“Success is in making money, not in the size of the airline”*…
Airlines make more money from mileage programs than from flying planes—and it shows. Ganesh Sitaraman explains…
… From the late 1930s through the ’70s, the federal government regulated airlines as a public utility. The Civil Aeronautics Board decided which airlines could fly what routes and how much they could charge. It aimed to set prices that were fair for travelers and that would provide airlines with a modest profit. Then, in 1978, Congress passed a sweeping law deregulating the airline industry and ultimately abolishing the CAB. Unleashed from regulation, airlines devised new tactics to capture the market. American Airlines was one of the most aggressive. In the lead-up to the deregulation bills, it created discount “super saver” fares to sell off the final few remaining seats on planes. That meant cheap prices for last-minute travelers and more revenue for American, because the planes were going to take off whether or not the seat was filled. But these fares upset business travelers, who tended to buy tickets further in advance for higher prices. So in 1981, American developed AAdvantage, its frequent-flier program, to give them additional benefits. Other airlines followed suit.
In the early years, these programs were simple, like the punch card at a café where your 11th coffee is free. But three big changes transformed them into the systems we know today. First, in 1987, American partnered with Citibank to offer a branded credit card that offered points redeemable for flights on the airline. Second, in the ’90s, the airlines proliferated the number of fare classes, charging differential prices for tickets. With more complicated fare structures came the third change: Virgin America realized that the amount people spend on a flight, based on the fare class, is more important to their bottom line than the number of miles flown. So, in 2007, it introduced a loyalty program rewarding money spent rather than mileage accrued.
These three shifts fundamentally transformed the airline industry. They turned frequent-flier systems into the sprawling points systems they are today. And they turned airlines into something more like financial institutions that happen to fly planes on the side.
Here’s how the system works now: Airlines create points out of nothing and sell them for real money to banks with co-branded credit cards. The banks award points to cardholders for spending, and both the banks and credit-card companies make money off the swipe fees from the use of the card. Cardholders can redeem points for flights, as well as other goods and services sold through the airlines’ proprietary e-commerce portals.
For the airlines, this is a great deal. They incur no costs from points until they are redeemed—or ever, if the points are forgotten. This setup has made loyalty programs highly lucrative. Consumers now charge nearly 1 percent of U.S. GDP to Delta’s American Express credit cards alone. A 2020 analysis by the Financial Times found that Wall Street lenders valued the major airlines’ mileage programs more highly than the airlines themselves. United’s MileagePlus program, for example, was valued at $22 billion, while the company’s market cap at the time was only $10.6 billion.
Is this a good deal for the American consumer? That’s a trickier question. Paying for a flight or a hotel room with points may feel like a free bonus, but because credit-card-swipe fees increase prices across the economy—Visa or Mastercard takes a cut of every sale—redeeming points is more like getting a little kickback. Certainly the system is bad for Americans who don’t have points-earning cards. They pay higher prices on ordinary goods and services but don’t get the points, effectively subsidizing the perks of card users, who tend to be wealthier already.
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The strange evolution of airlines into quasi-banks reflects how badly deregulation has gone. Regulation carefully set the terms under which airlines could do business. It was designed to ensure that they remained a stable business and a reliable mode of transportation. Deregulation, in turn, allowed the airlines to pursue profits in whatever way they could—including getting into the financial sector.
The proponents of deregulation made a few big promises. The cost of flying would go down once airlines were free to compete on price. The industry would get less monopolistic as hundreds of new players entered the market, and it would be stable even without the government guaranteeing profitable rates. Small cities wouldn’t lose service. In the deregulators’ minds, airlines were like any other business. If they were allowed to compete freely, the magic of the market would make everything better. Whatever was good for the airlines’ bottom line would be good for consumers.
