The latest mediation effort has failed and as such a court supervised liquidation appears to be the next step. Companies will probably buy up some of the Hostess brands and facilities. Will be interesting to see what survives and what doesn't and in what form.
Hostess employed 18,500 people.
A handful of years ago, GM and Chrysler was essentially in a similar position: unable to pay its bills, too many unprofitable brands, costly union contracts and excess capacity. But since that industry employed so many more people, the pressure to bail them out was tremendous. The Federal government bailed them out at a cost that is still uncertain despite claims it was a success. Here is a video that explored some of the problems of the bailout beyond taxpayer cost including favoritism to unions, business decisions driven by political considerations instead of economic ones and moral hazard.
One wonders how would things have unfolded if GM and Chrysler had gone through traditional bankruptcy court?
Showing posts with label business. Show all posts
Showing posts with label business. Show all posts
Business: Twilight for Twinkies
I have to say I ate them as a kid but not often and haven't had one in decades.
But in any case, Hostess bakery is going out of business and the union blames management and management blames the unions.
If indeed, management was lousy, a company will buy some of the assets of Hostess that are profitable and some of the union jobs will be restored.
But I suspect as more and more Americans are health conscious about eating habits, Hostess successor company will have to change their product line quite a bit.
As for AFL-CIO President Trumka's attack on Hostess, Bain and Mitt Romney: it is emotionalism and disconnected from economic reality. His charges against mis-management of the company probably has some validity but the changing marketplace which the leadership probably failed to respond adequately to and union demands probably pushed the company over the brink.
On a broader question of unions, the one big difference between a union in the private sector and the public sector is that the private sector company may go belly up if it can't meet the union's negotiating position. Thus, a union in the private sector can only push so hard before the company just goes out of business.
In the case of the public sector union, the government can raises taxes to meet the public sector union's demands. But eventually, there are limits to that too as some city, county and state governments are having their finances pushed to the brink to meet public sector union contracts. The problem is that in this case, the fallout hit everyone taxpayer and is not just limited to the company, its workers and investors.
But in any case, Hostess bakery is going out of business and the union blames management and management blames the unions.
If indeed, management was lousy, a company will buy some of the assets of Hostess that are profitable and some of the union jobs will be restored.
But I suspect as more and more Americans are health conscious about eating habits, Hostess successor company will have to change their product line quite a bit.
As for AFL-CIO President Trumka's attack on Hostess, Bain and Mitt Romney: it is emotionalism and disconnected from economic reality. His charges against mis-management of the company probably has some validity but the changing marketplace which the leadership probably failed to respond adequately to and union demands probably pushed the company over the brink.
On a broader question of unions, the one big difference between a union in the private sector and the public sector is that the private sector company may go belly up if it can't meet the union's negotiating position. Thus, a union in the private sector can only push so hard before the company just goes out of business.
In the case of the public sector union, the government can raises taxes to meet the public sector union's demands. But eventually, there are limits to that too as some city, county and state governments are having their finances pushed to the brink to meet public sector union contracts. The problem is that in this case, the fallout hit everyone taxpayer and is not just limited to the company, its workers and investors.
Business: 12 small business stories
With the whole "you didn't build that" controversy, I was prompted to think about the businesses I have encountered in the course of my activities. So what follows are 12 brief stories of small businesses.
One
If you buy flowers at a local store, it is probably a small business. Be sure to check out Sada Flowers!
Two
One of the tools of laboratory work is the pipet. Periodically, they need to be cleaned, calibrated and have parts replaced. Hats off to Pipet Repair Service, Inc. who did the most recent service call on our 30+ pipets.
Three
I'm told there used to be more Scandinavian bakeries. Recently coming onto the scene is Copenhagen Pastry. Hope they have a good long run!
Four
Remember the line from that 60s movie? "Plastics." Well, Kurt Landsberger lived it long before the film. Bel-Art Scienceware might not be a small business anymore (don't know how many employees they have today) but they started as one.
Five
Flooring. If your office needs carpet or your home needs tile, you call someone to put it in and that crew of guys is almost certainly part of a small business. We had some carpeting and blinds put in as part of our home improvement renovations and Scandia Carpets did a great job!
Disclosure: This small business is owned and operated by my wife's uncle. His company has been in business a long time and for good reason - the crew came in and did a quality job fast and friendly.
Six
The restaurant business is hard work for all involved and having a famous father doesn't mean success if the food isn't great, the service friendly and the atmosphere inviting. But hat's off to Ben Ford's team at Ford Filling Station. Great for special occasion dining.
Seven
The alternative to not visiting the dentist is to have your teeth and gums go bad! Running a dental practice is running a small business.
Eight
There are big chain restaurants but usually what makes a neighborhood a neighborhood is the little place on the corner. On one corner near where we live is Cafe Laurent.
Nine
I've had some work done on my bike. Their story is pretty much a classic small business story. A family with a simply idea, having the boldness to do it and sustaining it with good service. So hats off to Abba Padre Bikes and Books.
Ten
Big box retailers have a place in the marketplace but so do specialty retailers where you can get items but also expert advice about those items and what to do with it from passionate and knowledgable folks. One of my favorites for outdoor gear is Adventure 16. See the story of its founder Andy Drollinger.
Eleven
The ethnic restaurant is the classic example of small businesses. In a typical month, how often do you go one? NBC Seafood is one of our family favorites.
