Category: Uncategorized

Value beats sunk cost anyday

We use economic terms all the time.  For instance, economies of scale,[1] efficiency,[2] elasticity,[3] and externality,[4] just to name a few that start with “e”.  For the most part, we more or less know what they mean, even if we don’t use them precisely correctly.

This short foray into economic terms is mere prelude to two short stories:  the first centered on the term “value,” the second on the term “sunk cost.”

Last weekend, I was fortunate enough to be invited to two different homes.  Friday night I visited former neighbors, Sunday night I went to visit my nephew at his new apartment.  Both times, I took (among other things) a small cooler full of drinks.  The cooler is an Igloo brand Tag▪Along 8.  My working theory is that nothing I currently own has provided more value to me.

Value is defined as “a measure of the benefit provided by a good or service to an economic agent.”  https://en.wikipedia.org/wiki/Value_(economics)  I purchased the cooler sometime in the late 1980s for under $10.  In the intervening 30 or so years, I have used it hundreds of times.  It accomodates six cans or bottles of soda, beer, or water, with enough room for sufficient ice to keep the drinks cold for the duration of the event.  The best non-cooling feature is a wide shoulder strap that makes the cooler easy and comfortable to carry.

My best estimate is that I have used the cooler 500 times (a bit more often than once a week) in the last 10,950 days (30 years times 365 – I’m ignoring leap days).  If so, the cooler has cost me two cents per use.  It is unlikely that I have another possession that I have used as often that still provides the same functionality that it provided 30 years ago.

Upon further review, I have come up with a couple of possible contenders.  Flatware is essentially indestructible and gets used daily.  Each individual item is much less expensive; currently you can buy decent forks for $60 a dozen.  I haven’t owned any flatware for 30 years and (like most of you) I don’t keep track of individual forks.  Still, I think we all receive significant benefit from our forks and spoons.

My mother gave me a pot that I have had for at least 30 years.  I still use it often, whether for boiling vegetables or pasta.  It might be an even better value than the cooler because it cost me nothing.  I’ve had some LL Bean boots since high school.  They don’t get much use now that I live in Ohio; they retain significant user value, if not monetary value.

Each of these items is used regularly and each performs according to original expectation.  I would be quite cynical if I didn’t appreciate the fact that they still assist me after all these years.  See Oscar Wilde who defined a cynic as “a man who know the price of everything and the value of nothing.”  From Lady Windemere’s Fan.  https://en.wikipedia.org/wiki/Lady_Windermere%27s_Fan

Though I have a few possessions that have provided long-term benefit similar to my Tag▪Along 8 cooler, none of them has appreciated in value.  Although ebay is an inexact predictor of price, the exact (vintage) cooler I have, is being offered for  $32.  http://www.ebay.com/itm/like/112521252487?chn=ps&dispItem=1  My flatware, pot, and boots are not currently sellable for over three times the original purchase price.  So I’m giving the value edge to the Tag▪Along 8 – it still provides benefit and it’s worth more than when I bought it.  It has been an excellent value play.

Do you any long-held possessions that have generated excess value?

The next vignette is not nearly so positive.  A “sunk cost” is “a cost that has already been committed and cannot be recovered” — the virtual opposite of value.  https://quizlet.com/460890/100-economics-terms-flash-cards/  I never hear or read the term without offering up an internal chuckle.

A few months after purchasing the Tag▪Along 8, I bought new skis, bindings, boots, and other assorted skiing necessities.  They cost much more than my cooler, but I had been skiing enough to justify purchasing equipment instead of renting it.  Or so I thought.

The very next day (literally), I went skiing with friends and they took me on a slope that was beyond my capability.  I managed to get to the bottom, after many flips, spills, and falls, without damaging my body or equipment.  My ego was another matter.

The rest of the group was assembled at the bottom of the hill, waiting for me.  In what was (I hope) an aberrant fit of pique, I vented my frustration by taking off my equipment and outer ski garments throwing each one to the ground while yelling – it’s just a sunk cost.  I threw my skiis muttering, I don’t care how much money I wasted, it’s a sunk cost.  I threw my goggles, saying, it’s a sunk cost.  Over and over as I threw each item, I uttered some variant of it’s just a sunk cost.

My best friend’s father-in-law, one of the nicest, most interesting and generous men I have ever met, could not stop laughing.  Virtually every time he sees me, the story is revisited.  And he chuckles and I chuckle.  Not one of my better moments, but then, they can’t all be.