They were wrong. As I explain in my forthcoming book, most of their predictions didn’t come true, because air travel isn’t a normal business. There are barriers to entry, such as the fixed supply of airport runways and gates. (And, for that matter, mileage programs, designed to keep customers from ditching an established airline for a rival.) There are network effects and economies of scale. There are high capital costs. (Airplanes aren’t cheap.) The idea that anyone could successfully start an airline and outcompete the big incumbents never made much sense.
After a relatively short period of fierce competition, the deregulated era quickly turned to consolidation and cost-cutting, as dozens of airlines either went bankrupt or were acquired. Service keeps getting worse, because the airlines, facing little competition, have nothing to fear from antagonizing passengers with cramped legroom, cancellations, and ever-multiplying fees for baggage and snacks. Worse still, without mandated service, cities and regions across the country have lost commercial air service, with serious consequences for their economies. And when a crisis like 9/11 or the coronavirus pandemic comes along, the airlines—which prefer to direct their profits to stock buybacks rather than rainy-day funds—need massive financial relief from the federal government.
Deregulation even failed to deliver the one thing it is sometimes credited with: lowering prices. Airfare did get cheaper in the years after the 1978 deregulation law. But the cost of flying had already been falling before deregulation, and it kept falling after at about the same rate.
The old system of airline regulation wasn’t perfect. Barred from competing directly on price, the airlines got into an amenities arms race that notoriously included in-flight piano bars. But the cure was worse than the disease. The industry went from being a regulated oligopoly, which had real problems, to an unregulated oligopoly, which we are now seeing is much worse…
Painful reading: “Airlines Are Just Banks Now” (gift article) from @GaneshSitaraman in @TheAtlantic.
* Gordon Bethune (Long-time chair of Continental Airlines)
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As we pray for an aisle seat, we might console ourselves that at least we’re not boarding the S.S. Minnow; on this date in 1964 Gilligan’s Island premiered on CBS. Seven castaways– five paying passengers who’d booked a “three hour tour” from Honolulu, and their two-person crew– spent the next three seasons marooned on an uncharted island.
“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist”*…
… something that nature seems to know. The population of the world, now roughly 8.1 billion, seems poised to shrink. To some, this is good news; to others, a cause for alarm. Phoebe Arslanagić-Wakefield and Anvar Sarygulov, co-founders of Boom, fall into that latter camp. But their provocative analysis of the dynamics of the Baby Boom is relevant to anyone concerned with the future of population on earth…
… In the countries that it touched, the Baby Boom created generations massive in size. In the US alone, 76 million babies were born in its peak 18 years, 30 million more than were born in the previous 18, a demographic difference bigger than the 1960 population of Egypt, the Philippines, or Ethiopia. By 1965, people born during the Baby Boom made up 40 percent of America’s population.
Today, a fifth of both the UK’s and the USA’s population are baby boomers and we live in the world they created. Despite that, as mentioned above, the most widely known piece of information about the Boom is its most pervasive myth, that it was caused by the end of World War Two.
The Baby Boom was not the result of people making up for lost time during the war: it saw total lifetime fertility rates rise, meaning that people did not simply shift when they had their children but had more of them overall. And in many countries, including the US, UK, Sweden and France, the rise in birth rates began years before the war had even started, while neutral Ireland and Switzerland experienced Booms that began during the war, in 1940.
Instead, to explain the Baby Boom, we must consider why it was that the iron law of fertility – that as incomes go up, births must come down – was suspended for this extraordinary period of time…
Fascinating and important: “Understanding the Baby Boom,” from @PMArslanagic and @ASarygulov.
By way of further background on our current situation: “Population bomb, bust – or boon? New UNFPA report debunks 8 myths about a world of 8 billion.“
[image above: source]
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As we grapple with growth, we might send hygienic birthday greetings to Melville Bissell; he was born on this date in 1843. An inventor and entrepreneur, he created and marketed the first modern carpet sweeper… which, as explained in the article featured above, was a seminal contribution to the advances in household technology that helped fuel the Baby Boom.
