I just found Tony Hsieh’s astonishing book excerpt in Inc, entitled “Why I Sold Zappos“. It makes for very sad reading. Hsieh starts by explaining that he never wanted to sell to Amazon:
Our hope was that we’d eventually go into all sorts of other businesses. We saw Zappos as a global brand like Virgin — except whereas Virgin was about being hip and cool, Zappos would be about offering the best service. The plan was to grow sales to $1 billion by 2010 and eventually go public.
But then Amazon came calling again:
As before, our plan was to stay independent and eventually go public.
But our board of directors had other ideas. Although I’d financed much of Zappos myself during its early days, we’d eventually raised tens of millions of dollars from outside investors, including $48 million from Sequoia Capital…
By early 2009, we were at a stalemate. Because of a complicated legal structure, I effectively controlled the majority of the common shares, so that the board couldn’t force a sale of the company. But on the five-person board, only two of us — Alfred Lin, our CFO and COO, and myself — were completely committed to Zappos’s culture. This made it likely that if the economy didn’t improve, the board would fire me and hire a new CEO who was concerned only with maximizing profits. The threat was never made overtly, but I could tell that was the direction things were going…
I left Seattle pretty sure that Amazon would be a better partner for Zappos than our current board of directors.
Essentially, Hsieh never wanted to sell, but Amazon was a less-bad option than sticking with the bean-counters at Sequoia, who never really signed on to Hsieh’s philosophy:
Some board members had always viewed our company culture as a pet project — “Tony’s social experiments,” they called it… The board’s attitude was that my “social experiments” might make for good PR but that they didn’t move the overall business forward. The board wanted me, or whoever was CEO, to spend less time on worrying about employee happiness and more time selling shoes.
The tensions between Hsieh and his board (for which read Sequoia GP Mike Moritz) were reported by PE Hub at the time, and then dismissed by the NYT; it seems PE Hub was right. This is a lesson for anybody who takes VC gold: VCs always have an eye on their exit, and they usually want it more quickly than the founders do.
Still the tensions can’t have been all that bad. After Zappos was sold to Amazon for $1.2 billion in Amazon stock, the team which had fought to keep it independent — Tony Hsieh and Alfred Lin — stayed on at the company. Until, in April, Lin announced that he was leaving. To go to Sequoia Capital. I wonder how closely he’ll be working with Moritz?
I sent AT&T spokesman Mark Siegel some questions this morning:
1. Will you have “rollover megabytes”? If not, why not?
2. Why do the plans have to be chosen ex ante, rather than ex post? Wouldn’t the plans be much more convenient for consumers if they just automatically paid for the Data Pro plan when they went over 200 MB, but paid only for Data Plus if they consumed less than 200 MB?
3. How exactly does data plan switching work? If I’ve consumed 150 MB in a month and switch from Plus to Pro for the rest of the month, do I pay any more than if I had been on Pro all along? What if I’ve consumed 250 MB in that month before making the switch? Do I pay $30 or $25? And what if I switch down from Pro to Plus — is the amount of time I spent on the Pro plan pro-rated, or do I still get the whole month for $15?
It’s a patently cyncially priced plan. It’s extremely easy to exceed 200MB if you use your phone to surf the web and use Google Maps on a fairly regular basis, but you’re unlikely to exceed 500MB unless you do data intensive stuff like downloading music and streaming video.
You say you’re all about consumer choice, but it does seem that your choices are clear ones only for (a) Blackberry users who mainly just use email; and (b) heavy users who stream music/video, or who have a 3G iPad. The rest of us — which I think would include most people with an iPhone — are in that unhappy cusp zone around 200 MB where it’s very easy to make the wrong choice. Are these plans specifically designed to make us unhappy?
5. An AT&T representative said here that iPad 3G owners who turn off their $30 unlimited plan will be able to turn it back on again. Is that true? And is it fair for people to characterize the widespread advertising of the unlimited iPad plan as a bait-and-switch, given that it lasted less than 40 days?
We don’t have rollover megabytes.
The iPad plans are all prepaid and no-commitment. You pick the plan that works for you. Want to drop it? No problem. Want to pick it up at some other time? Also no problem.
We think that approach is easy and flexible and puts the customer in charge of what they want to do.
