Ben Perreira

My head's dropbox.

Month: December, 2013

Give Me What I Want

Sam Biddle found a clip of Uber CEO Travis Kalanick saying that Uber’s mission is to serve people who hold the attitude “give me what I want and give it to me right now.” Biddle makes a strong point that this perspective on the world could make us terrible people. I hold that anyone who thinks this way may already be afflicted with this problem, but that is an issue for someone with a different specialization than my own.

Sure, when I want a ride somewhere I don’t want to wait in the cold, so getting a car in five minutes is amazing. I absolutely love what Uber does for getting cars. The miss here is in thinking people want all things delivered in the same way they get cars. The enjoyment of a product or service can be thought of as three phases:

  1. Anticipation: Establishing a need for a product or service, deciding to use it, selecting a provider, and thinking about how the experience will be.
  2. Use: Usually the shortest phase. Transactional consumption.
  3. Memory: Recall and recognition (or triggered) memories about when/ how/ why we used the product or service, ultimately leading us to use it again.

Getting things instantaneously removes phase 1 almost entirely. 

I enjoyed the film “Jiro Dreams of Sushi” and I would likely try to go there if I ever make it to Tokyo. A huge component of my enjoyment is Jiro’s restaurant is in the anticipation. It is in making a reservation, having to wait weeks or months, flying to Tokyo, trying to find the restaurant in a new city, and watching the chefs prepare each course. If Jiro’s food appeared at my doorstep in five minutes I would miss a substantial part of what makes it a great experience.

As Uber moves into delivering other things it will need to consider the totality of how people get enjoyment out of consuming each of those things.

 

 

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Market Norms vs. Social Norms

I started reading Dan Ariely’s Predictably Irrational this week. It’s a great read for anyone interested in consumer psychology/ behavioral economics. 

He discusses the idea of the market and social values of goods. He has found that people act in markedly different ways when they accept payment for things than they would if they were doing something strictly to remain in line with social normality. It may sound abstract, but it’s pretty simple.

Here’s an example:

I have been surfing since 1997 and began giving surf lessons around 2002. At first I would take out friends and family members. After a while, I honed my craft and people started asking me if they could pay me for lessons. I accepted their money as any enterprising capitalist would. I loved surfing, enjoyed teaching and was not opposed to making money. It was a win-win situation, I thought.

As I began to make $50/hour teaching surf lessons (vs. $8.50/hour that I was making at a surf shop), I began to detest giving surf lessons for money. When I was doing it for free I was forced to view all gains as social, and it made me satisfied with the transaction. Once I started charging it became something I was forced to do in order to make hard currency to purchase other goods. I became another service-provider; a professional giver of surf knowledge. It even made it harder for me to enjoy going surfing outside of “work.”

I still teach friends how to surf on occasion because I still enjoy it. We all have things to learn from each other, so why not share what we know with those we admire?

But I never accept money for surf lessons. 

The ‘Bama Baseline and The Saban Premium

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Nick Saban may not be the happiest guy in the world today. He is likely experiencing a hangover of sorts, having lost to rival Auburn on Saturday on what some could call a tactical error. Others may just call it one of the greatest college football finishes in recent history.

Coach Saban probably feels much better when he cashes his paychecks, rumored to amount to over $5.5 million per year.

This figure is the cause of some grumbling. Some simply say that no college football coach can possibly be worth that much. Others say that college coaches are only paid so much because players can’t get paid per NCAA regulations (ok, this may be true).

Since we can’t move the goalposts, so to speak (too soon, ‘Bama fans?), let’s focus why he makes that much. Firstly, we have to look at the value of the job itself. Any schlub hired to coach football at big schools like Alabama, Texas and USC would be making $3 million. That $3 million baseline is the price to have a guy on the sidelines calling the shots. 

The $2.5 million is the premium assigned to guys like Saban, Kiffin* and Mack Brown for the wins they deliver to the school. Wins mean more TV money, more Bowl money, a better recruiting pipeline, and more. Just like only a handful of quarterbacks will deliver wins consistently, a handful of coaches simply know how to get the job done. When they win they more than earn their keeps.

Alabama may have recused itself from the National Championship game this year, but you be sure that paying the premium to have a guy like Saban at the helm will keep them in contention for years to come.

*Wins not applicable.