Category: Labor Economics

Why Did McPizza Fail?

Why do some products succeed and others fail? The answers may hold lessons for which future projects should be pursued and, if pursued, how to pursue them. Successes are sometimes researched; failures much less often. The passages quoted below are from an unusually deep dive into the story of McDonalds’s failed McPizza.

(p. 1) Maybe you are too young to remember. Perhaps you forgot. Or there’s a chance you’ve blocked it. But the home of the Big Mac began selling pizza in the mid-1980s, hoping to grab market share from national pie chains. McDonald’s gave up a few years later. Nobody seemed to lament the passing of McPizza, and nobody was urging its return. Which, to Mr. Thompson in the fall of 2016, made the topic all the more appealing.

. . .

(p. 8) One trick to keeping this enterprise alive and entertaining is Mr. Thompson’s refusal to accept answers to the show’s titular question, which he had learned by Episode 5. McPizza failed for reasons that should have seemed evident before it was rolled out: It’s way, way off brand, and it didn’t bake fast enough to keep pace with the rest of the menu.

. . .

Early on, Mr. Thompson learned that a McDonald’s in Pomeroy, Ohio, was the last franchise in the country still serving the pizza, and he raised money through Indiegogo to fly there and try it. (He described it as “at least as good as Little Caesars.”)

He wondered how the place kept selling an item that others in the chain didn’t offer. Once again, definitive answers were elusive because the franchise owner would not speak to him.  . . .

Several months after Mr. Thompson’s visit, the Pomeroy McDonald’s stopped selling McPizza. The podcast depicted this as retaliation against the show, a shameless effort to curtail old-fashioned muckraking. This makes sense only in the mind of “Brian Thompson,” whose baseline assumption is that McDonald’s ought to again sell pizza because people love it and because the company is in business to make money. Hence, any rationale for the product’s demise is under suspicion.

To Mr. Thompson’s delight, he keeps unearthing new rationales for the product’s cancellation. At one point, he heard about a McDonald’s in Adak, Alaska, a largely deserted island in the middle of the Bering Sea. For years, Adak was a Cold War outpost for Army and Navy barracks, but it was decommissioned in the early 1990s, and the McDonald’s there was abandoned. Last year, Mr. Thompson raised money online to travel the 3,100 miles there, hoping that the husk of a restaurant would contain his Holy Grail: a McDonald’s pizza oven.

He flew to Anchorage, then took a once-a-week, three-hour flight to Adak. After landing, he went straight to the McDonald’s and was disappointed to see it had been boarded up — there was no way inside. The trip seemed a grand bust. But as Mr. Thompson prepared to leave the island, his Airbnb host suggested he call a guy named Larry, who, it turned out, had once found a pizza oven in a derelict bowling alley. Evidently, it had been hauled out of the defunct McDonald’s. Larry determined it had been manufactured for McDonald’s by Garland Commercial Industries, a company in Freeland, Pa.

To “Brian Thompson,” this was a breakthrough on a par with the formulation of the laws of thermodynamics. He called Garland, and a representative put him in touch with a service tech in Cleveland who had once repaired McDonald’s ovens. Unlike the corporate P.R. department, this guy was chatty.

“They were only in McDonald’s for roughly two to three years because of the difficulty to program them,” the tech said on Episode 143. “I don’t even think there’s program manuals for it.”

And thus, to Mr. Thompson’s delight, three years into the show, he’d added another reason that McDonald’s killed pizza — the ovens were a fiasco.

For the full story, see:

David Segal. “Answering a Fast-Food Question, if You Care.” The New York Times, SundayBusiness Section (Sunday, November 1, 2020): 1 & 8.

(Note: ellipses added.)

(Note: the online version of the story has the date Oct. 28, 2020, and has the title “A Podcast Answers a Fast-Food Question That Nobody Is Asking.”)

“Run With the Herd or Be Crushed by It”

The author of the passages quoted below writes poetry and novels in Havana.