On switching plans: Customers can switch between the two new plans easily, even in the middle of the month. They can do so themselves on the Web or by contacting us. In either case, they choose whether to make the jump from DataPlus to DataPro that day, for the next cycle, or backdate to the beginning of the cycle to avoid overage charges. And remember, we give free text message (and email if we have the address) alerts at three usage levels, in addition to all of the other ways customers can monitor usage.
If you buy the iPad before June 7 and want to use the unlimited plan, you can.
So, that’s one question answered, at least: it seems that you can backdate your data plan to the beginning of your billing cycle if you’re switching up from Plus to Pro. (It’s not clear if you can backdate a downswitch from Pro to Plus.)
It’s also pretty clear that if you turn off your unlimited data plan on the iPad, you won’t be able to turn it back on again. But we knew that already, didn’t we.
As for the lack of rollover megabytes, I think that underlines that the underlying business plan here is cynical/evil. AT&T loves to talk about how many people use less than 200 MB of data per month on average — and if they really cared about serving those people, then they would be happy to let them roll over their unused megabytes. But as it is, someone like me who uses less than 200 MB of data per month on average is still probably going to end up subscribing to the Data Pro plan. Which is great for AT&T — an extra $10 a month for them — but is hardly the customer service that Siegel’s making it out to be.
David Enrich and Damian Paletta have the latest news on the Basel III front, and the compromise seems to be coming into focus: not so much on the substance, which remains more or less intact, but rather on the timing, which could get pushed out as much as a decade.
I don’t have any problem with this. And it sounds like no one else does either. If the new requirements are stiff enough to actually make a difference, we’d be nuts to demand that banks adopt them immediately in an environment where growth is already slow, lending is anemic, and raising risk capital is difficult. The real question isn’t so much the timeframe for adopting the new rules, it’s whether the rules are any good.
This makes some sense, but as anybody who’s ever faced a deadline knows, if you commit to doing something by some far-off date, you’ll end up doing absolutely nothing until suddenly it rushes up on you.
What’s more, it’s worth remembering that Basel II was meant to be fully implemented by 2004, and still hasn’t really been adopted in the U.S., six years after that deadline. So I fear that the pushed-back deadlines for Basel III will in effect be the date at which banks start worrying about the new rules, rather than any kind of firm line in the sand.
Still, if we’re going to compromise on anything, then compromising on timing makes sense. Let’s just hope that it comes with a commitment by national regulators to hold their banks to the timetable, and to make sure they’re on course to meet that pushed-back deadline once it’s set.
I know a lot of people — myself included — don’t have the time or inclination to watch videos online. So for those of you who didn’t watch the full congestion pricing debate, here’s a few highlights.
The first video, at about 1:40, starts with Charles Komanoff using Times Square as an example of how a city’s residents and visitors can benefit as a group, even if some drivers are inconvenienced. New York recently pedestrianized Broadway, and the result, says Komanoff, is that “it does reduce the amount of space that cars and taxis have to operate, but considering that there are so many more people walking than there are in motor vehicles, this rebalancing has been a very positive thing for the city”.
Corey Bearak says that New York businesses need all the customers they can get right now — but Reihan Salam responds by looking at precedents elsewhere in the world, which have generally been very good for centrally-located businesses.
One of the key themes running through the conversation is that the politics of congestion charging is always local and usually anecdotal. Bearak’s opposition is grounded in the reality of where subways do and don’t reach, or whether federal funds can be found to subsidize New York City transit; it’s really hard, Komanoff’s spreadsheet notwithstanding, to return to solid empirical data.
Still, some of the anecdotes are useful. Skymeter’s Kamal Hassan, at about 8:10, notes that if you have a congestion-charge boundary, as London does, then you get boundary effects: things like cars idling on the perimeter of the boundary until the off-peak period begins, or taking circuitous routes around the boundary because they’re free. He’s right, even though he’s talking his book: a per-mile charge, which could change gradually rather than drastically according to geography, would solve all those problems. (In the second video, at about 10:30, Komanoff talks about how it might be possible to charge very low rates in Queens, and very high rates in Times Square.)
