Category: Economics

Nike and Tiger Woods Announce End of 27-Year Collaboration

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On Monday, golf legend Tiger Woods announced the end of his 27-year collaboration with Nike, marking the conclusion of a longstanding partnership with the world’s largest sportswear company. Expressing gratitude for the iconic brand’s support, Woods hinted at an upcoming chapter in his career. Nike bid farewell to the golf legend on Instagram, acknowledging his transformative impact on the sport and expressing gratitude for the challenges he posed.

Despite facing setbacks, including a notable sex scandal that cost him millions in sponsorships, Woods maintained his association with Nike. From his professional debut in 1996 to his Masters win in 2019, Nike and Woods shared a significant history. Over the years, Woods signed lucrative endorsement deals with Nike, including a groundbreaking $85 million contract in 2000, making it the richest in sports history at the time.

Speculation arose about Woods potentially joining ON Running, but the Swiss sneaker brand’s CEO, Marc Maurer, dismissed the rumors at the ICR retailing Conference, stating that they were not partnering with Woods. Industry experts speculated that Nike’s separation from Woods might be linked to the company’s shift away from golf-related products.

Notwithstanding the decline in positive public opinions, Woods remains a prominent figure in sports, with his enduring popularity among fans. Analysts like Eric Smallwood suggested that Nike’s decision might be strategic, potentially reflecting a broader move by the company away from golf. Observers noted that Woods, being a shrewd businessperson, could leverage this separation to explore opportunities with brands targeting a younger and more diverse audience within the evolving landscape of golf apparel. Overall, Woods’ departure from Nike represents a significant shift, offering him new possibilities and signaling changes in the golf industry.

Study Reveals Tax on Sugary Drinks Leads to Decline in Sales

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Boulder, Colorado, Oakland, California, Philadelphia, Seattle and San Francisco recently joined over 50 countries who raised the price of sugary beverages, including coffee, tea, energy, sports, fruit drinks and sodas. Scott Kaplan, an assistant professor of economics at the US Naval Academy, conducted a study to examine how customers’ consumption habits adjust according to price changes. Kaplan discovered that the price hike of sugar-sweetened drinks led to a 31% reduction in consumer purchases.

Kaplan’s study also revealed a direct correlation between every 1% increase in price and 1% decrease in purchases. This decline in consumer purchases was an immediate result of implementing taxes, and remained consistent over the entire three years of the study.

A 2020 study demonstrated that just one daily serving of a sugary soft drink was linked with a higher risk of cardiovascular disease, and these calorie-laden drinks contribute to heart disease, diabetes, obesity and stroke. Researchers from Tufts University discovered that a reduction in sugary beverage consumption by 15-20% could lead to significant savings in healthcare costs, as much as $45 billion.

Kaplan’s study did not directly survey the health impact of the decline of sugary drink sales, though he did surmise that a 33% drop in consumer purchases could lead to a similar positive affect on healthcare costs. His analysis was published in JAMA Health Forum, and explored the possibility of a broader scale of implementation beyond the five original cities. Kaplan suggested implementing taxes from the federal level.

A New Phone Plan for the New Year

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With the new year approaching, consider a more cost-effective cell phone plan. According to the New York Times, a growing trend among wireless plans promises customers significantly lower monthly rates. Budget carriers leasing wireless services from the larger companies offer phone bills at around $25 per month, undercutting the well-known providers whose monthly plans range from $60 to $200 a month.

While a budget carrier may not be able to offer the same network speed performance, download speeds with 5G and 4G technology remain quite fast and users will most likely not notice a difference between the larger versus budget providers. Additionally, with the shift to a hybrid work-week cutting down on commute times, most employees rely more on Wi-Fi connections at home or at the office and less on their cellular network.

Many have reported that the transition to a budget carrier was not always smooth. Customers complained of eSIM activation fees, wireless services that did not activate right away, unhelpful customer service, and failure to send monthly receipts. However, those who have switched over, report savings of 50%, some around $1000 a year, a worthwhile tradeoff for the hiccups they encountered. The discount plans even allow users to buy a physical or eSIM, which can be purchased from their website or app, to test out the service without dropping their current provider. This way, consumers can choose the best option available without any hassle.

If you’re looking to cut your expenses in 2024, switching to a discount phone plan is easy and will not disrupt your lifestyle.

