Google+ Followers

Friday, August 25, 2017

Pay and the Perception of Fairness

     Once upon a time, I worked for a high-tech division (Bell Laboratories) of a company. Within the company, the technical people knew what the pay scale was on a statistical basis. Each level of promotion was paid the square root of two, on average, times the average pay of the level below. Thus, my department head (the manager of my manager) would, on average, be paid twice the amount that someone at my level, on average, would get paid. This went up at least four levels. It did NOT go to the very top (more on that later) but it did go up a ways.
     There were sub-levels to which the square root of two did not apply. For example, the equivalent of a SW Engineer I versus a SW Engineer II did not connect to the ratio of the square root of two. But, in general, people knew what type of average deltas existed between levels (and even sub-levels, to a point). I keep saying "on average" because, as was (and still is) true for most companies, the monetary amount for each level was not publicly discussed -- neither the average nor the range.
     This worked well. The precise amount did not matter too much. Maybe each level could have increased by the square root of three rather than two. It couldn't be a lot more than that, however, and still be considered "fair". It was known, and understood, that each level had more responsibility than the previous but -- beyond a certain ratio -- pay ratios could get out of whack (no longer at a reasonable point). Perception of fairness depended on two things -- visibility of ratios and a translation of that to a delta of responsibilities and duties.
     How high up in the hierarchy did this pay ratio between levels apply? I don't know. As stated earlier, it made it four levels up. Beyond that, I don't know except that it did NOT apply to the highest executive levels. Thus, at some point, the ratios were discarded.
     This discrepancy, or abandonment, of fairness at the higher layers was a topic of discussion. Most of the time it was just something in the background as we were doing OK within the company and system. One year, however, the CEO doubled their salary while doing a pay freeze for the rest of the employees. That did not go down well but it was known that most of the people were there because they could do the work they wanted to do -- not primarily for the money. But the perception of fairness never returned and morale never quite made it back to the same levels.
     So, how should a CEO be paid? What is fair? If you used the formula I mentioned at the beginning here, then a CEO of a huge corporation should be paid about 16 times that of a regular worker. Is that close to the reality? Nope. Not even in Poland, where a CEO gets about 28 times that of a regular worker. If we used the (straining the "fairness" doctrine) square root of three (rather than two) ratio, it would mean that a CEO of a huge corporation would be paid 81 times that of a regular worker.
     What is it like in the United States? About 354 times that of a regular worker -- it continues to go up and up. The highest in Europe is a ratio of about 148 to 1 in Switzerland. An article with more numbers is here.
     So, once again, what is fair? More important, what meets the PERCEPTION of fair? Perception of fairness goes hand in hand with perceived mobility. If I can work hard and get that golden apple, that brass ring of the merry-go-round, that round-the-clock money mill then almost anything can be perceived as fair. Dreams of winning the lottery just don't allow reality and statistics to interfere.
     Note that there are two categories of CEOs -- those who are heads of private corporations and those who are heads of public corporations. The CEOs of private corporations often have relatively low salaries because they have large amounts of equity (ownership) and recognize that putting money back into the company (if successful) will give them a higher eventual rate of return. Taking out a lower salary allows the money to be used to actively grow the company. When I was "Vice President of Engineering" of a company that I co-founded, my salary was only a little (not even the square root of two ) higher than the rest of the employees.
     The CEOs of public corporations have salaries, perks, "golden parachutes", and so forth determined by the board of directors. They will have equity as part of their compensation but their salaries have no direct interaction with the equity. In other words, a lower salary does not translate into higher potential equity and a higher salary does not mean less equity.
     So, how is the compensation package of the CEO of a for-profit (non-profit is similar but generally has a ceiling beyond which people won't tolerate) public corporation determined? First, please note that public corporations (those which have had a successful Initial Public Offering (IPO)) are going to be beyond the small scale of most private corporations. Saying, as an example, that an average employee's compensation package (salary, taxes, benefits, physical overhead, etc.) is $50,000/year this would indicate an average U.S. CEO salary of $17.7 Million/year. Obviously, a company grossing $15 Million/year cannot pay this. Probably a company would have to start reaching a $500 Million/year gross income before their board of directors would even consider a $17.7 Million/year compensation package for the CEO.
     The above referenced study actually indicates the average CEO salary in the U.S. is approximately $12.3 Million/year (less than that $17.7 Million/year of the example calculation). I have not seen a distribution graph of CEO salaries. However, the highest paid CEO in the U.S. for 2017 is $236 Million/year. My suspicion (not verified by any hard data) is that the distribution does not follow a standard bell curve. I think that there are a lot of lower salaries from smaller companies that bring down the average from the higher paid ones. But, since the average still exists at 354 times average worker, there also has to be a lot of very highly paid ones.
     These highly paid CEOs are not really in the salaried employee category. They are Rock Stars, Professional Sports First Draft Picks, Celebrity Panelists, and so forth. Their compensation packages are based on competition between boards of directors which keep inflating compensating packages in order to "win" -- show that they have a better CEO because they are paid more. There is no tie between company performance and package and most have such extensive separation packages that someone can be hired as a CEO, do a horrible job, and leave with enough money to support 1,000 (or more) families for a year.
     Boards of directors are theoretically determined by the stockholders -- but stockholders care primarily about quarterly results and, with the mega corporations, even effective losses of hundreds of millions of dollars, don't affect the bottom line much. If that is so, does it really matter what the CEOs are paid? Some say no, it doesn't. Personally, I think (like the situation from my earlier career days) it poisons morale. And, whether it affects the stockholder's value or not, that $236 Million/year is paid for by at least $1000/employee in the one company. In other companies, it may affect the "average" employee even more. But it is still all part of the package of valuation of employees at companies -- not just the CEO's compensation package.

