Sunday, 3 November 2013

They probably aren't even aware they are doing it.

This month's edition of British Airway's Business Life magazine ("Total reading time 57 minutes", it says on the cover) includes half a dozen main articles (one page or longer) all of which are about rents and rent-seeking:

1. Interview with the CEO of Canada Goose, the premium cold weather clothes manufacturer:

When [my grandfather] first arrived, he worked in a clothing factory as a cutter and then decided at some point that he wanted to open up his own place, which he did. It was very small and in downtown Toronto, which was the home of the garment industry back then. Now it's the night-club district…

Most brands these days are not real brands, they're some product mass-produced in some factory somewhere else that has a fancy store woven in front of it by marketing departments…

I went to Europe, where I learned how valuable the term 'Made In Canada' is for us. I realised that for a lot of people a Canada Goose jacket is like a Swiss watch. The place where it is made is really important. We're a quintessentially Canadian product. All of our jackets are made in Canada. It's impossible to imagine us not making them in Canada.

2. Article about football players' salaries:

Manchester City, the 2011-12 Premier League champions, spend more than £200 m each year on player wages along, a figure that equates to 87 per cent of the club's total turnover… it's not as if it's the players or even their agents who are ultimately deriving up wages, it's the broadcasters - and one in particular.

In the summer of 2012, BSkyB signed a new three-year deal to cover 166 games a season, worth a record £2.3 bn to the Premier League… It's interesting to contrast that with Sky's first deal to cover Premier League in 1991. Back then it paid just £340 m.

3. Article about a private business which wants to build reusable rockets for space travel:

"I think there's nothing positive or constructive I could say about Kenneth Clark" [Managing Director Alan Bon] told an interviewer earlier this year.

It was Clark, in his role as Minister for Trade and Industry during Margaret Thatcher's final term, who 25 years ago pulled the plug on government funding of HOTOL - Horizontal Take-Off and Landing - the admittedly flawed spaceplane being developed by Bond and his colleagues…

Earlier this year, however, the government did a volte-face and over next two years it is to plough £60 m into the development of Sabre, a revolutionary engine tipped to transform the economics of putting satellites - and indeed people - into space…

… The technology behind Reaction's pre-cooler is so commercially valuable that rather than take out a patent - which would perforce lead to publication of its workings - the company is avoiding the risk of feeding copycat competitors by treeing it as a trade secret, like the recipe for Coca Cola.

… a new backer emerged in the shape of Nigel McNair Scott, a Conservatie Party donor and chairman of property investment company Helical Bar.

4. Article about commercial property syndicates:

Commercial proeprty is bounding back. Figures from industry monitor IPD who that UK commercial real estate returned1.9 per cent in the three months to June, the highest return in two years…

Many hope that this heralds a definitive upturn in the property cycle, and a signal to invest in shops, offices and factories on the back of a recovering economy.

5. Article about local loyalty card schemes:

My Sant'Ambrogio card, issued by the eponymous market of central Florence, is about two tubs of fresh pest away from marking me as a most loyal customer indeed.

Supported by the local council, this card is designed to encourage me to shop not in the international chain supermarkets and stores on the edge of town, but instead with the market stall holders and local businesses who risk being left behind if everyone moves to the suburbs.

6. Article about hotel renovation:

You could argue that a quality new build might be cheaper but that misses the point. The Prince de Galles has an established location on Venue George V and a proven trading history, and offers considerably less market risk.

Finding suitable land in an established European city is all but impossible, and what's more, a speedy renovation can improve a hotel's fortunes in months, while building from scratch takes years.


The Stigler said...

1. Not sure I understand how that is rent seeking if he's making coats.
2. Pretty much, but Sky have better coverage, and well, people can choose football if they like. I prefer to go to the occassional live match which is much more exciting.
3. Yup. HOTOL has always played on the "Britain will be left behind" nonsense. If Concorde didn't make sense, nor does a spaceplane.
4. Yup
5. Yup
6. Hotels are rent-seeking enterprises, but the article strikes me as interesting in terms of the cost of downtime (and why reputable shopfitters earn good money).

Mark Wadsworth said...

TS, the guy from 1 was the only one studiously avoiding rent seeking - he still makes the stuff in Canada instead of having it done in Vietnam and sticking label on it.

Kj said...

MW: sh#t expensive coats though. They're one of the primary markers of status among teens for the last few years. Fekkin 700 quid + for these. Also signals shop-lifting skills in some areas.

Mark Wadsworth said...

Kj, I'm sure they are a status symbol in e.g. Norway, but fair enough, that wasn't his conscious decision.

Kj said...

MW: I think most products that get extra value from the "produced in (some rich country)" factor, to a certain extent are status symbols. Nothing wrong with that.

Mark Wadsworth said...

Kj, I say fair play to them.

They know that there is a premium attached to "Made in Canada" so in that sense they are collecting a bit of rent, but he is still manufacturing in Canada (and thus paying higher wages and rent etc) so with him it cancels out.

Kj said...

Looking at it from that perspective, he´s not collecting rent at all actually, or very little, he is promising a set of qualities for the product that makes it more expensive in production. If he were to make it in Vietnam, he probably wouldn´t be able to. But his landlord is!

Kj said...

Hey, the phenomenon´s even got it´s own song:

With a political message directed at house-prices to boot:
I paid 600,000 to live in a box
So why not pay 600 to freeze of my cock.

Mark Wadsworth said...

Kj, good video.