Twelve
Storefront bookstores are hard to find these days. In our neighborhood, the only place where you can wander the aisles and browse is Piccolo's. They have four locations in Southern California.
Hats off to all the founders of these businesses and the employees that help make them go!
One
If you buy flowers at a local store, it is probably a small business. Be sure to check out Sada Flowers!
Two
One of the tools of laboratory work is the pipet. Periodically, they need to be cleaned, calibrated and have parts replaced. Hats off to Pipet Repair Service, Inc. who did the most recent service call on our 30+ pipets.
Three
I'm told there used to be more Scandinavian bakeries. Recently coming onto the scene is Copenhagen Pastry. Hope they have a good long run!
Four
Remember the line from that 60s movie? "Plastics." Well, Kurt Landsberger lived it long before the film. Bel-Art Scienceware might not be a small business anymore (don't know how many employees they have today) but they started as one.
Five
Flooring. If your office needs carpet or your home needs tile, you call someone to put it in and that crew of guys is almost certainly part of a small business. We had some carpeting and blinds put in as part of our home improvement renovations and Scandia Carpets did a great job!
Disclosure: This small business is owned and operated by my wife's uncle. His company has been in business a long time and for good reason - the crew came in and did a quality job fast and friendly.
Six
The restaurant business is hard work for all involved and having a famous father doesn't mean success if the food isn't great, the service friendly and the atmosphere inviting. But hat's off to Ben Ford's team at Ford Filling Station. Great for special occasion dining.
Seven
The alternative to not visiting the dentist is to have your teeth and gums go bad! Running a dental practice is running a small business.
Eight
There are big chain restaurants but usually what makes a neighborhood a neighborhood is the little place on the corner. On one corner near where we live is Cafe Laurent.
Nine
I've had some work done on my bike. Their story is pretty much a classic small business story. A family with a simply idea, having the boldness to do it and sustaining it with good service. So hats off to Abba Padre Bikes and Books.
Ten
Big box retailers have a place in the marketplace but so do specialty retailers where you can get items but also expert advice about those items and what to do with it from passionate and knowledgable folks. One of my favorites for outdoor gear is Adventure 16. See the story of its founder Andy Drollinger.
Eleven
The ethnic restaurant is the classic example of small businesses. In a typical month, how often do you go one? NBC Seafood is one of our family favorites.
Twelve
Storefront bookstores are hard to find these days. In our neighborhood, the only place where you can wander the aisles and browse is Piccolo's. They have four locations in Southern California.
Hats off to all the founders of these businesses and the employees that help make them go!
Business: How price controls can make things worse
Cindy's Chicken Coop raises chickens for food at the cost of $1/chicken.
She sells them at $2/chicken to Mary's Market and the profit is her annual income. She raises and sells about 50,000 chickens a year thus she makes $50,000 a year before taxes.
Mary's Market then sells them to you for $4/chicken.
That is how the free market system works.
The government may send the occasional inspector to Cindy's Chicken Coop and they will visit Mary's Market as well.
But what if the government institutes price controls arguing: chickens are essential to the health and well being of our citizens and the people must be protected from the profit taking Cindy and price-gouging Mary.
Therefore, Mary's Market must sell chickens at $2 and if the inspector finds the prices higher Mary will be fined or imprisoned or both.
Mary goes to Cindy and says, can you sell me your chickens for $1.50 a piece?
Mary also starts looking into selling other kinds of products that aren't price controlled to keep her business afloat.
Mary starts looking into chicken farms that may sell her chickens for less than Cindy.
Cindy has to decide, do I see my profits cut in half? Or do I give up raising chickens for a living?
Cindy decides to give up her chicken business and find another line of work.
Mary finds that George sells chicken for the $1.50 price but he makes most of his money selling corn. Thus, his farm isn't set up to raise as many chickens as Cindy so Mary's Market is constantly short of chicken.
Thus, the chicken shortage was caused by the government instituted price controls driving Cindy out of business. The opposite of what the price control was intended to do which was to make chicken available at more affordable prices.
The chicken shortage has gotten dire and people are demanding chicken and will go to great lengths to get chicken. The shortage is so extreme that Michael decides to set up a chicken coop and he brings them to market himself in a truck he parks down the street from Mary's Market. He sells chicken for $8 each (4x higher than the government regulated price). When he sees the inspector coming, his drives off avoiding the fines. The people buying from Michael ask why he charges so much? He explains, "if I get caught I have to pay a fine which has happened on several occasions so I use the profits to pay for those fines." He also explains some of his profits go to paying bribes to inspectors who will look the other way and not issue him a citation.
In the more extreme scenario, not only does the price control result in shortages it can result in black market prices that may be higher than what they would have been without the price control!
She sells them at $2/chicken to Mary's Market and the profit is her annual income. She raises and sells about 50,000 chickens a year thus she makes $50,000 a year before taxes.
Mary's Market then sells them to you for $4/chicken.
That is how the free market system works.
The government may send the occasional inspector to Cindy's Chicken Coop and they will visit Mary's Market as well.
But what if the government institutes price controls arguing: chickens are essential to the health and well being of our citizens and the people must be protected from the profit taking Cindy and price-gouging Mary.
Therefore, Mary's Market must sell chickens at $2 and if the inspector finds the prices higher Mary will be fined or imprisoned or both.
