We Buy A Staggering Amount Of Clothing, And Most Of It Ends Up In Landfills

This article is part of HuffPost’s “Reclaim” campaign, an ongoing project spotlighting the world’s waste crisis and how we can begin to solve it.

“Too much of a good thing can be wonderful,” Mae West, the Hollywood actress and style icon, once famously quipped.

At a casual glance, you might think her quote would accurately describe the fashion industry. The availability of an endless supply of cheap clothing has unleashed a whirlwind of color and beauty, giving people the chance to express themselves ― even on a tight budget ― and stamp their identity on the world.

But the dark truth about the fashion business is that too much of a good thing is creating environmental destruction and human misery on an unprecedented scale.

Let’s be clear: There is nothing beautiful in seeing a river polluted by toxic dyes or a garment worker surviving on a pittance while toiling in dangerous sweatshop conditions.

The merry-go-round of new apparel ranges the industry spews out at a dizzying rate is fueling an addiction to clothes and a perceived need to constantly be at the cutting edge of fashion. As a result, people around the world collectively consume more than 80 billion items of clothing each year, and those items are increasingly seen as disposable.  

We need to slow things down and become more aware of the negative impacts of our actions. That does not mean taking the fun out of buying clothes. It just means becoming less impulsive in our shopping habits and thinking twice before paying $4.99 for another cheap top to add to our already cluttered closets.

In order to help in this process, The Huffington Post is today launching the second stage of our “Reclaim” campaign, which aims to examine and fight the world’s waste crisis. For the past two months we have focused on food waste, creating more than 180 articles and more than 20 videos. We will now be putting our attention on fashion.

The facts speak for themselves. Fashion is considered to be one of the most polluting industries in the world, and the 1,135 people who died in the 2013 collapse of the Rana Plaza building in Bangladesh are a constant reminder of the terrible conditions suffered by millions of garment workers around the globe.

Andrew Biraj / Reuters

People rescue garment workers trapped under rubble at the Rana Plaza building after it collapsed April 24, 2013.

Americans alone produced 15.1 million tons of textile waste in 2013, and around 85 percent of that ended up in landfills, according to the Environmental Protection Agency.

On average each American throws away roughly 70 pounds of clothing and other textiles per year, equivalent in weight to more than 200 men’s T-shirts. 

The scale of waste is no great surprise when you consider that retailers tend these days to focus more on price than quality, which means many garments may survive only a few washes. More than this, the constant change of styles leads to heavy markdowns as retailers need to get rid of stock to create space for the newest styles.

Those clothes that don’t get thrown away often end up in cheap markets in the developing world. This ever-growing mountain of garments prompted five East African countries earlier this year to announce they are considering banning the import of secondhand clothes because their own domestic garment industries have no hope of competing against them.

While the scale of the industry’s problems are immense, the good news is that there are many solutions out there and many more in development.

We are seeing an immense amount of innovation, ranging from the development of less toxic materials, to new technologies that can transform old clothes into new garments, in a similar way to paper recycling.

Environmental organization Greenpeace is campaigning for the apparel industry to eradicate toxic chemicals, and there is increasing pressure for garment workers to be given a living wage to support themselves and their families.

There is also an emerging movement, supported by organizations such as Fashion Revolution, to find alternatives to buying new clothes. These range from going to thrift stores, swapping clothes with your friends or work colleagues, and renting clothes for a special occasion.

Though retail giants seem unable to break out of the fast fashion system they have created, a number of them are taking action to make their products more sustainable. Nearly three-quarters of Nike’s footwear now contain materials made from waste products from its own manufacturing process; H&M is investing in new recycling technology and offering in-store collection points, where customers can deposit old clothes.

But much more needs to be done. First and foremost, the big fashion companies need to be more transparent about the environmental and social impacts of the products they sell. It’s no wonder customers keep shopping to the max if they don’t feel any connection between what they buy and the environmental and social impacts, which disproportionately play out in developing countries, where regulations tend to be lax and the public’s gaze doesn’t often turn.

