By Evelyn Black, on July 12th, 2008
I read recently that Barnes & Noble may soon be acquiring Borders. Borders belongs to K-Mart which is now combined in some weird and not very successful way with Sears, and K-Mart is struggling. Sears is doing even worse, much worse, and so Borders is about to go the way of all flesh. When that finally happens, there will be exactly one bookstore in the city of 300,000 where I grew up:
Barnes & Noble. King of the hill.
It wasn’t always that way though. Fifteen years ago, we had lots of bookstores, most of them independently owned and operated.
I actually worked in the last independent bookstore in that city for two of its final three years. At the time that I worked there, the store was not making money on selling books. The reason was that the distribution center gave bulk discounts and early release privileges to the big box stores only. So if a new Harry Potter novel came out, it would show up in Barnes & Noble and Wal-Mart the day before we could even get our hands on it, at 30% off. We would get it the next day, mark it 10% off, and make pennies per book. Sometimes we would go buy a dozen from a big box store just to have a few in stock the same day.
In order to make rent, the owners, two Jewish brothers, decided to sell Beanie Babies too.
Remember Beanie Babies?
Beanie Babies were little bean bag toys shaped like animals. They all had heart-shaped tags attached with their “birth dates” (the first date they were available for sale in stores) and their names written on the tags: Smooshie the Slug, Stinky the Goat, Tickly the Tapeworm, whatever.
Anyway, Beanie Babie birth dates were a huge deal at the bookstore because on those days, hundreds of insane people, mostly adult women, would cluster around the door waiting for the store to open. We had a drill for those days: one beanie per customer, no inspecting dozens of beanies for the best one, and so on, one by one, until everyone was gone from the store. It could take hours.
But the most important rule of all was this:
Never open the door until the beanies are behind the counter and ready to be parceled out one at a time.
The first Christmas season I worked there, a temporary employee who was unfamiliar with the drill opened the doors just as one of the owners was halfway to the counter with a cart filled with Randy the Reindeer (or, Stupid the Snowman, or whatever). Immediately a tidal wave of customers came crashing in, surrounding him on all sides almost instantly, all shoving and yelling and grabbing for reindeer. You could see reindeer flying through the air, but you couldn’t see the owner or much else, just lots of big behinds, lots of shoving and then, not very long into it at all, a bloodcurdling scream,
“My daughter! He shoved my daughter! Police! Call the police!”
Someone did call the police. Or maybe they just heard all the screaming. At any rate, the police were there in seconds. Once they got Randy and his reindeer friends behind the counter we began our routine of parceling them out and ringing them up one by one, and the crowd shifted our direction. But as they queued up at the counter still complaining and cussing, we saw that the owner, two policemen, and two enormously fat older women (apparently the mother and daughter) were still in the center of the store, all attempting to shout over one another.
Finally, the owner was escorted out of his own store and down to the police station. About an hour after that, the last of the beanie psychotics got their Randy the Reindeer, and we spent the rest of the day not selling books and waiting, worrying, and feeling horrible, especially the new kid, who went to lunch later that day and never returned, not even for his check.
When it was almost time to close, a very frazzled owner showed up with a bottle of peppermint schnapps, a box of chocolates, and a weary expression I will never forget for as long as I live.
“They dropped the charges.”
That was all he had to say about it, and none of us pressed him. Sometimes you can look at a person’s face and know that, well, now is not the time. No words are needed. He tossed the box of chocolates at us on the way to the back room with the schnapps, proclaiming as he strode out of sight,
“Merry #@?!* Christmas.”
And to all of us, a good night.
By Lee Jamieson, on July 12th, 2008
In June, Ernst & Young revealed that China is now the world’s most attractive destination for foreign direct investment (FDI), securing 47% of votes in the survey. China’s economy is now set to welcome foreign resources – especially from the west where investors and business owners are looking for a place to harbour their capital from the current financial storm.
But something doesn’t add up. Despite the region’s economic stability and willingness to open its economy to the global marketplace, China still only attracts 8% of global FDI (compared to 37% in western Europe).
Put simply, China is undergoing an image problem: after all, less than 40 years ago, China was a closed, totalitarian state behind the sinister Bamboo Curtain. However, since the introduction of economic reforms in 1978, China has industrialized rapidly and embraced the capital markets, growing by an annual average of 10%. Although modern-day China has moved on, it is still haunted by the shadows of its history.
Ironically, 2008 was to be the year that China would finally confirm its development to the world. The Beijing Olympics was the perfect opportunity for China to demonstrate its economic and political supremacy to an international audience. Rather, high-profile media coverage of the numerous protests against the Chinese government presented a very different picture. The world has seen the dragon of old – Chinese military sweeping aside demonstrators in an attempt to silence opponents.
