Only slightly bent

Today the online version of Helsingin Sanomat is running a poll asking “Onko polttoaineiden hinnannousu oikein?” i.e. roughly “Are the rising fuel costs just?” or “Is it right that fuel prices rise?” – what an exceedingly dumb question. It’s not a matter of “right” or “wrong”, it’s just the way things are.

And it’s the way things are going to be, too. Fuel prices will continue to rise, despite of and actually especially in the face of lunatic energy policies globally until significant demand destruction takes place. Of course, there are different degrees of lunacy; in many (or most) countries consumers cry for easing fuel taxes or any way of bringing down the fuel costs. The fact that some governments are caving in is bad enough, but then there’s one country that’s contemplating suing OPEC for limiting oil production. They won’t, of,course, but the mere gesture is so outrageously ridiculous it’s hard to understand. Peak Oil, anyone? Hello? Doesn’t ring a bell?

The era of cheap oil is OVER. Permanently, irrevocably over. Just how difficult can that be to understand? Just get over it. Does it hurt to fill up so often? Drive less. You “have to” drive since your commute is 50km each way with no access to public transport? Move. Who told you to live far out in the proverbial suburbia anyway? At least pressure your county/town/city to build some public transport infrastructure. Life’s full of choices and the rising energy price is hopefully forcing people, corporations and governments alike to choose a bit more environmentally friendly options in all walks of life.

Check out this great post by Richard Heinberg. In the end, it really does come down to this:

We will drive less, we will fly less, and we will grow our food more locally with fewer inputs. But these changes will go far more smoothly if we plan for them, rather than being forced into them at the nozzle of an empty gas pump. There is a cliché in action films: “We can do this the hard way, or we can do it the easy way.” Blaming OPEC while doing nothing to rein in our domestic demand for petroleum only ensures that we will be adapting to Peak Oil the hard way.

Indeed. Calling for tax cuts and whining about fuel prices while doing nothing to conserve fuel, failing to look for alternatives with any serious effort and neglecting to improve the public transit infrastructure are also ways of insuring we do it the hard way.

Links

• The Market Traders: Foreign Oil Dependency and Political Lunacy
• Peak Oil News / Richard Heinberg: Have we really hit peak oil?
• An example of just how wrong analysts can be; CNNMoney.com on “Why oil won’t hit $100″ from less than a year ago.
• Energy Bulletin: The illusion of vast undeveloped U.S. oil resources
• The Oil Drum: Countdown to $200 oil
• Jamais Cascio: The suburban question
• The Economist: Double, oil and trouble
• The Oil Drum: Why oil costs over $120 per barrel (excellent overview)

Ps. As a sidenote, it’s generally agreed that there is only one oil-producing country in the world that is not (or may not be) pumping flat out as it is – Saudi Arabia. And contrary to popular opinion, them not taking into use the modest reserve capacity they have or may have is a very good thing. If even they pumped at full capacity, the world oil supplies would be even less resistant to disruptions and Peak Oil itself would come that much sooner. What we really need is to implement a controlled, predictable decline of global oil production.

May is a good time to catch a few blooming flowers even in Finland. From the cherry blossoms (from the Japanese Garden in Roihuvuori, Helsinki) which have an exotic whiff here as they’re not so common to the sea of tulips from black to red (from Tampere), below are some examples of how pretty flowers can be. Click on the thumbnails to enlarge slightly.

You named it what?

The allergy season is thankfully waning for me personally as birch winds down its bloom. “Bloom” sounds better than it is really – a blooming birch is just ugly, contrary to many other blooming plants. Anyhow, allergy season brings with it ads for all the allergy drugs out there. Like this one, Senirex.

Senirex?! Who in their right mind names a drug Senirex? Is it just me or does it conjure up images of something senile rather than an allergy aid? The ad even looks like it’s targeted for the 90+-year-olds, down to the coloration and all.

So you can park but can you read?

All too rarely – once a year, I kid you not – our street is washed and the cars have to be moved away for that time. Despite plenty of warning, the car owners are apparently blind around where we live since as you can see, the street is full of parked cars during the parking ban.

Really, is once a year too much for you to move your cars?

Luckily they got towed away, but they didn’t get towed away far enough – the custom in Finland is just to move them to the closest available spot. Nevertheless, a hint to the car owners: the guys towing the cars weren’t exactly gentle, so if you care about your vehicle, move it yourself.

GSM is dead, long live GSM!

When we moved offices, books concerning GSM suddenly found themselves in the trash bin. Though I’m not sure if you can read anything into this largely symbolic gesture, as the books probably hadn’t been touched for years to begin with..

