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As E-Commerce Grows, Department Stores are Dying Out

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See the source image
Customers fight over Black Friday sale items at Walmart.

As Thanksgiving approaches and people stock up their food pantries for the big meal, retailers are preparing themselves for their biggest day of the year: Black Friday. One company that is looking to make a rebound after a streak of recent losses is Toys-R-Us. In September, the company filed for bankruptcy as their long-term debt now totals over $5 billion [1].

As one of the world’s largest toy store chains, Toys-R-Us joins a list of other retailers that have been forced to take this proactive measure to try and save their company. Gymboree, Payless ShoeSource, and rue21 are other notable retailers that have had to file for bankruptcy in just this past year. In addition, there are thousands of retailers that have had to close stores and lay off employees in an effort to cut costs [1].

Why are retailers doing so unsuccessfully recently? It all starts with the fact that they are competing with online shopping and a worldwide powerhouse in Walmart.

Shoppers are now making a majority of their purchases online. A survey annually conducted by an analytics firm found that, for the first time in history, more people shop online than in stores. Shoppers in 2016 made 51% of their purchases online, as compared to 48% in 2015 and 47% in 2014 [2].

See the source image
2016 marked the first year online shopping took over as the most-used method of shopping.

In addition, the National Retail Federation predicts that online retail will grow between 8-12% this year, which is three times higher than the growth rate of the wider industry. The Census Bureau proposes that e-commerce sales are poised to be in between $427 billion and $443 billion this year. In comparison, brick-and-mortar retail, which is composed of typical retail stores, is expected to grow at just 2.8%, slower than the average rate of growth for the overall industry [3].

As technology has grown, so has people’s laziness. They can now shop in the comforts of their home, and no matter how much retail stores try to replicate that for their own stores, they won’t be able to match online shopping’s convenience.

However, even with all the failure that retail stores have been having recently, Walmart has still been able to grow as a company. In fact, they are making more now they ever have before. How are they accomplishing this feat? Well, it all starts with their outlook on their company.

While other companies are so focused on how the profit and loss statements for their company and how much debt they are in, Walmart focuses on how they can save people more money. The companies that are failing are the ones that constantly worry about the numbers and their profits. Instead, Walmart puts all of their focus on how to best run a business that will attract customers.

What can retailers do now to turn their businesses around when the industry they’re in as a whole is declining so quickly? Well, they could adapt their business mindset towards Walmart’s. Their current mindset is most likely that they are just a business trying to sell products to people. They could start to cater to what their customers really want and what they can afford. Until they make this change, retail stores may continue to have a streak of failures and the industry may be obliterated altogether.

[1] https://www.nytimes.com/2017/09/19/business/dealbook/toys-r-us-bankruptcy.html?&moduleDetail=section-news-2&action=click&contentCollection=Business%20Day&region=Footer&module=MoreInSection&version=WhatsNext&contentID=WhatsNext&pgtype=article  

[2] http://fortune.com/2016/06/08/online-shopping-increases/

[3] http://www.businessinsider.com/national-retail-federation-estimates-8-12-us-e-commerce-growth-in-2017-2017-2

[4] https://www.forbes.com/sites/louisefron/2017/05/31/why-wal-mart-is-winning-in-a-losing-industry/#12dd75bc44d5

Palantir: The Silicon Valley Unicorn No One Knows About

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Go to your local Starbucks and ask someone to list the most powerful technology firms today – you’ll probably hear Google, Facebook, Apple, or Amazon. Compared to these firms, Palantir has largely gone unnoticed, yet it may have just as much influence in our daily lives as its peers. Valued at $20 billion in 2015, Palantir shares its spot with Airbnb, Xiaomi, and Uber as one of the world’s most valuable tech startups.

 

The name “Palantir” comes from J.R.R Tolkien’s Lord of the Rings. It is a dark crystal ball that allows its user to see any part of the world. Palantir Technologies Inc. plays a similar role for its clients by funneling data sets through its software interface to create intuitive maps and predict the future. The NSA, FBI, CIA, law enforcement agencies, various military agencies, and even the IRS have used “Palantir Gotham” to make sense of the enormous amounts of data they’ve collected. The Pentagon used Palantir to track patterns in roadside bombs. Infowar Monitor used Palantir to uncover China’s cyber-espionage operations, Ghostnet and Shadow Network. Palantir is even rumored to have helped track down Osama Bin Laden. 

 

Image result for palantir
Saruman searching for Chinese hackers (Colorized TA 2953)

 

Palantir’s sensitive “big brother” clients have kept the company private with minimal publicity, but that may soon change as the company is mulling an IPO in 2019. Over the course of 10 years, Palantir has slowly shifted its business from counterterrorism towards the commercial sector. “Palantir Metropolis” helps hedge funds, banks, and financial services identify trends and anomalies from various data sets. Today, commercial contracts generate approximately half of Palantir’s total revenue.

Not much is known about Palantir’s business model, but the company is expected to turn a profit for the first time this year in its 13-year history. A report by Zion Market Research predicts the global advanced analytics market to reach $60.44 billion by 2021, growing around 33% per year. Palantir seems poised to capture this growing market. Its European operations have tripled revenues since 2013 and cash burn rate has decreased by 60% across the company, according to Alex Karp, the company’s CEO and co-founder. However, it will face intense competition from established players – IBM, Microsoft, and Oracle.

