Extraordinary Observations

AdAge has a headline that reads: D.G. Yuengling & Son Becomes America's Largest Brewer. Of course, once you get into the meat of the article you see that it's technically true because all the major beer conglomerates have now all been acquired by even bigger foreign conglomerates, not because of some ridiculous growth trend in Central Pennsylvania.

True or False: a household whose income is $160,000 is "wealthy" or "rich"?

Another one of the things that makes the show so good is that they don't just show you recipes, they review different brands of ingredients and different pieces of kitchen equipment. Here's a segment that they did on drip coffee machines.


Not surprisingly, most of these machines make a pretty bad cup of coffee. To me, the idea of paying a hundred or more dollars for an appliance that makes coffee as bad as a cheapo machine makes me cringe. Of course, the reviewer does make a good point - fancy bells and whistles may simply be disguising the fact that the "guts" of the machine aren't any good.

I think it says something when the best cups of coffee come from the simplest brewing methods: French press, pour-over cone and Chemex. Sure, they require a little work and a source of hot water, but honestly, it's really not that much extra work considering how much better the final product is.

Last week I was walking home from work, and without my iPod and earphones, had little ability to block out the loud conversation taking place behind me. One woman was telling another woman that she needs to get out of the non-profit sector because "there's no money in non-profits".

Meanwhile, over at Mother Jones, Josh Harkinson has argued that non-profit credit unions often serve their customers and their employees more effectively than giant corporate banks. I think this points to a fundamental misunderstanding, by a lot of people, about what it means for an organization to operate as a non-profit.


There are some complicated legal and accounting details when it comes to classifying non-profits, but I think it can be summed up as simply as this: A non-profit organization is an entity that does not have owners or shareholders; a for-profit company is an entity that does.

A lot of people think "non-profit" is synonymous with "non-revenue". That's true in a few cases, but not across the board. A non-profit can have customers and funders, the same way a corporation can have customers and investors. A non-profit does not have to be a charity that relies entirely on donations to stay afloat. It's bad deductive reasoning to think that because all charities are non-profits, that therefore all non-profits are charities.

Consider two hypothetical banks. One is non-profit credit union and the other is for-profit bank. They're both relatively conservative, don't engage is risk-taking, and at the end of the year, each has $1 million leftover after it's paid the bills.

What does the for-profit bank do? It divvies up the money and cuts checks to the owners (shareholders) based on how much of an ownership stake each person has. What does the non-profit bank do? It gives a raise to its employees and re-invests the rest of money back into the business, so that it can grow and expand and better serve its customers.

Which of the hypothetical companies is better to work for or do business with? Plenty of people would say the non-profit bank, despite the broad claim that there's "no money in non-profits".

Of course, the world isn't as simple as this; but for-profit companies lay off employees, slash benefits, and screw their customers all the time. To say that they're acting in their best interest because they're motivated by profit is only partially true - it's their owners that are motivated by profit. Sometimes, the employees and customers are also the owners, but not all of the time. When they're not, there can be conflicting interests.

Saying "there's no money in non-profits" is as vague as saying there's enormous money in the field of law. Some attorneys work for corporations, others work for governments. Some work for rich clients, others are public defenders. Some prosecute the bad guys, others defend them. How much money there is to be made in law is pretty contingent on exactly what type of law your practice.

Sometimes the non-profit model works, other times it's not the best fit for an organization. Sometimes, like in the case of banks and credit unions, they can even exist side-by-side.

Later today I'll be boarding a plane and flying to Ohio for the holidays, just like I did last month for Thanksgiving, and dozens of other times this year, for a variety of reasons.

Last month I heard a pretty interesting interview on public radio with Andrew Thomas, who's written a book about the airline industry. I've always felt like kind of an out-of-place urbanist when it comes to air travel. From my experience, many urbanists love trains, buses, and bikes, while air travel often seems to get shunned along with the automobile as an occasionally necessary evil.


Without a doubt, one of the biggest downsides of airports is that they're almost always on the outskirts of cities. Train stations, on the other hand, tend to be centrally located. A downtown-to-downtown trip by air often involves ground transportation on both ends that can be expensive, and frankly, a pain. Asking someone for the "airport pickup" is a favor that usually requires great repayment. So yes, I get why people don't love it.

There's also a lot of things that fuel constant complaints. TSA has become the prime example of everything that's wrong with doing things in the name of "security". The problem is, if it's true that TSA is mostly in the business of "security theater" and the reasons for its existence is arbitrary (that some bad people chose to abuse airplanes rather than trains) then there's a real risk that TSA could be applied to other forms of transportation if something terrible were ever to happen.

The reality is that traveling is difficult and expensive. It doesn't matter whether it's a trip cross-country or a commute from the suburbs to the city. The longer the distance, the more painful it's probably going to be, regardless of the mode of transportation used. When I hear people talk about how much they hate to fly, I think what they often mean is that they hate to travel.

