The Airlines Always Win. NewsWire

NEWSWIRE: 2/10/20

• The increased use of dynamic pricing means that travel companies are nearly always outbargaining customers. With the help of AI, airlines and hotels now update prices dozens of times a day, factoring in data like weather forecasts, local events, and even trending Google searches. (The New York Times)
• NH: Say you’re planning a family vacation to Disney World. Not too long ago, it was clear when you could score the best deals. You knew, for instance, that prices would be highest during peak demand periods: weekends, summer, school holidays. This is still true, but seasonal considerations are now only a tiny slice of the data airlines and hotels are using to set prices now.
• If the weather’s been bad lately, they know. If BTS just announced a concert there, they know. If a hot new restaurant just opened nearby and you’re a big foodie, they know. The pricing is up-to-the-minute and ever-more individualized. On high-traffic flight routes like New York to London, they can change up 70 times in two days. What's more, they know a lot about just how much you personally can afford.
• Forget dynamic pricing. Now we’ve entered the era of “hyperdynamic pricing.”
• How did we get here so fast? The scope of data available to companies is growing exponentially, and so is their ability to crunch it. In the cat-and-mouse game between companies and consumers, the company holds so much more information that they’re almost always the cat. They’re getting closer and closer to achieving perfect price discrimination. This is an issue we’ve written about extensively (see “A Special Price Just for You”). With a downward-sloping demand curve, retailers can practice perfect price discrimination by charging each customer according to his or her willingness to pay at that moment. If you can pay more, you will. If you can only pay less, you will. This enables the firm to pocket all of the consumer surplus that would be ordinarily left on the table by one universal price. It’s much more effective than simply limiting raising your (one) price and limiting your sales--which is the classic "monopoly" strategy.
• To work well, price discrimination requires not only pricing power. It also requires a relatively low marginal cost per good sold. Airfare and hotel rooms (and pharmaceuticals) are perfect candidates. It costs Marriott and Delta very little extra to fill a room or a seat that would otherwise go empty. So they make money even at a "super-discount" price. On the other hand, price discrimination doesn’t make sense for products with a relatively high marginal cost. A big-name masseur, for instance, could possibly make more money by upping his price for all customers, but probably would not benefit by charging differential prices to different customers. There's just too much labor and cost that goes into each sale.
• The comments to the original NYT story are full of readers chanting a familiar refrain: This isn’t fair. Surveys reach the same conclusion: When informed about the practice of selling the same thing to different customers at different prices, the vast majority of Americans agree that it's not fair. Yet even as Silicon Valley antitrust concerns have gained steam on Capitol Hill, price discrimination remains basically a non-issue among policymakers. They’re plenty worried about possible monopolistic practices by the big FAANG firms, but not (yet) about the obvious antitrust implications of rampant price discrimination. Once upon a time, the FTC frowned on the practice (mainly in the context of B-to-B transactions). But that was decades ago. Today, it goes pretty much unregulated.
• Why? Well, for starters, most companies aren’t engaging in egregious levels of personalization just yet. One analysis of Amazon’s prices found that they are the same across different geographies 91 times out of 100. But I suspect it’s also because dynamic pricing so often delights the customer as a "bargain." A recent paper from the University of Chicago found that personalized pricing improves a company's profits by 86% compared to standard pricing--but at the same time, 60% of consumers benefited from prices lower than the announced "sticker price." You may be outraged that NYU charges $100K per year to send your child there--but then again, aren't you delighted that your special child got a $30K scholarship? (Colleges are masters of price discrimination: See "Six-Figure Tuitions are Coming to Colleges.")
