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Nick Leiber
Nick Leiber is a journalist.
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What Happens When We Run Out of Jobs?

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Photo by Pete Markham, Flickr

After 300 years of breathtaking innovation, people aren’t massively unemployed or indentured by machines. But to suggest how this could change, some economists have pointed to the defunct career of the second-most-important species in U.S. economic history: the horse.

For many centuries, people created technologies that made the horse more productive and more valuable—like plows for agriculture and swords for battle. One might have assumed that the continuing advance of complementary technologies would make the animal ever more essential to farming and fighting, historically perhaps the two most consequential human activities. Instead came inventions that made the horse obsolete—the tractor, the car, and the tank. After tractors rolled onto American farms in the early 20th century, the population of horses and mules began to decline steeply, falling nearly 50 percent by the 1930s and 90 percent by the 1950s.

Humans can do much more than trot, carry, and pull. But the skills required in most offices hardly elicit our full range of intelligence. Most jobs are still boring, repetitive, and easily learned. The most-common occupations in the United States are retail salesperson, cashier, food and beverage server, and office clerk. Together, these four jobs employ 15.4 million people—nearly 10 percent of the labor force, or more workers than there are in Texas and Massachusetts combined. Each is highly susceptible to automation, according to the Oxford study.

Technology creates some jobs too, but the creative half of creative destruction is easily overstated. Nine out of 10 workers today are in occupations that existed 100 years ago, and just 5 percent of the jobs generated between 1993 and 2013 came from “high tech” sectors like computing, software, and telecommunications. Our newest industries tend to be the most labor-efficient: they just don’t require many people. It is for precisely this reason that the economic historian Robert Skidelsky, comparing the exponential growth in computing power with the less-than-exponential growth in job complexity, has said, “Sooner or later, we will run out of jobs.”

—In “A World Without Work,” Atlantic senior editor Derek Thompson argues it’s time to plan for a future in which machines, from driverless cars to operating room robots, do most of our current jobs.

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June 26, 2015
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Why Big Food Is Feasting on ‘Natural’ Startups

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Photo by Dave Nakayama, Flickr

Fortune writer Beth Kowitt reports on the packaged-food industry’s response to an existential crisis: Shoppers are seeking alternatives they deem healthier and more authentic than legacy brands.

In addition to selling fruit and veggie drinks, Bolthouse grows and packages fresh carrots—an old-fashioned, weather-sensitive farming business that Morrison suspected would be a turnoff for any packaged-goods company, including her own. True enough, Morrison’s board was skeptical at first. “Carrots, Denise? Really?” asked one director. But in the end, the numbers sold themselves. The so-called packaged-fresh sector, where Bolthouse was a standout, was already an $18.6 billion business—and one with promising growth.

Campbell paid $1.56 billion for the company in 2012. Today it has roughly half that amount (more than $800 million) in sales. The following year Morrison bought baby-food maker Plum Organics for $249 million. (It has over $90 million in sales.) Both of these new businesses are small in the context of the soup company’s total $8.3 billion in revenue, but they are transformational in their own way—giving Morrison some pastoral cred when she calls Campbell an “organic carrot farmer.”

The acquisitions have also, as intended, shifted Campbell’s center of gravity—moving it closer to what the food industry calls “the perimeter,” the outer ring of the supermarket where fresh foods are stocked. This is where the big growth is.

More important, Morrison didn’t just set out to buy Bolthouse, she went after Bolthouse’s DNA. Following a trend in the tech industry, legacy food companies are on an acqui-hiring spree, hoping to gobble up foodpreneurs, their more agile management operations—and their know-how in the natural food arena. Morrison made Jeff Dunn, who had been president of Bolthouse, the head of Campbell’s new “packaged fresh” division, where he is tasked with expanding the portfolio (though Dunn is cagey about what that might entail).

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June 23, 2015
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A Business Journalism Classic: Inside the Multibillion-Dollar Takeover Battle for RJR Nabisco

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Image via Classic Film, Flickr

Everyone in the room knew about leveraged buyouts, often called LBOs. In an LBO, a small group of senior executives, usually working with a Wall Street partner, proposes to buy its company from public shareholders, using massive amounts of borrowed money. Critics of this procedure called it stealing the company from its owners and fretted that the growing mountain of corporate debt was hindering America’s ability to compete abroad. Everyone knew LBOs meant deep cuts in research and every other imaginable budget, all sacrificed to pay off debt. Proponents insisted that companies forced to meet steep debt payments grew lean and mean. On one thing they all agreed: The executives who launched LBOs got filthy rich.

