Nov 30, 2012

Boehner sees no progress in fiscal cliff talks | Reuters


Boehner said he was "disappointed" after a phone call with Obama on Wednesday night and a meeting with Treasury Secretary Timothy Geithner on Thursday moved the two sides no closer to an agreement to avert the tax hikes and spending cuts that will be triggered at the start of 2013 unless Congress intervenes.
"I'm disappointed in where we are and disappointed in what's happened over the last couple of weeks," Boehner, of Ohio, told reporters after a private session with Geithner at the Capitol.
"No substantive progress has been made in the talks between the White House and the House over the last two weeks," he said. "There's been no serious discussion of spending cuts so far, and unless there is, there's a real danger of going off the fiscal cliff."
Markets dipped briefly into negative territory on Boehner's comments before finishing higher, continuing a pattern of gyration tied to the latest utterances about the outlook for an agreement to avert the fiscal cliff.
"Until the fiscal cliff is solved, the madness of the crowd will not subside," said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.
The tone in Washington was in sharp contrast to the one expressed on November 16, the last time Obama met with congressional leaders. Boehner then stood next to Democratic leaders and voiced optimism they could find common ground in fiscal cliff negotiations.
Thursday, as Obama prepared for a campaign-style trip Friday to sell his argument to the public, Boehner said the last thing the country needs is "a victory lap" by the president.
There were also signs that the debate was about to get more, rather than less, complicated thanks to a renewed fight over raising the U.S. debt ceiling. That explosive issue, which could have been handled separately in the spring, was thrust into the fiscal cliff fray on Thursday in an exchange between Republicans and Democrats.
Boehner said any debt limit increase needed to be matched or exceeded by spending cuts to be proposed by Obama as part of the cliff negotiations.
"DEEPLY IRRESPONSIBLE"
White House spokesman Jay Carney responded by demanding that Congress go ahead and raise the debt ceiling as part of any year-end deal to avoid the cliff. To do otherwise, he said, would be "deeply irresponsible."
Geithner, for his part, requested in his meetings on Capitol Hill that the president be given new powers to raise U.S. borrowing authority, according to a Republican aide. Currently, Congress must pass legislation.
The last partisan fight over the nation's borrowing limit in 2011 was settled by a law that led directly to the fiscal cliff and to a downgrade of the government's credit rating.
Geithner, Obama's top negotiator in the talks, met with congressional leaders from both parties at the Capitol as the end-of-year deadline approaches to avoid the onset of $600 billion in tax hikes and spending cuts that analysts warn could push the U.S. economy back into recession.
The immediate issue is whether the tax cuts that originated in the administration of former President George W. Bush should be extended beyond December 31 for all taxpayers including the wealthy, as Republicans want, or just for taxpayers with income under $250,000, as Obama and his fellow Democrats want.
Republicans have said they are willing to consider new ways to raise revenue as long as Democrats and Obama agree to accompany it with significant spending cuts, particularly to entitlement programs like the government-sponsored Medicare and Medicaid healthcare plans.
Boehner said Geithner and the administration had not offered any new plans during the meeting to break the impasse, while Senate Democratic leader Harry Reid said Democrats were still waiting for a "reasonable" proposal from Republicans.
In the meetings with Republicans, Geithner set forth a series of proposals - most taken straight out of Obama's budget proposal last February - that include $1.6 trillion in new revenue increases and Medicare savings of more than $300 billion that mainly would hit healthcare providers.
The White House, according to the Democratic aide, also called for another extension of the 2 percentage point payroll tax cut that is due to expire on December 31. In recent weeks, Democrats in Congress had been talking about growing support for the tax cut extension to help stimulate the economy.
One of the Republican aides said the White House wants $75 billion in additional economic stimulus, which likely would consist of previously proposed White House initiatives, the Democratic aide said.
CRACKS IN REPUBLICAN RANKS
Just as Boehner begins serious wrestling with the White House, there were indications that his hand may be weakening with a small but growing number of House Republicans saying they believe some type of tax increase on the rich will be part of a fiscal cliff deal.
"I wouldn't have a problem with letting those tax rates go up," if they are coupled with spending cuts, Representative Mike Simpson of Idaho told Reuters on Thursday.
A similar sentiment expressed by about a half-dozen House Republicans in recent days likely will increase pressure on Boehner to reach a bipartisan agreement with Obama and his fellow Democrats.
In the absence of progress, or any realistic understanding as to when or if the cliff might be averted or a deficit reduction agreement reached, prodding has started to come on a regular basis from business leaders as well as Federal Reserve officials.
New York Fed President William Dudley and Richard Fisher of the Dallas Fed, highlighted the problems that U.S. lawmakers were causing for both hiring and the economy with each day they fail to strike a deal to avoid a pending fiscal crisis.
Dudley said on Thursday that if it is not addressed, the economic contraction is likely to be larger than normal because interest rates are so low.

