"UPS figured out that if they created routes for all their trucks traveling across the country that avoid left turns at all costs, it saves them a lot of gasoline."
I wonder if this will stick after they electrify and no longer have an idling fuel cost.
Electric cars do still have costs to operate (and they aren’t even that great environmentally because the tires cause air pollution.) I also suspect the right turn only route is safer for the drivers… wouldn’t know though.
Yes, they have operating costs that are common to ICE trucks as well, like human operators, but have lower maintenance and fuel costs and have a favorable profile of fuel usage (great at stop and go).
On the tire point, which is kind of a non-sequitur and seems possibly trolly, ICE trucks also have tires that wear with usage, and also have brakes that wear more rapidly since they don't have regenerative braking. If you are less constrained by fuel efficiency, then you can begin to optimize routes for tire and/or brake wear or safety without as steep of a tradeoff on fuel costs.
But really, if you're citing a guy named Benjamin Wild Pugsley, haven't you already lost the argument? Just kidding, great name.
More seriously: I'm mostly persuaded by your argument here, and I feel keenly aware of how reactionay small-business owners seem to be as a political force. But what about small business as an economic ladder for new immigrants? I worked in economic development in San Francisco's Mission District for years, which is full of inspiring examples of risk-taking entrepreneurs trying to do better than the awful jobs commonly available to them. Would like to hear your take on this--do most of these business fail, and is this more of a mirage than a real ladder to success?
One of the main reasons Trump got 74 million vote is the precariat is making more than it used to. Big employers upped pay a few bucks an hour, and many small employers matched these increases in whole or in part.
Excellent take Matt. When I saw the title in my inbox, I immediately thought of the Hurst and Pugsley paper, I'm glad you include it. They document the facts I cite most often when discussing the societal value of "small business" with my friends and colleagues. In summary:
(1) Provide an existing service to an existing market
(2) Little desire to innovate or grow
(3) Motivated mainly by desire for schedule flexibility and autonomy
Loved this one. Just going to make a brief comment on Hawley and the so-called "Working Class Republican Party."
When he first entered the scene, I was worried about Hawley, because he was early to grab ahold of a political alignment that is much more popular in European right-wing movements. I am less worried about him now, since his incompetence (like Trump) essentially dooms his project.
One other thing I realized. It's harder to get a pro-welfare agenda on the right wing in the United States. It's a little too easy to demagogue about who the welfare is going to. Protectionism, yes, I think we will see more of that on the right wing (as Matt suggested). But, individual material demands, will take much longer to catch on in the US... longstanding attitudes are hard to break, particularly with these voters.
Is there an aesthetic component to the anti-bigness argument? It seems to me that part of what is so offensive about big chains is that they are ugly. It is tiresome to see the same logos lit up in neon primary colors every few miles. And the big box warehouses like Lowes don't fit into downtown business districts. Instead, you have to drive to the Lowe's campus with empty parking spaces and asphalt as far as the eye can see.
I think this take is mostly right, but I wonder if it's true for every industry. I work in childcare, a notoriously low wage industry, in a high cost of living city in a blue state.
Here there are basically three different options: home childcare providers, big for-profit childcare chains and large non-profit childcare centers--sometimes part of a larger organization like a religious organzation, but not always. All of these are liscened by the state. This doesn't include nannies and informal childcare arrangments. In my expience the childcare worker workforce partially overlaps the nanny workforce, but not completely. And many families who need childcare could never afford a nanny. Many of the home childcare centers have just one person working for themselves; some hire an assistant or two.
From a worker's perspective, the best place to work is either one of the non-profit centers or as a home provider. The home providers get the benefits of running their own businesses; except it's more like running a bookstore or coffeeshop in that it's really hard to take sick or vacation time. The non-profits pay better than the for profits, mainly because the non-profits roll any profit into higher pay or upgrading facilities. I'm wondering if there are other industries where this is also true? It might be that childcare workers as a whole are so underpaid that the typical non-profit/for profit dynamic doesn't work here. Smaller non-profit centers almost always have to spend more on health insurance for employees than the chains, but the cost employees pay in premiums is usually similar.
The worst place to work is as an assitant to one of the sole proprietors. Low pay, no benefits provided, and very little flexibility.
