Friday, April 12, 2024

Flying over Troubled Red Sea Shipping Lanes


Since November 2023, there have been 133 reported incidents of shipping attacks by Houthi militia in Yemen, including 14 vessels struck by missiles or drones and 18 vessels hijacked by Somali pirates. This has caused some ships to bypass the Suez Canal in favor of the Cape of Good Hope. But Paul Berger at the WSJ reports on another alternative for some shippers. Some cargo has been diverted to air freight leading to huge increases in rates.

On lanes linking the Middle East and South Asia to Europe, average spot rates rose 46% from February to March to $2.82 per kilogram, a 71% increase from last year. The average global spot rate to ship cargo by air in March rose 7% from a month earlier to $2.43 per kilogram, according to Xeneta. 

Tuesday, April 9, 2024

Diverse MBA teams perform worse

From "Diversity and Performance in Entrepreneurial Teams" (SSRN): 
  • Among the randomly-assigned teams [of MBA students], greater diversity along the intersection of gender and race/ethnicity significantly reduced performance. 
  • However, the negative effect of this diversity is alleviated ... [when teams can choose their teammates]
  • ...teams with more female members perform substantially better when their faculty section leader was also female. 

Monday, April 8, 2024

Pricing the Atlantic

A WSJ article by Alexandra Bruell reports that three years ago the Atlantic magazine ran a $20 million deficit which led to layoffs. A new boss, Nick Thompson, was tasked with turning this around. Along with editorial changes toward longer investigative pieces rather than breaking news, the Atlantic raised subscription prices 50%. How did he know to do this?

Thompson’s team ran experiments to determine the best way to charge more without alienating new readers. It is offering fewer stories free and no longer discounting subscriptions. Last year, it raised prices for annual subscriptions to $80 from $60 for digital and to $90 from $70 for both print and digital.

Revenue was up 10% last year to close to $100 million and the magazine is now profitable.

Friday, April 5, 2024

What makes people happy?

Economist: Four main factors, explain happiness: 
    • Age: Things go downhill from youth to middle age until they reach a nadir commonly known as the mid-life crisis. ... . [Then as people lose] ... vitality, mental sharpness and looks, they also gain what people spend their lives pursuing: happiness.
    • Gender: Women, by and large, are slightly happier than men. But they are also more susceptible to depression: a fifth to a quarter of women experience depression at some point in their lives, compared with around a tenth of men. 
    • Personality: Neurotic people—those who are prone to guilt, anger and anxiety—tend to be unhappy. ... Whereas neuroticism tends to make for gloomy types, extroversion does the opposite.
    • Circumstances: Married, employed, childless, and richer people are happier

    Wednesday, April 3, 2024

    Spotify's Complements?


    Anne Steele at the WSJ reports that Spotify is the leading audio-streaming platform with 600 million users and a 30% market share. Even so, it seems to be struggling. After a couple of rounds of layoffs, some false starts from expansion into podcasting, concert promotion, and audio books, it earned its first quarterly profits since 2022 in the last quarter of 2023. Competition with tech giants Apple, Amazon, and Google have kept margins low - for every dollar it earns on music streaming, it pays $0.70 in royalties.

    But its tech giant competitors do not have to earn profits on streaming music. Their other services can be complementary to audio-streaming. For example, Apple would be happy if Apple Music operated at a loss so long as it helped to sell more high-margin iPhones. This is exactly what Netscape complained about in the late 1990s when Microsoft gave the Internet Explorer away for free. Netscape's revenue model was based on the sales of the browser. Microsoft's was based on sales of operating systems. So long as a free browser sold more computers with Windows already preinstalled, Microsoft was happy. How could Netscape compete with free? How can Spotify compete with subsidized competitors?

    Steele hints at this problem by suggesting that Spotify could be a takeover target for companies like Microsoft, Netflix, or Tencent. These companies all have services that could be complements for music streaming. They might be willing to subsidize Spotify if doing so sells more operating systems, movies, or video games.

    Tuesday, April 2, 2024

    Keeping you from Cutting your Finger Off

    The Consumer Product Safety Commission (CPSC) is considering mandating SawStop technology on future table saws. Ben Blatt at The Age does a good job of laying out the issues and providing some numbers. The technology to drop the blade out of harm's way within a few milliseconds is amazing (see video). My table saw is the scariest piece of equipment in this woodworker's shop. 

    Let's see if this mandate might be worth it. The article in The Age reports that table saws cause 4,300 amputations every year, more than thousands of other products combined. Almost all of these will be fingers. Maximum workers compensation values for a lost finger range from 20 weeks of pay (a pinky) to 45 weeks (an index finger). The average carpenter's compensation is $63,149 per year or $1,214 per week. This means that if all amputations were prevented a maximum value of the savings would be $24,288-$54,648 per accident, or about $104-$234 million in aggregate. 

    The Age also reports that 675,000 table saws are purchased in the US and that the CPSC estimates that the technology would add $338 to $1,210 in costs per table saw. This implies total cost increases of $228-$817 million. So the costs of the mandate are two to three times the maximum benefit.

    But it is worse than this. A mandate eliminates choice. SawStop is already available on the market but only has a 2% market share. Those who value this technology can purchase it. Those who place a lower value on it can choose not to. The mandate implies that the government knows better than the 98% of practicing woodworkers and carpenters who have opted out. This little back-of-the-envelope calculation confirms my own decision not to purchase a SawStop. This may be a case for more information disclosure rather than a product mandate.