technology Archives - Page 8 of 8

Insuring Nothing

Tyler Cowen mentioned something about product insurance at one part of his book, Discover Your Inner Economist. He says that one should not argue with his wife when she insist on buying product insurance even when you know that the results are economic analysis are at your favour. Presumably, there are some other cost-benefit analysis taking place, at the level where the cost of winning the argument greatly overwhelms the benefit (which of course is the cash saved on the product insurance). The Economist asked why people continue to buy them even when products are unlikely to fail, which means that these product insurances are immensely profitable for the electronics retail sector. The researchers who examined purchase data from a big electronics retailer for over 600 households from November 2003 to October 2004 concluded that the purchases were linked to the shopper’s mood. Of course, a less-than-rational wife might be the explanation, but even the wife has a sound explanation for that:

[…] the emotional tranquillity that comes with buying a new warranty is not in itself without value, even if “rationally, it doesn’t make sense”.

But I find an ingredient missing in this story; the researchers probably falsely assume that all the shoppers have got the same level of perceptiveness. And I believe perception have all to do with the purchase of product insurance. Think about it, when was the last time you had a product which failed and the warranty period was just over and you blame yourself for not buying additional coverage? But how about the last time when you did buy the product insurance and it didn’t fail at all within the span of its usage, not once? Just like the belief that we’re unlucky enough to always join the slowest queue in the supermarket; our erroneous perception of the frequency we get unlucky can make us more frustrated with a product insurance unextended than a product which didn’t fail after we bought the coverage despite the fact that they probably inflicts the same cost on you. Obviously it actually hurts you more when you think back and regret not extending coverage; you probably won’t even think back on how stupid you were to buy product insurance for a reliable product since you’re using it happily.

This creates a bias for purchasing product insurance. Our faulty perception supplements our faulty memory in suggesting that buying product insurance would be the wise choice, going by the seemingly sound argument of ‘if the product fails, I’m protected; and even if it doesn’t, I get a peace of mind plus the retailers deserve the reward if they recommended me the durable kind of good’. You could very well have realised that if the product was that durable the manufacturer would already have taken a cut for that on the retail price and that if the product ran a high chance of failure the retailer wouldn’t even offer you the product insurance in the first place. And if your wife has anything to say about that, it’ll probably be “Must you be that calculative?”

Fake Stuff

The Economist ran a story about counterfeit handsets in China lately. Counterfeiting and piracy is not exactly all imitation and no creativity but it does actually hurt the economy, or so claimed by original manufacturers because it affects their incentives to innovate. The difficulty lies with assessing whether the consumer would even consume the good in the first place if the imitation is not available. As a matter of fact, I think the best way for these problem to solve themselves is for consumers to realise which one of the products (real or fake) offers them the utility they need. In most cases, people may just be satisfied with imitations then so be it; the original manufacturers simply may not have profited from these group of consumers who would otherwise not be able to afford the real thing.

It is only when the utility functions of these products coincide and people switch from using original to fakes that matters (but the difference should be made up by the disparity in quality or the time lag in introduction of imitations) and becomes a huge problem. And it would be a bad thing if manufacturers ends up engaged in the competition of who is best able to prevent piracy – that’s senseless innovation that penalizes the society in general. Take Digital Rights Management (DRMs) for example. It sucks, everyone hates them and games like Red Alert 3 lost business because of it (though most part of its lack of popularity was attributed to its poor interface design and lame scenarios) and consumers hate big firms for them.

Perhaps intellectual property should be contained in ways that are stricter such that innovations built upon ideas that belongs to others are welcomed. In many sense, parodies are imitations, and so are fan fiction, built upon characterization or story frameworks that belongs to others. We should perhaps start treating the NPhone’s relation with iPhone like Shrek’s relation with Matrix. A joke.

Careful Bots

It’s a long time since I last directed readers to a lengthy prose penned at The New Yorker; while some of those long-winded stuff are reserved for pure entertainment when one is really bored in front of the computer, Jeremy Groopman wrote an interesting narrative report about robots that cares for patients. If you’ve some time to spare, it’d be good to go through some of these technology stuff that is more elaborate and human in reporting than those featured in The Economist.

The same magazine reports about another kind of careful technology. Seymour M. Hersh explores a more remote topic that less people would really bother about seriously despite its implications on many.

Tech Bits Again

While the big stuff like satellites seem to be doing a great deal for our planning and crops, the small stuff in the field of nanotechnology is doing pretty scary stuff with carbon nanotubes again. The nanotubes actually end up being integrated into the plant cells, how disgusting can that get. Okay, I’m a little paranoid.

Tech Muscles

No doubt the Japanese are really good with technology and particularly great with their niche areas of precision engineering. The Economist reveals how indispensable some medium-sized corporations in Japan have come to be so (despite their somewhat unknown-ness) in our global tech economy. Their culture of monozukuri (making things) and kaizen (continuous improvement) have probably helped Japan sustained these niches but I must say that the article revealed an important aspect of business in certain industry that have too often been overlooked.

The very fact that long-term working relations helps these Japanese firms gain trust from their client for reliability and a special understanding of their client’s needs presents a difficulty for other firms to compete with them. It is something rather different from brand-loyalty that consumers might exhibit like the case of food, as a recent Schumpeter article was suggesting. This loyalty is something functional and as long as these engineering firms continue to provide excellence in the fields they engage in, they’ll continue to thrive.

Of course, The Economist sounded some warning about the secrecy these Japanese firms place on their technology and how their belief in the strength of the firm being stored in the collective mind of their employees devour them of labour flexibility that may some day come to haunt them. Japanese firms have prevailed more or less and I believe they’ll adapt their culture to the changing time, all while insisting they didn’t quite change the traditions and beliefs.