For now, it is uncertain whether Palantir will follow through with its plans to go public in 2019. With a growing commercial demand for big data analytics and trends in global counterterrorism and information warfare, Palantir’s potential for explosive growth should not be overlooked by tech investors.

Is Bitcoin Useful to Consumers?

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Image from wired.com

 

Bitcoin made headlines again on October 31st as the Chicago Mercantile Exchange, the largest futures and options market in the world, announced that it would soon be offering Bitcoin futures, allowing investors to bet on the future price of the currency. This came a month after the digital currency broke the $5,000 per bitcoin barrier and has continued climbing to over $6,500 per bitcoin as of November 1st. This is an incredible increase from starting the year at $1,000 per coin, and at this point it is unclear whether this is a bubble, the currency is finally breaking into the mainstream, or a little of both. Aside from a way for tech-savvy investors to make millions, a true test of Bitcoin as a replacement or supplement to traditional fiat currencies such as Dollars or Euros will be whether or not the average consumer will be able to find any use for them.

 

To understand whether or not Bitcoin can be useful to consumers, first one must understand the intrinsic values that set Bitcoin apart from other currencies. Every transaction is verified and recorded on a public ledger, called the blockchain, with participants hidden behind anonymous bitcoin wallet ID numbers. End users can use bitcoin wallets, software that gives a user a wallet ID and tallies their holdings based off of transactions they participated in. From there, users can send and receive parts of or entire bitcoins securely and anonymously using the encryption built into the Bitcoin platform. (1) In the long term, the implications of this system are a currency that is independent from government meddling, as well as being completely anonymous in a world where it seems like every week a new batch of millions of credit card details is stolen. (2) This video, from bitcoinproperly.org, goes more in depth into what the blockchain that drives Bitcoin is, how it works, and what the practical benefits are. https://www.youtube.com/watch?v=oSP-taqLWPQ

 

Wide reaching positive effects have never been a reliable driver for change, especially when it involves tradeoffs. For example, a significant part of the US still smokes cigarettes despite many cheaper and healthier options being available. In the case of Bitcoin, new users are stepping into a volatile market where, next week, their stash of bitcoins could be worth hundreds more or less than they were a week before. Your bitcoin wallet is the only connection you have to your funds; if you lose the passcode for it then your money is effectively gone, unlike actual banks that are happy to hold on to your money. Bitcoin transactions are only verified onto the blockchain as fast as the network can write new blocks, which means transactions are not confirmed for 10 minutes to up to an hour or more on busy days. (3) This is a result of Bitcoin’s coding, which dictates how often new blocks of transactions are confirmed on the public ledger. Due to Bitcoin’s decentralized system, this can only change once a majority of the computers in the Bitcoin network “vote” to change this by running new coding. Until that happens, this remains a massive barrier to the ability for a consumer to go trade 1/2000th of a bitcoin for a cup of coffee.

 

For online shoppers, the outlook on the usefulness of Bitcoin is much brighter. Many retailers now accept bitcoin as a payment option, and for those that do not, there is often a workaround in place that allows it. Hardware retailers have been quicker than most to jump on the Bitcoin trend, with Dell and Microsoft both accepting bitcoin as a payment option. Newegg, a consumer computer parts supplier, also has begun accepting bitcoin as well. Middleman services such as Purse.io even allow for users to buy from Amazon at a discount using bitcoin, by connecting their orders with people who want to trade Amazon gift cards for bitcoin. Gift card suppliers also serve as a way to connect bitcoin to the outside world, with companies such as Egifter and Gyft allowing users to buy gift cards for common retailers such as Starbucks or the Gap with bitcoin. With the ultimate goal being a universal and secure currency, an obvious use for Bitcoin would be in travel so people would not have to deal with currency exchanges. This is becoming less of a pipe dream as travel companies, such as Expedia, have started to accept bitcoin to book hotels. (4)

 

Everyday usability is still an elusive goal for Bitcoin, and for the foreseeable future, the average consumer will be better off using traditional currencies for purchases. However, as Bitcoin continues to make headlines and smash records, it is not a bad idea for more people to attempt to better understand the platform and how to use it. If society moves on to digital currencies like Bitcoin in the future, the transition will be a lot easier to those who have experience with it.

 

Works Cited

  1. https://bitcoin.org/bitcoin.pdf
  2. https://www.identityforce.com/blog/2017-data-breaches
  3. https://blockchain.info/charts/avg-confirmation-time
  4. https://www.coindesk.com/information/what-can-you-buy-with-bitcoins/

Effects of Hurricane Harvey on Company Ethics

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Many people know that as the transition between seasons (Summer and Fall) begins to occur, hurricanes become more frequent and even more disastrous. In the peak of hurricane season, a category 5 hurricane drastically affected the gulf-region of America.

It has been almost two months since Hurricane Harvey hit the Gulf Coast and large parts of Texas on August 25th. With winds reaching up to 130 mph, the hurricane was thus named a Category 5. The brunt of the storm was on Thursday, August 31st, as it began to move upward towards Louisiana [1]. In Texas alone, over 33,000 people sought refuge. Unlike other natural phenomenons in the past, Texas has never experienced such a catastrophic one to cause ruin and “life-threatening flooding” [2]. Weeks following these hurricanes, many corporations began to donate large amounts of money to hurricane relief programs.

