Marketplace - American Public Media

Weekly Wrap: Comsumers, Congress and commodities

Fri, 2014-12-12 11:00

Kai sat down with Catherine Rampell of the Washington Post and Sudeep Reddy of the Wall Street Journal to discuss highlights from this week's news.

Growing Styrofoam out of mushrooms

Fri, 2014-12-12 09:55

In a college dorm room, under a twin XL bed, a company was born. Ecovative, a biodesign company based in Albany, NY, began as a science project for Gavin McIntyre and Eben Bayer -- they grew oyster mushrooms under their beds, in the hopes of using them to recycle farm waste, and eventually, create an alternative to soft plastics, like Styrofoam. 

The experiment worked. Using the roots of mushrooms, Ecovative turns agricultural waste into packing materials, insulation, and even surfboards. Their products replace harmful, carcinogenic plastics found in Styrofoam and in furniture made from wood composite. Their products are all biodegradable, compostable, and sustainable. 

Mushroom roots bind together particles of farm waste to make a foam that settles in a mold -- Ecovative is able to shape these to make the kind of packaging that protects computer parts or furniture during shipping. Their materials, called Myco Board, have a pretty typical look and feel, and they cost about the same about as unrecyclable soft plastics. 

Replacing packing materials made logistical sense for Ecovative -- Gavin McIntyre, co-founder and chief scientist at Ecovative,  says that the company "sees itself as a material science company, and a materials provider...similar to Dow and DuPont, who were the materials leaders within the 20th century, we seek to be the biomaterials leader in the 21st century."

"When a customer is going to buy a product, they're looking at price, and performance," McIntyre says, "the environmental story is a nice-to-have, but it's not a need-to-have. All of our product offerings are at price parity or below traditional plastic foams or woods." That pitch has swayed customers already. In 2007, Ecovative's first customer was a Fortune 500 company, Steelcase furniture. Now they work with many other companies, including Dell and Crate and Barrel. 

They've also allowed smaller companies to experiment with their materials, offering the option to grow their own Myco Board -- that's how most of the mushroom surfboards are made, by individuals or companies, mostly located on the West Coast, who use Ecovative's foam to shape their own boards. Standford also collaborated with Ecovative on the body of a drone, made from mushroom materials, that will decompose in nature. 

Ecovative is able to keep prices down because they don't rely on fossil fuels to produce materials. They don't have an expensive factory, just molds that hold the Myco Foam while it hardens. Oil independence gives Ecovative added stability, and they save on space and staffing. 

Right now, materials made from agricultural waste are only making a small dent in the amount of unrecyclable material going into landfills and oceans, but as the number of biomaterials producers grows and as these companies expand, the materials industry could get a lot 'shroomier. 

Growing a replacement for Styrofoam ... out of mushrooms

Fri, 2014-12-12 09:55

In a college dorm room, under a twin XL bed, a company was born. Ecovative, a biodesign company based in Albany, NY, began as a science project for Gavin McIntyre and Eben Bayer -- they grew oyster mushrooms under their beds, in the hopes of using them to recycle farm waste, and eventually, create an alternative to soft plastics, like Styrofoam. 

The experiment worked. Using the roots of mushrooms, Ecovative turns agricultural waste into packing materials, insulation, and even surfboards. Their products replace harmful, carcinogenic plastics found in Styrofoam and in furniture made from wood composite. Their products are all biodegradable, compostable, and sustainable. 

Mushroom roots bind together particles of farm waste to make a foam that settles in a mold -- Ecovative is able to shape these to make the kind of packaging that protects computer parts or furniture during shipping. Their materials, called Myco Board, have a pretty typical look and feel, and they cost about the same about as unrecyclable soft plastics. 

Replacing packing materials made logistical sense for Ecovative -- Gavin McIntyre, co-founder and chief scientist at Ecovative,  says that the company "sees itself as a material science company, and a materials provider...similar to Dow and DuPont, who were the materials leaders within the 20th century, we seek to be the biomaterials leader in the 21st century."

"When a customer is going to buy a product, they're looking at price, and performance," McIntyre says, "the environmental story is a nice-to-have, but it's not a need-to-have. All of our product offerings are at price parity or below traditional plastic foams or woods." That pitch has swayed customers already. In 2007, Ecovative's first customer was a Fortune 500 company, Steelcase furniture. Now they work with many other companies, including Dell and Crate and Barrel. 

They've also allowed smaller companies to experiment with their materials, offering the option to grow their own Myco Board -- that's how most of the mushroom surfboards are made, by individuals or companies, mostly located on the West Coast, who use Ecovative's foam to shape their own boards. Standford also collaborated with Ecovative on the body of a drone, made from mushroom materials, that will decompose in nature. 

Ecovative is able to keep prices down because they don't rely on fossil fuels to produce materials. They don't have an expensive factory, just molds that hold the Myco Foam while it hardens. Oil independence gives Ecovative added stability, and they save on space and staffing. 

