Seriously. 10% of the profit from every item sold by Conservance goes to social, economic, or environmental initiatives. Ones that actually make a difference in the world. And yes, that’s a ten. No wimpy 1% donation here.

%d bloggers like this: