Tuesday, June 11, 2024

China's anti-growth policy

...China’s stockmarkets began falling in the second half of 2023, then plunged in early 2024 (see chart).

This led to regulatory scrutiny of new IPO's 

...On top of on-site inspections, regulators now review companies’ past business deals and trawl through executives’ bank accounts, according to Reuters, a news agency. Faced with this, at least 80 companies withdrew their ipo applications in the first quarter of 2024.

When IPO exits are harder, fewer VC's want to invest:

...Just five Chinese companies listed on domestic bourses in April, down from 35 in April 2023. The ipo market raised 80% less capital in the first four months of 2024 than in the same period the previous year.

RIP James Lawson

James Lawson taught nonviolent resistance to a generation of civil rights leaders that ended government-imposed, mandatory discrimination.  
  •  The protests forced a reckoning, and Nashville became the first Southern city to desegregate its downtown lunch counters in 1960. 
  • Vanderbilt expelled Lawson in 1960 due to his leadership role in the sit-ins. Lawson later reconciled with Vanderbilt, and the university created an institute in his honor.
Obituary:  Axios Nashville

Sunday, June 9, 2024

Price controls deter voluntary, wealth-creating transactions: CA minimum wages increase to $20/hour

 When staking out a position, it is rare for a politician to acknowledge any tradeoffs.  For example, a politician in favor of a minimum wage increase will praise the increased wages for workers, but won't acknowledge that businesses will shut down or fire workers.  That job is left to those on the other wide of the issue:

Nearly 10,000 California fast food workers have been firedthanks to the state's new $20 minimum wage, according to the California Business and Industrial Alliance (CABIA), which slammed Governor Gavin Newsom for the law which went into effect April 1.
Source: ZeroHedge

Saturday, June 8, 2024

Why organizations commit less visible errors or why Anthony Fauci didn't test

When one type of error (e.g., doing something you ought not to do) is less visible than the other type of error (e.g., not doing something that you ought to do), employees are more likely to commit less visible errors, as they are less likely to be punished for doing so.  

In addition, employees have an incentive to conceal errors, which may explain the lack of follow up, e.g., to test whether action or inaction was the right thing to do.  For example, Anthony Fauci conducted ZERO tests of non pharmacological interventions (lockdown, social distancing, wearing masks, border closure), despite claiming that doing so would help prevent spread of the virus.  

Testing would have made visible the costs of Fauci's errors which could explain why he didn't test.

Wednesday, June 5, 2024

When life imitates comedy: FTC's Amazon Flip Flop

Nobel Laureate Ronald Coase once quipped that he left antitrust because "When prices go up, its monopolization, when prices fall it's predation, and when they stay the same it's collusion." As if to illustrate this idea, the FTC's Chair is reversing herself to bring a case against Amazon.
On one hand, booksellers argue that Amazon uses its clout to obtain and sell books at lower prices, forcing them to cut their own prices [Chair Khan's former position]. On the other, the FTC says Amazon uses its market power to block other businesses from selling at lower prices [Basis of FTC's current position]. (WSJ)

When an Agency with enormous prosecutorial discretion abandons principle, it loses credibility:

The progressive antitrust movement that Khan leads is ideologically incoherent. Progressives believe that the government should break up Amazon simply because it is a big company and will say or do anything to reach their desired goal. The FTC’s and ABA’s arguments, while contradictory, both amount to the legal equivalent of flinging spaghetti at the wall and seeing what sticks. (Nat'l Rev)
There is also a rumor that the FTC might be offering VERA-VSIP (early retirement with an incentive payment), perhaps to rid themselves of the remaining staffers who still care about principle, i.e., protecting competition.  

DISCLAIMER: I have worked at the FTC and done consulting work for Amazon.