Allaying Doubts
Some foreign investors do not feel that their capital would be safe if invested in China’s economy. Is this fear justified? The Chinese authorities are attempting to facilitate FDI by implementing policies aimed at strengthening and diversifying their economy. In January, the China Securities Regulatory Commission (CSRC) set out to develop the bond market and improve the quality of listed companies in order to make them more appealing to FDI.
“With sophisticated legal and regulatory systems, bigger and more efficient markets and improved international competitiveness, China’s capital markets can play an important role in building a harmonious society,” sates the CSRC. “Then China will become a significant and influential member of the world financial system.”
And so, a process is underway: China’s insatiable appetite for resources and finance has forced it to look beyond its borders, thus fostering an international business environment. The back-room secrecy that once dominated Chinese business practice is slowly being replaced with disclosure and transparency procedures, corporate governance, auditing and the declaration of quarterly results.
Old Habits
However, establishing international confidence and credibility has been difficult for China. For all the government’s “forward thinking” policies, the future success of FDI in the region rests upon the government and business community’s willingness to change.
It is ironic that the companies least willing to adapt and meet the government’s international vision are China’s State Owned Enterprises. Also, despite the rhetoric, the Chinese government remains unafraid to make heavy-handed interventions into the equity markets, evidenced recently when they reportedly capped the bid of two state-owned banks for Wing Lung Bank.
Is China really ready to let outsiders in and fully integrate FDI into its economy? For the moment, China is wrestling with this question – and perhaps the Chinese business community has not fully escaped from the shadow of its closed, totalitarian history.
By J.C., on July 12th, 2008
These are exciting times for all of us given the increasing interest in healthcare during a presidential election. One key theme in the transformation of our medical system has been whether universal healthcare is something we want, something we can afford, and something we want to make happen.
When people think of universal healthcare, they often look at the rosy view – that every person should have access to healthcare. This is an ideological change from the previous view that healthcare was a privilege and a fringe benefit. For those of you who don’t know, the health insurance industry really came about for the need for companies to recruit great workers. Many of these potential workers were war veterans and needed medical care. Thus, medical “benefits” was indeed a fringe benefit that was only previously afforded by the elite or those with good jobs. Interestingly, if you think about it, every one has “access” to medical care these days. There are no barriers from anybody walking into a doctor’s office or a hospital. Whether you can pay for it is a different story. Thus when we say “access to care” we really mean “care that is paid for by someone else”!
In this day and age, many people are viewing healthcare as a right. Thus, in other words, people expect to receive medical care that is paid for by someone else; simply because you exist in this world, you have the right for healthcare. That “someone else” happens to be the government, which passes on the cost to every person in the United States via some tax somewhere.
But one of the consequences of universal care, which I view as somewhat of a socialist concept, is that all care will be the same. In other countries where universal care is in place, you do not get a “choice” to go to the doctor you think is better than the other. What you get is the right to see the doctor who you see.
We Americans are truly a spoiled lot when it comes to consumerism – the medical industry is not spared. We want to go to the best doctor possible. We want choice, and we will pay for choice. If there is a special procedure, we want it done. What we do not realize is that those choices and tiers of medicine are only availed through a profit-driven capitalist medical industry. Where do we think all of those drug and device discoveries are coming from? From the company that spent billions of dollars researching it and who sells it at a handsome profit and whose stock is listed in the public markets!
Are we ready to give up choice to establish a “standard” of care from which no patient receives anything different? I really don’t think so. I really think we love the idea of “fairness,” but when it comes to ourselves and our bodies and our health, we want the best even if it is what others cannot afford.
By R. C. Anderson, on July 12th, 2008
At the University of Louvain in Brussels, Dr. Jacques Donnez and his associates at the Gynecology Research Unit are working to advance a new method of preserving the fertility of young women diagnosed with cancer. Although approximately 90% of these young women will defeat cancer with proper treatment, their ovaries are often destroyed as a result. This robs many adolescent girls and young women of their ability to have children in the future. It is estimated that by 2010 one in every 250 young women will be a childhood cancer survivor, and most of them will be infertile.
Cryopreservation, which uses temperatures as low as -196°C for tissue storage, has been successful in small trials to preserve ovarian tissue of young cancer patients. Dr. Donnez has been researching a way to preserve this tissue without delaying cancer treatment. In May 2008, Donnez and his team published an article* in Reproductive BioMedicine Online which could extend hope to young women dealing with cancer and infertility. This article described the cryopreservation process, which included removing tissue samples from the ovaries of five women diagnosed with cancer prior to their treatment as well as the cryopreservation protocol.
