(Roughly) Daily

Posts Tagged ‘Monopoly

“A town isn’t a town without a bookstore. It may call itself a town, but unless it’s got a bookstore, it knows it’s not foolin’ a soul.”*…

Behold, a behemoth…

Take a look at this graph. The blue is Amazon’s share of book sales in the past six years. The orange is where we are headed if their average growth rate (8%) continues. If nothing slows their momentum, Amazon will control nearly 80% of the consumer book market by the end of 2025. Every single book lover should worry. After we’re done worrying, we must change the way we buy books.

Books are a fundamental social good that have an outsized impact on our development, individually and collectively. They move us forward. They have been fundamental to our moral and social evolution, our inner lives, and our understanding of ourselves, others, and the world. What they give us is too precious to trust to a single entity for whom they are ultimately just a product, and whose algorithms value them only by the revenue and customers they bring in.

Popular books are so deeply discounted on Amazon that other bookstores have found it hard to compete. Why does Amazon sell books at prices so low they lose money? Cheap books are a loss-leader that devalue books to drive competitors out of business and help Amazon gain control of the market, leaving them with near-monopoly power.

What is lost if at the end of 2025, Amazon sells 80% of books in the US? If one mega-retailer has unprecedented control over what everyone reads?

For one thing, diversity. The vast majority of people will be reading the same top-selling books, as determined by Amazon. On Amazon, as The New York Times puts it, “Best Sellers Sell the Best Because They’re Best Sellers”. Amazon is algorithm driven; the books promoted by Amazon are the ones that are already selling well. That makes it very difficult for new authors to build audiences. It keeps lesser known, unconventional books from reaching the readers who would appreciate them. It narrows our national conversation down to a very fine point, and sands the edges off of human ideas and creativity. It excludes marginalized voices. It does to our culture what losing biodiversity does to our environment.

Authors and publishers need to worry. Once Amazon dominates 80% of the book market, who are authors working for? Authors will effectively be producing content for Amazon to sell on commission, and Amazon will have control over the terms. Everything we’ve seen from Amazon indicates that when they have leverage, they use it to squeeze the most profit for themselves at the expense of their partners.

Local bookstores are essential to a healthy culture around books. Independent bookshops are crucial for emerging authors, who find passionate advocates in the booksellers who hand-sell their books and can make their careers. They are where authors meet readers, where book clubs form, where children discover a love of reading, and where schools and businesses partner to increase the impact of worthy books. Every bookstore is an activist for the importance of books in our culture; they ar ethe fertile grounds where all kinds of wild narratives are nurtured and grow.

f Amazon succeeds in putting bookstores out of business, readership will decline and the importance of books in our culture will diminish. Books will not thrive without the advocacy, passion, and resourcefulness of our booksellers.

Booksellers are people so taken by the imagination and insights of books that they have dedicated their working lives to them. Only a very special person makes that choice, and independent bookstores are filled with remarkable people. People with enthusiasm and curiosity, who can press a new book into your hands that you would never have discovered otherwise. We need that humanity in the book market, not algorithms.

I created Bookshop.org, a public benefit corporation, to help independent bookstores compete for online sales. Bookshop.org has just hit a major milestone — in the past 16 months we’ve helped bookstores earn $15,000,000 in profit, providing a lifeline for many stores. We’ve made progress, capturing about 1% of Amazon’s book sales. But it’s not enough. We need to shore up the culture around books against the forces of consolidation and big business. We need to make this a movement…

Every Book Lover Should Fear This Graph“; Andy Hunter (@AndyHunter777) reminds us to take our book buying where it matters.

Note that the effect of Amazon’s growing monopoly power on competition isn’t the only concern for readers…

You may own a Kindle full of books, but in reality, the only thing you truly own is the Kindle. Buried in the spaghetti code that is Amazon’s Kindle license agreement is the truth: your eBooks are not yours. You have a license agreement to view those books, and Amazon can revoke it at any time…

Technology Review

And of course, even as we support our local booksellers, we must also support our libraries, both local and global.

* Neil Gaiman, American Gods

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As we vote with our dollars, we might send historically-accurate birthday greetings to James MacGregor Burns; he was born on this date in 1918. A historian, political scientist, presidential biographer, and authority on leadership studies, received both the Pulitzer Prize and the National Book Award in History and Biography for his work on Franklin Delano Roosevelt, America’s 32nd president, Roosevelt: The Soldier of Freedom.

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Written by (Roughly) Daily

August 3, 2021 at 1:00 am

“Before the monopoly should be permitted, there must be reason to believe it will do some good – for society, and not just for monopoly holders”*…

From the ever-illuminating Matt Stoller (@matthewstoller), eagle-eyed sentinel against exploitative monopolies…

I write a lot about big tech, but today’s issue is about something so basic and fundamental we literally don’t think about it. Salt. Salt mining is one of humanities’ oldest industries, with wars fought over this commodity. Cities like Venice monopolized the salt trade in the middle ages for geopolitical reasons, and the British tried to block colonists from access to salt during the American Revolution to prevent their ability to preserve food. 

Today salt is still used in everything from chemicals to food preservation. Its main use is deicing our roads, because salt from mines across North America, and shipped in from overseas, makes it possible to drive in all sorts of weather. Salt saves lives, stops car accidents, and makes our economy run. 

And in the U.S. and Canada, salt mining is being monopolized, as we speak…

In the winter, when it’s really cold and snowy, what Americans need is not a competitive semiconductor industry or better app stores. They need salt. And not the kind of salt that flavors our food, but the kind that melts snow and ice. If we don’t have salt, no one can drive, because salt is what keeps our roads manageable. Without salt, trucks can’t deliver supplies, people can’t get to stores or work, and the economy comes to a standstill. 

And people die. A lot of them.

Every year, over 1300 people die in car accidents due to snowy, slushy, or icy pavement, with another 117,000 injured. Snowy weather is also a huge waste of time and money, costing roughly $500M a day, and 544 million vehicle-hours a year of delay. Road salt doesn’t eliminate this problem entirely, but it comes close, reducing collisions by up to 88% and injuries by 85%. Studies show that deicing salt pays for itself within the first 25 minutes after it is spread. Roughly 40% of domestic salt, produced largely from mining, is used not for food or chemicals, but for deicing. It’s a major expense for cities and states, and commercial customers like shopping malls. And because weather leads to demand spikes, and America tends to operate in just-in-time style inventory models instead of managing risk by storing surpluses of critical commodities, there are often shortages of road salt precisely when everyone needs it most.

And that’s why I paid attention when ex-convict and junk bond king Michael Milken’s alleged private equity firm, Stone Canyon, bought two major salt producers over the last year. Early in 2020, Stone Canyon acquired Kissner, a producer of deicing salt, private label consumer salt, and salt-related chemicals. Then, nine months later, Stone Canyon bought Morton’s Salt, the largest producer in the world, for $3.2 billion, and it is now awaiting antitrust approval. Kissner is itself a roll-up of the salt industry, having bought Central Salt and Lion Salt and turned itself from a small Ontario-based regional distributor of ice melt into one of the giants of the industry. So Stone Canyon is overseeing a roll-up of roll-ups.

This series of mergers should terrify cities across the upper Midwest, who have to buy salt in unpredictable spot markets and often deal with shortages when the weather gets bad. Minnesota, for instance, bought roughly 1.5 million tons of salt for the 2020 season. Salt is a regional business, it’s just not economical to move extremely bulky road salt over land more than 150 miles, so while port cities can get salt from abroad in ocean vessels, and salt can be barged up the Mississippi river, much of the upper Midwest and Canada has to buy local. (It doesn’t help that America’s rail system is monopolized.)…

The salt industry is an oligopoly, and the number of suppliers to Governments in regions of the Great Lakes markets will shrink from 4 to 3 and in some geographies from 3 suppliers to 2. There are two consequences of this consolidation of salt production. The first is that prices will go up, and municipal budgets will be stretched. 

Salt is sold in blind bidding processes. Governments put out tender offers, and then suppliers bid. When bidding, suppliers will set prices by considering the supply levels among competitors. If there are only two competitors in a market and one of them has committed their salt production for the year, then the remaining one is a monopolist who can just set the price. This is particularly true for a bunch of Midwestern states, like Michigan, Ohio, Indiana, Illinois, Wisconsin, and Minnesota.

But the much more serious problem is that of shortages. The industry manages demand spikes from weather not by having spare production capacity or lots of storage, but by overpromising salt deliveries. The rule of thumb is that one out of every five years will see a mild winter with few sales, three out of five will be snowy but normal, and one out of five will involve extreme weather and much higher demand. Of course, rules of thumb have gone out of the window now that there’s more extreme weather, which means demand drops and spikes will be more common. 

One of the best ways of winning market share is to bid low, and then if demand is high, to simply not deliver to Commercial customers (Landscapers that service residential and commercial customers are almost always shafted first, meaning driveways and sidewalks go unsalted.) There are penalties in contracts for doing this to government customers, but when the snow hits, it doesn’t matter and the producers often pay the penalties if they are even enforced by the government entities. All customers need the salt when it snows, and a contract dispute doesn’t get in the way. 

It’s quite possible, and indeed likely, that shortages will worsen. Without competition, it will be much harder to go to a different supplier, because there won’t be any other suppliers. And private equity takeovers in general are operational nightmares, which means that it’s likely Kissner and Morton will have problems with production and distribution purely because mergers tend not to work out. 

There’s one final piece of the problem. Because private equity firms have too much money and not enough acquisition targets, prices for mid-market industrial companies are really high. So Stone Canyon almost certainly overpaid for both Kissner and Morton’s. To justify its investment, Stone Canyon is going to have to cut costs and reduce capital spending, which will harm production, because salt mining needs a lot of investment. Then it will likely have to raise prices. In other words, if the merger goes through, the financial pressure of paying such rich prices for salt firms will force significant price hikes, and potentially shortages in the market… 

A private-equity salt roll-up suggests that we’re in for shortages and price spikes: “How a Salt Monopoly Could Spike Car Accidents in the Midwest,” eminently worth reading in full.

For other reasons to be paying attention to salt: “How America got addicted to road salt — and why it’s become a problem.”

* Lawrence Lessig

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As we study saline substitutions, we might recall that it was on this date in 37 CE, following the death of Tiberius, that the Roman Senate annulled Tiberius’ will and confirmed Caligula, his grandnephew, the third Roman emperor.  (Tiberius had willed that the reign should be shared by his nephew [and adopted son] Germanicus and Germanicus’ son, Caligula.)

While he has been remembered as the poster boy for profligacy, Caligula (“Little Boots”) is generally agreed to have been a temperate ruler through the first six months of his reign.  His excesses after that– cruelty, extravagance, sexual perversity– are “known” to us via sources increasingly called into question.

Still, historians agree that Caligula did work hard to increase the unconstrained personal power of the emperor at the expense of the countervailing Principate; and he oversaw the construction of notoriously luxurious dwellings for himself.  In 41 CE, members of the Roman Senate and of Caligula’s household attempted a coup to restore the Republic.  They enlisted the Praetorian Guard, who killed Caligula– the first Roman Emperor to be assassinated (Julius Caesar was assassinated, but was Dictator, not Emperor).  In the event, the Praetorians thwarted the Republican dream by appointing (and supporting) Caligula’s uncle Claudius the next Emperor.

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Written by (Roughly) Daily

March 18, 2021 at 1:01 am

“All I know about music is that not many people ever really hear it”*…

In the early 1950s, James Baldwin moved to a Swiss village in the Alps with two Bessie Smith records and a typewriter under his arm. It was there that he finished his first novel, Go Tell It on the Mountain (1953), which he largely attributes to Smith’s bluesy intonations: “It was Bessie Smith, through her tone and her cadence, who helped me to dig back to the way I myself must have spoken…and to remember the things I had heard and seen and felt. I had buried them very deep,” Baldwin wrote in an essay.

