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The Stripy Strudel's Journal

Posts tagged with "economics"

iSocket

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Some people ask me why I dislike Apple when they make good things, nice and comfortable, which “just work”.

In order for things to work (and especially “just work”) with other things, there are standards. All electrical appliances have plugs of the same shape, and that's why they can be plugged into any socket of the same standard. You don't need a Siemens socket to plug a Siemens hoover. Anyone can make a socket into which a Siemens hoover can be plugged. Any hoover can be plugged into the same socket. The owner of the apartment chooses the electric power supplier or even produces their own power. A Siemens hoover will still work in a new apartment after moving because the sockets there are the same. Even Eskimos who live in igloo and herd penguins have sockets into which a Siemens hoover can be plugged.

An Apple hoover can only be plugged into an Apple socket. There is no publicly available schematic for Apple sockets. Chinese manufacturers have disassembled a sample and started making sockets into which Apple hoovers can be plugged, but using such sockets voids the warranty on your hoover. Not every hoover can be plugged into an Apple socket. Electric power in Apple sockets is supplied by Apple's partners and is more expensive than on the free market. Apple sockets cannot be found in every apartment, but I must admit that Apple builds beautiful apartments. Apple sockets are never found in igloo because Apple has no interest in that market. Nobody knows what the plugs of the next generation Apple hoovers will look like, and whether they can be plugged into Chinese sockets.

EU: please investigate // Nei til nye stikkontakter
© Martin Bekkelund, 2008.

This is a picture from the photo-report about the demonstration in Oslo against accepting the OOXML format pushed by Microsoft as an ISO standard. A banner can be seen in the picture: «Nei til nye stikkontakter» («No to new sockets»). On the right, with a megaphone in his hands, is Håkon Wium Lie, CTO of Opera Software and the inventor of the CSS technology. To him I'm grateful for the idea of the plug-and-socket analogy which I somewhat developed here.

By the way, here is an article in the Norwegian newspaper VG where the bottom picture captures yours truly taking part in the demonstration.

UPDATE: No, it's not a Siemens advertisement. I just needed some placeholder.

UPDATE: For the sake of justice I must admit I've got no complaint against Apple's browser department. Thanks to these guys for their decent and fair competition, for active participation in the web standardization process and for active cooperation with fellow browser makers on security issues.

По-русски: iРозетка

Serving Those who Serve the People

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Some work just for money, others achieve immediate satisfaction from doing the job, and for others still it's important that their work is of use to someone. Isn't it nice to know that a person becomes a little more happy, content and healthy from what you do for them? It's easy to feel something like this when you work as a hairdresser: a man comes shaggy-haired and leaves with a trendy haircut, saying thank you to you as he looks in the mirror. It gets harder if you repair hairdressing equipment. A man wouldn't have his haircut without this work as well, but he doesn't experience it directly.

There seem to be different kinds of services: some of them are rendered to a person directly, and some are only indirect. For a more detailed classification of services by this principle let's consider the following set of rules.

  1. Services rendered to a person directly are first order services.
  2. Services rendered to subjects rendering nth order services are services of order n+1.
  3. Production of goods is comparable to rendering of services. For example, baking bread is rendering a first order services.
  4. Performing work as an employee is considered rendering a service to the employer if the nature of the service is substantially different from what the employer (the enterprise) renders to its consumers. For example, an employed hairdresser renders a first order service, but a packer at a confectionery renders a second order service to the enterprise because this service (packing) is different from the service rendered by the enterprise to its consumers (supply of finished confectionery articles).
  5. Reselling of goods or services without introducing a qualitative change in their nature doesn't increase the order of service.
I work for SWsoft, Inc, a company that makes web hosting automation software. Here is how I analyze the order of my service:

  1. When browsing a website, an internet user consumes first order services from the content author. (Of course, there are specialized websites for those who render specific services of various orders, but our web hosting automation software are not specifically tailored for hosting of such websites, so this fact doesn't increase the order of the service.)
  2. The author uses a web hoster's service to host the website. This is a second order service. The end user mentioned above doesn't experience this service directly.
  3. The web hoster routinely uses the automation software made by our company. Even though sometimes content authors use it as well, it's targeted at those who sell web hosting services, and contains specialized tools for this. Therefore, the web hoster consumes a third order service by purchasing our software.
  4. Finally, I personally render a fourth order service to the company by working as a software architect. My output is not finished software, it's substantially different from what the company offers to the consumers, so my services are of the fourth order.
This concludes the chain because there aren't any special goods or services targeted at software architects for web hosting automation products. Even though there are products targeted at software architects in general (such as Rational software), they aren't specific to architects in this particular branch and therefore have a lower order.

The higher the order of services, the narrower the specialization of labor. Higher orders become possible only with overall advancement of the industry characterized by increased branching of trades. I'm not sure if it's for good or bad, but I'm sure that there wasn't anything like fourth order services a couple hundred years ago. High order services make the service circulation chain longer. For example, in a small 19th century town the shoemaker would fix the barber's shoes, and the barber would shave the shoemaker's beard. The chain was two persons long. The distance could be bigger between some other professions, but not a lot. It's much harder now to trace the circulation of services between a web hosting automation software architect and a lawyer in an auditing company.

Back to the original topic: the opportunity for satisfaction from realizing that your work is useful quickly diminishes with the growth of the order of services. Starting with something like the third order, it's nearly impossible, so those who render such services have to look out for other ways of getting satisfaction. For example, to me the work itself is interesting as an abstract task that I'm constantly solving.

The original entry in Russian features a poll: Your work. It is possible to vote in the poll after logging in to LiveJournal; registration of LiveJournal accounts is free.

