National News

Wannabe tech cities need angel investors, too

Marketplace - American Public Media - Tue, 2014-08-05 02:00

The suburb of San Leandro sits just east of Oakland, California, within striking distance of San Francisco and Silicon Valley. Underneath the city lies a loop of ultrafast fiber optic cable known as Lit San Leandro. Data speeds through these cables about 2,000 times faster than a typical internet hookup. 

The cable exists because of one guy: Pat Kennedy.

Kennedy runs OSIsoft, a company based in San Leandro. A few years ago, he was looking to expand, but he wanted the kind of infrastructure he saw in towns like Palo Alto. So he put down $3 million of his own money to make it happen in his backyard.

“The reason I did it is that I’ve actually been a 40-year resident of San Leandro," Kennedy says.

It became clear to him that industrial cities like his were never going to be top picks for things like broadband or fiber. "We’re really going to suffer as a result,” Kennedy says.

Can broadband speed up the economic of industrial towns? 

San Leandro was already struggling. It used to be a manufacturing town, but those jobs dried up in the '70s and '80s.

At one time, there were more than 20,000 manufacturing jobs in San Leandro. In 2013, fewer than 7,000 of those remained. Industrial-zoned land, much of it now used for storage, makes up nearly a quarter of the city. A 2013 report calls these areas “neither memorable nor particularly pleasant to get around.” 

On the other hand, a presentation by City Manager Chris Zapata calls broadband “a laser cheetah with explosive power accelerating economic growth.”

Deborah Acosta, San Leandro’s new Chief Innovation Officer, frames the issue differently: “How do we re-energize this industrial space to actually become alive again?” Her job is to convince businesses that San Leandro is the place to be.

That starts with the bright red streaks running through her hair. They put people on notice, Acosta says.

“When they see my red hair, they’re going, ‘Holy smokes! Something’s different here, I think I need to pay attention,’” she says. 

Investment in fiber and infrastructure — now at more than $13 million — wouldn’t have happened if Pat Kennedy hadn’t put down that initial money, Acosta says.

Analyst Craig Settles says private investment, like Kennedy's, is one way for cities to get broadband.

“The idea of going to local businesses and saying ‘can you contribute to the network?’ is one of the more viable options, in my book,” Settles says. Local businesspeople have helped get broadband off the ground in places far away from tech centers, like Emporia, Kansas; Fredericton, New Brunswick; Keene, New York.

In San Leandro, Pat Kennedy’s investment has paid off with buzzing and whirring on the second floor of the West Gate shopping mall. The sound comes from 3-D printers, manufactured by Type A Machines.

Based in San Francisco, Type A moved its manufacturing operations to San Leandro earlier this year. They’re currently based above a Sports Authority at the mall, a massive building that was once a Dodge auto plant. If all goes well this year, Type A’s workforce here could more than double, to about 50.

Since San Leandro first installed broadband a couple of years ago, the initiative has created about 90 jobs. But Acosta and Kennedy think they’re on to something. They’re doubling down, and point to half a million square feet of office space going up, with those ultrafast connections.

Comcast expands low-income internet program

Marketplace - American Public Media - Tue, 2014-08-05 01:00

Comcast is expanding its "Internet Essentials" program, which lets low-income Americans apply to receive broadband internet for ten dollars a month. The move to draw attention to the program has been part of a campaign to convince regulators to approve its merger with Time Warner Cable. Comcast says, if approved, the merger would extend Internet Essentials to millions more low-income people.

Comcast is also announcing is that they're changing their eligibility requirements so that former customers who still owe payments on their bills will be able to use the program.

“If your bill to Comcast is more than a year old, you will be able to apply for Internet Essentials,” says Brian Fung, technology reporter for the Washington Post.

While Comcast has touted the 1.4 million Americans currently enrolled in the program, critics counter that up to 2.6 million households would be eligible for the program, were it not for the current enrollment criteria -- A household is eligible for Internet Essentials if it has a child eligible for free or reduced school lunches.

What the program does make clear, according to Fung, is that there is now an understanding that internet access, especially for poorer families with children, is essential. 