For the eminent American novelist and essayist, music was generative, unearthing inspiration that may otherwise remain concealed. Ikechúkwú Onyewuenyi, a curator at the Hammer Museum in Los Angeles, hopes to rouse a new generation of writers with “Chez Baldwin,” a 478-track, 32-hour-long Spotify playlist based on Baldwin’s vinyl record collection.

“The playlist is a balm of sorts when one is writing,” Onyewuenyi told Hyperallergic. “Baldwin referred to his office as a ‘torture chamber.’ We’ve all encountered those moments of writers’ block, where the process of putting pen to paper feels like bloodletting. That process of torture for Baldwin was negotiated with these records.”…

Listening to the Joy in James Baldwin’s Record Collection“: “Chez Baldwin,” a 32-hour-long Spotify playlist based on Baldwin’s vinyl record collection.

* “All I know about music is that not many people ever really hear it. And even then, on the rare occasions when something opens within, and the music enters, what we mainly hear, or hear corroborated, are personal, private, vanishing evocations. But the man who creates the music is hearing something else, is dealing with the roar rising from the void and imposing order on it as it hits the air. What is evoked in him, then, is of another order, more terrible because it has no words, and triumphant, too, for that same reason. And his triumph, when he triumphs, is ours.” – James Baldwin

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As we listen, we might recall that it was on this date in 1575 that Queen Elizabeth granted choral composer Thomas Tallis and his student William Byrd a 21-year monopoly for polyphonic music and a patent to print and publish “set songe or songes in parts,” one of the first arrangements of its kind in England. Tallis had exclusive rights to print any music in any language, and he and Byrd had sole use of the paper used in printing music.

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Written by (Roughly) Daily

January 22, 2021 at 1:01 am

“The great packing machine ground on remorselessly, without thinking of green fields; and the men and women and children who were part of it never saw any green thing, not even a flower”*…

 

beef

 

Cheap beef and a thriving centralised meatpacking industry were the consequence of emerging technologies such as the railroad and refrigeration coupled with the business acumen of a set of honest and hard-working men like… Philip Danforth Armour. According to critics, however, a capitalist cabal was exploiting technological change and government corruption to bankrupt traditional butchers, sell diseased meat and impoverish the worker.

Ultimately, both views were correct. The national market for fresh beef was the culmination of a technological revolution, but it was also the result of collusion and predatory pricing. The industrial slaughterhouse was a triumph of human ingenuity as well as a site of brutal labour exploitation. Industrial beef production, with all its troubling costs and undeniable benefits, reflected seemingly contradictory realities.

Beef production would also help drive far-reaching changes in US agriculture. Fresh-fruit distribution began with the rise of the meatpackers’ refrigerator cars, which they rented to fruit and vegetable growers. Production of wheat, perhaps the US’s greatest food crop, bore the meatpackers’ mark. In order to manage animal feed costs, Armour & Co and Swift & Co invested heavily in wheat futures and controlled some of the country’s largest grain elevators. In the early 20th century, an Armour & Co promotional map announced that “the greatness of the United States is founded on agriculture”, and depicted the agricultural products of each US state, many of which moved through Armour facilities.

Beef was a paradigmatic industry for the rise of modern industrial agriculture, or agribusiness. As much as a story of science or technology, modern agriculture is a compromise between the unpredictability of nature and the rationality of capital. This was a lurching, violent process that saw meatpackers displace the risks of blizzards, drought, disease and overproduction on to cattle ranchers. Today’s agricultural system works similarly. In poultry, processors like Perdue and Tyson use an elaborate system of contracts and required equipment and feed purchases to maximise their own profits while displacing risk on to contract farmers. This is true with crop production as well. As with 19th-century meatpacking, relatively small actors conduct the actual growing and production, while companies like Monsanto and Cargill control agricultural inputs and market access.

