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    Published on: February 11, 2019

    by Kevin Coupe

    The Seattle Times reports that increases in the minimum wage in the Seattle market, creating higher cost structures that some predicted would result in higher grocery prices, in fact did not have that effect over the last two years.

    In fact, the story says the University of Washington has done another study saying that “more experienced Seattle workers had seen their paychecks rise and stayed in jobs longer, while less experienced workers had seen less positive change.”

    The fact is, when people stay in their jobs longer, it actually can lead to higher productivity, as well as lower training costs.

    That’s not to say that it was all positive: “Most child-care businesses did see their labor costs increase as the hikes were carried out, however, leading in some cases to staffing reductions, according to another UW study.”

    This is important, the Times writes, because “research on Seattle’s experience has attracted widespread attention as more cities and states have moved to raise wages and as supporters and critics of such increases have sought to back up their positions.”

    I’ve never thought that the same minimum wage rules ought to exist in every market … why would the same numbers automatically be relevant in Seattle as in Buford, Wyoming?

    But I also think that it is equally mistaken to assume that higher wages are bad for the economy … higher wages can create job stability, higher productivity, not to mention more disposable income that is spent by consumers, thus driving the economy forward. (And yet, how many executives are judged in part by how low they can drive labor costs?)

    I’m happy to see the Seattle study, if only because it adds to the notion that we have to think about these things in a nuanced way. That’s the Eye-Opener … that we can’t be guilty of epistemic closure when it comes to these things. Situations almost always are more complicated than they initially appear.
    KC's View:

    Published on: February 11, 2019

    Bloomberg reports on how retailers, inspired by Amazon’s success in converting its massive amounts of data into manufacturer advertising dollars, “are quietly courting big brands with a sales pitch that goes something like this: Facebook might know what your customers like, and Google might know what they want, but only we know what they actually buy.”

    It isn’t just Amazon’s example providing the fuel for these initiatives. The story points out that competing in the current climate can be expensive - it costs money to build effective websites, improve supply chain logistics and establish legitimate and efficient delivery and BOPIS (Buy Online, Pickup In Store) services. These expenses “crimp earnings,” while at the same time “the tailwinds retailers enjoyed last year from tax cuts and brisk consumer demand will dissipate in 2019, and looming Chinese tariffs could muddle the outlook further.”

    All of this means that retailers have to identify “alternate revenue streams” that can help fund all these new initiatives.

    Bloomberg points to the potential: “The potential is vast: Last year U.S. ad sales hit a record $208 billion, according to researcher Magna, and for the first time ever 50 percent of that spending was online. Facebook and Google combined gobble up more than half of those digital dollars, according to data tracker eMarketer, while Amazon gets only 5.5 percent.

    “That’s an opportunity for retailers, which already have long-standing relationships with the big consumer brands that quietly pay them millions every year for prime shelf space … But Walmart and its ilk will have to move fast: Amazon’s ad business doubled in size last year, and 97 percent of brands who advertise on Amazon find it valuable, according to a survey by Feedvisor, which sells advertising and pricing software used by Amazon sellers.”

    “Kroger wants to generate $400 million in additional profit by 2020, with some of that coming from a new marketing unit that places web ads for the likes of Unilever and General Mills Inc,” Bloomberg writes. “Target’s in-house media network has hundreds of clients including Oreo cookie maker Mondelez International. Walmart has hired executives from NBC Universal and CBS to help boost its advertising business.”
    KC's View:
    It long has been an article of faith around here that data is the ultimate differentiator for retailers - the ones that not only have actionable data, but then also act on it, are the ones best positioned to win.

    I do think that retailers have to be careful, lest their customers begin to believe that their data is being improperly shopped around and sold to third parties. But it seems to me that if retailers control the data and the access - like it seems Ahold Delhaize-owned Peapod Digital Labs is doing with Coca-Cola in two current campaigns that provide ROI without giving away specific customer information - then it can be a winner all around.

    Published on: February 11, 2019

    Amazon executives are being broadly reported to be seriously reconsidering the company’s decision to build a campus in New York’s Long Island City, just across the East River from Manhattan in the borough of Queens, as part of its HQ2 plan.

