Simple Rental Car Innovation

A new airport car parking/rental model? Instead of paying to park at the airport, while you are away, let this company rent your car out to someone in your hometown.

I love this observation from the company’s CEO:

“How does it make sense that there’s one parking lot at the airport where there are thousands of cars sitting there and people are paying for them to sit there and do nothing, and there’s another parking lot with thousands of cars owned by Hertz?” 18-year-old FlightCar CEO Rujul Zaparde said.

Of course, it can’t be that simple. Bureaucrats are having conniptions about it because it hurts their rent-seeking model.

Trade-offs and unintended consequences

Rare bird last seen in Britain 22 years ago reappears – only to be killed by wind turbine in front of a horrified crowd of birdwatchers (via Instapundit).

Higher-than-inflation challenge

Glenn Reynolds had a nice piece about student loans in the Wall Street Journal yesterday. These two paragraphs reminded me of an observation (that I will turn into a challenge) I’ve had for a while:

Why do students have so much debt? According to a recent study by Mark Perry, a professor of economics and finance at the University of Michigan at Flint, between 1978 and 2011 college tuition in the U.S. increased at an annual rate of 7.45%, vastly exceeding the rate of inflation and the almost-stagnant rate of growth in family incomes.

The difference has been made up by more and more debt. With costs above $60,000 a year for many private schools, and out-of-state costs at many state schools exceeding $40,000, some young people are graduating with student loan debts of $100,000 or more, sometimes much more. A study released last month by Fidelity Investments found that 70% of the class of 2013 is graduating with college-related debt—averaging $35,200.

Yep.

Here’s the observation/challenge:

Name a sector of the economy where prices have consistently grown at rates higher than overall inflation and that does not have government involved to a heavy extent. 

Education (K-12 and college) and health care are two common examples where cost increases have consistently outpaced inflation and both have government — Federal, State and Local — heavily involved.

In sectors of the economy without a great deal of government involvement, we generally enjoy more innovation and lower costs, or at least costs that do not rise faster than inflation consistently.

Just curious about the Supreme Court’s Windsor v. U.S. decision

I’m glad the Edith Windsor won her case. I think she deserves it.

The Supreme Court found that not allowing a survivor of a same-sex marriage (as recognized by Canada) to claim the U.S. Federal estate tax deduction that is available for survivors of heterosexual marriages violated the equal protection clause of the Constitution (Amendment 14).

For those who agree with me on the outcome of this case, but also wish to continue to apply different tax rules to high and low-income earners through a progressive tax code, I’m curious to hear why you think holding these two positions is consistent and why the latter position doesn’t violate the equal protection clause of the Constitution.

By the way, I don’t believe the problem is what the state defines as marriage. I think the problem is that we have a state so entwined in our lives that what it defines as marriage matters.

In this case, if there was no estate tax, there would have been no court case for the Supreme Court to rule on.

I have just one follow-up question for the Ms. Windsor. I’m curious if when her spouse was alive if she filed suit to be able to file a joint Federal income tax return to enjoy the same marriage tax penalty as heterosexual marriages.

Making a difference isn’t always romantic

Art Carden says well in his recent EconLog blog entry, You’re Not Pushing Paper Across a Desk. You are saving the world, what I tried to say in these two blog posts here and here.

Here’s Carden’s opener:

In my profession as an economics professor and through churches I have attended, I’ve been around a lot of people who want to “make a difference.” They almost inevitably equate “making a difference” with “working for a government or a non-profit organization like a church that is dedicated, at least in part, to helping poor people.” Rarely do I hear anyone say “I want to work in accounts receivable for a company that makes faucets–or worse, a company that just sells faucets and other sundries.”

But here’s the irony: I suspect that you will probably make a bigger, albeit harder to see, difference in the lives of many by working in accounts receivable for Amalgamated Faucets than you will on your two-week summer mission trip or in your career as a relief worker.

Carden goes on to explain:

Cleanliness, while not necessarily next to Godliness, is at least a few more steps removed from filth and the associated disease transmission. One quick and easy way to improve the lives of the people around you is to make sure you wash your hands carefully after using the restroom. By helping the faucet company run a leaner operation, you can help them expand and improve their faucet offerings. This in turn helps people wash their hands carefully. This in turn reduces disease transmission. Reduced disease transmission means less tragedy and higher productivity. It might not seem like much, but congratulations: by helping Amalgamated Faucet produce more, better, and cheaper faucets, you’re reducing the probability that someone, somewhere gets sick.