Even if a piece of clothing is made from organic cotton, the customer has no idea of whether the factory that produced it treats its workers fairly or whether the dyes used are polluting local rivers.

But while the fashion industry has a clear responsibility to take action, just as important is the need for every one of us to become more responsible about the amount of clothing we buy. That means taking a moment to breathe every time we get tempted by the latest fashion ― or enticed by a new markdown ― and asking ourselves a few very simple questions: Do I really need this, will it make me happy and will it make the world more or less beautiful?

How To Learn And Master Any Skill Twice As Fast, According To Science

Whether you're trying to be pro at Photoshop, or step up your tennis game, or master a dueling banjo song, you're probably dutifully following the age-old advice that practice makes perfect.

However, contrary to popular belief, doing the same thing over and over again might not be the most efficient way to learn foreign concepts.

Traditionally, we're taught using the "blocking" strategy. This instructs us to go over a single idea again and again (and again) until we've mastered it, before proceeding to the next concept. But several new neurological studies show that an up and coming learning method called "interleaving" improves our ability to retain and perform new skills over any traditional means by leaps and bounds.

What interleaving does is space out learning over a longer period of time, and it randomize the information we encounter when learning a new skill. So, for example, instead of learning one banjo chord at a time until you perfect it, you train in several at once and in shorter bursts.

Below are a some practical ways you can use interleaving to train your brain to pick up new skills quickly and effectively starting today:

Practice multiple parallel skills at once

Whether you're trying to improve your motor skills or cognitive learning abilities, the key to transforming how your brain processes new information is to break out of the habit of learning one facet of a skill at a time. The advantage of this method is that your brain doesn't get comfortable or store information in your short-term memory. Instead, interleaving causes your brain to intensely focus and problem solve every step of the way, resulting in information getting stored in your long-term memory instead.

For example, one study gave a collegiate baseball team extra batting practice and broke them up into three groups: a control group, a blocked group, and a random group. The blocked group faced a variety of pitches in a set order, and the other group encountered pitches randomly. After six weeks, researchers found that the random group improved 56.7%, while the blocked group only improved 24.8%. That's a massive difference! And similar results have been replicated in other sports and classroom learning studies.

Interleaving doesn't cut any corners, so your brain is always on guard. Think of the difference between blocking and interleaving like a boxer who practices one move over and over again versus a boxer who practices by sparring in the ring. In the ring, you have to be ready for anything. It makes you faster, sharper, and more versatile.

Plan your lessons in advance

Since randomization and spacing out lessons are crucial to the interleaving process, try planning when and what you want to cover in a lesson in advance. As block learning is such a linear technique, we might not normally think to do this, but a little pre-planning will make adopting a new skill set go by much faster.

Think of it like pre-planning a workout. If you go to the gym without having a plan in mind, you can lose time and momentum by trying to decide what to do next. But if you know you want to work on legs that day, you can create a plan that will help you achieve that goal without missing a beat. When it comes to interleaving, this will keep you from getting frazzled with the new learning process.

Go back to basics

When we progress with a new skill, it's easy to forget to practice older material. But going back over the basics is an integral part of the interlearning process. Doing so strengthens our brains and reinforces our long-term memory of a skill. It also has the added benefit of spacing out learning and giving our minds a break from taking on a new concept right away. This will result in higher and faster retention overall. Even pros like University of Georgia's football coach, Vince Dooley, subscribe to this methodology when it comes to training.

Keep track of your progress

If you find interleaving to not be as immediately gratifying as the blocking technique is, don't get discouraged, you're not alone. In one study, "80% of students claimed that the block style helped them learn better, despite testing better when using the an interleaved method."

In some ways, interleaving feels counterintuitive because the wide majority of us were taught to get comfortable with learning one concept at a time through school. But sticking with it and monitoring your results in a measurable way is the best way to stay motivated and see that the proof is in the proverbial pudding.

