Author Archives: umbrown

Reflections on Economics at Michigan

For my 40th blog post (about an hour before the last post is due) I wanted to reflect on a few details of my economics major at Michigan. I hope that some of the other seniors in the class will agree with some of the points that I make here.

First off, I would like to echo professor Kimball’s words. To paraphrase; while we obviously learn a lot in each class, that dwarfs what we can learn from a lifetime of following the news and reading articles related to Economics. This is true not just of this course, but the economics program as a whole. I am sure that maybe someone going on to a PHD or Masters in Economics may disagree, but since I am stopping my formal studies of economics at the undergraduate level, I am hoping that I can continue learning a substantial amount using my economics studies at Michigan as a lens with which I can view the rest of the information that I consume throughout my career.

I would also like to mention one of the courses that I took at Michigan that has had a substantial impact on me. The first elective that I took in the economics department was Econ 395, the Economics of Education with Adam Stevenson. The course looked at economics models of why people choose a given amount of education and examined different ways to improve education in the United States, among other things. Not only did this class do an excellent job of preparing me for Econ 401 and other upper level courses, it gave me an interest in education policy in the United States that has stuck with me for the past three years. With the amount of resources spent per pupil, it is amazing that our elementary and high school students are not performing better on international comparisons. While this is all unrelated to the job I will be starting in a few months, education policy is something that I follow on news sites such as politico (not to mention, it gave me a better understanding of the education reform bill that was discussed throughout the first several episodes of House of Cards).

I could write a similar paragraph about most of the economics courses that I took here. My point is that as many of us get ready to move on to the next chapter of our lives, we shouldn’t forget the impact that each class has had on us and how truly valuable our economics degrees will be to us.

Tech Companies’ Customer Retention

As my Apple Iphone 4 is approaching three years old and is starting to have some problems, I have been researching some new mobile phones and seeing what is out there. While I haven’t made a purchase yet, the two I was deciding between are the Samsung Galaxy S5 and the Apple Iphone 5s. With Apple’s most recent software update for their Mac computers (OSX Mountain Lion), you are able to use iMessage on your laptop. When it dawned on me that if I switched to the Galaxy S5 I wouldn’t be able to use this feature, my mind was made up, I would be sticking with an iPhone.

It is worth noting that usually Apple’s major operating system updates would cost twenty or thirty dollars. The most recent one was free. While I am sure that there were other reasons, I am also sure that this idea of getting Macbook users to stick with the iPhone by adding a whole new level of seamless interaction between the devices was part of the justification for giving this software update away.

Screen Shot 2014-04-24 at 8.53.25 PM

 

While the above infographic shows that this problem of customer loyalty isn’t really an issue for apple, it is for many other major tech companies. This got me thinking of ways that tech companies can do a better job with customer retention. As the example above demonstrates, Apple’s messaging feature being linked to their laptops got me to stick around as an iPhone customer. Many have noticed this trend of high customer retention with Apple. South Park even made an episode that made drew parallels between Apple and a cult or religion.

Clearly Samsung, LG and the others could take some lessons from Apple. With Blackberry’s terrible decline from the dominance they once held over the smartphone market, these companies have a lot of incentive to learn a thing or two about customer retention. As this driving sales article points out, and in line with the example I gave in my introduction, Apple’s products work flawlessly together. This is one benefit to the fact that you can’t buy Apple’s software unless it comes preinstalled on one of their machines. This is much different from Microsoft’s Windows or Android’s mobile operating system, that can be used on many different brands’ devices. While Apple’s policy on this has drawn some criticism, from the standpoint of brand loyalty, it has surely been a winning strategy.

Perry 2016; New and Improved

Its not quite time for midterm elections, which for American politics, means that its time to start thinking about who each party is going to run for president and what the primary’s will look like. Most of what I have read makes it seem that Hilary Clinton will have no major opposition to securing the Democratic party nomination leaving only the formality of winning the primaries and caucuses and choosing a running mate. The Republican side, on the other hand, is looking much more interesting for 2016. While Chris Christie, the governor of New Jersey, was an early favorite, his bridge closing scandal has left him hurt but not entirely out of contention. Out of the last round of Republican nominee hopefuls from 2012, Rick Perry didn’t seem to be in a position to make a serious bid but this time it seems as though a new and improved Rick Perry is taking national spotlight.