Since the 1970s, the amount of money given to charitable organizations has increased. TheCharity navigator website shows the statistics of the distribution and overall amount of money America donates. In 2016, $390 billion, which was 2.1% of Gross Domestic Product (GDP), was the total amount given to charities. When adjusted for inflation, this amount increased by 1.4% from 2015.

Also, from the total donations, corporations had donated up to $18 billion in 2016 [3]. Societal values in giving back have become increasingly popular, thus it is no wonder why corporations are publicly, and sometimes privately, announcing their help in donating large sums of money.

In this day and age, Corporate Social Responsibility has increased tremendously. Many businesses in America can be seen improving various aspects in their company, such as minimizing their carbon footprint and improving employee benefits. With this new social change in being an ethically good company to society, these social changes may be an obvious sign as to why many companies are willing to donate large amounts of money to hurricane reliefs.

There have been an astonishing number of hurricanes in the past decade that have caused great destruction and cost towards the affected areas. Wal-Mart, a major controversial industry, is one of the leading businesses in corporate philanthropy. The company has greatly helped in being a leader towards donating and supplying affected families with basic necessities.

Wal-Mart took action after Hurricane Katrina, one of the top five deadliest hurricanes in the United States, hitting New Orleans and the surrounding areas in 2005. The firm donated “$20 million in cash, 1,500 truckloads of free merchandise, food for 100,000 meals, and the promise of a job for every one of its displaced workers” [4].

Wal-Mart, along with Ellen DeGeneres, donated $1 million to Houston Texans player JJ Watt’s Hurricane Harvey relief fund.

In 2008, following Hurricane Katrina, Hurricane Ike devastated large parts of Florida, Texas, Louisiana, and Arkansas. Wal-Mart announced that they would commit $2.5 million to assist with relief efforts; including cash and product donations (food, water, and hygiene products). The company also stated that they would be longtime partners “in the area of disaster response, the American Red Cross, The Salvation Army, and Feeding America [5].

Just 9 years later, Hurricane Harvey is yet another storm that greatly affected the gulf-region of America. Already initiating the plan in matching the two-to-one customer donations, Wal-Mart has reached up to $30 million toward hurricane relief efforts. With the use of technology, Wal-mart is also allowing their stakeholders to donate online to the American Red Cross [6].

From the list of the worst hurricanes in the past decade, Hurricane Katrina seemed to be the storm to start the movement for corporations to help out with cleanup costs and relief programs. This started in 2005. Now in 2017, it is shown, through Wal-mart, that companies are increasing the amount of donations and improving their Corporate Social Responsibility. It will be interesting to see new ways Wal-mart and other companies will enhance their strategies in helping supply resources to the affected areas from natural disasters like Hurricane Harvey.

 

Footnotes

[1]http://www.businessinsider.com/tropical-storm-harvey-hurricane-updates-map-texas-where-landfall-damage-2017-8

[2]http://www.businessinsider.com/tropical-storm-harvey-hurricane-updates-map-texas-where-landfall-damage-2017-8

[3] https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=42

[4]http://www.washingtonpost.com/wp-dyn/content/article/2005/09/05/AR2005090501598.html

[5]https://corporate.walmart.com/_news_/news-archive/2008/09/16/walmart-donates-25-million-in-response-to-hurricanes-ike-gustav

[6]https://www.cnbc.com/2017/09/11/wal-mart-pledges-up-to-30-million-in-hurricane-relief-efforts.html

 

Uber Gets Banned in London

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LONDON, ENGLAND - JUNE 02: In this photo illustration, a smartphone displays the 'Uber' mobile application which allows users to hail private-hire cars from any location on June 2, 2014 in London, England. The controversial piece of software, which is opposed by established taxi drivers, currently serves more than 100 cities in 37 countries. London's black cabs are seeking a High Court ruling on the claim that the Uber software is breaking the law by using an app as a taxi meter to determine rates. (Photo by Oli Scarff/Getty Images)

It has been a tumultuous last couple of months for the ride hailing company Uber. After facing a lot of heat in the media for their internal affairs in the company, they recently named Dara Khosrowshahi as the new CEO after Travis Kalanick was pressured to resign from the company [1]. Everyone in the business world has since been holding their breath in anticipation wanting to see if this new move would help rebuild the brand loyalty in customers and businesses alike. However, the city of London is not buying into it, at least not yet.

In September, Transport for London (TfL) refused to give Uber a new private hire license, citing that on the grounds of “public safety and security implications,” the firm was not fit and proper to operate within their city limits [2]. This decision makes London join a long list of cities, states, and territories that no longer allow the company to operate there, including Bulgaria, Italy, Alaska, Vancouver, China, and Austin, Texas [3]. Until the TfL feels that the company has made significant progress in decision making and has undergone a thorough reform of their morals and ethics, they are not interested in doing business with the company.

The immense amount of pressure Uber has been under recently has stemmed from the decisions and actions they have made. Former head of Uber’s Asia-Pacific business, Eric Alexander, left after a report surfaced saying he had obtained the medical records of a woman being raped by an Uber driver and done nothing about it. There was also the report that Board member David Bonderman made a sexist remark at a meeting that was about workplace practice recommendations and as a result resigned from his post. Then, in February, Uber investigated sexual harassment claims made by their former engineer Susan Fowler. Finally, this past month of June, Uber announced that they had fired more than 20 staffers and taken actions against other employees after an investigation on harassment, discrimination and inappropriate behavior that happened in their company [4].