What kind of work do you do? Examples: fixing televisions, writing articles for a financial magazine, driving a subway train.

What order are the services you render? (1…6)

What is the primary source of the satisfaction the work brings you?
  • Knowing that I'm doing a useful job.
  • The very process of working.
  • Knowledge, experience, or physical form I gain.
  • Communication with colleagues, partners, clients.
  • Money.
  • My work doesn't bring me satisfaction.
Please don't vote if you haven't read all of the above. It's also interesting if you trace your service chain in a comment like I traced mine.

UPDATE: The average service order according to the poll participants is suspiciously close to π.

По-русски: Трудиться на благо тех, кто трудится на благо народа

The 21st Century: Goodbye to Quality?

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According to a story of unknown credibility, on the border of the 19th and 20th centuries investors considered automobile to be economically hopeless. Nevertheless, Henry Ford had managed to obtain a credit of $1400 to build automobile construction under very tight conditions. It seemed that the revenue from car sales wouldn't be able to cover the investment within the term for which Ford could get the credit. Henry Ford might never have become the man who made automobile available for millions of people — if not for the idea, brilliant in its economical efficiency, that came to his mind. The idea was to produce cars deliberately less reliable than it was possible, and to make money by selling spare parts. A quote attributed to Ford: “I make cars to sell parts for them”. The new business model let Ford build a profitable enterprise, return the credit in time, and become the world's first mass producer of cars.

Ford brought much to both industry and society. For example, the modern 40-hours week and the very notion of “weekend” became de-facto standard after having been implemented at Ford Motor Company. However, one of his innovations, namely “to make a worse product than you can when it's economically justified”, gave the world a dubious gain. Of course, if not for Ford, someone else would have come up with this idea, great in its simplicity; or maybe someone already had implemented it before him. Today you can see live examples of this wherever you look, and it's time to think about the reasons and consequences of this phenomenon.

It's important to note the difference between production of goods or services of simply low quality and production with quality deliberately lower than the producer is capable of ensuring. For example, a software producer who releases software with bugs doesn't necessarily fall into this category because it's impossible to get rid of all bugs (moreover, it's possible than the capabilities of this producer are so limited that they can't make less than one bug per ten lines of code, or that the programmer does a bad job because he's underpaid). We are more interested in a producer who releases software without sufficient debugging in order to make money on paid support or upgrades. So what are the reasons that can make it economically justified to make deliberately worse products than it's possible?

  • Releasing unreliable products stimulates demand for add-on goods or services (spare parts, repairs, tech support).
  • Short life of the product stimulates demand for more units in replacement of broken or worn out ones.
  • Low prime cost of a low-quality product allows to bring the consumer prices down and obtain greater revenue by entering the mass market.
  • Low-quality goods are possible to produce faster or in larger quantities, which leads to competitive advantage over those who make quality goods.
  • In the modern market, quality is no more the primary tool of competition, inferior to, for example, efficient advertising.
  • The market has come to a situation where, for the above reasons, all the competitors release low-quality products; under such conditions it doesn't make sense to try to achieve better quality in this branch because the consumer will have to choose among the available offers anyway.
It's hard to say whether it's good or bad that Henry Ford's approach is widely implemented in modern industry. Of course, many consumer products, such as cars, we'd never have seen without it, or they would be elite goods available to just a few. On the other hand, the lowering of quality directly affects the consumer. It's especially prominent due to the last reason in the list: as a chain reaction, it impels the makers to skimp on quality more and more in order to gain competitive advantage by other means (low prices, high volumes, advertising). Competition based on “who makes better” seems to have been left out of the modern economy and survived only in particular branches with very specific markets.

Each one of us is both a producer and a consumer. At work, we take part in production of goods or services, the rest of the time we consume what others produce. As a consumer, everyone is, of course, interested in having quality goods, however, as a producer, one might find it profitable to skimp on quality. Obviously, a single person's attitude towards quality can be contrastingly different when they routinely switch between the two roles. This means that there must be a conflict point somewhere where two approaches meet. In my opinion, there are three possible models for a person's attitude towards quality:

  1. One can accept that most of what one consumes is of low quality, just like what one produces.
  2. One can have double standards and expect high quality goods from the market while making low-quality production.
  3. Finally, one can demand quality of the goods offered and have the same attitude towards one's own output.
It's worth noting that an employee who follows the third model is inevitably in explicit or, more commonly, implicit conflict with the employer who strives to save on quality.

I must say I'm of the third kind. The second model I can't fit in my head at all, and for the first one I'm probably too old-fashioned. Having done some creative work well brings me direct æsthetic satisfaction, and it's for this satisfaction that I'm working in this particular branch and at this particular enterprise. Recently I've turned down an offer of a significantly higher salary elsewhere for a job that I could do but which was completely uninteresting to me. Having taken this decision, I've realized that I don't only work for money; an important part of what I get from my work is the very æsthetic satisfaction that I wouldn't have if I did a worse job than I can in favor of, say, production rate. This means that my and my employer's goals are unfortunately different: I squeeze the maximum æsthetic pleasure from my job by doing it as well as I can, while the employer strives for tighter timeframes, higher volume and everything else but quality. This conflict of interest is currently implicit. If it becomes explicit, I'll have to change my job.

The original entry in Russian features a poll: How do you combine the two attitudes towards quality?. It is possible to vote in the poll after logging in to LiveJournal; registration of LiveJournal accounts is free.

How do you combine the two attitudes towards quality?
  • Model 1.
  • Model 2.
  • Model 3.
  • A totally different model (please comment).
  • I don't face this problem (please comment).
Please don't vote if you haven't read all of the above.

По-русски: XXI век: прощай, качество?
November 2009
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