Mary goes to Cindy and says, can you sell me your chickens for $1.50 a piece?
Mary also starts looking into selling other kinds of products that aren't price controlled to keep her business afloat.
Mary starts looking into chicken farms that may sell her chickens for less than Cindy.
Cindy has to decide, do I see my profits cut in half? Or do I give up raising chickens for a living?
Cindy decides to give up her chicken business and find another line of work.
Mary finds that George sells chicken for the $1.50 price but he makes most of his money selling corn. Thus, his farm isn't set up to raise as many chickens as Cindy so Mary's Market is constantly short of chicken.
Thus, the chicken shortage was caused by the government instituted price controls driving Cindy out of business. The opposite of what the price control was intended to do which was to make chicken available at more affordable prices.
The chicken shortage has gotten dire and people are demanding chicken and will go to great lengths to get chicken. The shortage is so extreme that Michael decides to set up a chicken coop and he brings them to market himself in a truck he parks down the street from Mary's Market. He sells chicken for $8 each (4x higher than the government regulated price). When he sees the inspector coming, his drives off avoiding the fines. The people buying from Michael ask why he charges so much? He explains, "if I get caught I have to pay a fine which has happened on several occasions so I use the profits to pay for those fines." He also explains some of his profits go to paying bribes to inspectors who will look the other way and not issue him a citation.
In the more extreme scenario, not only does the price control result in shortages it can result in black market prices that may be higher than what they would have been without the price control!
Business: Are hybrid vehicles economical?
Short answer: it depends.
Assumptions:
Regular car getting 25 miles per gallon
Hybrid car getting 40 miles per gallon
Utilizing the vehicle for 100,000 miles
Gasoline costing $4 per gallon
Comparable repair costs
Comparable insurance costs
The hybrid car saves $6000 in fuel costs.
Change the assumption of gas to $5 per gallon and the hybrid car saves $7500 in fuel costs.
At the moment, hybrid vehicles cost more than regular vehicles. Thus, fuel savings may or may not balance the initial purchase cost.
Also, I don't know if the repair costs and insurance costs are actually identical.
Assumptions:
Regular car getting 25 miles per gallon
Hybrid car getting 40 miles per gallon
Utilizing the vehicle for 100,000 miles
Gasoline costing $4 per gallon
Comparable repair costs
Comparable insurance costs
The hybrid car saves $6000 in fuel costs.
Change the assumption of gas to $5 per gallon and the hybrid car saves $7500 in fuel costs.
At the moment, hybrid vehicles cost more than regular vehicles. Thus, fuel savings may or may not balance the initial purchase cost.
Also, I don't know if the repair costs and insurance costs are actually identical.
Business: Fannie Mae and Freddy Mac = Black Holes for Tax Dollars?
The politically correct targets these days are: the bankers, the insurance companies, the oil drillers ... they are indeed blame-worthy.
But I came across this news item ...
Excerpt:
Fannie Mae has again asked taxpayers for more money -- this time $8.4 billion -- after reporting another steep loss for the first quarter. The taxpayer bill for rescuing Fannie and its sibling Freddie Mac has grown to $145 billion -- and the final tally could be much higher.
The rescue of Fannie and Freddie is turning out to be one of the most expensive aftereffects of the financial meltdown, and Fannie Mae's first-quarter financial report on Monday made clear that there is no end in sight.
Where is the outrage here?
Could it be that because these two are GSE (government sponsored entities), they are getting a free pass because the paradigm of the political and media elites is "private business is evil and government is good?"
How big might the bailout get you ask?
Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Fannie and Freddie, lifting an earlier cap of $400 billion.
I take this to mean, they think it could exceed $400 billion?
And to think, this bailout could be bigger than the bailout of a whole country!
From the last news item I saw, the Greece bailout is at $140 billion.
Am not an economist, but one wonders if there is an alternative to these massive bailouts?
Is there a template for handling bankruptcies of nations (Greece and other nations teetering on the edge) and massive government sponsored entities (Freddie and Fannie)?
More on Fannie and Freddy ...
NTY excerpt:
Peter J. Wallison, a fellow in financial policy at the American Enterprise Institute, said it was true that the government could do nothing to stem the losses in the short term, but that it was a mistake not to decide the companies' future as soon as possible.
"Right now we have a consensus that something needs to be done," Mr. Wallison said. "The sensible thing to do is to put Congress in a position where they have to act within a certain period of time."
Pushing the debate into the future, he said, created the risk that Congress would pass the present bill, congratulate itself on addressing the financial crisis, and lose its appetite for the difficult question of what do about Fannie and Freddie.
WaPo excerpt:
As the Senate resumed debate Monday on legislation to overhaul financial regulation, leading Republican lawmakers are pushing an amendment that would wind down the government-controlled mortgage finance giants Fannie Mae and Freddie Mac.
The proposal by Sens. John McCain (Ariz.), Richard C. Shelby (Ala.) and Judd Gregg (N.H.) calls for the government to end its control of the companies within two years. Under the amendment, Fannie and Freddie would have to reduce the size of their mortgage portfolios and begin paying state and local sales taxes.
Congressional aides say the amendment is unlikely to pass. But as Congress argues over what to do with Fannie and Freddie, the hole burns deeper at the companies. Fannie reported Monday that it lost $11.5 billion in the first three months of the year and needed $8.4 billion from taxpayers to stay afloat.