Break out of your comfort zone

Often, we're gravitated towards repeated tasks that we already have a basic grasp of and exist in our comfort zones. The whole process of interleaving feels pretty uncomfortable at first, especially when you're trying skills from new angles and failing a lot.

When you realize that practice does not mean perfection, and that every step new towards finding a skill is a step forward (even if it seems like a step backwards), you'll have the winning attitude to use interleaving to your advantage.

By following these steps, you'll be able to use interleaving to your advantage and learn any skill at lightning speed like a champ.

At America's Largest Companies, Just 7 Percent Of CEOs Are Women

The visibility of CEOs like IBM’s Ginni Rometty, General Motors’ Mary Barra and Hewlett Packard’s Meg Whitman may give the impression that America’s largest companies are finally embracing female leadership.

But as a recent Fortune report reveals, that couldn’t be further from the truth.

Women comprise less than 7 percent of chief executives at Fortune 1000 companies ― America’s largest corporations based on revenue ― according to a recent survey conducted by sales analytics software company DiscoverOrg. “That means that for every [Rometty, Whitman, or Barra], there are a dozen male chief executives,” said Fortune.

Of the almost 10,000 C-level executives DiscoverOrg surveyed, just 18 percent were women. Only 6.7 percent of all chairs of the board, 7.2 percent of chief operating officers and 8.8 percent of chief financial officers were women.

Women are well-represented in two C-level positions, however: They make up almost half of chief marketing officers and more than 60 percent of chief human resources officers, according to the survey.

“You sort of wonder if women are being pigeonholed,” DiscoverOrg’s co-founder, Henry Schuck, told Fortune.

Chip Somodevilla/Getty Images

Nancy Pelosi, center right, was the first female Speaker of the House. She served in the role from 2007 to 2011. 

The gender leadership gap is not limited to Fortune 1000 companies. According to a recent American Association of University Women study, women remain “underrepresented at all levels of leadership” in the U.S., from the realms of politics to education. 

Women make up only 1 in 5 members of the U.S. Congress, the study said. As of 2012, only 26 percent of colleges and universities were headed by women. 

Women of color hold even fewer leadership positions. Last year, less than 3 percent of board directors at Fortune 500 companies were Asian, black or Hispanic women.

“To achieve gender parity, we need women willing and able to take up leadership positions. We need men willing and able to take on more domestic responsibilities so that more women have the opportunity to pursue demanding fields,” the AAUW wrote in its report. “We need employers to embrace a more flexible workplace, allowing women and men to move in and out of the workforce as they balance careers, family, and personal goals. In essence, we all need to intentionally engage in making diversity and inclusion work on a daily basis.” 

11 Surprising Habits Of Powerful People

Power gets a bad rap, but only because people pursue it for the wrong reasons. When power is pursued for the right reasons, it can be a tremendous force for good.

Niccolo Machiavelli spread the belief that people can only become powerful by exploiting the worst aspects of human nature. One of this teachings was, "A wise ruler ought never to keep faith when by doing so it would be against his interests." Machiavelli was essentially saying that you're an idiot if you keep your promises or stick to your values when you'd benefit more by breaking them.

Not only did we hear it from Machiavelli, but also from plenty of voices in our own time, such as Robert Greene, who said, "The key to power is the ability to judge who is best able to further your interests in all situations." It's no wonder so many people think that the only way to get power is to be a jerk.

Fortunately, Machiavelli and Greene had something in common: They were both wrong. Recent research from UC Berkeley shows that when it comes to power, nice guys finish first. The researchers found that the most powerful people (according to ratings from their peers) were those who were the most considerate and outgoing. They also found that those who were the most Machiavellian -- using things like gossip and manipulation to gain power -- were quickly identified and isolated and ended up with no power at all.

Studies like these are rehabilitating power's bad rap. Power isn't inherently evil, and it isn't inherently bad to seek power. Without power, you can't accomplish anything, good or evil. Even those who want nothing more than to make the world a better place, can't do so without exerting the influence of personal power. It's the abuse of power and the underhanded things people do to achieve it that cause problems.

