Episode #155: Free-Rider Friday - July 2017

Ed’s Topics

New York Urban Planning in 1898

Ohio in 1895 Theory of History: in 1895, there were two automobiles in the entire state of Ohio. They collided.

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In 1898, in New York City, there was the first ever urban planning meeting. The topic: Horse manure. The conclusion: All cities will be gone in 50 years, certainly 100 because the manure pile wold be too great. All (100 percent) of the experts agreed!

Why is milk in the back of the store?

Russ Robert’s article on this topic.

Bitcoin’s Jump

Last Friday, Bitcoin broke $3,500 and $3,600 while we were on the air. Now it is over $4,000. When can we call this "real!"

GOP Healthcare Failure

Coyote Blog proposal

Up to 10% of Adjusted Gross Income, you pay, after that Single Payer

Ron’s Topics

Fuel of the Future,” The Economist, May 6, 2017

Oil refinery and data centers much in common: crucial feed stocks to world economy.

https://theidpblog.files.wordpress.com/2016/01/data-is-the-new-oil-1000.jpg

By 2025, data every year will reach 180 zettabytes (180 followed by 21 zeros). It would take 450 million years to pump through a broadband connection.

Oracle: Data will be the ultimate externality; we will generate them whatever we do.

Google: Information allows it to target ads better; use for AI, and cognitive services.

Tesla possesses 1.3 billion miles worth of driving data, far more than Alphabet’s Waymo (its self-driving car division).

Flows of data are not a commodity; each stream is different (lack of fungibility):

  • Unlike oil, it’s a non-rival asset
  • Easily used for other purposes than agreed
  • Adds confusion over who owns it (e.g., with driverless car who owns the         data: sensor makers, owner, passenger, auto manufacturer?)

We are only starting to develop pricing methodologies. When Caesars Entertainment filed bankruptcy in 2015, its most valuable asset: data on 45m customers.

Will the future bring personal data account that can be bought, sold, and managed personally?

Google’s chief economist, Hal Varian says data exhibit decreasing returns to scale, collecting more doesn’t add anything. What matters is the quality of the algorithms, and the talent that develops them. “Google’s success is about recipes, not ingredients.”

3 Policy problems:

  1. Antitrust (broke-up Standard Oil; will Google suffer the same fate?)
  2. Privacy
  3. Social equality

The Economist, Free exchange, “How to be wrong,” June 10, 2017

We did episode #147, Changing Your Mind on June 16, 2017.

Real trouble leads to a refusal to grapple with contrary evidence.

Beliefs are like other economic goods. We spend time and resources building them, they become part of our identity (Endowment effect—we value that which we own or possess, sometimes called the IKEA effect).

People engage in three “motivating reasoning” to manage such challenges:

  1. Strategic ignorance, avoid information that contradicts your beliefs
  2. Reality denial, troubling evidence is rationalized away
  3. Self-signaling, believer creates his own tools to interpret the facts in the way he wants (e.g., an unhealthy person goes for a run everyday which proves he’s well)

“It is rarely in the interest of those in the right to pretend that they are never wrong.”

The Economist, “Not so Froogle,” July 1, 2017

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Margrethe Vestager, the EU’s competition commissioner has fined Google 2.4 billion Euros ($2.7 billion), a record antitrust penalty in Europe and the USA, for abusing it’s monopoly.

One business owner complained. NPR’s Planet Money podcast, Google Is Big. Is That Bad? discussed this issue.

In 2002 Google launched price-comparing shopping, called Froogle, later renamed Google Shopping. It was found to systemically favor Google’s own results.

Supposedly, Google has a 90% market share in Europe. Of course, that’s because the EU doesn’t count other sites as search engines for shopping, such as Amazon, eBay, etc.

Competition is just a click away. Compare the convenience of shopping on the Internet with that of driving around comparing prices.

One EU commissioner said, “We need these super-platforms to adhere to a principle of neutrality.” But competition isn’t neutral; there’s no such thing as “perfect competition,” which is the outdated model antitrust regulators use.