    The reason: Amazon has gotten blowback from a number of quarters, with people questioning things like the size of the incentives, the impact on local neighborhoods, the expected stresses on the city’s infrastructure, and the company’s long-held resistance to unionization, which is not the best attitude in a highly unionized city.

    The Wall Street Journal reports that “the discussions at Amazon have caused leading government officials in New York who support the project to worry that Amazon may abandon its plan to bring 25,000 jobs to Long Island City and $2.5 billion in investment, according to a government official.”

    According to the Journal, “The recent change in conversation at Amazon accelerated after Monday’s nomination of New York state Sen. Mike Gianaris, a vocal opponent of the deal, to a state board that would allow him to veto the development plan, people familiar with the matter said. Mr. Gianaris needs to be approved for the post by Gov. Andrew Cuomo.

    “The governor and New York Mayor Bill de Blasio, fellow Democrats who have often clashed, agreed on wooing Amazon to New York with up to $3 billion in state and city tax incentives. On Friday, Mr. Cuomo reiterated his support for the deal for Amazon as he warned that local opponents could derail the project … Other opponents include the Retail, Wholesale and Department Store Union—which is trying to organize workers at an Amazon warehouse on Staten Island—as well as U.S. Rep. Alexandria Ocasio-Cortez, who represents nearby parts of Queens, and Mr. Gianaris, who represents Long Island City.”
    KC's View:
    It was somewhat ironic that on Friday, Gianaris said of Amazon, “If they want to threaten that they won’t come here without it, that’s their decision. But we shouldn’t allow ourselves to be extorted.” After all, the word “extort” was one that came up with Amazon in a very different context last week, used by founder/CEO Jeff Bezos to describe the activities of the owners of the National Enquirer.

    But I digress.

    Seems to me that there could be a real and irresolvable cultural difference here. Amazon, right or wrong, believes that communities need it more than it needs communities, but in New York, that sort of rubs folks the wrong way; it is, after all, New York.

    Amazon could have a real and positive impact on Long Island City, but there almost certainly would be negatives - even Amazon, for all its size, would just be one component of an enormously complicated ecosystem and infrastructure. I have to wonder if there are places where the building would be a lot simpler, where maybe Amazon could have a far bigger and even more positive impact.

    Amazon likes to change the world, but I’m not sure if it can change New York. So maybe it ought to go someplace else.

    Published on: February 11, 2019

    Business Insider has an interview with Joel Larson, the former head of checkout innovation for Walmart, in which he says that the checkout-free technology used in Amazon Go stores “has too many limitations to succeed in large stores,” that its “accuracy accuracy rates decline in stores with too many products that are similar in appearance,” and “is expensive and generates significant heat.”

    “The Amazon Go store is just a fairy tale for retailers that actually want to make money,” Larson says.

    The Business Insider story notes that “when Larson left Walmart, he joined Innowi, a company that makes handheld mobile checkout devices.”
    KC's View:
    He could be right. Or he could be wrong. I would make three observations.

    One is that considering what Larson currently is doing for a living, it is certainly in his best interests to argue against the broad efficacy of checkout-free systems. (It isn’t just Amazon doing this, after all.) So I think it is important to take his criticisms with a grain of salt.

    Second, Amazon has had a pretty good run challenging conventional wisdom and making stuff work that many people predicted never could. So I would be loathe to bet against Amazon on this one.

    Third … where is it written that for Amazon Go-style technology to be successful and impactful, it has to be applied to large stores? After all, we are entering a time of urbanization, when companies are developing small-store formats that will be relevant to where the demographic trends are headed. That seems like a pretty ripe opportunity to me.

    It may not be a coincidence that Larson’s comments seem positioned to counter a piece from the Associated Press about Amazon Go and how “startups and retailers are racing to get similar technology in stores throughout the world, letting shoppers buy groceries without waiting in line.”

    The AP story points out that “Amazon doesn’t say how much money its cashier-less stores make. But analysts from RBC Capital Markets recently visited Amazon Go’s two San Francisco stores to come up with a number. Based on their observations of traffic patterns, they estimated about 400 to 700 customers per day will visit each of the roughly 2,000-square-foot Amazon Go stores, generating sales of $1.1 million to $2 million annually, assuming an average purchase of $10. At the high end of that range, it works out to twice the sales of a typical U.S. convenience store, RBC calculated.”

