Marketplace - A rigged version of Monopoly

Episode Date: July 1, 2024

Lawrence Brown created “Urban Cipher,” a Monopoly-like game, to illustrate the consequences of neighborhood redlining. We’ll join Baltimore city educators at a professional development session led by Brown and hear how redlining continues to affect families today. Also in this episode: Lumber prices fall while housing remains expensive, Toys R Us dips its toe into AI-generated advertising and a landscape designer tells us about his job before the arrival of drafting software.

All right, I'm going to date myself here, but do you remember before we had all this technology at work? From American public media, this is MarketFlags. In Los Angeles, I'm Colin Rezdall. It is Monday, today, July the 1st. Good as always to have you along, everybody. Our new series about the technological before times coming up a little later in the program, but we are going to talk here at the top of the show about price levels, about supply

chains, and about what a difference a couple of years can make. Didn't take too long as the pandemic really got going for pretty much everything home-related to get really pricey. People stuck at home started spending money on their homes, which drove up the price of construction materials, lumber in particular. Now though, with the pandemic in the rear view mirror and people out and about and interest rates high and the economy slowing a bit, those lumber prices have fallen back to earth. Not so much though, all the other stuff that goes into the home building and renovation

business though, as marketplace Mitchell Hartman reports to get us going. This summer, it's all about SPF, not sunscreen, two by fours. It stands for Spruce Pine Fir, and it's the benchmark for lumber pricing in the US. Back in 2021, with demand soaring and supply chains a mess, the price peaked at $1,600 per thousand board fee, says Paul Yonkey at Forest Economic Advisors. Prices currently stand at about $355. So lumber prices are extremely weak right now. What happened? A combination of weaker new home construction and renovation, plus more lumber supply. Those record high prices that we saw the second half of 2020 through the first half of 2022 led to

extensive investment. Mills investing in existing capacity, new capacity. So last week I asked economist Robert Dietz at the National Association of Home Builders, if lumber is relatively cheap, why are new homes still so expensive? Building material costs are 30% higher compared to 2019. A lot goes into building or remodeling a home, says Carlos Martín at the Harvard Joint Center for Housing Studies. There are a wide range of other materials whose prices have gone up. A lot of plastics, classically related products.

There's been some variability with steel. Not to mention electrical equipment like transformers, along with air conditioning and heating components in high demand because of government tax credits and rebates for green energy improvements. All these higher costs are helping to drive a shrinkage trend, says Robert Dietz. New home size has actually been falling in recent quarters as builders adapt to an environment where housing affordability conditions are really quite challenged. Construction of townhouses rose 6% last year and now constitutes a multi-decade high share, nearly one in five new homes. The smaller the home, the less construction materials it needs. I'm Mitchell Hartman for Marketplace.

On Wall Street today, traders were upbeat to start the second half of the year. We will have the details when we always have the details. You'd be hard pressed to find a more beleaguered company right now than Boeing, its commercial airplane division in particular. There were reports this morning that the Department of Justice plans to charge the one-time paragon of American manufacturing with fraud after, the DOJJ says it violated an agreement that shielded it from prosecution over those two fatal crashes involving its 737 MAX jets. Also this morning Boeing announced it has agreed to buy one of its key suppliers Spirit Aero systems or rather buy it back I should say Spirit which makes fuselages including the one that lost the door plug midair back in January

It was a subdivision of Boeing until it was spun off in 2005. Marketplace Daniel Ackerman looked into why now, nearly 20 years later, Boeing wants Spirit back. Boeing thought selling off Spirit Aero systems in the first place was just good business. The idea was they could just not have to worry about the enormous problem of building the body of the plane.

Richard Abilaffia is with the consultancy Aerodynamic Advisory, and he says building fuselages is expensive. In theory, making spirits stand alone would reduce Boeing's overhead, because rivals, including Airbus, could also do business with the new company. Meanwhile, Boeing had ambitions of simply crunching it on price, basically demanding price concessions to enhance their own profitability. Boeing tried that for almost two decades. But then came the two deadly 737 MAX crashes, plus a supply chain scramble due to COVID,

and the great experiment failed. Richard Safran is with Seaport Research Partners. He says the crashes and pandemic slowed down production lines. And natural attrition shrank Spirit's labor force. Then when demand for airplanes picked back up, You had to rehire massive numbers of people. during what turned out to be a historic labor shortage. For suppliers like Spirit,

Their policies and procedures were geared towards a much more sophisticated Worker than they were able to hire so Boeing decided to bring spirit back under its wing Following foot look the name of the game now is vertical integration and we should be doing more of that Making its own fuselages could eat into profits But it'll also give Boeing more control over a high precision process, says Vijay Pandyarajan of Michigan's Ross School of Business. The specifications are extremely tight, so you need to exercise a lot of control. And Pandyarajan says being in control is especially important for a company that's losing public confidence. I'm Daniel Ackerman for Marketplace. The thing about history is that you can read it and study it and learn as much about it as you can.

