Going Cashless is Not the Future

As the number of Americans who use cash declines, businesses that refuse to accept cash are increasing. A good thing right? Not so fast (sorry).

Photo by  Jp Valery  on  Unsplash

Photo by Jp Valery on Unsplash

If you are used to carrying cash around town, cashless establishments may be inconvenient. But for the newly affluent individuals who live in previously stagnant urban cores, cashless businesses make for a convenient and seamless experience. 

Though the number of cashless businesses are still rare overall, their owners, like Amazon Go and Sweetgreen, argue that a cashless economy is the future and people need to get on board. Going cashless, they say, also discourages illicit activities such as money laundering, human trafficking and tax evasion.

There are also other practical reasons to eliminate cash, including:

  • Safety. Because cash can be easily stolen, a cashless environment is a safer working environment.

  • A cashless business is easier to run, especially from a record—keeping perspective.

  • Businesses that carry cash have higher insurance premiums due to the safety and security risks of keeping cash on hand.

  • Counting cash every day and taking it to the bank takes hours per week and increases labor costs.

  • Cash is hard to track and easy to purloin - cashless businesses diminish the chance of employees stealing restaurant funds.

But of course this isn’t the whole story. You’ll find that most cashless businesses are relatively expensive and cater to a younger crowd of consumers, often in gentrifying areas where a large number of residents are still low to moderate income (LMI). For LMI consumers, a cashless business is inaccessible, inconvenient and in some cases, dangerous. 

How Could Cashless Businesses Ever Be a Problem?

Because not everyone has credit, or credit card

Let alone a bank account. Policymakers refer to this population as America’s “unbanked” and there are many good reasons why they remain so. Some folks do have a bank account, but still prefer to use alternative financial institutions such as check cashing establishments, and are collectively referred to as the “underbanked. Nationwide, some 20% of African-Americans and 15% of Hispanics don’t have bank accounts according to the FDIC. 

There are a lot of reasons why people remain unbanked. In some cases, they just don’t have enough revolving cash to maintain a minimum balance, a requirement often as high as $1000. In other cases, privacy concerns discourage individuals from using banks (discussed below). LMI families also can’t afford high bank fees. Just last week, I had three small transactions each under five dollars that occurred over the course of a couple of hours and each transaction resulted in an overdraft fee of $35 dollars. By the time I actually received an overdraft notice from my bank, I had racked up almost $150 in overdraft fees alone. 

A startling 20-25% of LA residents don’t have a bank account or credit card. 

Los Angeles is a good example of a city with a large unbanked population. With almost 100,000 people, LA has the largest homeless population in the country. Almost all of these individuals are unbanked. Almost a million undocumented immigrants live in LA Country - the majority of whom are unbanked or underbanked. Recent immigrants such as refugees or asylum seekers also tend to trust banks less, preferring to hold on to their money as cash. Add to this significant portions of the elderly, African-Americans and other minority or LMI groups that include large unbanked populations and you realize that a startling 20-25% of LA residents don’t have a bank account or credit card. 

Yet just because these Angelinos are unbanked, does not mean that they don’t participate in the local economy. They either prefer to or have no choice but to use cash.

Those who have credit cards, often can’t use them

Despite a robust economy, a number of Americans are drowning in credit card debt. The average household credit card debt for LMI households is over $6,000. Because these households often cannot afford more than the monthly interest payments, credit card debt only continues to inch upward. 

Cash is a good way for these families to spend only what they earn, avoid the burden of interest payments and learn good financial habits. Though some people are using credit cards for a beneficial purpose (to collect credit card rewards, building credit etc.) LMI individuals are often not benefiting from credit cards and going further into debt.

Photo by  Ryan Born  on  Unsplash

Photo by Ryan Born on Unsplash

For those who have serious credit card debt, cashless businesses are just not an option. 

Some choose not to use cards or join banks due to privacy concerns

In a time when consumers are becoming the product (there’s a reason why you don’t pay for Facebook or Gmail) your personal data has immense value. Every business where we use a credit card gets access to our personal information, including name, zip code and phone number. Combined with other data that is usually bought from data merchants, as well as information about our purchasing habits, this can result in a tailored profile both offline and online businesses can use to further target consumers. Inadequate privacy laws and a credit card and bank industry dominated by a few large players doesn’t help. 

