Exploitation, Bribery and Basketball

College athletics have a long history of bribery incidents, so much so that these acts have become institutionalized into the college recruitment process. This large scale issue has recently gained significant notoriety, beginning with the FBI arrest of many high profile basketball coaches and sports executives. On October 24th,James Gatto, former head of global sports marketing for basketball at Adidas, was convicted of conspiracy to commit wire fraud by a jury in the Southern District of New York. The court found that he participated in bribing families with funds to lure students to certain universities that were sponsored by Adidas. These bribes were committed with hopes of elevating the notoriety of these institutions and, subsequently, the Adidas brand.

The case is intertwined with many long-standing critiques of the NCAA and raises the potential effects on basketball recruitment and college athletics at large.

Specifically, the judge in James Gatto’s case did not allow the defense to include in their arguments the NCAA’s rules regarding the lack of payment to amateur athletes. This is not a new issue, but it is a crucial aspect that provides a greater perspective to the interrelationship between bribes and financial need. The NCAA has been able to exploit the labor of teenagers and young adults for immense amounts of financial profit. However, players should have the ability to use their abilities and notoriety to make money despite their amateur status. By restricting the nature if its relationship with student athletes, the NCAA is ultimately perpetuating its own monopoly. This is particularly unjust because in many cases highly recruited basketball players come from lower socioeconomic households, which heightens their desire for financial stability. If these athletes had the autonomy over their abilities within collegiate athletics, they could accumulate income.

Additionally, in recent years, greater attention has been paid to the athlete recruiting process, which has translated to stricter regulations. Although there has been an increase in scrutiny, it seems as though universities have found a loophole: an institution can have a third party, such as James Gatto, do the bribery work on its behalf without suffering legal ramifications. This scenario causes us to question whether a university is actually a victim simply because it provided a scholarship to an athlete who is ineligible to play because he or she accepted a bribe. Or, are universities allowing third parties to present incentives on their behalf to attract the best talent?

Following these arrests, many wonder what the state of college basketball will be because of the increase in the monitoring of the recruitment process. Many think that nothing will change, but there is a potential to see a shift in the power dynamics of college basketball due to the possible surge of new powerhouses given the potential decline of bribes.

Exploitation Bribery and Basketball

U.K. Chancellor Announces New Digital Service Tax

European governments grow increasingly concerned that major tech companies are not paying enough taxes to the countries they operate in. Critics argue that because revenue for tech companies is recorded based on where those services are created rather than where they are consumed, tech companies like Amazon, Facebook, and Google benefit from the European market without paying European taxes. For example, in 2017, Amazon earned £1.98B in revenue and £72.37M in profit in the U.K., but only paid £1.7 million in taxes, a 2.35% tax rate.

In response, recently the U.K. announced a 2% tax on digital services starting April 2020. Under the new provision, tech companies will be taxed if they have global revenues of at least £500M and are profitable. The U.K. was not the first to explore a digital services tax. The European Commission and the Organization for Economic Co-operation and Development (OECD) have been working on a uniform and long-term solution. They proposed a two pronged approach, first an interim digital service tax, and second, a long-term solution of taxes based on significant digital presence in a country. However, progress has been slow so the U.K. decided to act first.

Opponents of these new taxes argue that it will result in double taxation of revenue, a slowdown of international trade and development, and hurt smaller firms. They further argue that these digital service taxes come at a bad time with increasing global trade tensions and protectionist policies. Because mostly large U.S. tech companies will be affected by the U.K. tax, the U.S. government might interpret these new taxes as tariffs on American companies, which could spark retaliation. In addition, the more a U.S. company’s profit is taxed in Europe, the smaller the taxable base in the U.S is. Ironically, these higher taxes may help U.S. tech companies establish stronger market positions in Europe by increasing the barrier to entry for competitors.

In a digital economy where borders are not a significant barrier for tech companies to operate and scale, technology is pushing governments to change what and how they tax. Therefore, it is important to revamp old assumptions such as where revenue is recognized and where a sale occurs to create effective taxation structures without driving away beneficial tech services.

U.K. Chancellor Announces New Digital Service Tax

 

Exploiting Chinese Laborers: Apple’s Rotten Core

The world’s most valuable company is once again facing allegations of exploiting Chinese laborers. According to a report published by a labor rights group, one of Apple’s suppliers illegally forced high school students to assemble Apple Watches at a factory in China.