People who earn and use power wisely have a profound impact on everyone they encounter. Yet, they achieve this power only because they exert so much influence inside, on themselves. We see only their outside; we see them innovate, speak their mind, and propel themselves forward toward bigger and better things. Yet, we're missing the best part. The confidence and wherewithal that make their influence possible are earned.

And while what people are influenced by changes with the season, the unique habits of powerful people remain constant. Their focused pursuit of excellence is driven by eleven habits, which you can emulate and absorb until your power and influence expand:

1. They don't wait for a title to lead. It's important not to confuse power with authority. The right title can give you authority, but it can't give you power. On the other hand, you don't need a title to be powerful. You can lead without being a boss and you can have a powerful influence upon your workplace and community without a title.

2. They're graciously disruptive. Powerful people are never satisfied with the status quo. They're the ones who constantly ask, "What if?" and "Why not?" They're not afraid to challenge conventional wisdom, and they don't disrupt things for the sake of being disruptive; they do so to make things better.

3. They think for themselves. Powerful people aren't buffeted by the latest trend or by public opinion. They form their opinions carefully, based on the facts. They're more than willing to change their mind when the facts support it, but they aren't influenced by what other people think, only by what they know.

4. They focus only on what really matters. Powerful people aren't distracted by trivialities. They're able to cut through the static and clutter, focus on what matters, and point it out to everyone else. They speak only when they have something important to say, and they never bore people with idle banter.

5. They master conflict. People tend to err on one of two extremes when it comes to conflict: some are passive and avoid conflict altogether, while others seek out conflict aggressively, thinking that this will make them powerful. People who master conflict know how to approach it directly and assertively, yet constructively. In essence, they practice emotional intelligence. Truly powerful people do not react emotionally and defensively to dissenting opinions -- they welcome them. They're humble enough to know that they don't know everything and that someone else might see something they missed. And if that person is right, they embrace the idea wholeheartedly, because they care more about the end result than being right.

6. They inspire conversation. When powerful people speak, their words spread like ripples in a pond. Influencers inspire everyone around them to explore new ideas and to think differently about their work.

7. They know their strengths and weaknesses. People who get seduced by power and, therefore, start abusing it are often blind to their own weaknesses. To become truly powerful, you have to see yourself as you really are and to position yourself to use your strengths for the greater good. That means taking a clear-eyed look at your strengths and your weaknesses and owning them both completely.

8. They grow and leverage their networks. Those who grow power the Machiavellian way don't bother with people who aren't useful to them. People see this coming a mile away, and it doesn't win any friends. Truly powerful people know how to make lasting connections. Not only do they know a lot of people, they get to know their connections' connections. More importantly, they add value to everyone in their network. They share advice and know how, and they make connections between people who should get to know each other.

9. They ask for help when they need it. It's easy to mistakenly assume that powerful people never ask for help from anybody. Asking for help when you don't know the answer or can't do it all by yourself is not a sign of weakness; it's a sign of strength. It sends the message that you're not so insecure as to put your ego above the mission. It takes a tremendous amount of confidence and humility to admit that you need assistance, and asking for assistance is critical, because there's nothing worse than trucking down the wrong path when you're too embarrassed or proud to admit that you don't know what you're doing.

10. They believe. Powerful people always expect the best. They believe in their own power to achieve their dreams, and they believe that others share that same power. They believe that nothing is out of reach and that belief inspires those around them to stretch for their own goals. They firmly believe that one person can change the world.

11. They do it now. Way back in 1894, Orison Swett Marden made an important point: "Don't wait for extraordinary opportunities. Seek common occasions and make them great. Weak men wait for opportunities. Strong men make them." If you put off growing your power until the right opportunity comes along, it's never going to happen. Powerful people know that developing power is a lot like lifting weights or running a 5K. The only way to strengthen those muscles is by using them, so stop making excuses and just start. You know what you believe in, you know who you are, and you know what you want to become, so act like it. Yes, it will be uncomfortable at times, and yes, some people will tell you you're doing it wrong, but the only way to achieve power and use it for good is to get out there and do it.