Yesterday's lead story on 60 Minutes was about vacancy and abandonment in Cleveland. This is an issue that hits close to home for me.

I started studying the problem in 2008. Back then the pressing question was how to target HUD money to strategically knock down blighted houses. The amount of money that HUD had to distribute wasn't nearly enough to take down all the vacant and abandoned houses, so using it wisely was key, and it still is.

I want to emphasize that even though 60 minutes may have opened a lot of eyes to demolition in Cleveland, it's not something that's new. The idea of knocking down houses as the means to saving neighborhoods may seem counter-intuitive, but it's been the prevailing strategy for several years now. Detroit has been following a similar strategy as well.


I do want to add something to the 60 Minutes analysis - a piece of the story that I don't always feel gets told. Foreclosures may have fueled vacancy in Cleveland, but foreclosure is not the only reason why it's such a big problem.

When homes go into foreclosure, they should get taken by banks and sold at auction for the price they're worth, allowing investors to pick them up and rehabilitate, or allowing new buyers to own a home for a price they can afford. But banks themselves are walking away from these homes, because they're literally worth zero dollars. When you look at it at the scale of the metro area, you realize that there is a big glut of housing supply on the market that's driving down prices across the board, and in these extreme cases, all the way down to zero.

Believe it or not, the house I lived in before I moved to DC went through foreclosure. In 2008, the bank holding the delinquent mortgage sold it for $23,500 to an owner who rehabbed it, and then sold it the following spring for $96,000 (these numbers are all public record, in case you were curious). This is what should happen in a healthy market. Foreclosure shouldn't necessarily mean vacancy, but too often in Cleveland, it does.

The Cleveland metro area is made up of the five counties around Cleveland - Cuyahoga, Lake, Geauga, Lorain and Medina. Between 2000 and 2010, two important but divergent trends emerged:

• The population of the Cleveland metro area fell roughly 3 percent.
• The number of housing units in the 4 counties excluding Cuyahoga grew more than 13 percent.

In other words, homes kept getting built between 2000 and 2010, even as people were fleeing the metro area. And most of these new houses were getting built in the suburban fringe counties. If you want to understand why there's an oversupply of housing in the Cleveland area, look no further than these counties.

The fact that there were more houses but fewer potential buyers created an imbalance. When houses started to go vacant, no potential buyers stepped up because there were no potential buyers out there. If there had been potential buyers, houses might have gone through the process that my former house did. Many instead became vacant, because folks looking to buy a house had plenty of areas to look, and the weakest neighborhoods were obviously the first to go rotten.

But there's more. Now that the bulldozers are starting to demolish houses and even entire blocks in the name of stabilization, it's creating a metro area where tons of vacant undeveloped land is being created in the urban core, while developers are simultaneously building on greenfields in the fringe counties. Slowly but surely, it's creating a "donut hole" that will make the entire metro area weaker.

Getting urban neighborhoods stabilized should rightly be the top priority, and Cleveland has decided that demolition is the best way to accomplish it. Unfortunately, years or sprawl and overbuilding, fueled by a foreclosure crisis, has created this reality. Further sprawl isn't going to make the situation on the ground any better.

There's been a lot of chatter around the blogosphere about Christopher Leinberger's New York Times op-ed that I think really hits the nail on the head when it comes to the issue of what's ahead for fringe suburbs.


Basically, the hypothesis presented is that fringe suburbs are headed downward, and I think this piece of evidence is really the most damning.

Many drivable-fringe house prices are now below replacement value, meaning the land under the house has no value and the sticks and bricks are worth less than they would cost to replace. This means there is no financial incentive to maintain the house; the next dollar invested will not be recouped upon resale. Many of these houses will be converted to rentals, which are rarely as well maintained as owner-occupied housing. Add the fact that the houses were built with cheap materials and methods to begin with, and you see why many fringe suburbs are turning into slums, with abandoned housing and rising crime.

Leinberger goes on and cites several examples of urban neighborhoods that have transformed from slum to hip in recent history: Capitol Hill in Seattle; Virginia Highland in Atlanta; German Village in Columbus, Ohio, and Logan Circle in Washington.

I don't know much about Capitol Hill or Virginia Highland, but I do know something about Logan Circle and German Village. One very important (and I think non-trivial) quality that they share is that they both have a high quality, durable housing stock that has held up very well, given its age, all things considered.

When I think about what made cookie cutter houses in suburbs appealing to people, in addition to the square footage and the yards and the school systems, I really suspect that one of the things that people were drawn to was the absolute "newness" of everything. People love having new stuff - new appliances, new counter tops, new floors. When stuff is brand new, it's almost guaranteed to be in style. When it's brand new, it's not in need of immediate repair. There's a lot to like about brand new.

The fact that the U.S. Post Office is basically a failing enterprise is nothing new. Figuring out where things went wrong is becoming a common theme in the blogosphere.


Jordan Weissmann has this post over at the Atlantic that proposes several compelling theories, but it glosses over one that I've written about in the past: sprawl.