For parents looking to find childcare for their kids, the best affordable option is a good home provider. But finding one can be hard, and often relies on word of mouth reccomendations. There are some bad home providers and a lot that are so-so. The for-profit centers offer a more consistent experience, but aren't usually excellent.
The non-profits generally offer the best experience and are the biggest source of innovation. Some of them have small chains, but the biggest way innovation spreads in this sector is through continuing education. The state mandates a specific number of training hours each year for all childcare workers, so there's a market for providing high-quaility training. (There's also a market for low-quaility online, checks the boxes, training.) Some of the innovative centers have a big side business in offering training, "Come see what we do here at _____, and take back these ideas to use in your center."
Of course what counts as innovation in childcare in a big city (ways to have children lead the curriculum through play, anti-bias education strategies, trainings on how to support social-emotional growth in todders) may not be popular in more rual areas. (Yes, some of this is about race and LGBTQ issues, but the bigger divide is between authoratarian vs. authoritative/permissive parenting styles.)
The for-profits operate in rual areas as well as the city, so adopting these innovations and scaling them isn't going to work in all their locations. There are non-profits in rual areas as well, but they tend to innovate less or serve specific religious communities.
Some of the home care providers are also innovators, but they don't have access to the resources the non-profits have. Although a few successfully transition to from a career as a home provider to more flexible work providing training to other home providers.
So small can be good for almost everyone, but not-consistently. Big is consistent, but not great. And the medium-size centers are the best place to work, and one of the better products for consumers. Is that true for any other industry?
The real limit on the analogy is that child care can become better, but it can't really become more efficient or more productive. The adult to child ratio will remain about the same no matter what training or innovation occurs. The Chick-fil-A in our small town has dramatically improved drive thru efficiency. There is an entire meme genre about how good the company has become and moving people through quickly. But serving more "customers" with the same amout of labor just isn't an option for a daycare already mazing out staff to child ratios. So the size of the provider can't do much to change the average quality or price.
That’s true. The state mandates minimum adult:child ratios. And the best programs exceed those somewhat. Parents prefer it, and it’s much better from a worker perspective to be able to call in sick, knowing there’s a float teacher to cover your class and your boss won’t pressure you to work anyways.
And that inelasticity in productivity might be a reason to regulate childcare centers in a way that favors non-profits. Especially in any plan to have the state subsidize childcare more widely.
Thanks, that is interesting. Of note, the entity that bought out the 750 Australian centers after ABC went bankrupt was a charity owned by 3 non-profits.
Australia appears to subsidize childcare via a tax rebate. So the profits they were making were largely from taxpayer money, which was pretty controversial there.
I’m all for universal childcare in the US, but most of the proposals are pretty light on details of which types of childcare get funded. Then again, private companies earning profits based on Medicaid/Medicare payments had worked out for healthcare companies without much blowback.
When the first real big-box retailer (K-Mart) opened in the late 80s in the small town I grew up in, it was a significant improvement over the alternatives, mostly in terms of selection but also price. And aside from the local Woolworths and Ben Franklin (themselves chains albeit located downtown on the old main street), it didn't really compete with mythical local businesses, but with other less-good regional chains such as White-Mart and Pamida. It was followed by Target and then Wal-Mart, and they in turn are now being cut into by Amazon, because the simple truth is that being able to have a world of goods affordably delivered to your door step is an improvement in quality of life for most people. And no mom-and-pop retailer is going to be able to pull off the infrastructure investments it takes to do that.
But I do think we'd be better off if more of those goods were manufactured locally instead of all overseas.
Matt seems unaware that narrowly framing the risk posed by big businesses as an anti-trust, competition and choice issue ignores the danger posed to democracy by the outsized political influence of monopolies or near monopolies, both directly through lobbying and indirectly via the threat of relocation if their interests are not put ahead of those of the general population.
Superior customer service is one benefit "mom and pops" provide, and I would add: you get a different feel from local restaurants/breweries/stores than you do from chains. You can call this "customer service" if you want, but it brings a local value to the area, which your local Panera simply wont match. I love Starbucks, and am a card carrying member of their rewards program, but I also get all my coffee from a local roaster, and think the best coffee in town is a nearby local coffee shop. This character, I think, is beneficial for the community.