Though credit cards aren’t the only way merchants can track individuals, and likewise while using cash doesn’t guarantee privacy, cash is still nonetheless far more privacy-protective than credit cards.

Lastly, there’s no benefit to the cashless consumer

Consumers could still use credit cards at Sweetgreen before it went cashless. Going cashless does not increase consumer choice, it reduces consumer options. 

There’s also an argument to be made that using cash is beneficial to smaller, low-margin businesses who can avoid paying the transaction fees that credit card companies charge on each swipe of the card. 

Is There an Alternative to Cashless Restaurants?

The Regulatory Route

There is a growing movement that understands the advantages of a cashless business, but also the accessibility that cash provides to economically marginalized communities. 

Massachusetts and New Jersey have already banned cashless businesses. New York City and Washington D.C. are considering bans, and San Francisco recently passed a ban on cashless businesses. 

Philadelphia, which has an unbanked population of nearly 25%, recently passed an ordinance that is a good compromise. Though the law, which went into effect in July, bans cashless businesses from operating in Philadelphia, it exempts some on a case-by-case basis. For instances, places where cash truly creates a security hazard, such as parking garages, are exempt from the law as are retail stores that sell goods through a membership model like Costco (though there is some controversy regarding this exception as it looks like it was drafted specifically to allay Amazon’s concerns as it looks bring Prime membership to the brick and mortar world through its Amazon Go and Whole Foods locations).

The Banking Route

Banks have little incentive to curry favor with LMI customers, so incentivizing them to do so through tax subsidies or other similar measures is a good start. This is where neighborhood credit unions, with lower overhead and more concern for their local community, can be good allies. Banks already know your approximate net worth, so pegging bank fees to an individual’s net worth may also encourage individuals to enter the banking market - someone making $35,000 shouldn’t have to pay the same overdraft fee as a millionaire. Finally, mandating stronger privacy protections for banks and credit card companies can also help allay fears and encourage people to use banks.

If enough of the population feels comfortable using banks and credit cards, a cashless society could be less of a problem.

The Hardest Solution

In the end, as with many things, a more equitable society is the hardest, but most comprehensive solution. A community where LMI individuals make enough so that they don’t need to worry about being able to afford a bank account and thus buy products that cashless businesses would sell to them, is a long-term solution that’s good for individuals as well as for the businesses that aim to sell to them.

Your Fitness Tracker May Be A Little Racist

Your Apple Watch or Fitbit may not be measuring your steps or heart rate accurately if you are a person of color.

Photo by  Andres Urena  on  Unsplash

Lots of people wear smartwatches and fitness trackers — nearly 40 million in the U.S alone. These fitness trackers not only measure steps, but also use sophisticated laser technology to monitor heart rate and other physiological measures of well-being. But the technology that manufacturers rely on was designed effectively with light-skinned people in mind, and according to researchers and reporters, is likely to provide erroneous readings for people with darker skin. 

No wonder all that walking wasn’t making me lose weight.

Not-So-Colorblind Tech

Let’s take Fitbit for example, which uses the industry-standard laser technology in its trackers. If you own one, you’ve probably seen the green lights peeking out from beneath the device when you take it off. These lights rest against the top of your wrist and are used to measure heart rate. In between heartbeats the volume of blood in your blood vessels declines. If a light is shined onto your skin, it reflects back in differing amounts depending on how full of blood your vessels are at the moment. The cadence of darkening and lightening blood vessels changes as a result of your heart rate, and this cadence is what the green lights in your Fitbit measure. They then convert this cadence into a relatively accurate measurement of your actual heart rate.

However, darker skin has more melanin pigment, which has been conclusively proven to block green light, making it much harder to get an accurate reading. The darker your skin, the less accurate the reading. 

Research on the issue is still ongoing, but one of the few papers on the topic noted that not only were there connections between inaccurate readings for dark skin, but also for differing skin types. Anecdotal evidence for this phenomon is also easy to find: lots of consumers have complained about inaccurate readings over the years. Little has been done to solve the problem so far. 

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Why Does This Matter?

Unconscious bias in technology is not a new problem. Though new technologies appear objective, implicit biases often leak into how they are researched, designed and marketed to a diverse public. There is substantial unconscious bias in other areas of design (just ask women about the freezing temperatures in older office buildings which were traditionally designed for men) so its discomforting but unsurprising to find the problem crop up in the world of health and fitness wearables. 