Bringing It All Together

Boris Yeltsin once said, "You can make a throne of bayonets, but you can't sit on it for very long." Forget everything you've heard about power, because, in the end, the nice guys really do win. Whether you call it power or influence, it's okay to want it and it's okay to have it. You just have to pursue it and use it with integrity.

Have you seen people abuse power? Please share your thoughts in the comments section below, as I learn just as much from you as you do from me.

Now You Can Do Your Thrift Shopping Online, And It's About Time

This article is part of HuffPost’s “Reclaim” campaign, an ongoing project spotlighting the world’s waste crisis and how we can begin to solve it.

A slew of successful online secondhand stores has made it easier than ever for consumers to buy and sell old clothing.

The leaders of the upstart industry tout the environmental benefits of this new kind of thrift shopping experience. But will it be enough to meaningfully reduce the staggering amount of textiles pouring into our landfills every year, or is it just a way for savvy shoppers to ease their guilty consciences about the waste they produce?

For now, clothing resale is too small-scale to make a dent in landfill waste. And even if it does, it should not be confused for an environmental panacea. But if it forces us to question the way we shop and rethink the way we get rid of our old stuff, it’s a step in the right direction. 

David Goldman/ASSOCIATED PRESS

Shoppers at an H&M store in Atlanta. H&M is one of the big retailers known for "fast fashion," constantly introducing new styles at low prices.

“Even if we manage to come up with the ultimate technology solution, the positive impact of all of that is still outweighed by the amount that we produce and consume,” said Renée Cuoco, manager of the Centre for Sustainable Fashion at the London College of Fashion. “We need a whole scope of initiatives.”

For a variety of reasons, consumers in the developed world often have more clothing than they know what to do with. The rise of “fast fashion,” in which big retailers like H&M introduce new styles more frequently and at low prices, has accelerated this trend.

The short shelf life of many garments has major implications for the environment.

Americans threw away 15.1 million tons of clothing in 2013, with 12.8 million tons of it ending up in landfills, according to the Environmental Protection Agency.

Landfills are a top generator of methane gas, which contributes disproportionately to climate change.

Methane made up 11 percent of U.S. greenhouse gas emissions in 2014, according to the EPA. But methane traps warming in the atmosphere far more effectively than other GHGs, giving the gas a “global warming potential” that the federal environmental watchdog says is 25 times that of carbon dioxide.

A New Model For Thrift Shopping

Digital secondhand clothing and consignment stores did not arise to save unwanted clothing from landfills ― and the industry does not claim otherwise.

But San Francisco-based ThredUP, which may be the largest online outfit for secondhand clothing, markets the positive environmental impact of using its services.

“If 1 in 100 American households shopped resale, it would save over 1.1 billion pounds of CO2 emissions every year,” the company’s annual resale report notes.

There is no concrete data on how much ThredUP and comparable services like eBay Valet and Poshmark have actually reduced the amount of clothing sent to landfills.

By effectively “Uber-izing” the thrift store experience, however, these outfits enable people who might not otherwise want to deal with the hassle of brick-and-mortar thrift stores to clean out their closets without leaving the house.

If the model becomes very lucrative, it can change the market.Tasha Lewis, Cornell University

To send clothing to ThredUP, for example, all consumers need to do is order a “clean out kit” (essentially a free bag), fill it with unwanted clothes and send it to the company. The company only resells clothing and accessories that are “like new,” so it rejects about 60 percent of what it receives and offers to return the rest to senders or give it to other thrift shops or clothing recycling entities.

Once ThredUP has inspected an item and decided it is suitable for resale, it professionally photographs it and lists it on the site. The price is based on quality, original retail price and other factors.

For items that sell for under $60, ThredUP pays sellers between 5 and 40 percent of the list price up front, with the cheapest items offering the smallest payout.