This sort of transgression of events only happens when there are deep issues in a company. It makes you start to wonder if this is the scandals that have gotten leaked to the public, what else are they covering up within their business? Employees in the company have cited that there is a premium placed on workers who deliver strong performances and personal growth, no matter the means they take to get there [5].

What does all of this mean for the average citizen? Well, some 3.5 million passengers and 40,000 drivers use the Uber app in London alone [2]. For a tourist that has never used the public transportation in a new city, Uber can be a means to get where they need to go that they’ve used before in their home country. According to Business Insider, in terms of London has the 4th most complicated underground subway system in the world, only placing behind New York City, Paris, and Tokyo, respectively]. For the study, “they considered all the trips a traveler could make from Point A to Point B with two connections, then determined the fastest possible path for a given trip” [6]. For someone that has never navigated the London Underground, Uber is a convenient means of traveling until a person is more comfortable and confident with navigating the public transportation.

Image result for london bus
Student Jacob Fernandez cited London’s confusing bus routes as a reason Uber should be permitted to stay in London.

Even when the average citizen does get comfortable using the London Underground, or public transportation system in general, Uber still stands out in its convenience. For example, student Jacob Fernandez recalls from his study abroad experience in London that, “at night time the bus routes are not the same and run infrequently, so it was much more convenient to just call an Uber to the location you were at.” With Uber no longer as in an option in the future for city dwellers, Londoners will have to resort to something else to get home.

Uber responded to this news by appealing TfL’s decision, which means they can continue to operate in the city until the appeals process is over. This at least buys them some time to continue to change their company image in the hopes that London will become satisfied and change their decision. London took a bold move by not renewing Uber’s license to operate in the city, but it remains to be seen if other major cities in the world will take an initiative like this one.

[1] https://www.economist.com/news/business-and-finance/21727855-he-must-tackle-huge-losses-lawsuits-and-meddling-predecessor-uber-picks-dara

[2] http://www.bbc.com/news/business-4606965

[3] http://www.independent.co.uk/travel/news-and-advice/uber-ban-countries-where-world-taxi-app-europe-taxi-us-states-china-asia-legal-a7707436.html

[4] http://www.bbc.com/news/business-40351859

[5] https://www.nytimes.com/2017/06/06/technology/uber-fired.html

[6] http://www.businessinsider.com/worlds-15-most-complicated-subway-maps-2016-2/#1-new-york-city–the-most-complicated-subway-map-1

Toyota Targets Ethnic Groups with New Advertisements. Will Other Companies Follow?

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Toyota recently released four different commercials for their new 2018 Toyota Camry. But these are not your run of the mill advertisements; Toyota tailored each commercial to appeal to several different ethnic groups. The goal was, “to tap into drivers’ emotions and the sensations they will feel when driving the vehicle.” Each commercial was specifically designed to include certain music, actors, and scenarios to aid in relating to the targeted demographic. The ethnic groups that each advertisement is geared towards include African-Americans, Asian-Americans, and Hispanics. This is not the first time a company has advertised towards a certain ethnic group, but Toyota is one of the first major companies to do so.

In one commercial, an African-American man orders a pizza for pickup despite free delivery offered by the restaurant. He heads to his garage where his red Camry is stored and starts the engine. A peacock quickly appears on the screen spreading its feathers. He drives with hip-hop music playing loudly from the JBL speakers included in the vehicle. The man drives by an African-American woman who smiles as the car speeds by, blowing her hair back. The title of the commercial, “Strut”, fits well as the man clearly enjoys showing off his brand-new Camry. The advertisement was created by Burrell Communications Group, a company that specializes in creating ads geared towards African-Americans. The ad agency wanted to give life to a car that has always been labeled as boring and lacking in style.

Another ad depicts an Asian-American father and his daughter driving in the new Camry. The daughter has her face glued to her tablet in the back seat, causing the father to play a song on Pandora. Both smile at each other as they enjoy the ride with the engine roaring in the background of the music. This ad, titled “Captivating”, targets the Asian-American demographic. It was created by interTrend Communications, an ad agency whose primary audiences are mainly Asian-Americans. This commercial was aimed at breaking the stereotype that Asian fathers fail to relate well to their children. The new Camry brings the family together and strengthens their relationship.

The ad that targets Hispanics is titled “Rebelde” which translates to “Rebel” in English. The commercial, which is narrated in Spanish, shows a Hispanic man speeding through a desert road in his red Camry. A call from his mother appears on the Camry’s touchscreen. The man sees this and a bead of sweat drips down his forehead before he hits decline. A smile crosses his face, and the man switches the Camry to Sport Mode as he speeds off. The man ignoring the phone call of his mother would be seen as rebellious by people of the Hispanic culture, one that shows great respect for mothers. But the thrill of driving the Camry is too much for the man to resist. The ad, created by Conill, was designed to show that the enjoyment of driving the new Camry is even worth ignoring a phone call from one’s own mother.

This strategic move by the automobile company may set a new precedent in the way companies advertise their products and services to consumers. Depending on the success of the campaign, other firms may try to cater their advertisements to certain ethnic groups. Toyota decided to place each advertisement where each ethnic group will most likely see them. For example, television shows that are commonly watched by Asian-Americans will likely have the “Captivating” ad whereas a Spanish network may show the “Rebelde” ad often. By designing their commercials to relate well to the people watching them, Toyota is attempting to bring out the positive emotions in these ethnic groups, hopefully leading them to purchase the new Camry.

