Books on BART today

Bitch Reloaded
The Last Promise
The Amber Spyglass
Spanish to English Pocket Dictionary
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Books: What People Are Reading In BART

1. Simple genius
2. Psychology of selling - brian tracy
3. Strategy and the fat smoker
4. When We were Orphans
5. Harry Porter and Prisoner of Azkaban
6. The Acquitaine Progression - Robert Ludlum

I created a simple list on Squidoo. Go head and add your selection there.

A Very Simple Primer On Short Sales

This is a work in progress. So far I showed very simple transactions involving short sales and their impact on your balance sheet. Give me any feedback.

Pricing Your Air Travel

The Dallas Morning News gives us the run down of the different charges Airlines make these due to their increasing costs:

FEE SPREE

Airlines are adding fees and charges aggressively as they grapple with rising fuel costs.

AMERICAN AIRLINES

$5 to redeem a frequent-flier award online, up from $0

$6 for a sandwich or liquor,

up from $5

$15 to check the first bag (each way), up from $0

DELTA AIR LINES

$25 for booking a trip over the phone, up from $20

$100 for an unaccompanied minor on nonstop flights, up from $50

$100 for transporting a pet in the cabin, up from $75

UNITED AIRLINES

$25 to check a second bag (each way), up from $0

$150 to change a nonrefundable ticket, up from $100

OTHER AIRLINES

US Airways: $5 and up for a window or aisle seat in the first rows of coach, up from $0

Northwest: $50 for each bag weighing over 50 pounds, up from $25

Frontier: $100 to transport antlers, up from $75

SOURCES: The airlines; Dallas Morning News research

Unbundling Airfares

Southwest Airlines took a full page Ad in WSJ to air travelers about the added costs of all other airlines. The side by side comparison shows Southwest charing $178 flat and the other airline charging extras over over the same $178. The Dallas MorningNews reports:

The message is that "Southwest is not going to do that to their customers," said Melanie Mahaffey, senior manager at Southwest's advertising agency, GSD&M Idea City. "They decided to do this marketing push to show how they're different and not going to raise fees on their customers."

Southwest chief executive Gary Kelly says the airline wants credit for not charging for such things as changing a ticket or checking a couple of bags.

"It's not what customers want," Mr. Kelly said after Southwest's annual meeting May 21. "Nobody wants to be nickeled and dimed."

There are two points we can deduce from this

1. Southwest cost structure is so so low that it can still make a profit $178, even after providing all the usuals (free bags checkin, free soda ...). In other words, Southwest Bundled Price still makes money for them

2. Southwest by committing aggressively to an Ad strategy of speaking against all the fees and positioning itself as "nofees" gives up the option to every do unbundled pricing.

Either they expect their cost structure to continue if not improve or they rely on every airline doing unbundled pricing and transitioning to it without getting noticed. If it is the latter, then it does not make sense to differentiate themselves on this. So we should assume that they are continuously improving their operations and hence will keep their costs down.

It still look like they will be leaving a lot of money on the table if every other airline does unbundling.

Selling Kindle Books Below Cost

The New York Times reports on the eBook for Kindle pricing by Amazon.com. Most books go for $9.99 According to the report, most books are sold below cost, because the publishers sell the books at the same cost of print books.

Amazon sells most Kindle books for $9.99 or less. Publishers say that they generally sell electronic books to Amazon for the same price as physical books, or about 45 percent to 50 percent of the cover price.

The Kindle itself goes for $399, while the books are sold at a a lower price than print books. A model that very much resembles the iPod and iTunes songs pricing model. But Apple's strategy was to sell more iPods and the iTunes was just part of the ecosystem. Amazon on the other hand sated the change in the way books will be read in the future and made Kindle as part of its strategy to lead the next version of books. If Amazon wants to dominate the format it should have priced the Kindle at a lower price and charged a higher price (at least above the cost) to grab market share.

So why would Amazon price below cost? Conversely why would the publishers charge the same for eBook when they do not incur the same cost of physical books, like materials, labor , warehousing and distribution costs? The questions are related but the answers are not.

First the publishers see a very small uptake for eBooks while there are 100 million people who still buy physical books. The do not need Amazon's Kindle, but Amazon needs them. So they do not need to give a price rent to Amazon. They may be uncertain about DRM protection. Any sale they make on Kindle comes at the expense of the physical book sales (cannibalization), so they want Kindle sale to pay the same margin. They also do not want to discount the eBook for fear of the low price expectation creeping into physical books market.

