Delivery economies of scale

Firms that deliver a lot of stuff have a huge advantage over smaller rivals because they can design more efficient routes. In the figures above, we plot the shortest delivery routes for randomly distributed customers on a 1x1 square. The length of two independent routes on the left is 5.68.  When the routes are combined on the right, as they would be if one firm outsourced its delivery to the other, route length goes down to 3.73, a reduction of 34%. 

Such route consolidation not only reduces cost, but it also reduces traffic and pollution.  You may recognize this as the "Traveling Salesman Problem" from your Ops class.  It is the source of big economies of scale, as the average cost per delivery goes down the more deliveries a firm makes in a given area.  

Revealed preference: young Russians are leaving

From The Economist:

Vladimir putin, so intent on bringing Ukraine under his control, is neglecting the problems facing Russians at home. A survey conducted between February 17th and 21st—that is, in the week before Mr Putin’s invasion—by the Levada Centre, an independent Russian pollster, found that 43% of Russians between the ages of 18 and 24 wanted to leave the country for good. And 44% of those who hoped to emigrate cited the “economic situation” as their motivation.

Moving to higher valued uses

Which are the best charities?

From GiveWell: 

1. Medicine to prevent malaria, sub-Saharan Africa ($4500/life saved)
2. Nets to prevent malaria, sub-Saharan Africa ($4500/life saved)
3. Supplements to prevent vitamin A deficiency ($3000/life saved) 
4. Cash incentives for routine childhood vaccines ($4500/life saved), Africa
5. Treatments for parasitic worm infections (deworming)
6. Treatments for parasitic worm infections (deworming)
7. Treatments for parasitic worm infections (deworming)
8. Treatments for parasitic worm infections (deworming)
9. Cash transfers for extreme poverty, mostly Africa

Forecasting the Future of Russia

Need a forecast of how the Ukrainian / Russian conflict will be resolved? Ask the prediction markets! Predictit has created a security that tries to get at this. The price of this instrument can be interpreted as the probability that Putin holds onto the Russian presidency through the end of 2022, as determined by the collective wisdom of people willing to stake money on their beliefs. It started at 84% on 25 Feb but is closer to 74% as of 28 Feb.

Why are Russians withdrawing money from banks?

From today's WSJ:

In Russian cities, anxious customers started lining up on Sunday in front of A.T.M.s, hoping to withdraw the money they had deposited in banks, fearful it would run out. The panic spread on Monday.

...On Monday it plunged further, with the value of a single ruble dropping to less than 1 cent at one point. As the value of any currency drops, more people will want to get rid of it by exchanging it for one that is not losing value — and that, in turn, causes its value to drop further.

In Russia today, as the purchasing power of the ruble drops sharply, consumers who hold it are finding that they can buy less with their money. In real terms, they become poorer. Such economic instability could stoke popular unhappiness and even unrest.

News from Ukraine

 From software developers working for US clients:  

Hello team, now I am in a save place in the mountains near the Poland. As --- mentioned I have laptop not so strong to use it for development. Tomorrow I will try to buy it in Mukachevo city and will try to return to the work. Network is poor, but I think I will have ability to work.

A few words about war: russians are very bad peoples especially from Chechnya. They stopped a car and killed a family with 2 children’s we know this family they killed all of them, children’s 3-5 years old….. Family want to move from Kiev today. I took my child, wife and my mother and we fill safe. My father and sister couldn’t move from Kiev. They are on the front line with enemy. We have a contact with them. Hope they will be alive.

Also tomorrow I will go and give my blood for our army. 

Please if you have time: share the information about Russians invaders in different channels. We need to stop them. This is terrible!!! lovely and pleasure capital of Ukraine Kiev was bombed all night. Millions of people are staying at home. It is a disaster!!!!!

Be safe and pray for Ukraine.

Best regards, -----

The costs of equity and equality

==> Weaker incentives.

...pay transparency causes significant increases in both the equity and equality of pay, and significant and sizeable reductions in the link between pay and individually measured performance.

HT: MarginalRevolution.com

Why do women earn more than men in Pakistan?

 Tim Harford ("The Undercover Economist") suggests that it is due to selection bias:

...in a country where the barriers to paid work for women are high, the few women who do have jobs at multinational companies are outstandingly good. These high‑flyers are promoted and paid more than the average man. This suggests that there are women outside the workforce who, if they did have paid jobs, would be well above average even if they weren’t superstars. If the barriers to their workforce participation could be lowered, they would raise the productivity of the companies that employed them.

Bottom line: Inefficiency implies opportunity for those with the imagination and initiative to exploit it.

Why did Airbnb succeed?

 Interesting story from Wharton that illustrates a number of ideas from the book.

Airbnb was born in 2007, when two broke designers were trying to make rent on their San Francisco Apartment.  When a design conference came to town, and hotels were sold out or charging surge prices, they bought some air mattresses put them on their floor, and rented them to conference attendees. 

Obviously, the space on the apartment floor was more valuable to the conference attendees than it was to the two designers [Ch 2].  

At the time, there were other home-sharing sites, like VRBO and Homeaway.com.  But these were for vacation rentals.  Airbnb was uniquely urban.  Every time a conference came to town, demand for lodging would spike, and hotels would raise rates [Ch 12, "revenue management"].  Airbnb made money by sending some of this demand to apartment owners and renters.

The still-private company has grown rapidly and reached a valuation of $31B.  As a result, the hotel price spikes have gotten smaller, called "compression" in industry jargon, because Airbnb supply is drawn into the market during these increases in demand [Ch 8].  

Can you distinguish correlation from causality?

"Everyone who confuses correlation with causation eventually ends up dead."--Emily Rauscher

HT:  Nico