Although it seems like a smart idea to create specific advertisements towards certain ethnic groups, some people may view these ads as tasteless and stereotypical. The ad agencies that designed the commercials each specialize in marketing to their respective ethnic groups and many employees in each company are of that ethnic group. Despite this, consumers may think that it is stereotypical, for example, to play hip-hop music while the African-American is driving. Furthermore, the idea of marketing differently depending on a person’s ethnicity may depict Toyota as segregating its consumers based off of race and ethnicity. Additionally, there were four commercials created for this campaign. The fourth commercial is titled “Thrill” and features three different characters running late for three separate events. The song “Don’t Stop Me Now” by Queen plays in the background as all three characters enjoy their ride in their Camry before eventually making it to their destination. The controversy arises with who the target audience is, which is stated as being the “Transcultural Mainstream.” The ad depicts mostly white characters and could easily come off as targeting the Caucasian demographic. Despite this, Toyota has said that “there is no Caucasian market.” The commercial is intended to apply to all ethnic groups. If these new commercials are successful for Toyota, a new age of advertising may be upon us, as companies may attempt to create multiple commercials that will also appeal to different demographics.

Sources:
http://toyotanews.pressroom.toyota.com/releases/all+new+toyota+camry+ignites+senses.htm
https://www.youtube.com/watch?v=iD06uTMU2nw
http://www.reelchicago.com/article/burrell-and-new-toyota-camry-strut-pizza170905/
https://www.youtube.com/watch?v=HMlmPxD9KK8
https://www.nytimes.com/interactive/2017/10/12/business/media/toyota-camry-ads-different-ethnicities.html?_r=0   
https://www.youtube.com/watch?v=abIwVn_KqrY  
https://www.youtube.com/watch?v=LPYHWn_plh0  

The Rise of Innovation Hubs on College Campuses

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Innovation seems to be one of the key buzzwords of the time.  Everyone and everything has to be “innovative” to be worthwhile or successful.  That seems to be the thinking behind a slew of new university innovation hubs, facilities designed to bring students, faculty, and private enterprise together to be “innovative”.  While that does not necessarily mean a whole lot, since schools are always speaking of collaboration “amongst the stakeholders”, that has not stopped many schools from actually throwing money at these facilities and programs.  In fact, one type of facility is being erected just across the street from us here at the University of Pittsburgh, and another is being discussed right on campus.

The one currently being built, Carnegie Mellon University’s Tepper Quadrangle, will cost a whopping $200 million, with a majority of the funding coming from alumnus and building namesake David Tepper.[1]  Alongside the given amenities that seemingly come with every university enhancement (X amount of classrooms, a café that will turn out to be a Starbucks, and an auditorium that will still somehow be smaller than what is actually required), the building is a great representation of this new trend in inter-disciplinary collaboration and community engagement.  The bells and whistles like the cafes and classrooms are only distractions for the few goals (and also the potential problems) of new hubs like these.

First of all, let’s not pretend that these new, flashy university buildings do not serve as a key marketing tool for school admissions departments.  Any time a university builds one of these facilities, the focus still tends to remain on the amenities, with only an underlining theme of the more important impact these buildings have on the surrounding community.  A great example is the University of Utah’s Lassonde Studios, a $45 million academic/residence hall community, which seems more concerned with the number of 3-D printers and laser cutters in its ground floor “garage” configuration than about harnessing student energy and motivating them to create things of value with these tools.  The executive director of the institute, Troy D’Ambrosio, even admitted to forgoing formal classrooms or offices in the building, reasoning that “we didn’t want to have a classroom because that says, ‘In this room you learn, out here you don’t learn.’”[2]  The admissions department probably has an easy sell when you get to tell students that “we don’t have classrooms” but a harder sell when these centers aren’t producing anything of value to the community and are instead serving as playgrounds for unmotivated students.

Another point of contention for these new buildings is the cost.  That $45 million Utah building comes with higher “rents” for students: between two and three thousand dollars more per academic year.  The $200 million Tepper Quad is only partially financed by David Tepper ($67 million) and others, which means more than 50% of the funding is coming from other sources including fundraising, bonds, and more critically, students themselves.  Tuition rates have long filled the gap in funding for schools, particularly as public-school funding from state governments dries up.

One of these public schools is Wichita State University, which is planning a massive 50% increase in the size of its campus, essentially creating more than an innovation hub.  This “innovation campus” is set to take 20 years to complete and will include new “business and engineering buildings and residence halls alongside headquarters for private industry.”[3]  What the university community is not thinking about is the long-term funding opportunities available to the school.  Already the Kansas public education department cut funding to public universities throughout Kansas, resulting in a 5 percent tuition increase for most Kansan universities.  Can Wichita really afford to be planning a campus expansion worth hundreds of millions of dollars with budgets as tight as they are?  I’m not convinced current or future students would see the value there, especially at the cost of exorbitantly high tuition prices to cover the difference.

I think the most important point to these new innovation hubs (and a point which some universities understand and some do not) is their inherent goal in the community.  In my mind, these centers should serve as both a conduit of learning for aspiring entrepreneurs, engineers, and other students to interact with one another and external partners while also churning out substantive results in the form of start-ups, inventions, breakthroughs, and community development projects.  Schools jumping on the innovation hub bandwagon and funding these multi-million dollar facilities without the proper planning and vision for creation in place are digging their own graves when the funding falls through, the business partners do not show up, and the students refuse to payout thousands of dollars more in tuition.  But at least the grave will have a nice Starbucks.

