Companies often run into trouble when they offer a service at a zero price. Not always, of course. Many all-you-can-eat buffets continue to thrive even though the marginal cost of the next chicken nugget is zero. And many content providers manage to stay in business by selling radio, TV, or display ads against the free [...]
Archive for the ‘Business’ Category
Why Free is a Bad Price, American Airlines Edition
Posted in Business, Microeconomics, tagged Adverse Selection, Airlines, Microeconomics, Moral Hazard, Pricing on May 7, 2012 | 1 Comment »
Is Incentive Compensation a Giant FIB?
Posted in Business, Finance, Microeconomics, tagged Business, Finance, Incentives, Inequality on February 28, 2012 | 5 Comments »
Harvard Business School professor Mihir Desai believes American companies and investment firms have erred–horribly–by linking manager compensation so tightly to financial market performance. In the current Harvard Business Review, he identifies this as a giant FIB, a Financial Incentive Bubble: American capitalism has been transformed over the past three decades by the idea that financial [...]
Financial Answers Made Simple
Posted in Business, Finance, tagged Finance, Start Up on February 12, 2012 | 3 Comments »
For the past year, I have been advising a start-up, FedWise LLC, that is working to improve American’s financial literacy. (Full disclosure: I have a small interest in the company.) FedWise’s vision is simple: to provide helpful, unbiased, reliable information to consumers about financial products and services like mortgages and credit cards. The company recently [...]
Cuddle in Coach, But Don’t Get Too Comfortable
Posted in Business, Microeconomics, tagged Airlines, Microeconomics, Pricing on December 9, 2011 | 1 Comment »
Yesterday’s Wall Street Journal had a fun article about Air New Zealand’s latest innovation: Cuddle Class. As “the Middle Seat” columnist Scott McCartney describes it: Steve Metz of Houston cuddled up with his wife Jackie and slept as they flew to New Zealand on a small futon. This flying couch wasn’t in a private jet [...]
More on Apple’s Skill at Operations
Posted in Business, Technology, tagged Apple on November 7, 2011 | 1 Comment »
A few weeks ago, I discussed a Quora thread explaining “how Apple sends technology back from the future.” The gist is that Apple is phenomenally good at managing its supply chain, particularly for innovative technologies that haven’t hit the market yet. Bloomberg BusinessWeek expounds on that theme in its latest issue, beginning with the story [...]
Bank Marketing When Interest Rates Are Almost Zero
Posted in Business, Macroeconomics, tagged Banks, Capital One, Interest Rates, Marketing on October 13, 2011 | 2 Comments »
Judging by all the ads I saw on my commute this morning, Capital One has rolled out a new marketing campaign. At least half-a-dozen ads on my Metro car announced that Capital One offers interest rates that are five times higher than offered by their competitors: And what is that 5x interest rate? Just one percent. Such are [...]
Netflix and the Benefit of Flip Flopping
Posted in Business, Technology, tagged Netflix, Sunk Costs on October 11, 2011 | 2 Comments »
Reed Hastings, CEO of Netflix, gave subscribers some good news yesterday: We are going to keep Netflix as one place to go for streaming and DVDs. This means no change: one website, one account, one password … in other words, no Qwikster. As a long time subscriber, I can only say Hallelujah. But I am [...]
How Apple Sends Back Technology from the Future
Posted in Business, Technology, tagged Apple on October 6, 2011 | 2 Comments »
Over on Quora, an anonymous author has a fascinating post about another dimension of Apple’s and Steve Jobs’ brilliance–managing its supply chain: Apple has access to new component technology months or years before its rivals. This allows it to release groundbreaking products that are actuallyimpossible to duplicate. Remember how for up to a year or so [...]
How Fast Does the Stock Market Forget False News? About Seven Days
Posted in Business, Finance, tagged Finance, Stock Market, UAL on October 5, 2011 | 2 Comments »
The New York Federal Reserve just posted an entertaining analysis of an “Internet blooper” that struck UAL, the parent company of United Airlines a few years ago. As authors Carlos Carvalho, Nicholas Klagge, and Emanuel Moench note in a blog post: On September 8, 2008, a six-year-old article about the 2002 bankruptcy of United Airlines’ parent [...]
Groupon’s Revenue Measure Shrinks More Than 50%
Posted in Business, Technology, tagged Accounting, Business, Groupon, Internet on September 24, 2011 | 3 Comments »
About a month ago, I remarked on Groupon’s explosive revenue growth (and its equally impressive cost growth). The company revised its financial results yesterday, and the revenue picture looks less explosive. In the latest update of its S-1 registration statement, Groupon reported $393 million in Q2 revenues. That’s a remarkable figure for such a young company but a far [...]
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