Anyhow, recently raised discussion of GSM’s death may be a bit premature – from this yearly update of fascinating data from TKK and the Finnish mobile operators, it can be seen that still 82% of the phones in Finland are GSM (i.e. non-3G) devices. Check out the report though, there’s plenty of other (more interesting) data points, such as:

• 95% of the packet data traffic is to the Internet – so much for the success of operator portals.
• Computers cause 92% of the traffic in mobile networks; perhaps the rumors of mobile broadband taking off aren’t that far off after all.
• Total mobile network packet data traffic increased almost 11-fold in just a year. Let’s see how long that trend holds – even if it slows down a lot, we may actually be seeing 100-fold traffic increases from the 2006 levels in the not-too-distant future.

There’s this one great quote on a despair.com product:

Quitters never win, winners never quit, but those who never win AND never quit are idiots.

Every now and then you run into people who just don’t know when to quit in time. One that keeps annoying a lot of people by refusing to quit – and at the same time inflicting untold damage to her party – is Hillary Clinton. I mean come on, it’s clear she should quite simply just drop out of the race as gracefully as is possible. But nooo, she vows to keep on fighting. Oh damn it, if the Republicans end up winning the general election – again – it’ll be at least partly all her fault for screwing with the Democratic nomination for so long.

And from this real life (tragi)comic case, we can make a smooth transition on to printed comic strips, because it’s easy to find more people from that field who refuse to quit in time. A prime example was Peanuts by the late Charles M. Schulz. It went on for literally decades too long. Piranha Club by Bud Grace is also way overdue for getting out of the papers and into the trash bin (the octopus theme is really beating a dead horse).

Then there are borderline cases like Patrick McDonnell, the creator of Mutts. Sometimes he’s stuck repeating the same stupid theme for weeks on end, but sometimes still manages to pull off great stuff.

Of course there are also comics that should never have been allowed in print to begin with, like “Auttajahai” in the weekly supplement of Helsingin Sanomat, NYT. Luckily I’m unable to find a digital example of this.

Luckily, there are people who do know when to quit in time. One of my favorites was Bill Watterson who drew the Calvin & Hobbes comic for 10 years. In that spirit, here’s one great Calvin & Hobbes-strip:

And of course there are strips that are still riding high, like Dilbert. But sometimes that feels way too much like a documentary than a mere comic strip..

Paying with Plastic: The Digital Revolution in Buying and Borrowing by David S. Evans and Richard Schmalensee (2nd edition, MIT Press 2005) was, from a personal perspective, a very unusual read in more than one way: first, it took me a shamefully long time to read it, more than a year. Second, it was mostly about stuff I should already know. Third, it took me another year after finishing the book to write a review about it. Finally, despite these somewhat ominous signs, I can honestly say that it was a really good read and an excellent book.

So what’s it about?

Well, in short, it’s about credit cards, how they work, how the business is run and how they’ve changed the way we do our daily business. And unless you were born more than 50 years ago, you may not even realize how much it has changed things before reading this book.

Paying with Plastic starts off with a comprehensive tour of the history of payments, obviously focusing on the birth and development of the credit card industry and its competitive dynamics. Significant amount of space is also devoted to the economics of multisided business platforms which I have discussed also earlier; if you’re still unfamiliar with them, this book provides more than a short introduction to the multisided business models of the payment industry. What I found particularly interesting was the deep insight into the competitive and regulatory dynamics of the business and how they have changed over time.

“Right, whatever, not a book for me”, you may say – so is there anything everyone can take away from this book without having a professional interest in the field? Well, this excerpt, when discussing about merchant competition, brings up an interesting point that seems to indicate there is inevitably too much advertising in the world:

This sort of nonprice competition, which includes competing by accepting checks and payment cards, has a curious feature: it can be socially excessive. Consider advertising. If merchant A’s advertising simply shifts business from merchant B to A, the gain to A is like to substantially outweigh the gain, if any, to society as a whole – that is, to all merchants, including B, and all consumers in aggregate. With a few more assumptions, one can argue that merchants as a group tend to advertise more than would be optimal from the standpoint of society as a whole. This “market failure” has been almost completely ignored in policy circles for one simple reason: even if there is too much advertising in theory, it is not clear how in practice one could ever calculate the optimal amount of advertising, let alone attain it.

Another interesting point that arises from the nature of multisided business models is that price discrimination is not always bad – indeed, sometimes it’s necessary. This may sound counter-intuitive at first (I mean it’s unfair for some to pay more than others, right?), but the necessity becomes clear when you think about it:

Most businesses in single-sided and multisided markets engage in price discrimination because it is possible to increase revenue by doing so, and because in the case of businesses with extensive scale of economies, it may be the only way to cover fixed costs. A dating club may charge men a higher price just because they have more inelastic demand and because it is easy to identify consumers on the basis of gender. But businesses in multisided markets have an additional reason to price discriminate: by charging one group a lower price, the business can charge another group a higher price; and unless prices are low enough to attract enough of the former group, the business cannot obtain any sales at all.