A lot of times you can see the after effects of that history in the present day, but you can't really experience it. You probably heard the term redlining, right? The now illegal practice of denying credit and other services to people in certain areas based on their race or ethnicity. You don't have to look too hard to see the after effects of it on those disadvantaged populations today. And now a public health expert in Baltimore has figured out a way to let people get at

least a feel for what it might have been like back then. Marketplace's Amy Scott went to check it out. In the auditorium at Patterson High School in Baltimore, a bunch of adults seated around tables are about to play a board game. Their staff at Baltimore City Public Schools here for a day of professional development. All right, who's ready to play Urban Cypher? Dr. Lawrence Brown is a research scientist at Morgan State University and creator of Urban Cipher.

It's like a rigged game of monopoly. Players are assigned colors, red, yellow, blue, and green, that correspond to coded maps created by the federal government in the 1930s to steer lending to certain neighborhoods. That's what cipher refers to. Like Monopoly, players roll a die to move around the board, collecting money and buying property along the way. But how far they can move depends on their color. Tierra Evans gets red.

So if you roll a one, you move zero. Got you. Two, zero, three, one. It's a lot of zero options. That's crazy. Just can't move around in life, huh? Scott Johnson is yellow. He gets to move a little more quickly.

$100,000. Hit me, hit me, hit me. Thank you very much. Annabella Hunter, as blue, goes almost all the way around the board on her first turn, collecting a college scholarship, parental inheritance, and Grandparents Trust Fund. You just got $700,000. I surely did. She also gets to draw a card, sort of like the chance and community chest cards in Monopoly. Okay, so this one says highway construction. It's time to build a new highway in our city. The highway must cut through one red and one yellow neighborhood.

Hunter has to decide which neighborhoods to cut through. Oh! I'm in that neighborhood of the gun. Oh no. It's cold blooded. Finally, Reese Cox, who's green, rolls a six and moves 24 spaces all the way around the board. Since your neighborhood is helping keep red players out, artificially inflating property

values collect an extra $100,000. That's wild. It goes on like this until everyone has rolled three times and the game ends. Green and blue have each amassed at least a million dollars, yellow has a few hundred thousand, and red has just a hundred thousand. All right, so where are my red players? Afterward, Dr. Brown debriefs. Give me one word to explain how you felt playing as Red during the game.

Stuck. Stuck. It's reality. This is how a lot of our students and ourselves have actually come through, if you think about it. Evans was raised in a historically yellow neighborhood in Baltimore by her grandmother and was the first in her family to graduate from college. You really had to have somebody strong connected to you to make those kind of moves.

Then Brown asks how the Green players felt. I felt blessed. You felt blessed? Barely stressed and highly blessed. Is that what you're saying? Yes, and highly favored. Is that what you're saying? Yes, and highly favored. Next Brown passes around a printed map of the city of Baltimore. The original 1937 residential security map created as part of the New Deal to grade the perceived risk of lending in certain neighborhoods. Red and yellow neighborhoods,

with more black residents, immigrants, and low wage workers were considered risky. And blue and green, with more white people and higher incomes, were deemed safer. Red and yellow neighborhoods would not get loans or would get very few loans, subprime loans maybe, whereas green and blue neighborhoods would receive all kinds of resources, all kinds of loans, goodprime loans maybe, whereas green and blue neighborhoods would receive all kind of resources, all kind of loans, good interest rates. SONIA DARA those policies have had lasting effects. Research has shown that people living in formerly red and yellow lined communities have worse health, social and economic outcomes.

Brown says he created the game as a teaching tool, but he's seen how it also helps build empathy, especially when people who grew up in green or blue neighborhoods play yellow or red. If this game can help people say, all right, now I understand what it means to struggle and it's based on the way that the rules of the game are laid out. Not effort, because we're rolling the same thing, but we're getting different results. I think that is incredibly valuable. And if they can understand that, maybe they can help change it.

In Baltimore, I'm Amy Scott for Marketplace. Coming up... We need green trees. We need good water. We need to save our resources. All true. But first, sure, let's do the numbers. Dow Industrial's up 50 points today, 5-0 points. 10% close to 39,169.

The Nasdaq rose 146 points, about 8 tenths percent, finished 17,879. S&P 500 picked up 14 points, about a quarter percent, 54.75. Mitchell Hartman was talking about the decline in lumber prices tied to the slowdown in home construction. So, some stocks in the timber and building materials industry then, shall we? Boise Cascade slid 1.3% today. Warehouser retreated 2.9% Louisiana Pacific basically flat. UFP Industries down 1.5% today.