A Hospital Reboots Medicaid To Give Better Care For Less Money

NPR News - Mon, 2014-08-04 23:44

In Cleveland, a public hospital may be succeeding at the seemingly impossible: saving money while making patients healthier. It's doing so by giving patients personalized attention.

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When Kids Start Playing To Win

NPR News - Mon, 2014-08-04 23:40

And, what the adults in their lives should do about it.

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From 'Good Times' To 'Honey Boo Boo': Who Is Poor On TV?

NPR News - Mon, 2014-08-04 23:39

What do sitcoms, dramas and reality TV say about poor people? For our yearlong series exploring poverty, NPR's Elizabeth Blair takes a look at the television shows that place the poor center stage.

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2nd American With Ebola En Route To Atlanta

NPR News - Mon, 2014-08-04 19:44

Nancy Writebol, a missionary from North Carolina, will be treated at the same hospital where an American doctor with Ebola already has been taken.

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After A Decade, Comet-Chasing Spacecraft Nearly There

NPR News - Mon, 2014-08-04 14:36

The European Space Agency's Rosetta Mission has taken the long way to reach Comet 67/P. Later this week, it will finally arrive.

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Mississippi Senate Race, Held Weeks Ago, Subject To Fresh Challenge

NPR News - Mon, 2014-08-04 14:01

Chris McDaniel fell short in his bid to take the GOP nomination from Sen. Thad Cochran. He has complained for weeks that the runoff vote was a sham and on Monday asked the party for a hearing.

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Why does popcorn at the movies cost so much?

Marketplace - American Public Media - Mon, 2014-08-04 13:50

Why do cinemas charge so much for popcorn? Wouldn't they make more money if they lowered the price because, presumably, many more people would purchase it for $4 instead of $7?

- Basil Utter, Maryland

This is a question with some easy answers and some surprisingly complicated ones.

First the easy — and incomplete — answer...

Because they can.

This is what we all intuitively assume, that theaters are shooting fish in a barrel by charging high prices to a captive audience. 

“They’re basically in a monopoly selling position,” says Russell Winer, chair of the marketing department at NYU’s Stern School of Business. “Since they don’t allow you, theoretically, to bring food into theaters, they can pretty much charge what they feel the market will bear.”

Indeed, they do.

In theory, they will charge a price for popcorn where the spread between what it costs them to make another box of popcorn, and what consumers will pay for that box of popcorn is at its highest level.

Movie theater owners aren’t residing in some dark turret behind the screens, stroking a cat and reveling in the injustice they are inflicting upon hapless moviegoers. Ask movie theater owners, and they’ll tell you they charge so much for concessions. . .

Because they must.

Jack Oberleitner, a 55-year veteran of movie theaters, is now a consultant. He quotes a friend whose family has been in the business since 1908, with a line he says summarizes the situation of theater owners: “We left the movie business and we’re now in the popcorn business."

Movie theaters don’t make much money from movies. Movie studios do.  

“The film industry will charge movie theaters upwards of 70 percent of the box office revenue,” Oberleitner says. Revenue sharing schemes change over the years – sometimes studios take a peak percentage from the first few weeks and then adjust downward, sometimes they take a peak percentage from the best few weeks regardless of when they occur – but the outcome is the same: Studios take far and away the biggest chunk of ticket proceeds.

On top of that, he says, studios place a lot of conditions on playing their movies.

“So they’ll say if you have 14 screens, for instance, we want the latest film from our company to show on three of those screens for the first three weeks. If you’re not getting people into those screens, well, sorry about your luck.”

Being forced to fill screens with movies nobody’s watching can be a revenue suck, but if the theater says no, the studio can turn around and say, "Fine that’s the last MGM or Warner Brothers or Disney movie you ever screen."

At the same time, costs like rent, air conditioning and heating for large spaces are significant. And every few years there’s some new amenity or technology no theater can do without: surround sound, stadium seating, digital and 3D projection systems. Each requires hefty investment that brings down profit margins.

Theaters could raise ticket prices, but with 70 percent of any increase going to studios, it isn't particularly appealing. Plus, price competition between theaters is fierce.

The one thing that does not have to be shared with studios: concessions.

