Category Archives: Culture

These posts will deal with Copyright and other cultural topics

Taking the long view

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I read a great article today that I needed to write about. I think it’s going to influence the way that I write. It was Adam Curtis – WHAT THE FLUCK! which take a very different view on writing and journalism that really intrigued me. His article is really long, but well worth the read as it is something of a history of two types of journalism in the UK. On the one hand he discusses the rise of Tabloid journalism while on the other hand he discusses the origin of muckraking which helped to unseat the powerful in the 1930’s and helped get FDR elected leading to his trust busting.

Curtis argues that we’re at a similar inflection point in our society as we were at the turn of the 20th century. There have been revelation after revelation and the general public hasn’t figured out how to tie all of this together. I believe that there are a few journalists out there that have been pushing the current power structures and they’ve suffered from this a great deal. Glenn Greenwald and Julian Assange are two that have been the most vocal in challenging our current societal structure.

Aside from the history lesson on journalism the article is important because the author uses something similar to a popular research style in academia called Actor Network Theory. This pushes the actors and the people they interact with to the fore of historic events. It also reduces the importance of a single individual because they act within the constraints of their network. In many cases the most pivotal people are those that build the network to connect individuals in the network. In many of the history of companies books I’ve been reading lately this style is implicit in the writing.

What I took away from this article is that when I write I need to work to ensure including the longer view. Looking back more than just the past few weeks but to include events that precipitated the topics I’m writing about. This will help build credibility for my perspective as well as help convince skeptical readers through a consistent evidence and a broader story to explain the reasoning rather than just a reactionary response to an event.

Looking for feedback on the new look

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I just decided to go bigger with my writing. I’m planning on writing at least 3 or 4 times a week on here. My goal is to write on a consistent basis so I can begin working on a book. I’m not entirely sure what I’d like to write about. I’ve had some friends over the past two years suggest writing a book with them. The first book I wrote several chapters, but my co-author became too busy to continue. Which was fine, it was a great learning experience for me and I’d love to collaborate with her again. My more recent request hasn’t really gone anywhere beyond the first phase of planning, so I figure I might as well just try to come up with an idea on my own.

So, I’d like to get some feedback from all my loyal readers on a few things.

First, how’s the new layout and color scheme. I’m not really the best with design like this, so please provide some feedback!

Second, any topics you think I’d be able to provide insight into that you’d like to see me write about either in my blog or in a longer format of a book.

Thanks for reading and I look forward to engaging more on this new platform with you all.

Tools that will help disrupt Healthcare

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I’ve been reading this really interesting book on healthcare – it focuses on the potential Hows that healthcare can be disrupted. If you aren’t sure what disruption and/or disruptive innovation is then check out my last blog about some of the industries where it’s occurring and you’re likely part of the disruption.

If you buy your own health insurance you may have noticed a new type of insurance. It was new to me whenever I joined my health insurance company in the North West. Neither AMD nor Samsung had similar plans so when I first signed up for it, I was extremely ignorant of what it was and just signed up for something that looked good. This type of insurance is called HDI w/ HSA.

HDI: High Deductible Insurance. This means that you’ll likely have a high deductible (obviously) and will have to pay out of pocket.
HSA: Healthcare Savings Account. This is an account that allows you and your employer to make pre-tax contributions. You will also be able to pay for healthcare tax-free and accrue interest tax free as well. This is great in terms of how much money you actually gain from this. When you pay for a healthcare service like a Doctor’s visit, you’ll have to pay all $150, however, since you didn’t pay taxes on that $150 you end up saving money. Further, your employer can contribute to this account in the same fashion as your 401(k) and your account will be invested in a similar fashion as a 401 (k).

Of course there are some draw backs to this type of health insurance. First, until you reach your deductible you’re going to end up paying out of pocket. You could potentially have a deductible as high as $5,000 which is highly undesirable. Your employer might not contribute to your account, which places more of the burden on you, which sucks.

How can this contribute to disrupting healthcare? Well, you’re going to start really shopping around for your day to day medical expenses. You’re not going to go to a specialist unless you really think you need to. You’re not going to go straight to the hospital for care. You’re going to try to find another place to get the care you need. This will open up the possibility for care givers to provide healthcare in other fashions. This will potentially change the way that insurers will begin to pay out to providers as well.

