Author Archives: William King

3-D Printing and Food (Revised)

Thesis: 3-D printing could solve food shortages and malnutrition across the world.

The cost of a 3-D printer ranges from less than a thousand dollars all the way to near one million dollars. While this obviously represents a huge disparity in cost, I believe it is possible that these machines could be mass produced, driving down costs and enabling families to own these incredible machines. As these machines become more advanced and the costs of manufacturing them decreases, the applications for 3-D printers could reach new levels.

3-D printing has fascinated me since the first time I heard about it. It blew my mind that a machine could produce a 3-D object using an ink-like material. A recent article by the Wall Street Journal illustrated how 3-D printing could be used in space. The article describes how buildings could be made by using lunar dust as bricks. However, the most interesting part of the article was the fact that it stated that, “If astronauts ever do attempt to reach Mars, they may survive the journey by eating pizza made with a 3-D-printed food system for long duration space missions, now under development in Texas.” http://www.wsj.com/articles/how-3-d-printing-is-going-out-of-this-world-1428873155?mod=WSJ_hp_EditorsPicks. While 3-D printing is not a new development, I have not of it being used to make food. If proven successful, this technology could be used in poor countries and in countries experiencing famine to provide food in times of need.

A recent publishing by the Washington Post describes how patients could be given specific dosages of vitamins by actually hooking up the printer to their body. “We can see a time when you might be wearing technology that would be sensing what your body needs at any given time, whether you’re an athlete or whether you have a medical condition or whether you’re elderly,” von Hasseln said. “And that could theoretically link up to your printer at home and when you get home a specialized meal could be waiting for you that provides exactly what your body needs.” http://www.washingtonpost.com/blogs/innovations/wp/2015/01/28/5-amazing-ways-3d-printed-food-will-change-the-way-we-eat/. This is remarkable and would enable those with medical conditions and even those without  to properly monitor certain levels of vitamins and maintain proper health. This would help people in poorer countries get certain levels of nutrition their current diets do not allow.

The key with all of this is to develop 3-D printing cheap enough to allow for wide scale application and use. Currently, these machines are limited to companies who specialize in making products with these machines and other large institutions such as universities and NASA. The fact that people in space are actually planning on maintaining proper nutrition using these machines is remarkable. If successful, this industry could take off and provide an effective was of nutritional gain. I believe now is the time to invest in 3-D printing. This is our future and I could right an essay about the areas of life in which to apply this technology. As people constantly seek to create new medical devices to combat disease or find cures to disease, 3-D printing could be a solution to malnutrition and proper health maintenance.

Raising Taxes for the Wealthy is Not Necessary

Thesis: Raising taxes for the wealthy is unnecessary and should not be part of the national debate.

As tax season approaches, people will surely bring up how taxes for the wealthy need to be higher. Democrats and Republicans each have very clear stances on this. A Wall Street Journal article today illustrated who pays what when it comes to taxes and pointed out a few interesting things. First, tax revenue accounts for half the entire federal government revenue. This is incredible and shows how important tax revenue is for governments. Obviously the wealthy account for for a substantial portion of this and as it turns out, the top 20% of earners pay 80% of all income taxes. The top 1%, which is around 3 million people, account for 50% of all income taxes. Thus, 1% of all earners account for 25% of the entire revenue stream for the government. To me, this is absolutely astounding. Income tax is very necessary and the fact that the top 1% accounts for this proportion of the entire government revenue is crazy. People should not be arguing that the wealthy need taxes raised is just not accurate and uninformed.

On the other hand, income taxes for the lowest 40% of earners in negative. Why you might ask? According to the article, “In recent decades Congress has chosen to funnel important benefits for lower-income earners through the income tax rather than other channels. Some of these benefits, such as the Earned Income Tax Credit and the American Opportunity Credit for education, make cash payments to people who don’t owe income tax.” http://www.builderonline.com/newsletter/the-top-20-of-earners-pay-almost-80-of-all-income-tax_t. While this may seem very drastic, I am okay with these programs that aid the poor. I especially like the American Opportunity Credit for education. This credit that is very specific is smart and investing in education is very important. It will aid in getting this lower 40% out of poverty. The following link gives a layout of how much income one must make to fall into certain categories http://www.bankrate.com/finance/taxes/tax-brackets.aspx. The highest tax rate is 39.4% of income which is a lot of money to take from someone working hard.

