Frozen Transparency

Soap really is a good product to talk about when discussing economics. It has a great many properties that are desirable to have: it’s universally known (except for a small group of people), it’s a product that people can easily think about making and wanting, and it’s a relatively universal want (again, aside from a small group of people). But this time, let’s talk about making soap. Not the actual process, mind, but the economics of it.

Let us say that in our fantastic little playground for economics, soap essentially comes in two grades: 2$ soap and 4$ soap. Let us also ignore the population and the price-setting, and just assume that this is what the prices would be based on the money of the population and so on. So now, let us consider the salaries of those who make the soap.

Suppose you own the factory that makes soap. You have an employee (Adam) that makes one bar of the 4$ soap each day. He’s good at it, and his work is high-quality (which is why it’s 4$). His value to you is 4$ a day, because that’s how much money you get because of him; his salary is therefore 4$ a day. (Tangent: yes, there are taxes and raw materials and profit to be considered here; I ignore them at my own peril for simplicity). He’s happy, and you’re happy—well, aside from the fact that his salary is so high. The employee knows the value of his work, so he demands his salary be that.

So you hear about this other employee (Bob), who happens to come from a different city. He says that he would be willing to work for only 2$ a day, instead of 4$, but he produces 4$ soap! So you hire him and fire Adam, which increases your profit margins. So Bob comes, and for a while, he’s making soap worth 4$ for only 2$ a day. His value to you is still 4$ a day, so you’re paying him below his value—but Bob, upon moving to a new city, talks to people. He learns that the actual value of his work is 4$ a day. So he finds another factory that will pay him 4$ a day, because that’s what the value of his work is. You’re short two employees (or you start paying him 4$ a day).

Instead, let’s say there’s a third employee (Charlie), who also comes from that same city, and makes the same claims. You hire him, but then you find out he was lying: his soap is really only worth 2$ a day. It doesn’t seem like that big of a loss, because you’re only paying him 2$. His value to you is 2$, and that’s his salary—you’re just short that salary of 4$.

On the other hand, if you went to Adam and told him that you’d pay him 2$ a day for his 4$ soap, he would either tell you to get lost, or he might sign on—but start making 2$ soap. After all, that’s all you’re paying him, so why bother making his soap any better? He’s working at what he’s worth.

The point I’m rather awkwardly trying to get to here is that in general, people will find jobs where they are paid what they are worth, and people will perform in their jobs with work worth what they get paid. If you pay someone 2$ a day, they will produce 2$ soap. If you pay them 4$, they will produce 4$ soap. You might have someone you pay 4$ a day produce 2$ soap, but I guarantee you that you will almost never see someone who makes 4$ soap getting paid 2$ a day. They’d just find a company that pays them what they’re worth.

So my rhetorical query is thus: are there any jobs out there where we’re assuming a fungibility of employee that doesn’t exist, and is therefore severely impacting the quality of the product? Or places where we’re paying people a low salary in order to “save money”, but end up receiving an inferior product?

I’m sure if you think about it, you can come up with some.

With the completion of Heir To The Gallery, I decided to get nice copies made, and so I went to Lulu.com and “published” the whole story in book form. It took some time to set up the files and the project, but eventually I ended up with a nice paperback (albeit textbook-sized) copy of the story. Excited to have a good physical copy, I sat down and read it. It took four nights of about three hours each (I was also trying to read carefully), but it was the first time I had actually read through the entire thing. I had read through parts before when doing research, but I had never sat down and read through the entire book. It was enlightening. There were things that bothered me; some bothered me when I had been writing it, but others suddenly jumped out at me when I was finally able to step away from the book and read it more objectively. I will talk about these things here.

In case it’s really unobvious, this discussion will contain spoilers for the whole story. Read at your own discretion.

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While I was investigating my options for Valentine’s Day (I have tended in the past to get things for my female friends as tokens of friendship), this year I looked at online flower delivery. After all, flowers are a typical gift for the day (not necessarily roses; there are flowers out there that mean friendship), and it would be difficult and awkward to get flowers to all the women I know around me—and there are quite a few who live a distance away.

I found it somewhat interesting when looking at delivery dates (which mean more than shipping dates): setting a delivery date for either the 13^th or the 14^th gave the order a fairly obscene shipping charge. But the 15^th? Same as all normal weekday shipping.

In the future, I may very well suggest celebrating Valentine’s Day the day after the fact. That way, picking up some flowers and chocolate will be tremendously cheaper, since it all goes on sale—and it can still possibly maintain the romantic aspect. And since I don’t watch TV, I don’t have advertisers yelling at me to do any different. Everyone wins.

In either case, today happens to be the day after Valentine’s Day. I hope all of you had a nice and pleasant evening to celebrate love and sex, even if you’re someone currently lacking either. And if you didn’t get any special love or sex—or even if you did—look on the bright side: chocolate is now on sale, so you can treat yourself.

Way back when, IBM decided to standardize computers. Prior to that point, all hardware was custom—IBM had the sense of mind to realize that the computer needed to be modular, and that custom-made hardware would be marginalized. Lo and behold, they were right.

Along came Microsoft (more especially, Bill Gates), who realized that with market forces, the cost of hardware was going to sink to nothing—all the cost was going to be in the software. Lo and behold, they were right.

Then came the Open-Source community, and they saw that eventually, the cost of software was going to sink to nothing—all the cost was going to be in support. Red Hat and several other companies positioned themselves for this, and they’ve been shown half-right.

Then came Apple, who realized that all computers are really just consumer electronics, and that’s how people want to treat them: like any other appliance. And wouldn’t it be cool if all of these things worked together? So they create the iPod, iTunes, the iPhone, the iTV, and so on and so forth. And, like history before them, they’ve destroyed the previous competition in those spaces (Microsoft, mostly). Produce good code on specialized hardware that “just works” and lasts forever (because honestly, people don’t need to know all the details), and that’s where the money is.

They’re being proven right.

My beef is this: Apple has shown time and time again that they can produce very good code with supreme design and aesthetic. There are some problems to be sure, but overall, they create a wonderful experience and have amazing brand loyalty.

Microsoft has a bunch of really smart people. IBM has a bunch of really smart people. The Open-Source community has a bunch of really smart people.

Why is Apple the only company that seems to be able to do this, and do this well?

Having read through all of Heir To The Gallery after finishing it, I’ve noticed a fair number of things that need to change. But as I finished the book, one thing cemented itself in my mind immediately as the thing most needing to be fixed: Mazhigo. The language of the magi. It was an idea that didn’t work out as well as I might have hoped, but it was an experiment, and one worth thinking about.

The rest of this will contain spoilers; read at your own discretion.

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