For Amazon, I do not know why they do not do the Razor-Blade pricing. If they want to gain upper hand in the channel relation they should have priced Kindle lower than $399. The books on Kindle also provide value added features that are not available on a physical book, like search, font magnification for easy reading, convenience etc. So they should charge higher than $9.99 for Kindle books. The possible reason is that their margin on Kindle is already low and they can' cut further. On the other hand, they must be thinking that eventually they can convince publishers to cut their prices.

By some measures there are 10,000 Kindles in consumer hands. The next move will depend on how the Kindle's customer base will grow over the next 12 months.

Revised but not Rejuvenated

The GDP numbers for 08Q1 was revised to show a 0.8% growth instead of the 0.6% growth. But the growth components still do not show healthy growth. We are not in a recession by the NBER definition, but the higher expectation among consumers for a faster price increase and the anemic growth point to a worser condition, stagflation.

Budget Hero

Budget Hero is a Flash based interactive game from American Public Media (the MarketPlace people).

The game lets you play with the multiple levers the Federal Government has and see how the national debt performs. Are you for big Government? big defense spending? tax cuts?

Play the game and see.

I left all the Bush tax cuts alone and played the cards like Cap and Limit Greenhouse gases and increase Federal gasoline tax (yes the 18 cent tax that McCain and Hillary wanted waived). But it is hard to see the macroeconomic impact from the results. Here is mine.

Economics or Emotions

Professor Robert Shiller of Yale, wrote for The New York Times on the human side of foreclosures and supporting Rep. Barney Frank's plan. He argues:

It’s easy to take a stern view of this spectacle.
...
This stern view may, in fact, be winning the battle of public opinion.
...
But instead of having sympathy for these homeowners, many people blame them for their predicaments. That isn’t surprising. It’s an example of a general tendency that was documented by social psychologists decades ago.

To put things in perspective:

1. Homeownership rate is about 68% (i.e, 68% of the housing units are occupied by owners). The rest that are occupied by renters who chose not to buy, because they understand the responsibilities that come with a mortgage one can't afford and because some can never afford a house.
   
2. Is there another higher purpose for the $300 billion proposed package to help homeowners? There are 43 million people without medical insurance in America. Can we achieve a much better impact and improve the lives of a vast number of people if we employ the funds to insure the uninsured?
   
3. Shiller paints a picture of 243,353 families losing their homes, moving to other side of town. Compared to the number of renters who move continuously and are always at the mercy of the owners this is still a small number.
4. Shiller described the economical view as "stern" and referred to studies that found people attributing predicaments to one' behavior. Then how would you reconcile the enormous amounts of contributions from the public after man-made and natural disasters? Americans gave $295.2 billion to charity in 2006. Is that not helping people in predicament?
5. From Kant's Universality principle, would a similar legislation be enacted to help everyone who gets into trouble with finances? Many of the uninsured families are just one medical disaster away from bankruptcy. Should they not be helped?
   

I tend to lean on the economic side. I am however confused about what is the minimum responsibility the society has. As Kant would ask, "What moral minimum or basic human rights am I duty bound to honor?"

Conflicting Interests - Environmentalists Oppose Clean Air Plan

There was an interesting story on multi-party negotiations in the WSJ, "Environmentalists Oppose Clean Air Plan". It is not that they are against clean air but object to a plan that disallowed big trucking companies and instead encouraged owner-operators. On the surface it would look like the environmentalists support the big trucking companies, but it is only because the workers of these companies are the members of the union that supports the environmentalists. The union is against the plan as well and favored the trucking companies.

The Mayor of the City, Villaraigosa, is for the trucking companies as well. He couches his argument with environmental concerns by saying, "Right now, the burden to clean up and retrofit the trucks is on an independent contractor who makes $11 an hour and has no benefits. They are never going to have the resources to do that."

Only the Port Officials seem to support the poor independent truck operators. That is again not out of the concern for them but from the fear that the union will end up unionizing the port workers.

Do environmentalists care more about the environment or union jobs? Why do the unions support the cause of environmentalists? Why do unions sometime side with management? Does the mayor of a city care about protecting jobs or the environment?

The answer is, it is a package. An individual issue matters only to the extent it adds to the total value of the package. If winning one issue would add more to the package than losing or compromising on another, the parties would do just that. Sometimes the issues are hidden and long term than what is currently at play. For example, the environmentalists want the union support in all their battles, port officials are afraid of unionization, etc.

This is a text book case of multi-party negotiations. Everyone is trying to maximizing their share of the pie and have more riding on this negotiation that it meets the eye. They all will be willing to trade one for the other as long their share keeps increasing.