I do not consider myself to be very heavily invested in politics. I try and look and every issue without any bias. I hope this article does not come off as being leaning too strong one way. The wealthiest Americans should pay a large majority of the income tax burden. They have the most money and can afford to take a slightly greater hit. While it is not exactly “fair” it is the way it always has been done and the way it should be done. Taxes are always a tricky topic but raising them on the wealthy needs to stop being discussed.

3-D Printing and Food

Thesis: 3-D printing could solve food shortages and garbage problems across the world.

3-D printing has fascinated me since the first time I heard about it. It blew my mind that a machine could produce a 3-D object using an ink link material. A recent article by the Wall Street Journal began showing how 3-D printing could be used in space. The article describes how buildings could be made using lunar dust as bricks.  These bricks would need to be airtight as well as radiation proof. The engineers are intending for this to be done on Mars which could open up doors to people living in outer space.

The most interesting part of the article was the fact that it stated that, “if astronauts ever do attempt to reach Mars, they may survive the journey by eating pizza made with a 3-D-printed food system for long duration space missions, now under development in Texas.” http://www.wsj.com/articles/how-3-d-printing-is-going-out-of-this-world-1428873155?mod=WSJ_hp_EditorsPicks. While 3-D printing is not a new development, I have not of it being used as a wide spread application such as substance for a journey to Mars. If proven successful, this could be used in poor countries and in countries experiencing famines. While I do not know how much nutritional value 3-D printing offers, given humans traveling for days in outer space, I’m sure it provides some. This article describes how patients could be given specific dosages of certain vitamins by actually hooking the printer up to your body. “We can see a time when you might be wearing technology that would be sensing what your body needs at any given time, whether you’re an athlete or whether you have a medical condition or whether you’re elderly,” von Hasseln said. “And that could theoretically link up to your printer at home and when you get home a specialized meal could be waiting for you that provides exactly what your body needs.” http://www.washingtonpost.com/blogs/innovations/wp/2015/01/28/5-amazing-ways-3d-printed-food-will-change-the-way-we-eat/. This would be remarkable and if done cheap enough, could be available on a wide scale basis.

 

Another useful application of this, especially in the US, could be to provide a useful way to recycle plastics and wrappers. The European space station are developing recycling systems that would allow plastic tools, food wrappers, packing materials and other space-station waste to be melted down and reprinted into other useful objects as needed. This would save money in space but allow a cheap and useful way for humans to recycle.

I believe now is the time to invest in 3-D printing. This is our future and I could right an essay about the areas of life this could apply to. 3-D printing will prove to be a very cost efficient way to operate in the future. It may hurt certain industries but will overall help the country. As we progress into the future, things will change and companies and people will need to adapt. This is be the case with 3-D printing but this will overall help the economy and the world.

 

 

Welfare and Jobs

Thesis: Americans needs to earn high wages in order to live and ultimately, save the government money.

Higher wages will lead to a higher standard of living for American citizens. This is why companies need to raise wages. I believe the way to do this is voluntary, not through government mandated actions. This will be good PR for the companies and lead to a better overall perception in the eyes of the public.