The reality is these kinds of businesses typically don't need lots of protection. Particularly construction companies: every local jurisdiction has its own building codes, and that's probably a good move for many communities. It's quite different building in Miami than New York, which has different concerns than Phoenix, which will inevitably have different issues than San Francisco. Local control makes more sense since specialization is not merely specializing in building practices but in the nuances in each market (be it taste or environment, or local architecture).
I think one thing that Mom & Pop appears (provide me data!) to do better than chains is small community support elements. Also, in places like mine that don't see a lot of national or internationally headquarterd companies, they provide some additional tax revenue on ownership profits versus out of area companies.
Belated comment; big v. small is not about antitrust or competition; it is part of an overall desire to return to am imaginary status quo ante prior to the "modern" period where "Small Town America values" reigned. Big corporations are being lumped in with all the bad modernist forces that have eroded those (white Christian male) values. In this sense, big box stores, "feminism," technology, BLM, et. al. are all part of a series of attacks felt on something Hawley is trying to protect. Hawley dresses up the emotional response of being attacked as a philosophy, but it isn't, which is why "eroding the free market by forcing wage controls" (how he would perceive minimum wage laws) is not an acceptable policy response. He just knows that if things were "Small Town America" again wages would magically be fixed because those (white Christian male) small business owners would do the "just and moral" thing. He is a philosopher like Paul Ryan is an economist -- with a superficial layer of ideas which once pierced reveal a soup of feelings, assumptions and givens.
While passing through Kansas on a college road trip, my friends and I made the foolish decision to get off the interstate and proceeded to immediately get lost. This was a year or two before the iPhone came out, when that was still possible.
We eventually stopped for gas in a small town and asked the woman behind the counter where we could get something to eat. She told us that there were two restaurants in town, Jimmy's and Crappy's. When we asked her which one she would recommend she looked thoughtful for a moment and then asked us, "Do you like good food?" When we averred that we did, she told us, "Well then don't go to Jimmy's."
It turned out that Jimmy's and Crappy's occupied the same building on the main drag, and once inside it wasn't really clear where one restaurant ended and the other began. We did our best to seat ourselves on the Crappy's side of the line, and then sat down to enjoy what turned out to bethe worst meal I have ever paid money for in my life. Just bafflingly terrible food. Cold and overcooked burgers with sandwich slices instead of buns. French fries that were a solid conjoined mass. Partly microwaved baked potatoes.
I can only imagine what Jimmy's would have been like.
Such was the state of roadside food in the 1950s - a crapshoot - when Ray Kroc had the bright idea that maybe people would appreciate knowing they could expect a consistent quality if they went to the place with the golden arches.
I think the biggest problem with economic entities like Walmart and Amazon is not their impact upon local Mom & Pop stores (see Oriental NC < https://www.newsobserver.com/opinion/op-ed/article55900800.html > and I personally saw the destruction of our small town downtown business district in the 1980s following Walmart's entry into our city outskirts). I think the biggest problem has been the anti-competitive control over the suppliers of products to their monopolistic control over the access to the marketplace. Walmart drove profitable businesses into bankruptcy (Vlasic Pickles) or caused the shutdown of manufacturing in the USA and outsourcing of that capability to cheap labor markets (i.e.: China; see Rubbermaid) due to their price-fixing behaviour. Always low prices have had a high cost in lost American jobs.
Well we get cheaper products and south east Asian living standards improve. I like all my clothes from Vietnam, they really know garments and tailoring, is there really no upside global division of labor?
Hey Matt, do the positives you mention for workers employed by a big company hold up against a trend of increasing automation? If big companies devote some of that R&D to automation and therefore fewer workers (relative to a scenario of less automation), and it improves conditions for a smaller workforce, is this a positive for the wider pool of workers?
"UPS figured out that if they created routes for all their trucks traveling across the country that avoid left turns at all costs, it saves them a lot of gasoline."
I wonder if this will stick after they electrify and no longer have an idling fuel cost.
Electric cars do still have costs to operate (and they aren’t even that great environmentally because the tires cause air pollution.) I also suspect the right turn only route is safer for the drivers… wouldn’t know though.