“The most outstanding feature of life’s history is a constant domination by bacteria”*…
Jennifer Kahn interviews biochemist Jennifer Doudna (who won the Noel Prize for the gene-editing engine Crispr) on her new focus– our microbiomes, tackling everything from immune disorders and mental illness to climate change—all by altering microbes in the digestive tract…
… what isn’t the microbiome responsible for? It’s been all the rage for the past few years, with scientists hoping it could help treat everything from immune disorders to mental illness. How exactly that will work is something we’re just starting to explore. This spring, the effort got a boost when UC Berkeley biochemist and gene-editing pioneer Jennifer Doudna, who won a Nobel Prize in 2020 for coinventing Crispr, joined the pursuit. Her first order of business, spearheaded by Berkeley’s Innovative Genomics Institute: fine-tuning our microbiome by genetically editing the microbes it contains while they’re still inside us to prevent and treat diseases like childhood asthma. (Full disclosure: I teach at Berkeley.) Oh, she also wants to slow climate change by doing the same thing in cows, which are collectively responsible for a shocking amount of greenhouse gas.
As someone who has written about genetic engineering in the past, I have to admit that my first reaction was: No way. The gut microbiome contains around 4,500 different kinds of bacteria plus untold viruses, and even fungi (so far: in practice we’ve only just started counting) in such massive quantities that it weighs close to half a pound. (Microbes are so tiny that 30 trillion bacteria would weigh roughly 1 ounce. So half a pound is a lot.)
Figuring out which ones are responsible for which ailments is tricky. First you need to know what’s causing the problem: like maybe something is producing too much of a particular inflammatory molecule. Then you have to figure out which microbe—or microbes—is doing that, and also which gene within that microbe. Then, in theory, you can fix it. Not in a petri dish, but in situ—meaning in our fully active, roiling, squishing stomach and intestines while they continue to do all the stuff they usually do.
Until recently, it would have seemed insane—not to mention literally impossible—to edit all the microbes belonging to a species within a vast ecosystem like our gut. And to be fair, Doudna and her collaborator, Jill Banfield, still don’t know quite how it will work. But they think it can be done, and in April, TED’s Audacious Project donated $70 million to support the effort. My own gut feeling (right?) was that this was either brilliant or terrifying, or possibly both at once. Brilliant because it had the potential to head off or treat diseases in an incredibly targeted and noninvasive way. Terrifying because, well, you know … releasing a bunch of inert viruses equipped with gene-editing machinery into the vital ecosystem that is our gut microbiome—what could go wrong? With that in mind, I invited Jennifer Doudna to my house for a chat about the future of microbiome medicine…
Fascinating– and encouraging: “Crispr Pioneer Jennifer Doudna Has the Guts to Take On the Microbiome,” in @WIRED.
(Image above: source)
* Stephen Jay Gould
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As we investigate our intestines, we might spare a thought for Guido Pontecorvo; he died on this date in 1999. A geneticist, he discovered the process of genetic recombination in the common soil fungus Aspergillus— and as a result the parasexual cycle— in what became the model for the genetic studies in many other fungi. This cycle gives rise to genetic reassortment by means other than sexual reproduction; its discovery provided a method of genetically analyzing asexual fungi…. which, as noted above, populate our microbiomes.
“But if thought corrupts language, language can also corrupt thought”*…
In an excerpt from his book A Myriad of Tongues: How Languages Reveal Differences in How We Think, Caleb Everett on the underappreciated importance of syntax and recursion in our languages…
Words are combined into phrases and sentences in a dazzling array of patterns, collectively referred to as syntax. The complexity of syntax has long confounded researchers. Consider, for example, the previous sentence. There are all sorts of patterns in the order of the words of that sentence, patterns that are familiar to you and me and other speakers of English. Those patterns are critical to the transmission of meaning and to how we think as we create sentences. It was no coincidence that I put “complexity” after “the,” or “syntax” after “of,” or “researchers” after “confounded,” to cite just three examples of many in that sentence alone. You and I know that “researchers” should follow the main verb of this particular sentence, in this case “confounded.” If I put that word somewhere else it would change the sentence’s meaning or make it confusing. And we know that articles like “the” should precede nouns, as should prepositions like “of.” These and other patterns, sometimes referred to as “rules” as though they represented inviolable edicts voted on by a committee, help to give English sentences a predictable ordering of words. It is this predictable ordering that is usually referred to when linguists talk about a language’s syntax.