According to the report, students aged sixteen to nineteen in the city of Chongqing were placed in mandatory school internships at the watch factory run by Quanta Computer. Further, the students were forced to work excessive and overnight shifts, with only one day off per week. In addition, the school threatened students that they would not graduate on time if they refused to work in the factory, even if the work did not relate to their major.

This is not the first time that Apple has come under fire for illegal labor practices. In 2017, students were discovered working more than eleven hours a day as part of a “voluntary” school internship program at an iPhone X plant in Shenzen run by Foxconn. In 2014, a report revealed that another supplier factory in Suqian was guilty of workplace violations including excessive hours, locked exits, and inadequate ventilation. Moreover, Apple faced global scrutiny after a spate of suicides by young workers at Foxconn in 2010.

Since the 2017 Foxconn scandal, Apple has required its suppliers to limit student interns at factories to no more than 10% of their total workforce. It enlisted the Fair Labor Association in 2012 to conduct regular audits of its suppliers. Unfortunately, these latest allegations suggest that Apple is still profiting from the exploitation of young Chinese workers.

Apple’s humanist brand has made it an icon of Silicon Valley. However, under that sleek surface, Apple has a rotten core assembled in China.

Exploiting Chinese Laborers- Apple’s Rotten Core

Expanding E15 Sales: Proactive Energy Policy, or Reactive Political Move?

For many, spring is a time for elation, as long-awaited beams of sunshine slice through the smothering blanket of clouds. The grave silence of winter is disrupted by the chorus of birds, and bleak, frost-covered landscapes explode into a dazzling collage of vibrant colors. For millions of farmers across the United States, however, spring is a time of solemn calculation and meticulous statistical analysis. It is time to make a crucial choice: soybeans or corn.

Both crops are planted during the same season (April through June) and are grown in exactly the same environment. As such, they are perfect substitutes—for every acre that is devoted to corn, it means one less acre devoted to soybeans. Thus, come April, farmers must choose which crop to plant. Relying on statistical projections, farmers do their best to determine which crop will bring higher revenues. In recent years, American farmers have increasingly favored soybeans. A drought in Argentina has drastically cut the global supply of soybeans, pushing prices upward. Seeking to capitalize on the rising prices, American farmers have dedicated more and more land to soybean cultivation. The growing reliance on soybeans, however, has made farmers particularly vulnerable to China’s latest tariffs.

In the escalating U.S.-China trade war, Beijing has levied a 25% tariff on U.S. soybeans. For many farmers, this raises serious financial concerns. Roughly one third of all U.S. soybeans are exported to China. The tariffs will make U.S. soybeans more expensive for Chinese consumers; as a result, China is expected to reduce its annual imports by several million bushels. The tariff is highly strategic—China has tailored its tariffs to disproportionately impact President Trump’s voter base. Rather than trying to undermine U.S. economic stability, China is leveraging its tariffs to undermine Trump’s political stability. China is selectively targeting those sectors of the economy upon which Trump relies for electoral support. Against this backdrop, Trump’s recent decision to expand the sale of E15 fuel seems highly reactive—a desperate effort to rekindle political favor among the farmers who have been detrimentally impacted by his trade war.

E15 is a special type of fuel with a higher ethanol content—15% ethanol, compared to a nationwide mean of roughly 10%. E15 sales are currently prohibited from June through September, because the higher ethanol content makes E15 a particularly strong pollutant during hot weather. Trump has ordered the EPA to lift this summertime ban, thereby allowing sales of E15 year-round. Of course, ethanol is derived from corn. By lifting the ban on E15, Trump will increase the demand for ethanol, which in turn, will increase the demand for corn. Presumably, Trump expects this to serve as a life-line for struggling farmers—rather than despairing at the mercy of China’s tariffs, farmers can opt to produce corn instead of soybeans, thereby availing themselves of the newly expanded E15 market. In effect, Trump is hoping to stimulate corn-demand, in order to offset the reduction in Chinese demand for American soybeans. In fact, USDA Secretary Sonny Perdue practically said as much in a recent statement, declaring that “year-round sale of E15 will increase demand for corn, which is obviously good for growers…[this] is another victory for our farm and rural economies.”