    Published on: February 11, 2019

    The Los Angeles Times reports that Amazon “at times dips into the tips earned by contracted delivery drivers to cover their promised pay” - behavior for which delivery service Instacart has been roundly criticized.

    The story says that “Amazon guarantees third-party drivers for its Flex program a minimum of $18 to $25 per hour, but the entirety of that payment doesn’t always come from the company. If Amazon’s contribution doesn’t reach the guaranteed wage, the e-commerce giant makes up the difference with tips from customers, according to documentation shared by five drivers.”

    Amazon seems to willing to own the policy. In a statement, a spokesperson says that “our pay commitment to delivery partners has not changed since we launched the Amazon Flex program - delivery partners still earn $18-25 per hour, including 100% of tips - and on average drivers earn over $20/hour.”

    The story notes that “drivers have long suspected that Amazon uses their tips to hit promised wage targets, according to five former and current drivers who spoke on condition of anonymity for fear of reprisal. It has been hard for drivers to prove — the company does not provide them a breakdown of their compensation beyond showing the total paid out, citing privacy concerns.” But several drives tested the system by placing orders that they ended up delivering to their own homes, which allowed them to track the entire process.
    KC's View:
    If the Amazon language is accurate, then I suppose it cannot be accused of being dishonest - it does say the pay “includes” 100 percent of tips. But it still strikes me as kind of cheesy, and maybe even purposefully opaque.

    Amazon can do better. It should do better. I know it comes from two different budget lines, but if Amazon can spend $250 million to acquire the TV series rights to “Lord of the Rings,” then it can afford to pay its people properly and not nibble around the edges.

    Published on: February 11, 2019

    Politico has an excellent piece about former Starbucks CEO Howard Schultz, who currently is considering an independent run for the US presidency.

    An excerpt:

    “Though he stepped down last year as Starbucks’ chairman and CEO, Schultz’s political pitch is deeply rooted in the company’s carefully cultivated image as a progressive, benevolent employer that cares for its employees, which it calls ‘partners,’ and acts as what he calls a ‘gathering spot, a Third Place that draws people together.’ He presents himself as a rare combination of archetypes: a visionary entrepreneur who’s built an $84 billion global empire on pricey lattes, and a bleeding-heart do-gooder who lavishes health coverage, college tuition and other benefits on those 330,000 ‘partners,’ has them undergo racial-bias training and write ‘Come Together’ on customers’ coffee cups. In response to President Donald Trump’s immigrant-bashing, the company promised to hire 10,000 refugees.

    “This pitch is also steeped in the mystique of progressive, affluent Seattle, Starbucks’ hometown, celebrated around the world as a capital of coffee culture, innovation and progressive policy. In an op-ed in the Seattle Times last week, Schultz praised his adopted home effusively, oddly crediting its ‘diversity of thought’ with helping inspire him to (maybe) run as a centrist independent.

    “But there’s a disconnect here … His ‘come together’ pitch may ring weakest here in Seattle, where he’s proved a singularly divisive figure and left a long, unhappy trail of civic and community disengagement. The rest of the world might know him as the father of the Frappuccino, but here he’s known for treating a public park like private property and throwing away the city’s NBA team. Schultz acknowledged in his op-ed that ‘Seattle and I have had a complicated relationship.’ But that was putting it mildly.”

    Perhaps most revealing are quotes from Gordon Bowker, one of Starbucks’ founders, who calls him “vindictive,” “instinctually defensive and self-protective” and “not an honest person.”

    You can read the entire story here.
    KC's View:

    Published on: February 11, 2019

    CNN reports that Amazon has invested in Aurora, described as “a highly regarded Silicon Valley startup that develops technology to power fully autonomous vehicles … The move is a clear sign that Amazon doesn't want to miss out on an innovation that has the potential to create a sea of change in business and society.”