• Safeway says it's giving you a "personalized price." And maybe a few coupons. How can you get angry about that? One word of advice, though. If you suspect you may have a higher-than-average ability to pay, you should do everything you can to erase your social-media identity or buy incognito. It's like the old joke about the poker game. If you look around the table and can't figure out who's getting conned, well... you know the rest.
• A recent Pew study breaks down support for the 2020 Democratic field, with notable divides by age and race. The share of adults whose first choice is Joe Biden increases sharply moving up the age ladder, but the opposite is true for clear Millennial favorite Bernie Sanders. (Pew Research Center)
• NH: After the Iowa Caucus debacle, there still isn’t a clear front-runner for the Democratic nomination. But this Pew report gives us a clear portrait of the kinds of people who support each candidate. I’ll spare you the exact numbers, but you can see them on the first chart below.
• When you look at voters by age Biden sweeps with older supporters but does terribly with the 18-29 age group. Bernie, on the other hand, gets the highest percentage of the young but does the worst with the 65+ age group (see “Millennials Still Love Bernie Sanders”). Another interesting age anomaly is Pete Buttigieg, the youngest candidate running, who doesn't do at all well with his own generation but does very well with the old. Millennials see him as the apple-polishing teacher’s pet, not a champion of their causes. Older adults wish he was their own kid.
• When you look at supporters by race, Biden does the best with blacks, probably due to his connection to Obama. Buttigieg, on the other hand, does the worst with African-Americans, with less than 1% support. Opinions differ about why this is so. Maybe its his sexual orientation, or his secularism, or his somewhat pedantic manner of speaking, or his scandal firing South Bend’s first black police chief. When it comes to Hispanics, Sanders does exceptionally well. This may help him on Super Tuesday.
• When you look at education, Warren gets the most educated supporters. This goes along with her “brainy” professor brand. Buttigieg also gets most of his support from the highly educated, attracted to his Harvard degree and Rhodes Scholarship. Biden does the best with the least educated, but that could simply be because they don’t follow politics as closely and choose him out of name recognition. Sanders evenly gets his support from high school or less, some college, and 4-year degree holders. His brand resonates with the working-class voter going against the “1%.”
• The Pew report also offers some insight into who voters will support if their first choice drops out (see second chart below). If Sanders drops out, as you might guess, most of his supporters will go to Warren. And if Warren drops out, her supporters go to Bernie; a progressive to a progressive. For the minor, also-ran candidate, their favorite second choice is Warren. (These “others” are mostly “brainy” candidates like Yang, Gabbard, and Bennet who do well with well-educated voters.)
• More surprising is that if Bloomberg drops out, his supporters go to Biden--but if Biden drops out, his supporters go to Sanders. Most Bloomberg supporters were originally Biden fans who feared his ability to win. If Bloomberg drops out, they will go back to their original choice. But Biden supporters stayed with him because they wanted a seasoned moderate party man--not a billionaire oligarch. If Biden isn't viable, they would rather switch to a working-class champion like Sanders than the guy who made billions selling to Wall Street.
• The report also undermines the popular media narrative that Buttigieg is everyone's second choice. In fact, Buttigieg doesn't get a majority second choice from any of the candidates' supporters. His biggest support comes from Warren voters with 13% naming him as their second choice. But 36% of her supporters choose Bernie and 18% choose Biden. Buttigieg may be feeling good after Iowa. But waiting for other candidates to drop isn't likely to help him a lot. 