Saturday, August 12, 2017

The Fragility of Life

     Growing up, I was not in the very bottom of the the U.S.'s income classes but, as discussed in my blog on Democratic class structures, we were in the lower income region. This basically meant that we survived but we never quite knew how we were going to survive. Each day was a recognition that my father might not have a job after the end of that day, my mother might be heading out again to find yet another service job, and that it might even mean moving once again. But, in comparison to many, I was still lucky and blissfully ignorant of how bad it might be -- I always had food, shelter, clothing and, although I was aware of those who did not have such, since I had always had them, I still mostly felt that I would continue to have them.

     This stays with me, on a daily basis, as part of my individual psyche. Each day when I go to work, I recognize that I might not have a job when I come back. When I spend money I am concerned as to whether I am saving enough -- do I REALLY need that item -- or should it go into savings? But, if I put it into investments or savings, is it really safe? Should I, instead, live fully with my income as it is and just live with the reality that it might go away at any moment?

     Life is insecure. Life is fragile.

     My children haven't faced that environment and it is both good and bad. They don't have the fears and they do have a feeling of security. On the other hand, it is hard for them to really understand how others can be so concerned about their ability to live into the future. Empathy is also more difficult when you have always had store-made shoes in which to walk.

     Life is fragile. It can be fragile because you are aware that a job is something that not everyone has and which you might not have after the end of the day. Some groups face something even more directly tangible -- you might be dead because someone feeling anger, fear, or hatred decides to kill you as you walk along the street.

     Recognizing that life may end at a moment's notice affects the way people live. You live each day as best as you can -- or you give up (either option is possible with, in addition, complex mixing of both). You embrace family while, at the same time, you cherish them each day because either you, or they, may be lost before tomorrow. Or you reject family -- afraid of the pain that will occur if you lose them. You may live life loudly -- shouting instead of speaking -- out of joy of life. Or you may retreat into your own world drawing up the blanket to hope that the angels of death and misery will pass you by. Everything may be met with a laugh, perhaps your best shield against the pain and fear. Or there may be a blank face to the world trying to never give offense, never be noticed.

     In regions of the world where war and poverty are more prevalent on a daily basis, life is seen as ghostly. You don't name your children until they are one or two years old because the chances are good they won't live that long. Material objects become meaningless (or everything) because a bomb may take them away as you are sleeping. Knowledge becomes more important because, most of the time, that cannot easily be taken. At the same time, the ability to survive may be paramount and leave no time or energy for seeking out knowledge that is not able to be immediately put to use.

     Daily awareness, conscious or subconscious, of life's fragility molds the way many of us live our lives on a day to day basis. We may fight for greater opportunities and equality of treatment. Or we may take the other end of the teeter-totter and hold tight to what we have and denying others out of fear of loss of our own -- the fear of scarcity. We may look around and decide to blame others for our situation. Or we may look around and recognize what we do have and embrace that.

