Category Archives: Uncategorized

Falling DRAM Prices – Supply and Demand Assignment

Market: Dynamic Random Access Memory (DRAM) Source

graph

After the huge cryptocurrency mining craze died down last year, people stopped trying to build mining rigs, and a lot of people are even trying to sell their old rigs. This means that the demand for computer parts, especially components found in both mining and personal computers such as graphics cards and RAM modules is going down.

Due to a change in buyers preferences, from wanting to mine cryptocurrency to not wanting to mine cryptocurrency, the demand of desktop DRAM has gone down, decreasing the price of a large portion of the market, predicted to settle around 15%-25% cheaper.

This is also potentially a decrease in a “price” in a “complementary good” (which isn’t entirely true because cryptocurrencies are valued by the people who own them, and are not really controlled by a market, and they also aren’t really a complementary good, as one directly creates the other).

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Annie – Supply/Demand Assignment: Redux

https://www.countrynews.com.au/2019/04/10/527396/milk-supply-takes-dive

Fonterra, Australia has experienced a large decrease in the supply of milk. The production of milk fell by 27.2% in northern Victoria since January of last year. Fonterra Australia even offered an incentive of 70 cents/kg for farmers who signed a deal that required them to commit to both the volume and quantity of milk they make. Many farmers have even had to close their farms due to the high costs of feed/water as the drought continues.

The reason for the decrease in supply is because of a decrease in the number of overall suppliers. This decrease in number of supplies happened because of a change in cost of factors of production (water/feed required to raise cows that produce milk went up, maintaining the farm land was also too expensive for some farmers, etc).

Elaine: Supply and Demand Assignment

Market: Potatos

Source: Potato prices climbing in wake of poor growing season

Potato prices are estimated to rise at least 15%. This is due to a decrease in supply. The supply determinant is number of sellers. Many potato farmers were forced to abandon their crop as it was too muddy to harvest. In PEI, Canada’s largest producer of potatoes, an estimated 2,800 hectares were left in the field as they were too wet and muddy to harvest. After a cold spring and late growing season, this year’s harvest is said to be one of the shortest crop since 1972. As a result, the supply curve shifts to the left, causing the equilibrium quantity of potatoes to decrease and the equilibrium price of potatoes to increase.

Why the tech giants must be broken up

Imagine this. You’re talking to your friend and someone asks “Wait, how old is Donald Trump?”. What happens next in this situation? The answer’s simple, you’ll just Google it. The term “Google it” has become synonymous with searching something up on the internet. But what about all our other options? What if I want to “Bing” something or “Yahoo” something? Chances are you probably wouldn’t.

Alphabet, Google’s parent company, is one of the tech giants, alongside Amazon, Apple and Facebook. In today’s day and age, it’s hard to get anything done without one of these corporations knowing about it. Google owns 90% of internet searches, while Facebook owns 70% of social networks. And even more shockingly, only 1% of smartphones are operated with an OS other than iOS or Android, owned by Apple and Google respectively.

Google, Facebook, Apple and Amazon have essentially become monopolies. These companies dominate the market they operate in. In April, when he appeared at a hearing in Washington, Facebook’s CEO, Mark Zuckerberg, failed to name a single direct competitor.

In order to understand how dire the situation really is, we need to take a closer look at the companies involved.

Google

Although Google and Facebook are often discussed together, their core services are actually very different. Both companies make the majority of their profit via advertising, 97% for Facebook and 88% for Alphabet. While Facebook allows users to connect with people, Google allows users to find information they need. But most of these searched aren’t monetized – 3.5 billion to be exact. Google only gets paid when their ads at clicked on – often the top three results that are labeled as “Ads”. To advertisers’, Google’s system is a much better deal than other outlets. Google’s ads also target consumers at the exact moment they are looking for a product.

Facebook

Facebook’s ad system is more traditional than Google. Just like television and radio, Facebook creates interesting content that attracts users and sells this attention to advertisers. Facebook charges advertisers based on how many people see a message, not how many click the message. Like Google, Facebook is able to target very specific groups of people with a customized advertising message. This targeting is also what garnered widespread criticism after the events during the 2016 US presidential election.

Apple

In contrast to the previous two companies, Apple remains predominantly a hardware technology company, deriving 84% of its revenue in 2016 from iPhones, iPads and Mac computers. Since the profit margins on the sale of hardware is much larger than the sale of non-hardware services that Google and Facebook offer, Apple doesn’t have to dominate the hardware market in the same way that Google and Facebook dominate their respective markets. Despite the popularity of the iPhone with youth, iPhone rarely top 20% of worldwide phone sales, and account for about 30% of US sales. Apple also has a non-hardware element – such as its iTunes music and App Store. These elements are mainly used to support its primary focus as a hardware company.