Kurzweil: Your brain will connect directly to the cloud within 30 years


akeaway: By the 2030s or 2040s, inventor and futurist Ray Kurzweil envisions micro-computers embedded non-invasively in the brain that will act as an interface to a “cloud” of storage and processing power.
Inventor and futurist Ray Kurzweil remains coolly confident in his prediction that by the 2030s, blood-cell sized computers will integrate with the human brain and dramatically expand its cognitive capacity well beyond the neocortex’s paltry 300 million or so pattern recognizers.
And why shouldn’t Kurzweil be confident? By his count, he’s been right about 86 percent of the time, and that’s not counting near-misses like predicting we’d all be riding in self-driving cars by now.
Advancing technology’s capacity to mimic, and eventually deeply integrate with, the human brain was one of the central topics of a public Q&A Kurzweil participated in last night in Louisville, KY as part of a promotional tour for his new book, How to Create a Mind: The Secret of Human Thought Revealed. The new book draws on his deep knowledge of language and cognitive hierarchy to predict how computers will continue to expand humans’ ability to store and relate information in what we call “intelligence.”
The talk, which was taped for national airing, ranged widely, as does Kurzweil’s influence on technology and almost any discussion of what the world will look like 30 years from now. For the most part, Kurzweil steered clear of the headline-grabbing philosophical and ethical implications of his predictions, most notably that supercomputing will create a macro cyber-intelligence in which human consciousness will live forever. (As I imagine many of you will note in the comments section, that’s a gross oversimplification of Kurzweil’s fascinating work.) Instead, Kurzweil focused on the fundamentals of the science behind How to Create a Mind, and how current technology already has greatly augmented those lame 300 million recognizers nature gave us.
Kurzweil said his latest predictions are built around his theory of Pattern Recognition Theory of Mind (PRTM), which describes our cognitive processes as a series of nested activities. In How to Create a Mind, he cites the example of how most people struggle to recite the alphabet backward, although the components of the information are clearly stored in the neocortex. But the pattern — or more precisely, the potentially thousands of patterns — in which the neocortex connects those data are the essence of intelligence, human or artificial.
This theory is based on Kurzweil’s own ground-breaking work on optical character and speech recognition software, and a similar theory was employed in large part to program Watson, the supercomputer that recently whooped up on human Jeopardy! champions. Kurzweil defends the Watson project from criticism that the supercomputer was simply running statistical analysis against specialized programming. Watson actually “read” 200 million Wikipedia pages to build its knowledge store, and the statistical analysis it ran was patterned after the human brain’s own hierarchical models of data relationships (Kurzweil dubbed them Hierarchical Hidden Markup Models in his speech recognition work). Kurzweil was quick to note that Watson is not as good as an average human when it comes to understanding a single Wikipedia page; it’s the ability to store massive quantities of information and quickly relate it that makes the computer so “smart.” He suggested that soon, technology derived from the Watson project will be able to aid physicians in diagnosing illnesses, since doctors don’t have enough time or pattern recognizers to read and immediately recall tens of millions of pages of medical research.
And he’s confident that his Law of Accelerating Returns will continue to hold true for computational power, even though Intel now predicts Moore’s Law will run its course by 2022 or so. (If you haven’t read this excellent TechRepublic post by Peter Cochrane, do so now.) Kurzweil describes Intel’s 3D structure for transistors as the sixth paradigm of Accelerating Returns (with Moore coming in at number five) that will continue to drive exponential growth in computing power and get us to thattechnological singularity everyone is so excited (or freaked out) about.
By the 2030s or 2040s, he envisions micro-computers embedded non-invasively in the brain that will act as an interface to a “cloud” of storage and processing power — it will be like having five or 10 neocortexes on demand. And, given that the adult brain often has to overwrite redundant instances of data to “learn” new things, that won’t be so different than our use of external computers to store and process data today. Fondling his own smartphone throughout the hour-long presentation, he repeatedly described such devices as “brain extenders.”
Other geeky stuff on the table:
  • Kurzweil really digs Google’s Project Glass, and says that within five years the devices will become commonplace. When you see somebody on the street, your visor will tell you their name and other quick information so your brain won’t have to do all that work.
  • He’s also high on Google Cars, but he still counts that as a “miss” in evaluating his own predictions, given that they are not yet broadly available to consumers.
  • On the ongoing advance of technology, Kurzweil says: “A kid in Africa with a smartphone has more information than a U.S. President had 15 years ago.” Process that for a second.
  • If you’ve never seen it, be sure to check out this video from 1965 of Kurzweil as a 17-year-old on I’ve Got a Secret, demonstrating a music-composing computer of his own device. Dig brainy Miss America Bess Myerson.
For more details about the event, you can read my post Building the Better Brain: Ray Kurzweil on why reverse engineering the human mind is just to be expected.

Gartner: SaaS now replacing legacy apps as well as extending them


Companies are not only buying into SaaS (software as a service) more than ever, they are also ripping out legacy on-premises applications and replacing them with SaaS, according to analyst firm Gartner.
"In the past 12 months, Gartner has seen a decline in the proportion of SaaS deployed to augment existing applications," according to Gartner's report, which explores global SaaS adoption patterns. It found regional patterns, with SaaS replacing existing systems in mature markets, while often being the first business solution implemented in emerging markets.
[ Get the no-nonsense explanations and advice you need to take real advantage of cloud computing in InfoWorld editors' 21-page Cloud Computing Deep Dive PDF special report. | Stay up on the cloud with InfoWorld's Cloud Computing Report newsletter. ]
Much of SaaS adoption is fairly recent, Gartner found, with 71 percent of responding organizations overall reporting that they have been using it for less than three years. Brazil showed the highest level of new users; 27 percent said they had adopted SaaS less than a year ago, Gartner said.
A sizable majority of respondents in all regions said they planned to increase their investments in SaaS. Only small percentages planned to cut spending on SaaS, according to the report.
"Seeing such high intent to increase spending isn't a huge surprise as the adoption of the on-demand deployment model has grown for more than a decade, but its popularity has increased significantly within the past five years," the report states. "Initial concerns about security, response time and service availability have diminished for many organizations as SaaS business and computing models have matured and adoption has become more widespread."
Users are also increasingly weighing whether a SaaS vendor also offers PaaS (platform as a service) capabilities for extending the software and building new applications, according to Gartner. Fifty-six percent called PaaS "very important," another 22 percent termed it a "requirement," and 18 percent said it was "somewhat important," the report states.
Gartner surveyed 592 respondents during June and July in the U.S., Asia-Pacific, Europe, and Brazil, covering 10 countries in all.

Google’s approach to Big Data is BigQuery | TechRepublic

Google’s approach to Big Data is BigQuery | TechRepublic

Nov 29, 2012

Bounce house injuries rocket; child hurt every 46 minutes - latimes.com


Although they have become a popular staple at children’s parties, inflatable bounce houses can be dangerous and are associated with a 15-fold increase in the number of injuries from 1995 to 2010, according to a study published in a scientific journal.
Writing in the journal Pediatrics, a group of researchers examined records from the federal National Electronic Injury Surveillance System, operated by the Consumer Product Safety Commission. They looked at patients 17 years old and younger who were treated for injuries from inflatable bounce houses from 1990 to 2010.
“The number and rate of pediatric inflatable bouncer–related injuries have increased rapidly in recent years,” they wrote. “This increase, along with similarities to trampoline-related injuries, underscores the need for guidelines for safer bouncer usage and improvements in bouncer design to prevent these injuries among children.”
The study was co-authored by Meghan C. Thompson, Thiphalak Chounthirath, Dr. Huiyun Xiang and Dr. Gary A. Smith. All are affiliated with the Center for Injury Research and Policy at Nationwide Children’s Hospital in  Columbus, Ohio. Smith is the director.
Overall, an estimated 64,657 were treated 1990 to 2010, the researchers found. The numbers suggest 31 children a day in 2010 were treated in emergency rooms for broken bones, sprains and cuts from injuries in bounce-house accidents. That is the equivalent of one injured child every 46 minutes, they said.
Part of the problem is that the bounce houses have become increasingly more popular for parties and that means the number of injuries from children bouncing off of walls, floors and one another has risen. There were fewer than 1,000 injuries in 1995 but almost 11,000 by 2010.
“From 1995 to 2010, there was a statistically significant 15-fold increase in the number and rate of these injuries, with an average annual rate of 5.28 injuries per 100,000 U.S. children,” the authors said in the abstract of their findings. “The increase was more rapid during recent years, with the annual injury number and rate more than doubling between 2008 and 2010.”
Bounce houses can be rented for home or recreation center use. According to the findings, 43.7% of the injuries occurred at a recreation facility while 37.5% took place at a home.
A majority of injured patients, 54.6%, were male and the average age was 7.5 years old.

