Indy Economics

One of my favorite media sources is This American Life.  It is an hour-long quirky journalism program that reports on off-beat stories that can be compelling, heart-breaking, or hilarious, and sometimes all three at once.  The show is produced by Public Radio International, and can be heard on public radio stations or the podcasts can be downloaded from iTunes or the This American Life website.

In January, they broadcast an episode written by Mike Daisey, an actor with an off-broadway show about Steve Jobs and Apple.  The episode specifically centered around Apple's Chinese suppliers and the working conditions in the factories there.  Mike's story met all the criteria of a great story (compelling, heart-breaking and funny), and, in fact, became This American Life's most downloaded episode.

There was only one problem:  it was all bs. 

Much of Mike's story was fabricated.  He told of meeting with underage workers and workers who were disabled and/or poisoned by the production process and then terminated.  His story included armed guards, government blacklists, and inhumane living conditions.  Most of it he made up.   A real journalist who has experience in China thought a lot of it sounded fishy, so he followed up on the story.  He tracked down Mike's translator (using Google) and she confirmed that none of the above things happened when he was researching the story.

This American Life has published a retraction episode in which they investigate what went wrong.  The NY Times has covered the story as well.

I listened to the episode.  Since it was related to outsourcing, supply chain, and all that kind of stuff, I shared a link with my class (to my M303 students, sorry about that).  I told my friends about it.  Now I feel as if I've been duped.

There is a raging debate going on now (type Daisey into Twitter) about whether Mike Daisey is a lying self-promoter (a la Greg Mortenson of "Three Cups of Tea") or is being attacked for attacking Apple.  You can put me in the first group. 

What are the lessons we can take from this?

Don't lie.  I'm sure that when he started adding some details, he thought it was for dramatic effect.  But one thing leads to another and in this connected world, things come back to haunt you.  That little resume "enhancement" will come back to bite you. 

Mike Daisey is out there arguing that the truth (that Apple allows the mistreatment of workers) is more important than the fact that he made up interviews.  However, he has probably done more harm than good.  What better ammunition for Apple than the fact that its most well-known and outspoken critic is a liar?

What else?  I don't want to be the media basher.  In fact, I think the problem with this country is that too many people are skeptical of quality journalism, rather than that people are too trusting.  However, maybe I need to be more discerning about what I hear and what I pass on to others.

What is your take?  Do the ends justify the means?  What can we learn about ethical decision-making in journalism and in business from this episode? 

 

 

 

As I argued in my last blog post, transportation in the U.S. has only experienced modest and incremental gains over the last 50+ years.  However, I think that will change in the next 10-15 years.  The reason will be the rise of the driverless (or autonomous) car.

 

Like any other field, business has its own language, cultural references, and media.  If you want to speak the language and get the inside jokes, you need to spend some time immersing yourself in the ideas.  So I humbly present to you the "B-List", which is my recommendations of books, movies, websites, media, and general stuff that may be of interest to you.

This month,  I'm focusing on Spring Break.  Here is what you might want to be reading, watching, or consuming over the month of March, especially if you have a free week in the middle of the month:

1.  Switch, by Chip and Dan Heath.  This book is phenomenal because it works on so many different levels.  The subtitle is:  "How to Change when Change is Hard."  And when is change (for the better) not hard?  The over-riding theme of the book is that you have a rational self and an emotional self and that any change that gets made has to deal with both.  The authors provide a guide for making change along with dozens of examples that resonate with readers.  The great part is that it works for personal change (e.g. how to motivate myself to exercise) to organizational change to change at a public policy level. 

2. Boiler Room (2000).  A classic business movie about a 23 year old guy whose illegal apartment casino gets shut down.  So he takes a job as a broker in a high pressure, high intensity Boiler Room brokerage, where he has to convince new clients to sign up using the time honored tradition of "smiling and dialing."  Good performances by Giovanni Ribisi, Ben Affleck, and Vin Diesel.  Put it in your Netflix queue, and when your roommates ask you why you're sitting around watching movies, tell them your studying the financial services industry.

 3.  RadioLab (www.radiolab.org) is a podcast and radio show about all things science.  The hosts explore many areas of science, history, sociology, psychology in short or long podcasts that are ridiculously engaging.  OK, so it's a little nerdy (NPR and science) but the stories are extremely well done.  What does it have to do with business?  Nothing and everything.  Load it on your iPod and listen to an episode or two in your car as you drive around.  As entertaining as Bob & Tom and not quite so juvenile.