“The wolf is not at the door,” Johnson said. No corporate raider was forcing him to do this. “This is simply the option that I think is best for our shareholders. I believe it is a doable transaction, and it can be done at prices much higher than the present stock price. We’re not far enough along this road to make firm conclusions or make a proposal at this point, though.”

Johnson stopped a moment and looked at each of the directors: mostly current and retired chief executives, their median age was sixty-five. They had given him a free hand running RJR Nabisco, and hadn’t objected when he wrenched it from its century-old North Carolina home and transformed it into a monument to nouveau-riche excess. But they had struck down his predecessor for lesser transgressions than the one he was now committing.

“I want you to understand one thing,” Johnson continued. “You people will have to decide. If you think this isn’t the answer or there’s a better idea, there will be no hard feelings. I just won’t do it. There are other things I can do, and I’ll do them. We’ll sell food assets. We’ll buy back some more of our stock. I have no problem walking right back upstairs, going to work on plan B, and no hard feelings.”

Silence.

Vernon Jordan, the civil rights leader cum Washington lawyer, was the first to speak. “Look, Ross, if you go ahead with this thing, there’s a real likelihood this company is going to be put in play. Somebody might come along and buy this company for more than you can pay. You might not win. I mean, who knows what could happen?”

—From 1989’s Barbarians at the Gate: The Fall of RJR Nabisco by journalists Bryan Burrough and John Helyar. Their bestseller followed the multiple players involved in the 1988 bidding war for the tobacco and food giant, which resulted in its $25 billion leveraged buyout, at the time the largest in history.

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June 20, 2015
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Trouble in the Bloomberg Solar System

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Photo by Roman Kruglov, Flickr

The Bloomberg was often seen inside the company it built as a sort of heavenly body. Dan Doctoroff likened it to the sun, a “life-giving force” that sustains its orbiting planets of business and media ventures. The CEO kept a model of the solar system near his desk, with a tiny replica of The Bloomberg affixed to the sun. The analogy might have even been too limited. There are now 324,000 Bloombergs in operation. Each brings in more than $20,000 in annual subscription fees per user. Bloomberg’s annual revenue is about $9 billion, with gross profit approaching $3 billion, according to Douglas Taylor of Burton-Taylor International Consulting, a market research and consulting firm that closely tracks the privately held company. The lion’s share of that profit comes from the terminal, which Bloomberg’s media operation and its 2,400 journalists exist to serve. Started by Winkler as a supplement to the terminal, the wire service has evolved into an essential feature. Taylor estimates that Bloomberg’s terminal business would suffer a 30 to 50 percent hit if Bloomberg News were to disappear.

***

To stay solvent today, almost every media outlet strikes a devil’s bargain with its business model, some more offensive than others. (BuzzFeed, for instance, has deleted posts that big advertisers object to.) The difference with Bloomberg is that its news service doesn’t merely grapple with that questionable compact—it was born from it. Bloomberg News was created to fuel the sun, not to be sustained by it in virtuous orbit. That is a tension that may never be resolved, a gap between business and influence, Owner and Mayor, a conflict inherent in the DNA of the company created in Mike Bloomberg’s image.

Which is why everything at Bloomberg, ultimately, begins and ends with what is going on in the black box of a billionaire’s brain. It has always been thus. Bloomberg is, as many of his employees told me, a brainy, unpredictable, sometimes irrational actor driven by ego. He has never been able to let the media professionals take over.

—Politico Magazine senior correspondent Luke O’Brien reports on the existential problem facing the 73-year-old billionaire’s eponymous company as he returns to run it.

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June 19, 2015
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How the World’s Biggest Food Chain Got Its Start

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Photo by vincent desjardins, Flickr

Subway debuted as Pete’s Super Submarines in Bridgeport, Conn., in the summer of 1965, when a Brooklyn-born 17-year-old named Fred DeLuca borrowed $1,000 from a family friend, a doctor named Peter Buck. De­Luca, an aspiring doctor who is now worth $2.6 billion, hoped slinging sandwiches would help him pay his way through medical school.

The duo slogged through several slow years of sandwich-making until, in 1974, they started selling franchises under a new name, Subway. (One theory: The old name, on radio ads, sounded confusingly like “Pizza Marines.”)

