April 11, 2011

Management as the Science of Squeezing

Certain theories of management might not only hurt the business, but also reduce the need for managers.

Posted by Justin Katz at 2:00 PM

January 4, 2011

Starting Up to Capture Talent Flow

We can come up with whatever buzzwords we want, but what Rhode Island's economic policy needs remains the same.

Posted by Justin Katz at 6:26 AM

April 30, 2010

The Misdirected Swagger of the Go Getter

Folks on Wall Street appear to think themselves the archetypes of professional workers. I'm not so sure.

Posted by Justin Katz at 7:24 PM

April 10, 2010

What Are You Working Toward?

A recent Dilbert cartoon captured a lamentable dynamic of the modern workplace.

Posted by Justin Katz at 2:12 PM

March 1, 2005

Shipping in the Margins

Glenn Reynolds has been blogging about his signing up for the Amazon Prime program, through which customers pay $79 for year-long free two-day shipping. The first intention that Glenn has for his new deal is to replenish his supply of nutrition bars as needed, rather than travel to Target, buy in bulk, and be enticed by storefront wiles. Now, reader David Walser has worried Glenn that too many Amazon Prime subscribers might smash Amazon's plan:

You wrote that Amazon's flat fee shipping program has changed the way you shop. I suspect that Amazon wanted to change your shopping patterns, just not in the way yours have changed. They wanted you to buy more of the high margin stuff, more frequently. You seem to be buying more of the lower margin (although very nice) products, more frequently. I doubt that Amazon's margin covers the shipping cost on a typical order of food bars. If the flat fee shipping program is too successful in changing shopping patterns to lower margin goods, Amazon (or their shipping partners) could lose a ton of money.

Now, I don't know how quickly the Reynolds household goes through a 15-bar box or how many Glenn is ordering at a time. Assuming he orders one box at a time, the two-day shipping fee would be $8.99. In other words, Amazon could send almost nine shipments of nutrition bars to the Reynolds household before it had to sacrifice a dime on shipping. And let's not forget that 1) these are sales that the company would not have made otherwise, and 2) Amazon takes some unknown cut of the shipping charge, so it can probably send many more shipments before it's actually lost anything.

The more important consideration, however, is that Amazon's potential customer base is still wide open, pending a crack in the resistance to ordering products online. Internet star that he is, Glenn is comfortable in the environment, but many people still are not, with a halfway group (including me) that's comfortable ordering, say, books, but not flat-screen TVs. If Amazon could entice such customers to become accustomed to using its Web site as a first-source for all sorts of little stuff, the big stuff will surely follow, either independently or as "might as well" items tacked on to the regular shipments. Moreover, if — hush, hush — Amazon Prime members share their deal with people other than the allowable "four family members living in the same household," then more people will advance to the halfway group.

The reality is that Amazon and other online merchants don't just have to change "shopping patterns"; they have to change shopping culture. I'll tell you this: in my two weeks as a UPS driver's helper before Christmas, I noticed that Amazon-package houses tended to be regular stops and to receive multiple packages each time. The company can afford to eat the cost of a whole lot of snack shipments before it outweighs the largesse of special-occasion splurges.

I've no special insight into the company's business workings, but it seems to me that, unless a large number of existing Amazon customers use the new option to ship regular orders of low-margin items that they would have paid full shipping price for anyway, Amazon stands only to gain.

Posted by Justin Katz at 1:43 PM | Comments (2)

January 22, 2005

Business Decisions Without Consequence

A recent George Will column makes points advisedly incorporated in the discussion about balancing the market and the government:

Three decades ago sociologist Daniel Bell postulated the "cultural contradictions of capitalism.'' He meant that capitalism, by its success, subverts its cultural prerequisites. At first, capitalism depended on a Protestant asceticism -- thrift, deferral of gratification, industriousness. But capitalism produces wealth, and a shift from production to consumption -- the marketing of hedonism -- as the economy's motor. The banishment of asceticism by acquisitiveness means the systematic inflammation of appetites and the undermining of stern capitalist virtues. ...

Market forces, including the gales of globalization, prod capitalist entities, in their pursuit of efficiencies necessary for survival, to shed pensions. This heightens the entire public's sense of insecurity. But the welfare state exists to assuage insecurities. So this dynamic of capitalism draws the economy deeper into regulation, overruling market forces that make possible capitalism's rational allocation of wealth and opportunity. Hence capitalism's dynamism, a virtue which entails insecurity, reduces capitalism's virtues.

We place a great deal of weight on comfort and security in our society, and our doing so speaks well of us as a people. Nonetheless, in succeeding in our intentions, we're losing a sense of hardship's value. Even as I strive to claw my way out of them, I can see how my own financial difficulties have been to my benefit in other, more-important ways than laying a foundation for economic gain. Assuming my family and its members survive the strain, I've no doubt I'll one day look back on this time as having been for the best.

Apart from general principles, Will's column is particularly relevant to the discussion on Dust in the Light because it deals with the U.S. government's Pension Benefit Guaranty Corporation, which insures companies pension programs:

The PBGC is taking over the pilots' pension plan of United and will soon have all of US Airways' pensions, just as in recent years it took over many from the steel industry. Three other airlines are in bankruptcy court to dissolve imprudent labor contracts. No legacy airline can compete with another that has dumped its pension burdens in the government's lap.

Seeking to protect workers who've invested their lives in organizations that could cease to exist before retirees do, the government has simultaneously protected companies from their own imprudent commitments (and unions from their inclination to push for them). It's probable that there are limitations that mitigate matters somewhat, but from the public's point of view, it appears that companies have essentially negotiated a public benefit.

I've no justification for differing with Will's suggestion that the "PBGC probably is necessary." The difficulties of balance, however, illustrate just how many angles must be considered when attempting to soften that cold, hard marketplace.

Posted by Justin Katz at 3:30 PM

March 31, 2004

Information a Day Late

Just yesterday, I had a discussion about international high-tech job outsourcing, and this finding would have been extremely helpful:

According to the Study, U.S. spending for offshore outsourcing of computer software and services is expected to grow at a compound annual rate of almost 26%, increasing from approximately $10 billion in 2003 to $31 billion in 2008. During the same period, total savings from the use of offshore resources will grow from $6.7 billion to $20.9 billion. Using offshore resources lowers costs and boosts productivity. As a result, inflation is lower, interest rates are lower, and economic activity is higher. The increased economic activity creates a wide range of new jobs, both in IT and other industries. While there are some dislocations that affect both industries and regions, the overall economy adjusts so that offshore IT outsourcing actually creates new jobs. Over 90,000 net new jobs were created in the U.S. through 2003. The number of net new jobs is projected to grow by 317,000 in 2008. The impact on U.S. jobs does vary by industry sector, with the major beneficiaries for the next five years being construction, transportation and utilities, education and health services, wholesale trade, and financial services.
Posted by Justin Katz at 10:36 PM