While concessions account for only about 20 percent of gross revenues, they represent some 40 percent of theaters’ profits. Even with $10 tubs of popcorn, and profit margins on concessions of 85 percent, profit margins for a whole theater average around 4.3 percent for the industry, according to IbisWorld.

“I would say the '70s is when it first started to change,” says Oberleitner. “The quarter cup of popcorn increased to 50 cents, 75 cents and then $1. This all happened pretty rapidly through the course of the '70s, and by the time we hit the '80s it was in full gear completely.”

Which do you prefer: expensive concessions, or expensive movie tickets?

Some consumers are paying a lot for concessions, but on the other hand, this means that all consumers are paying less for movie tickets than they otherwise might. If you factor in inflation, admission prices are actually about the same as they were 40 years ago. Those $10 buckets of popcorn are subsidizing everyone’s tickets.

But any good movie has a twist, and in this case it falls under the second part of our question: If they lowered the price of the popcorn wouldn’t they increase sales and profits?

The immediate answer is no.

Popcorn is a tool to get you to pay more.

Simply put, it’s quite possible for the profit from a few moviegoers who pay an obscene amount for popcorn to be worth more than dozens of people who pay a reasonable price. You can also think about it this way: A monopolist has a sweet spot between price, demand, and cost that lets it maximize profits. There is nothing in economics that requires that sweet spot to be reasonable for most people. And, in fact, it is pretty much always higher than a situation where there is competition.

But high-priced popcorn also is a valuable tool. 

“Movie theaters use this to price discriminate across moviegoers,” says Ricard Gil, associate professor of economics at Johns Hopkins’ Carey School of Business. He says popcorn lets theaters charge different consumers different prices for going to the movies, which helps maximize profits.

“Different movie viewers have different willingness to pay for the experience of watching a movie. When you’re on a date, you know you’re gonna spend some money.”

From a theater’s perspective, it would be fantastic if the theater could find out who would pay a lot to see a movie and charge them extra. But theaters can’t stop everyone in line and look at their tax returns. So, instead, they offer something only the spenders will buy: Really overpriced popcorn.

Voilà:  Some people get charged extra for going to the movies.

This is, incidentally, the same principle by which lot of other products operate. Video game manufacturers, for example, will sell a console at cost or even at a loss, but then charge a high mark-up on video games. Some people will only buy one or two video games, and others will buy a ton. By setting a low barrier for getting a console, and then charging a ton for games, the firm can extract profit from all different kinds of people.

Coupons operate the same way. Some people are willing to pay full price because the idea of saving, organizing and coordinating coupons is too much of a bother. So the store captures them at the highest price. Others won’t pay those prices, but they are willing to save and look for coupons, so the store is able to capture them too.

Some people are complete coupon fanatics, who won’t pay a penny more than they have to, will spend hours accumulating discounts, and the store can get them in the door as well.

Economic jargon at your local theater: Mixed bundling.

Not only does the selling of high-priced concessions allow a theater to locate which consumers can pay more for a movie experience, it also allows theaters to zero in on those consumers and figure out who is willing to pay more for certain types and combinations of snacks, says Daniel Vincent, professor of economics at the University of Maryland in College Park.

They do this through what’s called “mixed bundling” in economic jargon. Bundling is where you combine one product with another – like the popcorn-soda combo. Mixed bundling is where you offer combos like that, but also let people buy products – popcorn and soda – individually.

Here’s how it works: The theater charges the highest price it possibly can for soda and popcorn individually. But it offers a slight discount on the combo.

Some people really just want a Coke and nothing else, and they’ll be willing to pay that price. Maybe they’re really wealthy, or maybe they’re allergic to popcorn. Vice versa, there are some people who love popcorn but would rather get free water than soda. The theater captures them no problem.

However, there are some other high value consumers who are willing to pay a lot, but not that much. “The guy who is on the fence, he sees the current monopoly price for Coke and he’s willing to buy that. He sees the monopoly price for popcorn and says, 'Ehhh, I’m not willing to buy that for that price.'”

By offering the combo at a slight discount, the theater captures that guy and all the people who are on the fence. They’re still paying an arm and a leg for popcorn and soda, but not quite as much as the people the theater captured who are willing to pay even crazier prices for an individual item.

