It seems the health care conflict is heating up... congressmen are cancelling town hall meetings for fear of the pitchforks. The arguments are intense and the news is showing the conflicts, no doubt encouraging more conflicts. The conflicts are over the false dilemma over more government intrusion versus less government intrusion.
The solution to the health care crisis is complete deregulation; indeed, with deregulation there would be an economic recovery that would lead the world as USA puts its creativity behind alleviating pain and suffering.
With medicine in USA now, we have such massive featherbedding in both health care and insurance that we guarantee a false dilemma fight.
Since insurance companies accepted regulation, they merely amortize risk and complain when government policies change the premises, such as extending health care to domestic partners. With such a change the insurance companies have to start over, and since they don't know really what the cost for amortization is, they jack up the price high. Any extra revenue that flows i, they spend to maintain their traditional profit margins. Ooops! What to do more money coming in after mispricing premiums? Private jet travel at the VP level!
In a free market insurance companies make money by lowering risk; when they find less claims through better medicine, they earn more and cut premiums to stay competitive. In a free market prices drift down.
Subsidized corn, sodium and lard are reworked into about their worst combination and fed too people on welfare, who then end up ill and on medical welfare. Ross Perot became a billionaire computerising the welfare state, and FritoLay became huge feeding those on welfare. (As did the people eating Frito's)
For most people, most health care expense comes at the first few days and the last few days of life. For 89 year old who dies of pneumonia, or the 19 year old who dies of motorcycle wreck injuries, it is that intensive care that costs.
One change in our society is we began farming out assisting our elders as they aged. By concentrating elders in group settings, we can farm out care to poor people to attend to our elders, and be free of the responsibility. This is of course a distortion of division of labor, since there is nothing anyone can do that is more important than taking care of one's elders.
Of course, when we see what it takes to care for elders in such concentrations, we are convinced we could not do it ourselves. But again, that is just what they spend, not what it costs. Another factor: elders live better longer in multigenerational settings. Concentrate them, there are more problems, more costs.
But what if you are a single mother working and mom has alzheimers and you cannot leave her alone all day. Single mothers used to be rare, we were once neighborhood rich, and neighborly. If all else failed there was charity. By passing responsibility for health care and so much more onto others, we have deprived ourselves of much richness in our lives.
If we took responsibility for our elders, we would certainly have to re-arrange our lives, and work at a higher level of responsibility. But then we are flexible, we humans, we so often rise to the occasion.
A big part of medicare expense is mom using "free" care to get attention. Doctors nurses, drugs all charge a lot of money, especially because they spend a lot, not that they cost a lot. Insurance companies simply move the money around according to the amortization tables. With health care costs so high, something must give. Washington State just past an "physician-assisted suicide" which of course introduces violence to address the problem. This is a downward spiral.
We can deregulate the field of medicine and see similar job-generating, wealth expanding innovations when we saw deregulated telecommunications. Probably not, because telecommunications was a small slice of the USA economy. health care is bloated. Probably the best thing you can do, the least thing you can do, is visit mom. Invite her to move in. Make it so she can move in if need be.
Saturday, August 8, 2009
Fix Health Care - Visit Mom
Tuesday, August 4, 2009
Free Market Price Regulation
I wrote a defense of price gouging not too long ago, and I want to update that with another aspect of free market price regulation. I demonstrate your products will never be stolen from you in any materially meaningful way when you compete on design. Another constant factor in a free market is profit margins are competitive and tend to settle to a basic common place.
Knocking off competitors' designs is easy within any industry, since all of the players can look at any item and know the cost and engineering involved. But what would be the point when you can gain the same profits off your own designs? Plus, being a knock-off is generally considered second-rate, so it is avoided.
Should you compete on design, and choose to charge more than is warranted empirically, you will be abusing your customers by charging too much. Your competition will spot this instantly.
Say a normal mark-up in an industry is 100%, and for one item in your line of 50 items, you actually price it out for a 500% markup.
Well, your competitors will spot this, and see that if they "steal" your idea, and mark it up a mere 250%, they at once protect consumers from your avarice by exposing it, plus pick up a super-premium over what they normally earn by selling an item of your instead of their own. This is the natural law sanction on overcharging your customers.
For anyone who makes the mistake of overcharging customers, this slap on the wrist normally restores the avaricious to their senses.
Now of course, with government intervention in the forms of patents or other monopolies, some biz people will raise prices, and make it look necessary by spending more than is necessary. Medicine is a perfect example of this, with massive featherbedding to jack up costs.
Usually unions get accused of featherbedding, that is demanding more workers than necessary to get a job done, driving up costs. So it is with every other field where competition is not allowed, only worse than when unions do it, because it is hard to see where the feathers are being embedded. In a free market this overpricing is not possible.
Duncan Develops Luggage
On Jul 26, 2009, at 3:20 AM, Duncan wrote:
John,
Hope you're doing good. I'm finding the Hammacher Schlemmer catalog is a really great source of inspiration. Does a successful importing company lie behind every product? Would any one of these products be good enough to launch an importing business? Many of the products I can certainly imagine leading to the response 'good idea, doesn't exist'.