The real impact of these biases is felt in the secondary effects the wearable market is having on important scientific research — which often relies on these devices to make important measurements in studies. Health insurance companies and employers often offer lucrative bonuses or discounts to employees who meet certain step or heart rate metrics on their fitness trackers. Individuals of color could be missing out on a number of these benefits without even knowing it. 

What Can Be Done?

Fitbit is apparently aware of this issue and has tried to boost the power of the green light in its trackers to account for skin color. Apple has added an infrared light to its Apple Watch to supplement readings from its bank of green lights. But for now, these efforts may be ineffective stopgaps. Green lasers are used by all of the major brands to measure heart rate because they are cheaper to produce and less prone to erreonous readings due to movement — a must-have in a device that literally measures movement.

Its good that these companies are slowly becoming aware of the issue their devices pose for people of color. At the same time, its also important for researchers, sports medicine doctors, insurance companies, employers and the general public to know how inaccurate wearables can be for darker-skinned people. Awarness is the first step toward conscious design. 

Tools must be consciously designed with forethought and inclusivity in mind, not only because its the right thing to do, but also because it makes business sense … especially when nearly half of the consumers who purchase these products in the U.S. are people of color. 

Why Amazon Isn't Good For Us

It’s not hard to understand why Americans love Amazon. An estimated 60 percent of households subscribe to Amazon Prime and almost half of all online dollars are spent on Amazon’s platform. Hitting Amazon’s “buy now” button kickstarts a cascade of complicated algorithms that deliver products to millions of American households in less than two days, sometimes in less than two hours. No other online retailers can match Amazon’s combination of product selection, price and delivery speed.

How is Amazon.com Possible?

Amazon’s entire business model is to lure consumers in with very low prices, establish market dominance and crush (or buy out) competition and once competition has been eliminated, raise prices as much as they want.

Here’s how it works:

Aside from well-established merchants, everyone else basically has to either use Amazon Web Services or the Amazon storefront in order to reach customers. Amazon can take up to half a merchant’s sale on the Amazon platform as a fee. If the merchant still manages to sell products at a decent profit and become successful on the Amazon platform … well then they just become an acquisition target and Amazon buys them out … sometimes by withholding access to their platform as a threat until they sell. Or Amazon uses its deep pockets and control over the distribution and manufacturing process to sell a competitive product at a deep discount (all those Amazon Basics cables you buy) which eventually drives the competitor out of business. Once the competition is decimated, prices on those cheap Amazon-branded products are then increased.

So … Amazon isn’t winning over consumers by building better products but by selling acceptable products at cutthroat prices … reducing competition, consumer choice and product quality along the way. That’s bad for everyone but Jeff Bezos.

The Amazon Way Has a Cost

This is where you ask: “How are they able to lower prices so much that they drive competitors out of business?” and where I tell you that the cost of these low prices is borne primarily by the people who work at Amazon.

When a product you buy becomes cheap overnight, it’s because something (like the environment) or someone (like an Amazon contract worker) has borne the cost. Amazon’s goal to reduce prices, eliminate competition and control the online economy results in a workplace where:

  • Warehouse workers’ every move is monitored, down to the second.

  • Workers are fired if they miss their delivery quotas, even by a small amount.

  • Most workers don’t even survive one year, and quit frequently.

  • Workers make significantly less than other similar personnel (and in fact, when Amazon moves into a new town, wages drop for all workers by as much as 30%).

And to help out Amazon even more, cities offer tax breaks and all kinds of incentives to get Amazon to build warehouses in their towns. These financial incentives are taken directly from public funds that could have gone to help those workers who’s wages decrease when Amazon comes to town, further exacerbating community resilience and driving down the broader economy.

Photo by  Bryan Angelo  on  Unsplash

Yes, But That’s What Taxes Are For

But that’s OK you say because Amazon pays lots in taxes to help communities they operate in. Wrong. In 2017 YOU paid more in income taxes than Amazon did - because Amazon paid ZERO dollars in corporate income tax. Since roads still have to be built and schools still have to be funded, Amazon’s exploitation of the tax code just increases the tax burden on smaller (usually more innovative) companies as well as ordinary Americans.