Amazon

Once known for its book sales, Amazon operates in many different business sectors. But with the introduction of Amazon Alexa, Amazon Video and Amazon Music, they are now expanding into web services, where they were once predominantly in the goods industry. Amazon’s media businesses provided roughly 18% of their $136 billion annual revenue. Amazon’s $24 billion media revenue is nearly three times that of Netflix, but is still not their core business.

How did this happen?

With antitrust laws implemented in the US and Canada, many wonder how these corporations got so large in the first place. Let’s dissect this by starting with what antitrust laws are. Antitrust laws are a set of federal and state government laws that regulate the behaviour of corporations and promote fair competition in a market economy. They focus on restricting mergers that could lessen competition and prohibit the creation of a monopoly along with the abuse of monopoly power.

So how have Google and Facebook gotten away with becoming so large without any intervention from the FTC?  The main cause of the lack of regulation is the outdated nature of many anti-trust laws. In the past, the standard for whether to intervene a company’s affairs or not was if it was affecting “consumer welfare”. For the most part, this concerns the impact a merger or acquisition would have on price. Since the use of Facebook and Google are free, there is no effect on price, resulting in the FTC giving their two thumbs up.

With the outdated antitrust laws, Google was able to buy its main competitor, DoubleClick, Facebook was able to buy Instagram and WhatsApp, and Amazon was allowed to buy dozens of ecommerce rivals and online booksellers. All while facing no regulatory issues. In fact, Google, Amazon, Apple, Facebook, and Microsoft have acquired over 500 companies in the past decade combined. As a result, it has become much harder for new companies to enter the market, and many don’t even get the chance to compete with the tech giants before being acquired (a defining characteristic of a monopoly).

What’s the problem?

Many people, including myself, wonder where the issue lies with the mass power that the tech giants have gained. Like many others, I once thought that, since these huge corporations have worked their way to the top, there was nothing wrong with one company owning the majority of a market. Besides, in a capitalist society, the most successful company in a market place will keep growing. Just as the saying goes, the rich get richer, right? In reality, the issue with monopolies isn’t so simple.

Monopolies have many disadvantages for a society, such as higher prices, decline in consumer surplus, and possible diseconomies of scale. In addition, large companies often have substantial power, which allows them to influence the government to change laws in their favour. From a consumer’s point of view, this means that you will have less options for products, and also worse quality products for higher prices (which explains why Rogers’ prices are going up, but service is going down).

We’re past the decade where the only downside to a monopoly is having to pay more for a bag of barley. In this new age where virtually everything is done on the web, the tech giants have access to everything we do. Now, you can’t just buy privacy with curtains anymore. Instead of being concerned with prices, the majority of people are concerned with the vast amount of data that the tech giants have. And as everyone knows, data is the new oil. It’s the new precious commodity. But unlike oil, data is taken from internet users by tech companies and dealt with their own discretion. Not only can this data be leaked, which has happened countless times, it can also be used to grow their companies even further. Amazon has used their data to see which products sell the best and then create their own versions of these products to sell. Facebook has admitted to sharing users’ phone numbers to improve their account security with advertisers.

This brings us to the next issue with monopolies, the abuse of power. Just as wealthy people abuse their money, the tech giants abuse their large consumer base. To ensure that they don’t meet the same fates as some of their predecessors such as Blackberry and MySpace, the tech giants have questionable ways of maintaining their place in the Fortune 500. In 2010, Amazon notoriously dropped their price of diapers as much as 30% to match Diapers.com until the smaller company agreed to be acquired.

The Next Steps

Triggered by Facebook’s recent controversy, attention is finally being brought to the tech giants’ malicious power. Not only has this attracted the attention of online journalists, it has also made the government turn their heads. Google has already been fined $5 billion for anti-competitive Android bundling while Apple was fined $11.4 million for software updates that forced consumers to buy newer products. But these fines will not result in any lasting change since the fine is miniscule in comparison to the companies’ net worth and will barely make a dent in their cash. In the tech giants’ eyes, these fines are just the cost of doing business.

The only way to make any lasting change is to get to the root of the problem. The tech giants have gotten to where they are right now by buying out their competition and using their power in an anti-competitive nature. A major step was taken when senator Amy Klobuchar introduced a new bill that places a ban on buying start-ups for any company with a market cap higher than $100 billion (Google has a market cap of around $840 billion). If passed, this bill will prevent any further destruction to the market and allow and encourage start-ups to compete against the tech giants.