Must-Have Job Skills in 2013 - WSJ.com


Even as employers remain cautious next year about every dollar spent on employees, they'll also want workers to show greater skills and results.
For employees who want to get ahead, basic competency won't be enough.
To win a promotion or land a job next year, experts say there are four must-have job skills:
1. Clear communications
Whatever their level, communication is key for workers to advance.
"This is really the ability to clearly articulate your point of view and the ability to create a connection through communication," says Holly Paul, U.S. recruiting leader at PricewaterhouseCoopers, the accounting and consulting firm based in New York.
Looking for a job? Looking for a promotion? Marketwatch's Kelli Grant and WSJ's Simon Constable discuss the top skills you must have to have a successful career in 2013.
For job seekers in particular, clear communication can provide a snapshot of their work style to employers. "I can walk away from a five-minute conversation and feel their enthusiasm and have a good understanding of what's important to them," Ms. Paul says.
As office conversations increasingly move online, some workers are losing or never developing the ability to give a presentation, for example. Others may be unable to write coherently for longer than, say, 140 characters.
"Technology in some ways has taken away our ability to write well. People are in such a hurry that they are multitasking," and they skip basics such as spelling and proofing, says Paul McDonald, senior executive director of Robert Half InternationalRHI +0.18% a Menlo Park, Calif., staffing firm.
2. Personal branding
Human-resources executives scour blogs, Twitter and professional networking sites such as LinkedIn when researching candidates, and it's important that they like what they find.
"That's your brand, that's how you represent yourself," says Peter Handal, CEO of Dale Carnegie Training, a Hauppauge, N.Y., provider of workplace-training services. "If you post something that comes back to haunt you, people will see that."
Richard Faust
Workers also should make sure their personal brand is attractive and reflects well on employers. "More and more employers are looking for employees to tweet on their behalf, to blog on their behalf, to build an audience and write compelling, snappy posts," says Meredith Haberfeld, an executive and career coach in New York.
Ms. Haberfeld has a client whose employee recently posted on her personalFacebook FB +0.57% page about eating Chinese food and smoking "reefer."
"I saw it on Facebook. Her supervisors saw it," Ms. Haberfeld says.
3. Flexibility
The ability to quickly respond to an employer's changing needs will be important next year as organizations try to respond nimbly to customers.
"A lot of companies want us to work with their employees about how to get out of their comfort zone, how to adapt," says Mr. Handal. "Somebody's job today may not be the same as next year."
The ability to learn new skills is of top importance, says George Boué, human-resources vice president for Stiles, a real-estate services company in Fort Lauderdale, Fla. "We want to know that if we roll out a new program or new tools that the folks we have on board are going to be open to learning," he says.
4. Productivity improvement
In 2013, workers should find new ways to increase productivity, experts say. Executives are looking for a 20% improvement in employee performance next year from current levels, according to a recent survey by the Corporate Executive Board, an Arlington, Va., business research and advisory firm.
"When you are at your job, do you volunteer for projects? Are you looking for creative ways to help your organization," Mr. McDonald says. "The way to really differentiate yourself is to be proactive."
Companies that are considering adding workers in coming years want current employees to operate in growth mode now. "My clients are looking for employees that have a great ability to understand what is wanted and needed, rather than needing to be told," Ms. Haberfeld says.
Even hiring managers need to work on certain skills as organizations consider expanding next year. "The ability to spot talent and hire people has fallen out of use over the last several years," says Ben Dattner, an organizational psychologist in New York. "As the economy turns around, companies will have to work harder to retain talented employees. Companies have trimmed the fat, and now they have to build the muscle."