In the decades that followed those first shops, Subway franchises have expanded, yeast-like, onto what seemed like every street and strip mall in America. By 2013, Subway was opening 50 new shops a week. Today, Subways serves nearly 2,800 sandwiches every minute, data from industry researcher IBISWorld shows.

Still owned by Doctor’s Associates, the founders’ holding company, Subway has opened inside hundreds of U.S. colleges, malls, military bases and other, less-predictable locations: a car showroom in California, a Goodwill thrift store in South Carolina, a church in Buffalo.

—Washington Post national business reporter Drew Harwell examines the troubles facing the ubiquitous sandwich franchise as it nears its 50th birthday.

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June 12, 2015
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Inside the Secretive Industry That Makes Junk Food Addictive

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Photo by Sonny Abesamis, Flickr

The companies that make up the flavor industry — including international manufacturers such as Givaudan, Firmenich and Sensient — are not household names. But they make their money by selling flavors to big food companies such as Kellogg, Kraft and Nestlé.

Last year, Switzerland-based Givaudan reported 4.4 billion Swiss francs (roughly $4.8 billion) in sales of flavor ingredients. The company leads the industry with about 25 percent of the global market share in flavors and fragrances.

“The modern processed food industry could not flourish without the flavor industry,” said Kantha Shelke, a food scientist and spokeswoman for the Institute of Food Technologists, a society of food science professionals.

Today, Shelke said, the flavor industry is “big, it’s complicated and it’s sophisticated” — to the point where companies can create a product that tastes like guacamole without even using avocado as an ingredient. The goal, one industry scientist told CBS’ 60 Minutes in 2011, is to develop addictive flavors that consumers “want to go back for again and again.”

—The Center for Public Integrity reporters Chris Young and Erin Quinn report on how a food industry trade group, not the U.S. Food and Drug Administration, oversees the safety of flavor additives in the U.S.

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June 11, 2015
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Why (and How) the U.S. Overthrew Iran’s Democratic Government

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Harry Truman and Mohammad Mossadegh in 1951. Photo via Wikimedia Commons

In 1953 the United States was still new to Iran. Many Iranians thought of Americans as friends, supporters of the fragile democracy they had spent half a century trying to build. It was Britain, not the United States, that they demonized as the colonialist oppressor that exploited them.

Since the early years of the twentieth century a British company, owned mainly by the British government, had enjoyed a fantastically lucrative monopoly on the production and sale of Iranian oil. The wealth that flowed from beneath Iran’s soil played a decisive role in maintaining Britain at the pinnacle of world power while most Iranians lived in poverty. Iranians chafed bitterly under this injustice. Finally, in 1951, they turned to Mossadegh, who more than any other political leader personified their anger at the Anglo-Iranian Oil Company (AIOC). He pledged to throw the company out of Iran, reclaim the country’s vast petroleum reserves, and free Iran from subjection to foreign power.

Prime Minister Mossadegh carried out his pledges with single-minded zeal. To the ecstatic cheers of his people, he nationalized Anglo-Iranian, the most profitable British business in the world. Soon afterward, Iranians took control of the company’s giant refinery at Abadan on the Persian Gulf.

***

British agents began conspiring to overthrow Mossadegh soon after he nationalized the oil company. They were too eager and aggressive for their own good. Mossadegh learned of their plotting, and in October 1952 he ordered the British embassy shut. All British diplomats in Iran, including clandestine agents working under diplomatic cover, had to leave the country. No one was left to stage the coup.

Immediately, the British asked President Truman for help. Truman, however, sympathized viscerally with nationalist movements like the one Mossadegh led. He had nothing but contempt for old-style imperialists like those who ran Anglo-Iranian. Besides, the CIA had never overthrown a government, and Truman did not wish to set the precedent.

—From journalist and author Stephen Kinzer’s All the Shah’s Men, the history of the CIA’s 1953 coup in Iran, which deposed the only democratic government the country ever had. Earlier this month, negotiators announced an accord to restrict Iran’s nuclear program in return for sanctions relief. The deadline for a final deal is June 30.

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April 27, 2015
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The Bestseller That Warned Us About California’s Water Problem

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When most of us think of California’s irrigated acres, we visualize lush fields growing tomatoes, artichokes, strawberries, and grapes. But in California, the biggest user of underground water, more irrigation water is used for feed crops and pasture than for all these specialty crops combined. In fact, 42 percent of California’s irrigation goes to produce livestock. Not only are water tables dropping, but in some parts of California the earth itself is sinking as groundwater is drawn out. According to a 1980 government survey, 5,000 square miles of the rich San Joaquin Valley have already sunk, in some areas as much as 29 feet.