According to a recent article published by the Wall Street Journal, the majority of Americans receiving well fare already have a job. The perception many Americans have is that well fare recipients are unemployed and lazy, with the well fare checks discouraging them to go out and find a job. While this may be true to some portion of those on well fare, it is not true in the aggregate. A study by researchers at Cal Berkeley found the majority of households receiving government assistance are headed by a working adult. “The study found that 56% of federal and state dollars spent between 2009 and 2011 on welfare programs — including Medicaidfood stamps and the Earned Income Tax Credit  — flowed to working families and individuals with jobs. In some industries, about half the workforce relies on welfare.” http://blogs.wsj.com/economics/2015/04/13/get-a-job-most-welfare-recipients-already-have-one/?mod=WSJ_hpp_MIDDLENexttoWhatsNewsForth. This clearly is a problem that needs to be corrected by these large companies many of these people work for. There is no way people should be able to work and hold a full time job, but yet, still need additional assistance from the government. In the fast food industry, 52% of workers receive some form of government aid. Luckily, this receives a lot of attention in the media and the problem seems to be getting better. McDondalds says it plans to raise wages for some of its lowest 90,000 workers. While this is a good idea and sounds like a good plan, it really will not change much. They will pay $1 dollar more than the minimum wage to these workers. In my opinion, this is still not enough. It also only includes 90,000 workers, which is minimal compared to how many works McDondalds employees around the globe. In addition, “The increases could reflect some payback after several years of wages barely keeping pace with inflation, or could indicate that skilled-workers who resorted to restaurant jobs in the economic downturn are now seeking better-paying work.” http://www.wsj.com/articles/mcdonalds-to-raise-hourly-pay-for-90-000-workers-1427916364. If wages are not keeping up with inflation, then the purchasing power of these people are increasing and thus, they are essentially getting poorer. This is a problem that needs to be corrected.

Finally, the low wages paid by companies around the country costs the US government, and tax payers, money. A recent report for that a single 300 person Walmart store in Wisconsin costs tax payers at least $904,542 per year, or about $5,815 per employee. This is crazy as this money could be put to such better use. As this illustrates, the system is messed up and the only way to fix it is for companies to provide higher wages. This will have so many positive externalities for the country now and in the future.

 

 

 

Housing Market

Thesis: While the US housing market look to be improving, lenders and borrows alike must continue to be cautious.

Traditionally, spring has been a time of a lot of action in the housing market. News out of Jacksonville this week indicate the season if off to a good start. According to the article, houses are selling in Jacksonville and cities across the country. “The downturn was brutal for Jacksonville; home sales sank and foreclosures were running at high levels during the crisis. But in recent months, home sales have shot up, the percentage of distressed homes on the market has declined and traffic at model homes in new subdivisions has been brisk.” http://www.wsj.com/articles/housing-market-sees-hopeful-signs-of-spring-1428593691. This is positive for the city of Jacksonville as well as for cities across the country as this positivity could spur an increase in optimism in other cities. After last years average year and an overall slow recovery, people in the industry knew this needed to be a good year. Both US sales of new and old single family homes are up in the first two quarters of 2015 when compared to 2014. Although all of these things look positive, lenders and borrowers must continue to be cautious.

Lenders must continue to lend to borrowers that prove to be credit worthy. While many families may be eager to borrow at these low rates that still exist today, they must not over extend themselves. Lenders lending at low rates many be eager to lend to more people to compensate for the average returns. However, as the recovery continues, rates are sure to increase which will lead to higher revenues for commercial lenders.

“Based on its National Delinquency Survey, the Mortgage Bankers Association (MBA) reported that most measures of delinquency and foreclosure rates on mortgage loans in the fourth quarter are back to pre-crisis levels.” http://www.huduser.org/portal/periodicals/ushmc/pdf/NationalSummary_4q14.pdf While this is positive, it is something that needs to continue. While these numbers are very positive, they are this way because lenders still have 2008 on their minds. As we move towards a recovery and away from that dark period for the housing market, lenders must not forget how much they lost. As profits begin to climb, lenders can not become loose or else a repeat of 2008 could be right around the corner. It appears these low interest rates have begun to spur borrowing, but it is not likely to last. As rates increase and borrowers are more strained given the increase in the amount of interest on their loans, lenders must be cautious and take this into account. 

Overall the housing market is improving. I am very interested to see what the next five years bring. Lenders and borrowers must continue to be smart and borrowers must not over extend themselves. There is a lot speculation about the future so it’ll be interesting to see how this plays out.

 

US-Cuba Relations

Thesis: The US must actively support Cuba and it’s growth by installing large companies in the country.