The Petraeus scandal and computer ethics - Computerworld


Last week Gen. David Petraeus, the director of the Central Intelligence Agency, resigned in response to what has turned out to be a much bigger scandal than it first appeared.
We've gone from a complaint to the FBI by one woman, Jill Kelley, over harassing anonymous email messages that were sent, it turned out, by another woman, Paula Broadwell (who was, of all things, Petraeus' biographer) that exposed the affair Petraeus had had with the latter and which has now embroiled another senior military man, Gen. John Allen, because of email sent to the first woman.
I was tempted to provide a some kind of business intelligence style interactive taxonomic diagram to explain all of this mess, but I simply haven't quite got my head around who's who yet.
The only plausible explanation for the behavior of these people is that they must have all recently escaped from an asylum (see CNN's article "Timeline of the Petraeus affair" along with a ridiculous number of sidebars slicing and dicing every aspect).
What is fascinating about this case is how the FBI examined messages in Kelley's account to find out who was harassing her, which led them to discover the emails between Kelley and Allen, and then how they proved the anonymous messages came from Broadwell.
The FBI relied on the Electronic Communications Privacy Act (ECPA) to legitimize its investigation and, according to the Electronic Frontier Foundation's posting "When Will our Email Betray Us? An Email Privacy Primer in Light of the Petraeus Saga," the bureau cross-referenced the IP addresses of Wi-Fi hotspots Broadwell had used while traveling "'against guest lists from other cities and hotels, looking for common names.' If Broadwell wanted to stay anonymous, a new email account combined with open Wi-Fi was not enough."
I recommend carefully reading the EFF article, which dissects a very complicated topic and clearly shows how incredibly weak our protections are from unwarranted government search of our private messaging.
Anyway, be all that as it may, I will refrain from dwelling any further on the sordid yet highly entertaining details other than to note that the whole reason all of these people got swept up into the scandal was due to two things: their unethical behavior and their use of email.
Curiously, ethical lapses and email often go hand in hand ... in fact, unethical behavior is commonplace in all forms of Internet communication for two reasons.
First, it's easy to do things that are unethical when you're dealing with a computer interface rather than a person. The lack of an empathetic human connection makes it easy to forget or ignore virtues such as politeness, honesty, generosity and fairness. Second, the medium is so new we have neither a sound social foundation for computer-mediated communication nor a system of education that has yet managed to construct such a thing.
This brings me to the whole idea of computer ethics education. My old friend Winn Schwartau, who has also been known to pen a piece or two for this august organ, told me a story about how his wife, Sherra, who is also in the computer security business, was contacted by a woman looking for a computer ethics course.
The woman's seventh-grade son had got into trouble at school for hacking a shared computer and altering grades. Part of the punishment set by the school when they discovered what he'd done was to complete a computer ethics course. The problem was, the mother said, that she couldn't find such a thing.
Sherra talked to Winn and when they couldn't find anything like that either, they, in a paroxysm of creativity, decided to update a book Winn had created more than a decade ago titled "Internet & Computer Ethics for Kids (and Teachers and Parents without a Clue)." Back in 2001, with help of corporate sponsors, Winn distributed something like 125,000 copies of that book.
Now Winn's thinking has become somewhat more ambitious: He wants to give away 1 million copies of the new book!
~~
The new version, "Cyber Safety and Ethics and Stuff (for Kids, Teens, Parents and Teachers)" is being launched on Kickstarter and will be "a high quality, full color, glossy, easy to read and share book, designed to help kids, families and schools, churches and youth groups, learn about the challenges of online security, safety and privacy."
I think this is a great idea. The issues of ethical behavior when using a computer are misunderstood by most people, even those inside the computer industry.
Winn's new book will cover all of the hot button issues of online safety and ethics, including hacking, sexting, bullying, theft, privacy, pornography, scams and phishing, plagiarism and safety but, and here's the interesting angle, it will not be prescriptive.
A key concept behind the book is to ask questions that make readers think about the various topics, provide insight into the issues involved, and then let them draw their own conclusions. I think this is a great idea because, while a few of the topics have simple right or wrong or yes or no answers, the majority are situationally dependent and hard and fast rules won't really answer the question. Understanding the background and dimensions of issues will make it possible for readers who haven't run up against these situations to figure out what the ethical issues are.
Winn's Kickstarter project is looking for initial funding of $60,000 to be pledged by Wednesday, Jan. 2, at 9:02 a.m. PST, which will be used to "fulfill all [backers] rewards and get copies to every member of Congress, every State education director, leaders in Washington, key media and online groups that support kid and family cyber safety."
To be able to give away a "quantity to every school district in the US" will require roughly 1 million copies total, Winn says, and will require something on the order of $4 million, and I think the payoff would be fantastic. At the very least, we'd get some level of national dialogue hopefully involving politicians and policy-makers and start to build a foundation for a more informed, ethical and mature approach to our society's use of computers.
So, check out Winn's Kickstarter pitch, see whether you think this will make an impact, and, if you decide it will, back the project!
Just think, if this book had been published a year ago and had gotten into the hands of government officials, perhaps Petraeus would still be running the CIA.
Gibbs hopes this was ethically persuasive ... Your judgment to gearhead@gibbs.com and follow him on Twitter and App.net (@quistuipater) and on Facebook (quistuipater).

Symantec spots odd malware designed to corrupt databases - Computerworld


Symantec had spotted another odd piece of malware that appears to be targeting Iran and is designed to meddle with SQL databases.
The company discovered the malware, called W32.Narilam, on Nov. 15 but on Friday published a more detailed writeup by Shunichi Imano. Narilam is rated as a "low risk" by the company, but according to a map, the majority of infections are concentrated in Iran, with a few in the U.K., the continental U.S. and the state of Alaska.
Interestingly, Narilam shares some similarities with Stuxnet, the malware targeted at Iran that disrupted its uranium refinement capabilities by interfering with industrial software that ran its centrifuges. Like Stuxnet, Narilam is also a worm, spreading through removable drives and network file shares, Imano wrote.
Once on a machine, it looks for Microsoft SQL databases. It then hunts for specific words in the SQL database -- some of which are in Persian, Iran's main language -- and replaces items in the database with random values or deletes certain fields.
Some of the words include "hesabjari," which means current account; "pasandaz," which means savings; and "asnad," which means financial bond, Imano wrote.
"The malware does not have any functionality to steal information from the infected system and appears to be programmed specifically to damage the data held within the targeted database," Imano wrote. "Given the types of objects that the threat searches for, the targeted databases seem to be related to ordering, accounting, or customer management systems belonging to corporations."
The types of databases sought by Narilam are unlikely to be employed by home users. But Narilam could be a headache for companies that use SQL databases but do not keep backups.
"The affected organization will likely suffer significant disruption and even financial loss while restoring the database," Imano wrote. "As the malware is aimed at sabotaging the affected database and does not make a copy of the original database first, those affected by this threat will have a long road to recovery ahead of them."
Stuxnet is widely believed to have been created by the U.S. and Israel with the intent of slowing down Iran's nuclear program. Since its discovery in June 2010, researchers have linked it to other malware including Duqu and Flame, indicating a long-running espionage and sabotage campaign that has prompted concern over escalating cyberconflict between nations.

Nov 28, 2012

Caviar-Dispensing Vending Machine Opens in Los Angeles


Caviar is not the usual fare one would expect from a vending machine.
Beverly Hills Caviar has unveiled its first touch-screen vending machine at the Burbank Town Center, offering “a large selection of the world’s finest selection of caviar, truffles, escargot, bottarga, blinis, oils, Mother of Pearl plates and spoons, gift boxes and gourmet salts.”  Prices range from under $50 up to $500, KNX 1070’s Vytas Safroncikas reports.
All manner of products are now being offered via vending machine – ranging from the usual fare of candy, snacks and soda all the way to pricey electronics like iPods and iPhones – but fresh foods seem to be the latest trend.“Oh, my God, too expensive for me. I can’t afford that,” one passersby said of the products offered by the vending machine.
Earlier this year, the LA-based cupcake bakery that started the cupcake craze began dispensing the treats via an ATM called 24-Hour Sprinkles.