Right now, materials made from agricultural waste are only making a small dent in the amount of unrecyclable material going into landfills and oceans, but as the number of biomaterials producers grows and as these companies expand, the materials industry could get a lot 'shroomier. 

Growing a replacement for Styrofoam...out of mushrooms

Fri, 2014-12-12 09:55

In a college dorm room, under a twin XL bed, a company was born. Ecovative, a biodesign company based in Albany, NY, began as a science project for Gavin McIntyre and Eben Bayer -- they grew oyster mushrooms under their beds, in the hopes of using them to recycle farm waste, and eventually, create an alternative to soft plastics, like Styrofoam. 

The experiment worked. Using the roots of mushrooms, Ecovative turns agricultural waste into packing materials, insulation, and even surfboards. Their products replace harmful, carcinogenic plastics found in Styrofoam and in furniture made from wood composite. Their products are all biodegradable, compostable, and sustainable. 

Mushroom roots bind together particles of farm waste to make a foam that settles in a mold -- Ecovative is able to shape these to make the kind of packaging that protects computer parts or furniture during shipping. Their materials, called Myco Board, have a pretty typical look and feel, and they cost about the same about as unrecyclable soft plastics. 

Replacing packing materials made logistical sense for Ecovative -- Gavin McIntyre, co-founder and chief scientist at Ecovative,  says that the company "sees itself as a material science company, and a materials provider...similar to Dow and DuPont, who were the materials leaders within the 20th century, we seek to be the biomaterials leader in the 21st century."

"When a customer is going to buy a product, they're looking at price, and performance," McIntyre says, "the environmental story is a nice-to-have, but it's not a need-to-have. All of our product offerings are at price parity or below traditional plastic foams or woods." That pitch has swayed customers already. In 2007, Ecovative's first customer was a Fortune 500 company, Steelcase furniture. Now they work with many other companies, including Dell and Crate and Barrel. 

They've also allowed smaller companies to experiment with their materials, offering the option to grow their own Myco Board -- that's how most of the mushroom surfboards are made, by individuals or companies, mostly located on the West Coast, who use Ecovative's foam to shape their own boards. Standford also collaborated with Ecovative on the body of a drone, made from mushroom materials, that will decompose in nature. 

Ecovative is able to keep prices down because they don't rely on fossil fuels to produce materials. They don't have an expensive factory, just molds that hold the Myco Foam while it hardens. Oil independence gives Ecovative added stability, and they save on space and staffing. 

Right now, materials made from agricultural waste are only making a small dent in the amount of unrecyclable material going into landfills and oceans, but as the number of biomaterials producers grows and as these companies expand, the materials industry could get a lot 'shroomier. 

The ups and downs of manufacturing jobs

Fri, 2014-12-12 09:36

The labor department says 28,000 new manufacturing jobs were created last month.

For decades manufacturing was a way to make a solid living without a college degree, but was it hit hard by automation and off-shoring.

The manufacturing jobs being created now are different, they are often specialized, or regional. One plant leaves and  another comes ... bringing with it a few precious slots.

Kenny Reeves has been working in manufacturing in the south since he graduated high school in 2007.

Book publisher experiments with Twitter sales

Fri, 2014-12-12 09:24

The Hachette Book Group is experimenting with selling books directly to customers on Twitter, a departure from its usual practice of selling through Amazon or brick-and-mortar book stores.

The publisher offered 100 copies of Amanda Palmer's autobiographical book "The Art of Asking" Thursday, along with a signed copy of a manuscript page. The books could only be purchased through a buy button on Hachette's Twitter account. They sold out in 20 minutes.

Through its various imprints, Hachette publishes about 1,000 books a year, so its Twitter experiment — with just three titles — is limited. The next two are former astronaut Chris Hadfield's book "You Are Here," which will go on sale Monday on Twitter, followed by The Onion's "The Onion Magazine: The Iconic Covers That Transformed an Undeserving World" on Thursday. 

"We are always looking for ways to connect our writers with their readers," says Heather Fain, head of marketing strategy at Hachette. "And selling people books through Twitter, where they're already talking about books, seems like a very simple and direct way to do that."

Hachette's move comes after its very public spat with Amazon, which it recently settled by gaining the right to set its own prices on Amazon's website. But, Fain insists that the Twitter campaign is a social media marketing effort, and is unrelated to Amazon.

"This really is just an example of a new way to communicate to consumers," says Fain, "They're just not connected."

By contrast, Gumroad, which powers the buy button on Hachette's Twitter page, is firmly focused on e-commerce. The start-up has been courting authors and musicians, offering them an alternative to  iTunes and Amazon.

"There's a lot of opportunities for Gumroad and for a lot of other companies to be able to do things to empower creators to make more money, get more data for their transactions, understand their audience better," the company's Ryan Delk says. 