Well, I’m off to a neighborhood Labor Day party.  I’ll fill my Tag▪Along 8 with my beverage of choice and I promise not to shed gear and clothing while screaming “sunk cost.”

 

[1] “the property whereby long run average total cost falls as the quantity of output increases”  https://quizlet.com/460890/100-economics-terms-flash-cards/

[2] “the property of society getting the most it can from its scarce resources”  Id.

[3] “a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants”  Id.

[4] “the impact of one person’s actions on the well being of a bystander”  Id.

Mount Kineo

I lived in Maine until I was 18 years old.  Mainers call it “the state of Maine” because until the Missouri Compromise of 1820, Maine was part of the Commonwealth of Massachusetts.  We remain happy about and proud of our liberation.

Maine is roughly the size of Ohio, but has fewer people than the Columbus metro area (or the Cleveland metro area or the Cincinnati metro area).  If its 1.3 million people (slightly more than the Dayton metro area) were even distributed, the state would be sparsely populated.  But the population isn’t evenly distributed; it is heavily concentrated in the southern coastal area, whose northern terminus includes Portland and its suburbs.

The Portland metro area contains over 600,000 people, almost half of the state’s population, though fewer than the Toledo metro area or the Youngstown metro area.[1]  Mainers from other parts of the state routinely refer to Portland and the southern Maine coast as not really part of Maine.  Given the prevalence of sand on the coast and the paucity of rural inhabitants, it’s easy to see why other Mainers consider that area anomalous.

I was recently in central Maine, visiting family.  I stayed in Dixmont, whose 36 square miles contain fewer than 1,200 people.  There are 640 acres in a square mile, meaning that (on average) each resident of Dixmont has over 19 acres in which to spread out.  Your neighborhood probably has a different look.

Feeling a bit crowded, my sons and I headed to Rockwood, which is a village in Northeast Somerset County.   This chunk of Maine has 354 people spread over 521 square miles, almost 1.5 square miles per person.  That is some serious elbow room.  https://en.wikipedia.org/wiki/Northeast_Somerset,_Maine

The main draw is not the space, but the lake.  Rockwood is one of several villages and towns that ring Moosehead Lake, the largest lake in Maine (120 square miles) and the largest mountain lake in the eastern United States.   https://en.wikipedia.org/wiki/Moosehead_Lake  At 1,000 feet above sea level, Moosehead Lake is the source of one of Maine’s great rivers, the Kennebec.

A wondrous focal point of the lake is Mount Kineo (in the background as viewed from the shuttle boat dock).

Though only 1,789 feet high, or almost 800 feet higher than the lake, Mount Kineo looks and feels taller because it rises virtually straight up from the water.  It is a state park and, though technically on a peninsula, can only be reached by water.  We took a shuttle boat .8 miles from Rockwood to Mount Kineo and began hiking.  The trail starts flat, following the lake to the west from the drop-off point, then ascends steeply along a ridge offering fantastic views of the lake and surroundings.

To the southeast is the currently closed Big Squaw ski resort.  Though the mountain itself has been renamed “Big Moose” to avoid political incorrectness, the locals refuse to call it anything but Squaw.

Upon reaching the flat plateau at the top of the mountain, the views were disappointing.  We were ringed in by trees.  But a now obsolete fire tower has been converted to a lookout.  After climbing seven stories, using rickety hand rails for support,[2] we had 360 degree views, which confirmed the concept of a mountain lake.  Moosehead is surrounded by mountains, in every direction except due south, that are significantly higher than Mount Kineo.  The highest, Mount Katahdin, which is exactly one mile high, if you count the pile of rocks that surmount its plateau, was not visible the day we were there.

The view was outstanding, well worth the climb.

Mountains and lakes in all directions.  Precious little evidence of human activity.  Even the gigantic lake had only a couple of boats moving about.

During our return shuttle ride to Rockwood, the boat’s captain pointed to a cottage on the peninsula, which looked nice, freshly painted anyway.  He said that is for sale for $825,000, but that he thought the owners would take $700,000.  He then laughed and said, oh yea, it isn’t heated.  And it’s only accessible in summer (by boat) and in winter (by snowmobile).  During the shoulder seasons, there is too much ice for a boat and too little for a snowmobile.[3]

If you’re ever in central Maine, I recommend a day trip to Mount Kineo.  If you’ve never been to central Maine, you should plan to go, even if only because it is the best way to drive to Acadia National Park.

