Avu's Econ Blog

Microsoft’s Creative Destruction Fail February 10, 2010

Microsoft is showing all the symptoms of a monopoly, accidental or not. It is overly large, a leviathan even, leading to dysfunctional externally and chaos internally. One would hope that competition between parts of the corporation would render the best innovation, products, and working experience. Reality would prove to be quite the opposite. Rather than competing with each other, leading to the best products, the firm has competitive forces that force its forces to get crushed by the older groups. This leads to blockages rather than flow of ideas. Its a college football team with hierarchy and gang warfare rather than a sleek company like Apple is. Microsoft just isn’t cool anymore. Creative destruction can have its positive effects. For example, with the complete destruction of the US steel industry, more opportunities were created, allowing for a stronger economy. I believe that in fields such as agriculture, if the market in the US and EU was destroyed or outsourced to Africa, creative destruction would ensue and the world would be a better place. This of course needs the removal of all trade barriers, but thats not the issue. The issue is that Microsoft’s internal self destruction through combat between sectors of the firm is not resulting in any creation, at least not inside. When was the last time Microsoft came out with anything new or revolutionary? Vista was a failure, XP wasn’t revolutionary. They dabbled in the music industry before getting smoked out. Microsoft simply repackages what already exists with a little logo on the back. Microsoft’s market control has caused it to grow into a behemoth of unmanageable size, and it is now experiencing diseconomies of scale. I expect that it is not long until it falls as GM did to innovation and creativity. This is the simple reason why Apple is a better company than Microsoft. Apple creates; Microsoft destroys. Oh the joys of being a leviathan…

The Worst Is Over January 31, 2010

Thank God! Thank the Christian God! The United States enjoyed a 5.7% economic growth rate, its best performance since 2003. This is wonderful, yes? NO! This growth is the child of inventory changes. Firms that tightened their stores are now operating on a more normal level, boosting the economy. The United States will not continue to grow without more demand. Not just demand. Individual demand. Individual demand is at a rock bottom, and savings have increased from last quarter. Of course, without employment rising, demand is unlikely to surge, and the economy shouldn’t grow anymore. Furthermore, there is oversupply in both residential and commercial sectors, leading to more problems. Problems. Problems. Problems. More problems? Of course there are. Government stimulus has provided a good deal of the economic boost that the US of A is hungrily salivating over. Government stimulus is projected to slow down, or even stop, over the next few quarters. Finally, the reports could be overjoyed jubilance. The actual growth could be several units less. For now we can all be happy that the worst is behind us, but we need to be careful to not get caught in another quagmire like that of the Bushevik era.

PED at Price Club November 29, 2009

This is a handsome Korean boy at Price Club

This is a handsome Korean boy at Price Club

Earlier today I had the pleasure of spending an afternoon with two handsome young Korean boys as we went to Price Club to buy some treats. Price Club is, for those that don’t know, a small shop on the east end of the island which predominantly deals in foreign goods. These goods are mostly food and drink, and almost all from the United States. Among the goods included are Wonka bars, Old El Paso, and Thansgiving treats. To the point however, three young men enter this store looking to buy chocolate and soda. We are all students at Canadian Academy, from relatively affluent families, seeking to buy chocolate and soda for no reason other than our own personal enjoyment. So, in other words, these are luxury goods, and not necessities, as we are not purchasing this food for needed nourishment. Needless to say we can live without these goods, however delicious they may be. We came across Wonka “Whipple Scrumptious Caramel Delight” chocolate bars and, reminiscing on better days when our parents would buy these for us, we were in the mood to purchase some. The bars were priced at 525 yen for normal shoppers and at 500 yen for Price Club card carryers. With this price tag, one handsome young Korean boy misread it and said happily, “At 500 yen I will buy 3 bars!” Upon the realization of his mistake, he was taken in with shock. At 500 yen, he was willing and able to purchase 3 bars. At 525 yen, he was still able to buy 3 bars, but he was not willing to. He was not even willing to buy two bars. At 525, this hansome young Korean boy bought one chocolate. This shows just how elastic the market is. Since he does not need, but simply wants the bar, his demand is going to be more driven by price than any other consideration. Of course, this is not necessarily a change in price, not at all, but psychologically the price has increased by 25 yen for our handsome young Korean boy.

Upon the "shift" in price, quantity changes dramtically

After eating a third of the chocolate bar, the handsome young Korean boy announced that he is suffering from diminishing marginal utility with each bite, but that’s another story for another time.

The Bronx Zoo Needs Gentrification… Seriously November 27, 2009

Charlotte Street, part of the Bronx, one of the most violent, poor, and dangerous areas in the United States. The tenants in the late 20th century would aggressively commit arson to try and receive reparations and perhaps a new home. Landowners were hardly forgiving. Buildings would shut down abruptly, with homeowners being offered little advice other than “move to Queens”. This has improved lately, with a homeowners association reselling houses at about 50,000 dollars, inviting a larger market, and over time driving the prices up. At this time, a relatively large amount of real estate, quite functional for a single nuclear family, sells for 500 grand. Across the river in Manhattan, a person would pay the same for a studio apartment the size of a closet. As time went by, 92 more houses were constructed in the area, inviting more and more people. The secret was financial stimulus from the city, organizations, and generous donators. The basic price was less than half of that of construction, providing reasonable accomadations for less affluent folk. However, Charlotte Street’s real triumph was their screening process. Only buyers with a high credit score could buy, and they had to go through house ownership counseling among other requisites to be considered acceptable buyers. Now comes the next step. Complete gentrification of this Bronx neighbourhood. Because of its success in an age of debacles, its pretentious historical value could attract more pretentious millionaire trust fund babies who are sick of the bustle and hustle and Manhattan and would prefer to live in a quaint little slum in the Bronx. This is after gentrification of course, we can’t have rich white kids living in reasonable housing, they need McMansions. All sarcasm aside, gentrification of the Bronx would create huge investment potential. While it may, potentially, and of course tragically, leave some homeless, but the cash flow of course forgives this. Profit is of course more important than charity.