ThredUP has a consignment system for items it lists for $60 or more, offering as much as 80 percent to consigners once the company succeeds in reselling an item. (The shipping and handling costs of sending the ThredUP “clean out kit” are deducted from whatever payout the company provides.)

ThredUP

ThredUP allows consumers to shop for high-quality secondhand clothing without some of the hassles of traditional thrift stores.

ThredUP’s business is booming: It has resold over 10 million items and at least doubled its revenue every year for the past several years, according to Chief Marketing Officer Anthony Marino.

That can only have a positive impact on the U.S.’s landfill waste problem.

But there is a catch. Although the company’s selectivity is the formula for its successful business model, it demonstrates how difficult it is for secondhand clothing sites to turn online clothing resale into a profitable business.

ThredUP does not buy or sell men’s clothing, serving women and children only. The company told HuffPost it focuses on women because men’s clothing makes up a much smaller share of the resale market.

Until the economics of the business allow online secondhand shops to make up a bigger share of clothing sales, there are limits to their impact on waste.

“If the model becomes very lucrative, it can change the market,” said Tasha Lewis, a professor specializing in fashion sustainability at Cornell’s College of Human Ecology. “The only obstacle is the scale of these programs, and they are constrained by quality, size and color of the things they get.”

More Innovations, Persistent Challenges

Meanwhile, some brick-and-mortar retailers are trying to do their part to address waste with in-store recycling programs. Patagonia invites shoppers to return old clothing and sells used products on-site.

H&M also allows shoppers to return worn clothing to stores, where the retailer sorts it for resale or recycling.

One risk, however, is that clothing that gets offloaded to local thrift stores by major retailers or higher-end online secondhand sites will sit idly on shelves, too, and eventually end up in a landfill anyway. Unwanted clothing can also end up getting exported to developing countries, where it risks undermining local textile industries.

A way around that problem would be ensuring that clothing is made from recyclable material. For example, cotton and polyester blends, commonly used in items like T-shirts, are impossible to recycle.

Last March, H&M and Kering, the parent company of Gucci and other luxury brands, announced a partnership with technology startup Worn Again that aims to speed up that process. The companies will be “monitoring the testing” of technology developed by Worn Again that separates fibers and removes dyes and other chemicals that prevent textile recycling.

Some popular styles are impervious to this kind of innovation. Leather, a material with one of the most opaque supply chains, is not recyclable. (Though it is compostable in some circumstances.) Making it more sustainable, according to Cuoco, would likely mean phasing it out of our wardrobes altogether ― which, it’s safe to say, is not going to happen anytime soon.

Bloomberg/Getty Images

Discarded clothing contributes to landfill waste -- which emits methane, a greenhouse gas that's especially effective at trapping heat.

Even if all clothing becomes recyclable, there are limits to the environmental benefits of technological innovations.

It’s possible that after consumers clear their closets by reselling or recycling clothing, they’ll feel freer to buy more brand-new clothing, lessening the effect of the overall recycling trend.

Advanced recycling technology also requires energy and resource expenditures, which would have to be weighed against emissions savings from reducing landfill waste.

And, of course, landfill waste is just one way the ever-growing clothing industry affects the environment. Among other things, the energy expenditures from the agriculture and transportation needed to make and sell clothes will persist regardless of how many garments are saved from landfills.

Deeper change requires a cultural shift in the developed world, in which producers slow down fashion cycles and consumers demand higher-quality clothing that lasts longer, rather than just the newest styles at an affordable price.

“We need to be asking more insightful questions about how we purchase and consume,” Cuoco said. “If we relinquish too much responsibility from ourselves as consumers, that’s really dangerous.”

This article has been updated with additional information about post-consumer alternatives for leather products.

Edward D. Jones Accused of Cheating Its Own

A participant in the 401(k) Plan administered by Edward D. Jones for its employees has filed a lawsuit alleging breach of fiduciary duty and prohibited transactions by the broker-dealer under the Employee Retirement Income Security Act of 1974, as amended (known as ERISA). All of the claims in the Complaint are allegations that will have to be proven at trial.

