What’s wrong with this picture, retailed inÂ The Economist [sic] from an air traveler web site where the discussion has some sensible observations about seat pricing?Â Right: the seat with no legroom, and the original seat with some legroom, are treated as though they are the same good that will sell for the same price, even as the seat with extra legroom is credited with a higher price.Â If markets work, the squooshed seat has to sell for less than the standard seat.Â In Patrons Despite Themselves, we examined resale royalties laws that obliged art collectors to pay artists a fraction of any appreciation a painting experienced after they (collectors) bought it.Â Artists lobbied hard for this nonsensical piece of policy, because they couldn’t see that when the dust cleared, collectors must pay less for “Sunset less 15% of its appreciation after purchase” than for Sunset in fee simple, and that the real effect of the law, even leaving aside the nuisance of keeping track of your work after you sell it, is to transfer risk from (rich) collectors to (poor) artists and money the other way, something no-one would knowingly advocate as abstract goals.Â It’s the same mistake, subconsciously treating both deals as though they involved the same thing. Continue reading “Annals of commerce: Do airline companies know what they’re doing?”
A few months ago I argued that one reason Republicans handled the contraception issue so incompetently was that public opinion on premarital sex was strongly divided by age and party: older Republicans, and nobody else, overwhelmingly regard sex outside marriage as inherently wrong.
Mitt Romney has a similar problem regarding Bain. According to a Gallup survey from a few weeks ago, only 21 percent of Americans feel “a great deal” or “quite a lot” of confidence in business. (Here’s Gallup’s discussion with some historical averages; here’s a bar graph. And by the way, I’m glad that Gallup combines the results for “a great deal” and “quite a lot” since I don’t see a clear difference between the two.) But big business is the institution whose levels of trust show the greatest partisan differences. Fully 39 percent of Republicans proclaim the highest level of trust, but only 11 percent of Democratsâ€”and, very important, only 15 percent of independents.
I wish I had a breakdown by income (consider this a bleg), but I’d be astonished not to see stark differences there as wellâ€”as well as by region; from anecdote and experience I suspect a pro-corporate mentality is much more common in the South than everywhere else.
In other words, Republicansâ€”especially rich Sun Belt Republicansâ€”generally think that big business is doing fine by America and can be counted on to continue to do fine. They’re astonished that anybody would call fairly standard corporate practices “the problem” rather than the solution. And they would probably hit back hard against Romney’s campaign if he tried to distance himself from those practices (not that he could easily do so!). But in feeling this way they are badly, perhaps fatally, out of touch.
By the way, are there issues on which partisan gaps place independents closer to Republicans than to Democrats? Yes. More on those in a later post.
Friday afternoon my wife and I stopped into our local Wells Fargo branch to figure out why her ATM card wasn’t working.Â We had a ten-minute conversation with a nice staffer, solved the problem and went on our way.
Tonight the phone rang at about 9PM: it was a nice young woman from Gallup “calling for Wells Fargo” to interview me about my recent experience at the branch.Â This has become a plague, and the bank’s rudeness and arrogance in doing this is so astonishing that I’m not sure about the motivation.Â Just to be clear: the bank and I have a deal about services and payment that in no way includes my providing free management consulting at a time of the bank’s choosing: the survey would have taken about as long as I had already committed to the ATM card problem.
I have done survey research and taken the time of customers (in that case museum visitors) and I understand there’s some irreducible imposition;Â I usually reply to political surveys if I don’t read them as push polls or tendentious.Â At the museum, we were careful to make a fuss about how grateful we were for the respondents’ time, and gave them a couple of free admission passes as at least a gesture recognizing their cost.Â Some of these irritating follow-up surveys enter you in a lottery with unknown odds for some sort of prize, and some are online so you can do them when convenient.Â But calling a customer at home in the evening is really over the top.
Perhaps this is some idiot’s idea of making the customer think the bank cares how he feels.Â If they get anything useful from these surveys, it’s profitable for the bank, and they pay their staff, Gallup, and everyone else a share of the gains: what this little exercise made me feel, as so often happens when we interact with people selling us stuff, is that the bank thinks my time is worthless to me (or, I guess, that I find it amusing or useful to respond to one of these surveys).Â They are wrong, and I hope a wave of resistance to this spreading imposition develops.Â I can assure anyone reading this that the result of the bank’s lame marketing idea was to turn a perfectly satisfactory commercial encounter into a disagreeable one that I will remember with distaste, and of course I didn’t answer their questions either.
The guiding principle of the University of Californiaâ€™s Berkeley campus intercollegiate athletics program is something called comprehensive excellence, an idea or at least a slogan originating in a report from decades back (that I now canâ€™t find) that has resonated through years and yearsÂ of pointing with pride and viewing with alarm. The idea was that if we were going to have big-time sports, we should do it well both academically and on the field, with team rankings to match our campus status as the best public university in the world and scholar-athletes pulling Aâ€™s and Bâ€™s in hard courses while they pulled down touchdown passes.
Thereâ€™s a social justice angle to college sports as well, and here our mantra is that scholarships for the best athletes allow [minority] kids to get a Berkeley education who wouldnâ€™t otherwise have access to it; sometimes the word in brackets appears, sometimes it doesnâ€™t. This principle asks for some definition of the phrase Berkeley education, because you can drive a largish truck between having a 40-hr non-intellectual manual labor job in a town that has a college (as long as you can do the work better than the next piece of blocking fodder and donâ€™t hurt yourself) and getting a bachelorâ€™s degree and learning what college graduates are assumed to know. For some reason, the impulse to return this favor by gifts from the few alumni athletes we qualified for zillion-dollar pro sports careers has been in the minimal-to-invisible range, as far as I can tell.