“Yeah, I can think of probably better things I can buy out of a vending machine than fish eggs,” another passersby said.
Curious to try the automatically-dispensed caviar? The vending machine is at Burbank Town Center mall, 201 E. Magnolia Blvd., on the second floor across from Bath and Body Works. It operates daily 

Technology built into mannequins helping stores track customers


Facebook and Google arent the only companies with the ability to spy on you. Brick-and-mortar stores can too thanks to some creepy technology. Its no secret some companies track your online browsing activities to figure out what you're interested in so they can serve you targeted ads that you're more likely to notice. Now some stores are employing a new breed of mannequins equipped with facial recognition technology, reports The Washington Post .
The Italian company Almax SpA sells a mannequin called the EyeSee that has a camera built into one of its eyes that ports data into facial recognition software that can tell the age, gender and race of people walking by.
With such data, retailers can pivot store layouts, displays and promotions to better market to whatever demographic is checking out a certain area. Fashion retailer Benetton is reportedly investing in the EyeSee, which costs more than $5,000.
If the thought of mannequins seeing you is a troubling thought, you might as well get used to the idea. Online companies such as Facebook, Google and Apple have been using the technology for a while to identify people in photos.
Not only that, the FBI has started rolling out its $1 billion biometric Next Generation Identification (NGI) system, a nationwide database of mug shots, iris scans, DNA samples, voice recordings, palm prints, and other biometrics collected from more than 100 million Americans and intended to help identify and catch criminals.
The FBI has been piloting the program with several states and by the time its fully deployed in 2014 it will have at its fingertips a facial recognition database that includes at least 12 million photos of peoples faces.
Its a touchy subject.
Facebook, when rolling out its facial recognition feature in mid-2011, said it would help users tag photos of friends and family members. Privacy groups complained that the company was collecting new personal data without asking users for permission.
The use of facial recognition by Web companies, including Facebook, and government agencies has raised concerns from privacy advocates and some lawmakers. In July, U.S. Sen. Al Franken, a Minnesota Democrat, said that legislation may be needed to limit the way various entities use the technology.

Nov 27, 2012

The Washington Monthly - The Magazine - Last Call


England has a drinking problem. Since 1990, teenage alcohol consumption has doubled. Since World War II, alcohol intake for the population as a whole has doubled, with a third of that increase occurring since just 1995. The United Kingdom has very high rates of binge and heavy drinking, with the average Brit consuming the equivalent of nearly ten liters of pure ethanol per year.