His 2012 run was characterized by far right religious positions that didn’t sit well with many Americans as well as some gaffes that made it difficult for him to be taken seriously. With ads like this one as well as not being able to remember the third government agency he wanted to end, it is no surprise that he wasn’t destined to win the nomination. But that was 2012 Rick Perry. 2016 Rick Perry seems to be a much stronger candidate with better preparation and in better health (he was recovering from back surgery the last time around). In 2012, not only did he come off as unprepared but unintelligent. While he hasn’t officially announced that he would run in 2016, he has been visiting talk shows and states who vote early in their primaries, winning over many voters. He has also been discussing his stances on Russia and other issues that he wouldn’t need to worry about if he wasn’t looking past his duties as the Governor of Texas.

Aside from his refined ability to speak publicly, he does have an impressive track record, including being the longest serving governor of Texas. Under his leadership, Texas didn’t bear the burden of the recession as badly as much of the country either. Both of these factors will be important for his candidacy. Despite his blunders in the 2012 race, Rick Perry appears to be gearing up to run a much more successful campaign. While it is much to early to say if he will be a viable contender, adding a new serious politician to the running will inevitably have a strong impact on how the race will look as a whole.

 

What to Pursue; Money or Fulfillment?

Barack Obama was recently berated in the Wall Street Journal’s opinion section in regards to his federal debt forgiveness programs related to student debt. One such program is a limit on how many years after graduating that your debt can follow you. For some jobs sectors, such as government employees, this can be as little as ten years. Another aspect of Obama’s program is limiting the percentage of your income that has to be paid towards student debt. With the numbers of those enrolling in this program increasing, the articles main criticism of the program is that it is becoming increasingly costly for the taxpayer.

While the author has a point in that the more people who sign up for this program, the more expensive it is, this is the case for many government programs including food stamps, welfare, etc. The writer also claims that it is a negative point that such programs incentivize going into lower paying fields if the government will forgive their student debt faster. While this may be the case, isn’t it better to have people in some positions who otherwise wouldn’t have been able to afford to take a lower paying job if that is what they want to do for work? I know some grad school students and phd candidates not only get their tuition covered, they get a stipend for living expenses. While this isn’t the case for any undergraduate programs (that I know of), going easier on their student debt can incentivize and allow more people to pursue fields with lower pay that they find more fulfilling even though it may not require an advanced degree.

The article takes a tough stance on fields of study that don’t have high pay and whose graduates are likely to need help paying back their student debt because their chosen career doesn’t allow them to make enough money. I took issue with this because for many people, their preferences are such that personal fulfillment and happiness at work is much more important than earning a high salary. Most of these people understand that when they choose their field of study in college that they may not make as much as an engineering or finance major. My point is that high levels of debt is a major cause of unhappiness and stress, and while programs that help forgive debt can be expensive, they are a drop in the bucket in terms of the United States’ federal budget and federal debt but if they allow students to pursue passions that they otherwise wouldn’t have, then isn’t it money well spent?

Net Neutrality takes Another Hit

Last week, I posted about the dangerous precedent set by Netflix by agreeing to pay Comcast for faster streaming speeds for its users. The FCC just gave a green light for this kind of agreement to be reached between any websites and broadband providers. While broadband providers aren’t allowed to block or slow any individual websites, by allowing some websites who can pay for it preferential treatment, other websites will slow down relative to websites who pay. While the FCC’s newest rule on Net Neutrality requires that they oversee every agreement to make sure the terms of the agreement are “commercially reasonable”, I am afraid that this is putting us on a dangerously slippery slope towards an internet that is heavily tilted towards benefiting companies whose ability to pay for such arrangements exceeds that of most other websites. While the clear winners here are broadband providers, this move can have massive effects, including stifling innovation when startups can’t pay for the same speed as other websites.