Without syntax, it would seem, statements could not be understood, because they would be transferred from speaker to hearer in a jumbled mess of words. This is, it turns out, a bit of an oversimplification since a number of the world’s languages do not have rule-governed word order to the extent that English does. Still, let us stick with the oversimplification for now, because it hints at something meaningful about speech…
An illuminating read: “What Makes Language Human?” via @lithub.
* George Orwell, 1984
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As we contemplate cogitation and communication, we might spare a thought for Sigismund Schlomo “Sigmund” Freud; he died on this date in 1939. A neurologist, he was the founder of psychoanalysis– a clinical method for evaluating and treating pathologies seen as originating from conflicts in the psyche, through dialogue between patient and psychoanalyst, and the distinctive theory of mind and human agency derived from it.
Freud’s psychoanalysis further complicated our thinking about language: In his theory dreams are instigated by the daily occurrences and thoughts of everyday life. In what Freud called the “dream-work”, these “secondary process” thoughts (“word presentations”), governed by the rules of language and the reality principle, become subject to the “primary process” of unconscious thought (“thing presentations”) governed by the pleasure principle, wish gratification, and the repressed sexual scenarios of childhood.
Jacques Lacan built on Freud’s approach, emphasizing linguistics and literature. Lacan believed that most of Freud’s essential work had been done before 1905 and concerned the interpretation of dreams, neurotic symptoms, and slips, which had been based on a revolutionary way of understanding language and its relation to experience and subjectivity, and that ego psychology and object relations theory were based upon misreadings of Freud’s work. For Lacan (as, in a way, for the author above), the determinative dimension of human experience is neither the self (as in ego psychology) nor relations with others (as in object relations theory), but language.
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“Reality is merely an illusion, albeit a very persistent one”*…
In an excerpt from his new book, The Rigor of Angels: Borges, Heisenberg, Kant, and the Ultimate Nature of Reality, the estimable William Egginton explains the central mystery at the heart of one of the most important breakthroughs in physics–quantum mechanics…
For all its astonishing, mind-bending complexity– for all its blurry cats, entangled particles, buckyballs, and Bell’s inequalities– quantum mechanics ultimately boils down to one core mystery. This mystery found its best expression in the letter Heisenberg wrote to Pauli in the fevered throes of his discovery. The path a particle takes ‘only comes into existence through this, that we observe it.’ This single, stunning expression underlies all the rest: the wave/particle duality (interference patterns emerge when the particles have not yet been observed and hence their possible paths interfere with one another); the apparently absurd liminal state of Schrodinger’s cat ( the cat seems to remain blurred between life and death because atoms don’t release a particle until observed); the temporal paradox (observing a particle seems to retroactively determine the path it chose to get here); and, the one that really got to Einstein, if the observation of a particle at one place and time instantaneously changes something about the rest of reality, then locality, the cornerstone of relativity and guarantee that the laws of physics are invariable through the universe, vanishes like fog on a warming windowpane.
If the act of observation somehow instantaneously conjures a particle’s path, the foundations not only of classical physics but also of what we widely regard as physical reality crumble before our eyes. This fact explains why Einstein held fast to another interpretation. The particle’s path doesn’t come into existence when we observe it. The path exists, but we just can’t see it. Like the parable of the ball in the box he described in his letter to Schrodinger, a 50 percent chance of finding a ball in any one of two boxes does not complete the description of the ball’s reality before we open the box. It merely states our lack of knowledge about the ball’s whereabouts.