The United States and Cuba have begun to improve relations and it should be positive for both parties, especially Cuba. Cuba has long been shut out from the US and all it has to offer. Due to conflict because of its communist regime, a strict trade embargo was enacted. This shut Cuba off from much of the outside would and left the county behind many of its neighbors. This past December, change began to take place as the US and Cuba made strides towards diplomacy. According to an article published at the time when the announcement was made, “Word of the massive change was met with passionate opinions and some protests in the United States. And tearful celebrations erupted in the streets of the island after President Raul Castro announced the news in a televised address.” http://www.cnn.com/2014/12/17/politics/cuba-policy-change-reaction/. This shows just how long the citizens of Cuba have been waiting for this news. It is monumental and they know it will improve their standard of life.  Large companies have the potential to enact this change. They can make a substantial change and reap profits while they are at it.

Leaders from the United States and Cuba met in Panama today to discuss relations between the two countries. While things have improved, they are still not perfect. According to the article, “An informal, face-to-face discussion between President Barack Obama and Cuban President Raúl Castro will symbolically punctuate their agreement in December to end to more than five decades of Cold War enmity. But the two governments have yet to resolve some key issues, including Havana’s demand that the U.S. remove Cuba from its list of countries that support terrorism.” http://www.wsj.com/articles/americas-summit-puts-focus-on-u-s-cuba-thawand-remaining-hurdles-1428525510. While this may not help either of the two countries per say, it will build on relations and make an increased trust in Cuba by the United States.

The United States must begin to help the country grow and become modernized. Cuba offers incredible growth opportunities for large US corporations. Cuba has been untapped and has been stuck in the past for decades. This is why large US corporations should go in and tap this potential new client base. It would be a nice source of revenue for companies but more importantly, it would help Cuba grow and become a country that could one day, become a democracy. The US must look at its relation with Cuba as a chance to foster positive relations and turn it into a democracy.

 

Reform Education (Revised)

Thesis: Education reform will be one of the most important innovations of the next 50 years and will be best accomplished using the teacher as a reference point with most learning done individually.

Most people when asked about education, specifically college education, say it is way too expensive. College education, while valuable, needs to be reformed both from a pricing standpoint but more importantly, from a structural standpoint. Individual learning aided with the help of teachers is in my opinion, the future of education.

My argument, while being able to decrease the cost of college education, is more focused on the learning aspect of education. When I go to a large lecture, it is very difficult to pay attention. Between the thousands of websites and social media applications available to kids today, it is no wonder many people report this exact problem. Even if I do pay close attention, I think I could teach myself most of the material in less time. With the help of textbooks and the internet, along with slides provided by the professor, there is no doubt I could teach myself the material. This is why my solution to the problem of education is to make the teacher a reference point for questions. The teacher would assign weekly readings and add lecture slides at the beginning of the week. The entirety of lecture would be online and be dedicated to answering students questions, similar to office hours. This way, the student would “teach” him or herself all of the material before “class” and any material they do not understand could be answered with the help of the teacher. All students could engage in the forum and ask questions while other people watched and benefited from the experience.

The cost of college education has risen to around $23,000 dollars per year. This number is sure to increase if something does not change. Just ten years ago, the average price was $13,000 dollars. http://nces.ed.gov/fastfacts/display.asp?id=76. This is a substantial increase and unless structural change takes place, the cost will keep rising. The University of Texas School of Architecture has an interesting breakdown of the cost of college education. According to them, nearly 60% of the cost of tuition is for university professors and staff’s salaries and benefits. http://www.utexas.edu/tuition/breakdown.php. While my proposal will not eliminate these costs, it should substantially decrease them. The teacher would benefit from this design by not having to go to lecture and teach the same thing repeatedly. They could use slides from previous years and benefit themselves from the potentially thought provoking discussions on the forum. This could lead to a decrease in salaries. In addition, teachers could have more time for research and because of this, administrators could lessen their salaries as they push for a research based compensation. In addition, operating expenses make up around 17% of the total cost of college. This could be nearly eliminated as the infrastructure needs at a traditional university are lessened. Classrooms would be nonexistent and the overall cost of maintenance would drop.