As we’ve again seen recently out there in the real world, markets hardly ever cooperate by following simple textbook rules. But things get much more difficult in multisided models:

In traditional markets, however, the classic truism can at least serve as a starting point for more nuanced analysis.
[...]
By contrast, multisided platforms – especially those in new markets – all too often require clean-sheet planning. With multiple yet interdependent business constituents to serve, costs offer little guidance for pricing strategies. By the same token, early entry may yield first-mover advantages or provide an instructive failure that simplifies the search for successful strategies that follow.

In addition to the multi-sided business models utilized throughout the payment industry, another interesting feature is the co-opetitive nature of the credit card business; they co-operate and compete at the same time. This leads to interesting issues with how to prevent the tragedy of the commons from taking place, how to deal with negative externalities, free-riding and loyalty issues. These are governed by several rules and it’s fascinating to see learn the system has been built.

Overall, Paying with Plastic is a book I can highly recommend if you’re dealing with or are interested in anything dealing with the credit card business. From the retail to the banks and the consumers, it is a fascinating read offering interesting anecdotes to the surprisingly eventful history of the credit card business. The book wraps up with an appropriate chapter on discussing the future and the rising technologies as well as business ecosystem issues.

I would be willing to bet there’s new information and insight in Paying with Plastic even for most industry professionals. And you know the saying how those who are unfamiliar with the history are doomed to repeat it? The history of the credit card business has a plethora of lessons to learn. Admittedly Paying with Plastic takes on a somewhat US-centric view and given that it’s somewhat different from other parts of the world, I would’ve welcomed more views, commentary and statistics from other parts of the world. But despite this shortcoming it’s a great book.

As sidenote, it’s outrageous how much we in Finland still have to pay for our credit cards considering their benefits – or the lack thereof – compared to the ubiquitous and free debit cards. In other countries that have some real competition and customer service, it goes the other way around. It seems that over here, the issuers and banks seem to want to implement the multi-sided business model in a very strange way; so that each and every party from merchants to consumers ends up paying as much as humanly possible. News flash, guys, that’s _not_ how the model is supposed to work.

I don’t particularly like Espoo – not an entirely uncommon sentiment from a person living in Helsinki. Anyway, this second largest city in Finland has the feeling of big suburb, spread out in a shotgun manner all over the map. After some years commuting (by mass transit) to Espoo for work, I’ve noticed the following deficiencies in the city:

• The mass transit system and pedestrian walkability are terrible – the city has obviously been designed for car users only, which is simply environmentally and otherwise unsustainable. More about the transport below.
• The areas around the train stations – which should be heavily populated as they’re next to the most efficient form of mass transport there is – often consist of fields or crummy old factories or logistical centers inhabited by hundreds of semis. What horrible planning.
• The areas around the train stations are just one symptom of overall poor city planning – despite being the 2nd largest city in the country, the Leppävaara area is about the only area that feels like anything resembling a city, with the maze-like Tapiola a runner-up. Most areas are largely sparsely populated and inefficiently planned with no life – like the curiously ironically named “Espoon Keskus”. It’s amazing how much farmland and forest can sit so close to the capital city. The ludicrously high plot prices in the area therefore have nothing to do with the unavailability of land itself.
• An environmental impact study was made of the planned Hista area – when the report produced some unfavorable results, Espoo declared it secret. How’s that for open government?

Like I mentioned, the mass transit system in particular is badly broken. Here’s how:

• The few train stations that there are – there’s a single line going through the city – are in a crappy condition and infrequently serviced.
• There are basically no bus lanes anywhere, which means the buses also stop when there’s a traffic jam. That means there are fewer incentives for people to use buses – if they ran faster than other traffic during critical rush hours, that alone would be a powerful incentive.
• The buses are often late or don’t show up at all (partly due to the above, I’m sure). Another big disincentive to using them.
• To add to that problem, they run very sparsely. Departures every 20min on a single line is already considered a very frequently operated line in Espoo.
• The buses don’t have right-of-way or optimizations at traffic lights.
• The buses are of very varying condition and upkeep. Some are decent enough while some are $hitty.

Another curios factor is that one would think the recently designed & built areas would be better-served with public transportation, but no.

Given all this, it’s no wonder people rely on cars in Espoo – they have to. Let’s see if they’re all so wealthy that they can easily absorb the coming $200/barrel oil prices..