Yes, they have operating costs that are common to ICE trucks as well, like human operators, but have lower maintenance and fuel costs and have a favorable profile of fuel usage (great at stop and go).
On the tire point, which is kind of a non-sequitur and seems possibly trolly, ICE trucks also have tires that wear with usage, and also have brakes that wear more rapidly since they don't have regenerative braking. If you are less constrained by fuel efficiency, then you can begin to optimize routes for tire and/or brake wear or safety without as steep of a tradeoff on fuel costs.
But really, if you're citing a guy named Benjamin Wild Pugsley, haven't you already lost the argument? Just kidding, great name.
More seriously: I'm mostly persuaded by your argument here, and I feel keenly aware of how reactionay small-business owners seem to be as a political force. But what about small business as an economic ladder for new immigrants? I worked in economic development in San Francisco's Mission District for years, which is full of inspiring examples of risk-taking entrepreneurs trying to do better than the awful jobs commonly available to them. Would like to hear your take on this--do most of these business fail, and is this more of a mirage than a real ladder to success?
One of the main reasons Trump got 74 million vote is the precariat is making more than it used to. Big employers upped pay a few bucks an hour, and many small employers matched these increases in whole or in part.
Excellent take Matt. When I saw the title in my inbox, I immediately thought of the Hurst and Pugsley paper, I'm glad you include it. They document the facts I cite most often when discussing the societal value of "small business" with my friends and colleagues. In summary:
(1) Provide an existing service to an existing market
(2) Little desire to innovate or grow
(3) Motivated mainly by desire for schedule flexibility and autonomy
Loved this one. Just going to make a brief comment on Hawley and the so-called "Working Class Republican Party."
When he first entered the scene, I was worried about Hawley, because he was early to grab ahold of a political alignment that is much more popular in European right-wing movements. I am less worried about him now, since his incompetence (like Trump) essentially dooms his project.
One other thing I realized. It's harder to get a pro-welfare agenda on the right wing in the United States. It's a little too easy to demagogue about who the welfare is going to. Protectionism, yes, I think we will see more of that on the right wing (as Matt suggested). But, individual material demands, will take much longer to catch on in the US... longstanding attitudes are hard to break, particularly with these voters.
Is there an aesthetic component to the anti-bigness argument? It seems to me that part of what is so offensive about big chains is that they are ugly. It is tiresome to see the same logos lit up in neon primary colors every few miles. And the big box warehouses like Lowes don't fit into downtown business districts. Instead, you have to drive to the Lowe's campus with empty parking spaces and asphalt as far as the eye can see.
I think this take is mostly right, but I wonder if it's true for every industry. I work in childcare, a notoriously low wage industry, in a high cost of living city in a blue state.
Here there are basically three different options: home childcare providers, big for-profit childcare chains and large non-profit childcare centers--sometimes part of a larger organization like a religious organzation, but not always. All of these are liscened by the state. This doesn't include nannies and informal childcare arrangments. In my expience the childcare worker workforce partially overlaps the nanny workforce, but not completely. And many families who need childcare could never afford a nanny. Many of the home childcare centers have just one person working for themselves; some hire an assistant or two.
From a worker's perspective, the best place to work is either one of the non-profit centers or as a home provider. The home providers get the benefits of running their own businesses; except it's more like running a bookstore or coffeeshop in that it's really hard to take sick or vacation time. The non-profits pay better than the for profits, mainly because the non-profits roll any profit into higher pay or upgrading facilities. I'm wondering if there are other industries where this is also true? It might be that childcare workers as a whole are so underpaid that the typical non-profit/for profit dynamic doesn't work here. Smaller non-profit centers almost always have to spend more on health insurance for employees than the chains, but the cost employees pay in premiums is usually similar.
The worst place to work is as an assitant to one of the sole proprietors. Low pay, no benefits provided, and very little flexibility.
For parents looking to find childcare for their kids, the best affordable option is a good home provider. But finding one can be hard, and often relies on word of mouth reccomendations. There are some bad home providers and a lot that are so-so. The for-profit centers offer a more consistent experience, but aren't usually excellent.