These women, from 21 to 28 years old, underwent surgery to re-implant their cryopreserved tissue after they remained disease-free for at least five years. All of these women faced infertility after their cancer treatments caused ovarian failure. Within 16-26 weeks of re-implanting the tissue, it began to function normally, restoring the possibility of children. Although Dr. Donnez has been conducting this type of work for 10 years, he has reported that only five women have had their ovarian tissue preserved and later replaced because “…it was often hard to convince oncologists and pediatricians of [ovarian preservation’s] worth in early years.” He has, however, stated that after 2000-2001, there was a definitive rise in the number of requests for ovarian tissue storage.
A Motherhood Restored
In an October 2004 publication of Lancet, Dr. Donnez’s goal was fully realized. Using ovarian tissue preserved from a 25-year-old Hodgkin’s lymphoma patient for seven years, he re-implanted several samples when she was 32 years old. Like many other women, her cancer treatments had left her infertile. Within five months of the surgery, the ovarian tissue was functioning; at 11 months she became pregnant through natural means. In September 2004, she gave birth to a healthy baby girl. Donnez and others hope this will become the standard procedure for young cancer patients in the future. He does caution, however, that there are limits to this technique. He points out that “we should keep in mind that if we cryopreserve ovarian tissue, [we] should do [it]…before the patient hits 35 years. After that, the ovarian reserve [is]…lower, and we know we will lose about 60%-80% of the follicles.”
Although there have been positive results with this method of fertility rescue, the ethics of performing such a procedure, especially on children and adolescents, has been hotly debated. According to the Ethics Committee of the American Society for Reproductive Medicine in 2005, embryo cryopreservation, which uses a woman’s fertilized egg, was the only established method. According to Dr. Tommaso Falcone, Chairman of the Department of Obstetrics-Gynecology at the Cleveland Clinic, “This technique is considered experimental at all American sites.” Dr. Falcone also notes that the local bioethics department usually gets involved when this procedure is considered. This outlook made acceptance of ovarian tissue preservation slow.
However, favoring embryo cryopreservation over ovarian tissue preservation presents a number of problems. The main one is that, unlike ovarian tissue preservation, it requires the adolescent or young woman to both have a partner or sperm donor as well as undergo ovarian stimulation. Most adolescents and young women do not have a partner for this. Moreover, when cancer treatment is imperative, delaying it to undergo ovarian stimulation and embryo preservation can be detrimental. In children who have not reached puberty, embryos are impossible, leaving ovarian tissue preservation the only option for fertility. A final problem with embryo storage is that many people believe life begins at conception. For those with this view, embryo preservation is unacceptable, leaving ovarian tissue preservation their only true option. In a review article by Dr. Donnez in 2006, he responded to the controversy by stating that “it is our ethical responsibility to propose ovarian tissue cryopreservation…to all adolescents and young women having to undergo chemotherapy. Respecting the code of good practice, all patients who may become infertile have the right to receive proper consideration of their interests.”
Limited Success
While some U.S. centers such as the Center for Reproductive Medicine at the Cleveland Clinic offer ovarian tissue cryopreservation, their website states that they have only re-implanted a few ovarian pieces and that they functioned for only a matter of weeks. While transplanted ovarian tissue may function for weeks or years, there is always the possibility that it will become dysfunctional. For this reason, many women wait until they are ready for children before reintroducing their saved tissue. It is important to remember that although the freezing and storage of this tissue is less than $1,000, the surgery required to remove the tissue and replace it is significantly more. While insurance may cover a portion of the surgical cost, in many cases it doesn’t.
Regardless of this, interest and awareness regarding ovarian tissue preservation has increased in the last several years even though only six healthy pregnancies using this method have been reported worldwide. Although initially used for cancer patients, it has seeped into the mainstream. Many worry that this procedure will become increasingly commonplace and that it will eventually be viewed as normal. If this technique were normalized for the public, the pressure to have a family and career simultaneously could be lifted. A woman of 25 could save her tissue, solidify her career and choose to become pregnant at whatever age she wished. Even if she waited until she was 50, the ovarian tissue would act as if she were only 25. It is unclear what the consequences of this would be; however, it seems delaying the next generation in this way could significantly change our society, what is expected of women and what is perceived as normal.
*“Restoration of ovarian function in orthotopically transplanted cryopreserved ovarian tissue: a pilot experience.”