So few people recognize these benefits. Carden explains:

Is it romantic? No. Will people write books about you and give you humanitarian achievement awards? No. Will you be recognized in church? Sadly, almost certainly not.

Sadly, yes. Perhaps churches and other organizations should start recognizing these unseen and under appreciated deeds. That may be a new idea for a thread on this blog — how people make a difference by doing something that appears to be boring and regular.

I’m reminded of the story Mitch Albom told in his book, The Five People You Meet in Heaven. I don’t want to give too much away, but one of the people Eddie meets explains to him that his seemingly boring and unromantic job as an amusement park maintenance worker was valuable because he kept untold numbers of kids safe for all those years and he paid particular attention to that safety because of what happened between Eddie and this person.

Unintended Consequences of Work Space Design

Is your office making you unproductive? According the Wall Street Journal and the study they reference, yes.

I’ve lived through this lub-dub cycle a couple of times in my career. More “open” and “collaborative” workspaces is one of the mythic magic potions managers believe will spur a company’s culture into producing stellar growth.

The problem is…it doesn’t work.

In my experience, people will find ways to get some privacy and these days, there are a lot more options to do that. They’ll camp out in a meeting room or go find a quiet corner at the local coffee shop. 

They get less done at work since open spaces create more opportunities for interruptions. I use to sit with two work mates in a tight space. We noticed that when two of us were there, we talked much less than when all three was there. Like Metcalfe’s Network Law, the third person in the network increased the odds that we’d happen upon conversations one or the other would find interesting. 

Often a conversation might start between A and B, then C would find something said to be interesting and jump in. A might even drop out because he found the subject uninteresting. But, having C there, made it more likely that the conversation would continue. 

Beliefs in office layout schemes does produce growth for office furniture makers and moving companies, though.

Additionally, the guests in the Harvard Business Review podcast from April even say that group brainstorming may not be as good or any better than individual concentration.

This, too, is something I have confirmed with my experience where I’ve seen group brainstorming sessions used as domains for folks who like the sound of their own voice. I have, however, seen group brainstorming sessions work well when everyone in the group felt comfortable with each other.

I’m not sure if this would work any better, but what I would like to see work groups within a company have more say in how their space is laid out. There is a lot of resistance to this at most firms, where it is someone’s job to order office furniture and move it. They will argue for efficiency and economies of scale for making larger purchases and never will the benefits of more productivity be weighed against the costs of less efficiency.

Recycling

Interesting video on how glass is recycled (via Marginal Revolution).

At the end, of the video the guys says, “the interesting things is if you buy a Snapple bottle in New York and turn it back in through one of the recycling bins, we’ll turn it into another Snapple bottle.”

I did find that interesting that it must be cheaper and easier to break down the bottle and remake it than it is to wash it and reuse it.

 

Innovation is a discovery process

I also enjoyed this Wall Street Journal article about innovation and Thinking Inside the Box.

Yep:

How could business leaders rate innovation as so important yet feel so dissatisfied with their own organizations’ performance? Because what they really want to know is how: How do you actually generate novel ideas and do so consistently, on demand?

The article goes on to provide five suggestions for taking a different approach to innovation by taking an existing idea and doing things like removing essential elements, combining unrelated tasks, and so on. Less ‘pie-in-the-sky’ thinking.

They provide good real world examples of each. One such, under the combining unrelated tasks, was the online security measure where you have to type in the letters of a fuzzy image to prove you’re not a computer.

The unrelated task is that those images are old texts that haven’t been converted to digital format yet. So, as we all verify that we’re not computers trying to buy tickets to our favorite sporting events, we’re also helping someone digitize an old book.

Even though I found their examples interesting, I’m still skeptical that their recommendations would improve effectiveness in producing innovation on-demand.

I think there’s 20/20 hindsight bias in their observations. They key in on the innovations that work, but don’ts consider the innovations that used the same approaches and didn’t work.

What “works” isn’t obvious. Even the people who eventually get the most out of an innovation would never had guessed that they would find that value prop useful prior to its existence. The Sony Walkman is a good example:

Even Akio Morita, Sony’s chairman and the inventor of the Walkman, was surprised by the market’s enthusiastic response.

Here are the suggestions for innovation that I’d add to the authors’:

Try stuff in the real market, even on a small-scale. It doesn’t have to be perfect or refined to the level of your other products to find out if you have something. The things that I’ve worked on that have worked were not pretty in their initial stages, but they still ‘moved some numbers’ and refining them didn’t seem to improve the effectiveness.

