Economics for the Rest of Us

Much Economics Writing is Academic and High Level – Today Let’s Look Closer In


Economics is Life

Whether we like to acknowledge it or not, economics is a powerful force in all our lives. It may be complex, it may be removed from our observation, but it determines so much, including much of our politics and social norms. If there ever was a domain in which the term “unforeseen consequences” rings true, it is economics.

I am in the process of reading Barack Obama’s last book and have just completed the section about the economic crisis he inherited and the remarkable demands it placed, in time and imagination.

We perhaps came closer than many realized to another great depression. We saw similar risks rising as the pandemic crushed our economy. Now we worry about lingering pandemic effects and the specter of inflation. History is shaped by such forces

Herein are a few interesting odds and ends of note, perhaps at a level those of us not steeped in the discipline can grasp.

The Fortune 500

 Fortune magazine recently published its Fortune 500 – a listing of the 500 hundred largest companies in the world, measured by revenue. I found the following bits therein quite interesting:

  • It’s not a very big number, 500. Yet these 500 companies generated $31.7 Trillion in revenue last year, despite (and sometimes because of – hello, Amazon – the pandemic). That is equal to 1/3 of the total GDP of the entire planet during the same period. That is power.
  • Of the top 20 companies, the largest number are US (8), but that is the smallest such percentage ever. China is right on the number two spot, with 6 companies. The rest of the top 20 are one each from Japan, Saudi Arabia, South Korea, UK, Germany, and the Netherlands.
  • Striking that so few were based in Western Europe.
  • None are from Russia. Russia still is an energy giant and has other valuable resources as well. But Putin and company have run it like a mob cash machine. It seems like everything of value gets sucked into a government enterprise or one of the bundles run by friendly oligarchs, followed swiftly by massive incompetence and corruption. It happens over and over again.
  • I was struck by the distribution of companies by sector.
    • While 5 are in energy, none of those are US (Exxon is no longer in the top 20 – imagine that)
    • Next was a tie with 4 each in technology and Finance/Insurance
    • Two each were in health, transportation, and retail sales
    • One was in construction
  • Americans may be surprised to learn that retail sales only had two in the top twenty, but that does include Walmart, which is the largest company in the world, and Amazon, which is number three overall. In case you are wondering, Apple is at number six, behind a couple of Chinese companies.

Rest assured that changes are afoot all the time. The amazing interconnections of all our economies, the rise of virtual currencies, and more mean the slow afoot will die on the vine.

Note that 45 of the companies on the list this year are on the list for the first time. That means 45 others either died off or slipped down the roster. You snooze, you lose.

 McDonald’s Ice Cream Machines

 The back story of McDonald’s ice cream machines has long been a twisted tale, one well known in the fast-food industry. The machines are rare in that the same machine can deliver cones and milkshakes.

They also are famously finicky and easy to break. And neither the corporation nor the franchisees really own them. They depend on an amazingly restrictive contract with the vendor, which also sells grills and other equipment to McDonalds.

If an ice cream machine breaks, the restaurant has to call the vendor for repair – the repair codes are a mystery unknown to any of the users. And they break – a lot. Franchisees routinely spend thousands every year on a service contract they must accept.

It has gotten so bad that reportedly the Federal Trade Commission (FTC) has started an investigation. Wired magazine recently published a wonderful expose on all this, complete with photos of the bizarre innards of these machines and stories about efforts to beat the system. I highly recommend the article:

Electric Car Charging – A Remarkably Diverse and Interesting Story

We are rapidly approaching the tipping point of electric cars becoming the norm. It will happen faster than many think. The launch a few months ago of the all-electric Ford F150 pickup truck is a strong harbinger of what is coming. The market shift is underway.

But how ready is the infrastructure, especially charging stations? We need way more charging stations, and we need them to be faster if this change is to happen.

President Biden has proposed a major government investment to move this along. That will make a difference, but in the end, it will be private sector innovation that does the job. And it is fascinating how many different approaches are being tried.

Some companies are installing dedicated charging sites around the country. Tesla is about to open its many charging stations to other electric cars as well. Some are working to sell charging by time, others by the amount of electricity used. Still others are charging little or nothing, setting up screen with entertaining videos that include advertisements, which are the real revenue source.

Some are, naturally, setting up at gas stations. But many are setting up in parking lots where people go to shop and or will be spending time doing other things while their cars charge. As one vendor said recently, “Do you know how many parking lots are out there?” They plan to make it easy to get a quick charge while you do other things almost anywhere.

The technology continues to evolve. The most basic charge, which runs a cable between the car and a 110-volt outlet, costs almost nothing, but takes forever to charge (I know, I use one at home). Dedicated 220-volt units come at a price but are much faster.

The newest innovation, rapid DC charging units are blazingly fast, but can cost up to $100K to set up – how to price that service will be a challenge. And Tesla, perhaps among others, is working on a system that is built in a ground pad. No cables, you just drive up and park on it.

It will be fun to watch innovation, competition, market forces, and social changes drive the development of this essential new infrastructure.

These Were the Easy Topics

What is happening in the job market is much more complex, and even more interesting. We will talk shortly about how it is about 8 million Americans are looking for work, yet about 10 million jobs go unstaffed. The pandemic has really, really changed everything about labor in America, in ways we are just starting to grasp.

Stay tuned – we will give this a shot shortly.

           Bill Clontz

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