For example, Hachette will get the email addresses of those who bought books via Twitter, allowing the publisher to develop a direct connection with readers.

"It's an interesting experiment," NextMarket Insights analyst Michael Wolf says. "It won't serve as a direct alternative to Amazon."

Hachette and Gumroad are far from matching Amazon's scale, but it makes sense for Hachette to be thinking about how to rely on Amazon less in the long term, Wolf says.

"If you're Hachette, and you're looking at the future of your business, you don't want to put all your eggs certainly in one basket," Wolf says.

Hachette started its Twitter campaign with authors who have millions of followers. The publisher says its next move may be to see if authors with fewer followers can also sell on its non-Amazon platform.

This year's must-have holiday gifts

Fri, 2014-12-12 09:00

Comedians Sam Weiner and Daniel Kibblesmith are the authors of the book, “How to Win At Everything.”  Every so often, they provide us with a humorous take on the news we cover every day at Marketplace. Here, they present their satiric guide to the season's must have holiday gifts.

Every year brings a new wave of must-have holiday gifts, from Tickle Me Elmo in 1996 to the polio vaccine in 1956. But this season, the stakes are higher than ever — here are the holiday gifts your family literally cannot live without. 

1.  For your kids: They're probably already begging you for their very own "Disney’s Frozen Sparkle Princess Elsa Doll."

But what you might not realize is if your child is the only the kid at school without this coveted plaything, you’re dooming them to life as a social pariah. Friendless and desperate, their grades plummet. By age 10, your child will become addicted to huffing packing peanuts and selling their own eyelashes under a bridge, their sullen face caked with regret. They'll wail long into adulthood the day you cursed them by buying them the wrong doll.

2. For Mom: Everyone’s talking about the new iPad Air 2 — it’s the must-buy gift to bring Mom into the 21st century.  

And if you fail? Mom will start missing crucial email updates: engagement announcements, wedding invitations, and priceless photos of her first grandchildren. Soon, she’ll be entirely cut off from the family, focusing her love on an ever-expanding “family” of stray, feral cats. In no time, she'll forget the English language entirely and start subsisting on a diet of leaves and injured birds. If only you’d gotten her that iPad, you'd still have a mom instead of a gibbering cat queen.

3. For your teens: Here's a quick tip to remember which hot new video game console you have to buy for your teen:

"PlayStation 4, love evermore ... Xbox One, lose your son."

4. For the whole family: The gift your whole family desperately needs: A Sony 85-inch Ultra HD 3D television.

Without this glorious slab of distraction, your family will be condemned to the worst possible fate of the holiday season: Enjoying each other's company.

Whatever you buy this holiday season whether toy, gadget or entertainment experience, remember that the real perfect gift is love — the love of buying things.

Quiz: The most popular computer in school

Fri, 2014-12-12 04:36

There’s a new top-seller in the U.S. edtech market, according to International Data Corp.

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PODCAST: Investing in coffee

Fri, 2014-12-12 03:00

First up, the latest chapter in the story of how falling oil prices are affecting the global economy. Plus, profile of a South African investor who was badly burned once by corruption in Congo. But now he’s back, figuring he’s learned a few things.

The Media formerly known as Print

Fri, 2014-12-12 03:00
219-206

That was the vote in the House Thursday night, passing a $1.1 trillion spending bill and narrowly avoiding a second government shutdown in as many years. Infighting between House Democrats and the White House nearly derailed the bill, the Washington Post reported, because of some changes to Dodd-Frank embedded in it.

2/3

Looking ahead to the weekend, Japan will hold an election on Sunday in the midst of its recession. Polls suggest Prime Minister Shinzo Abe’s ruling party could win as much as a two-thirds majority.

0.6 percent

The portion of online holiday deals researched by the site Wirecutter that actually ended up being unusual and hard-to-find anywhere else. A lot of it comes down to old fashioned consumer psychology, the New York Times reported

800 magazines

More than 800 new magazines launched over the past 12 months. So print isn't necessarily dead, but the industry has changed. New technology allows for smaller runs and more specialized titles, like "Guinea Pig Magazine" and "BeerAdvocate."

24 percent

The portion of first-year college students who could estimate their student debt within ten percent, according to a Brookings survey reported by the Upshot. The vast majority of students underestimated the debt they'd end up with.

 

More than 800 magazines launched in the last year

Fri, 2014-12-12 02:00

Get with it Gutenberg. 

In order to print their glossy editions on paper, magazines need to sell ads. But nowadays, that can be problematic. 

"Many advertisers want to be on mobile, they want to be on television," says Andrea Marder-Kick, vice president of global planning and buying at Media Associates, an ad agency focused on ad placement. "Very few advertisers are walking through the door, or ringing us on the phone, saying they want to be in print. Print is perceived as being very archaic."

But try telling the winners of the "Hottest Magazine Launches of the Year" awards that they're about to go extinct. 