 That's the B-List for this month.  I would love to hear your thoughts about what the essential books, movies, TV shows, podcasts, websites, etc. are.  Let me know what makes you laugh, cry, think, etc.  Post them in the comments or e-mail them to me at kyjander@iupui.edu.

 

Why are we still stuck driving to work and school everyday?  In my lifetime, we've had enormous change in so many aspects of our lives, but I still get where I'm going in the same way I did 20 years ago.

In many ways, the slow pace of change in transportation has been a disappointment for many of us.  If you think about it, very little has changed since the 1950s.  Yes, we have more and larger interstates, and nicer and faster and cheaper (in real terms) cars.  But all of these changes have been incremental.  Our world is incredibly different than it was 50 years ago, but our transportation systems are little changed.  We are still driving our own gasoline powered cars whereever we want to go.

Economists have an explanation for why change has been slow.  Transportation has a lot of what are known as "network effects."  Network effects occur when the value of a good is dependent on how many others use that good.  Facebook is a classic example - the value of a Facebook account increases as more people use it, because you now have more friends to connect with.  The network effects in transportation are slightly less obvious, but they are still important.  In our case, the more drivers we have, the more incentive we have to build more roads.  The more (and better) roads there are, the higher the value of the automobile.  By using taxpayer money to build roads, the government  has been increasing the value of cars and trucks.

Likewise, the more gas stations there are, the easier it is to find one, the easier it is to drive a car around. While this might seem like a  trivial example, it is a problem that is preventing a wider adoption of electric cars.  If there are few re-charging stations for electric cars, then few people want to buy one.  But if few people buy electric cars, then there is no market incentive to invest in re-charging stations.  So the network effect prevents the adoption of electric cars.  Economists describe this as "lock-in" - we are locked in to gasoline powered cars.  That is why the "hybrid" is so successful, it doesn't require any new network to power it.

Economists also study network effects to understand public transportation.  Some in Indianapolis suggest that we should invest in better public transportation, including a light rail system between downtown and suburban areas.  However, it is unlikely that this will be successful.  The reason is that we will never overcome the network problem.  The network problem is that you can't afford to invest in a great light rail system until many people are willing to use it, but many people won't be willing to use it until you have a great system.  Since we have already invested in roads and cars, it is too costly to have the significant investment required to create a light rail system.  You need a system in which public transportation is popular and extensive (New York) or in which you rely on cars (Indianapolis).  We can't afford both, and once one is in place, it is hard to replace it with the other.

We are "locked in" to our current system.  As a result, we see a transportation system that hasn't changed in 50 years.  And efforts to massively overhaul it are likely to fail.

However, I see radical change coming (relatively) soon.  The reason that this time is different is because the radical change won't have to overcome the network effects in transportation.  And, I won't have to drive myself to work everyday. 

Next blog post, I'll expand on how I think the system will change. 

 

Edward De Bono is a business management consultant whose primary focus is in fostering creativity in businesses and indivduals. To anyone interested in creative thinking (and everyone should be), I would highly recommend both "Lateral Thinking" and "Six Thinking Hats" as seminal works on purposefully creative thinking.

Was the Indianapolis Super Bowl an economic success for the city?  This question seems to be asked a lot these days, and the opinions are all over the place.  My answer is a qualified "Yes".

Estimates will vary, but the overall impact is on the order of $100-$150 million to the area.  Of course, some of that has already left town in the form of profits to the NFL and profits to the hotel owners and other businesses that do not reside in central Indiana.  But that which remains will still exceed the costs of putting on the game.

The issue that makes the economics look worse is when you factor in the cost of Lucas Oil Stadium.  While building the stadium did not ensure that Indy would get a Super Bowl, we surely would not have gotten it without a new stadium.  Taxpayers funded about $600 million of the construction costs of Lucas Oil, and the financing means we will be paying for it for years to come.  The economic benefits of hosting a Super Bowl certainly do not exceed this amount.

However, at this point (and when the Super Bowl was awarded) that was a sunk cost, one the citizens of Indianapolis could not recoup regardless of whether the game came to town.  So the Super Bowl is economically beneficial to Indianapolis.  Whether having an NFL franchise here is economically beneficial is an open question.

Personally, I would love to see the Super Bowl come back in the next 6-10 years.  We've already built the stadium, the J.W. Marriott, Georgia Street, etc.  Might as well get as much return on those investments as we can.