keeping the economy honest

Monthly Archives: January 2011

Custom made garbage can for you!

Do you find it frustrating that when you pull the garbage bag out of the can, it’s still half empty?  In my case, the bag is too big for the can.  I’ve been living with the garbage can/bag mismatch problem  for a while.  Back in school, I was too cheap to buy real garbag bags, so I use the grocery store bags which are too small for most cans.  But  it doesn’t stay on the can for very long, especially after you throw some garbage of substance into it, the bag would just fall in the can with the garbage.

Now, my wife buys high quality bags with nice integrated ties.  So I like to get the most use out of them.  I take it out and lean the half empty bag against the can on the outside, so I can put a big more garbage into it before I throw it out.  But my wife doesn’t like a open ended bag slouching against the garbage can.  I agree with her, I almost had a garbage avanlanch a couple of times when it didn’t lean right.  So after throwing out many under-utilized garbag bags out, I finally decided to make my own garbage can out of wood.

I think it looks pretty good.  And for those people like Merrill Lynch CEO John Thain, who paid $1,200 for a wastebasket and enjoys my handmade, custom designed and cherry wood waste can, you can contact me for a special discount through this blog.  And for those people who can’t afford my high quality garbage can, they should really sell garbage cans with garbage bags together, so they will match.  Or they should standardize the size, like they do with beds.

HOV lane doesn’t work

HOV is misuse of resources in my opinion. Many times, the HOV lane is empty or sparse, when the other two lanes are congested or much slower.  I understand HOV has a good intention in trying to encourage carpool.  But saving gas is by far the dominating reason for people to carpool.  If two people find it convenient for them to go to work together, then they probably would carpool  to save on gas.  If it’s not convenient,  like one person might not be reliable with time or they don’t want feel obligated to talk to the other person,  then  they probably wouldn’t carpool even if it means spending more on gas.

But no two people who like to enjoy the morning commute alone would carpool because they get to use the HOV lane so they can get to work a little earlier.  So exclusive use of the HOV lane  is not going to push the decision to the other side, when gas saving is not incentive enough.  So in reality, HOV doesn’t reduce the number of cars on the road, it just rearranges them, so a few cars get to go faster who would carpool anyway without HOV, but most cars are forced to go slower with a lower MPG.  That’s worse for the environment.

Outrageous CEO compensation

I don’t understand why shareholders can’t have a say in CEO compensation.  Afterall, they own the company and the CEO works for them.   Having your overpaid CEO friends on the board of directors to decide your salary is like having other convicts to decide another criminal’s sentencing.  It may not be practical to get all shareholders to agree on a compensation package.  But I think we can all propose a better approach for CEO compensation that’s performance based.  One of the top of my head is… if the company averages 100 millions profit per year in the past, then let’s offer the CEO say 0.5% of the profit.   That’s a very good base salary of $500,000/year.  If the company makes more, he makes more.  If the company loses money, then he’ll make less, now that’s real incentive to perform.  There’s a reason why salesman, insurance, and real estate agents all work on commission.  No says they’re overpaid, because there’s tons of competition for those jobs.  Why can’t CEOs?

Probably, at the generous 0.5% of the profit, the CEO is still overpaid.  I would really love to run a social experiment to compare performance of one of the overpaid CEOs against one of those smart, common sense, business savvy contestants from the Apprentice show…I mean one of the good ones…to expose the fact that there are plenty of people capable of doing the same job and willing to work a lot less.  They can even make a reality show out of it.  But the problem is it’s almost impossible to do it, that’s why free market is often not exercised at higher level due to barrier to competition.  But anyone can start a chinese restaurant to compete, if he sees another chinese restaurant that is overpriced and making easy money.  That’s why you don’t see any chinese restaurant that charges $20 for chinese fast food… at least not in Vancouver.