It’s apparent in their hospitals, where since the 1970s rates of cirrhosis and other liver diseases among the middle-aged have increased by eightfold for men and sevenfold for women. And it’s apparent in their streets, where the carousing, violent “lager lout” is as much a symbol of modern Britain as Adele, Andy Murray, and the London Eye. Busting a bottle across someone’s face in a bar is a bona fide cultural phenomenon—so notorious that it has its own slang term, “glassing,” and so common that at one point the Manchester police called for bottles and beer mugs to be replaced with more shatter-resistant material. In every detail but the style of dress, the alleys of London on a typical Saturday night look like the scenes in William Hogarth’s famous pro-temperance print Gin Lane. It was released in 1751.
The United States, although no stranger to alcohol abuse problems, is in comparatively better shape. A third of the country does not drink, and teenage drinking is at a historic low. The rate of alcohol use among seniors in high school has fallen 25 percentage points since 1980. Glassing is something that happens in movies, not at the corner bar.
Why has the United States, so similar to Great Britain in everything from language to pop culture trends, managed to avoid the huge spike of alcohol abuse that has gripped the UK? The reasons are many, but one stands out above all: the market in Great Britain is rigged to foster excessive alcohol consumption in ways it is not in the United States—at least not yet.
Monopolistic enterprises control the flow of drink in England at every step—starting with the breweries and distilleries where it’s produced and down the channels through which it reaches consumers in pubs and supermarkets. These vertically integrated monopolies are very “efficient” in the economist’s sense, in that they do a very good job of minimizing the price and thereby maximizing the consumption of alcohol.
The United States, too, has seen vast consolidation of its alcohol industry, but as of yet, not the kind of complete vertical integration seen in the UK. One big reason is a little-known legacy of our experience with Prohibition. From civics class, you may remember that the 21st Amendment to the Constitution formally ended Prohibition in 1933. But while the amendment made it once again legal to sell and produce alcohol, it also contained a measure designed to ensure that America would never again have the horrible drinking problem it had before, which led to the passage of Prohibition in the first place.
Specifically, the 21st Amendment grants state and local governments express power to regulate liquor sales within their own borders. Thus, the existence of dry counties and blue laws; of states where liquor is only retailed in government-run stores, as in New Hampshire; and of states like Arkansas where you can buy booze in drive-through liquor marts. More significantly, state and local regulation also extends to the wholesale distribution of liquor, creating a further barrier to the kind of vertical monopolies that dominated the United States before Prohibition and are now wreaking havoc in Britain.
Since the repeal of Prohibition, such constraints on vertical integration in the liquor business have also been backed by federal law, which, as it’s interpreted by most states, requires that the alcohol industry be organized according to the so-called three-tier system. The idea is that brewers and distillers, the first tier, have to distribute their product through independent wholesalers, the second tier. And wholesalers, in turn, have to sell only to retailers, the third tier, and not directly to the public. By deliberately hindering economies of scale and protecting middlemen in the booze business, America’s system of regulation was designed to be willfully inefficient, thereby making the cost of producing, distributing, and retailing alcohol higher than it would otherwise be and checking the political power of the industry.
When these laws were passed, America was a century closer to its English roots, and lawmakers remembered very clearly the effects that a vertically integrated alcohol industry had on pre-Prohibition America (and that it still has in the UK today). In the 1920s, Americans had learned the hard way that flat out banning drinking empowered the likes of Al Capone and was, on balance, unworkable. But it made no sense either to go back to the world of pre-Prohibition America, in which big, politically powerful liquor producers owned their own saloons and were therefore free to pour cheap booze into communities coast to coast, sweetening the doses with enticements ranging from rebates on drinks to cash loans, and frequently tolerating in-bar gambling and prostitution.
And so, for eighty years, the kind of vertical integration seen in pre-Prohibition America has not existed in the U.S. But now, that’s beginning to change. The careful balance that has governed liquor laws in the U.S. since the repeal of Prohibition is under assault in ways few Americans are remotely aware of. Over the last few years, two giant companies—Anheuser-Busch InBev and MillerCoors, which together control 80 percent of beer sales in the United States—have been working, along with giant retailers, led by Costco, to undermine the existing system in the name of efficiency and low prices. If they succeed, America’s alcohol market will begin to look a lot more like England’s: a vertically integrated pipeline for cheap drink, flooding the gutters of our own Gin Lane.
Amoment’s thought makes it obvious that alcohol is different from, say, apples. Apples don’t form addicts. Apples don’t foster disease. Society doesn’t bear the cost of excessive apple consumption. Society does bear the cost of alcoholism, drink-related illness, and drunken violence and crime. The fact that alcohol is habit forming and life threatening among a substantial share of those who use it (and kills or damages the lives of many who don’t) means that a market for it inevitably imposes steep costs on society.
It was the recognition of this plain truth that led post-Prohibition America to regulate the alcohol market as a rancher might fetter a horse—letting it roam freely within certain confines, neither as far nor as fast as it might choose.
The UK, by contrast, spent most of the last eighty years fussing with the barn door while the beast ran wild. It made sure that every pub closed at the appointed hour, that every glass of ale contained a full Queen’s pint, that every dram of whiskey was doled out in increments precise to the milliliter—and simultaneously allowed the industry to adopt virtually any tactic that could get more young people to start drinking and keep at it throughout their lives. It is no coincidence that one of the first major studies to prompt a shift in Britain’s approach to liquor regulation, published in 2003, is titled Alcohol: No Ordinary Commodity.
The UK’s modern drinking problem started appearing in the years following World War II. Some of the developments were natural. Peace reigned; people wanted to have fun again; there was an understandable push toward relaxing wartime restrictions and loosening puritan attitudes left over from the more temperance-minded prewar years.
But other changes were happening that deserved, but did not get, a dose of caution. As the nation shifted to a service and banking economy, and from agricultural and industrial towns to modern cities and suburbs, social life moved from pubs to private homes and shopping moved from the local grocer, butcher, and fishmonger to the all-in-one supermarket. In the 1960s, loosened regulations led to a boom in the off-license sale of alcohol—that is, store-based sale for private consumption, as opposed to on-license sale in public drinking establishments. But whereas pubs were required to meet certain responsibilities (such as refusing to serve the inebriated), and had their hours of operation strictly regulated (for example, having to close their doors temporarily in the afternoon, to prevent all-day drinking), few limits were placed on off-licenses.
Supermarkets, in particular, profited from the new regime. They were free to stock wine, beer, and liquor alongside other consumables, making alcohol as convenient to purchase as marmalade. They were free, also, to offer discounts on bulk sales, and to use alcoholic beverages as so-called loss leaders, selling them below cost to lure customers into their stores and recouping the losses through increased overall sales. Very quickly, cheap booze became little more than a force multiplier for groceries.
When the supermarkets themselves subsequently underwent a wave of consolidation, the multiplier only increased. Four major chains—Tesco, Sainsbury’s, Asda, and Morrisons—now enjoy near-total dominance in the UK, and their vast purchasing power lets them cut alcohol prices even further. Relative to disposable income, alcohol today costs 40 percent less than it did in 1980. The country is awash in a river of cheap drink, available on seemingly every corner.
Part of the problem, too, was that Britain’s “tied houses”—drinking establishments that are owned by liquor producers—have remained, in one form or another, a dominant part of the country’s drinking landscape. From the time brewing industrialized in the late 1700s, brewers were permitted to operate their own pubs, which they owned outright or whose owners signed exclusive retail agreements with them in exchange for inventory discounts, no-interest loans, and other assistance. The result of this system, which also existed in the U.S. before Prohibition, was a glut of pubs, since each brewer needed its own tied house in a given neighborhood, and a race to the bottom ensued, with each pub competing to offer lower prices and lure customers in with extras like gambling and prostitutes. The problem of this beer-fueled mayhem—of the lager louts smashing up storefronts, beating up foreigners, and glassing one another—became so acute in the 1980s that Parliament finally acted to break up the tied houses, passing legislation in 1991 known as the Beer Orders.