My point here is that we need to think critically about what these innovation hubs mean in the context of today’s higher education environment and from both a financial and practical standpoint.  I think Carnegie Mellon is one of the more prepared schools to address these issues as construction of the Tepper Quad continues.  It is also important to note that CMU, as a private institution with no funding from the state of Pennsylvania, has more predictability and regularity over its revenue streams than an institution like Pitt, where something in the ballpark of $150 million comes from the state every year.

This is part of my concern over my own university’s plans for such a hub.  Dubbed “One Bigelow” and announced to the public in early 2015, we have heard little since then about the project that Chancellor Gallagher described as “a front door for the business community” and a space where “students can see research being translated into new products and services before their very eyes.”[4]  But, Pitt’s participation in this initiative brings to light all my previous points:

  1.       As someone who has worked for the Office of Admission and Financial Aid, I know that Pitt’s recruiting strategy is all style and little substance.  The admissions department focuses on spending thousands of dollars on everything from balloons to food, but in my opinion struggles with describing current student initiatives and outcomes of merit.  This building could be the physical embodiment of that technique, with cool gadgets and flashy amenities but few real outputs.
  2.       The cost alone could be on par with the Tepper Quad, meaning a rough $200 million in development costs.  At a time when Pennsylvania is in a budget crisis and state-related schools are still without their allocation, (Pitt is still missing about $150 million from the state government right now, which means tuition costs to offset this funding fall-out could come to $11,000 per student) moving forward with this project would almost certainly result in some direct or indirect cost to current and future students.
  3.       Because of the lack of details this plan has at the moment, we don’t know how this building would, as Gallagher puts it, serve as the “hub of innovation and entrepreneurship” in the community.  More important than the architectural plan for the building is the plan for execution of the experience within the hub and the outputs which the experience can create.  These facilities are supposed to create things, not just look pretty in a marketing strategy, and if there’s no plan in place for how start-ups are to be born, inventions commercialized, or collaboration achieved, the purpose of the facility is lost.

With over 2 years having passed since first hearing of Pitt’s idea for an innovation hub, I am hoping the administration is using the time to craft a thoughtful plan, including appropriate financing options and a meaningful execution strategy.  This is my warning to the university: don’t jump on the innovation bandwagon before you’ve thought through what the consequences could be.

 

[1] https://www.cmu.edu/news/stories/archives/2013/november/nov14_teppergift.html

[2] https://www.nytimes.com/2016/08/07/education/edlife/innovation-campus-entrepreneurship-engineering-arts.html

[3] https://vimeo.com/110931562

[4] http://triblive.com/news/adminpage/10687186-74/gallagher-hub-university

 

How Important is the Chinese Communist Party Congress?

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Chinese President Xi Jinping bows before delivering his speech during the opening session of the 19th National Congress of the Communist Party of China at the Great Hall of the People in Beijing, China October 18, 2017. REUTERS/Thomas Peter - RC16EA74B380

 

Chinese President Xi Jinping bows before delivering his speech during the 19th National Congress of the Communist Party of China.

 

The National Congress of the Communist Party of China, a meeting widely covered yet very secretive, began in Beijing this week. It is the 19th Communist Party Congress, with the first being held in 1921. They have been held every five years since the 11th Congress in 1977. The event is not merely an election, nor is it simply an outline of policy, but rather a chance for chosen delegates close to the party to discuss political ideologies.

While changes of leadership within the party have seldom occurred during the assemblies, it has happened, such as Deng Xiaoping taking over at the 12th Congress in 1982 and subsequently transforming China into a global socialist power. While the 1982 Congress was certainly one of the more interesting and progressive meetings in the party’s history, current President Xi Liaping took control after 2012’s Congress, and is expected to firmly consolidate his power and remain in control. In fact, some are predicting that President Xi will usher in the next great era of Chinese power, as observers describe the 65-year-old as the most powerful Chinese official since Deng Xiaoping, or maybe even since Mao Zedong.

On Wednesday, President Xi opened the Congress with a speech in front of the 2,287 chosen delegates, which was promptly entitled, “Secure a decisive victory in building a moderately prosperous society in all respects and strive for the great success of socialism with Chinese characteristics for a new era.” The current President delivered his address in a manner that lived up to its title, taking no shorter than three hours and twenty-three minutes.

In this speech, President Xi strongly outlined the success of his five-year regime, stating China had “become a great power in the world” and played “an important role in the history of humankind.” He then used this to turn towards the future, getting the delegates excited for the next five years under Xi, stating, “It is time for us to take center stage in the world and to make a greater contribution to humankind”. Amidst uncertainty of Western democracies, President Xi affirmed his ideological confidence in the communist party and said they look strong and unified in comparison. Additionally, he said China would not close its doors to the world, and promised lower barriers for foreign investors, hoping to further grow the economy.

Image result for  communist party congress 2017
Over 2,200 delegates were in attendance during the opening day of the 19th Congress.

If you had only heard Xi Linping’s speech, you would not be mistaken in thinking the entirety of the country was unified and resolute in its growth. Chen Daoyin, a political scientist from Shanghai, believes this very Congress will usher in the third great political regime since Mao Zedong brought communism to China. According to Daoyin, Mao, the revolutionary figure, represents the first epoch and Deng Xiaoping, the reformer, further strengthened China in helping it become wealthy. Now, according to Daoyin and other Chinese analysts, Xi Liaping is bringing in the third. Xi has been tightening his control over the party for the last five years, and now has the most power any Chinese leader has had in decades, perhaps even since Mao Zedong. While this is shown in positive light at the Congress, it could also be interpreted as negative.

