The Price of Everything

Sting still pulls in $2,000/day in royalties for Every Breath You Take. 

Pretty cool, but nothing like singing about central bankers.  From Columbia Business School, economics with an eighth note pulse.  Schoolhouse Rock, eat your heart out.

Bankers: Pop this one in before your next ALCO meeting.  All that jaw-jaw about forward rates, consumer demand drying up, and asset-sensitivity goes down a little smoother with a catchy tune.

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BTN reports a new service for bank customers: placing shredders in the branch.

What’s the connection?

Banks sell trust and security.  Customers want to buy peace of mind - and one of their deepest financial fears is identity theft.

Leave aside the profit implications of offering this product for fee.  The service deepens the relationship with your customer exactly along your key branding as a bank. 

Shredding is similar to placing a coin counter in your lobby.  Take care of your customers’ financial headaches and they will stay loyal. 

Of course, only offer services that enhance your key value proposition - no lottery tickets, hedge funds, or payday loans, please.

Bankers: You can lower your optimal rates by changing rate sensitivities.  Deepen your bonds with the customer and use your retail presence to your advantage.

Update: Shredding is spreading to banks across the country.  From American Banker ($) (hat tip: John McCaffery):

National Penn Bank has had such good attendance at its shredding days that it is considering handing out coupons for special bank offers at next year’s events, said Linda C. Hill, director of retail marketing for the subsidiary of the $5.2 billion-asset National Penn Bancshares Inc. in Boyertown, Pa.

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Yes, it turns out our China trade deficits are partly due to those darned bankers.  America’s financial system may be working a little too efficiently. 

My econ classes taught money flows from developed economies to build up evolving countries.  The Brits and Dutch invested lots of money in the Colonies because that’s where the returns were.  Investment (factories, tools, etc.) is more effective in places that don’t already have a lot of money. Read more »

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From the NYT, Diner Beware: Turisti Pay More in Roman Restaurants

It might be an extra 30 cents for an espresso, or a $5 tithe tacked onto a bottle of wine. It may even mean the substitution of lower grade ingredients. But the practice of charging tourists more does exist and is committed daily, even hourly. If executed properly, the turista will be none the wiser.

“You think you are being taken care of,” said Christian Boyle, a Londoner who has spent some months in Rome. Soon after arriving, she and some friends displayed fatal naïveté, when they were not sure what to order at a restaurant just off the Piazza del Popolo. “We couldn’t decide,’’ she said, “so the waiter said he would bring us some things to try.’’

“One thing kept arriving after another,” she said. Things were fine until “he charged us full price for all these little dishes that we thought we were just trying.”

People hate getting cheated.  Evolutionary psychologist Leda Cosmides built pretty cool experiments to demonstrate how good we are at finding cheaters.  Turns out, the human brain specifically evolved the ability to detect cheaters.

Which brings us to price gouging.

Read more »

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The Wrong Way:

I vividly remember my first experience in the corporate world after college.  I was hired by an enormous engineering firm to program some small subsystems for a multimillion dollar simulation of a power plant in Canada.

I was pretty excited.  I had a cool job for a respected company where I could learn a lot.  Plus, they paid me an adult salary. 

After my first day at my new desk with a multicolor employee manual, corporate vision statement, and new stapler, I was still raring to go.  But the next day, I was assigned to investigate the “library”, a small office filled with various piles of disorganized correspondence about the project.

I spent weeks in that room.  My eyes wore grooves in the paperwork as I read and reread - trying to make sense of the project and my part in it.  I bulled my way through it and eventually, the project engineer let me out of the room.

I organized the mess so no one else would needlessly suffer.  I created a thermodynamic heat balance so our 30-engineer team could work effectively together.  Then, I created a paper-based version  of the distributed control system (the video game the operators control the power plant with) so everyone could see who was working on what - and where the holes were.

I hated being the new guy.  Turns out, the experience stuck with me.  Read more »

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