This was a project I completed for my graduate journalism program, and it was inspired by Dan Ariely’s book “Predictably Irrational”.  For my own experiment, I asked people in New York City whether they would prefer to give or receive a gift card, or the same amount in cash.  In light of the upcoming holidays, I hope you enjoy….

I used to love gift cards.  When I was a kid I liked getting them. As an adult, since I am bad at choosing gifts, I like giving them.   Dan Ariely, author of Predictably Irrational, seems to like them too.  In a blog post titled “An Irrational Guide to Gift Giving”, Ariely suggests,

“you can think about gift certificates for iTunes, drinks, movies, etc. as gifts that not only get people to experience something new, but also get them to experience something guilt-free, and without the pain of paying.”[1]

Ariely, I concede, makes a good point.  His overall thesis in this post is that “A good gift is something that someone really wants but feels guilty buying it for themselves.”  Ariely here is considering a gift card a kind of “nudge” in a particular direction, to borrow a term from behavioral economist Richard Thaler and Cass Sunstein.  Limiting a person’s choices helps to clear his mind, and guide him toward beneficial decisions. But is there some a bit creepy about furtively choosing for someone else?

Some might argue that these sorts of tricks are manipulative and paternalistic.[2]  They make the giver look good or feel good, rather than give the recipient what she really wants. One can almost hear some libertarian economists braying their dissent.[3]  Should a gift please the giver or the receiver?

Ariely states in Predictably Irrational that human beings have “market” norms and “social” norms.  There are certain ways we behave in different situations that reflect different values and different rules.  In the aforementioned book, Ariely asks whether people would buy a boss or a coworker a $100 gift, or simply give the person the same amount in cash.  Most, he says would choose the gift, although it is not inherently more valuable.  The idea is that giving cash in this case would be inappropriate, even though it might be more useful.

I wanted to explore this question by comparing a cash gift with gift card or gift certificate.  My thesis was that most people would prefer to give gift cards, but would prefer to receive cash.

I asked 33 people in New York City whether they would rather give a gift card to a friend for a special occasion, or give the same amount in cash.  Twenty-five out of 33 would prefer to give the gift card.  I then asked if it would make a difference if a) the store issuing the card also charged a nominal (no more than 5 dollars) fee for the card, or b) if the card carried an expiration date or inactivity charge.  Most people said no in both cases, with one person in each case saying “I don’t know” or refusing to answer the question.

However, the most interesting fact for me was the fact that almost the same number of people—24 out of 33—said they would rather RECEIVE cash instead of a card.

This latter choice is a perfectly rational economic decision, and it was what I expected.  Cash is more liquid—it can be spent anywhere.  Also, cash does not really expire, and some gift cards do.  For example, the Stanford Shopping Center, a premier mall in Palo Alto, California, has outsourced its “all-mall” gift cards to a company called Simon.  Simon cards charge a monthly inactivity fee of 15% if they are not used within a year.

However the choice to receive cash begs me to wonder why we then would give something to someone else that we would not prefer to receive ourselves?  This seems to be an almost-statistically-exact case of irrationality.  Almost everyone asked would prefer to give something they would rather not receive, and receive something they would rather not give.

I should add that most people I interviewed did not value gift cards as highly as an actual gift, but when asked why they would gift a gift card when they would clearly prefer to receive cash, most said that the gift card gives the impression that you have “put some thought into it”.  I did not take notes on every person’s comment, but this was a common answer.  Most also seemed quite surprised to realize they would actually prefer to receive cash.

Here are my numbers:

I did not expect the majorities to so closely mirror each other—I expected more people would appreciate the gesture of someone actually selecting a gift card for them.  I was not surprised that many people still chose to give a gift card when the store assessed a fee or included an expiration date, even though to do so is completely irrational. When you consider that gift card is really just another form of currency, it seems silly that you would give someone $105 and only expect $100 in return, or that you would agree to a time limit on a contract.

Only one person actually volunteered a point that might support Ariely’s quote above—that gift cards give people a chance to buy things they would otherwise feel too guilty buying for themselves. The person in question told me that gift cards are good to give young recently-married couples who are concerned about finances.  She claimed that many men in these relationships often immediately start funneling any cash gifts into bills or a down payment on a house.  Giving a gift card allows the couple to—really, forces the couple—to spend the money on other, less practical things that might bring more fulfillment or contribute better to happy memories of the wedding.