     As difficult as being aware of life's fragility may make life -- lack of awareness, in my opinion, is much worse. No fear for the future because it exists as a tantamount right and anything done to stay on top of the mountain is as natural as water running downstream. Everyone else deserves to be in an inferior, lesser, position, because the divine right of ownership and leadership belongs to oneself. If you have the power to do what will benefit you then you use it for such. More is never enough because you are entitled to it all.

     I don't have any decent arguments that indicate that reincarnation is a reality -- but it is something in which I WANT to believe. Each of us is placed in life with certain obstacles (even being rich can be an obstacle depending on the definition of the goal) and we struggle forward. Wouldn't it be nice to have further chances with newer, possibly less difficult, obstacles as we give it another try?

Saturday, August 5, 2017

Equal opportunity -- that fragile illusion

     Most people think that everyone should have equal opportunities -- opportunity for financial success, opportunity for professional success, opportunity to be and do what they want, opportunity for happiness (in whatever way it is defined). There are those few who feel that they can have what they want only by denying others -- but I believe that most feel that equal opportunity is a good goal.

     There are also people who state that they believe that this is reality -- that there truly is equal opportunity for everyone. If someone is poor, it is because they just haven't worked hard enough. If someone doesn't have health care, it is because it wasn't really important to them to achieve. If someone has not achieved the professional and career level that they want, it is because they aren't good enough and/or haven't worked hard enough.

     As is often true of perceptions, there is a bit of reality mixed in. All the above COULD be true -- maybe the person did not work hard enough, maybe they weren't good enough, maybe something wasn't important enough for them to choose -- they chose something else of equal cost that was of more immediate importance for them. But the idea of equal opportunity is that each person has EQUAL access to the opportunities that allows them to succeed in whatever definition that may be.

     As I said earlier, most people think this should be and there are some who feel that that is the way that it is. It is a fragile illusion and is just not true for most people. Obstacles exist and not everyone has the same obstacles, or the same amount of obstacles, or the same ease of working through obstacles. While it is still possible for someone with many, many, obstacles to achieve "success" they may need to work many times harder AND encounter rare opportunities that many in their situation do not encounter (that is, they have to have "luck") as opposed to another person who has to work very little and have many opportunities presented.

     At heart, there are a number of different areas which present these uneven obstacles. Although I will present them in categories, they might fit into multiple categories or be "properly" classified in a totally different category. I won't argue about such -- what I am presenting is the idea that, because of all of these obstacles which are not the same for all people, equal opportunity is an illusion and, in order for the chance of "success", sometimes outside help is needed. Some of these areas include:

  • Nutrition. We presently have young children in Flint, Michigan growing up having had excess levels of lead in their drinking water. This will affect them all their lives. With continuously deteriorating infrastructure, including water lines and treatment plants, this is not unique to Flint even though it presently gets the headlines.

    Although few starve in the United States, malnutrition still exists (see previous blogs on nutrition and economics) because good nutrition requires good food and time to prepare and the poor often do not invest in this. With malnutrition, the full individual potential is difficult to achieve.
  • Income. Income facilitates many things. It allows access to better schools and teachers. It allows more time to be spent on activities for learning and relaxation rather than for survival. It provides access to networks of people who also have easy access to facilities and opportunities which can make a huge difference.

    Even though general attributes which may lead to success exist independent of wealth, or pigmentation, or ethnic history, income does help, and always has helped, to eliminate obstacles and ease the road to opportunities.
  • Prejudices. Opportunities can be explicitly denied to others because of the prejudices of those with the power. While prejudices can also exist on the part of the less powerful, those with power have the ability to "close the door" to others. Prejudices may be from most recent nationality ("Irish need not Apply", "No Chinese allowed", "Wetbacks not admitted", ...). They may be based on "race" (usually applied based on skin pigmentation, speech, or body patterns). They can be based on gender (male, female, trans-sexual, etc.). They can be based on religion, or ethnic background, or any other aspect that can be used as a separating label.

    Whatever prejudice exists, it can be used by those with power to limit opportunity and often has, both in the past and in the present.

  • Health. "People have diabetes because they choose a bad lifestyle." Sorry, but I did not choose my mother or my grandfather. Perhaps I could have eaten, or lived, in a manner that would have lessened my chance to get diabetes --  but I have no control over my genetic history, the preservatives, hormones, pesticides, insecticides, food additives, or other aspects of our environment which are now leading to rising cases of diabetes.