But I came across this news item ...
Excerpt:
Fannie Mae has again asked taxpayers for more money -- this time $8.4 billion -- after reporting another steep loss for the first quarter. The taxpayer bill for rescuing Fannie and its sibling Freddie Mac has grown to $145 billion -- and the final tally could be much higher.
The rescue of Fannie and Freddie is turning out to be one of the most expensive aftereffects of the financial meltdown, and Fannie Mae's first-quarter financial report on Monday made clear that there is no end in sight.
Where is the outrage here?
Could it be that because these two are GSE (government sponsored entities), they are getting a free pass because the paradigm of the political and media elites is "private business is evil and government is good?"
How big might the bailout get you ask?
Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Fannie and Freddie, lifting an earlier cap of $400 billion.
I take this to mean, they think it could exceed $400 billion?
And to think, this bailout could be bigger than the bailout of a whole country!
From the last news item I saw, the Greece bailout is at $140 billion.
Am not an economist, but one wonders if there is an alternative to these massive bailouts?
Is there a template for handling bankruptcies of nations (Greece and other nations teetering on the edge) and massive government sponsored entities (Freddie and Fannie)?
More on Fannie and Freddy ...
NTY excerpt:
Peter J. Wallison, a fellow in financial policy at the American Enterprise Institute, said it was true that the government could do nothing to stem the losses in the short term, but that it was a mistake not to decide the companies' future as soon as possible.
"Right now we have a consensus that something needs to be done," Mr. Wallison said. "The sensible thing to do is to put Congress in a position where they have to act within a certain period of time."
Pushing the debate into the future, he said, created the risk that Congress would pass the present bill, congratulate itself on addressing the financial crisis, and lose its appetite for the difficult question of what do about Fannie and Freddie.
WaPo excerpt:
As the Senate resumed debate Monday on legislation to overhaul financial regulation, leading Republican lawmakers are pushing an amendment that would wind down the government-controlled mortgage finance giants Fannie Mae and Freddie Mac.
The proposal by Sens. John McCain (Ariz.), Richard C. Shelby (Ala.) and Judd Gregg (N.H.) calls for the government to end its control of the companies within two years. Under the amendment, Fannie and Freddie would have to reduce the size of their mortgage portfolios and begin paying state and local sales taxes.
Congressional aides say the amendment is unlikely to pass. But as Congress argues over what to do with Fannie and Freddie, the hole burns deeper at the companies. Fannie reported Monday that it lost $11.5 billion in the first three months of the year and needed $8.4 billion from taxpayers to stay afloat.
Business: Would United's CEO Try the "Undercover Boss" Experiment?
Dear Mr. Glenn F. Tilton,
As the chairman and CEO of United, have you attempted what some are doing on the television show “Undercover Boss?”
Have you attempted to use one of your self-check in kiosks?
Have you worked along side the agents behind the counter?
I recently took two friends to LAX on the morning of April 28, 2010 and found a chaotic scene at the Terminal Seven United ticket counter. Though I’m not a frequent flier (once or twice a year), I do understand there is some amount of waiting involved but this scene was clearly out of control.
My question for you and your management team are the following:
Are your software engineers working on improving the self-check-in computer system such that less agent intervention aside from tagging the luggage is required?
On that morning, there was a long line to get to the check-in machines which we understand as many east-coast bound flights leave at that time. But what was frustrating was that upon using the self-check-in device, we quickly reached the point where it asked us to get assistance.
As I looked around at the other passengers, this seemed to be a fairly common occurrence. The passenger on the right kept asking the agent for assistance and eventually bellowed, I’ve been trying to get someone to help me for the last 45 minutes. The same was true of the passengers to our left.
In looking down the bank of kiosks, I can’t be certain, but it seemed only about 1/2 of the people appeared to breeze through the self-check-in process while the other half had to flag down an agent to continue the check-in process beyond receiving receipts for their luggage.
Is management aware of staffing levels at peak periods?
The agents behind the counter were clearly overwhelmed by the sheer numbers of passengers requiring additional assistance. I can’t imagine that the crowd that day was any more than any other day, after all, it was a mid-week flight. Perhaps, for some reason, that shift was particular short-handed. In any event, it was clearly a case of too few agents trying to address too many passengers.
What kind of training is your company giving these agents?
I could overhear many complaints that passengers were given conflicting information about which line to get into and what the charges were for luggage. In my two friends case, their 3 luggage (all under 50 pounds) should have been free since their final destination was a foreign country. But the agent at the counter insisted on charging them $50 for one extra luggage. Upon giving her $60 it took over over 15 minutes to get change back which involved talking to a supervisor who said the luggage fee was only $20 (still incorrect). At that point, weary of the confusion, we got the change and was done with it.
I realize that the airline business is difficult with unpredictable fuel costs, expenses to address terrorism, turnover in staffing and unexpected problems like an Icelandic volcano grounding flights. However, poor customer service is going to hurt your business far more than those external challenges.
Your management team needs to get into the front-line and see what your employees are facing and give them better tools and training so they can get the job done well so passengers will choose United again.
Thank you for considering this feedback on your customer service.
Sincerely,
As the chairman and CEO of United, have you attempted what some are doing on the television show “Undercover Boss?”