And yet, as experiment after experiment has proven, the balls simply aren’t there before the observation. We can separate entangled particles, seemingly to any conceivable distance, and by observing one simultaneously come to know something about the other–something that wasn’t the case until the exact moment of observing it. Like the beer and whiskey twins, we can maintain total randomness up to a nanosecond before one of them orders, and still what the one decides to order will determine the other’s drink, on the spot, even light-years away.
The ineluctable fact of entanglement tells us something profound about reality and our relation to it. Imagine you are one of the twins about to order a drink (this should be more imaginable than being an entangled particle about to be observed, but the idea is the same). From your perspective you can order either a whiskey or a beer: it’s a fifty-fifty choice; nothing is forcing your hand. Unbeknownst to you, however, in a galaxy far, far away, your twin has just made the choice for you. Your twin can’t tell you this or signal it in any way, but what you perceive to be a perfectly random set of possibilities, an open choice, is entirely constrained. You have no idea if you will order beer or whiskey, but when you order it, it will be the one or the other all the same. If your twin is, say, one light-year away, the time in which you make this decision doesn’t even exist over there yet. Any signals your sibling gets from you, or any signals you send, will take another year to arrive. And still, as of this moment, you each know. Neither will get confirmation for another year, but you can be confident, you can bet your life’s savings on it–a random coin toss in another galaxy, and you already know the outcome.
The riddles that arise from Heisenberg’s starting point would seem to constitute the most vital questions of existence. And yet one of the curious side effects of quantum mechanics’ extraordinary success has been a kind of quietism in the face of those very questions. The interpretation of quantum mechanics, deciding what all this means, has tended to go unnoticed by serious physics departments and the granting agencies that support them in favor of the ‘shut up and calculate’ school, leading the former to take hold mainly in philosophy departments, as a subfield of the philosophy of science called foundations of physics. Nevertheless, despite such siloing, a few physicists persisted in exploring possible solutions to the quantum riddles. Some of their ideas have been literally otherworldly.
In the 1950s, a small group of graduate students working with John Wheeler at Princeton University became fascinated with these problems and kept returning to them in late-night, sherry-fueled rap sessions. Chief among this group was Hugh Everett III, a young man with classic 1950s-style nerd glasses and a looming forehead. Everett found himself chafing at the growing no-question zone that proponents of the Copenhagen interpretation had built around their science. Why should we accept that in one quantum reality, observations somehow cause nature to take shape out of a probabilistic range of options, whereas on this side of some arbitrary line in the sand we inhabit a different, classical reality where observations meekly bow to the world out there? What exactly determines when this change takes place? ‘Let me mention a few more irritating features of the Copenhagen Interpretation,’ Everett would write to its proponents: ‘You talk of the massiveness of macro systems allowing one to neglect further quantum effects … but never give any justification for this flatly asserted dogma.’…
A fascinating sample of a fascinating book: “Quantum Mechanics,” from @WilliamEgginton via the invaluable @delanceyplace.
Further to which, it’s interesting to recall that, in his 1921 The Analysis Of Mind, Bertrand Russell observed:
What has permanent value in the outlook of the behaviourists is the feeling that physics is the most fundamental science at present in existence. But this position cannot be called materialistic, if, as seems to be the case, physics does not assume the existence of matter…
via Robert Cottrell
See also: “Objective Reality May Not Exist, Quantum Experiment Suggests” (source of the image above).
* Albert Einstein
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As we examine existence, we might spare a thought for Otto Frisch; he died on this date in 1979. A physicist, he was (with Otto Stern and Immanuel Estermann) the first to measure the magnetic moment of the proton. With his aunt, Lise Meitner, he advanced the first theoretical explanation of nuclear fission (coining the term) and first experimentally detected the fission by-products. Later, with his collaborator Rudolf Peierls, he designed the first theoretical mechanism for the detonation of an atomic bomb in 1940.
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