Kamal adds, at about 9:20, that “you can change traffic patterns and traffic flows just through parking charging and parking policies, and if you set up smart parking policies within a city, you can have a very large effect on what happens”. This is an important point, because it shows just how many moving parts there are in terms of congestion pricing, and how many different ways there are of getting to where we want to be.
At the beginning of the second video, Kamal goes into more detail: for instance, the cost of a taxi medallion — currently a very large fixed cost — could be turned into a per-mile charge, which would decrease the amount of empty taxicabs cruising for fares, and increase the number of stationary cabs at taxi ranks.
At around 7:00 in the second video, Bearak says that the capacity of New York’s transit system is insufficient to cope with the increase in demand that would come from a congestion charge. To which Kamal agrees that “it’s very important, if you’re going to do congestion charging of any sort, that you make sure people have alternatives” — while at the same time noting that subway ridership fell, in London, when the congestion charge was introduced, and so higher capacity on the underground wasn’t necessary. And it’s much easier to add capacity with new buses than it is to build new subway lines.
At about 12:20 in the second video, there’s an interesting terminological interlude: Bearak says that a congestion charge is “taxing folks”, Komanoff says that it’s “taxing traffic”, and Hassan says it’s “paying for convenience”. This is the point that Ryan Avent makes today:
Commuters who didn’t value their time as much as they valued a marginal dollar (and these will tend to be lower income individuals) will feel some loss from this shift. But it’s unlikely that there will be BIG losers; even the poorest automobile commuters out there (and you can’t be that poor and still be an automobile commuter) place a positive value on their time.
Meanwhile, there will be enormous utility gains elsewhere. Some subset of commuters would have preferred to use transit to driving, but found the bus system too slow and unreliable to be a reasonable option. Bus riders, current and potential, also benefit substantially from congestion pricing. Poor riders who never had the financial option to drive will experience huge gains from faster and more reliable bus transit. And just as the positive value of time ensures that there will be no big losers among drivers, it also means there will be some very big winners. This includes the rich, obviously, but also those with pressing needs. Any given day, there are many, many drivers who need to get somewhere in a hurry: for economic, or medical, or other reasons. These drivers would likely be willing to pay tens or hundreds or thousands of dollars to avoid congestion, but before congestion pricing they wouldn’t have that option. The consumer surplus generated for these drivers from an effective congestion price is simply massive.
Then at about 13:00, Reihan Salam has a great rant. “The idea that you should pay $2 or $9 to drive in to New York when other folks have to pay some amount to take a subway into New York and have a much smaller impact, in terms of traffic congestion, seems pretty fair”.
And at 16:40, Komanoff makes one of those points which is only obvious once it’s made: that the places with the worst congestion are invariably the same as the places with the best transit access. Moving people from cars to transit is not, in principle, all that hard.
And at about 17:00, Hassan raises the prospect of charging people little or nothing for driving in their own neighborhoods, especially in the suburbs — again, something that’s very easy with Skymeter technology. At about 19:30, Komanoff pans out a bit, talking about a tax on miles traveled as an extension of the congestion charge for the rest of the country:
“Even though it’s true that congestion pricing needs to have subways and very dense cities and preferably large cities, the idea of per-mile road pricing, in urban areas and in metropolitan areas, is extremely viable. The average person who has a car is making 1,500 trips a year. It’s not as though every one of those 1,500 trips has equal value to that person. So as we impose the per-mile charges, everyone will prioritize his or her own trips.”
Matt DeBord watched the whole thing, and he’s worried about the implications for “individual liberty” of a Skymeter solution. I’ve addressed this before: in theory, if you make your Skymeter payments in advance, you never need to have your movements monitored or recorded anywhere: the payments just get deducted from your account. Certainly the Singaporean government, if it implements this kind of a solution, is going to be prone to keeping all that extra data. But I’m convinced that DeBord’s “serious privacy issues” can be addressed as and when they arise: they’re not a reason to object ex ante to charging for certain types of driving.
DeBord also raises the issue of electric cars:
Many electric car startups, and even well-established automakers getting into EVs, are aiming to market their limited-range vehicles to city dwellers. You can image what the congestion-charge crowd thinks when it thinks about that.