Have you attempted to use one of your self-check in kiosks?
Have you worked along side the agents behind the counter?
I recently took two friends to LAX on the morning of April 28, 2010 and found a chaotic scene at the Terminal Seven United ticket counter. Though I’m not a frequent flier (once or twice a year), I do understand there is some amount of waiting involved but this scene was clearly out of control.
My question for you and your management team are the following:
Are your software engineers working on improving the self-check-in computer system such that less agent intervention aside from tagging the luggage is required?
On that morning, there was a long line to get to the check-in machines which we understand as many east-coast bound flights leave at that time. But what was frustrating was that upon using the self-check-in device, we quickly reached the point where it asked us to get assistance.
As I looked around at the other passengers, this seemed to be a fairly common occurrence. The passenger on the right kept asking the agent for assistance and eventually bellowed, I’ve been trying to get someone to help me for the last 45 minutes. The same was true of the passengers to our left.
In looking down the bank of kiosks, I can’t be certain, but it seemed only about 1/2 of the people appeared to breeze through the self-check-in process while the other half had to flag down an agent to continue the check-in process beyond receiving receipts for their luggage.
Is management aware of staffing levels at peak periods?
The agents behind the counter were clearly overwhelmed by the sheer numbers of passengers requiring additional assistance. I can’t imagine that the crowd that day was any more than any other day, after all, it was a mid-week flight. Perhaps, for some reason, that shift was particular short-handed. In any event, it was clearly a case of too few agents trying to address too many passengers.
What kind of training is your company giving these agents?
I could overhear many complaints that passengers were given conflicting information about which line to get into and what the charges were for luggage. In my two friends case, their 3 luggage (all under 50 pounds) should have been free since their final destination was a foreign country. But the agent at the counter insisted on charging them $50 for one extra luggage. Upon giving her $60 it took over over 15 minutes to get change back which involved talking to a supervisor who said the luggage fee was only $20 (still incorrect). At that point, weary of the confusion, we got the change and was done with it.
I realize that the airline business is difficult with unpredictable fuel costs, expenses to address terrorism, turnover in staffing and unexpected problems like an Icelandic volcano grounding flights. However, poor customer service is going to hurt your business far more than those external challenges.
Your management team needs to get into the front-line and see what your employees are facing and give them better tools and training so they can get the job done well so passengers will choose United again.
Thank you for considering this feedback on your customer service.
Sincerely,
Business: Is the health insurance industry very profitable?
Of course, in a country that espouses a capitalist economic system, making a profit is supposed to be determined by the free market forces on that industry.
So just how big are the health insurance giants?
Using Yahoo! Finance I found the chart above that shows how much annual revenue they generated.
That is a lot of money and a handful of companies are doing lots of business.
But how do these numbers compare to some other big companies?
McDonalds is one of the fast food giants and they bring in $22.7B in revenue.
Ford is the one US car company that didn't take bailout money and they bring in $118.3B.
Microsoft is the big cheese in software pulling in $58.7B.
Ralphs is one of the markets I shop at and they are owned by Kroger which claims $76.7B in revenue.
These findings indicate that health insurance is big business much like some businesses that are a regular feature of our lives.
But how profitable are these businesses?
Companies have expenses that are covered by the revenues. If you mom and pop fruit stand brings in $567,890 in revenue and has $600,000 in expenses then it's not profitable and could go out of business if it continues that way.
So how much profit did McDonalds, Ford, Microsoft and Kroger make?
McDonalds 20.37%
Ford 2.5%
Microsoft 35.02%
Kroger 1.38%
As you can see there is some variability as to how profitable some of America's biggest companies are.
At what point is a company "too profitable?" Is that even a proper question in a capitalist economy?
Of course, our recent experience with "too big to fail" has suggested that companies can become so dominant that their failure could take down whole economies! But that is an issue of size not profitability.
But back to the original question: Is the health insurance industry very profitable?
I ran the Yahoo! Finance for the insurance industry (see chart at right).
As you can see 3-7% is the range with Wellpoint making more. However, a little poking around revealed that Wellpoint's profit margin for last year is probably only a one-time thing because they made money selling off its pharmacy benefits management company NextRX to Express Scripts and without it they would have a 3.9% profit margin.
What do you think of these profit margins?
Business: Is the health insurance industry a monopoly?
This item tallies up the share of the market held by the top two insurance companies in a given state.
This item in Wikipedia gives the population for each state in America.
Combining the two pieces of information: the Y-axis is the market share held by the top two companies vs. the X-axis is the population of the corresponding state in millions. The trend is notable, the bigger the state, the less market share.
For those who want to see the raw numbers, see the figure below and I've included a correlation coefficient generated by Excel. +1 or -1 would mean perfect correlation while 0 means no correlation, thus the correlation coefficient is reasonably high.
I decided to bin out the data into small, medium and large states. I'm defining a small state as less than 4 million or the size of Los Angeles City or smaller. I defined medium size state as between 4 to 10 million which is about the size of Los Angeles County. Large states were defined as greater than 10 million or larger than the population of the County of Los Angeles.
I did averages for each of the three groups and then performed two-tailed T-tests between small vs. medium, small vs. large and medium vs. large. In all cases, statistical significance was met.