    People do not choose to be born blind, or deaf, or without use of some of their limbs. While there are many strong, courageous people who have overcome such obstacles -- they are still obstacles that others do NOT have to combat and, thus, prevent equal opportunity.

    In addition to birth conditions and genetically-inclined diseases, people encounter other health issues through their lives. With proper health care, most can be worked with, but many people in the U.S. do NOT have full access to proper health care. Some health issues can arise out of personal choices (smoking, drinking, illegal and legal drugs, ...) and some feel that others should not help support them in the consequences from these deliberate choices. But there are many other choices that are NOT deliberate and even the deliberate bad choices are made from an environment of unequal possibilities.
  • Appearance. OK. It shouldn't be this way but a taller person is more likely to be elected to office. A more fit person is more likely to be offered an opportunity that interacts with the general public. Societal views of "attractiveness" gives an advantage, or disadvantage, in the getting of jobs and of the likelihood of getting raises.
  • Access. I talked about the aspect of income of giving access to opportunities. However, there are also physical access aspects. Currently, there is debate about getting rural access to broadband Internet -- it costs more to provide such but there is reluctance to charge rural people more (similar to the issues involving landline telephone access in the early and mid 20th century).

    If you live an hour from the closest library and cultural centers, it will make a difference. If your local town, or neighborhood, has limited possible choices and you cannot go elsewhere, it will make a difference.
  • Education. Beginning with the time of Benjamin Franklin, and before, the idea of public education has been an important one to improve the chances of equal opportunities. Funding has always been a handicap to providing equal education but the struggle has continued with parents and teachers advocating for better, and more equal, public education.

    The "successful" -- even those who have been able to make use of private education -- have equally made use of public education to provide the workers needed for them to achieve their goals. Public education is needed to provide for the various types of workers needed within a society. Debate exists about how far along financial help should be provided for education -- but educated people are needed by society and, in my opinion, society should pay for what society needs. It is certainly an area to debate but it is true that the rich cannot exist without public education even if they do not directly make use of it.
  • Role Models. Sometimes the use of language for various positions is made fun of as being "politically correct". However, if a postal carrier is always referred to as a mailman then people WILL think of a "man" in the role -- even though the gender has nothing to do with it. Similar to a congressperson. It would be possible to refer to people as congressmen and congresswomen but, in reality, gender has nothing to do with the role and it is both easier, and more accurate, to refer to them as congresspeople.

    On the visual side, if people see people who come from similar ethnic or religious heritage in a particular role, they will think that that is a role in which they might find themselves at some time. If a CEO that is pictured is a woman as often as a man, then the term will become non-genderized. People find it much easier to imagine themselves in a specific role if others who remind themselves of themselves can be seen in those roles.
  • Physical Environment. A home is much more than a house, or apartment -- but having someplace stable to call home is important to people. It is important to their sense of stability and of being able to make plans for the future. In a similar fashion, it needs to be a safe place -- no rats coming out of the toilet or patches of plaster falling off the ceiling in the middle of the night. It needs to be sufficiently warm in winter and bearable in summer so that they can study, think, and relax.
  • Home Environment. A final (for this blog) category of obstacle is that of the home environment. This is in addition to the physical environment. Are there people to talk to? People to encourage and help? People to comfort and aid when things don't go wrong? Is there an environment of angry survival or hopeful loving comfort and support? While there is not that much, in isolation, that society can do to help in this -- it CAN be helped with the removal, or minimizing, of the other obstacles that people encounter.

     These are just a few types of obstacles that can stand in a person's way to the path of opportunities. What others come to mind for you? What are the best ways to make obstacles more even and allow something closer to "equal opportunity"?

Saturday, July 22, 2017

Hunger and appetite -- the lost relationship

     "Eat your vegetables." "Clean up your plate." "Don't you know that there are starving children in XXX and YYY who would love to have that food?" It may not be quite as true for children in the United States as it was 50 years ago, but I suspect many of the same statements are heard around the table. Of course, the last question of food distribution is more of a political issue than an economic or nutritional one.

     On the positive side, I was not allowed to become a "picky" eater. If it was cold, I ate it. If it was spoiled, I ate it. If it was burned, I ate it. If I hated it, I ate it. (If I loved it, I ate it but might, or might not, have more.) I remember one time when I refused to eat something and I was required to stay at the dinner table until I cleaned my plate. As I recall, that was at about 4 in the morning. I possibly could have (and maybe not) "toughed it out" and "succeeded" in not eating it but I reached the point of realizing that I might win that battle but I would lose the ongoing struggle.