• Contrary to media stereotypes, Boomers are less likely to live in urban neighborhoods than previous generations of older people. From 1990 to 2018, the share of 54- to 72-year-olds who are urban residents fell steadily from 21.6% to 17.8%. (The New York Times) 
• NH: This is an excellent analysis of Census data that basically corroborates what I have been saying for some time now. See "Reports of Suburbia's Death Are Greatly Exaggerated," wherein I make a similar point. The media seem to believe the opposite, that Boomers--especially affluent Boomers--are increasingly likely to move into urban cores. But no, this is not true--not even for affluent Boomers.
• Due to the importance of these numbers, we will be releasing an in-depth report on the data later this week. Stay tuned for further analysis.

• Grandma wants to hand down her prized fur coat—but the problem is, the grandkids don’t want it. What was once a status symbol has turned into an ethical quandary for younger generations who are recycling the coats into new items or refusing them altogether. (The Wall Street Journal)
• NH: Add fur coats to the long list of stuff older generations are finding it hard to pass down: crystal goblets, fancy tableware, elaborate home décor, McMansions. (See: “Boomers Burdened with China and Crystal” and “Keep Your Hand-Me-Downs.”) But this time, it’s not Mom and Dad but Grandma doing the pushing. Fur coats were the quintessential symbol of wealth and status for Silent and G.I. Generation women. They’ve been “out” a long time: The backlash against fur began stirring as early as the 1960s--and beyond that, it just looks old-fashioned.
• Sure, Macklemore made used furs an iconic image of Millennial thrift-shop chic. (See "'Let's Go Thrifting'... the New Millennial Pastime.") But if grandmothers everywhere have been holding on to their beloved mink coats all this time in hopes of a comeback, the article makes it clear they’re probably going to be disappointed.
• Still, you’ve got to give Grandma credit for trying. When one granddaughter turned down her furs on moral grounds, her 84-year-old grandmother shot back: “Honey, you not wearing the coat isn’t going to bring that [mink] back to life. He’s been dead 60 years!”
• Counties where Millennials make up at least a quarter of the population account for 62% of the entire U.S. population, but only 59% of single-family homebuilding. Particularly scarce is housing at the lower end of the market, where demand among Millennials is highest. (CNBC)
• NH: This story, based on data culled by the NAHB's "Home Building Geography Index," has been getting a lot of media play. See the first chart below. But it's hard to say whether the facts as presented should bother us or not.
• Millennial-heavy counties are building slightly fewer homes, per capita, than Millennial-light counties. But this would only be puzzling if the Millennial demand for additional housing is in the same counties in which they now live. And if other generations are not moving out of those counties. Yet neither of these assumptions are likely to be true. Many Millennial-rich cities are experiencing net out-migrations (see "Millennials Ditching Big Cities for the Suburbs"), and many too are experiencing net out-migrations of older generations.
• Adding new housing units to the nation's total housing stock is like adding seats to a game of musical chairs in which new players are always entering the game. Each time the music stops and every player sits down, the new players (or new households) aren't necessarily the ones who end up in the newly added chairs. In general, newly added homes are more expensive than existing homes. Which means, in general, that households buying new homes will tend to be more affluent--which in turn means they will be older.
• To be sure, over the last decade, all homes (both multi-family and single family) have become more expensive in real dollars. And new homes have become more expensive relative to existing homes. The rising trend in all homes is due mainly to the recovery from the 2003-07 overbuilding boom and to lower interest rates. And the rising relative trend in new homes is due mainly to rising labor and regulatory costs and to a policy-induced scarcity of available space in many of America's hottest markets (especially in the Northeast and West; see second chart below). A few economist believe some of the scarcity may been deliberately induced by a handful of major consolidating homebuilders.
• But is there any reason to think that the location of new home building should automatically reflect the current geographical distribution of Millennials? No, probably not.

• Between 2010 and 2016, the number of intentional communities in the U.S. nearly doubled to 1,200. These largely rural communities, where residents live close to nature and govern themselves by consensus, are seeing a revival as more Americans seek to consume less and opt out of the rat race. (The New York Times)
• NH: In American history, large-scale utopian and counterculture community movements have erupted at roughly 80-year intervals, during awakening eras when a prophet generational archetype is coming of age. The last time this occurred was in the late-1960s and 1970s, when Boomers were coming of age. Earlier ones peaked in the 1890s (the "Third Great Awakening"), the 1830s (the "Second Great Awakening"), or the 1740s (the original "Great Awakening"). These outbreaks tend to be explicitly generational, with youth organizing themselves in an explicit challenge to a conformist establishment culture built by their parents.
• About 40 years (or two generations) after these awakenings, it's fair to say that such utopian movements give rise to echo outbreaks, typically led by the aging prophet archetype or established according to the foundations they left behind.
• Today, one such echo may be underway. According to the Foundation for Intentional Community (FIC), "intentional communities" retreated heavily during the 1980s but ever since have gradually recovered in numbers and have lately enjoyed an accelerating resurgence. As this heavily anecdotal NYT feature story makes clear, there are no accurate statistics on the growth of this movement since so many of these communities are "off the grid." But in an America so desperately searching for closer forms of community at all ends of the cultural spectrum (see "Kansas is Home to a Thriving Conservative-Catholic Community" and "Religion-Free Millennials and Nuns Live Together and Learn from Each Other"), it is very likely happening with among back-to-nature utopians as well.
• The FIC estimates that maybe 100,000 people now live in these communities. That's not many--maybe, 0.03% of Americans. But they play an outsized role in our cultural imagination.
• What's similar to the '60s and '70s is that youth and young adults are a major driver behind the enthusiasm. Back then it was Boomers, and today it's Millennials. What's different is the active involvement of older generations. Back then--in the '70s heyday of Wheeler Ranch, the Farm, and Strawberry Fields--these communes were entirely filled and run by young people. (Back in the day, man, no one over 30 could be trusted!) Today, older generations play a conspicuous role, especially Boomers, as old-age "new-age" leaders and mentors. Indeed, many of new communities are being founded on boarded-up ruins of old '70s-era hippy-dippy communes. 