While it may be a victory for American farmers, the expansion of E15 sales will hurt the oil industry. If cars become increasingly reliant on corn-based biofuels like ethanol, they become proportionately less reliant on fossil fuels. Realizing this, the oil industry has already threatened legal action if the EPA chooses to expand E15 sales. President Trump is thus forced between a rock and a hard place. China’s tariffs have forced him to make corn more profitable, in order to offset the loss in soybean demand; simultaneously, by appeasing corn farmers, Trump has ignited the rage of the oil industry. Both the agricultural voting bloc and the oil lobby are crucial players in American electoral politics; it seems that Trump will be forced to gain favor with one at the expense of the other, thus rendering him politically vulnerable.

Expanding E15 Sales – Proactive Energy Policy, or Reactive Political Move

Twitter Posts Profit While Sustaining Decline in Users

Since its founding in 2006, Twitter has gradually integrated itself into the social fabric of American life. Today, Twitter touches the lives of many who are not even on the platform and serves as the preferred platform of the President of the United States.

Twitter has also been mired in several controversies, ranging from potential leaks of its users’ passwords to its infiltration by vast networks of bots aimed at influencing elections, during the past few years. Most of all, Twitter has often been used as a preferred tool for the dissemination of disinformation and right-wing radicalization, largely exemplified by its most famous user: @realDonaldTrump.

Nevertheless, these scandals have failed to dampen the famously unprofitable company’s revenue streak these past few quarters. Compared to last year, Twitter’s revenue has risen 29 percent, to $758 million, with a net income of $789 million according to the New York Times. The company has, remarkably, achieved its fourth straight quarter of profits, leading many investors to presume that the company has at last achieved a sustainable business model.

So why isn’t Twitter celebrating? Twitter continues to hemorrhage users. Once heralded as a possible direct competitor to Facebook, whose users number in the billions, Twitter’s user count has declined to 326 million monthly active users, from around 335 million in the previous quarter and 330 million last year. However, Twitter’s investors seem unphased by a contraction of the service’s active user base. This decline continues to trouble Twitter’s CEO Jack Dorsey even though shares have gone up 22 percent, from $26.91 to $31.27, following the recent quarterly earnings report.

Dorsey, who is also the CEO of the payment-processing company Square, has spent the last year struggling to diminish the increasing toxicity of the platform, by banning white supremacists like Alex Jones and Richard Spencer, while also trying to avoid alienating many of the platform’s vocal, virulent right-wing user base. Meanwhile, many of its users who are women, LGBT, and people of color have fled the site after suffering abuse.

Per the Washington Post, Brian Wieser, a senior analyst with Pivotal Research, believes that Twitter’s attempts to “improve the health of the platform” would likely harm its standing with investors in the short run. Yet it appears that investors are unlikely to hold Twitter accountable for its toxicity problem and declining user base as long as it continues to post a profit.

It may be up to us as citizens to step in and regulate Twitter not as a private company but as critical infrastructure. It may seem hard to believe in Dorsey’s vision of Twitter becoming a “health[y] and valuable everyday service” in light of the platform’s connections to domestic terrorists, such as the right-wing mail bomb suspect, Cesar Sayoc, and the organizers of the Charlottesville Rally. We can’t, however, deny the platform’s outsized impact on our public discourse and its role as a more transparent, public alternative to more toxic platforms like Gab and Discord. Although Twitter might finally be profitable, it may need to be saved from itself for the good of society.

Twitter Posts Profit While Sustaining Decline in Users

Survival of the Least Biased: Humans v. Machines

In the current political climate, many news sources have been heavily criticized as untruthful and polarized. It’s not only the “traditional” news sources, however, that have come under fire. Much of the condemnation has been directed at tech giants like Facebook, Twitter, and Google.

Recently, the Senate questioned Facebook’s commitment to privacy and distribution of news. The event added to an ongoing debate about whether these companies are media or technology businesses. Apple has almost miraculously managed to stay out of the limelight, even though its news app is used by roughly 90 million people.

Coincidentally, Apple is also the only company among the Silicon Valley corporations that chooses humans over machines and algorithms to pick its headlines. Thirty former journalists currently work for Apple in Sydney, London, New York, and Silicon Valley, where they review the news and pick stories to highlight on the news app.

Apple’s competitors, on the other hand, rely solely on algorithms. They argue that machines help to eliminate human bias. They forget, however, that algorithms are only as good as their creators. Therefore, they may propagate the systematic biases of their developers.