One mistake I regret is that I did not record all of the reasons my subjects gave for their answers—especially those that preferred to receive gift cards.  In most cases I chose to stick to my survey questions to stay efficient and to reduce distractions and variables.  But, I suspect that if I has asked one of the nine who preferred to receive gift cards, one might have answered something akin to the point Ariely made in his blog post—that by restricting our choices, gift cards allow us to splurge on things we might otherwise not buy.

I was also reminded (yet again), that I am no better than anyone else.  My choices would be no different from either majority.  I would give the gift card rather than the cash in many cases—especially to recipients whom I do not know well enough to confidently choose a smart gift.  But I would almost always prefer cash.  I have a small stack of unused gift cards with tiny balances on them in desk drawers.  Some have expired; some were misplaced; some I just keep forgetting to put in my wallet.  I have a $100 gift card to a restaurant in San Francisco that went out of business before I could redeem it.  I am much better at keeping track of dollar bills.

It is important to bear in mind that ‘irrationality’ should not carry the stigma it often does.  This experiment, like many people such as Ariely, Kahneman, and Tversky do, simply shows that we are complex beings with myriad concerns.  The best practical lesson I could draw from this experiment, and from much of Ariely’s work is the importance of being mindful, alert, and aware as we live our lives and make decisions.  Within reason, we can do whatever we want, but we should at least know what we are doing.

One-time-Presidential-candidate Mitt Romney famously to Tesla Motors—a Silicon Valley company that builds fast sports cars with electric engines—one of Barack Obama’s “losers”.  In the first presidential debate, Romney said, “

But don’t forget, you put $90 billion, like 50 years’ worth of breaks, into solar and wind, to Solyndra and Fisker and Tesla and Ener1. I mean, I had a friend who said you don’t just pick the winners and losers, you pick the losers, all right? So this is not the kind of policy you want to have if you want to get America energy secure.”

Ouch.  To be fair, Obama’s record funding green energy companies has not been stellar, though, unfortunately for Romney, Obama now has four more years to make up for mistakes.  But Solyndra has been a disaster and has prompted investigations from both the Energy Department and the Treasury.

Ener1, a lithium ion battery company, also the receipient of Department of Energy funds under Obama, had to file for bankruptcy in 2012 (though it has since reemerged).  Of course, also, the Anaheim-based  plug-in hybrid car company Fisker has a fate that is by-no-means secure, but the company has delivered at least 500 models to customers already.

Tesla Motors, based in San Carlos, CA, might be the brightest of the bunch, and may not at all be the “loser” Romney considered it.  Motor Trend just voted the Tesla Model S the 2012 Car of the Year  and investor analyst opinion on the company with a 3.5B market cap is slightly favorable.

At a sticker price of $59,900.00 Tesla’s offerings are a bit too rich for the modest consumer, especially in this economy.  But with carbon dioxide levels at record highs in 2011, demand for electric vehicles may grow faster than we think.  That could be a huge win for the company that has the highest-performing electric engines on the market.

Yes, you can run your car on fryer oil. Maybe even that Bradley tank, or the Millennium Falcon.  But like many, do you want to, and can you afford it?

Ethanol remains a popular fuel option for those who have the ingenuity to piece together their own engines (people have been doing so for decades). But the biofuel explosion that grasped the world in the in the first few years of the new millennium has lost favor. The oilfields of Saudi Arabia might have been eclipsed by the cornfields of Nebraska. Brazil was second to the United Stated in global corn for biofuel production, according to a recent piece featured in Scientific American.

The price of liquid ethanol is falling: it is 26% lower than is was at this time in 2008, the article says.  Brazil has about 400 ethanol plants, but 41 of them have closed.  Lula, Brazil’s president, thought that cleaner-burning ethanol could be a boon for both global climate-change concerns and Brazil’s economy.

However, writes Claudio Angelo,

“Five years on, Lula’s vision has tarnished. Biofuels are falling from grace around the world as critics charge that devoting millions of hectares of agricultural land to fuel crops is driving up food prices and that the climate benefits of biofuels are modest at best.”

80/20% Ethanol/petrol blends are more popular and affordable than pure ethanol and most consumption comes from this blend.

Angelo traces the root of the present problem to the economic crisis of 2008, when money to new investments for the industry dried up just as the ethanol sector was expanding.  Many ethanol companies were already in debt, and fell back on harvesting old fields instead of investing in new ones.  A country that was supposed to be leading the ethanol revolution found itself in the position of importing 1.5 Billion liters of corn ethanol form the US, writes Angelo.