Actually, as someone who’s spent quite a lot of time around the congestion-charge crowd of late, I can’t imagine what they think on this issue. But I know what I think, and I’m pretty sure that Komanoff thinks similarly: traffic congestion is traffic congestion, no matter what the car engines look like.
Finally, it’s worth pointing out that Frank McArdle (Megan’s dad) has left two interesting comments on this subject, here and here. A snippet:
Congestion is actually a good thing. It tells us that many people see great value in being someplace at the same time.We really don’t want it to go away, since it also reflects the higher values in the economy of places where there is congestion. We know that when there is no congestion at the beaches it is probably not a good beach day for most. That lesson applies very broadly.
What we really want is there to be congestion, but not enough to upset our private benefit. But we all know that the roads we take will have congestion at some points and some days. We factor it into our lives. The proof is in the changes in average commuting times over the last four decades,which have changed significantly only in those places where everyone wants to be because they can make more money than elsewhere.
I think this elides the distinction between congestion and density: the holy grail is to get the latter without the former. New York already has high density; its next job is to lower the amount of congestion that density is prone to create. One way of doing that is through public transit. But another way is through a congestion charge. It’s silly not to use all the tools at one’s disposal in the service of making a city as livable as possible.
Mark Siegel, the executive director of media relations at AT&T, was upset that I didn’t phone him before posting my blog entry yesterday on his company’s new data plans. He phoned me this morning, and I told him that I assumed the official AT&T press release — which I linked to from my blog — had all the information that the company wanted to release, but that if he wanted to tell me anything else, he was more than welcome to.
And indeed, he did clear up one thing for me. If you’re on the Data Plus plan, that costs you $15 for 200 MB no matter how much data you use. If you use 201 MB in a month, that’s $30; if you use 401 MB, it’s $45, and so on. If you go up to say 1.9 GB in a month, that’s $150 — six times the $25 you would pay to consume the same amount of data on the Data Pro plan.
Is there any point, I asked Siegel, at which AT&T will help a brother out and automatically switch a heavy data user from Data Plus to Data Pro? No, he told me: “Our assumption is that people are intelligent enough to see that they’re going over. People are way smart enough to manage their own usage.”
This puts a large and unnecessary onus onto people with phones, especially phones with WiFi capability. If you only use data-heavy applications like YouTube or Pandora when you’re connected to a WiFi hotspot, you should be fine with the lower data plan — until that fateful day when your WiFi craps out without you noticing, and you rapidly rack up a huge amount of data usage inadvertently.
I also asked Siegel what plan I should use, in the light of my detailed list of how much data I’ve consumed over the past eight months. “In your case it might be a toss-up”, he said, unhelpfully. “It’s up to you to decide.”
Well, that’s one choice I don’t want. Siegel thinks — or at least he told me — that “people don’t want one plan”, and that something along the lines of the plan I proposed in my post ($15 for the first 200 MB, and then $10 per GB thereafter) would constitute trying to fit all of AT&T’s customers into one mold — something he says that, after “months and months of speaking to consumers”, AT&T has learned that they don’t want.
So I asked him who would lose out from that kind of plan. He said: “For somebody who is a relatively light user, a gigabyte would be a much much much higher level of usage than that person would ever engage in, and why would you charge that at all.”
Somehow he forgot that AT&T, with its new plans, is asking anybody who’s likely to go over 200 MB in one month to get charged for two gigabytes of data each month — or face paying more for 201 MB than they would otherwise have to pay for 1.9 GB.
Siegel’s message, which I’m happy to pass on, is this: “One of the things we found is that people don’t want one plan. They don’t want one size that fits all.” Well, I want one plan, and it’s clear to me that AT&T new pricing scheme is deliberately constructed to ensure that a lot of people end up making unnecessary payments — either for using more than 200 MB when they’re on the Data Plus plan, or for using less than 200 MB when they’re on the Data Pro plan.
Of course, if AT&T weren’t evil, it could fix all this at a stroke, and it wouldn’t even need to change the plan pricing. All it would need to do is charge people for data usage ex post, rather than ex ante: if you used less than 200 MB in one month, it would charge you on the Data Plus plan, and if you used more than 200 MB it would charge you on the Data Pro plan.