"We’ve been sort of like the Kenny on South Park for like the past quarter century. Every disruption — you know, 'they killed Kenny again,'" says Jim Impoco, Newsweek's editor-in-chief, as he accepted the magazine's award for best re-launch at the event breakfast in New York. 

Magazines, it seems, are far from fossilized. They're still alive and kicking, and then some.  

More than 800 new magazines launched over the past 12 months says Samir Husni, AKA, “Mr. Magazine," director of the Magazine Innovation Center at the University of Mississippi. But, he admits the number includes a lot of annuals and book-a-zines like "The Best of Fine Gardening: Tomatoes" or Hobby Farm's "Bacon." 

“The days when you had TV guides selling 18 million copies every week, those days are gone," he says.

Magazines aren’t dead, they’re just different, explains Husni. New technology allows for smaller runs and more specialized titles like "Eye-lash," for lash specialists, estheticians and makeup artists;  "Vapor Voice," for those in the vape industry; and "Skinny News," which is about ... being skinny.

"There is a magazine for everything you can imagine, you can dream about or you can even have nightmares about," he says. "The joke I tell my students: you name a part of the human body, and there’s at least one or two magazines devoted to it."

Sid Holt, chief executive of the American Society of Magazine Editors, says it is a challenging time for magazines. While magazine audiences are growing online and on other digital platforms, the loss of advertising dollars that were once a mainstay of print has been hard to make up. 

"Those digital dimes haven’t replaced those print dollars yet," he says. But at the same time, he notes, magazines are adapting. In order for a magazine now to be successful it has to carry its shared passion between reader and publisher — be it guinea pigs or eyelashes — across platforms. 

"We no longer think of a magazine as this print thing; this print artifact. Although, obviously the print artifact is central," he says. 

Print does have prominence for certain advertisers, says Marder-Kick. For those trying to hawk luxury goods or beauty products to seniors — a group notoriously tricky to track down via new technology —  magazines play a key role. After all, it's very hard to smell a sample fragrance strip through the screen of your iPhone. 

"Print is an astonishing technology. And to begin with, it’s portable, it’s great to look at," says Holt. "It was a great technology when Gutenberg invented it and it’s a great technology today."

800 magazines launched in the last year

Fri, 2014-12-12 02:00

Get with it Gutenberg. 

In order to print their glossy editions on paper, magazines need to sell ads. But nowadays, that can be problematic. 

"Many advertisers want to be on mobile, they want to be on television," says Andrea Marder, vice president of global planning and buying at Media Associates, an ad agency focused on ad placement. "Very few advertisers are walking through the door, or ringing us on the phone, saying they want to be in print. Print is perceived as being very archaic."

But try telling the winners of the "Hottest Magazine Launches of the Year" awards that they're about to go extinct. 

"We’ve been sort of like the Kenny on South Park for like the past quarter century. Every disruption — you know, 'they killed Kenny again,'" says Jim Impoco, Newsweek's editor-in-chief, as he accepted the magazine's award for best re-launch at the event breakfast in New York. 

Magazines, it seems, are far from fossilized. They're still alive and kicking, and then some.  

More than 800 new magazines launched over the past 12 months says Samir Husni, AKA, “Mr. Magazine," director of the Magazine Innovation Center at the University of Mississippi. But, he admits the number includes a lot of annuals and book-a-zines like "The Best of Fine Gardening: Tomatoes" or Hobby Farm's "Bacon." 

“The days when you had TV guides selling 18 million copies every week, those days are gone," he says.

Magazines aren’t dead, they’re just different, explains Husni. New technology allows for smaller runs and more specialized titles like "Eye-lash," for lash specialists, estheticians and makeup artists;  "Vapor Voice," for those in the vape industry; and "Skinny News," which is about ... being skinny.

"There is a magazine for everything you can imagine, you can dream about or you can even have nightmares about," he says. "The joke I tell my students: you name a part of the human body, and there’s at least one or two magazines devoted to it."

Sid Holt, chief executive of the American Society of Magazine Editors, says it is a challenging time for magazines. While magazine audiences are growing online and on other digital platforms, the loss of advertising dollars that were once a mainstay of print has been hard to make up. 

"Those digital dimes haven’t replaced those print dollars yet," he says. But at the same time, he notes, magazines are adapting. In order for a magazine now to be successful it has to carry its shared passion between reader and publisher — be it guinea pigs or eyelashes — across platforms. 

"We no longer think of a magazine as this print thing; this print artifact. Although, obviously the print artifact is central," he says. 

Print does have prominence for certain advertisers, says Marder. For those trying to hawk luxury goods or beauty products to seniors — a group notoriously tricky to track down via new technology —  magazines play a key role. After all, it's very hard to smell a sample fragrance strip through the screen of your iPhone. 

"Print is an astonishing technology. And to begin with, it’s portable, it’s great to look at," says Holt. "It was a great technology when Gutenberg invented it and it’s a great technology today."