Regis is not happy with less than $18-$20 million per year

Apparently Regis quit because he’s not happy when offered less salary for his new contract.  The show’s producers offered lower salary due to lower ratings.  Ok, even if the show didn’t get lower ratings, the network should have negotiated the salary long time ago.  I’m sure they can find some quality host who can do the job for half of Regis’s salary.  You’re probably thinking that Regis is the star of the show and no one can replace him to the same extent.  I agree, granted, a lot of people watch the show for Regis and if they brought in another host, the show will probably have a lower rating.

Let’s say, the new guy is happy to work for $5 million a year and the show had 25% less rating.  But the $13-$15 million savings is straight network’s profit and probably will compensate more than enough the lost advertising revenues.  Or the network can keep the same profit and pass on the  $13-$15 million savings to the advertisers.  That’s probably a great deal for the adverstsers.  I don’t think 25% more rating will necessarily translate to more than $13-$15 millions more in business for the advertisers which is how much they have to spend for 25% higher rating.

Anyway, all these numbers are made up and have no basis in any inside knowledge of TV show production.  But my point is that this is how free market is supposed to work and free market should decide the fair compensation of the TV show host, but is not fully tested out.  It’s like the chef in the chinese restaurant can never make too much more than his worth because the owner will replace the chef faster than chinese fast food if the chef starts to demand excessive compensation.  But it’s much easier to exercise free market in small business, on a smaller scale, and to test out competition.

A $45,000 handbag is silly only if you’re poor.

This fabulous Louis Vuitton Tribute Patchwork Bag is priced at $45,000.  For $45,000, it doesn’t organize its content automatically or have a GPS tracking system in case it gets stolen, assuming the thief is discerning enough.  You know you want one too.  If you don’t and think it’s frivolous, it’s only because you’re not rich enough.

Ok, I have no problem with people spending their own money anyway they want.  I couldn’t care less if they want to pay $45,000 for the boulder in my backyard.  However, when people have undeserved wealth, they start to spend it frivolously, which I would do too if I was that rich.  But this is bad for the economy, because they support much unproductive economy such as the $45,000 handbag, the $100,000 birthday parties or the $1000 haircuts.  All the resources behind all these outrageous consumption wouldn’t be in it if it weren’t for the demand of the ultra rich.  If there was no ultra-rich, the people would have to inject their manpower, brainpower, and materials into production for the average people whose income is more sane.

American Idol advances free market reform in entertainment industry

Nothing to knock about Whitney Houston who has an amazing voice and performace skills. But listen to this guy(Lin Yu Chun).  Whitney Houston makes millions of dollar and this Taiwanese guy makes nothing close, at least not yet.  Now, is Houston’s version really worth million dollars more of enjoyment? especially if you’re just listening to the music CD.  I don’t think so.  I’m glad American Idol and similar shows reveal that there’re are tons of talented regular folks out there who could easily compete with the overpaid celebrities.  At least, a larger porportion of the song’s revenue should go to the composer who is the real talent of the piece.

BC Ferries CEO earns $1 million

BC Ferries CEO earns $1 million according to this article.

I’m sure David Hahn works very hard, has a lot of responsibilities and probably made great improvements to BC Ferries.  But $1 million seems a bit high and probably wouldn’t be this high in a true free market.   The problem is that the board of directors or whoever decide on their compensation, don’t have enough vested interests in the company’s profit.

If BC Ferries was privately owned by a chinese restaurant owner with his own money on the line, he would definitely not be paying $1 million.  The chinese restaurant owner will want to maximize BC Ferries’ profit and will definitely look a lot harder for someone else, qualified to do his job, who is willing to work for a less than $1 million.  And something tells me that there’re plenty of talented people who are willing to handle Hahn’s responsibilities for a little less than his salary.

I’m not trying to pick on David Hahn, because there are plenty of overpaid CEOs out there.  But this is just an example of where there’s no true free market at upper echelon of the corporate word.  If David Hahn’s position was exposed to true competition, I’m sure the compensation could be a lot lower.