The irony

It's ironic that these claims will be initially decided by a United States District Judge. That's a privilege denied to customers of Edward D. Jones and other broker-dealers. They require their customers to submit to mandatory arbitration of disputes, administered by the Financial Industry Regulatory Authority (FINRA). I am among the many who believe this system is rigged against investors and should be abolished. To date, Congress has not had the political will to do so.

The flawed 401(k) system

In 2008, I wrote The Smartest 401(k) Book You'll Ever Read. I asserted the current system benefited" brokerage firms, brokers, pension consultants, insurance companies, insurance agents, the mutual fund industry and employers." I noted that employees "get the short end of this stick" and stated that "this must be changed."

It took a while, but the system is starting to reform. Not because the securities industry suddenly believes it has an obligation to do so, but rather it's a result of a combination of the DOL's new 401(k) rule mandating that advisors to these plans must put the interest of plan participants first, and a spate of lawsuits (like the one against Edward D. Jones) that expose the excessive costs and other conduct harmful to participants which is at the core of many of these plans.

The allegations against Edward D. Jones

The Edward D. Jones plan has 35,929 beneficiaries with assets of over $3.9 billion. The complaint notes that Edward D. Jones has a fiduciary obligation to these plan participants which is "the highest known to the law." As a fiduciary to its plan Edward D. Jones was required to act prudently and "defray reasonable plan expenses."

In my view -- which has not been accepted by any Court to date -- the only way to fulfill this high standard is to limit investment options in the plan to low cost target date funds, or portfolios of index funds, exchange-traded funds or passively managed funds, at different risk levels.

Retirement plans should accept no payments from fund managers (known as "revenue-sharing payments"). The receipt of these payments compromises the objectivity of the plan sponsor and encourages the selection of expensive, actively managed funds, likely to underperform comparable index funds over the long-term.

The complaint alleges that Edward D. Jones accepted both revenue sharing fees and "Networking and Shareholder Accounting Fees" from both affiliated and partner mutual funds companies, who were rewarded by the inclusion of their funds as investment options in the plan.

The revenue sharing fees were significant. The Complaint alleges that, in 2014, Edward D. Jones received $153 million from mutual fund revenue-sharing.

The Complaint alleges "The Plan's investments show a high correlation to mutual funds offered by mutual fund families that pay Edward Jones the most money." If true, it's a classic example of "pay to play." Everyone's a winner -- except plan participants.

The Complaint asserts that Edward D. Jones made decisions about which funds to include in the Plan (and remain there) based on the amount of revenue-sharing fees paid by those funds, rather than which funds were in the best interest of plan participants.

The Complaint has a number of other allegations, including the failure of the Plan to include lower cost share classes of identical mutual funds. Instead, the Plan allegedly kept higher-cost share classes, resulting in an excess cost to the participants of over of $13 million.

Significance of this case

This case places the issue of whether plan fiduciaries have an obligation to consider low-cost index alternatives to expensive, actively managed funds squarely before the Court. The complaint summarizes the impressive array of academic evidence supporting its position that plan fiduciaries do have this obligation, including this quote from Jill E. Frish, in an article published in the University of Pennsylvania Law Review. Ms. Frish is a Professor of Law and Co-Director at the University of Pennsylvania Law School, Institute for Law and Economics: "The most consistent predictor of a fund's return to investors is the fund's expense ratio."

Class action attorneys and plan participants will be closely following this case and hoping the Courts are persuaded by the academic evidence supporting an "evidence-based" approach to managing retirement plan assets.

The present system is in dire need of an overhaul.

Dan Solin is a New York Times bestselling author of the Smartest series of books, including The Smartest Investment Book You'll Ever Read, The Smartest Retirement Book You'll Ever Read, The Smartest 401(k) Book You'll Ever Read and his latest, The Smartest Sales Book You'll Ever Read.

The views of the author are his alone. He is not affiliated with any broker or advisory firm.