(p. 7) Throughout my life, I’ve seen how powerless parents are in matters regarding their own children. Parents have no say over how their children should be raised, whether they will be conscripted or sent away to school in rural areas, and what dangers could befall them being so far from home and such a young age. They have no say over their children’s manners, religious teachings and political ideologies. There are only two choices: Run with the herd or be crushed by it.

As a teenager in the 1980s, I was taught in a “scientific communism” class that family was the heart of society. But from what I could see, that was no longer the case; organizations with mass followings like the Young Communist League had taken its place.

. . .

I was born and raised in a system that exerts control under the guise of paternalism — a system that caresses you as it beats you, that teaches you but also inhibits you, enlightens you and censures you. We are hostages to a government that behaves like an abusive, old-fashioned and sexist father, from whom we must seek consent and forgiveness.

For the full commentary, see:

Wendy Guerra. “Cuban Women Need a Revolution.” The New York Times, SundayReview Section (Sunday, October 13, 2019): 7.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Oct. 12, 2019, and has the title “‘Cuban Women Await Their #MeToo Moment.” The first paragraph quoted above is from the online version and differs in several respects from the equivalent paragraph in the print version.)

Robots That Can Grip Donuts Cannot Grip Asparagus

Distinguished MIT labor economist David Autor, who I reference in my book Openness to Creative Destruction: Sustaining Innovative Dynamism, was a co-chair of the MIT Work of the Future Task Force that wrote the report discussed in the article quoted below.

(p. B3) L. Rafael Reif, the president of Massachusetts Institute of Technology, delivered an intellectual call to arms to the university’s faculty in November 2017: Help generate insights into how advancing technology has changed and will change the work force, and what policies would create opportunity for more Americans in the digital economy.

That issue, he wrote, is the “defining challenge of our time.”

Three years later, the task force assembled to address it is publishing its wide-ranging conclusions. The 92-page report, “The Work of the Future: Building Better Jobs in an Age of Intelligent Machines,” was released on Tuesday [November 17, 2020].

. . .

Technology has always replaced some jobs, created new ones and changed others. The question is whether things will be different this time as robots and artificial intelligence quickly take over for humans on factory floors and in offices.

The M.I.T. researchers concluded that the change would be more evolutionary than revolutionary. In fact, they wrote, “we anticipate that in the next two decades, industrialized countries will have more job openings than workers to fill them.”

That judgment is informed by field research in several industries and sectors including insurance, health care, driverless vehicles, logistics and warehouses, advanced manufacturing, and small and medium-size manufacturers.

. . .

Despite advances, robots simply don’t have the flexibility and dexterity of human workers. Today’s robots learn from data and repetition. They can be remarkably adept at a certain task, but only that one. The report cited a fine-tuned gripping robot that could pluck a glazed doughnut and carefully place it in a box, with its shiny glaze undisturbed.

“But that gripper only works on doughnuts,” the report said. “It can’t pick up a clump of asparagus or a car tire.”

The cost and operational expertise required will also slow the widespread adoption of robots.

For the full story, see:

Steve Lohr. “Don’t Fear the Robots, Says Jobs Study Group.” The New York Times (Wednesday, November 18, 2020): B3.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date Nov. 17, 2020, and has the title “Don’t Fear the Robots, and Other Lessons From a Study of the Digital Economy.”)

The MIT report discussed above is:

MIT Work of the Future Task Force. “The Work of the Future: Building Better Jobs in an Age of Intelligent Machines.” Cambridge, MA: Massachusetts Institute of Technology, 2020.

My book mentioned above is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Least-Well-Off Were Gaining Before Pandemic

(p. A3) U.S. families’ income and wealth rose in the years heading into the coronavirus pandemic, with those in lower-income and lower-wealth categories reaping relatively large gains, the Federal Reserve said in a report on household finances.

. . .

The distribution of wealth between low- and high-income households narrowed slightly in the latest survey period, Fed economists said, a shift from the 2010-to-2016 period when incomes largely stagnated for all but the most well-off after the 2007-2009 recession.