But intense industry lobbying quickly watered down these reforms, and the result was a bitter farce. In the end, brewers were allowed to keep many of their tied houses, and wound up effectively controlling the rest through exclusive retail agreements and other corporate maneuvers. Some brewers simply split in two, with one side retaining the brewing operations and the other responsible for sales. Many other brewers instead sold off their brewing operations and repurposed themselves as giant landlords-cum-barkeepers, while continuing to enjoy exclusive—and lucrative—relations with their former partners. The Beer Orders thus had the unintended consequence of actually catalyzing comprehensive conglomeration and vertical integration, as a handful of giant firms snapped up thousands of independent pubs. This “rationalization” of the industry delivered economies of scale previously unknown, and soon drinkers in England found that booze was even easier to come by than it had been before. Far from vanquished, the lager lout had entered his heyday.
In the United States, the problem so far has not been one of vertical integration like that found in the UK. Here, the story so far has been mostly about horizontal integration—of one brewer buying another.
To be sure, the typical American beer drinker might have a hard time realizing the extent of horizontal consolidation that has already occurred. The shelves of your average gas-station convenience store offer not just Bud and Busch and Miller and Coors but Stella and Hoegaarden and Shock Top and Rolling Rock. At any decent grocery, Kirin of Japan sits beside Boddingtons of Ireland, Peroni of Italy beside Pilsner Urquell of the Czech Republic. Basses shadow Red Hooks in the lea of Goose Islands. Blue Moon shines down on it all.
But all is not as it appears. Two giant companies— Anheuser-Busch InBev and MillerCoors—own, bankroll, produce, control, or have distribution rights to all of these brands and hundreds more. The truly independent brewers in the nation—there are about 2,000 of them, from tiny local outfits to national brands like Samuel Adams—account for just 6 percent of the market.
Almost all the rest belongs to Anheuser-Busch InBev and MillerCoors, which now together capture nearly 80 percent of beer sales in this country. Smaller conglomerates including Pabst, Heineken, and Diageo (owner of Guinness) take up much of the remainder, but even this doesn’t capture how consolidated the market has become. Pabst, for example, does not brew its own beer: that process is contracted out to Miller.
The market forces that eventually led to this massive consolidation among American brewers took root in the mid-1970s with the passage of the Consumer Goods Pricing Act of 1975, which made it illegal for producers to set minimum prices for their goods at retail. This was ostensibly “pro-consumer” legislation: the practice of allowing producers to set their own prices limited certain types of price competition, and so could be viewed as “hurting” consumers in an economic sense. But, of course, in this case we’re talking about consumers of alcohol and not apples, and when it comes to alcohol, cheaper is not necessarily better.
No longer required to set across-the-board prices for their goods, breweries learned that they could manipulate the much smaller wholesalers to extract more favorable terms, brand support, and profit by offering lower prices to those that did their bidding. The threat of higher prices could be used to force a wholesaler to drop competing brands. Conversely, lower prices might be offered to a wholesaler who promised to push a given brand more forcefully. This ability to use pricing to “discriminate” among wholesalers gave producers another valuable return: detailed knowledge of their wholesalers’ acceptable margins. That could be used to extract profit right up to the maximum feasible limit.
Something of a countertrend to consolidation seemed to appear in the 1980s, which saw a boom in small independent craft brewers. Examples include the founding (among others) of such well-known brands as Sierra Nevada (1980), Sam Adams (1984), and Harpoon (1986). Smaller brands and brewpubs added to the mix. But few of these brewers succeeded in gaining significant market share, or even in maintaining their independence. Since big brewers had been freed up to use price discrimination to reward and punish wholesalers, they could passively pressure wholesalers into keeping competitors—particularly small, independent brewers—off the market. Meanwhile, after the election of Ronald Reagan, the Justice Department cut back sharply on enforcement of U.S. antitrust law, setting in motion an unparalleled period of consolidation across virtually all American industries, including the beer industry.
In 1980, forty-eight breweries served the fifty states, and the largest of them had only a quarter of the market. Today, again, the market is overwhelmingly dominated by two: Anheuser-Busch InBev and MillerCoors.
Here’s how it went down:
Stroh Brewery Company, founded in 1850, entered the 1980s as the eighth-largest brewery in the nation. But after a sleepy first 130 years, during which it marketed a single brand, director Peter Stroh had come to recognize that “it’s either grow or go.” Released from antitrust constraints by the new Reagan regime, grow they would. In 1981, Stroh bought Schaefer, a big New York regional, and moved to seventh. Two years later, Stroh took over Schlitz, leaping and to fourth place. By the mid-’90s, the company had also swallowed up Augsburger and G. Heileman, then the fifth-largest brewer in America.
Coors, famously secretive in its business dealings, began the Reagan era as the fourth-largest brewer in America, with a reputation for high quality and an almost chic image in the vast East Coast market as a great beer you could only buy west of the Mississippi. Then, in 1981, Coors crossed the river, crashed through the East Coast, and hurdled across the Atlantic. In 1994, Coors purchased El Aguila in Spain and founded Jinro-Coors in South Korea. And in 1997, Molson, Foster’s, and Coors partnered to bring the Silver Bullet to Canada for the first time. Coors was now number three.
Miller entered the 1980s riding the tremendous success of its innovative Miller Lite brand. Already the second-largest brewer in America, the company set its sights on expanding, purchasing Jacob Leinenkugel in 1988, and in 1992 bought distribution rights to 20 percent of Canada’s Molson. Distribution rights to Foster’s and several other top imports followed later in the decade. With a market share of 21 percent, Miller had solidified its position as number two.
Anheuser-Busch, like Coors, was run by a family famous for its intensely private control of its business. The company entered the Reagan era as the number one brewer in America, and spent the next decade consolidating that position by leveraging its size, mostly via internal brand diversification, and by aggressively expanding its presence abroad. As the 1990s drew to a close, Anheuser-Busch remained by far the top brewer in the United States, with nearly 50 percent of the market, and one of the biggest brewers in the world. It is a testament to the size of the global beer market that even those eye-popping mergers left vast opportunities for other companies to play the same game. Three are of interest here:
In 1987, two of Belgium’s leading brewers, Artois and Piedboeuf, joined together as Interbrew. For fifteen years they quietly ate up dozens of other brands, and by 2001 they were the second-largest brewer on the planet.
In 1999, Brazil’s two largest brewers, Antarctica and Brahma, joined forces as AmBev, instantly dominating that country’s market and moving quickly to buy up smaller brands throughout South America.
And during the 1990s, South African Breweries, virtual monopolists at home with 98 percent of market, moved decisively into eastern Europe, Russia, India, and China, establishing a formidable position on three continents.
So the 1990s drew to a close with four major players in America and three abroad—seven giant brewing conglomerates for six billion people. The contest to own the world’s beer market had entered its endgame.
In 1999, Stroh was split up and sold off.
Six left.
In 2002, South African Breweries bought Miller, creating SABMiller.
Five left.
In 2004, Interbrew and AmBev merged, forming InBev.
Four.
In 2005, Coors and Molson merged to form Molson Coors.
Three.
In 2007, Molson Coors and SABMiller created the joint venture MillerCoors to produce and distribute their products in the United States as a single entity.
Two and a half.
And in 2008, in a blockbuster $52 billion deal, InBev bought Anheuser-Busch to form Anheuser-Busch InBev. At the stroke of a pen, half the U.S. beer industry came under the control of an even more powerful firm—one with a huge inventory of international brands ready to ride Budweiser’s coattails into the American market. Then, in June 2012, Anheuser-Busch InBev announced plans to pay $20 billion to acquire the 50 percent of Grupo Modelo that it does not already own.
Two.
And soon one?
Industry analysis have recently floated the idea that Anheuser-Busch InBev might purchase MillerCoors. But even in the lax antitrust environment that currently prevails, it is almost impossible to imagine a single company being allowed to control—overtly—80 percent or more of the domestic beer market. This means both Anheuser-Busch InBev and MillerCoors have, for all intents, reached the limit of their horizontal expansion. As in the UK, the only direction to go now is vertical, with the first target being the wholesalers—the second tier of the three-tier system.
Prior to the 2008 takeover, Anheuser-Busch generally accepted the regulatory regime that had governed the U.S. alcohol industry since the repeal of Prohibition. It didn’t attack the independent wholesalers in control of its supply chain, and generally treated them well. “Tough but fair” is a phrase used by several wholesale-business sources to describe their dealings with the Busch family dynasty. Everyone was making money; there was no need to rock the boat.