But that would be far too easy for AT&T’s customers, and it would deprive AT&T of all that extra revenue from people who guess their data-usage needs incorrectly. Obviously AT&T prefers to make life harder for its customers, if that’s going to give it a little bit more money.
Andrew Vanacore spins a whole story out of one curious datapoint today: he says that on USA Today’s iPad app, advertisers such as Marriott are paying “about $50 for every thousand times, or impressions, the ad appears”, compared to less than $10 on the website.
I just downloaded the app to see for myself, and indeed the ad doesn’t work unless and until the iPad has an internet connection. Unlike say the Wired app, where the ads are downloaded with the app itself, the USA Today app can download the ad from an ad server which counts impressions.
Maybe that makes some sense, for advertisers which are used to running ads on a CPM basis. But it seems to me that one of the great things about the iPad is that it can be read in a leisurely fashion in places where there isn’t an internet connection — by the pool, or on the subway, or in an airplane. The problem is that Apple, if I have my facts right on this one, either can’t or won’t tell publishers how many times a particular ad has been viewed, if the ad is downloaded as part of an app.
In reality, this isn’t much of a problem at all: it’s long past time that we got over the tyranny of the CPM, especially when it comes to glossy, high-production-value ads on the iPad; the bigger problem is that Apple is far from forthcoming with the kind of demographic data that advertisers crave.
In any event, I look forward to a time when iPad ads — at least the ones within apps — are not sold or counted on a CPM basis. And I suspect that so long as they are, revenues will be significantly lower than they could be — not least because those ads simply won’t appear for many people trying to use the app.
No single datapoint — not even the monthly payrolls report — can in and of itself mark the beginning of the end of the recovery. But this month’s numbers are still depressing, coming in well below lofty expectations, and having no silver lining: there were no upward revisions to previous months, there was no big fall in the unemployment rate, there was no obvious reason to believe that the 411,000 temporary employees hired in May to work on Census 2010 would otherwise have found private-sector employment.
The really recalcitrant number here is the unemployment rate, which is staying stubbornly near 10% no matter what payrolls do: when they’re healthy, more people start looking for work. But if you want a hint of a glimmer of hope, at least the broad U6 underemployment rate is heading in the right direction: it was 16.6% in May, down from a whopping 17.1% in April. (But it’s still higher than it was at the beginning of the year.) And more generally, of course, this degree of labor-market weakness is yet more reason to believe that inflation simply isn’t an issue for the foreseeable future, especially given the strength of the dollar. So the Fed is going to be happy keeping rates at zero for the time being: remember it has a dual mandate, and that Ben Bernanke should care just as much about bringing the unemployment rate down as Barack Obama does.
My feeling, however, is that both of them are going to be disappointed. Expect unemployment to remain over 9% through the midterm elections — compared to a rate of just 6.9% in November 2008, when Obama was elected. It’s that number, rather than anything going on right now in the Gulf of Mexico, which is really “Obama’s Katrina”.
The whole idea of trying to force people into certain media consumption habits seems futile in an era when technology has enabled people to consume whatever they want, however they want it. If pushing a few thousand more visits to ATL every week with a truncated feed is the best idea we’ve got for monetizing our content then we’re probably pretty screwed anyway, so we’ll likely be better served focusing our energies on coming up with more compelling content and platforms (newsletters, mobile apps) and so on, than in further aggravating RSS subscribers.
And what were the numbers? Well, the experiment only lasted a month, so they were necessarily ambiguous — but they’re consistent with my thesis that if you truncate your RSS, then the amount of traffic you get directly from your RSS feed goes up, but your overall traffic from other sources goes down. Here’s Jonah, in an email to me:
I think this test would tend to support your theory in that we got more traffic from the feeds, but saw about a three percentage points decrease in referring sources.
Total numbers don’t give as clear picture as we might both like. We were up considerably in the first week after truncation, mainly on the back of a couple of breakout stories like the Harvard racism tale. In the latter half of the trial period we were below our best numbers. The last couple of weeks might well be indicative of some negative impact from truncation, but such a large proportion of our traffic is direct and search based that I’d be wary of drawing too many conclusions from topline numbers.
Like Jonah, I’m happy that Breaking Media did this experiment, I’m very happy that they made the results public, and I’m extremely happy that they ended up coming down on the side of the angels.