Families in the lowest two income groups recorded large percentage increases in median net worth, suggesting the decadelong expansion benefited a wide swath of society. Net worth rose 37% to $9,800 for the lowest earners, and increased 40% to $44,000 for the second-lowest group. The median net worth of the highest and second-highest groups declined 8% and 9%, respectively.

For the full story, see:

Harriet Torry. “Household Wealth Rose Before Crisis.” The Wall Street Journal (Tuesday, September 29, 2020): A3.

(Note: ellipsis added.)

(Note: the online version of the story was updated Sep. 28, 2020, and has the title “Household Wealth Rose in Years Before Pandemic, Fed Says.”)

“Before the White People Left”

(p. A1) CHICAGO — The old guard of this city’s Roseland neighborhood, a community on the South Side famous for molding a young Barack Obama and infamous for its current blight, has never forgotten the fruit trees.

Back in the 1970s, before the full exodus of white residents, the erosion of local businesses, the crack epidemic of the 1980s and the disinvestment that followed, it was the trees that signaled the societal elevation of Black families — separating those who moved here from the urban high rises they fled. An apple tree greeted Antoine Dobine’s family in 1973, he said. The tree meant a yard. A yard meant a home. And a home meant a slice of the American dream, long deferred for Black Americans.

“Pear trees, peaches, apples, it was beautiful,” Mr. Dobine recalled. “Before the white people left.”

. . .

The fruit trees have been replaced with overgrown lots. Residents say gangs use the abandoned areas to stockpile weapons, which children sometimes find.

For the full story, see:

Astead W. Herndon. “Black Area Embraces Protests But Still Has No Grocery Store.” The New York Times (Wednesday, August 12, 2020): A1 & A21.

(Note: ellipsis added. The online version say that the New York print version had the title “In a Black Chicago Community, Doubt Defies Hope for Change.” My National print version had the title “Black Area Embraces Protests But Still Has No Grocery Store.”)

(Note: the online version of the story was updated Aug. 28 [sic], 2020, and has the title “‘A Smoking Gun’: Infectious Coronavirus Retrieved From Hospital Air.”)

“An Active Regulatory State Is a Playground for the Privileged Class”

(p. A17) . . . the poor would suffer most under Mr. Biden’s platform. Dividing U.S. households into five income groups, I have estimated the regulatory costs of each quintile and expressed them as a percentage of each quintile’s average income. The costs to the bottom group amount to 15.3% of its total income—representing a burden equal to all the taxes they currently pay. This group would experience part of the cost as lower wages, but the biggest bite would come in diminished purchasing power due to higher prices for energy, cars and other consumer goods.

The top quintile, by contrast, would suffer the least from regulatory restoration, with labor, energy and other consumer rules amounting to only a 2.2% implicit tax on the highest earners.

This estimate includes not only regulations Mr. Biden has explicitly said he would revive, but also many of those that would be necessary to meet the goals outlined in his platform.

. . .

An active regulatory state is a playground for the privileged class to indulge its own preferences at the expense of ordinary Americans.

For the full commentary, see:

Casey B. Mulligan. “The Real Cost of Biden’s Plans.” The Wall Street Journal (Thursday, September 17, 2020): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Sep. 16, 2020, and has the same title as the print version.)

Open Offices Reduce Productivity and Spread Diseases

(p. B4) When historians of the early 21st century look back on the pre-Covid era, one of the absurdities they might highlight is the vogue for gigantic, open-plan offices. The apotheosis of this trend of breaking down barriers between co-workers must surely be Facebook Inc.’s 433,555-square-foot Frank Gehry-designed open-plan office at its headquarters in Menlo Park, Calif. Opened in 2015, it’s now a ghost town, a monument to offices vacated by the pandemic.

Cramming cavernous spaces with as many desks as they could hold might have increased serendipitous interactions, but it almost certainly reduced productivity and helped spread communicable diseases, including coronavirus.

. . .