    The size of Amazon’s investment was not disclosed. Aurora, based on its various funding rounds, is valued at more than $2.5 billion.
    KC's View:

    Published on: February 11, 2019

    …with brief, occasional, italicized and sometimes gratuitous commentary…

    • The New York Times reports on how “in recent weeks, beef and farming industry groups have persuaded legislators in more than a dozen states to introduce laws that would make it illegal to use the word meat to describe burgers and sausages that are created from plant-based ingredients or are grown in labs. Just this week, new meat-labeling bills were introduced in Arizona and Arkansas … These meat alternatives may look and taste and even bleed like meat, but cattle ranchers want to make sure that the new competition can’t use the meat label.”

    According to the story, “Meat producers say they don’t want to lose control of labeling like the dairy industry, which lost its battle to keep almond and soy producers from using the word milk on their beverages. Egg and even mayonnaise producers have faced similar fights.”

    • The Wall Street Journal reports that “makers of household staples from diapers to toilet paper are set to raise prices again this year after already hiking prices in 2018, hoping to offset higher commodity costs and boost profits.”

    Among them, Church & Dwight, which “recently increased prices for about a third of its products, including Arm & Hammer cat litter and baking soda, and some OxiClean cleaning products.” It is, the story says, “one of several consumer-goods companies that have raised prices—or pledged to do so—in response to higher costs of raw materials and transportation as well as unfavorable foreign-currency swings. As a result, consumers are being asked to pay more for Pampers and Huggies diapers, Bounty and Viva paper towels, Charmin and Scott toilet papers and Arm & Hammer baking soda, among other products.”

    USA Today reports that Coca-Cola will roll out its new Orange Vanilla Coke later this month, describing it as the first new flavor for its flagship brand in more than a decade. At the same time, it will introduce Orange Vanilla Coke Zero Sugar.

    The story says that “the Orange Vanilla announcement comes at a time when Big Soda contends with criticism over American's unhealthy eating habits and with municipalities around the country passing so-called soda taxes. Plus, Americans now buy more bottled water than carbonated beverages, data from the research and consulting company Beverage Marketing found.”

    Mark me down as being excited. I’m a big fan of the Coke Freestyle machines, and I routinely craft Orange-Vanilla Diet Coke and Coke Free drinks for myself when I have the opportunity. So this will be almost like having a Freestyle machine at home.
    KC's View:

    Published on: February 11, 2019

    • Lidl has named Roman Heini to be chairman of Lidl US. Heini is the former joint managing director for rival Aldi in the United Kingdom from 2010 to 2014.

    • Publix Super Markets has promoted Doug Harris, the company’s Director of Manufacturing to the role of Vice President of Manufacturing, effective May 1.
    KC's View:

    Published on: February 11, 2019

    Albert Finney, one of England’s “angry young men” of the post-war theatrical community, who had a career in which he played all the classic roles on-stage as well as a diverse roster of onscreen roles (Tom Jones, Saturday Night and Sunday Morning, The Dresser, Under The Volcano, Murder on the Orient Express), has passed away after a battle with cancer. He was 82.
    KC's View:
    Always a huge Albert Finney fan - he could find moments of magic in roles large and small. Think of his terrific performance in Erin Brockovich - especially his final scene of the movie, which makes me smile just thinking about it. Or his extended cameo as James Bond’s surrogate father in Skyfall, in which he is alternately nurturing and deadly. (I can clearly hear his voice saying, “Welcome to Scotland,” after dispatching a bad guy.)

    For me, one of Finney’s best roles was in a film that was not particularly successful when it came out in in 1982 - Shoot The Moon, written by Bo Goldman and directed by Alan Parker. Finney and Diane Keaton played a married couple whose separation has a devastating impact on their family; the story and the performances seem completely without artifice, with nerve endings raw and exposed.

    I was just 28 when Shoot The Moon came out, and I remember admiring it enormously. I screened it again over the weekend - it’s probably more than 30 years since I last saw it - and found it even more so, perhaps because my current age and past experiences made the drama and emotions - especially the stripped-down, close-to-the-bone emotional and almost entirely self-imposed agony of Finney’s character - seem even more raw and even recognizable (though, thankfully, far from my own experience).

    Published on: February 11, 2019

    Last week, responding to my several commentaries in favor of a traditional liberal arts education in which even people who study business or science are required to take Humanities courses such as English and History, MNB reader Dave Wiles wrote:

    Some studies in the Humanities is fine. We need a well rounded student to advance to the real world. The problem, as I see it, is that there are far too many students matching their studies to ineffective (in work life) majors. "Advanced Underwater Basketweaving" may be a fun topic but where is the job, in their future, to make a living?