The transformations that remade beef production between the end of the American civil war in 1865 and the passage of the Federal Meat Inspection Act in 1906 stretched from the Great Plains to the kitchen table. Before the civil war, cattle raising was largely regional, and in most cases, the people who managed cattle out west were the same people who owned them. Then, in the 1870s and 80s, improved transport, bloody victories over the Plains Indians, and the American west’s integration into global capital markets sparked a ranching boom. Meanwhile, Chicago meatpackers pioneered centralised food processing. Using an innovative system of refrigerator cars and distribution centres, they began to distribute fresh beef nationwide. Millions of cattle were soon passing through Chicago’s slaughterhouses each year. By 1890, the Big Four meatpacking companies – Armour & Co, Swift & Co, Morris & Co and the GH Hammond Co – directly or indirectly controlled the majority of the nation’s beef and pork…

Exploitation and predatory pricing drove the transformation of the US meat industry – and created the model for modern agribusiness: “The price of plenty: how beef changed America.”

* Upton Sinclair, The Jungle

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As we muse on meat, we might recall that it was on this date in 1637 (or nearabouts, as closely as scholars can say) that Cardinal Richelieu introduced the first table knives (knives with rounded edges)–reputedly to cure dinner guests of the unsavory habit of picking their teeth with the knife-points of the daggers that were, until then, used to cut meat at the table (though some suspect that Richelieu was acting in self-preservation).  Indeed, years later, in 1669, King Louis XIV followed suit, forbidding pointed knives at his table; indeed, he extended the prohibition, banning pointed knives in the street in an attempt to reduce violence.

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Written by (Roughly) Daily

May 14, 2019 at 1:01 am

“A buyer with disproportionate power”*…

 

Chickens are seen at a poultry farm at Hartbeesfontein, a settlement near Klerksdorp, in the North West province

Imagine the farm that raised the chicken that produced the meat that sits in your sandwich: a few workers, thousands of birds, tens of thousands of pounds of white and dark meat, work that starts before dawn and ends after dusk, uncertain revenue, slim profits. There are thousands of these small farms in the United States, and they benefit from millions of dollars of taxpayer support each year.

Chicken is America’s favorite protein, after all. Family farms are one of its most prized institutions. And farming is tough business. According to one estimate, a new, hangar-like chicken house costs something like $300,000 to build, and more to maintain and upgrade. “A farmer has to invest over $1 million just to get set up—a lot of debt to carry when you’re paid on average between 5 cents and 6 cents per pound of chicken produced,” Sally Lee of the Rural Advancement Foundation International-USA has found. Even when a chicken-growing operation is established, financial success is far from a sure thing. Given those realities—and given the American love for and support of the family farm—generous taxpayer subsidies seem not just sensible, but vital.

But a government report released this spring calls into question whether all those family chicken farms are really family chicken farms, and whether those taxpayer dollars might be better spent elsewhere. The Small Business Administration’s inspector general looked at poultry growers, and found that many of them are tied-and-bound contractors—so controlled by their agreements with giant food corporations that they no longer act like independent entities. Why offer them taxpayer support meant for the little guy?…

What your chicken dinner says about wage stagnation, income inequality, and economic sclerosis in the United States: “The Rise of the Zombie Small Businesses.”

For a consideration of the effects of corporate concentration on wages: “More and more companies have monopoly power over workers’ wages. That’s killing the economy.”

* Monopsony: 1) (economics) A market situation in which there is only one buyer for a product; also, such a buyer. [from 1930s] 2) (economics) A buyer with disproportionate power.  -Wiktionary

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As we cogitate on (real) competition, we might recall that it was on this date in 1947 that fabled computer scientist Grace Hopper (see here and here), then a programmer at Harvard’s Harvard’s Mark II Aiken Relay computer, found and documented the first computer “bug”– an insect that had lodged in the works.  The incident is recorded in Hopper’s logbook alongside the offending moth, taped to the logbook page: “15:45 Relay #70 Panel F (moth) in relay. First actual case of bug being found.”

This anecdote has led to Hopper being pretty widely credited with coining the term “bug” (and ultimately “de-bug”) in its technological usage… but the term actually dates back at least to Thomas Edison…

bug

Grace Hoppers log entry

 

Written by (Roughly) Daily

September 9, 2018 at 1:01 am

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