Cue the “dynamic workplace,” a pivot away from the open plan, built on the idea that with fewer employees coming to work on any given day, offices can offer them more flexibility of layout and management.

While open offices and dynamic workplaces share similar components—privacy booths and huddle rooms to escape the hubbub, cafe-like networking spaces, etc.—they’re philosophically distinct. One is intended to be a place where people come (at least) five days a week, and get most of their work done on site. The other is planned for people rotating in and out of the office, on flexible schedules they have more control over than ever.

. . .

Research on hot-desking in office spaces, for example—where employees give up a dedicated space in favor of first-come-first-serve seating—finds that it decreases socialization and trust. This happens because employees figure they might never again see the person they sit next to on a given day, says Dr. Sander. In other studies, employees complain they can’t find their colleagues, that it’s a hassle to find a new spot to work every day, and that such arrangements ignore humans’ innate territoriality and desire to make a space their own.

For the full commentary, see:

Christopher Mims. “Goodbye, Open Office. Hello, ‘Dynamic Workplace.” The Wall Street Journal (Saturday, September 12, 2020): B4.

(Note: ellipses added.)

(Note: the online version of the commentary has the same date and title as the print version.)

Amazon Adds 100,000 Fulltime, Nonseasonal Jobs That Include Benefits and Bonuses

(p. A1) Amazon.com Inc. plans to hire 100,000 additional employees in the U.S. and Canada, continuing a rapid expansion that began as the coronavirus pandemic forced many people to stay home and shop online for work and other necessities.

. . .

New jobs will be added at dozens of Amazon locations (p. A6) paying at least $15 an hour and including benefits and signing bonuses of as much as $1,000 in some cities. Hiring for the jobs has already begun. The positions are all nonseasonal, Amazon said.

For the full story, see:

Ben Otto, and Sebastian Herrera. “Amazon Ramps Up Hiring Plans, Adds 100,000 New Jobs.” The Wall Street Journal (Tuesday, September 15, 2020): A1 & A6.

(Note: ellipsis added.)

(Note: the online version of the story was updated Sep. 14, 2020, and has the title “Amazon to Hire 100,000 in U.S. and Canada.”)

Before Covid-19, Poverty and Unemployment Were Lowest in 50 Years

(p. B8) WASHINGTON — A record-low share of Americans were living in poverty, incomes were climbing, and health insurance coverage was little changed in 2019, a government report released on Tuesday showed — though the circumstances of many have deteriorated as pandemic lockdowns and industry disruptions have thrown millions out of work.

The share of Americans living in poverty fell to 10.5 percent in 2019, the Census Bureau reported, down 1.3 percentage points from 2018. That rate is the lowest since estimates were first published in 1959.

Household incomes increased to their highest level on record dating to 1967, at $68,700 in inflation-adjusted terms. That change came as individual workers saw their earnings climb and as the total number of people working increased.

. . .

Unemployment was hovering at around 3.5 percent before the crisis took hold, the lowest in 50 years, and wages were steadily rising.

For the full story, see:

Jeanna Smialek, Sarah Kliff and Alan Rappeport. “Census Shows Record-Low Poverty in U.S. Before Virus Struck.” The New York Times (Wednesday, September 16, 2020): B8.

(Note: ellipsis added.)

(Note: the online version of the story has the date Sept. 15, 2020, and has the title “U.S. Poverty Hit a Record Low Before the Pandemic Recession.”)

At Netflix “Adequate Performance Gets a Generous Severance Package”

Note that Netflix practices what Clayton Christensen called “emergent” strategic planning. Experimental responding to opportunities; no five year plans.

(p. B5) As a founder and co-chief executive of Netflix Inc., Reed Hastings has reshaped both the way people watch television and how the entertainment industry operates.

. . .

In his new book “No Rules Rules: Netflix and the Culture of Reinvention,” Mr. Hastings likens being employed at the streaming giant to being part of a sports team: Getting cut is disappointing but carries no shame. “Unlike many companies, we practice: Adequate performance gets a generous severance package,” reads one of Netflix’s mottos.