There is also a push for Accountable Care Organizations, look for those as well, which are paid based on outcomes rather than the type of service being provided. These organizations will help disrupt incumbent firms and will likely capture the attention of insurance agents. I believe that in many cases this is where a lot of Exchange insurance programs are going.

Personally, I’m excited about the potential to work within an insurance company to disrupt the industry. I believe that there are changes that can be made internally, through educating on what metrics are and how to improve based on these metrics. I also believe that we’ll be in a position to help enable providers to be more efficient and effective care.

Continual disruption – still happening in TV and content

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One of my favorite things to read about is innovation. For those of you that know me, that’s not really a surprise. However, I think that there’s a lot of misunderstanding out there about what “disruptive” innovation is. Most people think that apps that modify the way you do something is disruptive. For example, people have said that companies like Kayak and Hipmunk are both disruptors of booking travel. However, the true disruption came from travelocity or orbitz, whichever came first. These sites really did change the way the game was played for booking travel because they essentially cut out both the middleman (travel agents) and the airlines involvement in book flights. Anything beyond that has simply been sustaining innovations. These are innovations that are quickly co-opted by the existing incumbents as it’s possible for them to do that. A more disruptive technology for travel would view the process holistically from the moment you booked the trip to the time to returned home from your completed vacation. The site would need to account for getting you to your destination without any sort of delays. In James Womack’s book Lean Thinking, they point out the “value add” activity of a flight was only 3 hours, while the total waiting time was over 12 and they didn’t include the effort it took to book the trip back in 1995. All inclusive it’s likely to be much worse now. Especially the way that airlines measure “on time departure” (leaving the gate on time) which is different than our “on time departure” (taking off on time).

In a true disruptive situation you’ll typically see the incumbents resorting to changing laws to keep their supremacy of the markets, we don’t see this in travel at all. Where we do see this is in telecom and cable. The image below from Mashable pretty well explains why this is happening.

There’s likely overlap between users of Netflix, Prime, and Hulu, but if I was cable TV I’d be running scared. I also would love to see this graphic if you add Twitch.tv and specifically ESPN. I think eventually twitch will be disrupting ESPN and the traditional sports networks out there.

How are the cable companies using legal and technical mechanism to limit access to content on Netflix, Amazon, Hulu, and Twitch? First, the movie industries have absurd agreements with cable companies (providers) giving their services, like Xfinity from Comcast first access to content. In many cases this will translate into something earlier on the subsidiaries of those in terms of networks. Second, cable providers use their control over the network to throttle the internet speeds of these internet services. This is leading them to try to change the laws around net neutrality so that the cable providers don’t just become “dumb pipes” that content is passed through but the users don’t interact with.

I believe this also indicates that both cable networks and internet providers are being disrupted in a way that they don’t understand. They are using every tool they have at their disposal to fight against the adoption of these services, but they don’t understand what’s happening. Consumers have hired comcast, verizon, and others to provide them a solid consistent connection to whatever content the user wants. Internet providers are trying to force themselves into a middleman role that the users don’t want. When opportunities arise that will allow the user to experience content on their own terms. It’s clear that cable TV is losing the fight and this will only accelerate as people purchase more tablets and devices like that. Chromecast (which allows people to display things from a laptop/tablet on their TV) is another disruption that Google is providing, Amazon has something similar for their Tablets (which will increase Prime usage by the way). The TV companies are losing and need to figure out new business models to stay afloat. This is where disruption is happening. Not in other spaces.

Minimum Wage, labor, and economics

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Last night on the twittars I had an invigorating discussion related to minimum wage, the mobility of labor, and the economics. The basics of the argument started over the fact that in MA minimum wage will be slowly going up from around $8/hour to $11/hour. $8/hour already is pretty good for the US where the federal minimum wage is closer to $7.25/hour – which is an annual salary of $15,080 (poverty line for an individual is $11,490/year). Obama is proposing to raise the national minimum wage to $10.10/hour or $21,008/year and MA’s eventual minimum wage at $11,440/year. If minimum wage had kept up with productivity gains seen throughout the economy a study argues that the minimum wage should actually be $22/hour or $45,760.