So, could human journalists be less biased than machines? Awareness of one’s shortcomings is often the first step in addressing them. Human journalists can watch out for such biases, while machines might not be able to do so. Yet, engineers and app developers can similarly combat bias in their thinking.

The lack of public scrutiny over Apple’s news app draws attention to another interesting phenomenon: society’s fundamental mistrust of machines. That sentiment could explain why Apple hasn’t faced criticism similar to that of Facebook.

Humans have historically curated the news provided to the public. Bias has always been there, lurking behind the scenes. Now, that bias has assumed a more robotic and systematic face. Therefore, it has become a foreign threat. It is, after all, the human condition to fear the unknown — even as we rapidly forge ahead in our quest for new technology.

Survival of the Least Biased

Constellation Brands Looks to Sell Wine Brands in $3 Billion Deal

Constellation Brands Inc., an international producer of beer, wine, and spirits, is allegedly looking to sell some of its United States wine brands. According to sources close to the matter, this deal could be worth as much as $3 billion. This news comes just two weeks after Constellation’s CEO of 11 years, Rob Sands, announced that he is stepping down.

Constellation is a family-controlled company that has been in the alcohol production business for over 70 years and has grossed $7.33 billion in 2017. Pursuant to the deal, Constellation is contemplating selling Clos du Bois, Mark West, Arbor Mist, and Cooks. These brands generate 12-month earnings before interest, tax, depreciation, and amortization of more than $260 million.

Though the deal is still uncertain to close and is regarded as a confidential matter, it comes as little surprise that the company is looking to sell some of its wine brands. Last year, wine accounted for 38.6% of Constellation’s consolidated net sales, which is down from 44.7% two years ago. In contrast, Constellation’s beer business has continued to grow. During the second quarter of this year, Constellation was the top market share gainer in the U.S. beer industry. Further, one of Constellation’s top beer brands, Modelo, has grown nearly 20% in the last five years.

As the company turns away from wine, it is looking to invest in new markets, including the cannabis industry. In August, Constellation paid almost $4 billion to increase its stake in a Canadian cannabis company, Canopy Growth Corp., from 10% to 38%. Recreational marijuana is now legal in eight U.S. states and Washington D.C. Further, Canada just opened its first cannabis dispensaries within the last two weeks. Clearly, marijuana is a growing market and Constellation is taking advantage of the economic opportunity.

If Constellation sells these wine brands, it will represent a big shift in the company’s targeted customers. Since its inception, wine has been Constellation’s biggest business. However, as profitable opportunities increase in beer and cannabis, it will be interesting to see what other ventures Constellation engages in.

Constellation Brands Looks to Sell Wine Brands in $3 Billion Deal

YouTube Invests in Education

On October 22, YouTube announced that it plans to spend $20 million on educational videos and other education initiatives. While YouTube is well-known as a home for everything from how-to videos to informational shorts, this represents YouTube’s first investment in education-specific content. In addition to working on its own original content and developing an explainer series with Vox to answer questions posed by viewers, YouTube also plans to host more EduCon events, where it gathers YouTube Creators to discuss real-world education.

The investment comes on the heels of two key Google initiatives. First, YouTube has been pushing a subscription service, YouTube Red, for years with limited success. Like many Netflix competitors, Google’s shift includes investing in original content: YouTube Originals is slated to create over 50 programs in 2019. Second, Google has seen great success in the education market in recent years with its Chromebook products. Google recently overtook longtime education champion Apple with Chromebooks owning 60% of the K-12 market. However, competition from Microsoft and Apple is heating up. The new axis of competition is software, where Google’s competitive strategy is largely focusing on creating software for educators. In both cases, a suite of original content will bolster its efforts.

The investment in educational initiatives also comes as YouTube faces increased scrutiny for how it categorizes and promotes videos. This year, YouTube’s recommendation algorithms were roundly criticized for radicalizing individuals, and the national security community has expressed concerns on similar grounds for years. Similarly, some of its Creators notably quit—claiming that YouTube’s algorithms create a stressful work schedule—or were kicked off for creating offensive videos some Creators claim YouTube incentivizes them to create. These issues are critically important for YouTube as feed-style algorithms attract increasing regulatory scrutiny. Harmless content, like the upcoming Vox explainer series and other new educational videos, may take some of the edge off.