. . .

WSJ: In the book you say, “It’s impossible to know where a business like ours will be in five years.” What kind of prognosticating do you do?

Mr. Hastings: We keep trying experiments. The business model will be pretty similar in five years. Can we figure out animation? Can we catch Disney in family animation?

WSJ: You’ve said you want Netflix to be able to pounce on unanticipated opportunities. What’s an example of one you didn’t see coming?

Mr. Hastings: Nonfiction programming is a pretty good one. We started as superpremium TV, and the expansion into nonfiction has been a huge success. The whole sharing of content around the world has been a huge success. Prior to that, people thought Americans won’t watch content that’s produced outside the U.S.

For the full interview, see:

Joe Flint, interviewer. “BOSS TALK; Netflix’s Hastings Isn’t Fan of Remote Work.” The Wall Street Journal (Tuesday, September 8, 2020): B5.

(Note: ellipses added. “WSJ” and “MR. HASTINGS” were bolded in original.)

(Note: the online version of the interview has the date Sep. 7, 2020, and has the title “BOSS TALK; Netflix’s Reed Hastings Deems Remote Work ‘a Pure Negative’.”)

Hastings, Reed, and Erin Meyer. No Rules Rules: Netflix and the Culture of Reinvention. New York: Penguin Press, 2020.

“The Credentialist Prejudice” of the “College-Educated Elites”

Sandel in the passages quoted below is on to an important problem: that success depends too much on credentials. But in later passages than those quoted below, he misinterprets the deeper cause of the problem. He thinks the problem is that we value a person’s “merit.” I think valuing merit is fine, but we too much identify merit with credentials. Merit depends on character and skills. Credentials, at best, are one noisy signal of merit.

(p. 5) It is important to remember that most Americans — nearly two-thirds — do not have a four-year college degree. By telling workers that their inadequate education is the reason for their troubles, meritocrats moralize success and failure and unwittingly promote credentialism — an insidious prejudice against those who do not have college degrees.

The credentialist prejudice is a symptom of meritocratic hubris. By 2016, many working people chafed at the sense that looked down on them with condescension. This complaint was not without warrant. Survey research bears out what many working-class voters intuit: At a time when racism and sexism are out of favor (discredited though not eliminated), credentialism is the last acceptable prejudice.

In the United States and Europe, disdain for the less educated is more pronounced, or at least more readily acknowledged, than prejudice against other disfavored groups. In a series of surveys conducted in the United States, Britain, the Netherlands and Belgium, a team of social psychologists led by Toon Kuppens found that college-educated respondents had more bias against less-educated people than they did against other disfavored groups. The researchers surveyed attitudes toward a range of people who are typically victims of discrimination. In Europe, this list included Muslims and people who are poor, obese, blind and less educated; in the United States, the list also included African-Americans and the working class. Of all these groups, the poorly educated were disliked most of all.

Beyond revealing the disparaging views that college-educated elites have of less-educated people, the study also found that elites are unembarrassed by this prejudice. They may denounce racism and sexism, but they are unapologetic about their negative attitudes toward the less educated.

For the full commentary, see:

Michael J. Sandel. “The Consequences Of the Diploma Divide.” The New York Times, SundayReview Section (Sunday, September 6, 2020): 5.

(Note: the online version of the commentary has the date Sept. 2, 2020, and has the title “Disdain for the Less Educated Is the Last Acceptable Prejudice.”)

Sandel’s commentary is related to his book:

Sandel, Michael J. The Tyranny of Merit: What’s Become of the Common Good? New York: Farrar, Straus and Giroux, 2020.

The paper co-authored by Kuppens and mentioned above is:

Kuppens, Toon, Russell Spears, Antony S. R. Manstead, Bram Spruyt, and Matthew J. Easterbrook. “Educationism and the Irony of Meritocracy: Negative Attitudes of Higher Educated People Towards the Less Educated.” Journal of Experimental Social Psychology 76 (May 2018): 429-47.