Don’t let your biases get in the way of trying something. Let the market test it.

I’ve seen too many things that are actually working get canned because someone with political clout didn’t like it. They didn’t like it because it wasn’t their idea. Or, they didn’t feel it ‘fit with the brand’, though customers did. Or, they simply relied on poor business analysis that focused on a negative trade-off and ignored the positives.

When people have ideas, encourage them to put their money where there mouths are to try to prove it out. Reward them handsomely if it works. Encourage them to try again if it doesn’t. Understand, failure is likely and not a sign of incompetence. Good baseball players strike out much more often than they hit home runs.

Alos, read Nassim Taleb’s trilogy: Fooled by Randomness, The Black Swan and Antifragility.  Then read F.A. Hayek’s The Fatal Conceit. And, finally, read Russ Roberts’, The Price of Everything.

After reading these, you may see the world differently. Innovation is not a planning process, it’s a discovery process.

Examples of how one company deals with the mountain of policy disincentives

Speaking of the mountain of disincentives we face from policy-makers past and present, this weekend’s Wall Street Journal features an interview with Carl’s Jr/Hardee’s CEO Andy Puzder.

Policy-makers act as if business managers will not respond to their disincentives and end up hurting the very people they are trying to help. Puzder illustrates one such action:

Mr. Puzder also expects fast-food restaurants to deal with ObamaCare by replacing workers with kiosks. “You’re going to go into a fast-food restaurant and order on an iPad or tablet instead of talking to a person because we don’t have to pay benefits for any of those things.”

While Mr. Puzder supports technological progress and the efficiency of tools like the iPad, he laments that “there’s a personal element that you don’t get from machines, and I think you’re going to lose that.” It’s also unfortunate, he says, because fast food is a “great level of job for people to enter the labor force.

The sci-fi geek in me wonders when they’ll come out with RoboCashiers. I’ve seen RoboBlackjack Dealers in Vegas. They are 3D animated ladies on big screen TVs that sense your movement and interact with you. Max Headroom, SIRI and Watson, for $500, can you run a cash register and make small talk? You could probably even program it so that the 3D image that appears would be one that the customer prefers.

I enjoyed Mr. Puzder’s comment on price strategy:

Mr. Puzder’s Journal visit comes while he’s in New York scoping out sites for new restaurants in the city. I ask him how he plans to deal with New York’s sky-high rents, a recent minimum-wage hike and labyrinth of regulations. “I went into a McDonald’s yesterday and a Big Mac combo cost $7.19 for a Big Mac, fries and a drink,” he says. “That’s how you deal with it.”

Here’s Puzder on why he doesn’t prefer building in California:

These days, California is one of the few states where the company isn’t looking to expand. “Like many businesses, we love California and would love to build more restaurants,” he says. But “California is not interested in having businesses grow,”

Consider how long it takes for one of his restaurants to get a building permit after signing a lease. It takes 60 days in Texas, 63 in Shanghai, and 125 in Novosibirsk, Russia. In Los Angeles, it’s 285. “I can open up a restaurant faster on Karl Marx Prospect in Siberia than on Carl Karcher Boulevard in California,” he says.

Mr. Puzder’s favorite California-bites-business story is a law that requires employers to pay general managers overtime if they spend 50% of their time on non-managerial tasks like working the register if they’re short-staffed, “which is what we pay and bonus them to do in just about every other state.” Since managers were filing class-action lawsuits against the company for not being paid overtime, “every retailer in the state basically has now taken their general managers and made them hourly employees.”

The managers hated the change “because they worked all their careers to get off the base to become managers…

Paperless Office

I’ve been hearing about the paperless office for decades. But, as technology was integrated into business, it seemed like more paper was generated.

One example: When we had meetings, we had to make copies of the presentation for everyone. We all took notes on those copies and then went back to our desks and refined the presentations based on the notes. Over the course of weeks, my paper recycling box would become stuffed with the remnants of this process.

I just noticed recently that has changed. We all have laptops, tablets and wi-fi that work pretty well. We have LCD projectors in most of our meeting rooms. We email the presentation to the meeting participants and we project it on the wall. So, meeting participants follow along on their own computer or on the projected presentation. We make notes, electronically, directly on the presentation.

I looked around at a meeting this week and noticed it. I went back to my desk and looked at my paper recycling box. I couldn’t find my paper recycling box. I haven’t needed it for months and I haven’t paid much attention.

Sometimes change happens and you simply don’t notice it.