Hey, you know those red box movie rental kiosks that used to be pretty common outside gas stations and the like? Its parent company has filed for Chapter 11 bankruptcy protection chicken soup for the soul entertainment, which it turns out acquired red box in 2022, taking on more than 350 million dollars in debt in the process. Well, its stock plummeted 39 and four tenths of one percent today. Daniel Ackerman was telling us about Boeing's plans to buy Spirit Aero systems for something like 4.7 billion simoleons. Boeing elevated to 2.6% today. Spirit flew up 3.3%.

Bonds down. Yield on the 10-year T-note. 4.47%. You're listening to Marketplace. The wait is over. Dell Technologies Black Friday and July deals are live. Check out incredible savings on select laptops and more, like the XPS 15 powered by Intel Core processors. The XPS 15 brings you the perfect balance of power and portability, plus stellar visuals and immersive sound.

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I'm Kai Rizdall. Artificial intelligence, AI, can do a lot of things. Funny images, it can write speech, computations, all of that and more. Some of it, in fact, productive and useful. But can it revive a once mighty but diminished brand? Toys R Us, which first filed for bankruptcy protection in 2017 and is now mostly one of those shop inside of shop things and Macy's, has released what it calls

the first ever brand film created with AI. Using generative AI to come up with ads is still very much in its novelty phase and it is still definitely not risk-free. Marketplace's Matt Levin has this one. The Toys R Us ad is pretty obviously AI. It's got that whole, really smooth, this is kinda creepy, but I'm not sure why aesthetic to it. Did you ever wonder how Toys R Us

and Jeffrey the Giraffe came to be? Even if you don't lay awake at night pondering the Toys R Us origin story, that's not really the point. The point is, hey, we made this with AI. Christine Moorman is a marketing professor at Duke's Fuqua School of Business. This ad will get publicity. Whether it will really compel people to return to Toys R Us, I think is an open question. Moorman says when a brand dips its toes in artificial intelligence ads, it's betting its target consumer will find it cool and interesting and not scary and a threat to

their livelihood. If you're an older consumer, you may have more of that ick factor, that fear factor. If you're younger, you may be more in awe of it. It's not just Toys R Us. Companies like Under Armour and Levi's have also hyped their use of AI in marketing materials from short commercials to AI fashion models. Right now, some companies are using AI to help brand themselves to consumers and investors as ready for the future, which presents an opportunity for other brands to counter program.

Hey, those guys are with the robots. We're 100% certified organic human. Asa Heiken is at ad age. Asa Heiken, Ad Manager, Asa Heiken Dove recently did that. They sort of like came out and said, we're not using AI to create various things in our marketing. We're sort of human focused. Soterios Johnson, Asa Heiken Heiken says while AI ads are pretty easy to spot now with their rough around the edges fingers and faces and transitions,

they will get better. Although he doesn't see the controversy around them going away. I don't think there's ever going to be a time where everyone's on board. You know, I think that like, even with some pretty awesome technology like cell phones, there's a lot of people who are like, this is causing a lot of harm. Although it is hard to find any ad these days that's not optimized for your phone, I'm Matt Levin for Marketplace.

Speaking of your phone, you can take us with you, you know, in your pocket. We've got a podcast too, should you miss something on the air, get it at marketplace.org or on the platform of your choice, just follow us there. I saw a thing go by on Twitter the other day that caught my eye, a question that is a marketplace story in the making if ever there was one. This is the question asker.

My name is Don Tetman. I am a real estate investor. I run a real estate fund where we buy strip malls and I'm also known as the strip mall guy on social media. And this is the question. What did an office job look like before computers or cell phones? People got to the office at nine a.m. There was just a desk there and a telephone. What do they even do? I know there's an answer to this. I don't know what it is. As of today, there are 3600ish replies to Don's tweet, people from all kinds of jobs weighing in.

So we are cranking up the rotary phone for a new series we're calling My Analog Life. My name is Eric Weishar and I am the president of Breckenridge Landscape in Wisconsin. You know when I started, the way we communicated with people in the field were radios, two-way CB radios in the truck. There was two times a day, you know, break time and lunch time where you go back to the truck and there would be like a beeping and if there was a beeping that meant you had to push the button and call back to dispatch and they would, you know, have some instructions for you. You know, maybe the architect had questions or whatever it was. That was it.

There would be times where, let's say, a foreman or somebody hit something, whether it was a gas line, electrical, the only way they could let anyone know because we didn't have cell phones was to get on the radio, call back to Homebase, hope they answer, and then when they answer, eventually Homebase would have to then call the utility and then get the utility out there.