I think this analysis suggests that for markets that are small to medium, domination by one or two companies might be inevitable. Of note, there were exceptions to that rule. Since the insurance business is regulated at the state level, one wonders what the regulatory climate is like in those states that bucked the trend? And did bucking the trend prove beneficial for the people in those states? If so, other states should learn those lessons.
If you think about the nature of insurance as a business, you are pooling the risk of a large number of individuals to help pay for cost that at any given time is being incurred by a small number of individuals who need expensive health care services. Put in more human terms, it is 100 people pooling their money to help pay for the 5 people who are sick at a given time. Or put another way, it is you and I paying 40 years of insurance premiums to help cover the few times we wind up in the hospital with something really bad. Thus, might the markets in small states be too small to support much competition in an industry where some economy of scale (risk pool) is required to be effective?
So back to the original question: is the health insurance industry a monopoly?
In some small and medium size states, it seems to be pretty close. In the end, how many viable companies do you need in a given market to avoid monopoly/oligopoly behavior?
Would small and medium size states benefit from allowing sale across state lines thus making their markets "bigger" thus drawing in additional competitors?
This item in Wikipedia gives the population for each state in America.
Combining the two pieces of information: the Y-axis is the market share held by the top two companies vs. the X-axis is the population of the corresponding state in millions. The trend is notable, the bigger the state, the less market share.
For those who want to see the raw numbers, see the figure below and I've included a correlation coefficient generated by Excel. +1 or -1 would mean perfect correlation while 0 means no correlation, thus the correlation coefficient is reasonably high.
I decided to bin out the data into small, medium and large states. I'm defining a small state as less than 4 million or the size of Los Angeles City or smaller. I defined medium size state as between 4 to 10 million which is about the size of Los Angeles County. Large states were defined as greater than 10 million or larger than the population of the County of Los Angeles.
I did averages for each of the three groups and then performed two-tailed T-tests between small vs. medium, small vs. large and medium vs. large. In all cases, statistical significance was met.
I think this analysis suggests that for markets that are small to medium, domination by one or two companies might be inevitable. Of note, there were exceptions to that rule. Since the insurance business is regulated at the state level, one wonders what the regulatory climate is like in those states that bucked the trend? And did bucking the trend prove beneficial for the people in those states? If so, other states should learn those lessons.
If you think about the nature of insurance as a business, you are pooling the risk of a large number of individuals to help pay for cost that at any given time is being incurred by a small number of individuals who need expensive health care services. Put in more human terms, it is 100 people pooling their money to help pay for the 5 people who are sick at a given time. Or put another way, it is you and I paying 40 years of insurance premiums to help cover the few times we wind up in the hospital with something really bad. Thus, might the markets in small states be too small to support much competition in an industry where some economy of scale (risk pool) is required to be effective?
So back to the original question: is the health insurance industry a monopoly?
In some small and medium size states, it seems to be pretty close. In the end, how many viable companies do you need in a given market to avoid monopoly/oligopoly behavior?
Would small and medium size states benefit from allowing sale across state lines thus making their markets "bigger" thus drawing in additional competitors?
Business: 2001-2003 RAV4 Toyota Automatic Tranmission Problems
Love the car. But ...
It started to act up ...
Rough shifting between gears on a couple of occasions ...
When going up an incline, the car didn't seem to know it should downshift for more power so instead the car limped up the hill ...
Check engine light came on ...
That lead us to do some searchs on Google which brought up many web sites describing the problem.
Here is one on Toyotafans.net which refers to a bootlegged copy of the Technical Service Bulletin issued by Toyota describing the problem.
Even the New York Times is blogging about the problem.
The car is now in the shop and we are hoping that the transmission isn't torn up.
It started to act up ...
Rough shifting between gears on a couple of occasions ...
When going up an incline, the car didn't seem to know it should downshift for more power so instead the car limped up the hill ...
Check engine light came on ...
That lead us to do some searchs on Google which brought up many web sites describing the problem.
Here is one on Toyotafans.net which refers to a bootlegged copy of the Technical Service Bulletin issued by Toyota describing the problem.
Even the New York Times is blogging about the problem.
The car is now in the shop and we are hoping that the transmission isn't torn up.
Business: Palazzo Pizza and Pasta, Glendale, CA
I help out with the youth group at my church and so I've bought some pizza on a couple of occasions.
I could have gone with a national chain but I thought I'd try one of the local stores.
Palazzo Pizza and Pasta
233 1/2 North Brand Blvd.
Glendale, CA 91203
818-500-8485
I give it thumbs up! Good pizza, friendly service and reasonable prices.
As of Saturday 13 June 2009, what do the "voters" on the internets say?
5 out of 6 at Urbanspoon.com gave it a thumbs up.
3 mixed reviews over at Yelp.
1 positive review at Citysearch.
8 positive "Rah" comments at BooRah.com.
I could have gone with a national chain but I thought I'd try one of the local stores.
Palazzo Pizza and Pasta
233 1/2 North Brand Blvd.
Glendale, CA 91203
818-500-8485
I give it thumbs up! Good pizza, friendly service and reasonable prices.
As of Saturday 13 June 2009, what do the "voters" on the internets say?
5 out of 6 at Urbanspoon.com gave it a thumbs up.
3 mixed reviews over at Yelp.
1 positive review at Citysearch.
8 positive "Rah" comments at BooRah.com.