While websites are the ones paying the price of these rules, sooner or later, the broadband companies may be turning to internet users to pay based on how much they access the internet as well. Verizon’s CEO says that “you should pay more if you use the internet too much“. While currently this is not allowed under net neutrality rules, the FCC doesn’t have jurisdiction over mobile internet traffic. As I am sure many of you remember, Verizon and others used to have unlimited data plans for your smartphones. Recently those are beginning to turn into monthly limits on how many gigabytes of internet you are allowed to use. For those of us who don’t want an outrageous phone bill, this forces some changes to how you use the internet on your phone, including waiting until you are home and connected to your wireless network. If Verizon’s CEO had his way, the same types of data restrictions that are new to your phone may soon be coming to your home internet. While there are some points to be made justifying such a stance, the effect of such a move would put those who can’t afford to increase their monthly bill every time they browse the web into a disadvantage in countless ways. The internet is how students access information and job seekers access job postings.

My point is that net neutrality is headed towards the wrong direction and if the FCC, lawmakers, and the American people aren’t careful, some grim realities may become truths of how the internet is accessed, which will have a much larger impact on the bottom income earners.

(Revised) Netflix to Pay Comcast; May Cause Future Problems

A couple of months ago, Netflix announced that they would be paying Comcast for faster streaming to Comcast’s customers. Comcast, who recently acquired Time Warner, is the largest internet service provider (ISP) in the country with around thirty-two million households as customers. This move may have unintentionally harmed Netflix, other internet based companies, and setback everyone in the United States who requires access to speedier internet. This post will analyze the effects on all three of these groups of actors in the internet market.

1) Netflix

While Comcast is the dominant internet provider, there are numerous other internet providers who have just gained a substantial bargaining edge with Netflix. Since the move has increased streaming speeds for Comcast’s Netflix users, CNN reported that Netflix is in talks with Verizon and other ISPs to work out a similar deal. While the financial terms of the Comcast deal haven’t been announced, I think it is a fairly safe bet that this was costly for Netflix. They may have the cash on hand to pay Comcast and Verizon for this kind of arrangement, but It would surely be too expensive to pay every ISP in the country. Additionally, if an ISP wants such an agreement, what is to stop them from slowing Netflix’s streaming speed if they don’t pay up? Despite entering these agreements to pay ISPs, Netflix is publicly condemning the fact they have to in order for their customers to stream their movies and TV shows at a reasonable pace.

2) Other Web Based Companies

Not only has this move opened Netflix up to the problems mentioned about, they have set a dangerous precedent that may force other websites into such arrangements in order to get the same speed for their users. This will particularly effect websites who have massive traffic but don’t have the massive revenues to pay ISPs.

Since the previously slow streaming speed on Netflix was the result of their massive number of users, we can assume that internet speed is a zero sum game. If one website loads faster, others must load slower. This will also pressure websites who don’t want to frustrate users with slow load speeds to enter into agreements with ISPs and pay them so that their users can enjoy the same speeds.

3) Internet Users Everywhere

Finally, internet users in general are harmed by the direction that net neutrality is headed. Websites who previously had very minimal advertising may be forced to cover their websites with banner ads to make up the revenue that will be spent paying internet service providers. While the websites that we use that do agree to pay for faster streaming will speed up, other websites who don’t have the cash to pay ISPs will relatively slow down. 

A Proposed Solution

As the FCC’s net neutrality rules no longer hold ISPs from throttling websites’ speeds, ISPs are in a position to take advantage of websites, as they are doing with Netflix. To stop this, websites like Netflix can stop entering such agreements and instead use the money to help fund or lobby for increased expansion of services like google fiber, the 1 gigabit internet that is reasonably priced relative to companies like Comcast. (Currently it is only offered in a handful of cities). If Netflix would simply refuse to pay Comcast, Verizon, and other ISPs and instead try to help google fiber reach the entire country, there would soon be no need to pay for increased speeds, and websites would have no problems loading faster than ever.

Google Glass For Sale (Today Only)

A couple of weeks ago, I wrote about how Ray Ban and Oakley were pairing with google glass to increase interest in google glass. Today, beginning at nine o’clock this morning, you can purchase google glass for a reasonable fifteen hundred dollars. This offer only lasts for one day and then, beginning tomorrow, google glass will return to invite only.

On their website, google offers a range of color options and styles along with many tutorials and some information on the product. Using this one-day exclusive sale date offers a lot of advantages for google. It will add potentially tens of thousands of users to their “explorer program” of only a few thousand select users who have had google glass with their user information being sent to google to analyze so that they can fix and improve their product. Before today, most of the people using google glass were probably relatively tech savvy. With glass being sold to the general public, google can get user data on how your average (wealthy) person uses google glass, not just the techie people previously using glass. There is no doubt that this will offer new insights to how the average person will use google glass once it is released in a more permanent way. This will allow google to see what changes need to be made.