• According to a new study, 30% of Americans have used an online dating site or app, up from just 11% seven years ago. Most say their experience with online dating was positive, but many users—particularly younger women—also report that they’ve experienced some form of harassment. (Pew Research Center)
• NH: In our story on online dating last year (see: “Love at First Site”), we wrote that the industry had plenty of room to grow and was only going to get bigger. And we were right on target. According to the latest Pew figures, the share of Americans who have ever used a dating site or app has nearly tripled since Pew first asked this question in 2013. 12% say they have married or are in a committed relationship with someone they met online, up from just 3% back then. The use of online dating has increased across all demographic categories. Men are only slightly more likely than women to have tried online dating. and blacks slightly more likely than whites or Hispanics. But there are big differences by age and sexual orientation. Generally speaking, you’re most likely to have looked for love on the internet if you’re under age 30 and gay, lesbian, or bisexual.
• Most users (57%) say that their overall experience with online dating has been positive. It’s notable, however, that there are big differences by education: 70% of the college-educated rate online dating positively, compared to just 44% of people with a high school diploma or less. The report also lays out the many issues users have experienced with online dating in detail. Men are more likely to say they didn’t get enough messages or that it’s difficult to find people who share their interests. Women are much more likely to report receiving harassing messages (one of the main motivators behind the creation of Tinder’s biggest competitor, Bumble) or dealing with people who won’t leave them alone.
• Across the board, the biggest issue is dishonesty. Not surprising, but it looks like users have accepted that this is part of the territory that comes with online dating. Yes, it would help if dating sites and apps stepped up their identity verification practices to ferret out complete scammers. But they're never going to verify that your match really is six feet tall, a great cook, and enjoys long walks on the beach.
   
• Tufts professor Eitan D. Hersh has a warning for Democrats: Isolated individuals don't generate political change. His piece contends that the left increasingly consists of “political hobbyists”: people who follow the news individually, but don’t participate in organized political activities like volunteering or attending rallies. (The New York Times)
• NH: Hersh is a progressive Democrat giving advice to progressive Democrats. That's what makes his message so interesting.
• He starts with the observation that most (white) progressives do not profess to believe in religion. Instead, they like to say they are "spiritual." And by that they mean they can be decent, moral, and principled individuals without having to believe in all the theological hocus-pocus of organized religion. Hersh has no problem with this. But he does observe one other big difference between spirituality and organized religion. You practice spirituality alone. But in organized religion, you develop habits of working closely and routinely with communities of other people on common purposes.
• Hersh believes this poses a problem for Democrats. They may be more educated and informed than Republicans. But so long as they don't get involved with other people in a disciplined way, they will continue to fall behind Republicans in motivating public involvement and in voter turnout.
• Americans at both ends of the ideological spectrum are coming to recognize that radical individualism can undermine personal health. (See "All the Lonely People.") Where progressives lag behind conservatives, Hersh observes, is their failure to appreciate how it can undermine political health.
• "The increasingly nonreligious Democratic Party may continue to stay away from religious communities, even though research has found that religious participation, no matter the orthodoxy of beliefs, corresponds to greater involvement in civic and charitable work, and to higher degrees of happiness, and it also generates the social capital that can be leveraged for political activism."