Monday, June 3, 2024

Costco's Price Discrimination

There is a great episode of the Acquired podcast about the Costco business model. It is three hours long and full of history, anecdotes, and, importantly, lots of business insights. One is just how important two-part pricing is to their business model. Customer/members pay an annual membership fees to pay much lower prices. Costco limits product markups to 14% when the standard for traditional retailers is 100%. This means that 70% of the net income is from memberships and only 30% is from retailing. Another is how scale economies feature throughout their operations, from pallets on the floor to the Kirkland Signature brand. Their low margins and scale economies are meant to deliver huge consumer surpluses that they then extract with the membership fee.

Sunday, June 2, 2024

Migrants Bear Costs of Biden's Changing Immigration Policy

PHOTO May 23, 2024: Migrants in Salina Cruz, MX, 
heading to US 

NY Times: Migrants from all over Central and South America's are exhausting their savings to come to the US, 
But instead of landing closer to the U.S. border, they are being hauled roughly 1,000 miles in the opposite direction — deep into southern Mexico in a shadowy program meant to appease the Biden administration and ship migrants far from the United States.
Mexican authorities rarely publicly acknowledge the busing program, making it much less contentious than the efforts by Republican governors to transport migrants to blue states that have become political theater in the United States.
In the first four months of 2024, U.S. border apprehensions plunged in one of the steepest declines in decades, giving the Biden administration some relief as immigration persists as a top voter concern in this year’s election.
HT: Chris

Wednesday, May 29, 2024

Why the shift from owning to renting, and why are rents going up? (and rent controls don't help)


A sagging jobs market, high house prices, rising rents and tighter mortgage rules left many youngsters less able to afford a first property.

Owning is too expensive, so there is an increase in demand for renting, and rents have increased from 30% (for boomers) of income to 40% for todays homeowners.

And zoning controls prevent new supply from reaching the market

Rent controls first became popular in the aftermath of two world wars—a time when tenants were a large voting block. Milton Friedman attacked controls in an essay in 1946, warning that they would result in the “haphazard and arbitrary allocation of space, inefficient use of space, [and] retardation of new construction”. Liberal economists regard controls as a zombie policy.
No city today better demonstrates the distortions Friedman warned of than Stockholm. On paper Sweden’s system of rent controls, the hyresreglering is the strictest in the world. A powerful tenants’ union negotiates with landlords, holding rents as much as 50% below the market. In practice lots of people lose out. Swedes must join waiting lists for a rent-controlled apartment: in central Stockholm the average wait is 20 years; across the city it is about half that. Many who reach the front of the queue are in their 50s and own a home. Young Swedes often have to put up with expensive sublets agreed to under the table, laments Mr Persson.

Is there anything competition cannot do?

Politico: School choice programs have been wildly successful under DeSantis. Now public schools might close.
Gov. Ron DeSantis and Florida Republicans have spent years aggressively turning the state into a haven for school choice. They have been wildly successful, with tens of thousands more children enrolling in private or charter schools or homeschooling.
And, competition from private schools is putting the market pressure on underperforming public schools.
“If your product is better, you’ll be fine. The problem is, they are a relic of the past — a monopolized system where you have one option,” Chris Moya, a Florida lobbyist representing charter schools and the state’s top voucher administering organization, said of traditional public schools. “And when parents have options, they vote with their feet.” 

Booksellers are Straying from the Script

The parties that the FTC's case against Amazon is intended to protect are contradicting key elements of the FTC's case. A WSJ opinion claims that the FTC would like to prevent the American Booksellers Association (ABA) from permission to intervene in the case. “We believe the facts we bring to the table will significantly bolster key arguments made by the FTC in their already strong and compelling case,” says ABA CEO Allison Hill. The FTC wrote a brief opposing this "help" from the ABA because the ABA contradicts some FTC claims about the case.

What is the market definition?

The FTC narrowly defines the market in which Amazon competes as “online super stores”—namely, Walmart, Target and eBay—to argue that it has monopoly power. But small booksellers rightly argue that they also compete with Amazon.

Higher prices or lower prices?

On one hand, booksellers argue that Amazon uses its clout to obtain and sell books at lower prices, forcing them to cut their own prices. On the other, the FTC says Amazon uses its market power to block other businesses from selling at lower prices.