Another viable next step is to break up the companies into smaller companies. When Microsoft was accused of holding a monopoly and engaging in anti-competitive practices, they were requested to break into several parts. The same can and should be done with the tech giants. Many have suggested for Facebook to let go of Instagram and for Google to let go of YouTube and DoubleClick. By breaking up the tech giants into several companies, real competition will be introduced into a market that was previously dominated by a few companies.

References

https://www.telegraph.co.uk/technology/2018/12/15/watchdogs-close-silicon-valley-giants-monopoly-concerns-mount/

http://fortune.com/2019/03/16/google-amazon-antitrust-laws/

http://theconversation.com/big-tech-isnt-one-big-monopoly-its-5-companies-all-in-different-businesses-92791

https://www.theverge.com/2018/9/5/17805162/monopoly-antitrust-regulation-google-amazon-uber-facebook

https://qz.com/work/1460402/google-facebook-and-amazon-benefit-from-an-outdated-definition-of-monopoly/

https://www.usatoday.com/story/opinion/2018/10/05/facebook-dangerous-monopoly-divest-instagram-whatsapp-messenger-column/1512215002/

https://www.theguardian.com/technology/2018/jan/28/tech-backlash-facebook-google-fake-news-business-monopoly-regulation

https://www.theguardian.com/commentisfree/2018/apr/20/tech-monopoly-apple-facebook-data-extreme-content

https://www.wired.com/story/facebook-not-monopoly-but-should-broken-up/

https://www.wired.com/story/book-excerpt-curse-of-bigness/

https://www.vox.com/policy-and-politics/2019/3/11/18259885/elizabeth-warren-break-up-apple-google-facebook

Capitalism: The Best Market System?

capitalism comic3

The economy, arguably the major backbone of the human race.  It’s what we interact with in our everyday lives. From something as simple as buying your daily coffee before work to purchasing your very first house; the resources, money and work put into any of these purchases can be traced back to the economy.  As humans, we have experienced different types of systems that run our economy. From the traditional economy; which was bartering and trades that occur in places such as Bedouin in the Sahara Desert. As well as a socialist economy, which was mainly advertised by Karl Marx, which involved a society where the government owned and controlled the industry; and of course,  capitalism. Today, capitalism is the main economic system used across the globe. Countries such as the United States of America, the United Kingdom, Japan, Germany, and many more use this system to run their economy. However, the economical question on everyone’s mind: Is the capitalist system the most appropriate system for society? Although we most of the world have grown accustomed to this type of lifestyle, is it the best economic system for a better quality of life for all?

Before making this important decision, we need to take a deeper dive into what capitalism really is. Pure capitalism is when capital goods are owned by certain individuals and businesses.  Production of any type is based on the supply and demand of the consumers of the market. Unlike its counterpart (socialism) , there is little to no interference between the government and the economy, and economic activity is determined by individuals.

Freedom

In order to decide whether capitalism is the best economic system or not, we must first weigh the advantages and disadvantages of capitalism. It’s main advantage being the freedom that capitalism provides.  Because of the absence of government interference, profitable success is all up to the people. Whoever can provide the demand of the consumer can easily thrive in this system. Due to this, innovative ideas are heavily encouraged.  With no specific demand for a certain good or service, new ideas always have a chance to become successful. Major brands such as Apple can thank capitalism for a huge portion of their success. With new functions being added to the latest iPhone such as face recognition, better graphics and so on; the thirst for these new features is what drives the demand for iPhones so high. The idea of encourage innovation also reveals another advantage: heavy reward.  With an economy that allows capital goods to be owned by private individuals, anyone has the potential to become successful in this economy.

idea market

Production and Efficiency Increase

In addition to this, the production rate and efficiency of businesses are higher in capitalist systems.  Thanks to the control of their capital goods, business have a greater incentive to work harder to reap more profit through production.  Efficiency is also better, as companies are constantly looking to cut costs, yet still producing quality goods for the consumer.

With all these advantages, it may seem like a capitalism is the appropriate economic system, but it is in the disadvantages it provides that question it’s legitimacy as the best economic system.

Class Distinction and Inequality

One disadvantage being the distinction in class and ranking between the rich and the poor of the capitalist system.  When profit is generated, a large portion will go to the higher ups of the business. This makes a select few of the business extremely wealthy, while a large majority of the workers are paid salaries and wages while they work for these rich individuals.  As we travel down the from CEO to managers, to workers and so forth, we can see an obvious deficit in the wages for each class of worker. This overall makes the rich richer, while the lower ranks stay stagnant and strive for a higher rank to earn more. Here we see a lack of equality.  When compared to a socialist system, where everyone is paid a similar amount; the capitalist system draws clear distinction between the upper class, middle class, and lower class.