Silicon Tally: Robots ate my adspace

Fri, 2014-12-12 02:00

It's time for Silicon Tally! How well have you kept up with the week in tech news?

This week, we're joined by Paul Kedrosky, partner at SK Ventures.

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Consumer sentiment and retail sales

Fri, 2014-12-12 02:00

The University of Michigan issues its monthly Consumer Sentiment Index on Friday. Numbers from the survey have long been used as a leading economic indicator— data that economists mine for clues about what could happen next. This month’s number may contain clues about retail spending this holiday season. 

Researchers started looking at consumer sentiment decades ago, partly to help predict how much people would buy.

"It’s based on a theory that consumers needed both the ability to purchase goods and a willingness to purchase goods," says Robert Leone, a marketing professor at Texas Christian University. "They needed both of those."

Leone says sales numbers bear out the theory, and businesses depend on this data to make decisions: If the numbers say consumers will be skittish, retailers offer more discounts.

This year, the other factor — consumers' ability to buy — looks good, says Chris Christopher, director of consumer economics at IHS Global Insight. "Even though their wage gains haven’t been that great, their expenses — the overall price level for things — is much lower," he says. Lower gasoline prices put even more extra money in consumer wallets. "That’s helping them spend a little extra." 

Japan prepares to vote

Fri, 2014-12-12 02:00

Here’s a bright idea: in the middle of a recession, call an election.

That’s exactly what the prime minister of Japan has done. The voting is set for Sunday, and he actually could be headed for a landslide. Polls suggest Prime Minister Shinzo Abe’s ruling party could win a two-thirds majority. In this case, it’s not “the economy, stupid.” It’s the enfeebled opposition, analysts say.

Despite the GDP contraction, Japan’s economy may not be that bad. Adam Posen, President of the Peterson Institute for International Economics, sees parts of the “Abe-nomics” shock therapy working: monetary easing and reforms to bring more women into the workforce. There’s more to do, Posen says, but a victory could give Abe a mandate to pursue additional, significant changes: cutting business taxes, shrinking the deficit, and striking a trade deal with Washington.

Investing in coffee and Congo

Fri, 2014-12-12 01:30

The Democratic Republic of Congo needs investment to rebuild from decades of war. But the cruel irony is that it’s the last place many foreign investors want to park their money. 

Transparency international ranks DRC 156 out of 175 rated countries in terms of corruption. The World Bank says that while it’s among the world’s top ten most improved places to do business, it’s still one of the world’s hardest places to do business. And yet people do, and do so successfully. 

Konrad Brits is trying to be one of them. He is CEO of Falcon Coffee, a UK based green coffee supplier to brands all over the world.

He stands before the coffee processing mill that he helped finance in Goma, the capital of DRC’s North Kivu province. The mill processes coffee beans provided by cooperatives and farmers from around the region. He hopes it will offer a desperately needed source of revenue for people.

“It’s an incredibly risky investment, or a lot of people would view it as that,” he says.

After what Brits has been through, it is a miracle he is here. 

This isn’t his first ride on the Congo Coffee train. 10 years ago, he tried exporting coffee from the other side of the country. He set up a network of middlemen to buy coffee from villages, and then processed it in a factory like this one. He imported everything from screws and screw drivers, to cars and machinery and equipment.

“And once we started the process, the shackles began to tighten,” he recalls.

Taxes got pushed mysteriously higher, and higher, he says. And then there were random fees, like for the government to certify the weight of his coffee (even though officials had no scale).

“When we went to the government, they said, 'We don’t have a scale, but you need this paper to export the coffee. So even though we don’t have a scale, this piece of paper’s gonna cost you $750 every time.'” 

Konrad’s staff was stealing two tons out of every 18 ton container “in conjunction with the port authorities,” he says. “I was paying the tax and buying the 18 tons of coffee and buying the weight note; shipping thousands of tons. And when they started arriving, my buyers would tell me, 'You over invoiced me. There’s only 16 tons.'"

The staff were then reselling the stolen coffee back to Konrad.

“The degree of institutional corruption made me realize that I needed to cut my losses and leave,” he says. He lost $1.3 million.

At the time, he was furious that so many people and authorities around him had colluded to cheat him at the expense of their own communities.    

I’m going to leave here,” he recalls telling a group of officials and employees. “I’m bleeding, but I’m gonna survive, I’m gonna take my business somewhere else. And you’re gonna sit here with no future.”

Since that time, Konrad has come to think about his experience in a different way.

“Time and again, the Congolese have seen so many foreigners come and go, and by and large every one of those foreigners have been there to take not to give,” he says. Starting with slavery and everything else: the mineral wealth, the rubber, the hardwood. Investing in the DRC with my very developed-world, bleeding-heart attitude, believing I could deliver this promise of tomorrow to people who had been nothing but let down."