The unfortunate thing about minimum wage jobs is that you typically don’t work 40 hours per week, in fact places like Wal-Mart try to keep employees under 30 hours per week to avoid the requirement of paying any healthcare benefits (at least 1/3 of Walmart employees are limited to 28 hours/week). This requires minimum wage employees to have two or three jobs which creates an extra layer of uncertainty for scheduling of work and getting from one location to another using public transportation. (as a side note WalMart is holding a food drive for their employees)

Why don’t they move to another location that pays better for a job though? There are a couple reasons, first moving is expensive. Even if you’re renting on both ends a cross country move costs several thousand dollars. You have to put money up front for a deposit, go without pay for some period of time as you transition between jobs, you need to move your stuff, and finally, many places won’t hire you if you don’t live there, but you can’t rent unless you have a job. It’s even worse if you own a house, and the worst case is a house that’s underwater.

Now, under utility theory all that won’t matter because it’s a sunk cost. It’s the cost of doing business, all that matters is the amount of money you’ll gain on the other side. Now, if we were all perfectly rational “Econs” that would work, however we’re Human and we don’t think that way. According to Prospect Theory we are extremely loss adverse and would much rather have a small chance at a with with a worse downside than a guaranteed downside. For example, we’d rather have a 10% of winning $0, but 90% of losing $1,000 than automatically losing $900. From Utility theory or expected value they are the same, but from Prospect theory they are very different. This drives our behavior when it comes to relocating for jobs, and is especially true when you’re unemployed. Because your baseline is set at your previous salary, you’d rather wait and risk making no money than taking a job that’s more than 10% less than your previous salary. From an “Econs” perspective this is irrational as you should take any job that’s offered to you, because it’s more than $0. This theory can be applied to corporations as well. They are risk adverse in many cases. In one way this manifests is through the controllable costs of employees salaries. In many cases managers will let employees go or hire employees at a lower salary than deal with something that’s a sunk cost.

Prospect Theory FourFold, Thinking, Fast and Slow Daniel Kahneman

Furthermore, corporations are under pressure do to short term requirements of the market to continually beat the previous quarters. This pushes activities in to the lower right quadrant, which also negatively impacts innovation and employee salary.

Based on the rationality here, should we increase minimum wage? Based on both Utility theory and Prospect theory companies would dramatically reduce the number of employees they have to avoid a sudden massive loss. Companies should move or relocate elsewhere, however, many studies have shown this simply isn’t the case. I think that this can be explained by something else that’s unexpected, unemployment benefits help the economy grow. According to a Moody’s study several years ago and another talk a single dollar of unemployment benefits creates between $1.64 – $2.00 of economic activity. This is because it creates demand that otherwise would have been missing. It’s likely that the higher salary of people that are making minimum wage generates additional demand for goods and services that otherwise would have been unable to be fulfilled.

I believe, this is why Switzerland is looking into providing a living wage of $2,800/month or $33,600/year. It’s a way of being both moral (not allowing citizens to starve and live on the street), but also stimulate the economy to continually grow. The idea of lower taxes is to put more money into the economy so people will spend more money. However, there are a lot of people out there that don’t benefit from this all that much because they already pay little to no taxes (40% before 2007). Providing tax relief doesn’t help this portion of the economy. Providing a higher minimum wage would provide relief for them, but a tax on corporations, but would be recouped through additional demand. A living wage provides relief, but a tax on the broader public, but would be recouped through additional demand.

In the first case, people are working and providing a service to a corporation for the salary they earn. In the second case, there’s a higher chance of free loading – however I see no reason why you can’t put requirements on accepting the money such as community service, using the money for education and training, or volunteering somewhere.

Do these thoughts address every issues we’ve seen regarding minimum wage? No, but it’s helps frame the discussion a little bit and hopefully addresses some of the concerns. I believe that much of debate comes from non-rational sources, such as the economic theory you fully support. Prospect theory, Behavioral Economics, and Evolutionary Economics are disdained or unknown by Libertarians and Conservatives which paint a very different picture on the economic policies we should enact than neo-classical economics. Which puts this to something closer of a religious battle than a logical rational debate, because these theories are incommensurate with each other in the same way that Newtonian Physics and Relativistic Physics were to each other. It’s either one or the other not both.

Edit: I miscalculated on the salaries for minimum wages. I have corrected them.