     On the negative side, there was no control over portion size or what I ate. In fact, on those rare occasions when we ate out, I was not only expected to clean my plate but my mother seemed to feel that I was there as a garbage collector to clean her plate as well ("the growing boy needs his food and we are not going to waste any"). Any relationship between hunger and eating was burned out of me.

     As a result, it is probably not a surprise that I had problems controlling my weight. My older brother was "blessed" with a more active metabolism and didn't gain weight until after his metabolism changed when he was about 30. He stayed skinny. I did not. It wasn't until I was away from home and had direct control over my eating that I succeeded (with the help of a swim class and a mile of swimming per day) in getting my weight under control.

     That success did not carry over to the basics of appetite and portion control. I still had no correlation between how much my body needed and how much I ate. So, over the years, I regained the weight. During this same period (from the 1960s on), portion sizes at restaurants started on their continual gradient  (see my "Supersizing" blog about the economics behind that trend) -- and "fast foods" became more of a daily reliance than an occasional treat.

     The relationship between need and consumption is still not encouraged by the economic system of the U.S. Consumption is increased by various methods: commercials and general media as well as additives within the food. Addition of sugar adds to the calories, reduces the nutritional balance, and takes advantage of the "swallow reflex" to cause the body to want to eat beyond any (now ignored) response of fullness. Extra salt and/or MSG is added to enhance the other flavors to make it more appetizing without the need for careful preparation or more expensive ingredients.

     It is possible to escape the cycle of eating without need (in the areas of the world where food is not in shortage) but it is "swimming up stream". First thing to do is to set portion control. I now have the mantra of "to waste or to waist" -- meaning that I may waste extra food but it is not going to add to the inches around my waist. It is still difficult for me to actually throw food away so leftovers come back to the house (adding to landfill contents and, often, still being thrown away when there is no opportunity to actually need it for a meal). And people in the U.S. (not such a problem elsewhere) expect larger portions for the prices that are paid.

     After portion control (which can be done by mathematics rather than recovering one's ability to feel full) comes a deliberate reduction (or attempted elimination) of refined sugar and carbohydrates in the diet as well as the artificial sweeteners and substitutes which are, most likely, no better for your body (and possibly a lot worse). Not eating out gives much more control but processed foods are more accessible and more economic than home-prepared foods. I can buy grated cheese for less than I can buy block cheese and grate it myself (economics of scale, packaging, and distribution). In other words, a significant change in lifestyle as well as ignoring the economic, commercial, and media pressure to do otherwise is needed. Very difficult.

     Another item which can help is to take time with meals -- both in preparation and in consumption. My wife talks about the 10 minutes that we get to spend with our sons at the dinner table before they head back off. In many countries, and societies, that is a half-hour or more. The average amount of work hours in the United States is so high that various other non-work activities are cut down. And one of the dominant areas of reduction is in meal time.

     I am still fighting (at almost 60) to regain a relationship between need and consumption -- hunger and satiation. I make some progress but it is not easy -- society has evolved to make it undesirable for it to be easy. When you reach for the next bite of food, start asking yourself (this will slow down your eating also) whether you really want it. You may be surprised at the answer.

Saturday, July 8, 2017

Automation, employment, and UBI: how do they interact?

     In the early 1800s, groups of English craftspeople banded together (in a loosely organized fashion) into groups called Luddites. They were primarily home workers who did piecemeal weaving and other hand work which was in the process of being displaced by automation. In this case, it was a matter of large mills being set up with machinery that allowed much more work to be done with many fewer people. Their existing livelihoods were threatened and they rebelled -- destroying equipment and damaging factories until they were brought under control by continuously increasing violence on the part of the shop owners and government. This was the foundation of displacement by automation -- local retraining and dispersement of labor.

     In the world today, a first phase of economic displacement has occurred because of unequal labor laws across the world. Some areas pay low wages in comparison to where the products are sold (sometimes the wages are not that bad in comparison to other wages local to the workers). Some bypass, or do not have, environmental laws or labor laws which prevent the more severe abuse of workers in the region and/or move the burden of cleaning the environment to the general society. In this first phase, the manufacturing base is still trying to do more with less; in this first phase, it is done by moving the work to places where they can make use of people who are valued less.