Overall, college is a time of great learning and growth. However, the system is flawed and I think change is in order. With my proposed plan, the cost of college education could fall and the overall learning and efficiency would increase dramatically. Unless this change occurs, I fear prices will continue to increase and the US will continue to fall behind other countries from a learning standpoint.

Spotify: The Future of Music

Thesis: While many people criticize Spotify’s compensation methods, it is the future music and will lead to more revenue for everyone in the long run.

Spotify has recently put a number on the cost of a single play of a song. They estimate the cost of a single play on their Spotify is about 7/10’s of a penny. Royalties in the music industry are incredibly important and while Spotify may underperform when compared to revenues from compact CD’s, they outperform when it comes to passing revenue along more broadly. Spotify estimates that since inception in 2008, they have passed over $2 billion to rights holders across the globe. Spotify says that they only keep about 30% of the cash they bring in. This means that they are still compensating labels, publishers and artists a fair amount. In an age where digital piracy is alive and well, music steaming appears to by the way for the future.

When looking at figures in the music industry, people are moving away from buying CD’s and songs to streaming them. When compared to applications such as ITunes, Spotify offers many benefits. According to a recent article published by Business Insider, “Spotify is much more social than iTunes, it also has the added benefit of its own free app store. Users can download apps that recommend new songs to check out and apps that tell you when your favorite artist is coming to town.” http://www.businessinsider.com/spotify-or-itunes-which-is-better-2013-4. Spotify is a cheaper and easier way to get the songs you want without being tied down to them. This is where Spotify and its competitors come it. Companies such as Apples Inc.’s Beats Music and Pandora Inc. all have seen this and have tried to monetize the value of streaming music. Spotify offers subscribers a fee of $9.99 dollars per month to play basically any song on demand. They also offer an ad based free version that is available to consumers to do not wish to pay the $9.99 dollars per month. In 2014, the streaming music industry was values at $1.87 billion dollars. With this number sure to go up in the future, music makers and those in the industry must adjust their expectations regarding compensation. Martin Goldschmidt, co-founder of Cooking Vinyl, a British label that is home to Billy Bragg, the Prodigy, Amanda Palmer and other acts says it best: “A lot of artists think the world owes them a living, and it doesn’t.” http://www.wsj.com/articles/selling-songs-for-a-song-scrutinizing-the-streaming-model-1427468267.

The final upside of Spotify and a way to protect the future of the music industry is that it has been proven to deter the illegal downloading of music. Many people who would choose to take the time to download a song illegally now have a free way to access nearly any song they want. It is estimated that the number of people downloading music illegally has fallen from around 15% in 2008 to 11% in 2014. While this may not seem like a lot, the trend is music in the right direction and is most likely to continue moving in the right direction and music streaming progresses.  Curbing piracy will undoubtedly lead to more profits for everyone. While music streaming is still in its infancy, I believe it is the future of music and will lead to a better music experience for everyone in the industry and the consumers who rely on music everyday.

Business Investment is Falling

Thesis: Now is the time for companies to invest in themselves given the upcoming rise in treasury yields.

Many companies have slowed investing considerably this winter. This is not surprising given what has been occurring on a macro level. The value of the dollar is rising and the overall world economy is struggling. These things coupled with hurting US energy sector has most likely contributed to these figures. According to recent reports, the demand for investment in non-defense capital good excluding aircrafts fell 1.4% from January. This is after we saw flat growth for the first two months of the 2014.

BN-HO848_Durabl_G_20150325111202

 

According to experts, “Weak business spending—along with other factors like a downbeat export picture—prompted some economists to downgrade their assessments of how much the economy expanded in the current quarter. Morgan Stanlety said it now thinks gross domestic product grew at a 0.9% annual rate in January through March instead of its prior estimate of 1.2%. Macroeconomics Advisers lowered its estimate a tenth of a percentage point to 1.4%. http://blogs.wsj.com/economics/2015/03/25/weak-demand-strong-dollar-u-s-businesses-arent-investing-much/.  This is why I believe now is the time for companies to engage in serious capital expenditures. The US economy has been performing well relative to the rest of the world. Interest rates are due to start increasing as we have seen with this graph provided by FRED.

fredgraph

 