He adds, "The governor‘s son told me, ‘We are such a traumatized society that if you offer a Congolese one dollar today or ten at the end of the week, he can’t bank on the ten at the end of the week, so he’ll take the dollar today. And you look like the dollar today.’” 

So why is he back? 

Because of people like Kyriakides Menelas. 

Menelas runs the coffee mill. He was here when rebels swept through town just two years ago, leaving bullet holes in the gate of the mill’s compound. Menelas has been here thirty years, through wars and invasions and corruption. Brits says he trusts Menelas and his family.

“They have built up a huge coffee export operation out of Uganda for 15 years and we’ve been partnering with them there for the last 5,” he says.

The only way to survive here, says Menelas, is to know people who know how to survive here, and find partners who have a stake in your success. Konrad’s early experiment had him depending on people who would gain from his failure. Also, it doesn’t hurt to have an edge.

“In business, if you show up somewhere and don’t know anyone and nothing, you’re a sheep among lions. They’re obviously going to devour you. So you have to become a little bit lion,” says Menelas.

And as a businessman, Menelas takes the long view. 

“Our parents, they lost their things two or three times. Us too. You get used to it. The positive thing about Congo is you can lose for two or three years and then gain it all back and more,” he says.

Britsa takes the long view too.  He says his partners, who’ve invested more than he has, make him feel protected. This time, he says, will be different.

“Well possibly,” he adds with a laugh. “Maybe I’ll be a fool twice. We are yet to see.”

 

Barge owner talks oil and taxes

Thu, 2014-12-11 14:39

There's a lot of oil moving through the economy. It's literally moving, from point A to point B in trains, trucks and barges.

In light of the recent drop in oil prices, we checked in with Austin Golding, who runs Golding Barge Line, a family business in Vicksburg, Mississippi. Business has picked up since the last time we talked to Golding, and he's surprisingly excited about a new tax increase.

The economic evolution of streetwear

Thu, 2014-12-11 13:44

Farshad Arshid runs a clothing business with his wife Sandy.

Arshid started out on his own, with one part-time employee a little over a decade ago. Now, he owns three stores, two in Atlanta, and one in Houston. He has a staff of around 15 employees. It all started with a store called Standard.

 

The long arms of a U.S. law reach Congo

Thu, 2014-12-11 12:08

Three hours from the nearest city and 120 feet underground, at the end of a long tunnel just big enough for a person to crawl through, 25-year-old Nami Fusi is listening to his favorite music while digging.

 

"Here, this is a patch!" he says, shoveling.  Fusi is one of the Democratic Republic of Congo's estimated 500,000 artisinal miners.

 

"We advance a meter or two each day," he says.  He can spend as many as 12 hours down here, pursuing purple seams in the hard orange clay, hoping to see flecks of gold appear on his shovel or spring from his pick. 

 

There are half a million miners like Fusi in the Congo, and this is how a lot of the mining in Congo has been done for the past few decades: by hand.  Ores of the famous cell phone elements – the three Ts: Tungsten, Tantalum and Tin – were mined in much the same way. These ores earned the moniker 'conflict minerals' because the profits made from mining them haloed to finance armed groups in Eastern Congo, who controlled mines and who waged brutally violent campaigns. They killed nearly a million people by the most conservative estimates, and possibly up to six million.

 

Many things can shut a mine like the one worked by Nami Fusi – collapses, toxic gases, and, it turns out, Dodd Frank.  The bill to clean up Wall Street.

 

"Which, in itself, I think sounds a bit odd," notes Aloys Tegera wryly.  Tegera is director of the Pole Institute, a think tank based in Goma.  "There was this strong American lobby, they wanted to slot into this American internal act, something concerning Congo." 

 

Within the 2,300 pages of Dodd Frank is one small section, section 1502, which requires companies that buy minerals from Congo to certify whether or not those minerals are financing armed groups.  The idea was to help put an end to atrocities those armed groups were committing.  There were campaigns to hold cellphone companies and computer makers accountable on campuses, Facebook, and YouTube.

 

"But they didn't really foresee the reaction, the local reaction, how it was going to work," says Tegera. 

 

Reaction was swift and dramatic.  In 2010, many companies started looking elsewhere for minerals.  The government of the DRC, finally waking up to the issue of conflict minerals, unilaterally suspended all mining operations.  Even when the suspension was eventually lifted six months later, many international companies realized they couldn't certify anything about Congolese minerals.  Not  when the supply was dominated by long chains of middle men and thousands of just regular people –  men and women with picks and hammers.  So companies stopped buying.

 

"They didn't buy, these past few years, they don't buy anymore," says Gaspard Kashafali, an unemployed miner wearily standing on the side of a street in Bukavu.  "I can't do this job anymore, and up until now I have nothing.  I earn nothing.  I don't work."  Before Kashafali was a miner, he was a guerila fighter in the Mai Mai, one of Congo's dozens of armed groups. 

 

"Artisinal miners were all of a sudden unemployed," says Tegera.  It was a defacto embargo.