“Capitalism is, fundamentally, an economic system that promotes inequality”

Annalee Newitz

Capitalism comic 1

Uncertainty

In an economic system, uncertainty is a big issue for many businesses.  The reason being relevance. As mentioned before,the production of goods is based off of the demand of the consumer. Whoever can provide whatever is trending at an agreeable price at a low production cost can make the most profit.  However, if a good or service is suddenly no longer relevant, or a better substitute enters the market, suddenly businesses aren’t making the same amount of profit as before. The fluctuation of demand in the market can ultimately kill a business.  A business’s ability to adapt to the needs of the consumer can strive, but making the necessary actions to meet the demand and criteria of the consumer can become very challenging. If a company can’t adapt to these changes in demand, then they can ultimately run out of business, and thousands of jobs in that business will be lost.

Monopoly

With a heavy amount of competition in the capitalist system, monopolies are a potential threat.  When bigger, more successful companies enter the market, they can buy out and eliminate competition.  Suddenly, local companies and businesses are trampled over by big names. Once all competition is gone, big companies will start charging more for their goods and services. With no substitutes to go to, more money is taken from the consumer’s wallet and is placed in the hands of major companies

Business concept

Ethics, Responsibilities and Greed

Businesses can sometimes get carried away with the profit that can be made in an economical system.  Since the need to increase production is always present, companies can forget the dangerous pollution that can be released when in production. For example, an article written by Eric Roston of Time magazine that in 2018, the largest rise of carbon dioxide pollution in the USA was manufacturing, as it increased by 5.7%.  This is harmful for our planet, and must be decreased in order to preserve clean, useable air.

Morality is also in question in capitalism.  Thanks to greed, individuals are looking for anything they can sell to the market to generate income.   This can lead to some goods and services that question the moral of society. For example, in an article entitled “What Isn’t for Sale” written by Michael J. Sandel for The Atlantic, strange purchases are highlighted.  One example being the right to shoot an endangered black rhino for the low price of $250,000!  Although this is a hefty price to pay, the idea of killing an endangered animal for a sum of money is somewhat sickening, especially for many animal lovers world wide.  This itself is an example of the horrific goods and services that can be provided in an capitalist economy in desperate attempt for money.

Capitalism comic 2

As you can see, the disadvantages outweigh the advantages when looking at capitalism.  Is it the best market system? Probably not. Is it the worst? Not really. Keep in mind that the points highlighted were that of  perfect capitalism. Does this mean Socialism is better? Depending who you as, maybe.  The point is, the best market system cannot be purely one thing. I think the best market system is a mixed system. The freedom of capitalism with the subtle government control of socialism.  Although this perfect mixture may not exist, it is important to know the best market system will never truly exist, and the human race will continue their search to find the most satisfactory market system.

Works cited:

Capitalism

Socialism vs. Capitalism

U.S. Carbon Emissions See Second Largest Year-On-Year Increase in 20 Years

What Isn’t For Sale

The Power of The Market

The Point of View: The Revolution of Capitalism

Pros and Cons of Capitalism

Internet cartels: the age of the tech giants, and what can be done

Facebook, Amazon, Alphabet, Apple. Four companies, four household names, four symbols of the new era of corporate power we now live in. Collectively, they brought in more money last year than the entire country of Saudi Arabia produced. These are Silicon Valley’s tech giants, and they’ve come under fire recently by presidential hopeful Elizabeth Warren, who proposed breaking up the tech giants in order to cull their influence over the lives of Americans. So let’s talk about the power these companies have, and what, if anything, needs to be done in order to keep these companies in check.

Depending on who you are, when you first think of these companies you may or may not think about the power that’s attached to these companies. But it’s undeniable that these companies play a major role in our lives, not just in terms of their role in our daily lives, but also their stake in the larger tech industry.

Let’s use Facebook as our primary example of this. More than one and a half billion people use Facebook daily, and this isn’t any happy accident. Through acquisition after acquisition, and hostile advance after hostile advance, Facebook has secured a majority over the social media market, and as a result has immense influence over our media consumption.

Are these companies monopolies? By the technical definition, no, no they are not. There are other companies that exist and compete with them to provide some of the services; they are able to draw away some consumers. Some of these companies even compete with one another in certain markets (see: Apple and Alphabet in the mobile operating system market, Facebook and Alphabet in the social media market). So these companies are not in and of themselves a monopoly, even if they do dominate in certain segments of the market.

But what makes these companies so dangerous is their sheer mass. They’ve reached a critical point where just by virtue of their immense size; they possess massive amounts of influence over our economy, our culture and our lives. This influence makes them perfect vessels for income generation, as their size allows them to manipulate the markets into their favor and allows them to optimize the market to suit them.