[1] The point has been belabored.  Maine, though the size of Ohio, has many fewer people.  I have always loved saying or writing “many fewer.”  It shouldn’t work, but it does.

[2] The stairs themselves, as well as the platform at the top, were comfortingly solid.

[3] The captain also told us that during the winter, the road that ends at the dock during the summer, continues across the lake, across the Mount Kineo peninsula, and then onto land on the other side of the lake.  Though it has a state route number, it is only open to snowmobiles.

A Bit on Libraries

It won’t surprise you, given how often and much I write about reading, to learn that I love libraries.  The public libraries in our country are a wonder, an outstanding resource available to all of us.

Public libraries have five fundamental characteristics:

  1. They are supported by taxes,
  2. They are governed by a board to serve the public interest,
  3. They are open to all,
  4. They provide basic services without charge, and
  5. They do not require anyone to use their services.

https://en.wikipedia.org/wiki/Public_library citing Richard E. Rubin, Foundations of Library and Information Science, 2010.

The library in Worthington, Ohio meets all of these criteria.  And it provides outstanding service.  It has been rated a Five-star Library every year since 2009.  What that means exactly is a bit mysterious.  It is an amalgam rating based on library visits, total circulation, circulation of electronic materials, attendance, and public internet usage.  http://lj.libraryjournal.com/2016/11/managing-libraries/lj-index/class-of-2016/americas-star-libraries-2016-top-rated-libraries/#_

There are almost 120,000 libraries in the country.  http://www.ala.org/tools/libfactsheets/alalibraryfactsheet01 Personal experience suggests that they vary widely, from the grandeur of the main building of the Boston Public Library to the spartan one-room Newport Public Library.  At Harvard College, there are approximately 100 libraries, ranging from the massive Widener library[1] to the Qube.[2]

Only 7,349 libraries qualify to be rated by the Library Journal.  That “qualify” part is self-selective.  The Library Journal can only rate libraries that submit complete data to it.  Still, of the 7,000 plus qualified libraries, only 260 receive a star rating – three, four, or five stars.  In 2016, there were 84 five-star libraries in the country, slightly more than one percent of all qualified libraries.  So the Worthington Library system is doing pretty darn well and doing it consistently, which makes that separate assessment on my property taxes (criterion number one above) slightly easier to swallow.

 

 

[1] When I was an undergraduate, we were told that Widener was the third largest library in the world.  Maybe it was, maybe it still is, but only if the count is by books under one roof.  The more usual way to count these days is system wide.  By that measure, the Harvard library system is the 17th largest in the world.  Its 18.9 million catalogued items are dwarfed by the largest library system in the world, the Library of Congress, which has 162 million catalogued items.   https://en.wikipedia.org/wiki/List_of_largest_libraries

[2] Every academic department at Harvard has its own library in addition to the larger school-wide libraries.  Moreover, every residential house at Harvard has a library.  I lived in Quincy House, whose square-shaped library is called the Qube.  It was famous for its comic book collection; I hope it still is.

Two updates and three requests

Update 1 — John Stumpf is no longer the CEO of Wells Fargo.  He voluntarily submitted to a preemptive clawback, forgoing $41 million in unvested stock options, in an effort to save his job in the wake of the fake-accounts scandal.  It wasn’t enough.  This week, he retired.  His going-away present was in excess of $130 million.  After assuming responsibility for the scandal, he was ultimately, perhaps belatedly, held accountable.

Update 2 — During the debate last Sunday evening, Donald Trump referred to “the late great Abraham Lincoln.”  This usage of “late” to refer to a recently deceased person occurred over 151 years after Lincoln died.  The Napoleonic 85-year gap that I explained last week remains the largest published gap.

Request 1 — This week, Donn Fendler died.  One of our readers requested a blog post about him, but all I have is this snippet.  Fendler became a celebrity for a short time in 1939 when his 12-year old self vanished while hiking in Maine.  The manhunt to find him was front page news across the nation.  He survived alone for nine days and essentially rescued himself by walking into a hunting camp.  A relieved nation, in the person of President Franklin Delano Roosevelt, presented him with a medal as the outstanding youth hero of 1939.  https://en.wikipedia.org/wiki/Donn_Fendler

He wrote a book about the experience titled “Lost On A Mountain in Maine.”  According to my mother, he was a quiet unassuming man, who enjoyed visiting schools to describe his tale of perseverance to children.