With the Penn State episode of entitled, arrogant, secretive, out-of-control athletics transitioning from Sanduskyâ€™s conviction to the incoming Freeh report and a tidal wave of civil litigation, and UVa’s recent demonstration of how not to do higher education governance, itâ€™s worth a look-in at how comprehensive our excellence is. The news is pretty grim. Continue reading “Cal sports update”
The world of higher education is still trying to assess the recent firing of University of Virginia President Teresa Sullivan because…well, no one really knows why.Â The goobledygook spewed out by the University Board of Trustees is just that.Â But here comes this nugget from the Washington Post’s extensive write-up of the situation: one reason the UVA Board, which isÂ dominated and influenced by hedge fund and other financial wizards,Â wanted Sullivan out was that they felt “Sullivan lacked the mettle to trim or shut down programs that couldnâ€™t sustain themselvesÂ financially, such as obscure academic departments in classics and German.”
But…but…but…we’ve been told for years that it is the Left that is trying to destroy traditional learning.Â It’s all those terrible postmodernists and Marxists and feminists, and that is why we need to purge the Academy of evil left-wing influences that want to undermine the traditional curriculum.Â That’s what the National Association of Scholars says!Â Lynne Cheney says we need to keep the traditional humanities curriculum as the way to save western civilization from horrid secular liberals!Â I’m sure that their love for traditional humanities, like Latin, Greek, and German literature, will inspire them to rise up and defend President Sullivan.Â I mean, that’s a no-brainer for self-styled defenders of traditional values, right?
I’m anxiously awaiting their criticisms of the multi-millionaire businesspeople who pushed Sullivan out.Â Just any day now.Â Just wait…
In the indispensable G2 section of the Guardian, Louis Theroux describes how free pornography on the Internet has largely destroyed the pornographic movie industry. An actress’ fee for doing a hard-core porn scene used to be around $3,000. It has now dropped to $1,000 for big name performers and much less for unknowns. Theroux comments on how some women adapt:
It’s an open secret in the porn world that many female performers are supplementing their income by “hooking on the side”. It’s also called “doing privates”, as in private bookings. The official industry line is that it’s dangerous (because clients aren’t tested the way performers are) and irresponsible (because the women could then infect the closed community of professional performers). But the women can make far more money having sex behind closed doors than doing it on film and, in fact, the practice is widespread. For many female performers nowadays, the movies are merely a sideline, a kind of advertising for their real business of prostitution.
Fresh from helping bring the life saving 24/7 sobriety programme to the UK, Baroness Anne Jenkin appeared on the popular British TV show “Come Dine with Me”, but with the twist that she had to feed all her guests at a total cost of only a few quid. She is part of the live below the line challenge underway this month.
The challenge is to live on Â£1 a day of food for five straight days, which is not easy even with the refrigeration, electricity and clean water we have in developed countries. People who undertake the challenge raise money for charities that serve the more than one billion human beings who live in extreme poverty worldwide.
What can it mean that a pastel drawing sells for $120m?Â Â The economic function of this object is to create value inside the head of people looking at it; if it’s bought on speculation for resale, that function has to be anticipated for a subsequent buyer someday. It’s not copyrighted, so the value has to be the excess of value over that created by a good reproduction, of which there are lots in circulation.Â At 5%, it has to be $6m per year to justify this price, or $684/hour working 24/7, four times that 9-5 weekdays. The odds that it will be on display anywhere on any terms every hour of every day forever are pretty slim, so let’s go with 2200 museum hours at $3K/hr.
How many people can be really looking at this piece at once; it’s not very big.Â Maybe four, each of whom has to find it worth more than $10/min.Â Â There are certainly people who would pay that, but if they are spending two minutes each, we need 120 of them every working hour, or a quarter million a year, again forever.Â No, it’s not the greatest work of art ever made, whatever that could mean, and not in the top thousand despite its poster appeal and legs as a meme.
This transaction is completely ludicrous.Â It properly exposes the whole culture of fine arts to ridicule as a game of poseurs, ignorant speculators, and predators that has nothing whatever to do with what paintings are about, or what art does for us, and that it should be a front page story as a serious eventÂ does a little bit to damage the quality of everyone’s engagement with art.
reason 9.b.ii:Â We selflessly share our highest values with unfortunate people around the world and improve the cultures we engage with.
Today, let us reflect on two of those values, namely “more stuff cheap”Â [Amen], and “
business as a moral calling” “ highest standards of honesty and transparency” , um, wait a minute, “if no-one’s not many people have been indicted convicted yet, nothing has actually happened; keep moving and go shopping”.
Yeah, that’s the one.
What’s a financial advisor to do? The correct advice pretty much fits on a single sheet of paper that is available for free at the public library. Moreover, the products one should recommend buying are inexpensive, and are widely-available at leading websites. An audit study finds predictably depressign results
Suppose you are in business offering people advice about some important products. You have a problem, though. The correct advice pretty much fits on a single sheet of paper that is available for free at the public library. Moreover, the products one should recommend buying are inexpensive, and are widely-available at leading websites.
Thus the predicament of the modern financial advisor. Thus also the predicament of her unsophisticated customers. If the right advice is simple and free, at-best the expensive and complicated advice she will sell you will be overpriced, and probably more than a little wrong. Moreover, if the correct products to buy are cheap, no-load index funds that generate little sales commission, your advisor has obvious incentives to offer you something riskier or fundamentally more costly.
Thus, we have the results of an important, if cosmically unsurprising experiment: â€œThe Market for Financial Advice: An Audit Study,â€ by Sendhil Mullainathan, Marcus North, and Antionette Schoar. Continue reading “Think twice about that financial advisor”