President Xi spoke of measures to increase party discipline, and brought up a corruption crackdown that has punished more than a million Chinese officials. Additionally, he warned against separatism, affirming that Taiwan is a part of China and referencing recent political movements in Xinjiang, Tibet, and Hong Kong.

So how important is the 19th Congress? I believe it is massively significant, especially given the time period. Chinese officials make it seem like the gathering is a mere celebration and outline of Chinese strength and unity; however, I believe it is a move to tighten grip amongst fear of party separation. In recent months, independence movements have become very relevant worldwide. In September, Iraqi Kurds voted overwhelmingly for independence from Iraq in a controversial referendum. Days later, on October 1st, Catalonia voted overwhelmingly for independence from Spain in a controversial referendum. Both were met with violence and push-back from their respective countries. President Xi is well aware of these movements across the world, and used the Congress to deliver a warning to Taiwan, and other regions like Hong Kong, stating that Beijing has the will and power to stop any attempts at independence.

With the meetings only just the beginning, the Chinese Communist Party Congress will run until next Tuesday. Given the global influence China has, the rest of the world will be anxiously waiting to see what happens, not just in the next week, but in the next decade, as one of the world’s most powerful leaders attempts to bring China to its greatest height.

Sources:

https://www.cnbc.com/2017/10/16/chinese-communist-party-congress-what-you-need-to-know.html

https://www.theguardian.com/world/2017/oct/18/xi-jinping-speech-new-era-chinese-power-party-congress

http://www.bbc.com/news/world-asia-china-41647872

http://www.channelnewsasia.com/news/asiapacific/china-ready-to–defeat–taiwan-independence–xi-9320852

http://www.cnn.com/2017/09/27/middleeast/kurdish-referendum-results/index.html

http://www.cnn.com/2017/10/03/europe/catalonia-general-strike-protests-barcelona/index.html

 

Disney: A Magical Rival to Netflix

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Disney CEO Robert A. Iger recently announced Netflix-style streaming services.

After a reported 9 percent drop in net income and a slight decline in revenue, it became apparent to Robert A. Iger, Disney’s chief executive, that a drastic shift in strategy was needed. Disney announced two unnamed streaming services, one based upon Disney and Pixar films along with Disney channel programs, the other based upon sports using programing from ESPN.

Both services will be powered by BamTech, a direct-to-consumer video known for work with HBO and other established streaming services. Last year Disney paid $1 Billion for a 33% stake in BamTech. Recently Mr. Iger announced that Disney would pay $1.58 Billion for an additional 42% share in the company.

Disney’s switch to an online outlet seems likely to lead to conflict with Netflix, who currently has access to many Disney and Pixar films and television shows, as well as cable providers who pay Disney for access to ESPN and related networks. Iger feels that Disney is able to maintain favorable deals with them.

While the switch to an online streaming service may seem late compared to other companies such as CBS, Iger feels that they are making the jump at the perfect time as they have “an unrivaled connection to their audience- especially children, who are a huge driver for streaming services.”

Disney’s first proposed streaming service is set to arrive in early spring 2018 and will include sports, such as baseball, hockey, and tennis as well as college sports for a total of about 10,000 regional and national events in the first year. The service will be accessed through an updated version of the current ESPN app, consumers of ESPN on cable or satellite will also be given access to the app.

A separate streaming service will arrive in 2019. Disney has announced that this service will provide direct to consumer access to both old and new Disney films such as the upcoming “Frozen” sequel, “Toy Story 4” and the live-action “Lion King”. Disney typically does not make its movies available for long periods of time, instead relying on “The Disney Vault,” the idea that Disney will release a movie for a limited time and then not sell the film until it is re-released years later.

This new streaming service would change Disney’s formula of releasing content by making everything available to subscribers. This drastic change could cause harm to Netflix, who currently has rights to new Disney-branded disney films. Disney plans to take these rights back eventually.

The new service would not only feature films, but also all current and future television programs found on Disney Channel, Disney Junior, and Disney XD would be made available. Iger states that Disney will make a “significant” investment in original movies and shows for the service, much like many other services such as HBO and Netflix have done in the past.

Disney, who also owns labels such as Marvel and Lucasarts (Star Wars) has decided to include these labels in their service as well. However, shows currently produced by Disney Marvel studios such as “Jessica Jones” will still be available on netflix.

Disney will no longer be releasing new content to theaters. Instead, new films will be added directly to the proposed streaming service. An idea that seems detrimental to the success of movie theaters as Disney films typically bring in a large profit.

The amount that subscribers would have to pay for these services is still up in the air. Mr. Iger has discussed perhaps focusing on “dynamic format” almost seeming like a pay-per-view system in which the consumer will pay based on how often they use the streaming service.

Despite analysts responding well to the proposed service, Disney’s stock price declined 4 percent to about $102.95. This could have been the result of poor quarter results, however it is apparent that Disney is facing difficulty keeping its programming relevant as traditional subscription for ESPN continues to decline (3.5 percent in the most recent quarter).