There’s no way that the NYT or WSJ, both of which are becoming increasingly vocal about the necessity of paywalls, will ever serve up full RSS feeds. But I do think that those of us on free sites can and should use full RSS as a really easy way of adding value and differentiating ourselves from the paywalled newspapers. Not to mention Gawker Media.
Many thanks to Megan McArdle for giving me something to push back against with respect to congestion pricing. Megan, like me, favors congestion pricing, but she does see some problems with it.
The first, I think, is a bit of a straw man:
There’s a real tendency to tell drivers that congestion pricing is great for them: less traffic! I can kind of buy that argument, and then I notice something: almost no one making it commutes by car…
All the people commuting by car seem to think they will hate it. And that makes me think that they probably will.
Yes, this is absolutely true. Congestion pricing will hurt people who commute by car. That’s the whole point. If you currently commute by car, then you’ll either end up spending more money, or else you’ll use public transit. Neither is an obvious improvement. Some richer commuters will like their faster commute, but car commuters who aren’t wealthy will absolutely be the biggest losers here. We tax what we don’t want, and what we don’t want is car commuters. Most advocates of congestion pricing are pretty clear on that point.
That said, it’s worth pointing out a couple of mitigating factors here, beyond the simple idea that the cost of the toll might be balanced by the benefit of faster traffic. First, car commuters already pay for commuting into the central business district of New York, which has no on-street parking: they have to pay to park somewhere, and parking in the CBD is expensive. Megan talks about a car commuter paying $200 a month in congestion charging, and she’s right that that is “a lot of money for most people”. But on the other hand, we’re talking here about people who are already paying much more than that just for parking.
Secondly, where the congestion charge makes the biggest difference isn’t with commuters, so much as it is with through traffic and trucks. Insofar as commuters end up driving more quickly, it’s not mainly because there are fewer car commuters. Instead, it’s because truck traffic will end up moving from peak times to off-peak times, and because through traffic — cars which have no business in Manhattan but just drive through on the way somewhere else — will take alternate routes. Charging is pretty much the only way to make these things happen, and they’re clearly necessary.
And thirdly, car commuters are in the minority in every district in the New York metropolitan area: not just in the boroughs generally, but even in congressional districts in eastern Queens or in Westchester or even in New Jersey. Today, without congestion charging, the number of people who commute by car from any given area into New York’s CBD is smaller than the number of people who commute by public transit from the same area. It’s not like these people have no choice in their mode of transportation.
I still think that congestion pricing is a good idea for a lot of reasons, but let’s not kid ourselves that it makes everyone better off. It makes affluent people who can afford taxis and congestion fees better off, and poorer folks who can commute by bicycle.
Well, under the Komanoff plan, there’s a hefty 33% taxi surcharge, so let’s not jump to conclusions about whether people taking taxis will be better off. And most of the bicycle commuters I know are actually pretty affluent — for starters, it’s generally much easier to commute by bike if you live in Manhattan than if you live in Queens or the Bronx. And living in Manhattan, for the most part, ain’t cheap.
Certainly every city with congestion pricing has used some of the freed-up road space for bicycles, and the rate of bike usage in New York is rising fast. The more bicyclists there are, the safer and more pleasant biking becomes, and the more everybody wins: as someone who commutes either by bike or by subway, depending on the weather, I can assure you that biking is much more pleasant. And London is just one of many examples of cities where a large number of people have switched from the subway to a bicycle, not because biking is cheaper, but just because it’s a much more efficient way of getting from A to B. In New York, a congestion charge would be extraordinarily helpful in terms of increasing the number of bicyclists.
Megan then says that reducing subway fares “is a terrible idea”, on the grounds that rush-hour subways are already at capacity. But again, if you look at London, subway ridership went down after the congestion charge was introduced, because it made buses so much more attractive. Subways are capacity-constrained, but buses really aren’t.
But more generally, New York’s subways are woefully underused. For a couple of hours a day they’re crammed to capacity, and for most of the rest of the days there’s huge amounts of space. If you reduced the fare at off-peak times, that would do wonders in terms of maximizing the utility provided by the subways — while at the same time reducing congestion on the streets above.