All that changed quickly after Anheuser-Busch lost its independence. The executives from InBev who took over the company did things quite differently. During the negotiations to buy Anheuser-Busch, InBev made it clear that the Busch family would have to go, and at the old headquarters in St. Louis other changes soon followed. Executive offices were literally torn out and replaced by an open floor with matching desks. The private-jet fleet was put on the block. Company cars disappeared. So did 1,400 jobs, retiree life insurance, and contributions to the employee pension plan. Managerial pay was reduced to equal or less than the average for similar jobs in other industries, with bonuses tied strictly to performance. Salaried workers lost little perks like free beer every month, and hundreds of staff BlackBerrys were recalled. Cost cutting was the new imperative.
Then, after eliminating everything it could at home, the new regime turned to squeezing more out of its increasingly nervous partners, the wholesalers. And, today, with only one remaining real competitor, MillerCoors, the pressure it can put on its wholesalers is extraordinary. A wholesaler who loses its account with either company loses one of its two largest customers, and cannot offer his retail clients the name-brand beers that form the backbone of the market. The Big Two in effect have a captive system by which to bring their goods to market.
Here’s how it works in practice. In 2011, Anheuser-Busch InBev (“A-B”) sent out a Wholesaler Family Consolidation Guide to each of its contractors. The language is blunt:
Do you share the same vision as A-B on issues of importance to the industry, including support on legislation that can affect our competitive position? …
Are you selling competitive products in a fellow A-B wholesaler’s territory?
The introduction to the guide begins:
We ask all wholesalers to use the guide’s self assessment tool to objectively consider their capabilities and goals. Wholesalers who aspire to be an Anchor Wholesaler can identify any gaps they have in these qualities and build a plan to address them. Some wholesalers might remain committed to their current market, but realize further acquisitions are not right for their business. Others might decide now is the best time to consider whether a sale is in their best interest.
There are many aspects of an aligned wholesaler, and an explicit focus on our portfolio of brands is paramount. Those who are aligned with us only acquire brands that compete in segments underserved by our current portfolio and that bring incremental sales, not brands that have a negative impact on the A-B portfolio.
The guide emphasizes the last point: an aligned wholesaler is one who “shares the company’s long-term vision for how to operate successfully and grow business in conjunction with Anheuser-Busch InBev’s strategy.” So distributors are caught in an impossible bind: they either do the brewer’s bidding, including selling their businesses to favored “Anchor Wholesalers,” or they lose Anheuser-Busch InBev as a client.
And if the wholesalers try to push back? Anheuser-Busch InBev will get rough. In Arkansas, to take a prime example, a state inquiry revealed that the company was charging as much as $5 more per case (a huge margin against the average price of around $15) to some wholesalers, an obvious effort to run them out of business. In addition, through a second practice called reachback pricing, the company retroactively reset the value of its wholesale contracts once its wholesaler’s retail terms were known. The technique allowed it to reduce wholesalers’ profit margins. And when the state legislature took up a bill to make these practices illegal, Anheuser-Busch InBev filed a letter of protest “on behalf” of its wholesalers, in effect forcing those who disagreed with its practices to identify themselves if they chose to give the motion their public support.
Anheuser-Busch InBev’s efforts failed in this instance; the bill passed. But the door is open for similar behavior in other states. All that’s required is to get their legislatures to fall for familiar Chamber of Commerce arguments about regulation “hurting” businesses and consumers. Moreover, in some big states (notably California and New York, home to almost one in five Americans) brewers have already succeeded in finding loopholes that allow them to own wholesalers directly, giving them the chance to make vertical integration cut-and-dried rather than just a matter of strong-arm business practices. And given other trends toward consolidation at the retail level of American economy, there is, as we’ll see, every indication they will do just that.
For a long time, brewers weren’t interested in distribution, because distribution was a challenging, tight-margin enterprise. Those who did it had to manage hundreds or thousands of accounts, maintain a fleet of delivery trucks, store products in expensively refrigerated warehouses, get new stock onto shelves and remove the expired stuff daily (usually eating the cost as they did so), and, in some cases, maintain the taps at their contracted bars and restaurants. In short, they ran a very complex show. But with the emergence of national chain retail stores, much of the complexity and cost of distribution has been eliminated.
Just as England’s four major supermarkets now dominate alcohol sales there, so major all-in-one box stores, like Walmart and Costco, now dominate beer sales in the U.S. And these stores typically manage their own logistics, gathering inventory at centralized distribution centers and stocking all their shelves in a region from there. So it would be no big task for Anheuser-Busch InBev to run a fleet of trucks from its breweries to the big-box distribution centers—and that is precisely the plan. Anheuser-Busch InBev’s CEO Carlos Brito openly declared it to investment analysts from UBS in 2009, saying that the company was aiming at making 50 percent of its sales directly to retailers. (Aware that at least some people believe that this would or should be illegal under federal law, spokespeople quickly claimed that his statement was being misinterpreted.)
But to Anheuser-Busch InBev, as well as to MillerCoors, achieving de facto if not actual vertical integration is too tempting a goal to give up. Such control allows for the elimination, in literal, physical terms, of almost all competing brands on store shelves. And if eliminating middlemen leads to greater “efficiencies” and therefore lower costs, both companies can build the market for alcoholic beverages by manipulating prices and more aggressively marketing to consumers—which is exactly what happened, with obviously disastrous effects, in the UK.
And so the onslaught continues, by direct and indirect means, with few Americans having even the vaguest idea of what’s going on. In Ohio, for example, MillerCoors tried unsuccessfully to negate the contracts that its component companies, SABMiller and Coors, had already signed with distributors, with the goal of forcing them to renegotiate terms with the more powerful merged venture. In California, the state attorney general declared MillerCoors’s efforts at wholesaler exclusivity a violation of state law. In Illinois, Anheuser-Busch InBev stands accused by the state’s distributors of holding an illegal interest in a top Chicago-area wholesaler. If Anheuser-Busch InBev wins the case, now being heard by the Illinois Liquor Control Commission, the company may be emboldened to argue for similar rights in other states. (On October 31, after this article went to press, the Commission ruled in favor of Anheuser-Busch InBev, effectively permitting beer makers to self-distribute in Illinois.)
In fact, by exploiting existing weaknesses in some states’ commerce laws, Anheuser-Busch InBev owns fourteen distributorships in ten states (New York and California, as mentioned above, plus New Jersey, Ohio, Massachusetts, Colorado, Oregon, Oklahoma, Kentucky, and Hawaii) and is part owner of two more. The biggest beer producer in America, Anheuser-Busch InBev is now by volume the biggest beer distributor, too.
At times, the Big Two don’t even have to lead the fight. Costco spent $22 million last year in a successful ballot initiative campaign that allows them to stock their shelves directly from wholesale warehouses, effectively eliminating the protective inefficiencies of the second-tier distribution system. Such mutually beneficial efforts by big-box stores and the Big Two are no surprise: they all work on a high-volume, low-margin profit model. And though three-tier laws prohibit direct collaboration between them, it’s also no accident that in a March interview with the trade publication Beer Business Daily, Anheuser-Busch InBev Vice President Dave Almeida described in perfect detail how retailers can maximize their profits by replacing craft brews with “premium” beer—its term for its mass-produced light lager. Synergy: it’s coming to a store near you.
Horizontal integration of alcohol production. Vertical integration of distribution and retail. Loosened local regulations. National chain stores. Streamlined marketing. Volume pricing. Alcohol as an ordinary commodity. America resembles Britain more and more each passing day. How do you like them apples?
In recent years, the UK has started to reverse course as it struggles with its epidemic of alcoholism. After ten years of study and against vehement industry protest, a conservative, Tory-led Parliament now appears serious about passing reforms aimed at weakening vertical monopolies in the British alcohol industry and forcing the cost of drinking upward through minimum-price laws. Eighty years late, Great Britain is recognizing the hard-learned lesson that our forebears enshrined in the 21st Amendment: that alcohol truly is no ordinary commodity, and must be handled with care. We would do well to recall that wisdom ourselves.