Coyote Blog

Harvard Business School has (or at least had in 1987) its own equivalent of the show Big Brother.  During the first year, a new student gets locked in a classroom for a year with 88 other high-strung, type-A overachievers in an explicitly zero-sum process (there are a fixed number of each grade to be handed out) conducted by sometimes sadistic professors bent on eeking out the maximum amount of stress, fear, and verbal conflict.  Think John Housman's class in the movie "Paper Chase."  Students for some reason react to this process by, instead of branching out and meeting the other 800 students in the class, spending most of their social time with these same 88  (the rugby team saved me to some extent from such narrowness).

By no means are all these folks my "friends," in part because I have a fairly limited definition of that word, but they all became pretty close associates.  I knew most all of them pretty well -- well enough that both the couple that ended up in jail and the couple that became spectacularly successful were no real surprise.

One of those 88 I spent a year with was a guy named Jim Balsillie, now famous as billionaire CEO of RIM (Blackberry) and, more recently, for trying to buy an NHL franchise.  Jim is not a close friend, and in fact I probably haven't exchanged a hundred words with him since we graduated.  But over the period of a year I feel like I had the measure of him, as quiet, bright, kind and fairly humble.   Jim was a much, much nicer guy than I was -- certainly I was far, far more likely in class to rip into another student for being an idiot in class discussion.   I once got so frustrated with a teacher that I went to the front of class and took over.  I can't even imagine Jim doing something like that.

I write this all because I just have to make a public statement concerning a recent statement about Jim Balsillie by the NHL.  The NHL recently chose to vote against letting Balsillie buy the Phoenix Coyotes.  Fine.  I think they are idiots - they should be begging to have a guy of his talents and money in their fraternity - but whatever.  What ticks me off, though, is that instead of dicussing the controversial business reasons for the vote and they choose to smear Jim:  (via Market Power)

"We voted to deny approval to Mr. Balsillie because we concluded he lacks the good character and integrity required of a new owner" under NHL bylaws, said Boston Bruins Owner Jeremy Jacobs, chairman of the league's board of governors.

I suppose it is possible that Jim is some kind of evil smiling sociopath and managed to fool 88 of us for over a year, despite living in close proximity.  I seriously doubt it, but it is remotely possible.  But even if that were the case, there is no way the NHL suddenly figured this out when those who know him better have not.

Matt Nestor has some fun with this:

The NHL owners are obviously good judges of character. Some that have been approved:

● William "Boots" Del Biaggio (Nashville Predators), now headed to jail on fraud charges.

● Henry Samueli (Anaheim Ducks), now awaiting sentencing on SEC violations.

● John Rigas (Buffalo Sabres), currently in jail on embezzlement charges.

● Sanjay Kumar (New York Islanders), now serving time for conspiracy.

● John Spano (Islanders), who deliberately misled the NHL and the Islanders about his net worth.

● Bruce McNall (Los Angeles Kings), who pleaded guilty to conspiracy and defrauding six banks of $236 million.

Why would you want a successful businessman to taint such a group?

I always find it fascinating to observe how the same folks who criticize the US for not taking drastic action based on the "settled science" of global warming are often the first to ignore hundreds of years of study in the science of economics.  While the full breadth of economics is far from settled science, one thing that is far better understood than the effect of CO2 on global temperatures is the effect of higher prices on demand:  (via Market Power)

This chart confirms that for teenagers, those between the ages of 16
and 19 years old, all of the jobs that disappeared in 2007 were minimum
wage jobs. In essence, a total of 94,000 hourly jobs disappeared for
this age group overall. This figure is the net change of this age group
losing some 118,000 minimum wage earning jobs and gaining some 24,000
jobs paying above this level.

This represents what we believe to be the effect of the higher
minimum wage level increasing the barriers to entry for young people
into the U.S. workforce. Since the minimum wage jobs that once were
held by individuals in each age group have disappeared, total
employment levels have declined as those who held them have been forced
to pursue other activities.

Now consider this: The minimum wage was just reset on 24 July 2008
to $6.55 per hour, a 27.2% increase from where it was in early July
2007. Our best guess is that a lot of additional teenagers will be pursuing those other activities. 

Meanwhile, the lack of employment opportunities for the least
educated, least skilled and least experienced segment of the U.S.
workforce will likely have costs far beyond the benefits gained by
those who earn the higher minimum wage. The government might be able to
make the minimum wage earning teenage worker disappear, but they didn't
do anything to make the teenagers themselves disappear.

The increase in minimum wage earners in some of the middle brackets is likely due to a sweeping effect -- if the minimum wage is increase from $6 to $7, people making $6.50 before are swept into the "minimum wage" characterization.   