“Selling combos has as its ultimate goal the role of forcing the population to separate into different groups of people,” says Vincent, so they can be charged different prices.

Maybe there’s just something about popcorn?

Gil has an additional thought about pricing and popcorn. It has to do with the popcorn itself: It’s super salty and buttery. Which means, you can’t really buy just popcorn. You’d die of thirst. So if you want popcorn, you kind of have to commit to a soda, too. Maybe possibly to something sweet, as well.

So all of a sudden, a consumer isn’t choosing between buying no snacks and maybe just one little thing. They’re choosing between buying no snacks, and buying an armful of concessions.

If the choice is go big or go home, there are suddenly two types of consumers.

“The consumers that want to go all out, and the consumers that are very price sensitive,” says Gil.

Perhaps, he supposes, it helps that most people see a movie either before dinner or after dinner, so they’re either very hungry or not hungry at all.

Either way, once a theater has found a price where it can get all or most of the all-out consumers buying popcorn and soda and candy, if it lowers that price... it won’t get many new takers. There just won’t be that many more all-out people left. To get everyone else, they’d have to hit rock bottom prices – which just aren’t worth it.

“Theaters realize this and price accordingly,” Gil says.

Why ask why

There are a quite a few reasons consumers pay so much for concessions at the movies. So if you find yourself staring at the board of concession prices and shaking your head, just remember that basically, this is how theaters make their money.

 You could also just remember to sneak your snacks in next time.

Special thanks to 'Voice of Hollywood' Ben Patrick Johnson for doing the voice-over in the audio version of this story.

The Scrabble dictionary is getting an #upgrade

Marketplace - American Public Media - Mon, 2014-08-04 13:50

Here's your lexicographic update for the week.

Merriam-Webster has released some of the new words for the Official Scrabble Players Dictionary, due out next Monday. Standard rules apply: the word must be found in a standard dictionary, it can't require capitalization, it can't have hyphens or apostrophes, and it can't be an abbreviation.

"Bromance," "chillax," "hashtag," and "selfie" are just a few of the words that are now challenge-proof.

Now what about "synergy" or "deliverables"?

Municipal water systems are vulnerable

Marketplace - American Public Media - Mon, 2014-08-04 13:41

Toledo resident Lauren Birner's kitchen sink has looked a bit odd the past few days. Birner, who is 15 weeks pregnant, took extra precautions to keep herself from accidentally turning on the tap during the city's recent water ban. 

"I put plastic bags over the faucets because, without thinking, I would turn on the faucet, and think, 'Oh, wait!'" she says.

The ban was put in place Saturday and lifted Monday. Experts suspect that a big algae bloom on Lake Erie produced toxins that got into the water supply, affecting hundreds of thousands of people in Ohio's fourth-largest city.

Algae blooms have been growing on Lake Erie for years. The Ohio Sea Grant Research Lab told the Associated Press this year's bloom was smaller than in years past but it was pushed toward shore by wind and waves.

A number of factors make the algae flourish. Experts point to global warming and to fertilizer run-off from farm fields. "Algae blooms love fertilizer the same way wheat and corn love fertilizer," says Charles Fishman, author of "The Big Thirst," a book about water.

Fishman says when algae die, they produce a toxin, and that toxin appears to have gotten past Toledo's water treatment plant. Fishman fears the situation could happen on the other Great Lakes. That should put cities on guard, he says, especially if they rely on a single water source.

Fishman says the situation was not catastrophic in Toledo, but it could have been graver. "If this had happened in the middle of the week, it would've had a huge economic impact," he says. 

Experts say there are ways to mitigate problems tied to algal blooms, like improving water treatment facilities or getting farmers to grow crops that need less fertilizer, even if they're less lucrative. 

"A lot of farmers would see costs go up and revenues go down," says David Zetland, a water economist at Leiden University College in the Netherlands.

The state of Ohio has tried to address problem. Legislators passed a law this year requiring that farmers get training before using commercial fertilizers. 

But Alan Vicory, a principal in the water practice at Stantec Consulting in Cincinnati, says it's not clear what quantities of the fertilizer components nitrogen and phosphorous cause an algae bloom outbreak.