Senators Warren and Graham Release Digital Consumer Protection Commission Act

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Democrats and Republicans are setting aside their differences to impose restrictions on Big Tech platforms. US senators, Elizabeth Warren and Lindsey Graham, released the Digital Consumer Protection Commission Act. The bill calls on Congress to launch a governing body with the ability stop the operation of, or sue, platforms that cause potential harm to consumers. This bill would apply not only to social media platforms, but would extend to respond to new concerns that arise as AI continues to develop.  

Warren said in a statement: “For too long, giant tech companies have exploited consumers’ data, invaded Americans’ privacy, threatened our national security, and stomped out competition in our economy. This bi-partisan bill would create a new tech regulator and it makes clear that reigning in Big Tech platforms is a top priority on both sides of the aisle.”

The Act would establish a regulator to license and police the large tech companies in the US, such as Meta, Google, and Amazon, and set clear rules for tech companies. The bill will also enforce repercussions for companies that violate the law. It would implement safeguards for every customer: families will be able to protect their children from cyberbullying and sexual exploitation by requiring these companies to clamp down on these harmful practices. Families will have the ability to seek compensation should the company fail to do so. The bill will also enable consumers to opt out of targeted advertising in order to protect their privacy.  

According to Graham and Warren’s New York Times op-ed: “No company, no industry and no C.E.O. should be above the law. These reforms will ensure that the next generation of great American tech companies will operate responsibly while remaining on the cutting edge of innovation. It’s time for Congress to act.”

In Light of Recent Bank Collapse, Financial Advisors Offer Recommendations for Small Business Owners

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Following the collapse of Silicon Valley Bank and Signature Bank in March, financial advisors recommend that small business owners reexamine their bank accounts in order to protect their finances. Small business owners must perform their own risk assessment, should their current bank fail.

The Federal Deposit Insurance Corporation insures deposits up to $250,000, and most small business owners have less than that in their accounts. According to a JPMorgan Chase Institute survey of 600,000 of its small business account holders, the median cash balance was $12,100. However, businesses that have employees have higher payroll costs and, thus, higher risk.

A paper published in March 2023 assesses the likelihood of further banks crumbling. Experts advise diversifying one’s holdings in order to have more coverage in the event of a bank collapse. They also point out that holding an account in a separate bank enables the small business owner to wire funds, if one bank seems to suddenly be on the brink of collapse.

Another option is for banks to use the IntraFi Network, which splits a customer’s deposit into smaller amounts of less than $250,000. These smaller lumps are sent to other banks in the system, which grants customers various F.D.I.C-insured accounts.

Ultimately, financial experts and banks advise asking where service providers bank to ensure that there are backups in place.

New Initiative for Student Loan Forgiveness

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In April 2022, the US Department of Education announced a new initiative for public service student loan forgiveness and income-driven repayment (IDR). Payment plans that are income-based enable student loan borrowers to repay at a lower rate, based on family size and income. After 20-25 years of payments, the remaining debt can be cancelled.

In March 2023, the Department of Education notified borrowers whose loans could be canceled, and around 3.6 million borrowers will be given at least three years of credit toward forgiveness, according to the Federal Student Aid.

According to loan advisors, President Biden’s loan-cancellation program is separate from this program, and will not be affected if this program is not passed by the US Supreme Court. The Biden administration also announced an updated plan for income-based loan forgiveness, called REPAYE. REPAYE is more generous than existing loan repayment plans in that it will lower payments on undergraduate loans from 10-15% of discretionary income to 5%. It will also affect interest in that if the borrower’s payment does not cover interest for a particular month, the remaining interest will not be charged or added to the balance.

According to the White House, President Biden’s plan will eliminate debt fully for approximately 18 million people, and 90% of the country’s 45 million student loan borrowers will receive some form of debt-relief. The plan was brought to the Supreme Court on February 28, 2023, and is expected to issue a decision by June 2023.

Uber Reports Increase in Revenue at the end of 2022

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While Uber reported a downturn in revenue during the pandemic, chief executive, Dara Khosrowshahi said that the last 3 months of 2022 was the company’s “strongest quarter ever.” Khosrowshahi added that the company expects even more momentum in 2023.

Uber reported $8.6 billion in revenue from the last quarter of 2022, which is a 49% increase from the previous year due to the Omicron variant of COVID-19 limiting travel options. In 2020, during the lockdown at the start of the pandemic, Uber cut around 7,000 employees. However, according to Khosrowshahi, the pandemic is no longer impacting Uber’s operations. In fact, during the last quarter of 2022, active drivers hit an all-time high.

Khosrowshahi claims that the current economic inflation is working to Uber’s benefit in that 70% of drivers say that it is the reason that they join Uber’s platform. As Uber exceeded Wall Street analysts’ estimates for the end of 2022, their stock rose 5.5% in trading at the beginning of February 2023.