The Brazilian government, meanwhile, was offering tax subsidies on the sale of new cars and–to control inflation–freeze the price of petrol and diesel.

This is the sort of story that seems to keep happening all over the green energy sector.  Countries (many developing ones) made bets on alternative fuels as a source of economic growth and a step toward sound environmental policy.  But it seems that these industries rely heavily on support from governments, as is the case with solar panels, and that they are very vulnerable to changes in the oil sector–one wonders what will happen to these industries as the shale oil industry grows.

Some of the entries in the blog depart from the topic of energy to discuss other issues brewing in the business news world.

Today I think it is worth taking a look at a recent story about the rise of the Mexican economy and the attraction it has to American investors.

Much of the American discussion concerning Mexico centers around discussions of immigration and the drug war.

That is a shame, says Wall Street Journal reporter Jack Hough in a recent video interview.  It is a relative boomtime for Mexico, fueled largely by growth in Mexico’s manufacturing sector.  The country has enjoyed 4% GDP growth this year.

“When was the last time you saw growth in the US like that? ” Hough said. “Not even Brazil is growing that fast.”

Rapid growth in China, India, Russia, Brazil (so-called BRIC countries) has also inflated wages dramatically, Mexico’s average wage seem more and more attractive to investors in the United States.

Couple that with an important cost businesses are having to factor in–the price of oil.

“The transport costs are much lower (to the United States), because you don’t have to go overseas”, Hough said.

Mexico’s debt is about half of that of the United States (the country also does not have the same sorts of insurance programs such at Medicare/Medicaid or Social Security, which make up a tremendous amount of U.S. government spending).

Hough’s advice to investors looking to invest in Mexico?  Buy Mexican Bonds.

Might also be worth looking into American or Mexican transport companies that travel back and forth across the border.

The three founders of a small New York City startup were having a great time building a group-messaging app called Fast Society back in 2008, and thought they might have a great product on their hands.

But once they arrived in Austin, TX at the annual SXSW to launch the company about one year later, they decided to ditch it.

Matthew Rosenberg, co-founder and CEO Cameo, is not sure pivot is the right word for the dramatic strategic change his company has made.

The “pivot” has been more of an evolution, he says.

Fast Society began when Rosenberg and some friends were having trouble finding each other at a Bloc Party concert, decided an app could fix the problem.

A few days later, Rosenberg and partners Andy Thompson and Matthew Constantiner started building an app that would give groups users a way to communicate and share experiences over their phones.

Smartphones were still relatively new and the industry seemed full of possibility.

“The first iPhone had just come out, and this was probably before you could install apps,” Rosenberg said.”

By the time they arrived at SXSW to launch the app, they found out that the space was already flooded.

There were about thirty other startups in the space, Rosenberg estimates.  A company had developed a service that made it easy to build the backbone needed for an app, and the barriers to entry hit the floor.

“It was insane,” Rosenberg said.  “I guess when you have a good idea everyone has a good idea.”

Suddenly an idea for a simple useful app turned into something that no longer held their interest.  Tons of startups, including competitors such as GroupMe and Beluga (later acquired by Facebook) were all making the same app.  Even Apple had its own offering, called iMessage.

Even the technology seemed boring.

“Everyone had the same feature set at that point” Rosenberg said.  “No one doing anything innovative.  There was no one doing interesting.”

The team all agreed—the point was apparent enough—that it was time to move on.

They left Texas for New York the next day and got back to work.

“We were working on what we thought would be the third version of Fast Society”, Rosenberg said. “And just kept evolving and evolving into something very different.”

Initially, the team wanted to lay text messages over photos taken on users phones at events to create a kind of text and pictures story.

Then they included video, and found video was much more compelling.  They eliminated photo capability entirely to focus on video.

They realized that they had something completely different from what they had set out to make.  They called it Cameo, “to give it its own chance,” said Rosenberg.

Users take video with their phones, and the app renders the video, adds music and forms the clips into a movie.  It does this almost instantly.

Developing the app has taken a lot longer than they had expected.  The technology needed to render video is complicated and the expectations for the app keep growing.

But Rosenberg is happy they left group texting.  There were big expectations for that concept as a business model, but no company in the space has really taken off.

Instead, Rosenberg says, the company has retained the spirit of their original plan.

“Our concept has always been the same, it has been about sharing moments with friends” he said.