"We have been working on this as a community of scientists and engineers for many years, and it's very difficult," he says. "It's confounded our ability to tie all those things together to have any predictive capability as to an outbreak."

In Portugal, a 'bad bank' saves the day

Marketplace - American Public Media - Mon, 2014-08-04 13:41

A multi-billion dollar rescue is underway for a European bank, and global economy watchers are hopeful the fix will keep the problem from spreading beyond Portugal.

Banco Espirito Santo is getting chopped in two. Its toxic assets will be held in a so-called “bad bank,” a concept that drew attention during the worst of the global financial crisis.

The idea is that with bad loans and other toxic assets segregated from strong assets, the “good bank” can go on with the regular business of taking deposits and lending, without worries that customers will freak out and withdraw all their money, causing chaos.

When the bad bank tries to sell off the bad stuff, lots of money will be lost. But unlike previous bank bailouts, the burden doesn’t all land on taxpayers.

"The losses are gonna be borne by some of the creditors to that bank and the people that own stock in that bank, the shareholders," explains Matt Slaughter, associate dean at Dartmouth’s Tuck School of Business. "That’s a good move."

Slaughter says banks will manage risk better, if they don’t assume taxpayers will ultimately pay the bills for their screw-ups.

Mark Garrison: The basic idea’s actually quite simple. Raj Bhala, who teaches international law at University of Kansas, gives us a visual aid.

Raj Bhala: If you were drawing it out on a blackboard, you would be drawing out good assets and putting a big circle around them and then you’d be drawing bad assets and putting a big circle around them. They would not be linked.

European bankers call this ring-fencing and they love to reference herding cattle. Kerry Cornelius runs a real cattle ranch and directs the Ranch Management Program at Texas Christian University. He says fencing plays a role, but EU officials seem a bit off with their terms.

Kerry Cornelius: I think that’s something that bankers probably came up or dreamed up on their own.

Linda Hooks: Regulators and analysts look for analogies and the fence analogy makes a lot of sense. You’re trying to contain a problem and keep it from growing any further.

Washington and Lee economics professor Linda Hooks says when a bad bank fences off or herds in or does whatever to toxic assets, the good bank can thrive. It goes on with regular business of taking deposits and lending and customers won’t freak out and pull all their money, causing chaos. When the bad bank tries to sell off the bad stuff, lots of money will be lost. But as Dartmouth business school associate dean Matt Slaughter points out, unlike previous bank bailouts, it doesn’t all land on taxpayers.

Matt Slaughter: The losses are gonna be borne by some of the creditors to that bank and the people that own stock in that bank, the shareholders. And that’s a good move actually, going forward.

Slaughter says banks will manage risk better, if they don’t assume taxpayers will pay for their screw-ups. I'm Mark Garrison, for Marketplace.

An Ebola Quarantine In Freetown: People Come And Go As They Wish

NPR News - Mon, 2014-08-04 13:33

Sierra Leone is at the epicenter of the Ebola outbreak. All homes exposed to virus have been quarantined. We visited one of them and found the atmosphere there surprisingly relaxed.

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72-Hour Cease-Fire Takes Effect In Gaza

NPR News - Mon, 2014-08-04 13:04

Israelis and Hamas have agreed to a three-day truce. The proposal by Egypt had been on the table for three weeks.

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Gaza Family Mourns The Loss Of A Son, Brother — And Hamas Militant

NPR News - Mon, 2014-08-04 13:03

The brother and mother of a Hamas fighter who was killed in a tunnel recall his path into militancy. They're pleased he died for what they consider a good cause.

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Can I ask you to blue sky that synergy?

Marketplace - American Public Media - Mon, 2014-08-04 12:45

"Last week in my email to you I synthesized our strategic direction as a productivity and platform company. Having a clear focus is the start of the journey, not the end. The more difficult steps are creating the organization and culture to bring our ambitions to life..."

This is an excerpt from a memo Microsoft CEO Satya Nadella put out last month, announcing major lay-offs at the company. Entitled "Starting to Evolve Our Organization and Culture", it got a lot of attention for its extreme use of business jargon.

But, as it turns out, using business jargon has some big advantages.

A new study from the University of Southern California's Marshall School of Business found people who use business jargon are assumed to have a higher position within a company, and are seen as better leaders.