Microsoft Invests in OpenAI

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Microsoft announced on January 23 that they were making a “multiyear, multibillion dollar investment” in OpenAI, the maker of ChatGPT. In 2019, Microsoft invested $1 billion in OpenAI, and described their agreement from this past Monday as the third stage of the partnership between these two companies. News of the investment came on the heels of Microsoft’s announcement that they plan to lay off 10,000 employees as part of a larger cost-cutting measure.

This partnership authorizes the usage of OpenAI’s tools in Microsoft products, which gives Microsoft an edge over Google. According to OpenAI, the investment enables them to continue developing AI, and Microsoft’s Azure cloud platform will continue operating as an exclusive provider for OpenAI.

According to Microsoft, by incorporating the technology behind ChatGPT into their Bing search engine, they will revolutionize internet searches. Anton Korinek, AI researcher and professor of economics at the University of Virginia explains,

“[ChatGPT] allows consumers to interact with their computer in a much more natural and conversational form than traditional search.”

Microsoft CEO Satya Nadella said,

“We formed our partnership with OpenAI around a shared ambition to responsibly advance cutting-edge AI research and democratize AI as a new technology platform. In this next phase of our partnership, developers and organizations across industries will have access to the best AI infrastructure, models and toolchain with Azure to build and run their applications.”

Residential Conversion of Financial District Bldg

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25 Water Street, an iconic financial district building, is getting a residential facelift.
With a $535.8 million loan arranged by Newmark for GFP Real Estate, Metro Loft Management, and Rockwood Capital, the 1.1 million-square-foot office building will be bought and redeveloped in the largest ever office-to-residential conversion in the United States.

The renovation of the 22-story building is being redone to include some 1,300 residential units of varying size (studios to four-bedrooms). Amenities in the building will include a basketball court, steam room/sauna, indoor and outdoor pools, and other sporting/fitness equipment. There will also be a sky lounge, a rooftop garden terrace, and spaces for entertaining and coworking.

The property was built in 1969 and showcases views of lower Manhattan and New York Harbor from each floor. It sits on a double-wide street corridor with the widest exposure facing Water Street.

The Business of Bringing Back Businesses

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Fashion Fair, the beloved cosmetics company, went bankrupt in 2018. But in June 2022, the firm, which Pulitzer prize winner Lynn Nottage said “represented Black beauty, it represented sophistication, and it was the first makeup that I ever tried on in the mirror,” was resurrected. This is part of a current economic trend in which Black businesswomen opt to revive a legacy brand rather than start a new company from scratch. In some instances, Black entrepreneurs are launching companies based on known white-owned firms that unfairly used images of Black people as part of their branding and merchandising.

Like Fashion Fair, Madam (originally known as Madam C.J. Walker), the Black hair care brand, revamped both the external elements of their products, like packaging and advertising, as well as the actual production processes. Even with these changes, Fashion Fair and Madam still focus on the shared historic mission of each company: bringing wealth, access, and prestige to Black communities, particularly women.

A McKinsey study found that Black-founded and Black-owned beauty brands comprised 2.5 percent of 2021 revenue in that industry; Black consumers spent 11.1 percent, the equivalent of $6.6 billion, on beauty products. While spurred mostly by need, as a way of ensuring the employment and safety of Black Americans in the dark era of Jim Crow laws, Black-owned businesses are a historic and iconic representation of pride. Historian Juliet E.K. Walker describes the time as the “Golden Age of Black Business,” when Black-owned businesses grew across the U.S.

The newest iterations of the company are also updated for today’s consumer interests. The Madam formula, for example, has been revised to substitute petroleum, which is derived from crude oil, from the products’ hair and scalp treatment recipes.

In some instances, Black entrepreneurs are redressing historic wrongs of white-owned companies that feature images of Black domestic workers in their logos and images. Rapper and entrepreneur Percy Miller, known as Master P, restarted his Uncle P’s line of pancake mixes and rice in response to this trend. He recalls how his grandmother used to favor brands featuring Black people, but as he grew he came to realize “that Aunt Jemima and Uncle Ben were models, and none of the proceeds from these brands went back to helping the community and their families; it was just pure mockery.” In an attempt to remedy these historical injustices, Miller sources rice for his products from Ghana; some profits are earmarked for programs serving low-income children and the elderly in New Orleans and St. Louis. A picture of Miller himself, in sunglasses, is affixed on Uncle P’s products.