We’ve seen this type of behavior exhibited by every one of these tech giants, hostile actions and policies that directly reduce competition and inhibit innovation overall. Through acquisitions and use of their platforms to stifle emerging competitors, these companies have been able to secure their place at the top. This is not rhetoric, there is a legitimate case for these companies breaking anti-trust laws and using employing uncompetitive practises. Apple and its App Store, Google and its Google Play store, Amazon and its online marketplace, these companies have complete vertical control over their respective industries.

Each and every one of these companies has virtual vertical integration over massive markets, which gives them unparalleled control and ability to unilaterally influence markets and, thus, consumers. As a result, these companies should be broken up, in order to ensure the integrity of the market and to ensure no company has unilateral control over a certain segment of the tech industry.

Breaking Up Tech Giants is NOT the Answer

There has been a lot of talk lately surrounding Elizabeth Warren and her plans to break up the tech giants, because they supposedly hold too much power. However, I don’t think that breaking up these tech giants is a good idea, for a number of reasons.

First of all, changes like this would divide many people’s workflows. New rising companies, programs, and websites just force both companies and individuals to change their systems and complicate the current set of applications they use. A primary example right now would be all the different social networks with the exact same features. The fact that all these different networks exist make it extremely difficult to keep track of people who use these networks, especially “heavier” messaging programs such as Discord, Slack, Skype, or TeamSpeak. People usually only have and use one or maybe two of these at a time, so if you don’t have the right ones, it might be hard if not impossible to communicate with them. Another prime example would be our school’s programming club, which started off with a Facebook page and a site, then created a Slack, and stopped using the slack and created a Discord server, which was then temporarily blocked on school internet, but was unblocked recently. But the problem now is that we have a site, a Facebook page, and a Discord server, and it is unnecessarily complicated to update all three of them when one of them is enough. Furthermore, the Slack and Discord servers didn’t help that much with communication at all, and caused a lot of unnecessary and unrelated discussion to occur.

As well, having big companies buy out rising smaller companies of related services allows them to integrate the good of both together. For example, Apple products individually are objectively worse than their Android and PC/Linux counterparts in every way, but the people who don’t buy them out of stupidity or brand name buy them because of their familiarity and superb integration with the Apple products they already own. If more companies integrated their services together, especially the bigger ones, it would boost the use of compatible technologies, and creates more reliable long-term investment opportunities. Integrations such as Facebook with Instagram and Amazon with Twitch have already benefited many users with common friend suggestions and free gaming swag with Amazon Prime. Some articles even try to argue this as a bad thing, saying “This is a nakedly desperate attempt to justify the mergers by creating some utility for the user, where right now there’s none. For Facebook, however, advantages abound.” (Wired), though I fail to see how no change for one party and benefits for another party is not beneficial overall.

Furthermore, the “problems” that people are stating such as Amazon manufacturing popular products, or Google prioritizing their restaurant reviews are actually a good thing. If Amazon can manufacture themselves a popular product at a lower price, that both helps Amazon grow and allows consumers to make sure they are getting a well made, high quality version of the product. Also, Google can already scan your emails for train and plane tickets and send notifications and reminders for your trips (a feature that has already helped me multiple times), and prioritizing Google’s restaurant reviews lets them make better recommendations during your trip as well. Buying Waze, Doubleclick, and AdMob lets Google integrate the benefits of the services, and gives them the well known Google brand to show that they can be trusted.

Moreover, these big companies do have competition: with each other. They have overlapping products in many fields, such as livestreaming (Amazon’s Twitch, Google’s YouTube Live, Facebook’s Live, Microsoft’s Mixer), music streaming (Amazon Music, Google Play Music, YouTube Music, Apple Music, Spotify), mobile phones and operating systems (Apple’s iPhones/iOS/OS X, Google’s Pixel/Android/Fuschia/Chromebook, Microsoft’s Windows Phones and Windows), and many more. Competition within the already big companies are better than competition with new rising small companies as most people already have accounts with them. Forcing new small companies to emerge will only cause more frustrating account management and confusion.

On top of all of this, most of these services don’t cost any money to use and do their job very well already, so there isn’t any need for competition to keep prices low or supply flowing. Google is a very good search engine used by many people, and they can use your search and browsing history to show you targeted ads, which will help both you and the advertisers. Google used to have its own social network, Google+, but shut it down because it simply wasn’t needed as Facebook treated the average user’s needs better. Apple sells you a great lifestyle, Amazon is a reliable source for ordering products online, and Facebook does everything you need a social network to do.