What’s more, rush-hour subway traffic is very price inelastic. The people who brave the subway at 8am are the people who have to brave the subway at 8am, and that’s true whether it costs $4 or $2 or $0. Reducing the fare at peak times might increase peak-time ridership a little, but it wouldn’t increase it a lot. And in fact, if it were done in conjunction with putting a lot of new free buses on the road, there’s a very good chance that, just as in London, subway ridership at peak times would actually fall.
Finally, Megan says that “if you want to reduce auto traffic, you need more capacity on the [transit] system–and you cannot build that capacity if the system has no reliable source of revenue other than the largesse of the city government.” Well, yes. That’s exactly why congestion-charging revenues should be earmarked for transit.
Of course there are some losers with congestion charging. But everywhere that it’s been implemented, it’s been a bit like the smoking ban: people hated it before it was enacted, and then actually kinda liked it afterwards. There’s no reason that the U.S. should be any different.
On the London Underground, you don’t need to decide whether it makes more sense to buy an individual ticket or to buy a daily or a weekly or a monthly pass. With the Oyster card, you just tap in and tap out around the system, and it charges you whatever’s cheapest. You only make one journey? You only get charged for one journey. The minute that your journeys in one day add up to more than the daily-pass rate, you get charged the daily-pass rate, and no more. Similarly for your journeys in one week, with the weekly pass. And so on. Really, there’s only one plan, and there’s no way to get inadvertently ripped off.
When AT&T decided to abolish unlimited data usage on its smartphones, that’s the kind of of plan it should have implemented. Instead, it went the evil route, and it’s forcing its current customers to make one of three different choices, based on limited information. Whatever they choose is quite likely to be the wrong choice, and AT&T will chortle as it collects all that extra money which its customers didn’t need to pay.
The first choice is known as Data Plus, and gives 200 MB of data for $15. If you go over the 200 MB cap, you pay another $15 for another 200 MB. If you go over that cap, it’s not clear what happens, but you’ve already paid $30 and will certainly be asked to pay more.
The second choice, Data Pro, gives you 2 GB of data for $25, and then $10 per GB thereafter.
And the third choice is to stay grandfathered in to the current plan, which is $30 per month for unlimited data usage.
You can switch as much as you like between Plus and Pro, but once you leave the unlimited plan, you’ve left forever; you can’t go back.
AT&T is good at disingenuous statements like this:
Currently, 65 percent of AT&T smartphone customers use less than 200 MB of data per month on average.
This is disingenuous on two levels. First, as John Gruber points out, it carefully talks about “smartphones” rather than iPhones: the number for iPhone users is surely significantly lower.
But second, just because you’re using less than 200 MB of data on average doesn’t mean that you should necessarily choose Data Plus. I’ve just had a look over my most recent iPhone bills, and here’s my monthly data usage over the past 8 months: 202, 120, 160, 143, 89, 39, 333, 287. On average, I’m using 172 MB of data per month, and even with the overage charges I would have been better off with Plus rather than Pro. But for the past couple of months I’ve been significantly over 200 MB, and would be better off with Pro rather than Plus. And then, if I get the new iPhone 4G, is that going to raise my data consumption? Who knows.
At least with the subway you’re in control of how much you use it. With data usage on a phone, it often comes down to questions consumers can’t be expected to understand: how much data does say Google Maps use? And, more generally, if the AT&T network is good, and doesn’t time out on a regular basis, you’re going to use it more. And consumers can’t reasonably predict how good the AT&T network is going to be next month.
AT&T could easily have saved consumers all the trouble of having to try to predict their next month’s data usage by having a single plan: $15 for the first 200 MB, say, and then $10 per GB thereafter. They didn’t, because they’re looking forward to getting $30 per month from people exceeding 200 MB of data but who use nowhere near the 2 GB that “Pro” users get for $25. That’s where AT&T is evil, even if you think (contra Jeff Jarvis) that it makes sense to abolish unlimited plans.
Wcw explains the economics of the housing bubble, in a smart comment:
As for borrowing the money, I think the folks who did so did absolutely the right thing. When someone offers you a government-subsidized non-recourse loan on an appreciating asset, they’re giving you a put option. The more you borrow and the less you put down, the more that option is worth. These borrowers maximized their leverage. The market turned, and they exercised their put options. They are not the dumb ones, they are the smart ones. The dumb ones are the ones who gave away the farm lending this money.
