The executive search firm Russell Reynolds Associates recently profiled CEOs of the top 135. They found 22% graduated in economics – more than any other major.
J.P. Morgan’s chief economist, Michael Feroli, estimated sales of the iPhone5 could boost annualized GDP growth in calendar Q4 by 0.25 to 0.5 percentage points. You can read more here.
Last week the Social Security Trustee Report reported the Social Security trust fund will be exhausted by 2033. Comparing this date with previously released estimated Veronique de Rugy at the Mercatus Center highlights the estimated exhaust date has continued to decline and is now estimated to happen 20 years sooner than estimated in 1990. The chart below makes this point clear and should give most pause to any who think we have until 2033 to deal with this political third rail.
Last month – while in NYC for the CleanSlate executive forum – I stayed at the Westin New York. I arrived in NYC at 1AM and knowing in advance that I’d be arriving late called the Westin to check-in earlier that day. I’ve been “walked” enough times to know that when I’m going to be arriving late at the hotel I should call in advance.
Like airlines and other service industries driven by capacity utilization, hotels tend to overbook their properties knowing that some guests will never arrive. The practice of overbooking is lucrative for the hotel when it bets right but is expensive when it bets wrong and sells more rooms than it has in inventory. “Walking” is hotel industry parlance for the practice of sending guests to another hotel property when they’ve oversold their rooms. Airlines will buy passengers off an over-sold flight by offering them vouchers for future travel. Rather than a voucher for future travel, hotels typically pay for the single night stay they turned you away for. When staying multiple days, they will typically have you come back to the hotel to complete the remaining days of your reservation. Because it is expensive for a hotel to “walk” guests, some hotels do not engage in the industry practice of overbooking.
When I call earlier in the day of arrive to let the hotel know I will be arriving late most hotels will just check me in, but I have been “walked” even when calling in advance to check-in (also at a Westin BTW).
I arrived at the Westin at about 1:30AM and they didn’t have my room nor had they checked me in when I’d call earlier that day to ensure my room. It begs the question, why won’t hotels let you check yourself in like airlines do?
There is of course a time coordination problem. Airline capacity is measured by the number of seats on a given flight. Because that flight leaves at a specific time the capacity of that flight goes utilized or underutilized at a very specific time. This enables the airline to fill all available seats just short of this very specific time. Because hotel guests arrive throughout the check-in time window – which is typically 4PM to midnight – hotels are forced to bet on the last guest – the marginal guest – not showing in an overbooked situation.
But why not allow hotel guests the ability to see the properties entire inventory like airlines do? When I check into a flight I can pick the exact seat I want. Customers can also pay a surcharge and upgrade their seat to a “premium” seat if they so desire. This is lucrative for airlines and contributes to their profit margins. Why not allow hotel guests the ability to pick their room? It might offer hotels a way of upselling their customers to “better” rooms.
By allowing customers to check-in their room online within 24 hours – or even 12 hours – of arrive hotels could get a better sense of what utilization will look like. Guests could specify what time they will arrive as they check-in and hotels could still sell that particular room if the hotel guests fail to arrive within 3-4 hours of they pre-specified time.
Deficit reduction is all the rage these days and as a result there are a plethora of (formal and informal) plans on how to address the rising national burden. The Committee for a Responsible Federal Budget recently published a comparison tool to help us mere mortals navigate 30 different plans. You can also look here for a printer-friendly version of all of the 30 plans in full detail.
My most recent Vision Magazine article on oil prices can be found here.
Sally Kohn’s recent prose in USA Today was right in spirit, but nowhere else. Yes, we should worry about innovation. Yes, the future of the US economy is innovation. And yes, we should be making strategic investments into innovation. But it is ludicrous to suggest the national debt discussion is some “ideological attack.”
Kohn inaccurately compares a company’s income to the US economy’s GDP. The analogy fails on the surface. GDP measures national production, not the US government’s revenues – which are the ultimate source of repayment for debts issued. The US government collects net receipts of $2.16T – giving the US government a ratio of over 6-to-1.
The following was original published in CE Vision Magazine. You can download the full issue here.
The presence of electric vehicles at CES continues to grow with 2011 setting records on multiple fronts. As gas prices rise and show little sign of retreating any time soon, interest in electric vehicles will continue to peak in the years ahead. Here is some math to consider.
First, electric vehicles are good for domestic economic growth. Remember, economic growth in the U.S. is measured by GDP which consists of consumption + investment + government spending + exports – imports. Every dollar we import counts against domestic growth as we measure it under GDP. This includes things like lumber from Canada, consumer electronics from Asia or oil from the Middle East. If we replace vehicles that use traditional combustion engines with electric vehicles we presumably need to import less oil. We replace that oil demand with electricity demand that is created (and consumed) here in the U.S.
Adding an electric vehicle to a household should reduce the gasoline consumption of that household significantly, but it will conversely increase the electricity consumption. A single electric vehicle will increase electricity consumption by a third to one-half and two electric vehicles will consequently increase the electricity use for that household from 60 percent to possibly double the electricity use of that household.
Technology diffusion has a geographic component. A neighbor buys a new technology— be it a computer or an electric vehicle—and some of the first to notice are those most intimately associated with that individual. These are frequently neighbors, family, coworkers or other individuals in overlapping social circles. They likely live in relatively close proximity to one another, creating a geographic factor as technology diffuses from one party to the next. In the case of electric vehicles, this geographic component might be exacerbated in the earlier years because some of the vehicle manufacturers are restricting the markets where the vehicles can initially be purchased. Driving Demand Where might we see high electric vehicle adoption in the future? Basic accounting suggests electric vehicles are most financially lucrative in areas with the lowest electricity prices. The average retail price for electricity in the U.S. is roughly 12 cents per kilowatt/hour. Many of the states with the lowest electricity rates are in the western U.S. Another factor likely to influence electric vehicle demand is average miles driven. The fewer daily miles driven, the more cost advantageous an electric vehicle becomes. According to somewhat dated information from the U.S. Energy Information Agency (EIA) that has presumably not changed in relative terms, individuals in the western U.S. travel the least during the year. While we don’t have daily miles driven, these figures likely provide a good proxy and highlight another positive attribute to western states when it comes to identifying future electric vehicle demand.
Because electric vehicles can be expensive, household income also will play a role in diffusion. As you might surmise, above average household incomes are typically correlated with higher electricity costs. Only nine states have above average household incomes and below average electricity prices. Many of these states are in the West where miles traveled are relatively low. These include Colorado, Nebraska, Oregon, Utah, Washington and Wyoming. The other states not in the western U.S. are Iowa, Minnesota and Virginia. There are a variety of intangible characteristics that will influence electric vehicle demand and the subsequent impact and timing they have on the U.S. economy. If I was making the call today, I’d watch the nine states listed above.