The fact that water is free encourages this mammoth waste. Whoever has the $450 an acre needed to level the land and install pumping equipment can take groundwater for nothing. The replacement cost—the cost of an equal amount of water when present wells have run dry—is not taken into consideration. This no-price, no-plan policy leads to the rapid depletion of our resources, bringing the day closer when alternatives must be found—but at the same time postponing any search for alternatives.

—From 1991’s twentieth anniversary edition of Frances Moore Lappé’s Diet for a Small Planet, the bestselling book first published in 1971. She argues hunger is “human made,” and highlights the environmental effects of livestock production, noting it takes 2,500 gallons of water to produce one pound of steak.

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April 21, 2015
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What It Was Like Working with the Junk Bond King

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Michael Milken. Photo by Larry Weisenberg via Wikimedia Commons

Mark Attanasio: The day started at 5, not 5:01. …You got in between 4:30 and 5 and got yourself situated. … Often clients would show up early to man up and show Mike, “Hey, I’m here, too.”

G. Chris Andersen: We financed Ted Turner. We financed John Malone.

Mark Attanasio: Within a year I was in front of guys like Ron Perelman and Steve Ross at Warner Brothers.

Lorraine Spurge: And then, at some point, we met a gentleman named Steve Wynn.

Ken Moelis: Steve came to me in 1986. And he says, “Look, I got this idea. We’re going to build this casino for $800 million, and it’s going to have a volcano that goes off every 15 minutes.”

—from “Renegades of Junk: The Rise and Fall of the Drexel Empire”, an oral history by Bloomberg News reporters Max Abelson, Jason Kelly, and David Carey. Interviews trace the trajectory of former investment bank Drexel Burnham Lambert, where Michael Milken helped popularize junk bonds before the firm filed for bankruptcy 25 years ago.

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April 21, 2015
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The U.S., China and the ‘Financial Balance of Terror’

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Photo by Robert Baxter

This month, Britain, Germany, France, Italy, South Korea, and a handful of other U.S. allies announced plans to join the new China-led Asian Infrastructure Investment Bank, despite American pressure not to. The multilateral fund is essentially China’s answer to the World Bank and the Asian Development Bank, organizations where the U.S. has long had more influence than China. China has the world’s largest foreign exchange reserves—around $3.8 trillion in December—and wants to use some to fund infrastructure development projects in Asia. It’s clear enormous investment there is necessary. It’s also clear the U.S. is concerned the AIIB—and other new China-backed lending institutions—will weaken its influence. Below is a bit of background from the December 2009 Foreign Policy excerpt of Brad DeLong and Stephen Cohen’s prescient book The End of Influence: What Happens When Other Countries Have the Money:

Proverbs 22:7 instructs us: “The borrower is servant to the lender.” But the lesson requires some exegesis to fit smoothly into context. The burden of the U.S. foreign debt may be better explained by the oft-repeated Wall Street wisecrack, which we repeat: When you owe the bank $1 million, the bank has got you; when you owe the bank $1 billion, you’ve got the bank.

Neither side can walk away; we’re locked. The debt binds China especially and other governments that have the money. Selling the debt would send the dollar way down and thereby destroy the value of their dollar holdings and severely damage their economies’ massive export-based sectors. Worse yet, sell it for what? Their “reserves” are so huge that there is nothing else they can hold them in, not at that scale. From a Chinese viewpoint, it’s exasperating.

The U.S.-China economic imbalance has forced the two powers into a very intimate and not very desired embrace, something Lawrence Summers once called a financial balance of terror. This is all to the good: The two powers must learn to work as partners, and not just in economic matters — global warming and global order also need positive Sino-American cooperation, and they are much more important long-term issues. Sino-American partnership, in managing the complex mess of their imbalanced economic codependency, can constitute a good beginning for managing the utterly unhinged problems of world balance and order. We have no acceptable choice but to get good at it, and that will take some doing on both sides.

As money alters power relations, the United States is not simply becoming dependent — but it is no longer independent, either. That is a major change. And China is no longer helpless and cowed in face of the superpower hegemon; it has got a grip on it. Indeed, while the world peeks in, the two countries are realizing that they have thrown themselves into an intimate economic embrace with, to say the least, very mixed feelings.

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March 31, 2015
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