By G.L.C., on July 12th, 2008
Virtually every town in the United States has zoning laws which affect land use, lot size, building heights, density, setbacks, and other aspects of property use. Zoning laws are government regulated restrictions on how a particular piece of land can be used – residential, commercial, industrial, agricultural, and recreational. They impose many use restrictions, such as the height and overall size of buildings, their proximity to one another, what percentage of the area of a building lot may contain structures, and what particular kinds of facilities must be included with certain kinds of uses.
Zoning laws were introduced to tackle a real problem – if you do not want a noisy bar next to your house, there should be a law to prevent the bar from coming up in your neighborhood. Zoning law does not target the starting of the bar but the damage that you may suffer if the bar starts in your neighborhood.
Zoning laws restrict freedom by constraining the right to private property. If you own a piece of land and you want to build a factory on that piece of land and your neighbors have no problem, then you should be allowed to build the factory. But zone laws will not allow you to build the factory on your own land if your land is located in a residential zone. Not all factories are polluters. By preventing factories from being set up in an area even if the inhabitants have no problem, zoning laws hamper the local economy.
The negative impact of zoning laws is not restricted to the local economy. It has an impact at the national level, as well.
America is in the midst of an affordable housing crisis. How does zoning contribute to this? The cost of land is about 20% – 25% of the total cost of the house.
In simple economic terms, the price you pay for a house is the price of land + construction costs + a reasonable profit for the developer. But that is not the case in many American cities. The cost of land is about 20% – 25% of the total cost of the house.
Housing prices are determined by both demand and supply concerns. If the demand for housing is very high and the developers are able to make a fortune, then the market ought to be flooded with new houses which will drive the prices down. But that is just not happening. There is something wrong on the supply side. Edward Glaeser of Harvard and Joe Gyourko of the University of Pennsylvania studied this problem and attributed the error on the supply side to zoning restrictions. They studied the data from over two dozen American cities and concluded that zoning restrictions kept the housing prices high and did not allow competitive forces to correct the supply and demand position. The average American home buyer ended up paying not just the price of land + construction costs + a reasonable profit for the developer, but also the cost for regulatory compliance – zoning laws.
By Bhagwad Jal Park, on July 12th, 2008
In my previous post, you read about Nash equilibriums and the formation of cartels. You also read about how cartels tend to be unstable and susceptible to treachery by its members.
This week we will look at De Beers – one of the most successful cartels ever. In fact, it is so successful that it operates completely behind the scenes and has shifted public opinion to accommodate its internal needs.
Simply put, diamonds are not rare. They are expensive yes, but they exist freely on earth. However, like any other commodity, they do follow the laws of supply and demand. The supply has been artificially constrained so that there is no proliferation of diamonds in the market. Because of this, the prices of diamonds are higher than they would be in a free market.
So why is the cartel put together and led by De Beers stable? One would have thought that according to the laws of game theory, it should have broken apart by a defecting member. There are two reasons for this. First of all, most of the cartel members have major holdings by De Beers themselves. This means that there are even fewer players than it looks. Fewer players makes it less likely that there will be a defection.
Secondly, the real partners of De Beers in the cartel are the Russians. They mine small diamonds from Siberia and channel them through De Beers. The Russians know that if they put their diamonds directly into the market, the prices will drop. And that will be bad for them in the long run.
This brings us to an important point on cartels. The long run. Game theory predicts that if a “Prisoner’s Dilemma“-like game is repeated indefinitely with no end in sight, then the logical outcome, assuming that all participants are intelligent, is cooperation. What this means is that there is a better chance of a member cooperating if the game is repeated continuously.
This happens because if the game is repeated, then all other players will know that the person who defected last time is untrustworthy and can make life hard for them. Also, if it is known beforehand that each party will do in the next game what the other party did in the last game, then it is in each party’s best interests not to renege on the cartel since they will be punished for it in the next game.
Other firms can punish the defector by pricing them out of the market as well. This means that everyone collectively lowers their price temporarily so that the remaining firm is driven out of business. This usually happens to new entrants who are a threat to already established cartels.
Nevertheless, in my opinion, this only means that the cartel will survive longer. When there are a large number of participants, the temptation can be too great for individual members to resist, and cartels are always breaking and reforming again. However, if I’m in a cartel with someone else who I know has defected the last time, I might lose faith in him and decide to defect before he does. So again, the cartel breaks up.
It’s a complex dynamic, and in the long run, it’s all about trust. In fact, this leads us to another interesting idea. Perhaps altruism, self-interest, and honesty are rational strategies and not employed only by the soft-hearted. We’ll discuss that in another blog.
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