Posts tagged “economics”

Living in a hidden-fee economy

The SF Chron writes about those little extras costs on various services that add up pretty dramatically, with some economics research on how we perceive and make decisions around fees.

“In the end, you don’t fool the customers with the hidden price,” he says. “They know they’ve paid it even if they didn’t know they were going to pay it.” And if they feel ripped off, they won’t come back. In the cell phone industry, he says, carriers lose 40 percent of their customers each year, a tremendous “churn” rate that industry players are starting to take note of. Sprint, Nalebuff points out, recently began pushing what it calls its “Fair and Flexible” plan, which adjusts customers’ calling plans to minimize overage charges. Sprint is betting, in other words, that customer loyalty is worth more, in the long run, than sneaky fees.

They consider the cost of ink in owning a printer, and hotel costs. The quote takes a customer-centric view of what will most effective, but consider the switching costs (in terms of time, aggravation, and sometimes money) for banks, credit card companies, telephone service providers, and internet service providers. Not to mention that some hidden-fee situations such as utilities or cable TV may be monopoly situations. Frankly, we get shafted by these firms because they can. Because it’s too hard to make the switch or there is no one to switch to. It’s not loyalty on our part, or tolerance for this sort of crap, indeed there may not be any place to go. Do you see CitiBank or Wells Fargo or Bank of America as having dramatically different fee policies (we could investigate and see, for our specific needs, what the advantage is, of course, but my point is that these companies are all playing these games, and if you start factoring in the research required, it’s just silly)? Of course not.

We live in a society of choice, but not ubiquitous simple cross-category choice. If Coke on the shelf is going to charge a hidden fee, and Pepsi on the same shelf isn’t, then after the first time, we might consider Pepsi differently (for those who aren’t powerfully loyal to a beverage). If one gas station has a hidden, and the one across the street doesn’t, sure. On a purchase-by-purchase basis, there can be lots of choice.

But for an ongoing relationship, who the hell can deal with making changes. Would you change your car insurance? Your house insurance? Your health insurance? Your calling plan? Your broadband provider? Not if you could help it, not unless driven to it.

I wish it was easier, and I appreciate the pro-consumer attitude the Chron quotes, but I just don’t think it’s realistic.

With every trend, comes a counter-trend, and a counter-trend?

With every trend, comes a counter-trend, and a counter-trend? We’ve seen Indians come to Silicon Valley to be successful, and then last year we heard about successful Silicon Valley immigrants from India returning home to be more successful, and now we’ve got Silicon Valley folks (Americans from Indian and non-Indian backgrounds) who are moving to India (not just for jobs, but for life lessons)

Dharma Sears, 27, who also grew up in Oakland, said he was seeking a different kind of employment when he landed his first job at a private Indian school. He now teaches at the American Embassy School in New Delhi.

India made a lot of sense,” he said. “It’s an English-speaking country. I could find a job in a school easily enough.”

Living in Europe didn’t appeal to Sears. “I wanted to be in a country starkly different. India is a changing and dynamic country.”

Ashok Bardhan, senior economist at the Haas School of Business at UC Berkeley, said that India is facing a shortage of skilled workers and while the large majority of employees inside any one company is still Indian, there is a concerted effort to recruit from abroad.

Indian Americans are especially attractive because they can easily adapt, Bardhan said. “They’re a bridge between a different business culture practices in the U.S. and India. This is the key competitive advantage.”

He added: “There’s quite a significant number of people working at software companies. And at relatively higher positions are folks from the Bay Area.”

Statistics are hard to come regarding the number of young Americans landing jobs in India. Seasoned observers have noted a small but growing number over the past five years.

Robert Hetzel, director of the American Embassy School, said working in India has become a resume builder for many young Americans.

“You can’t pick up a news magazine without (reading) an article about the growth of the economy and the opportunities that are here,” he said. Young Americans “see it as a stepping-stone to a global economy. It says you’ve been in one of the drivers of that economy, India.”

India’s fast growing high-tech and banking companies need skilled employees. Infosys Chief Financial Officer Mohandas Pai said his company has grown from 500 to 50,000 workers in 12 years and has hired many young Americans.

Americans used to say “Go west, young man,” said Pai. “Now it’s go east. With the rise of India and China as economic powers, we are seeing life-changing opportunities here.”

Cultural adjustments come along with working in India for young, single Americans. Erik Simonsen, a 26-year-old native of Riverside, earns a low-six-figure salary working with the investment banking research firm Copal Partners in New Delhi. He rents a nice three-bedroom apartment with cable TV and paid utilities for $400 a month. But he can’t get a date.

“It’s not a place where you just approach somebody and introduce yourself,” he said. “There are expectations from the family. They usually date people from their own communities.”

With a smile, he admitted, “I’ve spent a lot of nights on the couch by myself.”

Hetzel said social life constitutes the biggest worry for his teaching staff. If American staff decide to leave India, he said, “that’s probably the No. 1 reason. They have not been able to create a social life for themselves. Culturally, that’s challenging here.” Single women face the same problem. Couples tend to marry much younger in India than in the United States. By the time a woman hits her late 20s, Indians “think something’s wrong if you’re not married,” said Hetzel. Nightclubs rarely attract single people in their late 20s or 30s.

“All the eligible men are married,” he said.

India has other downsides. Young American transplants immediately notice the poverty and crowded conditions. Simonsen said the first time he emerged from the New Delhi airport, it seemed as if people were “stacked on top of each other.”

“Then you snake into the parking lot and then into a rickety cab,” he said. “At 1 a.m., the highway is packed with trucks, honking, and you’re weaving in and out of them. It’s a pretty crazy first couple of hours when you get here.”

All the Americans interviewed for this story said, despite the difficulties, they wouldn’t give up the experience of living in India. They praised the opportunity to work at interesting jobs and immerse themselves in another culture.

Simonsen said he expects more Americans to head east. “A lot of Indians now in Silicon Valley are coming home, and they’re taking some of their western co-workers back with them,” he said.

“There’s an excitement here that we haven’t seen since the dot-com boom.”

Market pricing


click to enlarge

Wow – what the market will bear is clearly the rule with hotels.

It was hard to find a place to stay in Houston that was within 30 minutes of our meetings. Turns out the Rodeo was in town that week and so rooms were scarce. We stayed at a really crappy La Quinta Inn in a depressing part of nowhere suburbia.

And here’s what the room cost

2/28: $41.45 per night
3/1: $243.58 per night
3/2: $22.16 per night

One night is worth more than ten times what the other night was worth?

Unbelievable. It was crappy every single night.

Taiwanese researchers make colorful rice

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Edited from this story

With Taiwanese youngsters increasingly drawn to Western hamburgers and fries, government researchers are trying to lure them back with something more traditional – sort of: rainbow-colored rice.

Yellow rice gets its hue from curcumin, an herb that’s a spice in curries and is believed by some to be an antioxidant that may help prevent cancer. Green rice comes from the nutritious bitter gourd, often used in Asian soups and stir-fried dishes. Pink comes from tomato, and purple from a mixture of vegetables.

The colored rice will likely cost about twice as much as plain rice.

Besides the obligatory “wow aren’t they weird in Asia” reaction (which is ridiculous, because didn’t green ketchup start in the US, after all?), it seems like the story is equal parts science and technology, culture, marketing, fashion, and of course economics (2x for healthy rice? nice price!).

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