Economist Thomas Hazlitt’s new book, Political Spectrum, argues that net neutrality would have meant no iPhone.

EU has fined many USA tech companies: Intel, Microsoft (3 times), and Facebook. This is a form of blackmail, from unaccountable bureaucrats who are economically illiterate.

George Gilder is currently working on a new book, Life After Google (available in June 2018). Here’s a talk he gave at the Blockstack Summit 2017, where he argues that Google’s business model is not sustainable.

Charlie Gard, RIP, July 28, 2017, 11 months old

Parents: Connie Yates and Chris Gard wanted to try experimental treatment in USA for their infant son’s rare genetic condition, encephalomyopathic mitochondrial DNA depletion syndrome (MDDS). There are 16 known cases worldwide

The British government refused the parents to take their son to USA. Staff at the Great Ormond Street Hospital received death threats, which shows there’s at least some resistance in the UK who understand liberty.

The Parents raised £1.4 million from crowdfunding.

On April 11, the British High Court judge ruled that Charlie’s doctors to turn off life-support. Parents appealed to the Court of Appeals, the Supreme Court, the European Court of Human Rights, and lost at all three.

Two Congressman introduced legislation to expedite Charlie’s trip to USA.

On July 24th, Dr. Michio Hirano, at Columbia University, who was to carry out the experimental treatment. When he saw the scans of Charlie’s brain, he was no longer willing to provide the treatment.

In the UK, adults can consent to experimental treatment, but courts can overrule in cases of children. In the USA, courts are reluctant to go against the parent’s wishes.

This can mean doctors performing treatments they believe go against the best interests of the patient.

In Texas, the futile care law says that if doctors feel the treatment would be of no benefit the parents can appeal before an ethics committee. If the committee agrees, the parents can seek another doctor within a specified time limit.

Fortunately, only 10% of cases involve severely ill babies—hardest of all.

Charles Krauthammer wrote a column and offered this: Two truths must guide any decision cases such as these:

  1. The parents must be sovereign
  2. The parents are sometimes wrong

He believes the parents were wrong in this case. However, he would have allowed the parents take the child to USA. Since there are no definitive answers, so must we fall back on sentimentally, on love.

What’s the best for the child: The best guide is a loving parent, their motive is most pure.

Is death is in the child’s best interest? Dr. House: “Yeah, I’m trying to save her life, I’m morally bankrupt.”

National Review editors wrote: “Horrifying precedent: In the UK and, by extrapolation, throughout Europe, every child belongs, finally, to the state.”

John C, CPA, TSOE Listener Question, 8/2/17

Gentlemen,
I really struggle when I get the response that my price is too expensive.  I don’t get it all that often, which tells me my pricing is okay I think, but I wanted to see what your best responses would be to that response/question.
Thanks guys and keep up the good work!
John E. C, CPA, CGMA – Principal

Ron’s Answers

  1. We’re not the cheapest CPA firm in town, during the value conversation
  2. Reiterate value (value conversation is critical, excellent questioning)
  3. Reiterate your value guarantee, fixed price, change request policy, no surprises, unlimited access
  4. Often times, price isn’t wrong—the customer is
  5. Also, often they don’t understand the value, not so much questioning the price

Ed's Answers

  1. "Sounds about right."
  2. As the President of Snap-on Tools once said, "I would rather explain my high price once, then apologize for skimping on quality later. 

Other Resources

Ron’s recent post on LinkedIn: “Why Timesheets Focus Firm Leaders on the Wrong Things.”

Comment

Ed Kless

Ed Kless joined Sage in July of 2003 and is currently the senior director of partner development and strategy. He develops and delivers curriculum for Sage business partners on the art and practice of small business consulting. Courses include: Sage Consulting Academy, Business Strategy and Customer Experience Workshops. Ed is the author of The Soul of Enterprise: Dialogues on Business in the Knowledge Economy, a compendium of a few of the episodes of his VoiceAmerica talk-show The Soul of Enterprise: Business in the Knowledge Economy with Ron Baker, founder of the VeraSage Institute where Ed is also a senior fellow.