"What we found is that there’s something about abstraction that communicates that ‘I’m a big picture person,’" explains author  Cheryl Wakslak, Assistant Professor of Management and Organization at USC. "That’s what we expect powerful people to be like."

In fact, says Wakslak, people who don’t use management-speak and, instead, lay their ideas out in a concrete, detailed way, are perceived as less effective leaders. Wakslak says we see this in the reaction voters sometimes have to politicians who get too granular with their ideas. "You want to know that a leader’s on top of everything, that your politician knows these details. But when politicians start to talk in that way, they get labeled as wonky and they just don’t seem as effective."

"I remember when I first went to work a long time ago at a Xerox Research Center and I got a memo on the first day that said: 'Cascade this to your people and see what the pushback is,'" says Geoffrey Nunberg, a linguist at the University of California Berkeley's School of Information. "I thought, you know, I’m not in Kansas anymore." Nunberg says business-speak really got going in the 1970s. "That was the moment when people started talking about corporate culture. That was when managers began to feel that workers could be motivated not just by their salaries and job security, but by a kind of language."

Language that made people feel like going to the office every day was important and epic, says Nunberg. "You gave people a special language to speak that suggested that the work experience was somehow different and grander than the experience of ordinary life. You had champions in the workplace. You make mission statements and you have a vision."

The rise of business-speak also came about just as executive salaries began rapidly outpacing line-worker pay. Jargon was a way for managers to differentiate themselves from people who were earning far less than they were. They began using it as a power play.

"Sitting in on board meetings and other things, you were at a disadvantage if you didn’t understand what they were saying," says entrepreneur and investor Ron Sturgeon. Sturgeon started out working on cars after high school and eventually built a huge auto salvage business, which he sold to Ford. Sturgeon hadn’t been to business school, and when he first started sitting in on big, corporate meetings, he was struck by the use of jargon. "If you’re in the meeting and you don’t know what the term is, then you’re definitely at a disadvantage," says Sturgeon. "And so the person would obviously have more power than you or seem more intellectual than you."

Sturgeon became fascinated with the jargon and wrote and published a dictionary of business jargon terms.

But jargon isn't always about power. Nunberg says business buzz-words are also ways for us to communicate larger issues happening around work and the place of work in our lives.

For example, now that flex-time has us working from our home-office, we sometimes have to unplug to achieve work-life balance. And women in the workplace are being encouraged to lean in and shatter the glass ceiling.

"Jargon arises very often in order to deal with new phenomena," says Nunberg. "We are working differently now, we have different relationships to our workplace and our co-workers and we need new language to describe that."

It’s even started creeping into popular culture. Weird Al Yankovic’s new album, Mandatory Fun, has a song called Mission Statement, that’s written entirely in business jargon.

In other words: At the end of the day, there are a lot of moving parts in today’s workplace. And in order to authentically describe the transformational change we’re seeing in our relationship with our jobs, we need terms that facilitate new levels of communication so that we can more effectively circle back to these big picture issues, and touch base with how to best thrive and create effective synergies in workplace 2.0. 

We've been asking around about your most beloved/most despised examples of business jargon. And, well, if we were ever going to make good use of a wordcloud...

All of you. Excellent deliverables.

Justice Department Finds Excessive Use Of Force At New York Prison

NPR News - Mon, 2014-08-04 12:34

Adolescent inmates are subject to "extremely high rates of violence" at Rikers Island, according to a civil rights investigation. For male teens, the prison is "broken," a U.S. attorney said.

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Jim Brady, Press Secretary Turned Gun Control Activist, Dies At 73

NPR News - Mon, 2014-08-04 12:18

Jim Brady, the White House press secretary who was shot in the head by a gunman trying to assassinate President Reagan, has died at age 73. NPR's Brian Naylor reports on a man whose later life was dedicated to changing gun laws.

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Africa Summit To Tackle Food Stability And Climate Change

NPR News - Mon, 2014-08-04 12:18

An unprecedented gathering of African leaders opened in Washington, D.C. The U.S.-Africa Leader's Summit is covering topics including food security, climate change, regional stability and expanded business opportunities between the U.S. and Africa.

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