    This prompted MNB reader Joe DiVincenzo to write:

    I think MNB reader Dave Wiles misses it with his comments questioning matching studies to ineffective majors is not a path to making a living in the future.  Not surprisingly, studies have shown nearly three quarters of college grads end up in jobs unrelated to their majors.

    I have long held the belief that it’s not so important what you learn is college, but that you learn how to learn, and more importantly, you learn a skill that is fairly uncommon today: Critical thinking.

    I vividly recall to this day the words of my American History professor, Dr. Donald Bain, on my first day of class Freshman year of college.  He explained he planned to teach us not how to read a newspaper or watch the nightly television news (yes, that was how you got your information about the world in the early Eighties) and merely comprehend what they were talking about, but instead to hear it, understand it, question it, and think about it logically and decide for oneself if that was right or wrong or good or bad.  That was what a Liberal Arts education is all about, learning how to think for oneself.

    The superb employees I’m lucky enough to work with today are good at what they do not because they learned math, accounting, economics, or any other specific area of study in college, it’s because they became Great Thinkers who learned how to look at an idea or proposition and decide if that’s good or bad or right or wrong.

    Totally agree.

    The thing is, you can’t just start teaching this in college. Mrs. Content Guy is a third-grade teacher, and I know that this is something she’s highly focused on - getting her students to think and analyze and ask questions at a higher level.

    That’s not always easy. I would argue that much of the way education - especially elementary education - is structured today doesn’t always allow for this. There are so many assessments, so many tests, and so much freakin’ structure that only the really great teachers are able to teach the kids as opposed to just teaching the subject. That’s not just a semantic difference.

    My dad was a teacher for many years before he went into administration, so he understood the classroom environment and had a real feel for kids that translated into how he ran his school; he valued creativity in the classroom, and loved the kids for whom he was responsible, to the point that he’d always hang out on the playground during lunch periods, shooting baskets and playing kickball with the kids.

    I’m immensely proud that my wife brings that kind of passion to her role as teacher. I always joke that I grew up in a town where I would be identified as “Mr. Coupe’s son,” and now I live in a town where my primary identify is as “Mrs. Coupe’s husband.”

    Pretty cool.

    Regarding the Jeff Bezos-National Enquirer contretemps, one MNB reader wrote:

    National Retail Accounts need to take a stand and throw these trash journalism rags out of their stores. In some ways, they become complicit by supporting their product. Is this the type of product you want your stores to be associated with?

    Totally agree.

    I was yelling at the television yesterday during one of the Sunday morning news shows when one of the commentators started referring to this as a First Amendment issue, and that Bezos is wrong for challenging freedom of the press. What a crock.

    This wasn’t about practicing journalism. It was about extorting someone - saying that in exchange for money, these tabloid clowns wouldn’t practice journalism, that they wouldn’t publish something. (Not that they ever practiced it to begin with.)

    Finally, I really appreciated this email from MNB reader Bill Nace:

    I’ve been reading you since IdeaBeat, and I just realized your writing style saves me a lot of time. Thanks.

    So many news articles are written like features and not news these days, and it is a pleasure to read stories that get to the point like they’re supposed to, instead of teasing you through several paragraphs before making it.

    I read a lot of news every day, so I speed-read a lot and focus on what interests me. Your writing helps with that, and I’m grateful. I think part of it is because you were taught Latin. I only wish such writing were not so uncommon, although standing out from the crowd is good for your business.

    Thanks for continuing to do this all these years. I appreciate your insights, though I don’t always agree. Your humor and your comments on movies, wine, books, and especially baseball, round out what you do very well.

    Fortuna bona tibi sit.

    Thanks for the kind swords … but I must admit, in the interests of transparency, that despite an education that took place almost entirely in Catholic schools - Sts.. John and Paul Elementary School, Iona Preparatory School, and Loyola Marymount University - I’ve never taken Latin. Not one class. Almost all the Latin I know I learned while serving as an altar boy, which was a long, long time ago.

    Some lessons stick, just as some wounds never entirely heal.

    Dum spiro spero.
    KC's View: