Category: Innovation

Business, Innovation, Prediction

________ As-A-Service–The New Economic Indicator

pollywannamath

Economists are constantly inventing new weighing mechanisms to evaluate the overall health of the economy. Because the US economy is a massive, ever-changing, complex system comprised of independent and semidependent actors, no single number or equation has sufficed to gauge the heath of the economy.

I will not present a grand unifying economic theory.

Economists track a number of economic indicators to determine the health of the economy. Some indicators are leading, meaning they predict changes in the greater economy. Others are trailing, meaning they measure factors of the economy that already occurred. Given the complexity and velocity of the macro-economy, it operates with a sort of Heisenberg uncertainty principle that prevents a truly current understanding of economic health.

One of the most important leading economic indicators that policy makers use is the Consumer Confidence Index (CCI). The Consumer Confidence Index tracks responses to a monthly survey sent to consumers about their perceptions for business, employment, and income for the next six-months. Currently, the model indicates that the US is at lower-than-average confidence; however, I have reason to doubt the results.

Allow me to propose one more model for consideration. The percentage of “_________ as a Service” sales compared to total sales for the following industries:

  • Tech (enterprise, personal, and public sector)
  • Food
  • Automotive (leases)
  • Consumer non-durables

“_______ as a Service” or XaaS describes a model where consumers purchase a subscription for a product, rather than the product itself. In these agreements, the consumer pays a regular payment in exchange for usage of the product and the necessary support to maintain the product. At the end of the agreement, the consumer has no right to the product and must purchase a new subscription to continue use. Automotive leases are an example of cars as a service: consumers pay a lease to use the car each month and for the dealership to handle maintenance through the lease period.

Purchasing anything as a service requires confidence in an ability to pay for the product through and after the subscription term. If I anticipate a huge pay cut in three years, I will not start a lease. Instead, I’ll purchase a less expensive vehicle (finance if needed) that I will retain after my payments are through. Similarly, I’d purchase Microsoft Office (perpetual license), over Microsoft 365 for my personal or business use, if I had concerns about future cash flow.

Providing products as a service requires confidence from suppliers as well. If I anticipate high inflation I wouldn’t sell any subscription that locks consumers into today’s prices. In a period of high inflation, I either want to make one-time sales today or To continue the car lease example:

A dealership anticipates a 10% inflation rate over the next year. In real terms, that means that a $200/month lease today is worth $180 monthly in one year*. As a result, the dealership will encourage its sales staff to push sales over leases, or to encourage customers to wait and purchase the vehicle at a later time (because the car will sell for more nominal dollars). The lease option will lock the dealership into lower revenue for an inflationary period.

If the average consumer does not believe that she will be able to afford a subscription in the future, demand for subscriptions will fall. When producers anticipate that their products will be worth more in the future, they will not sell contracts at today’s prices. However, when both producers and consumers have confidence in the economy and their future income, the as a service model makes a lot of sense for both parties.

The “as a Service” model can cut costs and reduce time from purchasing to use for consumers. Reducing time to value is most applicable in a business-to-business context where new software deployments can take months, but holds true in the business-to-consumer landscape as well. Learning to cook and stocking a kitchen takes time and expense, consumers are increasingly shifting to Food-as-a-Service providers such as HelloFresh to manage the recipe creation and ingredient sourcing. HelloFresh allows consumers to have a “homecooked” meal much faster, and with less hassle, than the traditional grocery store process would have required. In the IT space, the as a service model reduces the physical overhead and resources that a consumer requires to support the product–the producer covers those costs with the subscription fee. Producers benefit from guaranteeing future recurring revenue and can reduce overhead through an economy of scale (by supporting all consumers). The “as a Service” model is so attractive to producers that Microsoft intentionally steers their consumers to the 365 subscriptions, rather than promote the purchase and subscription options.

The “as a Service model” is certainly booming. In 2018, Gartner predicted that “by 2020, all new entrants and 80% of haptoral vendors will offer subscription-based business models [in IT].” I could not find statistics to verify the accuracy of the claim, but it was directionally correct, at minimum. The growth rate of Microsoft 365 supports the claim.

Although the Consumer Confidence Index remains lower than historical average, the rise in XaaS agreements tells a contrary story. When confidence in both the economy and individual future purchasing power are high, XaaS arrangements are mutually beneficial. I anticipate that a reduction in the Xaas industry will be a leading indicator of falling economic confidence or a rise in inflation–both important economic indicators.

*I acknowledge the relationship between inflation and future payments isn’t as simple as stated. Financing, Net Present Value, and disparate effects of inflation create a more nuanced interaction of monthly lease payment and real value.

Innovation, Prediction, Technology

Will Google and Amazon Change Grammar Rules?

pollywannamath

Socrates criticized writing as a lesser form of communication. A tool of the forgetful to use in record keeping and trade:

[Writers] will cease to exercise memory because they rely on that which is written, calling things to remembrance no longer from within themselves, but by means of external marks.

Plato “Phaedrus”

The introduction of the printing press was not universally welcomed as a tool to make the production of the written word easier. The telegraph? Let me give you Thoreau’s take:

Our inventions are wont to be pretty toys, which distract our attention from serious things. They are but improved means to an unimproved end,… We are in great haste to construct a magnetic telegraph from Maine to Texas; but Maine and Texas, it may be, have nothing important to communicate.

Walden

The radio, telephone, and television also promised to fundamentally worsen interpersonal communication. The English language survived, mostly unscathed. Most of the high school English curriculum was written prior to 1960, and students do not struggle comprehend the English of American authors from the turn of the century.

However, the rise of the internet, specifically Amazon shopping and Google, may fundamentally change English grammar.

Without requiring formal study, native English speakers understand how to order words in a sentence. When describing an object, the descriptors generally lead the object of description. I have a red notebook. I use a large, yellow, fine-tipped, mechanical pencil. The general form of adjective placement for the English language is that adjectives precede the word they describe in the following order: Opinion; size; physical condition; shape; age; color; origin; material; purpose.

Not all languages follow this order. If I were to translate both sentences to French, they would translate literally as: I have a notebook red. I use a large mechanical pencil (mechanical pencil is a single word, so order of those words are irrelevant) yellow with a fine tip.

Most adjectives in French follow the object they describe. The same is true for Spanish and other romance languages.

Many aspects of computing follow the romance structure of object then adjective. When storing or retrieving data, programs basically write a sentence, in the form of a script, that requests information from another part of the application or database. The “computing sentence” is most efficient and clearest when adjectives follow the object they describe. Although this phrasing might seem complex, let me introduce a familiar scenario.

When shopping for a red notebook on Amazon, I can either search for “Red Notebook” or “Notebook Red.” Both will take me to a shopping page full of red notebooks. In the search process; however Amazon takes a different route to find those notebooks.

When I look for a red notebook, Amazon starts by looking for red items.
When the search starts with Notebook, Amazon will gather all notebooks as a starting point.

In this small search, the order doesn’t matter too much. Amazon has a powerful search engine and will react quickly to each new word. However, the path to the right notebook is more efficient when starting with notebook as my search term. When I type notebook first, Amazon recommends related searches and will limit suggestions to items related to notebooks. When I start with the word red, Amazon has to guess the next word based on the universe of items that could be red.

This image is obviously not to scale; however, if I were given the option to search either bubble for red notebooks, I’d want to start with all notebooks.

Computers are most efficient when objects are followed by descriptors. English speakers may find it more efficient to follow objects with descriptors in their internet search as well.

To revisit the red notebook example: When I search for a red notebook on Amazon, I’m given over 2000 results. Some are large, some are lined, some are bright, some belong with red fish, some with blue fish, some with one fish, some with two fish. To narrow my search, I add subsequent descriptors to my search. When I start with “red notebook,” I’ll likely end up with “red notebook hardcover lined 9×13” before finding few enough options to manually review. “Red notebook hardcover lined 9×13” does not follow any English grammar rules, and its uncomfortable to type. Amazon recommends additional words after my search, I end up with the unwieldy search by continuing to click the best fitting recommendations after each subsequent search. When I start with red notebook, Amazon recommends hardcover or paperback. I click hardcover. Still too many responses, I add a space to my search. Amazon recommends sizes. I click on the size. Too many responses. Etc.

Google works this way as well. When I search for something online and find too many results, I add additional criteria. That exercise of searching for an item and adding criteria with each subsequent search, is ultimately the same structure that Romance languages use in normal speech.

The advent of new technologies has certainly changed the English language. We have words to describe moving pictures, the internet, computer programming, and yellow fine-tipped mechanical pencils. However, these changes have been marginal. The internet, TV, and radio each added or standardized or added thousands of words, but the basic structure remained in tact. To call back to the beginning of the post, English teachers love to force Victorian literature on their students.

If the internet causes a single foundational, lasting change on the language, I think it will be a gradual shift in adjective order. Adjectives after the objects they describe are more efficient for the computer, more intuitive for online search, and are the norm for many other languages speakers that frequently use new technology. If English speakers continue to use online search for the next fifty years, and more people use voice recognition search, would it be crazy to think that the adjective order of the language will shift?

Business, Education, Innovation, Technology

Post-Pandemic-Policy-Proposal

pollywannamath

I find it likely that the United States will experience a new or worsening recession within the next year. Even the most optimistic economic projections anticipate that travel will remain depressed, the hospitality industry will recover slowly, and that direct stimulus will end.

The US government should take action that bolsters the US economy, even after the pandemic subsides, without writing blank checks to US corporations.

Why not continue direct investment in US corporations? The United States Congress already provided $25 billion in bailout funds to airlines alone this year, and House Democrats are pushing for more.

Airline bailouts, in particular, are ineffective and unpopular. There are some indications that Americans’ trust of large corporations is shrinking, and corporate bailouts don’t necessarily increase the prospects of the American worker.

A perfect post-pandemic-policy proposal to aid the US recovery will need to address a few concerns:

  • It needs to be popular with the public and both parties to pass into legislation
  • The policy will need to help the travel industry
  • Their must be a fiscal multiplier to funds allocated to the policy

What do I recommend?

A World’s Fair.

The United States Congress should sanction a World’s Fair for the summer of 2021 or 2022 depending on the anticipated longevity of the COVID pandemic.

Although a proposal for a World’s Fair initially sounds like an immature policy response, I think it would be strong policy, both symbolically and economically, for the American people.

The World’s Fair, as I imagine, would focus on showcasing four aspects of American society:

  • A Brighter Future–How technology and the nation’s youth will bring the United States into its brighter future.
  • American Made–How Farming and Manufacturing make America.
  • E Pluribus Unum–How immigration and cultural appreciation create the World’s Melting Pot.
  • American Life–Sports, Theatre, Design, and Art

Ideally the Fair would be held for a few months in a city that had experience with significant air, bus and rail travel, and could hold hundreds of thousands of daily travelers. To ensure maximum economic benefit and avoid political entanglements, I’d propose to hold the convention in a mid-sized city, in the middle of the country. Omaha, Minneapolis, Indianapolis, Detroit, St. Louis, and Oklahoma City are likely candidates. Once the Fair finished, its exabits would travel to the marquee cities of the United States.

As a part of the policy funding, Congress would appropriate funds for grants associated with each of the four showcases and to subsidize travel/hotel costs for every American (at a graduated rate based on income). Additionally Congress would pay for the costs of the expeditions and for the traveling show; the winning city would need to allocate funds for the grounds and any city-specific exhibits.

The World’s Fair will jumpstart the aviation, busing, and rail industries. Symbolically, the subsidized travel will indicate to the population that it is safe to travel. Financially, it will allow millions of Americans to leave their home state for the first time, and bring in foreign travelers. Even after the Fair terminates, I anticipate many Americans and foreign citizens will travel more frequently than they would have without the encouragement.

Congress will add stipulations to the grants for each showcase that encourage competition in certain, popular and positive, arenas. For instance, the grants associated with youth and tech should promote changes to the education landscape, reduce the barriers for at-risk youth, and inspire future corporates leaders. The Farming grants would reward a return to suitable, local farming and encourage new small farmers.

In order for the World’s Fair to make a noticeable impact on the US economy or society, Congress will need to spend a lot on it. The last US World’s Fair (1984) failed because it didn’t receive the investment it needed. The US needs the cultural equivalent of a Ferris Wheel or Eiffel Tower (both World’s Fair inventions) to inspire confidence.

To make the endeavor palatable for both parties, the Fair will need to be sold as a support to the airline industries and to small-and-large businesses first. I propose the following funding sturcture:

  • 40% of grant money to A Brighter Future
  • 40% of grant money to American Made
  • 10% of grant money to E Pluribus Unum
  • 10% of grant money to American Life

In this structure, Republicans can promote the fact that farmers and manufacturers received a 40% of the overall funding, more than the “Liberal causes.” Democrats can sell the Fair as a celebration of culture and Art, 20% of trillions is a lot of funding for diversity and arts events. Both sides and the public should support the funding of children’s programs and the airline industry.

Obviously a single Fair will not save the airlines or build confidence and togetherness in the US economy. That should not be the goal. The Fair would save the airlines and hopefully bolster travel for years to come. The Fair should introduce youth to new cultures and business ideas. Ideally the Fair would inspire future economic growth both through the grant recipients, and for visitors who walk away inspirited with their personal ideas on how to build their brighter future.

Business, Innovation, Observations

GoodRX? BadRX? How to think about prescription Discount Cards

pollywannamath

When I first saw an advertisement for GoodRx, I assumed it would be a fad for 6 months and then I would never hear about it again. It has been over a year and I still watch their bad Monte Hall commercial before every fifth YouTube video.

Before I describe GoodRx and pass judgement on it, I should describe a little of the prescription market. Major pharmaceutical companies manufacture drugs and determine a list price that will allow them to hit a target profit margin. Much like for clothing or vehicles, the MSRP is not the amount that an average person will pay; the cost to consumer depends on many downstream factors. The pharmaceutical company will sell to a wholesaler, who, in turn, sells to a pharmacy. Pharmacies have relationships with third-party payer and their wholesalers that cause price variance of the same drug between pharmacies. At each level, a little profit is taken. On the demand side of the market, consumers often have two options:

  • purchase the prescription in cash without insurance.
  • purchase the prescription using insurance.

Insurers don’t determine which drugs will be covered under their plans, nor do they determine the price of the drug for their members. Insurers contract that work to a Pharmacy Benefit Manager (PBM). Pharmacy Benefit Managers determine which drugs will be covered by a plan and what a member will owe for the drug, the PBM does not need to disclose the real price of the drug. Insurers pay the PBM a fee for administering the drug plan, and the PBM keeps any rebate or discount that they receive from the pharmaceutical manufacturer. I could write at length on PBMs, but for the purpose of this article, I’ll only note that the position of PBMs are controversial. Some claim that PBMs save consumers money, others note that PBM profits continue to grow at an alarming rate.

GoodRx, and other prescription discount cards, can be thought of as a self-serve Pharmacy Benefit Manager for the uninsured. GoodRx identifies the lowest cost location for a drug in the consumer’s area and negotiates rebates and discounts with pharmaceutical companies for further discounts.

Does that mean that my initial skepticism about GoodRx was unwarranted? Mostly yes. The business model is sound and prescription discount cards are legitimate. However, GoodRx is not a panacea and I have two primary concerns about its use:

The second point deserves some clarification. In 2018, over 43% of Americans were enrolled in a high-deductible health plan. In these plans, a member will generally pay for 100% of their care (either out of pocket or using an HSA/FSA) up to a predetermined dollar amount or deductible. The health insurance industry has a lot of nuance that I can’t begin to cover in this format, but understanding the concept of a deductible is the piece relevant to GoodRx. Deductibles can include or exempt pharmacy costs based on the member’s plan design.

GoodRx cannot be combined with insurance. For many on high-deductible health plans, GoodRx can appear to offer lower cost drugs than even the copay offered by the pharmacy benefit manager. These apparent savings are not as they appear. Over a year, because insurance will often pay for the drug once a deductible is met, members in the scenario described above will often be better off using their insurance and paying a little more early in the year. GoodRx does not make that evident.

GoodRx is a good option for those who are uninsured, or know their current insurance offering and can account for anticipated yearly cost of their drugs. It is not likely a good solution for all. Especially those who would save a little in the short-term and, as a result, spend more over a year by forgoing their insurance.

Business, Innovation

The Commercial Furniture Market is Shifting pt.2

pollywannamath

I encourage you to start with part one, before reading this post, to get the full picture of the shifting landscape of commercial office furniture.

I started part one by praising office furniture manufacturers, Haworth, Steelcase, and Herman Miller, for creating ergonomic furniture that remains comfortable for hours. Furniture designed with ergonomics in mind is incredibly beneficial. Not only will a bad working set-up lead to soft-tissue injuries and musculoskeletal disorders, it will lead to productivity loss.

When my employer announced that they were going to shift to work-from-home for the duration of the COVID pandemic, I went to a local office furniture reseller and bought a Leap v2 chair (highly recommended) and a sit-to-stand desk riser. With an external keyboard/mouse, a second (and third) monitor, and a few books to ensure everything is the correct height, I am currently writing from a home office that passes even the most stringent ergonomic standards.

I live with my significant other. She works from home, and did prior to the COVID outbreak. When I started work from home, it was clear to both of us that it was time for her to have a home office set-up that works for her, at least as well as mine does for me.

Should be easy, we could go to the same store and pick up a similar home office set-up. My set-up works well for me. It should work for her as well.

There is a small, but important, difference between my significant other and I. Size. She is petite. As it turns out, the furniture that is so well designed for me and makes it possible for me to work all day, is not suitable for her.

If I have any female readers, what I said probably came as no surprise to you. It shouldn’t have been a surprise to me. When women are more likely to be hurt in car accidents, have worse medical outcomes due to lack of research, and work in offices that are too cold for them, because of a series of design biases that favors men, why should I be surprised that it was difficult to piece together a home office built for a petite woman?

The standard office desk is between 28 and 30 inches tall. We needed a work surface about 24-25 inches tall when seated to accommodate her frame. When she wanted to work standing, we needed a desk between 37-39 inches tall. The office furniture store that sold me my work-from-home set-up did not carry desks that short. We checked Wayfair for options, and most computer desks had a worktop about 30 inches high. After weeks of searching online and in-person, we could not find a regular desk that fit her needs and our budget. Even sit-to-stand desks did not meet her requirements. All but the highest end options had minimum heights greater than 25 inches.

Chairs were hard to find as well. My Leap wasn’t as comfortable for her because the lumbar support in the back isn’t height adjustable. Other chairs did not lower far enough to fit under a 25 inch desk; those that did had a seat depth that was too big for her to touch the back of the chair and keep her knees at a 90 degree angle.

No, putting a footrest down does not magically solve ergonomic issues with a chair.

I’m pleased to report that we found a workable solution. Although we could not find one for purchase locally, the Aeron Chair deserves special commendation for serving all heights and weights. We ended up purchasing an activity table for a desk, added some small drawers below, and the sit-to-stand riser above. This set-up meets her needs and allows her to work comfortably through the day.

But why was it so hard? And why did we need to think outside of the box to find furniture?

  1. The three Office Furniture suppliers I mentioned above do not make enough office furniture that accommodates smaller, and traditionally female, bodies.
  2. Offices buy furniture suited to the average male frame and assume that bigger is better.

The office landscape is changing. Women outperform men in college education, the gender pay gap is shrinking for women who are below the average age of women that take maternity leave. There are good reasons to believe that women will overtake men as the most successful office workers within my lifetime. Both the furniture suppliers and office managers should take note and purchase furniture that will work for all parties. Not doing so will eventually lead to an inability to attract top-talent.

When buying sitting desks, offices should demand that the desks are height-adjustable from 22-32 inches. Standing desks should start at 22 inches and offer the ability to raise to meet the needs of someone who is 6’6″. Chairs should either fit all frames, or offices should buy a selection of sizes. Monitor arms should be employed to allow workers to adjust their screens to meet their eyes. If employers demand that furniture meets the needs of their employees, the furniture manufacturers will respond with better selection.

To learn more about your specific needs review an ergonomic calculator.