The Fed has recently announced they will most likely being raising interest rates this year after many years of keeping them as low as possible to spur investment. This is why now is the time for companies to invest in themselves. In as soon as this year, the cost of borrowing could become a lot more expensive, leading to potentially lessened profits for companies. Federal Reserve vice chair Stanley Fisher said, “It will likely be appropriate for the Fed to raise rates this year, but said rate increases won’t followed a predictable or necessarily steady course once the Fed begins lift-off.” http://www.businessinsider.com/stanley-fischer-fed-speech-2015-3. This unpredictability is another reason why now is the time to invest. Capital expenditure is a key driver of revenue growth and can be the difference between sustained long term growth or stagnation. If companies are not able to invest in themselves and buy new plants, property and equipment (PP&E), then they can not grow and build revenue. While some companies may counter this by saying they can cut costs and improve the efficiency with how they operate, I say good luck. These kind of management strategies are good in the short term but are not sustainable. At some point, investment is necessary. While rates are expected to increase, this does not mean they will shoot up overnight. It is necessary for companies to begin building a plan and capex schedule for the next 10 years so they are able to prepare for this increase. Many companies have gotten comfortable with these low rates and may be dealt a major blow when this increase occurs. Hopefully companies are prepared and are able to adjust properly to whatever action the Fed takes. If not, it could mean trouble for GDP growth over the next few years.

 

Adidas Needs to Boost Growth, Quick

Thesis: Adidas has seen slumping profits and needs to turn things around by better understanding its consumers needs.

Adidas has been slumping in recent years as Nike continues to dominate them not only in the US but abroad as well. Adidas has a large market share in Russia, but a hurting Russian economy as well the falling value of the ruble have hurt profits. Adidas needs to focus on the US, which is what they are planning on doing. Adidas says that if they can capture New York and Los Angeles, the two largest fashion cities in the US, then they will be able to control the US. Back in 2006, Adidas had 18% market share in the US. Since then, market share has fallen to around 7%. This is a dramatic drop and amid concerns over stagnating growth, Adidas recently announced they are looking for a new CEO.

Adidas claims that, “Central to their growth strategy is a decision to “over-proportionally” invest in talent and marketing in metropolitan areas around the world, focusing on Los Angeles, New York, London, Paris, Shanghai and Tokyo.” http://www.wsj.com/articles/adidas-targets-turnaround-with-new-strategy-1427358107. If this was the case, I believe Adidas would have done a better job creating clothes and shoes people enjoy and want to wear. If they “over-proportionally” invest in TALENT and MARKETING then they should have better results. Talent is what drives profit at the end of the day. If they are recruiting superior talent, then they should have at least growing profit and market share. In order to gain market share, they should try and differentiate themselves from Nike by coming up with unique products and looks.

The University of Michigan was sponsored by Nike for seven years before the contact ended in 2008. Adidas swooped in and took it upon themselves to offer one of the biggest contacts for university sponsoring ever. Adidas offered to pay $7.5 million dollars per year to the athletic department. This is significantly more than the 7 year $30 million dollar contact previously held with Nike. http://www.michigandaily.com/content/adidas-just-did-it. However, a recent survey sent out to all student athletes showed that the majority of athletes at the university preferred Nike over Adidas. If I was Adidas, this would make me incredibly unhappy and frustrated given the contract is almost up and how big of a client Michigan is for them.

Sponsoring Athletes and universities are a great way to gain exposure with a wide audience. However, even when these athletes do not prefer the apparel, change needs to take place. Adidas is planning on making changes. According to the Adidas officials, “Adidas has also vowed to speed up how quickly it brings new products to market and invest more in its core brands, particularly in the US. The company wants to open 55 new stores in the U.S. in the next 2½ years. It has 30 today.” I believe adidas should invest in core brands that are profitable, but also make new products that give them greater exposure and allows them to differentiate themselves from Nike. Opening new stores and getting products to market sooner requires capital. This is a big gamble from Adidas and it better work. I think bringing in a new CEO is a great start. Adidas needs to understand its customer base better and figure out ways to gain back their lost market share.