Another benefit to this one day release of google glass is that it increases demand and the short duration of the sale may lead many to jump on the offer who maybe would have thought about it and changed their mind if google glass was being sold in another way. While several thousand pairs of google glass is but a drop in the bucket of google’s revenue, I am sure they won’t complain if ten thousand or so people are willing to shell out fifteen hundred bucks for glass.

With this relatively large influx of google glass out there, I am sure that there will be some clever new uses for glass that hadn’t previously been thought of. I recently heard about personal injury lawyers having their clients use google glass to document struggles of living with an injury. Additionally, I am sure we will hear about some problems for those using google glass, including being banned from restaurants or stores who value their customers’ privacy or harassed by cops as driving laws with google glass haven’t been established yet.

(Revised) Bershidsky Wrong on Video Game Market

In a last month’s Bloomberg view article, Leonid Bershidsky wrote “Why Sony’s Playstation 4 is Really a Loss“. The article outlined the reasons that the newest Playstation won this round of “console wars” after the Nintendo’s Wii U was a flop and they are outselling Microsoft’s XBox One. Bershidsky’s view was that this was a fruitless victory as the console video game market is shrinking.

While Bershidsky presents some data to back up his opinion, there is other data that would point to the opposite conclusion; that the console gaming industry is in fact thriving. Bershidsky’s article itself points out that Sony has already sold six million Playstation 4 units (as of March 11) and is on track to beat the 9.1 million that the Playstation 3 took a year to sell. Beating previous sales marks is, by definition, not a declining market.

He also brings up a valid point that more of people’s gaming time is devoted to smartphone and tablet games rather than console games. While flappy birds and fruit ninja certainly take up some time spent gaming, I don’t think that playing one of these games is a substitute for console gaming. While the truly dedicated gamers will spend a few thousand dollars on a gaming computer and the most casual will only have the “free trial” version of some games on their smartphone, in between these two extremes are the millions of people who play console games. Given the increased sales of the Playstation 4, there is a market for consoles that has continued to thrive as the sales data alone for the most recent generation of consoles demonstrates. This market hasn’t declined and doesn’t appear to be declining in the future.

As Bershidsky correctly pointed out, the Playstation 4 still has competition from the Playstation 3 on sales, but I don’t doubt that effect will start to wear off as game developers begin to release more games that are only for the new systems and avid gamers will want to be part of it.

Even with negative publicity and bad reputations that games such as Grand Theft Auto have received, their sales are still massive. Just last year, Grand Theft Auto V broke the single day sales record for any video game ever. That certainly doesn’t sound like a declining market to me. While this game was released for the last generation of consoles, I am sure that Rockstar (the maker of the Grand Theft Auto series) will release something for this generation of consoles. While this may be a few years down the road, there will be people who buy this generation of consoles just to play the next Grand Theft Auto game, just as many people bought an XBox 360 or Playstation 3 to play GTA V.

In short, despite articles like Leonid Bershidsky’s, the console gaming market is not declining as strong sales push the Playstation 4 (and the Xbox One to a lesser extent) into the homes of millions of consumers, spelling out profits for console makers and incentives for them to keep innovating so that the Playstation 5 and next XBox can impress consumers just as much.

(Revised) Facebook’s Next Acquisition; a Prediction

Screen Shot 2014-04-06 at 2.56.41 PM

The above screenshot is from an interactive infographic that can be found in a Tech Crunch article, Visualizing 15 Years of Acquisitions by Apple, Google, Yahoo, Amazon, and Facebook. For perspective, that huge blue bubble in the bottom corner is the much talked about 19 Billion dollar WhatsApp acquisition by Facebook earlier this year. Scrolling through some of these acquisitions, I recognized many names including Tumblr, Instagram, and Youtube, among others. This got me thinking about some of the apps or web services that I have used or heard about that may be next on the list of companies to be acquired by one of these tech giants, given their seemingly unquenchable thirst to buy up these smaller web services and apps.

