econlife - Where Lost Luggage Finds a Home by Elaine Schwartz

Our story starts in 1970 when a part-time insurance salesman heard that Trailways wanted to get rid of a stack of unclaimed luggage. He borrowed $300 (equal to $2,046.01 now), bought it all, and the rest is history.

The Price of Lost Baggage

On card tables, Doyle Owens displayed the contents of his suitcases and sold whatever people would buy. Today, in Scottsboro, Alabama, the Unclaimed Baggage Center occupies a 50,000 square foot store. From airlines and other commercial establishments, it buys lost baggage, wheelchairs, items that were forgotten in overhead bins.

All is either sold, trashed, or donated. More than half is clothing that the company launders before selling it at a 20 to 80 percent discount. They also offer unclaimed headphones, lots of watches, e-readers, and the eyeglasses we stash in seat back compartments. Much less typically, they’ve found wedding dresses, a live rattlesnake, and a Gucci suitcase with Egyptian artifacts.

These are some of the watches they’ve found:

And these are the racks:

The Airlines

Only after mishandled baggage first has sat, unclaimed, for 90 days can it be sold. During the first quarter of 2020, an average of five or so bags per 1000 were mishandled. You can see below that, among the larger airlines, American is the worst at 5.74 per 1000:

Our Bottom Line: Markets

Not necessarily a place, a market is a process through which prices are determined. In 1970, Doyle Owens was clever enough to see that he could create a market for the shirts, shorts, and electronic devices that travelers left in lost luggage. Mr. Owens provided the supply and the prices at which he was willing and able to sell his inventory. But then demand kicked in because bargain hunters knew what they were willing and able to pay. At that point, supply and demand interacted and the market created an equilibrium price.

When Unclaimed Baggage buys suitcases from airlines, the market determines their value. Then, when the contents are sold, again, the invisible hand of the market nudges sellers and buyers toward a mutually agreeable price.

My sources and more: My email subscription to The Hustle introduced me to the lost luggage story. From there, a new world of baggage emerged, starting with U.S. DOT reports and WSJ, here and here. Then, for even more, you could go to the Unclaimed Baggage website.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - A Tale of Two (Very Different) Restaurants by Elaine Schwartz

Used to be that a restaurant was where we talked, and ate, and relaxed. Maybe we had some wine and good food. At Prune, in Manhattan’s East Village, our dessert could have been the sugared black plums on warm buttered toast (pictured above).

In this three-year-old image of Prune, you can see it was tiny and cramped…and diners loved it:

Now Prune has closed, maybe forever, maybe not. But in Midtown, Junzi remains opens. Let’s look at the difference.

Two Restaurants

Prune

Days before Prune closed on March 15, its owner saw her revenue cascading. It slid from Saturday’s $12,141 to Thursday’s $2,093. Hours after the owner decided to shut down, so too did the city. Gathering her 30 employees, she knew she could not afford her payroll, sales taxes, rent.

As Gabrielle Hamilton explained, in her 20 years in business, she had survived 9/11, Hurricane Sandy, and the Great Recession. But the coronavirus was different. Her dining recipe had brought success until we started to worry about social distancing.

She said she thought about take-out, an app, and a delivery service. But her style was too different. Yes, she has 10-year lease so reopening is a possibility. But her side-by-side 24 inch tables will no longer work.

Junzi

On West 41st Street in Manhattan, Juntzi Kitchen is open. No longer serving the tourist or office crowd at lunchtime, its fast casual Chinese food is ready for delivery. When Yong Zhao realized he needed to tweak his business model, he stocked up on larger takeout containers. Instead of single portions, he prepared larger family friendly meals. He had a chef streaming heating directions to all who ordered a three-course dinner. His logistics facilitated Grubhub deliveries and customer pickups.

In 2019, Junzi looked like this:

Now, the tables are gone and Yong is planning for the future.

His friends in China tell him that they seat parties of three or less at every other table. Diners have an app tied to their national ID number that tracks temperatures and contacts. A sign in front documents the establishment’s cleaning schedule, health stats, employee data. Yong’s plans could be similar.

Our Bottom Line: Land, Labor, and Capital

Called the factors of production, land, labor, and capital are the ingredients in every good and service recipe. Only months ago, a restaurant’s land, labor, and capital depended on the owner’s vision. People like Gabrielle Hamilton wanted a cozy establishment with her own kind of cooking. Her 30 employees included servers, bartenders, and a sous chef. Her tables, her stoves, and the chefs’ treasured knives would be in a list of her capital. As for the labor, they formed a sort of family. Regular customers became a part of the group. They produced 14 services, were open for 7 days, served brunch and lunch. Now she has to decide whether to change her land, labor, and capital if she reopens.

But the owner of Junzi is ready to change his.

My sources and more: While the NY Times Magazine took a close look at Prune in 2017, Planet Money told the Junzi story in a recent podcast.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - The Surprising Significance of Ping Pong by Elaine Schwartz

Twitter was regularly buying new ping-pong tables until the end of 2014. By 2016, the headlines said that their growth had stalled.

There might be a connection.

Ping Pong and Startups

In tech, playing ping pong is a normal part of the workday. Or, as one chief tech officer said, “If you don’t have a ping-pong table, you’re not a tech company.” We could add that when you stop buying ping-pong tables, your tech company might be declining.

To prove the correlation, one ping-pong table dealer tells us that when his store’s sales declined by 50% during the first quarter of 2016, startup venture capital funding dropped 25%. However, he was quick to point out that the table purchases are not a predictor. Rather they are “coincidental”:

 

Venture Capital (VC) Activity

If VC and ping pong (perhaps) relate, let’s follow the money.

Who?

In the following graphic, you can see that information technology got the most money from the most VC deals:

Where?

The San Francisco Bay Area was by far the top region for startup money and then the Boston/New York/Washington DC corridor.

However, New York is a distant second behind San Francisco:

 

Our Bottom Line: Venture Capital

Yes, we can look at the gargantuan dollar and deal totals for venture capital:

But what actually is venture capital?

Here is the perfect VC primer. I’ve summarized the list from BusinessInsider:

1. Just like Shark Tank, venture capital is the money received by young companies that helps them to grow. In exchange for the dollars, the investors get ownership shares.
2. On the other end, the VC firms get their money from investors like mutual funds and affluent individuals.
3. Entrepreneurs go to the VC firms asking for cash. (You might enjoy Startup.com-an award winning documentary about a tech startup.) The initial stage of funding is called “seed capital.” Snapchat first got $485,000 in 2012.
4. If the firm survives, the next step is the “growth round,” also known as Series A. Then the funding hits the multiple millions. For those millions, the VC investor gets a slice of the company. BusinessInsider compares it to an 8-slice pizza. Assume the pizza (the startup) is valued at $24 with one slice worth 12.5%. If that firm grows, the VC group retains its 12.5% stake and hope they have the next Google.
5. The last stage is the “exit.” If all works out for the VC firm (which is rare), the startup could be acquired or sell its shares to the public through an IPO (Initial Public Offering).

And then, ping-pong table sales skyrocket?

My sources and more: When ping pong and VC connect, that means there is lots more to explore. So, I took the next step with Medium and then the leap in the VC world with VentureSource. But if you want more of the perfect VC overview, do go to the Business Insidersummary.

Ideal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.