Business: Run (mouse over) to Zappos.com
Was trying to buy some black dress shoes recently.
Unfortunately, I soon discovered the size that fits me in a jogging shoe doesn't fit me in a dress shoe! It is too big!
Turns out that dress shoe sizing is different and there is variability depending on the brand and where the shoe is made. I soon discovered that smallest shoe available in the Macys, Bloomingdales and Nordstroms were too large for me.
So I had to go to the internet.
I had heard of Zappos.com and decided it was time to give it a try.
I ordered up a pair that looked promising and received it by UPS ground.
They were slightly large!
I called the 800 customer service number and explained the situation and she said, I'll send you the next size down at no charge and with 2-day UPS shipping. Once you decide which pair you want to keep, just go to the web page and print out a UPS return label and send back the pair you don't want.
Wow!
And indeed, the other day, I got the next size down and it fit much better and I boxed up the too large pair and printed the return label.
Thumbs up to Zappos.Com!!
Unfortunately, I soon discovered the size that fits me in a jogging shoe doesn't fit me in a dress shoe! It is too big!
Turns out that dress shoe sizing is different and there is variability depending on the brand and where the shoe is made. I soon discovered that smallest shoe available in the Macys, Bloomingdales and Nordstroms were too large for me.
So I had to go to the internet.
I had heard of Zappos.com and decided it was time to give it a try.
I ordered up a pair that looked promising and received it by UPS ground.
They were slightly large!
I called the 800 customer service number and explained the situation and she said, I'll send you the next size down at no charge and with 2-day UPS shipping. Once you decide which pair you want to keep, just go to the web page and print out a UPS return label and send back the pair you don't want.
Wow!
And indeed, the other day, I got the next size down and it fit much better and I boxed up the too large pair and printed the return label.
Thumbs up to Zappos.Com!!
Business: Are all the people at AIG bad guys?
The Federal Government, the media and the people are angry at AIG about the bonuses.
But is there more to the story than the image of pitchfork and torch carrying crowds marching down on the people who say let them eat cake?
I heard on a political talk radio program that an AIG executive published his resignation letter explaining the context of his bonus that is now vilified by everyone.
While looking around for information on the story, I came across this Campbell Brown clip:
A little more digging yielded the letter published in the New York Times. Excerpts:
How much is 10-14 hour days for a year worth?
Should their compensation be set by the outraged public and angry government officials?
Do we feel that sports figures get paid too much money?
The fact is they do something very few people can do.
Likewise, the world of high finance is opaque to most of us; thus, only a select few actually know how to do it.
How much do they deserved to be paid?
Maybe the picture of them being all bad guys isn't the whole story?
But is there more to the story than the image of pitchfork and torch carrying crowds marching down on the people who say let them eat cake?
I heard on a political talk radio program that an AIG executive published his resignation letter explaining the context of his bonus that is now vilified by everyone.
While looking around for information on the story, I came across this Campbell Brown clip:
A little more digging yielded the letter published in the New York Times. Excerpts:
After 12 months of hard work dismantling the company - during which A.I.G. reassured us many times we would be rewarded in March 2009 - we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.How much should these folks be paid?
I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.
You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.
........
I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.
But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.
.........
We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.
Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.
The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.
........
...I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.
On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.
This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.
Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses — especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be "shoved out the door."
Sincerely,
Jake DeSantis
How much is 10-14 hour days for a year worth?
Should their compensation be set by the outraged public and angry government officials?
Do we feel that sports figures get paid too much money?
The fact is they do something very few people can do.
Likewise, the world of high finance is opaque to most of us; thus, only a select few actually know how to do it.
How much do they deserved to be paid?
Maybe the picture of them being all bad guys isn't the whole story?
Business: FreeCreditReport.Com is not free
We have all seen the ads on TV or heard them on the radio for FreeCreditReport.Com.
Well, I tried it and indeed got my credit report. What I didn't realize but now looking back, there was "fine print" everywhere that it wasn't really free.
Right there on their home page is this:
A quick search on the internet revealed that many people did what I did.
The articles described how people had a very hard time getting the service cancelled.
In my case, I've seen one billing but for others who don't check their statements carefully, they wind up paying for this service for several months without realizing it.
What is the definition of fraud?
What do you think?
Today, I hope to NOT have to spend too much time on the phone calling Experian to cancel the service. I'll also be calling the credit card company to say I have cancelled the service and no more of these charges should appear on my card.
I feel like such a dope!
Liveblogging:
8:20 made call to the FreeCreditReport.com and on hold
8:23 got live person, Z, who looked up my file
8:24 Z reads script to keep me as a customer
8:25 Z offers a limited membership for $4.95/month
8:26 puts me on hold to cancel my membership
8:28 back on the line and am told I will receive an email that confirms cancelation of my membership.
8:29 calling Bank America Visa credit card company and going through the various voice menus
8:31 got live human and explained the situation and was given a number to call if the charge reappears. While logging my complaint in the computer, rep offers a credit card balance tranfer which I decline
8:34 my concerns about Triple Advantage Credit Monitoring are logged in and the call ends.
Well, I tried it and indeed got my credit report. What I didn't realize but now looking back, there was "fine print" everywhere that it wasn't really free.
Right there on their home page is this:
IMPORTANT INFORMATIONI noticed the other day a $14.95 charge by "#CIC*TRIPLE ADVANTAGE" on my credit card and wondered what was that?