The non-profits generally offer the best experience and are the biggest source of innovation. Some of them have small chains, but the biggest way innovation spreads in this sector is through continuing education. The state mandates a specific number of training hours each year for all childcare workers, so there's a market for providing high-quaility training. (There's also a market for low-quaility online, checks the boxes, training.) Some of the innovative centers have a big side business in offering training, "Come see what we do here at _____, and take back these ideas to use in your center."
Of course what counts as innovation in childcare in a big city (ways to have children lead the curriculum through play, anti-bias education strategies, trainings on how to support social-emotional growth in todders) may not be popular in more rual areas. (Yes, some of this is about race and LGBTQ issues, but the bigger divide is between authoratarian vs. authoritative/permissive parenting styles.)
The for-profits operate in rual areas as well as the city, so adopting these innovations and scaling them isn't going to work in all their locations. There are non-profits in rual areas as well, but they tend to innovate less or serve specific religious communities.
Some of the home care providers are also innovators, but they don't have access to the resources the non-profits have. Although a few successfully transition to from a career as a home provider to more flexible work providing training to other home providers.
So small can be good for almost everyone, but not-consistently. Big is consistent, but not great. And the medium-size centers are the best place to work, and one of the better products for consumers. Is that true for any other industry?
The real limit on the analogy is that child care can become better, but it can't really become more efficient or more productive. The adult to child ratio will remain about the same no matter what training or innovation occurs. The Chick-fil-A in our small town has dramatically improved drive thru efficiency. There is an entire meme genre about how good the company has become and moving people through quickly. But serving more "customers" with the same amout of labor just isn't an option for a daycare already mazing out staff to child ratios. So the size of the provider can't do much to change the average quality or price.
That’s true. The state mandates minimum adult:child ratios. And the best programs exceed those somewhat. Parents prefer it, and it’s much better from a worker perspective to be able to call in sick, knowing there’s a float teacher to cover your class and your boss won’t pressure you to work anyways.
And that inelasticity in productivity might be a reason to regulate childcare centers in a way that favors non-profits. Especially in any plan to have the state subsidize childcare more widely.
Someone in Australia tried to blitz-scale a chain of childcare centers. It didn't go great:
https://en.wikipedia.org/wiki/ABC_Learning
Thanks, that is interesting. Of note, the entity that bought out the 750 Australian centers after ABC went bankrupt was a charity owned by 3 non-profits.
Australia appears to subsidize childcare via a tax rebate. So the profits they were making were largely from taxpayer money, which was pretty controversial there.
I’m all for universal childcare in the US, but most of the proposals are pretty light on details of which types of childcare get funded. Then again, private companies earning profits based on Medicaid/Medicare payments had worked out for healthcare companies without much blowback.
When the first real big-box retailer (K-Mart) opened in the late 80s in the small town I grew up in, it was a significant improvement over the alternatives, mostly in terms of selection but also price. And aside from the local Woolworths and Ben Franklin (themselves chains albeit located downtown on the old main street), it didn't really compete with mythical local businesses, but with other less-good regional chains such as White-Mart and Pamida. It was followed by Target and then Wal-Mart, and they in turn are now being cut into by Amazon, because the simple truth is that being able to have a world of goods affordably delivered to your door step is an improvement in quality of life for most people. And no mom-and-pop retailer is going to be able to pull off the infrastructure investments it takes to do that.
But I do think we'd be better off if more of those goods were manufactured locally instead of all overseas.
Matt seems unaware that narrowly framing the risk posed by big businesses as an anti-trust, competition and choice issue ignores the danger posed to democracy by the outsized political influence of monopolies or near monopolies, both directly through lobbying and indirectly via the threat of relocation if their interests are not put ahead of those of the general population.
Superior customer service is one benefit "mom and pops" provide, and I would add: you get a different feel from local restaurants/breweries/stores than you do from chains. You can call this "customer service" if you want, but it brings a local value to the area, which your local Panera simply wont match. I love Starbucks, and am a card carrying member of their rewards program, but I also get all my coffee from a local roaster, and think the best coffee in town is a nearby local coffee shop. This character, I think, is beneficial for the community.