Any data, information and content on this blog is for information purposes only and should not be construed as an offer of advisory services.

Coca-Cola Has Always Had A Connection To The Cocaine Business

When news broke yesterday about the discovery of $56 million worth of cocaine at a Coca-Cola plant in France, the press was all abuzz. But as it turns out, this Cocaine-Cola connection is not entirely new; Coca-Cola has been intimately linked to domestic manufacture of cocaine in the United States for years.

A little glimpse into Coke’s history reveals all.

Yes, most people know that Coca-Cola’s first president Asa Candler became concerned about cocaine in the early 1900s and decided to remove any trace of the drug in the company’s famous drink, but few people know that Coke continued to use what is called “decocainized coca leaf extract” in its signature beverage. In company ledgers, this―mixed with kola nut powder― is what is known as Merchandise #5, one of the “secret ingredients.”

Here’s how the process works. Beginning in the early 1900s, Coca-Cola partnered with a company called Maywood Chemical Works based in Maywood, New Jersey (now the Stepan Company) to import coca leaves (which contain small quantities of the alkaloid found in purified cocaine powder) from Peru for Coca-Cola. The company removed the cocaine alkaloid from these leaves and then sold Coca-Cola the leftover extract. As per the cocaine, Maywood sold it under close federal supervision for approved medical uses.

Federal law sanctioned this practice. Legislators wrote a special exemption into the Harrison Narcotics Act of 1914, the Jones-Miller Act of 1922, and subsequent counternarcotics legislation that allowed “decocainized coca leaves or preparations therefrom” to be sold in the United States. Some lawmakers called this clause the “Coca-Cola joker” because it was clearly designed to protect Coke’s secretive coca business. 

Over time, Coke’s demand for coca leaves grew so great that legislation had to be passed to allow leaves to come into the country beyond what was needed for the manufacture of cocaine for medicinal purposes. These laws specified that alkaloids extracted from these coca leaves had to be destroyed with federal officials bearing witness.

All was well for Coke for many years under this arrangement, but in the 1960s, the company got a crazy idea: why not grow coca leaves secretly in the United States? That way the company would have a domestic source of supply.

It may sound outlandish, but that’s exactly what happened. In the 1960s, Coca-Cola, working with its partner, the Stepan Company, gained federal approval to begin a secret coca cultivation operation in Hawaii called the “Alakea” project. University of Hawaii scientists agreed to participate in the project but were prohibited from publishing any reports about their work because Coke did not want the public to know about its relationship to these coca leaves. 

Within months, those working on Alakea could happily report that coca shrubs were growing in Hawaii, but celebrations lasted only so long. Soon a fungus wiped out the entire crop and the project was abandoned.

The failure of Alakea was really no matter for Coke, which simply continued sourcing leaves from Peru. All of this was channeled through Stepan, a third-party buffer that helped keep Coke’s coca trade out of sight. Import records show that Stepan is still happily bringing in coca leaves in the 2010s.

David Mercado / Reuters

What’s problematic about all this is that cocaleros, coca farmers in Peru, have been getting a raw deal. For years, Coca-Cola has enjoyed exclusive access to coca leaves coming into the United States and cocaleros have been prohibited from selling other coca products—teas, candies, and flours—to American markets. Coke has no doubt liked it this way because competition for coca leaves would drive up prices, which is never good for business. 

But cocaleros see it differently. Peruvians with intimate knowledge of coca production in the Andes told me back in 2012 that coca farmers would love nothing more than to “revalorize” the coca leaf and once and for all quash the misconception that the coca leaf and purified cocaine are the same thing. Then cocaleros might experience a commercial boon that would allow them to abandon exploitative relationships with drug lords and monopolistic buyers.

Today, if I were to travel to Peru and try to return home with a small batch of coca leaves (perhaps to brew tea), I would be detained by border officials. 

So here’s the essential question: if Coke can work partnerships to bring coca leaves into the United States, why can’t the rest of us? That’s the real story behind the Cocaine-Cola connection.