     In the original Luddite period, automation came in and workers had to be retrained but the work and the labor remained local. Overall employment was (eventually) retained by retraining and by increasing the product market (increased consumerism and the rise of the "middle class"). In the first phase, production was moved to other locales to take advantage of the discrepancies of laws, working conditions, and attitudes toward general workers.

     We are now entering the second phase.  In this second phase, the cost of automation starts becoming less expensive, and more efficient, for the business owners than even that of outsourced labor and sub-component manufacture. In this second phase, it is still possible to have retraining but even with increased general education and increased consumerism it is not possible to fully compensate for the need of fewer workers per manufactured widget.

     As the tip-over occurs, the global amount of unemployment will steadily rise. There are, of course, various options. Some philosophical/economic groups feel there is no obligation by society to care about the poor -- so those without employment are free to starve or scrape by in any way they can (except by attacking the privileged, of course). Other groups recognize this economic trend and have started to set up a stabilizing economic foundation so that, as automation continues to shift and replace the existing workforce, people have the ability to live at a sustenance (ability to house, feed, and educate themselves) level.

     This concept of an economic foundation is called Universal Basic Income (UBI). It replaces various per-situation social supports (in the U.S., projects such as "welfare", "food stamps", "subsidized housing", and so forth) and allows for everyone to start off at a basic level no matter their circumstances. As they are able, and have opportunity, they add on top of this economic foundation to allow for "better" scales of living -- more space, fashionable clothes, less common foods, etc. The foundation exists for them to survive.

     As is true for the various per-situation social supports, there are questions of need versus misuse. One of the concepts behind UBI is that, since everyone is entitled to the benefit, there is no actual potential of misuse. It does require a reorientation of attitudes of social responsibility. It has the very significant advantage of being a simple concept -- although the actual implementation would require a huge shakeup of our economic structures.

     It also requires answering basic questions that are difficult and controversial. Is the ability to survive a basic human right? There is no overall consensus on this question. Should the right to have an unlimited number of children be universal or is this an extra right that must be earned beyond the foundational level of sustenance? What are the minimal needs for survival? Food, shelter, heat (where needed), and minimal clothing can probably be agreed upon but what about items such as Internet access, cell phones? Is education a universal right? To what level might it be provided by the general society?

     There are many other questions that must be resolved about UBI -- assuming that society decides that this is part of our overall social responsibility. There are social "experiments" in the process of being attempted right now and they should provide some ability to understand how various shifts change the economic interactions in society and the problems that surface.

Friday, June 30, 2017

I am not getting older, I am acquiring a new layer

     I have the privilege of turning 60 years of age this year. It is indeed a privilege but I cannot truly claim that I feel like I have been growing older -- it's just that more and more of the people around me are growing younger each year. While there are indeed parts of this body that are not running as well as they used to, there are a (too) few parts that run better than ever. I am, indeed, the same person that I used to be but, like a tree with its tree rings, I keep accumulating layers.

     Perhaps an analogy to a Matryoshka nesting doll might be more appropriate. Someone from the outside notices only the outside layer but I have access to all of the layers down to the first one that became self-aware. (That seems to vary from person to person -- some even claiming to recall their birth.)

     That doesn't mean that all of the layers are intact or equally accessible. As is true for most people, there are periods of my life that didn't go so well -- or had outside events happening that prevented (or accelerated) growth during that time. In this situation, perhaps tree rings are a better analogy; growth rings get wider or narrower depending on existing conditions for the year. Perhaps, like the view of light in physics, the layers can be seen differently depending on what is being observed.

     This view is not symmetrical -- people on the "outside" first see the outside layer of the nesting doll. And, frankly, people are not very good at observing those layers. Due to wonderful inheritances from my parents and grandparents, I got my first white hair at age 11 and was largely bald by age 30. A teenager gave me my first senior discount at age 38. (I didn't ask for it but who was I to embarrass them by refusing it?) It works in my favor now, however, as people start saying how young I look for my age .

     I say that people first see the outside layer -- but once people start getting to know others those layers start peeling away. I have an advantage, of course, because I already know what is underneath my own layers. Younger people may have more difficulty finding my layer that is parallel to theirs. One has to be a bit careful in "behaving one's age" if, for that day, you actually feel that 21-year-old within you trying to peek back out.