A few weeks ago, I discussed how Ivy League schools came under fire from some leftist for not spending their endowments fast enough.  Obviously this guy has been a succesful adviser to Congress.

Anyway, one of the differences between private and state schools is not just that many private institutions get a lot more per alumnus giving.  Another big differentiator is how the money gets spent.  Here is a great example of private giving taking on the, uh, most critical challenges in public education.  Via Market Power.

Sorry Mac folks, but as a guy who builds his own PC's, I am rolling on the floor laughing with Charlie Booker (via Market Power)

I hate Macs. I have always hated Macs. I hate people who use Macs. I
even hate people who don't use Macs but sometimes wish they did. Macs
are glorified Fisher-Price activity centres for adults; computers for
scaredy cats too nervous to learn how proper computers work; computers
for people who earnestly believe in feng shui.

PCs are the
ramshackle computers of the people. You can build your own from
scratch, then customise it into oblivion. Sometimes you have to slap it
to make it work properly, just like the Tardis (Doctor Who,
incidentally, would definitely use a PC). PCs have charm; Macs ooze
pretension. When I sit down to use a Mac, the first thing I think is,
"I hate Macs", and then I think, "Why has this rubbish aspirational
ornament only got one mouse button?" Losing that second mouse button
feels like losing a limb. If the ads were really honest, Webb would be
standing there with one arm, struggling to open a packet of peanuts
while Mitchell effortlessly tore his apart with both hands.

The two-button mouse thing has always been a mystery to me.  Clearly it is better.  Hell, I can't do without my two button mouse and its scroll-wheel.  Only a pathological desire not to copy anything from the PC world (copying from Xerox* is OK, I guess) has prevented Apple from adopting this no-brainer improvement.

* I may be one of the few people around who ever worked on the old Xerox workstations from which so much of the Mac was derived.  They had their issues, but they were unbelievable for their time.  I would put Xerox's failure to capitalize on this technology right up there with Amiga in the category of lost technological opportunities.  </dating myself>

Necessity is the mother of invention.  And who can think of an indignity humans suffer that is worse than having to get up from the couch to get a beer?  Via Market Power, the beer-launching refrigerator.  See the video here.

I am way behind on posting some of these reviews, but Market Power has a review of BMOC here.

There is also at least one new (5-star!) review up at Amazon.  It makes a great, uh... President's Day gift!

I know there are folks who get seriously bent out of shape by this type thing (Gouging!), I think this is pretty cool, from Market Power:

I wouldn't have thought this would
happen, but it appears that a gas station I pass during my commute
practices time-of-day pricing, charging more during the peak period and
charging less during the off peak.

For the past two months, every time I have passed the station in the
evening, the price of gasoline has been at least three cents/litre
lower than it was in the morning on the way to work. This station is
very convenient for people to pull into on the way into London, but it
is very inconvenient for people who are leaving the city at the end of
the workday.

The Market Power blog noticed something that also tweaked my interest, in an article from the Chronicle of Higher Education:

Today's M.B.A. students are not as ethically challenged as recent
reports make them out to be, according to the findings of a study being
released today at a global conference of business educators and
leaders. In fact, 81 percent of those responding to a recent survey
believe businesses should work to improve society, and 78 percent of
them want "corporate social responsibility" integrated throughout their
core courses.

The survey results will be presented during a three-day
conference, "Business as an Agent of World Benefit," at Case Western
Reserve University, in Cleveland. The conference, which began on
Monday, has drawn 440 management educators and business leaders, as
well as about 1,000 online participants.

I know this issue has been debated in circles, but I still have real heartburn defining business ethics as "corporate social responsibility."  In my mind, and as reinforced by cases like Adelphia and Enron, the number one overriding ethical responsibility of corporate managers is their fiduciary responsibility to the company's owners.  Second is their responsibility to comply with the law (though sometimes the law is so muddled and contradictory that may be difficult).  Third is the obligation to be honest in dealings with employees, suppliers, and customers and to honor the commitments that the company has made to all three. 

In this context, asking a manager to divert the company's resources away from honoring these commitments or providing a return on the shareholder's investment, instead focusing them on some other nebulous entity called "society," is wholly unethical. 

I love random but harmless hobbies.  This certainly qualifies as such.

Hat tip:  Market Power.

As a preface, I am not a socialist planner, so I do not presume to make other people's economic trade-offs for them.  If someone out there chooses to collect Pinto station wagons or pay $10 million to go on a Russian space launch, power to them.

That being said, I will observe that gas price concerns seem to drive people to do things that they would not normally do in other contexts.  Market Power quoted this statement from the Washington Post:

"When prices go up, you're going to see some interesting things," said Tom
Kloza, chief analyst for the Oil Price Information Service in New Jersey.
"Saving money on gas is something that's just magical in this country. Rational
thought just doesn't apply to gas."