When you order your free report here, you will begin your free trial membership in Triple AdvantageSM Credit Monitoring. If you don't cancel your membership within the 7-day trial period**, you will be billed $14.95 for each month that you continue your membership.
A quick search on the internet revealed that many people did what I did.
The articles described how people had a very hard time getting the service cancelled.
In my case, I've seen one billing but for others who don't check their statements carefully, they wind up paying for this service for several months without realizing it.
What is the definition of fraud?
Definition of FraudExperian is the company behind FreeCreditReport.Com and what they are doing is on the edge of fraud. They will always say that disclaimers are on the web site so they aren't being dishonest. But that truth is hidden amidst a cute radio and TV ad campaign scaring people about surprises in your credit score all the while calling their service FREE credit report.com ... does this skate right up to the edge of the line of "false suggestions or suppression of the truth?"
All multifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of the truth. It includes all surprises, tricks, cunning or dissembling, and any unfair way which another is cheated.
Source: Black’s Law Dictionary, 5th ed., by Henry Campbell Black, West Publishing Co., St. Paul, Minnesota, 1979.
What do you think?
Today, I hope to NOT have to spend too much time on the phone calling Experian to cancel the service. I'll also be calling the credit card company to say I have cancelled the service and no more of these charges should appear on my card.
I feel like such a dope!
Liveblogging:
8:20 made call to the FreeCreditReport.com and on hold
8:23 got live person, Z, who looked up my file
8:24 Z reads script to keep me as a customer
8:25 Z offers a limited membership for $4.95/month
8:26 puts me on hold to cancel my membership
8:28 back on the line and am told I will receive an email that confirms cancelation of my membership.
8:29 calling Bank America Visa credit card company and going through the various voice menus
8:31 got live human and explained the situation and was given a number to call if the charge reappears. While logging my complaint in the computer, rep offers a credit card balance tranfer which I decline
8:34 my concerns about Triple Advantage Credit Monitoring are logged in and the call ends.
Business: Immigrants starting businesses - like using worm poop as plant food!
America is the land of opportunity!
At the moment, people are nervous about the American economy but there is a dynamism that I think will help us bounce back!
Business: Perspective on Exxon Mobile Profits
CNN.com top story at 6:54AM PDT was "Exxon Mobile made nearly $1500 per second."
Read the whole thing and the breathless story headline seems less dramatic.
Speaking of perspective, let's do the numbers ...
Exxon posted $11.68 billion net income on total revenue of $138 billion.
11.68 divided by 138 multiplied by 100 equals 8.5% net income on total revenue.
The oil business is an expensive business: they got to find it and drill for it or buy it from someone, pump and ship it, refine it and then sell it. And indeed, "faceless evil profit mongering corporation" has employees who do all that.
And guess what?
Those employees have to put food on the table, pay the mortgage or rent, save for college and pay medical bills just like everyone else.
How about some perspective on how profitable this business is?
I'm typing this blog post on an Apple computer.
Their numbers:
Total Revenue $7.5 billion
Net Income $1.1 billion
Thus, 14.7% net income on total revenue.
Blogger belongs to Google.
Their numbers:
Total Revenue $5.2 billion
Net Income $1.3 billion
Thus, a whopping 25% net income on total revenue!
How about the place I go buy food, Ralphs?
The parent company is Kroger.
Total Revenue $23.1 billion
Net Income $386 million
Thus, a paltry 1.7% net income on total revenue. The grocer business is a tough business!
Read the whole thing and the breathless story headline seems less dramatic.
Speaking of perspective, let's do the numbers ...
Exxon posted $11.68 billion net income on total revenue of $138 billion.
11.68 divided by 138 multiplied by 100 equals 8.5% net income on total revenue.
The oil business is an expensive business: they got to find it and drill for it or buy it from someone, pump and ship it, refine it and then sell it. And indeed, "faceless evil profit mongering corporation" has employees who do all that.
And guess what?
Those employees have to put food on the table, pay the mortgage or rent, save for college and pay medical bills just like everyone else.
How about some perspective on how profitable this business is?
I'm typing this blog post on an Apple computer.
Their numbers:
Total Revenue $7.5 billion
Net Income $1.1 billion
Thus, 14.7% net income on total revenue.
Blogger belongs to Google.
Their numbers:
Total Revenue $5.2 billion
Net Income $1.3 billion
Thus, a whopping 25% net income on total revenue!
How about the place I go buy food, Ralphs?
The parent company is Kroger.
Total Revenue $23.1 billion
Net Income $386 million
Thus, a paltry 1.7% net income on total revenue. The grocer business is a tough business!
Business: Dave the Cobbler
Want to give a shout out to Dave Page, Cobbler!
I have an old pair of hiking boots I bought in 1997. Love 'em. Very comfortable. But the soles fell apart recently. Went to the REI page and found a page on Hiking Boot Care with info to Dave Page for repairs.
Contacted them and mailed the boots in and got them back!
Hiking anyone?
I have an old pair of hiking boots I bought in 1997. Love 'em. Very comfortable. But the soles fell apart recently. Went to the REI page and found a page on Hiking Boot Care with info to Dave Page for repairs.
Contacted them and mailed the boots in and got them back!
Hiking anyone?
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