The first that came to mind was the new Cyber dust app (currently only available for iPhone but their website promises an android version soon). The messaging company is somewhere in between text messaging and snapchat. The basic idea is that once you send someone any message or image, it disappears 30 seconds after they open it. Given snapchat’s popularity, I can see this app getting similar levels of attention. While they are too new to have published any data on number of users or anything like that, I can see them growing quickly.

I am sure that any of the companies included in the info-graphic above (Apple, Yahoo, Amazon, Facebook and Google) would be interested in acquiring this company, I would expect Facebook to make an offer if my prediction on the app’s user base growth is correct. Facebook had offered three billion dollars in cash for snapchat late last year, so they have an interest in this “disappearing digital footprint” fad. Given heightened privacy concerns of many mobile users, these kinds of apps are very popular. Since snapchat rejected Facebook’s offer, I wouldn’t be surprised if Facebook is quick to make an offer to purchase cyber dust.

The service, whose tagline is “Every spoken word isn’t recorded. Why should your texts be?” is owned by Shark Tank’s famous Mark Cuban, who says he doesn’t think it will replace texting, only supplement it but that Cyber dust does allow you to stay in control of your messages. With standard texting, you lose control as soon as you hit send. While there are some obvious sketchy uses for cyber dust that come to mind, I have used it to send my login information for my Netflix account to my brother. While that isn’t the most sensitive information out there, I don’t really want him to tell all his friends at school and have 300 high school freshmen using my Netflix account. Cyber dust prevents him from leaving that information on his phone when he takes it to school. Other more innocent uses for the app that come to mind are coordinating some kind of surprise birthday party or complaining about your boss to coworkers.

While there are a lot of “what ifs” about Cyber dust’s growth, I think that my prediction is a reasonable one. I don’t know much about Mark Cuban’s goals for holding onto or selling the service, so whether or not cyber dust is actually sold if an offer is made is another discussion entirely.

Facebook’s Next Acquisition; a Prediction

While scrolling through some articles for some inspiration for a blog post, I came across a tech crunch article that included a very good interactive info-graphic on acquisitions made by tech companies over the last fifteen years (screenshot below).

Screen Shot 2014-04-06 at 2.56.41 PM

For perspective, that huge blue bubble in the bottom corner is the much talked about WhatsApp acquisition by Facebook earlier this year. This got me thinking about some of the apps or web services that I have used or heard about that may be next on the list of companies to be acquired by one of these tech giants, given their seemingly unquenchable thirst to buy up these smaller web services and apps.

Cyber dust instantly comes to mind. The messaging company is somewhere in between text messaging and snapchat. The basic idea is that once you send someone any message or image, it disappears 30 seconds after they open it. Given snapchat’s popularity, I can see this app getting similar levels of attention. I couldn’t find any data on their current number or users or anything like that, but I have no doubt that this relatively new app will take off quickly.

While I am sure that any of the companies included in the info-graphic above (apple, yahoo, amazon, Facebook and google) would love to acquire this company, I would expect Facebook to make an offer if my prediction on the app’s user base growth is correct. Facebook had offered three billion in cash for snapchat late last year, so they have an interest in this “disappearing digital footprint” fad. Given heightened privacy concerns of many users, these kinds of apps are very popular. Since snapchat rejected Facebook’s offer, I wouldn’t be surprised if Facebook is quick to make an offer to cyber dust.

The service, whose tagline is “Every spoken word isn’t recorded. Why should your texts be?” is owned by Mark Cuban, who says he doesn’t think it will replace texting, only supplement it so that you can stay in control of your messages. With standard texting, you lose control as soon as you hit send. While there are some obvious sketchy uses for cyber dust that come to mind, I have used it to send my login information for my Netflix account to my brother. While that isn’t the most sensitive information out there, I don’t really want him to tell all his friends at school and have 300 high school freshmen using my Netflix account. Cyber dust prevents him from leaving that information on his phone when he takes it to school. Other more innocent uses for the app that come to mind are coordinating some kind of surprise birthday party or complaining about your boss to coworkers.

While there are a lot of “what ifs” about cyber dust’s growth, I think that my prediction is a reasonable one. I don’t know much about Mark Cuban’s goals for holding onto or selling the service, so whether or not cyber dust is actually sold if an offer is made is another issue.