Don’t get me wrong. Tax breaks are a legitimate way for governments to incentivize economic growth. The problem with Amazon and other tech giants is that hardly any of the public funds handed over to Amazon go back to the government. In fact, today many large tech companies like Apple funnel profits through foreign countries like Ireland and Luxembourg instead of paying their fair share in taxes.

Meanwhile, non-tech companies pay far more taxes per worker. For instance, Apple hires a small fraction of the employees a more traditional company like GE does. Which means that not only does Apple pay less in taxes than GE, it also contributes less to the local and national economy because it hires less workers and those it hires are far better paid. These better paid workers tend to invest their money (often overseas) rather than contribute to their local economy.

Big Tech’s Tactics Hurt Us All

Amazon’s anticompetitive, monopolistic and anti-labor practices increase economic and social inequality in troubling ways.

For instance, many tech companies have created a massive underclass of workers. Those at the top are the venture capital investors and white collar engineers and executives who “run” the company and at the bottom are the millions of contractors and “part-time” workers who actually run the company. Uber and Lyft are prime examples. Those at the top have full benefits and excellent wages, but the nearly four million ride-share workers who drive for Uber and Lyft have no paid time-off, no benefits or healthcare, and no job security. Moreover, they often end up making less than minimum wage - and this is before you factor in wear and tear on the car and fuel expenses.

Aside from the impact on individual workers, the communities in which tech companies operate are starting to fall prey to deepening inequality as well. As more of these white collar workers and investors have moved to places like Silicon Valley over the last decade, home prices have skyrocketed as has homelessness - which recently hit record highs per capita in San Francisco.

Why Doesn’t the Government Intervene?

Perhaps because the government now receives so many lobbying dollars from big tech that it exceeds those of the traditional lobbying industries.

While tech companies like Amazon go ignored, they continue to grow - getting larger and creating vast monopolies and oligopolies:

  • Google now accounts for 90% of all online searches … worldwide. Its Android OS runs on more than 80% of smartphones in the world.

  • Apple has $300 billion in cash - more than the gross domestic product of all but the richest countries and double that of any other US company.

  • Meanwhile Facebook, like Amazon, either copies or buys out its competition, now owning the four most popular apps in the world - including Instagram and WhatsApp. These apps count 1/3 of the world’s population as users who willingly share their data creating the world’s most effective and comprehensive surveillance apparatus - unmatched by any government agency.

These companies have amassed so much power, quitting them may well be impossible.

Photo by  Clem Onojeghuo  on  Unsplash .

So What Can You Do?

Encourage your elected representatives to investigate the increasing power tech companies are acquiring at consumer expense. Bring to light the funding tech companies provide to congressional campaigns. Encourage lawmakers to apply the fundamental antitrust laws of the United States and investigate whether some companies should be reduced in size. Even a threat of breaking up companies can have a major competitive effect that’s good for business: it was the threat to breakup Microsoft that cleared the way for companies like Google to exist. In many ways applying antitrust laws to big tech is one of the most capitalist things we can do, and also one of the best for our communities.

Finally, if you can afford to do so, consider putting your money where your mouth is: patronize small businesses that create innovative products that compete with Amazon and other tech giants. Be bold. Support indie developers and craftspeople so that they don’t feel like their only path to profitability is to get bought out by Amazon.

What I'm Reading This Week

I get asked this all the time so I’ve decided to start a short regular post sharing books I am currently reading. I usually finish a book a week, so I will try to share these on a weekly basis. This month, I’m about done reading Never Split the Difference: Negotiating as if Your Life Depended on it - an absolutely phenomenal book on negotiating written by former FBI hostage negotiator, Chris Voss.

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The book has been very helpful to me in negotiating a MAJOR project I am currently working on and I bought the book on the recommendations of FBI colleagues for especially this purpose. It’s been a game changer. And beyond being relevant, it’s also well-written and hard to put down as a narrative story.

The book takes the viewpoint that life is a series of negotiations you should be prepared for: buying a car, negotiating a salary, buying a home, renegotiating rent, deliberating with your partner. Taking emotional intelligence and intuition to the next level, Never Split the Difference, focuses on the importance of active and empathetic listening and not giving up in a negotiation, and instead asking, “how am I supposed to do that?” to any demand your counterpart makes.

Amazon lets you download a sample chapter in either audio or Kindle format - check it out.

Superman knows wassup

Superman from the 1950s was more on point than half the leaders in this country today.

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