Opinion

Reihan Salam

Facebook, McDonald’s and the divided American workforce

Reihan Salam
Apr 25, 2014 19:54 UTC

On Wednesday, Facebook released data on its performance in the first quarter of 2014, and the results were very impressive. The social network has succeeded in monetizing its enormous audience, having generated $642 million in profit on $2.5 billion in sales. The expectation is that Facebook profits will amount to 25 cents per share, quite a bit more than the 9 cents per share it generated last year.

McDonald’s, a much larger and older company, reported $6.7 billion in revenue in the first quarter, slightly higher than its revenue from last quarter. Yet its net income fell to $1.2 billion and its profits per share to $1.21, down from $1.26 last quarter. Analysts attribute McDonald’s lackluster performance to a modest decline in U.S. comparable store sales.

I mention Facebook and McDonald’s not just because they are both iconic American brands, but because they represent the contrasting poles of American business. Though both Facebook and McDonald’s are innovative firms operating in a competitive landscape, Facebook is a social media company that lives almost entirely in the cloud. McDonald’s, meanwhile, is the quintessential quick-service restaurant, which, like Wal-Mart, depends on an extensive, expensive and labor-intensive logistical apparatus to meet the needs of its franchises.

This difference helps account for the fact that Facebook had a 102.27 price to earnings ratio in 2013 while McDonald’s had a 17.99 price to earnings ratio that same year. It’s much harder for a brick-and-mortar company like McDonald’s to grow than its code-driven counterpart.

Yet the contrast between Facebook and McDonald’s that interests me most is the difference in how each approaches human capital investment. Facebook is a high-wage employer. Its workers pay relatively high taxes and get relatively little in benefits. You might think of them as net contributors to America’s public coffers.

The Cliven Bundy in all of us

Reihan Salam
Apr 17, 2014 21:13 UTC

At first glance, Cliven Bundy, the Nevada cattle-rancher who has been fighting the Bureau of Land Management tooth and nail for over twenty years, might strike you as an anti-government radical. He has, after all, led an armed rebellion against federal land managers, who contend that he owes over $1 million in back fees, penalties and other costs for grazing his cattle on federal land.

But the truth is that Bundy’s underlying beliefs are quite common, and not just among self-styled scourges of federal overreach. Once we understand what Bundy is really trying to pull off, we can understand why our country is plagued by sky-high rents and crumbling roads, and why our streets are choked by congestion.

First, it is worth recalling that Bundy has deep roots in Nevada. His family homesteaded the ranch that he owns and operates in 1877. Bundy’s ancestors were quite happy to work with the federal government when it was offering settlers the opportunity to claim federal land as their own, provided they were willing to work the land. Homesteading was an ingenious idea, as the federal government didn’t have the manpower to do the hard work of settling these vast expanses. Tempting young families westward had the added effect of making America a more dynamic, ambitious, upwardly-mobile society.

Why Congress must rethink sanctions on Cuba

Reihan Salam
Apr 11, 2014 20:40 UTC

Alan Gross, the 64-year-old American who has been imprisoned by Cuban authorities since 2009, is an unremarkable man on the surface. He could be a friend or colleague, or an uncle you’ve been meaning to call.

Yet what distinguishes Gross from most of the rest of us, myself included, is his courage. As a sub-contractor for the U.S. Agency for International Development, Gross traveled to Cuba to help private citizens gain access to the Internet, and thus to news and information not managed or manufactured by the Cuban government. Gross likely knew that his work was dangerous, but he may have underestimated the risk he was taking. In a heartbreaking letter to President Obama, Gross recounted the many ways his wife and daughters have suffered in his absence. He beseeched the president to intervene in his case.

And so Gross, a husband and father from Maryland who seems to want nothing more than to be reunited with his family, has reignited the decades-long debate over how the United States should deal with Cuba, a rogue state that continues to adhere to Marxist-Leninist one-party rule long after the collapse of its Soviet patron.

How to get Americans back to work

Reihan Salam
Apr 4, 2014 18:38 UTC

Friday’s Labor Department data shows an uptick in jobs, but an unemployment rate that remained steady from February to March. While the size of the labor force is increasing, the economy is not strong enough to get all would-be workers off the sidelines and into jobs.

Part of the story is that the fates of the short-term unemployed and the long-term unemployed have sharply diverged. The short-term unemployment rate, as Annie Lowrey of the New York Times has observed, is lower than its pre-recession level, while the long-term unemployment rate remains very high.

We need to find better ways to help the 3.7 million American workers who’ve been out of a job for six months, and the twice-as-large number of workers who are working part-time although they’d prefer full-time employment. But we would do also do a great deal of good by ensuring that the short-term unemployed don’t remain on the sidelines for long.

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