• Lockport City School District in New York has become the first public school district in the state to adopt facial recognition. The move has attracted fierce criticism from opponents who say that the privacy and bias concerns surrounding this technology are even more serious when it comes to children. (The New York Times)
• NH: It seems that every other week surveillance technology creeps into a new sphere of life. We have written about surveillance technology in the context of law enforcement, retail stores, parents, colleges, and now K-12 public schools. See  “Don’t Go to That College Party...Your Parents Are Tracking You,” “We Are Being Watched By Nearly 1 Billion Surveillance Cameras,” and “Colleges Surveilling Students Through Phones.”
• The Lockport City School District has spent $1.4 million on 300 facial recognition cameras. The camera’s search for faces on the school’s “persons of interest” list, which is made up of sex offenders, fired employees, and those with restraining orders. When the camera detects a facial match, it sends an alert to a hired security expert who confirms or denies the accuracy of the camera; if it’s confirmed an alert goes to school administrators. The cameras also scan for possible guns, with alerts going immediately to the police.
• If you have been reading the NewsWire you already know how generational views split on surveillance (see “The Rise of ‘Total Tech’”). Boomers and Xers see this technology as an invasion of their privacy and personal freedom. The beat goes on in this article. The authors interviewed a 62-year-old dad who said the cameras are “high-tech [experiments] in privacy invasion.” Millennials, on the other hand, apparently see surveillance technology as a comforting source of safety. One high schooler interviewed in the piece described the cameras as “cool.”
• Nevertheless it’s questionable how effective these cameras are at stopping crime. Studies have shown that surveillance cameras have higher false positives with minorities. Additionally, they struggle with distinguishing between children. Can these devices be trusted to give accurate results?
• Another complaint is that the New York state government said the cameras can’t be used on the students. Advocates for the cameras say that most school shootings are committed by kids and adding suspended students to the “persons of interest” list is needed. The Violence Project has created a database of mass shootings in the U.S. and when you search K-12 shootings over the last 21 years, 8 of the 13 attacks were in fact committed by students. Theoretically, the cameras would not have detected over half of the shooters.
• I think we can safely assume that it is only a matter of time before the ACLU sues the school.  
• In an op-ed, writer Derek Thompson argues: Boomers already have their own version of socialism—so why can’t Millennials? It’s only fair, he says, that in a nation that already has Social Security and Medicare, to extend “the terms of an already existing social contract” to cover young Americans facing a very different economy. (The Atlantic)
• NH: I’ve said this before. I think the main difference separating Millennials and Boomers on the question of Bernie Sanders' "socialism" is what each generation means by the word. (See “Socialism is as Popular as Capitalism Among Young Millennials.")
• Boomers equate socialism with violence and revolution. Globally, they connect socialism with the brutal dictators of the Cold War era. Here at home, they recall the Maoist and Che-Guevara firebrands who wanted to tear down "Amerika" in the name of the dispossessed proletariat. Millennials, by contrast, equate socialism with a strong and prosperous (and law-abiding) middle class. It's mainly about providing a safety net for those who work (healthcare) and investing in the future of those who will work (by expanding the supply of higher ed and vocational ed). Occasionally it's about doing more to help aspiring bourgeois homeowners. To Millennials, socialism is about as revolutionary as Social Security and Medicare--which is still going strong btw for Boomers. It's just that the rest of the New Deal package, which once helped younger adults, has been allowed to atrophy on the Boomer watch.
• This, then, is the Millennial complaint against Boomers, pretty well captured in Thompson's piece. The Boomers benefited plenty from American socialism when they were young. The government (via the G.I. Bill) helped find all their parents jobs after World War II. The government invested hugely in higher ed to offer this massive generation nearly free state education when they came of age. (Btw true confession: I paid less the $100 per semester to attend UC Berkeley back in the 1970s--care to know what it costs now?) And the government helped make sure that the cost of housing and healthcare as a share of median wages remained only a small fraction of what it is today.
• So here's the deal. A lot of Millennials simply want to bring back many of the government programs that helped Boomers get off to a great start early in life. (See “Millennials Moved by Democratic Socialism”).

DID YOU KNOW?

E-Cigs Go from Hero to Zero. Last fall, a surge in vaping-related illnesses nationwide led to a decisive drop in the public’s opinion of e-cigarettes. (See: “The Vaping Drama Continues to Get Worse.”) And according to Morning Consult, these views have continued souring—even though the CDC has since confirmed that the majority of the illnesses were caused by off-label THC pods with an additive containing vitamin E acetate. Fully 66% of American adults still believe that traditional e-cigarettes such as Juul were responsible for the illnesses and deaths, up 8 percentage points since September. Only 27% pin them on THC e-cigarettes, which is actually down 6 percentage points over the same period. Meanwhile, the share of Americans who think e-cigarettes are harmful keeps growing steadily: 65% now say that they’re “very harmful,” and 74% say they’re just as bad for your health as traditional cigarettes. The ban on flavored vaping products that recently went into effect has faced opposition only from those who want it to do more, not less.