Request 2 —  One of my faithful readers asked whether two Joey Bosas could kill an adult black bear in hand to hand combat.  Very far-fetched, of course, now that the Roman Coliseum has fallen into disuse.  In my opinion, the Bosas would have no chance unless they had a weapon, even a good hunting knife would likely be enough.

Bears are strong, fast, have fantastic weaponry (teeth and claws), and are protected by thick fur.  Usain Bolt, a good proxy for the fastest human, has been recorded at 27.8 mph.  Black bears, even big ones, reportedly sprint 25-30 mph.   Black bears routinely flip over rock looking for food and have turned over 300 pound rocks with one foreleg.

Still, a small adult female black bear might weigh as little as 90 pounds.  The Bosas might have a chance against her, but I doubt it.  She could kill or incapacitate them with a single blow or bite, they don’t have that capability.   One way to think about this issue is to consider all the stories you have heard about unarmed humans killing a bear.  As far as I know it has never happened.  To think two Bosas would have a chance against a large black bear, say a 500-pounder, is shear lunacy.  They probably couldn’t even kill a small adult.

Request 3 —  This request is from me.  As we approach the end of President Obama’s eight years in office, I plan to put together a spreadsheet of numerical indicators to compare the last three consecutive eight-year presidencies.

Question:  have there been other times in our history when three consecutive presidents served eight years?

Answer:  yes.

Question:  when?

An example of the type of indicator I plan to compile is gross domestic product.  I’d like to get 10-15 broad indicators of life in the U.S., not just indicators that measure the economy.

So – my request is to ask you for suggestions of statistics that I can compile that will give a good indication of how some significant aspect of life in the U.S. has during the past three presidencies.  You don’t have to do the research, I will.  But I would like help coming up with a list of noteworthy items.

Thrice we have had three consecutive presidents serve eight years.  The first time was early:  Jefferson, Madison, and Monroe.  The second time was relatively modern:  Roosevelt, Truman, and Eisenhower.  Truman did not serve two full terms, but I’m giving it to him because he succeeded Roosevelt so early in FDR’s fourth term.  (7.75 years rounds to 8.)  And the third time is now:  Clinton, Bush, Obama.

Blogging Feedback

They say that a blog should have at least one new entry a week.  You know — the blog experts.  I don’t think I have that much to say and I have many testimonials to support my position.

My sister-in-law says I should delve into controversial topics.  So does my neighbor.  Another friend says that I should avoid controversy at all cost.  My college roommate asks whether I want to know about typos, I suspect he has a lengthy list ready to throw my way.  If he does, I will make the corrections.

But still, I can’t get past the first thing:  I should post at least one entry a week.  That means I have to post something today.  But I don’t have anything interesting to say today.  (Some might question whether I have had anything interesting to say yet.)  In college, I had a paper due one day, might have been a Wednesday.  I had written nothing as of Tuesday evening.  So I pulled out my typewriter (have any of you used a typewriter in the last year, the last decade) and started tapping away.  The tapping of a typewriter feels more substantial than the tapping of a keyboard, in part because it’s more permanent, but really, a type hammer is just physically heavier.

In the end, I typed over four pages about why I wasn’t writing on the assigned topic.  It wasn’t an especially good paper, nor was it particularly bad.  It was unabashedly irrelevant to the class.  My kindly TA (teaching assistant) gave me a C+ and told me that if I rewrote it, on topic, I could improve my grade.  I declined because I was perfectly happy with a C+ in a class I was taking pass/fail.

This blog isn’t even pass/fail.  It’s more like I’m auditing.  I can write anything and nobody else has any impact.  Even the comments that you send are not published until I approve them.  That would have been a useful feature in college.  Imagine responding, “Thanks for the constructive criticism Paul.  Even though you are spot on that I didn’t address the assigned topic, I do not approve your comment.  It is hereby deleted.”

A couple of you have expressed a desire for shorter posts — something about falling asleep before the end.  First, I’m happy to substitute for Ambien, I’m cheaper and cause fewer side effects.  Second, tonight’s post is going to take that criticism to heart.  After all, it’s Tuesday, the post is due by Wednesday, I don’t have anything topical to say, none of you can grade me without my approval, and all I really want to do is turn this in and move on to my next assignment.  It’s as if I’m in college all over, except this time, I’m my own TA.