***Yes, I think Hammacher Schlemmer (HS) is merely one very well organized companys of which there are countless that sell products that compete on design. They are retailers, and behind those products are both importers and manufacturers. I would say whoever vends those products to HS did start as an innovator. If biz start without innovation, usually they die. Some start without innovation, but get the message quick enough to change and survive. Normally innovation is not something you learn to do later, you do it first.***
For example, the pop-up pavillion http://www.hammacher.com/Product/76540?promo=OutdoorFurniture
"I want a pavillion that collapses and stores easily in a bag" Doesn't exist, utilitarian.
Some of the products though I think I'd have a hard time getting to 'good idea, doesn't exist' without showing a picture first. What about this one: http://www.hammacher.com/Product/75808?promo=Sports-Leisure-Travel
Not much different from existing bags. Other bags open from the side, nothing unique. Nice leather, but so do a lot of other bags. I mention this because I'm focusing on bags. If I went in and described this they would say 'we don't have exactly what you want but this bag opens from the side and is made of a high quality leather'. If I insisted I want "American bison leather" and brought in a picture of this bag in my mind they might say 'nice, but we don't have it'. Is that the strategy you would use here?
***Yes, but lock in to the business side of the brain that the buyers you approach will place tiny, insignificant orders... " "hmmm, I am looking for new, and I supposed I could try three bags with no risk to me..." thinks the buyer. I does not take much to innovate, the buyer takes no risk, so not to worry to much about pictures, samples etc so early in the process...***
This one, too, http://www.hammacher.com/Product/75095?promo=xsells
"I want a bag that fits under the airplane seat and has easily accessible pockets" This would already be solved by existing bags on the market.
I would never design this bag http://www.hammacher.com/Product/76838?promo=Sports-Leisure-Travel because there are a zillion similar bags out there. I could never say it doesn't exist, which is an essential criteria.
***Right, never start by proposing to solve a problem that is already solved.***
This is a good candidate for solving a problem... http://www.hammacher.com/Product/77464?promo=Pool
"I want a swim mask with a bulit in camera so I don't have to carry one" (assuming it didn't already exist) , getting to milestone 2 would be easy
***Yes, in China this spring I saw a telephoto attachment for cell phone cameras... a wide angle attachment too... what a trip... ***
What would you ask for here
http://www.hammacher.com/Product/74035?promo=Apparel-Robes
"I want a bath robe that is heavier than anything you have in store?"
***the term for the heaviest cotton terry bathrobe a human can endure is a "turkish bath robe" I suspect it is already out there...***
the yahoo group group:
Of course, the govt distortions are still in place, but the run-up in real
estate is over. The
fantastic profits will be found by investing the excess profits of the business
you love in a different
asset class over the coming years, Exactly what will that be? Get a biz going,
get into those trade
shows, get into the conversations that normally occur, and at that time you will
find out as
everyone else does.
Wouldn't the greatest return be had from reinvesting and growing the biz? If not, why not start out in investing rather than entrepreneurship?
***Straight business is what you love... business is constrained by competition which limits the possible return on investment. the business you love is in a free market, and no one can gain outsized returns in a free market. Natural law constrains excesses. While you live your calling as a butcher, baker, candle stick maker, governments are busy distorting markets and generating misallocations and malinvestments. One may invest savings on the way up in these disasters, or on the way down (or both). to ones advantage. I certainly have, crying crocodile tears the whole time. In the case of the accidental millions those importers made off of warehouse real estate in the 50s 60s, those very warehouses now are again heading to zero value (meaning no buyers at any price.)***
When you ask the manufacturer to pay you a royalty when they sell your product, someone else is buying your design. What this person is doing is what you advise against though.... in this case is it the volume importers appropriating your product?
*** anyone buying my products is going to sell it to customers I cannot reach. If they start a biz with my product, they will likely fail, since they lack the faculty to compete on design. Understand this is mostly the answer to the fear people have that "someone might steal my idea..."***
Similarly, say I wanted to import speciality pasta. Couldn't I take off the shelf spaghetti from Italy and sell it? Isn't the whole idea that it's authentic and the way it's consumed in Italy? I don't see any different pasta here than from when I was living in Italy, there's just quite a lot more varieties there. I'm guessing this is an example of a 'design' that works everywhere, so no more work to be done here customizing for the market?
***Everyone sells authentic pasta from italy... what problem would you be solving?***
The other thing is not to worry too much about how well it sells... a key reason
for
getting any item out there is to get in line to here more and newer ideas, that
you,
being small and "hungry" will work on as well, ever building your compnay.
So get any item out there is crucial?? Couldn't I just put out a dish cloth in tartan, say, even though it probably already exists, then get in line for the new ideas? Or would the problem be that I wouldn't be seen as first rate?
***Right, and you have to earn a place at the table, with your first offering... you have to prime the pump by putting a little of your own in first...***
John