It’s well worth noting, here, that there was an extra necessary ingredient: fudgy accounting on the bank side. If the banks had marked those put options to market, they would either have never made the loans in the first place, or they would have noticed their balance sheets eroding long before it was too late to raise new capital.
But they still aren’t marking those options to market. Everybody in America who has a mortgage has the option to default on that mortgage. That option is worth some non-zero sum, and in aggregate, across all the homeowners in the country, that option is worth billions, if not hundreds of billions, of dollars. And if homeowners own an option worth billions, then lenders have a liability of exactly the same magnitude.
The biggest lenders, in this regard, are Fannie and Freddie. But many banks are in the same position.
Look at the question another way. The likes of Mike Konczal have been looking for a while at second liens, and asking tough questions about how much they’re really worth. But let’s zoom back and look at the first liens, and think of it like this:
Let’s say you’re a good, creditworthy borrower: a tenured university professor, say, earning $200,000 a year. You ask for a $500,000 30-year amortizing loan at a 5% interest rate, which would involve you paying back about $2,900 a month — well within your earnings. The bank would laugh you away. But ask for the same loan in mortgage form, and suddenly it’s no problem. Why? Because the loan is secured.
Clearly, the existence of the security radically changes the economics of the loan. And equally clearly, the value of banks’ mortgage security — the houses the mortgages are borrowed against — has been falling fast. We know that the value of a home is the best predictor of future default, and that mortgages become much riskier when the homeowner doesn’t have any equity. We also know that roughly 25% of homeowners with mortgages have negative equity.
So it’s pretty obvious that even without taking into account a single actual default, the value of banks’ performing mortgages has been falling fast. And it’s equally obvious that no one has even attempted to quantify the numbers involved here — just how much has the value of banks’ performing mortgages fallen? And how does that number compare to the banks’ own equity?
This is one of the reasons why I’m still very nervous about markets generally: while there are lots of big sovereign and geopolitical risks out there, it’s far from clear that the big mortgage/housing risk is even behind us yet. And I would be much more reassured if there were some numbers marking banks’ mortgage books to some kind of market or model. Even if those numbers didn’t turn up in the formal GAAP accounts, it would be good to know that someone was at least keeping an eye on them. Especially when prices could easily plunge again, if and when the government stops artificially propping up the market.
From a PR point of view — and Warren Buffett cares deeply about his public image — yesterday was arguably the single worst day of Buffett’s life. He was dragged against his will — with a subpoena, no less — in front of the Financial Crisis Inquiry Commission, which grilled him on whether, as Moody’s largest shareholder, he took any responsibility at all for the disaster that happened there. His answer — no — was met with unanimous derision, both in the mainstream media and in the blogosphere: see The Pragmatic Capitalist, or Bond Girl (“It’s funny how heroes end up cutting themselves down to size even when no one else can”), or Edmund Andrews:
Warren Buffett has turned into an evasive, disingenuous, bumbling buffoon…
When asked by Phil Angelides, the commission chairman, what the agencies did wrong, Buffett passed the buck as shamelessly as every other Wall Street powerhouse player: “I think they made the same mistake that virtually everybody else made,” Buffett told in the first in a long series of evasions…
Having basked for years in public adulation for his his investment brilliance, Buffett suddenly acted as if he hadn’t the slightest idea about the goings on at Moody’s even though Berkshire Hathaway had been one of its biggest shareholders.
Between his Moody’s investment and his Goldman investment, Buffett is slowly working out that only half of his public adulation comes from his compounded annual returns. The other half comes from the fact that he seemingly got those returns investing in Coca-Cola, motherhood, and apple pie. Rather than in entities without which the current wave of misery overtaking homeowners nationwide could never have happened.
Buffett is that rarest of institutional shareholders: someone who actually owns and runs lots of large companies of his own. As such, he can and should act much more like an owner than most shareholders. But he doesn’t, and he has no visible desire to fix the problems at Moody’s or at the ratings agencies more generally. He just says he wishes he’d sold his Moody’s stock earlier, passing on those losses to some other sucker. I don’t think he’s ever going to be able to live this one down.