 

"There is a lot of money going around that activity as well," he says.  "We had for instance local traders who would sell spare parts, food, beer etcetera, and these people also couldn't sell."

 

Tegera and others allege that the loss of jobs pushed erstwhile guerila fighters like Kashafali back to the banditry trade, ironically increasing insecurity contrary to the aims of the efforts to reign in conflict minerals.

 

The initial suspension, which closed down legitimate mining operations, also allowed rebel groups out of the reach of government, like the CNDP, to become monopolists in the mineral trade in the short term, smuggling their materials into Rwanda or Uganda. 

 

Unlike the artisinal miners, "Industrial mining operations were not hit," says Tibere Kajemba, program director at Observatoire Gouvernance et Paix, a human rights organization.  "They have a closed supply chain, they can show that their minerals are conflict free."

 

Not intended

 

Toby Whitney was legislative director for Congressman Jim McDermott, he was lead drafter of Dodd Frank. And he bristles at the notion that drafters were’t aware of the consequences.

"When you're going to break a black market, and provide some chance for peace and prosperity in the region, there's going to be some dislocation," he says.  "And it was worth some amount of dislocation to stop funding the killing of a thousand people a day." 

 

"This behavior has been going on for 20 years funding a huge war and we are saying you have to care about this, be transparent at a minimum," Whitney says.   

 

The complaint from Tegera and others is that if the consequences were known, there was no plan in place to support those who were negatively affected. 

 

Attempts to cope

 

In the wake of the disruption to one of Congo's most important industries, numerous efforts have arisen to help artisinal miners trace their product to show it's "clean." That's what designers of the law expected.  

Kajemba's organization, OGP, is helping the government of the DRC to establish a classification system of "red sites, yellow sites, and green sites," by monitoring different mines for the presence of armed groups.  There are also programs that bag and tag ore mined by artisinal workers, offering a seal of sorts that marks the minerals as conflict free. 

 

These systems have also incorporated standards banning child labor and pregnant women or women with small children on their backs from working in the mines.

"These programs exist and have been ratcheted up, so there's an improvement," says Jason Stearns, senior fellow at NYU's Center on International Cooperation. "But we are at such a low level - fewer than a dozen areas out of hundreds, and its very cumbersome infrastructure."

These programs have almost certainly  not been able to absorb all the displaced miners.

 

The classification systems are not all internationally recognized, meaning they are not sufficient for a company to meet the requirements of Dodd Frank.

 

A consequence of the traceability schemes has been the creation of monopoly dynamics, says Laura Seay, an assistant professor at Colby College whose research focuses on U.S. foreign policy effects in the African Great Lakes region.

"In the places where there is traceability there's only one buyer, that buyer gets to set the price, there are miners who think they are being cheated and are probably right, in terms of what they're getting for the minerals," Seay says.  "And so what we’re seeing is that it’s a relatively tiny number of miners who are benefiting from the new traceability schemes and the vast majority are still excluded."

 

Bitter medicine

 

One of the U.S. groups largely behind the Dodd Frank section on conflict minerals is the Enough Project.   For proponents like Congo country director Fidel Bafilamba, the law is like Quinine:  bitter but necessary.  He admits a lot of miners suffered under the rule, but he argues the people under the control of armed groups suffered without the rule.

 

When armed groups and militaries took over, "artisinal mining became synonymous of tragedy, malediction to the local communities."  He compares the condition of some mining communities controlled by armed groups to urban areas like Goma, "despite the nice buildings coming up in Goma, these communities still have nothing."   

 

And Bafilemba says despite the hardship, the law worked.

 

"Five years back, most of the mines - especially three T mines - were under the control of armed militias.  Today, 67 percent of mines are conflict-free." 

 

The International Peace Information Service, an independent research institute working on Sub-Saharan Africa, backs up this claim.  However only a third of gold mines are conflict-free.

 

Silver linings and gold chains

 

There are no reliable data on exactly how many miners were put out of work in the long run, and to what extent their financial hardship persists.  A World Bank funded report suggests one possibility:  it estimates four out of five artisinal miners in the DRC are now working in gold, a largely unregulated and untraced sector. 

 

"There’s been a large migration from the three T’s - tantalum, tin, tungsten - to gold, which is by far the largest mining trade or sector in the eastern Congolese economy," Stearns says. "So that has buffered and cushioned the impact of Dodd Frank."

 

It's also offered armed groups an escape route. 

 

"You definitely have more armed groups benefiting from Gold.  That is shown in data we have gathered this year," says Anna Bulzomi, an analyst with IPIS.  "It is very challenging to say that Gold is sourced responsibly right now."

 

Two-thirds of gold mines in the Congo operate under some kind of armed group according to IPIS.   Gold is easier to smuggle, easier to sell, and many of the mines are in areas not fully controlled by the government.   Now that cellphone minerals are less profitable, many people are making a living from gold.  And so are armed groups. 