YouTube Invests in Education

JPMorgan’s Fintech Vision Expands into the Valley

Residents of Palo Alto, California will soon be greeting banking giant JPMorgan Chase as it makes an aggressive expansion into the heart of Silicon Valley. The move comes as JPMorgan increases its focus on digital payments and technological integration within its various platforms and services. With roughly 50,000 employees working in tech, the division’s annual budget has reached a staggering $10.8 billion, with $5 billion in reserve for new investments. The “fintech campus” to be completed in 2020 will house over 1,000 employees, a quarter of whom were absorbed into JPMorgan’s payroll through the company’s recent acquisition of WePay, an online payment service provider.

Though the company has seen steady growth in the aftermath of the financial crisis, JPMorgan’s entrance into Palo Alto speaks to a grander vision that stretches far beyond the bolstering of its fintech operations. The banking industry has long been viewed as a white-collar vestige steeped in the formalism and soul-crushing expectations shrouded behind the Manhattan skyline—a snapshot of Wall Street elitism that runs contrary to the changing values of the modern tech workforce. JPMorgan’s entrance into Silicon Valley seeks to change this very notion.

In many ways, JPMorgan’s expansion illustrates the larger shift in the labor market for highly specialized workers: as the next generation of starry-eyed, socially conscious students surface from the libraries of elite universities, diploma-in-hand and the world at their fingertips, demand for brilliance will continue to outstrip supply. In such a market, concessions must be made—a reality that CEO Jamie Dimon has internalized by crafting the Palo Alto campus in a way that emulates many characteristics of its competing neighbors: laid-back work environments, humane hours, and bountiful amenities to keep workers happy, satisfied, and engaged.

Furthermore, the move serves as a fascinating case study into the convergence of both coasts—a decision that evokes memories of the “Traitorous Eight” and their relationship with deep-pocketed financiers of the east that gave rise to Silicon Valley mainstays such as AMD and Intel. JPMorgan’s new campus works to advance this very storyline—as an emblematic icon of a world in which minds and money are no longer separated by space, the future is looking bright for JPMorgan Chase in Palo Alto.

JP Morgan’s Fintech Vision Expands into the Valley

General Motors Wants the Trump Administration to Back a Nationwide Electric Vehicle Program

On Friday, General Motors announced its support of a National Zero Emissions Vehicle (NZEV) program.  The program, modeled on California’s electric vehicle efforts, would gradually increase the percentage of electric vehicles that car manufacturers must produce each year in their fleet, beginning in 2021 at seven percent.  The company said the plan would lead to seven million long-range electric vehicles on the road by 2030.  GM is asking the Trump administration to implement the plan nationwide, which would relieve automakers from having to follow specific electric vehicle sales requirements in individual states.  GM announced its proposal through comments to the Environmental Protection Agency’s Safer Affordable Fuel-Efficient rule that was announced this summer; the rule, in part, rolled back Obama-era emission standards.

GM has been pushing for electric vehicles for a while.  The company already has a successful electric vehicle in its Chevrolet Volt.  GM stated that the NZEV program would “promote innovation in the United States and help the US to become a leader in “technologies of the future.”

While General Motors’ proposal seems like a noble effort to move towards cleaner technology, it is important to note that the NZEV program could create a multitude of economic benefits for GM. First, some of General Motors’ competitors have been slower to break into the electric vehicle market.  Given GM’s successful Volt and focus on electric vehicles, the company is likely better positioned than some of its major competitors to increase its production of electric vehicles.

Second, following a nationwide mandate on electric vehicle production would be easier for automakers rather than requiring manufacturers to meet individual states’ electric vehicle production mandates. California has one of the strictest electric vehicle standards in the country.  The state wants 15.4 percent of car sales to be from either electric vehicles or other zero emission vehicles by 2025.  Nine other states have also adopted this standard.  In January, California Governor Jerry Brown announced his goal of having five million zero-emission vehicles in California by 2030, a goal much more ambitious than that proposed by General Motors; there are currently around 350,000 of these vehicles on the state’s roads.  By having a single standard that applies to all fifty states, automakers would not need to make different cars for different states, which would likely reduce production costs.

The Trump administration has been an outspoken critic of California’s electric vehicle measures and goals, arguing that consumers do not want electric vehicles.  As a result, the Trump administration claims, automakers must spend billions on cars that have to be sold at a loss.  The administration has also said it is considering banning California from enacting its own emissions standards.

General Motors Wants the Trump Administration to Back a Nationwide Electric Vehicle Program