     One of the exercises of advancing age is to keep de-nesting the layers of the doll. If a situation calls for the attitudes of a 21-year-old then do so (tempered by the (hoped-for) wisdom and experience of your later layers). It is important to not let the layers get stuck together because there is so much that was learned and times when the attitudes and approaches of each age are the most appropriate.

Saturday, June 24, 2017

Comparison shopping: When no choice seems to be a good one.

     I am a consumer. I admit it. I also try to make conscious choices -- picking products from companies that are less harsh to the earth, that work constructively with their employees rather than against them, and so forth. These are characteristics of the companies that are important to me that lead me to consider products in the first place.

     But, beyond that, I want to pick the product that seems to be the "best" to me. In order to do that, I need to understand what qualities I want, or feel that I need. Once I understand that, I check reviews and product comparisons to see what products best match to my desires. It is a logical process but it can drive people around me totally nuts if this is not the way they approach purchasing items. (The way they approach evaluations also drives me nuts -- it is an equal opportunity situation 😄 )

     In what is referred to as a "free market" situation, it is possible to make decisions solely upon the perceived qualities of a product. Qualities can include appearance, durability, price, features, societal responsibility, and so forth. Note that the perception is what counts. If a societal section decides that orange is the most beautiful color for eyeglasses then that is it. If a tall person is looking for a car then the head and leg room of the driver's seat area will be of great importance and value. If a short person is looking then they will consider a completely different selection of cars based upon their own needs -- probably for seat adjustment and ease of access to hand and foot controls. Each person has different needs and, thus, different sets of qualities.

     Some qualities should be more objective. A new tire with a lifetime of 50,000 miles should be considered to have better wear than another tire that has a lifetime of 20,000 miles. Of course, there may be other qualities that are more important than lifetime -- such as the ability to handle wet roads in Seattle (which may be of no interest in the Sahara).

     But what happens when you have only two choices of tires -- one that has a lifetime of 20,000 miles and one that has a lifetime of 15,000? All other qualities equal, people choose the tires that last 20,000 and the manufacturer of the 15,000 mile tire goes back to their labs and tries to develop a tire that lasts 25,000 miles. This is called constructive competition. The end result of such competition is the development of better products and lower prices for consumers. This is the ideal situation for the consumer.

     What happens when there is only ONE (1) supplier of tires for a region? They sell 20,000 mile tires for a while and then they decide to start selling the 20,000 mile tires for a higher price and selling a 15,000 mile tire for the same price as they used to get for the 20,000 mile tire. This is called a monopoly situation and is not a good one for the consumer or the quality of products. Monopolies can either be established by "natural" restriction of access to resources (all of the widgets are found only in areas controlled by a company) or by economic leverage (all of the competitors are under-priced until they go out of business or are purchased by the larger company). Laws can be created to control this situation to improve the situation for the consumer and for the improving qualities of the product -- but sometimes no laws are created and the monopoly continues to exist and degrade quality and inflate prices.

     By definition, there cannot be a monopoly with more than one company in active competition. But there can be private agreements between two or more companies that allow both, or all, to expand their profits at the expense of the consumers and which produce no constructive competition. This group of two or more companies can be called a "cartel". Although no single company within the group is a monopoly, they are able to control access to resources and to the consumers so that other companies that are not part of the cartel cannot compete. Laws can be devised to restrict this but they are much more difficult to monitor and enforce -- and, once again, it is possible that no law will be created.

     Finally, it is also to the advantage of each company to restrict comparisons. This can be done by restriction of the movement of information (control of media access, for example). It can also be done by creating "brand loyalty" -- such that the consumers directly identify with the product of the company rather than the qualities of the product. With sufficient brand loyalty, a company has a base of consumers for which it needs to provide neither quality nor value.

     So, on to the title of the blog. What happens when no choice seems to be a good one? In a free market situation new companies will arise if adequate constructive competition does not take place among existing companies. Old companies die away if they cannot maintain satisfaction of their consumer base. This can only happen in a truly free market and a truly free market can only exist with regulation and supervision. Otherwise, monopolies, cartels, and other restrictions penalize the consumers and the quality of the products in favor of the profits of the companies.

     I used tires as an example of a product. In reality, anything that people choose (or do NOT choose) is a product. This may include political candidates, or services (education, for example), or resources (water, for example), as well as manufactured products. Within any product marketing situation the free market allows consumers the best options. Giving the illusion of a free market while actually controlling the choices of the consumer favors the producers. It is a continual struggle as the needs of each are weighed against each other.