 

"The main hubs for gold are in places that so far have not been particularly active in the global conversation on conflict minerals," says Bulzomi.  "So for instance a lot of gold from the [African] Great Lakes region ends up in Dubai ...where... the level of commitment is not as high as the US or EU or players with large roles in other supply chains."

Gold also has a high intrinsic value, and it doesn't need to be smelted or refined before attaining that value.  It is also easily smuggled.

 

A pilot project at the Nyamorale gold mine where Nami Fusi works is seeking to change this, but it is one out of more than 600 sites.  Other sites are in isolated, rebel controlled areas for which such ticketing is not possible, but from which smuggling certainly is. 

 

Competing narratives

 

If you ask Dodd Frank's harshest critics, they will tell you that the law missed the point.  "It underestimated -- or overestimated the government's ability to provide law and order," says Aloys Tegera.  The underlying factor behind Eastern Congo's lawlessness and illicit mineral trading is not mineral wealth, it is a collapsed, feckless government.   To address the conflict, says Tegera, international organizations and governments should strengthen the government's ability to do what governments do:  provide services and stability.

 

For those like Bafilemba who favor Dodd Frank's approach of taking action at the economic level, government fecklessness is precisely the reason not to wage reform through the government.  "They are not interested in stability....basic services."  For Bafilemba, who views the current Congolese government as puppets of neighboring Rwanda and the United States and bent on extracting Congo's mineral wealth for personal or foreign gain, the government is the last place to begin. 

 

"It’s a shame that Dodd Frank wasn’t carried out with more preparation and foresight," Stearns says.  "We won't know whether this has been a success or failure for another five or six years."  But "the baby shouldn't be thrown out with the bathwater," he says.  "Now that it's in place we have to work with it and improve it.  The current standard in Dodd Frank is it that minerals must be completely conflict free to be certified, but supply chains are so confused through so many intermediaries that its impossible to verify that its conflict free."  More practical is to require a certain amount of due diligence, processes put in place, but "I think that standard should be lowered."

 

"No, it's the standard," Whitney says.  "If you bring a toy into this country and its painted, you need to know whether it was made with lead paint or slave labor.  You're not allowed to say 'I’m bringing something in this country with lead paint in it and it's too complicated for me to figure out, so sorry people got poisoned.'"  

 

Of minerals and men

 

Regardless of the government's utility and role in the minerals sector, Congo's minerals are  not the primary driver motivating the armed groups operating here. 

 

"According to the U.N., only 8 percent of conflicts are over resource conflicts – fighting over control of a mine to have access to particular mineral resources, but that means the other 92 percent of conflicts are not about minerals," Professor Seay says. It is about identity, belonging, ethnicity, and money.

 

In the past, many of those conflicts were funded by minerals but, Seay says, "in a war time economy, everything looks like a source of revenue."

 

"If one source goes away, that doesn't have an effect on the violence because the armed groups continue to finance their activities through a wide variety of means," she says. 

 

Groups have funded themselves by trading charcoal, timber, marijuana, and even poaching  animals.  "The M23 group that existed in 2012 and 2013, they were bringing in 200, 300, $400,000 a month just by informally taxing trade at a border post."

 

The conflict mineral cellphone narrative "was very deliberately chosen because it is simple, anyone can understand it, it’s relatable - everyone has a mobile phone. So if you say your phone has blood in it fueling violence, that gives everyone an immediate and personal connection.  Its very clever."

 

 The problem, says Seay, is that despite "the good intentions of mobilizing people around the issue when you have a simple narrative,  it's reductionist and leaves out important dimensions of the crisis."   

 

That is one thing that both critics and supporters of Dodd Frank agree on:  the roots of the conflict are deep and wide, and no simple stroke of a pen by an outside power can solve that problem alone. 

Where is all the gas money going?

Thu, 2014-12-11 11:00

What you and I and all the other drivers in the country aren't spending on gas could add up to hundreds of billions of dollars in savings. Columbia  professor Geoffrey Heal says that savings will act as an economic stimulus. 

“It will. Definitely," he says. "We’re giving consumers significantly more spending power.”

But don't put a new pony and castle on your Christmas list just yet. Consumers aren't planning to spend all that money right away, says Kent Smetters, a professor of business economics and public policy at Wharton. 

“They have a little bit more money, but at the same time their investment are doing a little less well," he says, "so they don’t necessarily feel that much richer.

Low gas prices could have a negative impact on the stock market. Shares of oil producing companies might go down, so would our retirement funds which puts us in the mood to save, not spend.

Scott Wren, a Senior Equity Strategist with Wells Fargo Advisors, says we have seen low gas prices act as an economic stimulus in the past. But that was then, and this is a recovering economy.

“In the past people were more prone to increase their spending. They were more prone to borrow money as well, do things like home equity loans," she says. "And I think right now the mentality is a little different."

At least we still like a deal. 

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