Market Power was skeptical that such irrationality exists, but I think it may be correct.  Here are a few examples:

1.  Waiting for hours:  A couple of years ago when I lived in Seattle, a local Costco put in a gas station and sold gas for 10-15 cents or so below most of the other local stations.  Every time I went there, there was a huge line -- perhaps half an hour long -- to get gas.  For a fifteen gallon fill-up saving 15 cents and waiting 30 minutes, that equates to $4.50 an hour savings for their efforts, not to mention the extra driving time (and gas!) spent getting to this one spot rather than their local station.  How many people in the line would have driven an extra 10 miles to take a job at $4.50 an hour? 

Lately, I witnessed a free gas promotion where people lined up and waited at least 3 hours for 10 gallons for free gas (people apparently had lined up starting at 4AM for the promotion that began at 8AM.  This is a bit better deal at $10 per hour, but I wonder how many people in the line would have participated in any other endeavor for $10 an hour?  Market Power points to a similar promotion in Sioux Falls, where the value of police time providing security was probably higher than the value of the gas given away.

2.  Save a dollar, pay three extra.  One of the reasons I am unconcerned with gas price gouging is that many gas stations today use gas as a loss leader, hoping to pull motorists into their store or restaurant.  In the language of gouging, what this means is that typically you are getting a great price on gas (given what the dealer's costs are) and are getting gouged on coffee and Twinkies.  Its amazing to me that people who check the Internet to find the place with 5 cents a gallon cheaper gas will then walk into the convenience store and pay whatever for Cokes and water and cigarettes and beer and coffee.  It seems crazy, but the best way to explain it is that for a number of people, a dollar saved on gas gives them far more satisfaction than say a dollar save on soft drinks.

3.  Wagering with the rental car company.  Every rental car company offers you a wager nowadays.  They give you the chance to buy the whole tank of gas in advance for something like 20 cents less than the local market rate.  Assume the local market rate is $3.20, the rental car advance rate is $3.00, and the tank is 15 gallons.  All you have to do to win this bet as the renter is to return the car with less than 1 gallon left.  If you do, you win, otherwise you lose.  Is this a bet you want to take?

But I left something out - the value of your time.  Let's say you value your marginal time at $30, and it take 15 minutes to fill up the rent car yourself.  By taking the fuel option, you save $7.50 of time.  This means to win the bet, including the value of your time, you have to turn it in with less than 3.5 gallons left, or less than 1/4 full.  The other alternative is to not stop and turn it in at the rent car place and let them fill it up at their $6.00 rate.  But even this ridiculously inflated rate for turning the car in part-full is still a better option than the pre-paid fuel as long as you don't use more than half a tank.   And I bet that the vast, vast majority of people who rent cars, particularly on business trips, don't use a half tank (a half tank at 20mpg is about 150 miles).

One of the best tests of my proposition is to see how many businesses
today act as if this gas-price-overfocus is a real phenomenon:  Car
dealerships give away free gas rather than rebates;  many many
companies are having free gas promotions;  gas stations continue to
sell gas at cost to get you in their store.  Basically, businesses
everywhere are betting that their customers will find $30 of gas more
appealing than any other $30 giveaway. 

None of the above bothers me particularly -- people are different and interesting in how they act.  That's why government planning tends to chafe everyone.  In fact, the only part of this supposed irrationality about gas prices that does bother me is the fact that so many people run to the government for price controls and gouging investigations whenever gas prices go up, and so many Congressmen of both parties see value to pandering to these instincts.  This despite the fact that gas prices are still effectively far lower as a percentage of income than they were 25 years ago.  I wish they would all go back to sipping their $8 Starbucks coffees and just deal with it.

Update:  Was on Snopes.com checking out an email that seemed like an urban legend (it was) and saw a sidebar listing gas wars as the #1 urban legend email of the moment.  ExxonMobil seems to be the bad-guy target-of-choice, I guess just because they are the largest.  The "idea" in the email is that if everyone would boycott ExxonMobil and shop at other gas stations, the price of gas would fall.  LOL.  As Snopes points out:

A boycott of a couple of brands of gasoline won't result in lower
overall prices. Prices at all the non-boycotted outlets would rise due
to the temporarily limited supply and increased demand, making the
original prices look cheap by comparison. The shunned outlets could
then make a killing by offering gasoline at its "normal" (i.e.,
pre-boycott) price or by selling off their output to the non-boycotted
companies, who will need the extra supply to meet demand. The only
person who really gets hurt in this proposed scheme is the service
station operator, who has almost no control over the price of gasoline.