The reality is these kinds of businesses typically don't need lots of protection. Particularly construction companies: every local jurisdiction has its own building codes, and that's probably a good move for many communities. It's quite different building in Miami than New York, which has different concerns than Phoenix, which will inevitably have different issues than San Francisco. Local control makes more sense since specialization is not merely specializing in building practices but in the nuances in each market (be it taste or environment, or local architecture).
I think one thing that Mom & Pop appears (provide me data!) to do better than chains is small community support elements. Also, in places like mine that don't see a lot of national or internationally headquarterd companies, they provide some additional tax revenue on ownership profits versus out of area companies.
Belated comment; big v. small is not about antitrust or competition; it is part of an overall desire to return to am imaginary status quo ante prior to the "modern" period where "Small Town America values" reigned. Big corporations are being lumped in with all the bad modernist forces that have eroded those (white Christian male) values. In this sense, big box stores, "feminism," technology, BLM, et. al. are all part of a series of attacks felt on something Hawley is trying to protect. Hawley dresses up the emotional response of being attacked as a philosophy, but it isn't, which is why "eroding the free market by forcing wage controls" (how he would perceive minimum wage laws) is not an acceptable policy response. He just knows that if things were "Small Town America" again wages would magically be fixed because those (white Christian male) small business owners would do the "just and moral" thing. He is a philosopher like Paul Ryan is an economist -- with a superficial layer of ideas which once pierced reveal a soup of feelings, assumptions and givens.
You will be highly interested in this piece - "As ‘Woke Capital’ Turns on Trump, the GOP Turns On ‘Small Government’" - if you haven't read it already: https://nymag.com/intelligencer/2021/01/trump-twitter-apple-amazon-parler-gop-woke-capital.html
While passing through Kansas on a college road trip, my friends and I made the foolish decision to get off the interstate and proceeded to immediately get lost. This was a year or two before the iPhone came out, when that was still possible.
We eventually stopped for gas in a small town and asked the woman behind the counter where we could get something to eat. She told us that there were two restaurants in town, Jimmy's and Crappy's. When we asked her which one she would recommend she looked thoughtful for a moment and then asked us, "Do you like good food?" When we averred that we did, she told us, "Well then don't go to Jimmy's."
It turned out that Jimmy's and Crappy's occupied the same building on the main drag, and once inside it wasn't really clear where one restaurant ended and the other began. We did our best to seat ourselves on the Crappy's side of the line, and then sat down to enjoy what turned out to bethe worst meal I have ever paid money for in my life. Just bafflingly terrible food. Cold and overcooked burgers with sandwich slices instead of buns. French fries that were a solid conjoined mass. Partly microwaved baked potatoes.
I can only imagine what Jimmy's would have been like.
I’m sorry you had that experience and I applaud you for your comedic flair in describing it.
Such was the state of roadside food in the 1950s - a crapshoot - when Ray Kroc had the bright idea that maybe people would appreciate knowing they could expect a consistent quality if they went to the place with the golden arches.
I think the biggest problem with economic entities like Walmart and Amazon is not their impact upon local Mom & Pop stores (see Oriental NC < https://www.newsobserver.com/opinion/op-ed/article55900800.html > and I personally saw the destruction of our small town downtown business district in the 1980s following Walmart's entry into our city outskirts). I think the biggest problem has been the anti-competitive control over the suppliers of products to their monopolistic control over the access to the marketplace. Walmart drove profitable businesses into bankruptcy (Vlasic Pickles) or caused the shutdown of manufacturing in the USA and outsourcing of that capability to cheap labor markets (i.e.: China; see Rubbermaid) due to their price-fixing behaviour. Always low prices have had a high cost in lost American jobs.
In retrospect, it not have been such a good deal for average Americans to use American trade policy to subsidize development in Southeast Asia.
Well we get cheaper products and south east Asian living standards improve. I like all my clothes from Vietnam, they really know garments and tailoring, is there really no upside global division of labor?
I'm glad to hear that ACA has helped on this score. And I hope we do even better than that soon.
Hey Matt, do the positives you mention for workers employed by a big company hold up against a trend of increasing automation? If big companies devote some of that R&D to automation and therefore fewer workers (relative to a scenario of less automation), and it improves conditions for a smaller workforce, is this a positive for the wider pool of workers?