Disney’s financial decline seems to come from several sources. Disney Media Networks (ESPN) reported a 22 percent decline in operating income after a new contract with the National Basketball Association. Disney’s studio also reported an operating income decline of 17% due to a this year’s set of released films not being as successful as the previous years.

Could this new approach to media that other companies have found success in be exactly what Disney needs to make up for a lackluster year? Or are they too late to the party? Based on what they have announced so far, I could see this new service being successful for Disney. They have a large fan base and with Disney films as well as Star Wars and Marvel films being released directly to consumers, there is a large incentive to pay for a subscription. This new service could compete with Netflix and the other streaming service but, It depends on exactly what Iger comes up with and if he can find enough content to satisfy consumers that are already loyal to the likes of streaming giants Netflix, Hulu, and HBO GO.

https://www.nytimes.com/2017/08/08/business/media/disney-streaming-service.html

http://www.latimes.com/business/hollywood/la-fi-ct-disney-earnings-20170808-story.html

https://www.cnet.com/news/disneys-robert-iger-shares-new-details-on-streaming-services/

Summer 2017: The Worst Summer Box Office in Years

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Movies in 2017 have not been rated poorly by critics, but have failed to bring in the box office numbers of past years.

Summer movies are supposed to be successful. Ever since Jaws was released in 1975, the summer blockbuster has been a favorite pastime of many families, movie-goers, and general audiences all over the country. This summer, however, saw a drop-off as the box office came crashing down to 3.7 billion dollars, its lowest total gross in eleven years. This was especially surprising because it was over a 15% drop-off from last year’s 4.4 billion dollar revenue, the lowest change in earnings recorded. This proposes an important question: Is there still a charm in going to the theaters, or are audiences better off saving their money and buying popcorn at the county fair?

It is difficult to examine why 2017 had a record-breaking low in box office profits because of the well-diversified group of movies for all audiences. The top ten films of the summer that came out were mass-appeal markets that should have had more of a draw than it did. Cars 3 and Despicable Me 3 were fit to entertain younger audiences and families; Transformers: The Last Knight, War For Planet of the Apes and Pirates of the Caribbean: Dead Men Tell No Tales came out for the plethora of fans of those action franchises; Dunkirk was well-received and appealed to fans of Christopher Nolan’s work; Guardians of the Galaxy: Vol. 2, Wonder Woman, and Spider-Man: Homecoming were big-budget superhero films (a huge demographic) and the top three movies of the summer; even Girl’s Trip was a surprise comedy that was well-praised. These types of films have brought in huge amounts of money before, which is why it is shocking to see such a poor turnout this summer.

The top ten summer movies of 2017 were not just appealing to their targeted demographics. Most of them were also extremely well-received by critics. Eight of the top ten films were deemed “Fresh” by Rotten Tomatoes, six were deemed “Certified Fresh” (meaning over 75% on the Tomatometer), and five of those six had over a 90% approval rating by the top critics on the site. While some of these movies were successful (the three superhero movies were in the top fifteen highest grossing superhero movies of all time), the overall gross of the summer box office did not amount to much. Even the movies that were franchise films were the lowest grossing films of their respective franchise. The problem clearly isn’t the appeal or the quality of the film, so what could it be?

There are two potential reasons I found that could be the reason for the lack of attendance at the movies this summer. The first was the quality of the films released last summer. The top ten from last year had a similar set-up to the top ten of 2017: three animated movies, three superhero movies, three franchise-esque films, and one original comedy. Of those ten, only six were deemed “Fresh” on Rotten Tomatoes, four were “Certified Fresh”, and only one of those ten had above a ninety-percent approval rating. As Forbes contributor and film analyzer Scott Mendelson puts it “Last summer was a horror show, with a deluge of pretty lousy tentpoles (Alice Through the Looking Glass, Independence Day: Resurgence, Warcraft, Suicide Squad, etc.) and a culture that seemed to talk about everything (the election, Lemonade, Stranger Things and/or Pokemon Go!) except mainstream movies.” The lack of successful mainstream movies may have steered away filmgoers who could have been interested in the films from this summer. Hopefully, it will have a reverse effect on next summer’s movies.

Another potential reason for the lack in revenue this season was the increase in streaming. At the start of the summer, over fifty million U.S. citizens were subscribed to Netflix, which is a higher number than people who are subscribed to cable television. There doesn’t seem to be a valid reason for going to see cinema movies anymore when you can pick and choose movies you want to watch and wait a few months for the movies to be available for streaming. As numbers in streaming increase, cinema tickets seem to decrease.

Even with a critically-acclaimed summer line-up, the cinema still managed to fail. Signs point to last season’s poor critical reception and an increase in streaming, but it’s still uncertain to say why it failed to this magnitude. “If last summer was Batman & Robin,” Mendelson says, “then this summer was Batman Begins.” Hopefully, next summer, the dark knight of cinema will rise from the ashes and soar back to box office standards.

 

Footnotes:

https://www.forbes.com/sites/scottmendelson/2017/09/04/why-the-worst-summer-box-office-in-years-was-great-news-for-movies/#345f32122013

http://www.businessinsider.com/summer-box-office-sequels-and-franchises-2016-8/#8-the-legend-of-tarzan-124-million-3

http://www.boxofficemojo.com/seasonal/?chart=byseason&season=Summer&view=releasedate

https://www.rottentomatoes.com

http://www.al.com/entertainment/index.ssf/2017/04/is_netflix_killing_cinema_do_y.html