Certainly the technology has made execution a lot more efficient. I would say the nostalgic part comes more to the design aspect. As I'm sitting here right now, I'm staring at a hand-drawn, hand-colored design that I did. I remember being at my home office in my apartment in Denver in the late 90s and just sitting there at night with some music and just drawing these sketches out. I felt like I was kind of creating something really artistic. It wasn't mechanical.

It wasn't just producing a product or something. I was creating a couple of decades ago, or even a couple of years ago, given how fast technology is changing things, drop us a line, would you? There's a spot you can do that at marketplace.org slash my analog line. Massachusetts, like a lot of states and the federal government, has some ambitious climate change goals. Getting from here to there, though, isn't going to be easy because to hit its targets, for just one example, the Bay State is going to have to double its rate of forest protection.

There is a conservation program in Massachusetts that could help, but it's under-resourced and oversubscribed. Martha B. Binger from WBUR starts our story just outside Rehoboth, Massachusetts. Edith with Lockie points across hay and bright yellow flowers waving in the wind. This is the meadow that could be dramatically changed, and this is the reason. A road along the meadow would give housing developers an easy way to build a cluster of homes. Wislocki gets messages asking if she wants to sell at least weekly.

It's constant. It's been constant for two years, and I say no, no, no and you know I keep wanting to say there's a restriction but there isn't because it hasn't happened yet. Wislocki is clear she does not want to sell. She started the paperwork to preserve her land more than three years ago. The property includes a therapeutic horse farm and more than 20 acres of trails through trees and over bridges above streams and swamps. Wislocki is on a waiting list for a conservation land tax credit.

It gives private landowners up to $75,000 to cover some of what their land would be worth to developers and the cost of appraisals, surveys, and legal fees. At least 12 other states and Puerto Rico have some kind of tax credit to encourage land conservation. In Massachusetts, the program is capped at $2 million a year. When the money runs out, Wislocki gets bumped to the next year or the next. And where are you on the waiting list? I have no idea.

You know, about every six months I send a little text, what's going on, and the answer comes back the same. You're in a queue. And while Wislocki has some patients left, other landowners are giving up and selling to developers. Massachusetts will have to end the long wait for this program if it hopes to get to net zero emissions by 2050. No state will ever completely eliminate harmful emissions.

So Laura Marx, a climate solution scientist at the Nature Conservancy, says Massachusetts needs to offset emissions by storing carbon in trees and open land. All of their projections forward kind of fall apart if we don't have that land base to continue to sequester and store carbon year after year. In fact, to meet the state's climate goals, Massachusetts will need to persuade more landowners

to say no to developers. Rob Johnson, director of the Massachusetts Land Trust Coalition, says the state should make better use of the tax credit program, which is already popular and effective. The leverage is substantial. For every dollar invested in the tax credit, over $4 in land value has been donated. But right now, the wait for help with land conservation costs is so long, some landowners never consider the program. Others drop out before their land is protected. Also in Rehoboth, Carol Williams is determined

to keep her nine acres along a gurgling stream wild. Carol Williams, Rehoboth, New York City We need it just to replenish the earth. We need green trees, we need good water, we need to save our resources to continue to live anywhere. But Williams has wondered if it makes sense to start the process. She's 81 and wouldn't get any money until 2027 or later. Hope I'm going to live that long. In Rehoboth, Massachusetts, I'm Martha Bebinger for Marketplace. This final note on the way out today, a couple of calendar notes and a data point. Calendar note number one, I mentioned this on Friday, markets close early on Wednesday,

closed entirely on Thursday for 4th of July. Back to work on Friday though, which is calendar note number two, that's when we get the June jobs report. Now the data points spare a thought, would you, for those on the road this holiday. AAA says almost 71 million people are going to drive 50 miles or more over the 4th of July and the extended weekend that a lot of people are taking roads were very empty here in LA today. I will not be traveling on the 4th. Thank you very much. Our daily production team includes Andy Corbin, Alicia Hassan, Maria Hollenhorst, Sarah Leeson,

Sean McHenry, and Sophia Terenzi. I'm Kyle Rizdall. We will see you tomorrow, everybody. This is APM. Hey, I'm Ryan Knudson, co-host of The Journal, a daily news podcast about money, business, and power. Every day on our show, we bring you the most fascinating stories from the business world. From covert corporate moves. What Amazon was doing is they set up a very secretive show company that people at Amazon didn't even know existed.

To the soda wars. Dr. Pepper? Like, where did it come from? It came out of nowhere. You'll hear it all on The Journal. Find The Journal on Spotify or wherever you get your podcasts.