Sprawl is a problem for the postal service for the same reason it's a problem for regular citizens... you have to drive everywhere, gasoline is expensive, traffic is congested, it's hard to get places, etc.

When I think about a postal carrier doing a route in a city, I imagine them taking a push card and walking from the post office to houses and offices. The number of pieces of mail they can deliver per ounce of effort has got to be so much higher than the carrier who has to drive, in his/her truck, from one house, then to the next house, then to the next house.

Of course, for reasons of "fairness" or otherwise, the postal service decided that mail should cost the same amount, whether it's going to a central city or a fringe suburb - whether it can be delivered on foot or has to be driven from the post office in a truck.

Maybe cities would be able to subsidize suburban postal service in a world where the population was heavily living in cities, but today, that's just not the case. Even worse is what's happened in "hollowed-out" cities where postal carriers still have to do routes, but the fact that a significant number of houses are vacant destroys the efficiencies they once enjoyed.

It's one example of what a mess we've got on our hands.

Someone sent me a link to this video today. It purports to show Mitt Romney as a wild flip-flopper. Watch for yourself.


Is Romney really incapable of holding a single position on these issues?.. maybe, probably; but this video provides zero real evidence, because all of the clips have obviously been sliced and diced, cherry picked, and presented without any relevant context.

This is what is so offensive about politics. The folks who made this video (apparently the Democratic National Committee, as it turns out) know that there are people who will actually be persuaded by it. To me, that says that they believe either a) people have already made up their minds and just want to make themselves feel good about their decision or b) people are not independently-minded enough to think beyond these carefully selected clips.

I don't care for Romney, but I'm also not persuaded by this sort of video. Sadly, it's going to continue, because enough people are. It looks like it's already shaping up to be a long political season.

To understand further, it's important to recognize the difference between the place I was living then (Cleveland) and the place that I'm living now (Washington DC). These are two wildly different housing markets, both on the rental and the sales side. Buying in one has benefits that don't exist in the other. Renting in one has benefits that don't exist in the other.

First and foremost, renting in DC is a hedge against inflation. This isn't so much the case in other cities, because inflation isn't much a problem in other cities. Between 2000 and 2010, I calculated that real-dollar rents in DC increased 52%, compared to only 8% nationally. For a home-buyer, that means that whatever your monthly payment is on the day you close is going to be (roughly) the same for the next 30 years. In an inflationary environment (and I would not hesitate to classify DC's rental market this way), buying locks you into a predictable payment for the long-term.

The biggest wildcard, of course, is maintenance and repairs. This is especially true if you're drawn to DC's beautiful Victorian housing stock, much of which is old and fragile. You never know when you're going to need a new roof, when you might have a problem with the foundation, or a pipe in the basement might burst.

The thing is, when you pay as much as, say, $2,000 a month for your mortgage, repairs suddenly feel a lot less outrageous. Need a new stove or dishwasher? The price is basically the same no matter where you live, but in DC, it might cost less than one monthly payment. In other city, it might be equivalent to several payments. When you think about it on that metric, it doesn't really seem so bad. That's not to say it's a cost that doesn't exist, but psychologically, it doesn't feel as painful, compared to someone who has to spent the equivalent of a year's worth of mortgage payments on home renovations.

I don't do much driving, but this year, I've made a couple of long-distance trips. The first was a round-trip between Washington and Akron - about 700 total miles. The second was the round-trip between Washington and Virginia Beach I did back in August - about 420 total miles. The first trip cost an extra $30 in tolls. The second trip was "free" as we often think of it. The first trip was generally low-stress and easy to drive. The second trip was high-stress and challenging to drive. Both trips took roughly the same amount of time (6 hours each way).

There's a really interesting article over at GOOD about the power that Yelp has on local businesses. It describes my behavior pretty accurately, and makes me realize just how crucial a tool Yelp has become in my own life; and also for the businesses I patronize.

Last week this headline caught my attention: "Pizzeria Eschews Groupon, Offers Own Half-Off Deal". The article is about a gourmet pizzeria in Arlington that will offer half-price pies every Monday... all you have to do is walk in and ask for the deal.

1. Removed blackout dates from discounts
2. Applied discounts to the entire menu
3. Offered a one-time email blast advertisement to a huge mailing list of people
   

Kojo Namdi did a very good show on coffee last Wednesday. Click through and listen to the segment, it's about a half-hour long and it's very good. They even produced this little video up at Qualia Coffee (hands down the best coffee shop in DC).


The show covers a number of coffee-related topics that I've written about here, including home roasting and culture around good coffee. Coffee is an interesting drink because the quality can vary so wildly depending on how it's roasted, ground and ultimately brewed. And unlike wine or beer, coffee is always made to-order. Someone can appreciate good wine, but wine is fermented and then stored in glass bottles. Beer is brewed and then canned or bottled. Someone who appreciates good coffee has to also appreciate the process by which its brewed in the moments immediately before it's enjoyed.