In defense of bottom feeding...

I had mentioned the show Pawn Stars a few days ago to a coworker, and he grumbled something about how he hated the store owners on the show because they usually make lowball offers to people selling them stuff - people who often desperately need the money.

I like the show, but I also see a little of myself in the main characters. If you've watched the show, they will often get an estimate from a pro of what something is worth. The person selling the item will then ask for close to that value, and the owners will usually offer them about half. He'll usually point out that the top value is usually what it would fetch at an auction, which would charge a serious commission, that he's got to pay the costs of running a store and still make a profit, and that he may have to sit on the item for a while before a buyer interested in it comes along.

I'm pretty sympathetic to these arguments. And if you've watched the show enough, there are times he's gotten burned - bought something that turned out to be unrepairable, or not sell-able, or stolen.

The way I see it, what he offers is liquidity - cash on the spot, hundred dollar bills. Sure, you could get more on eBay or at an auction, but that takes work. eBay isn't too hard once you get the hang of it, but there is a learning curve if you've never used it, and people are reluctant to buy from someone with no feedback. There are also a ton of ways to get ripped off if you don't know how to protect yourself as a seller. And auction houses and consignment sellers charge heavily - I was surprised when a faculty member at work asked me about selling some stuff on eBay for him - and told me that he had previously used a consignment store that charged 40% of the selling price.

Maybe I'm just rationalizing, though. The thing is that I've bought plenty of things at estate sales and auctions, yard sales, bankruptcy and going out of business auctions, and otherwise profited off people's bad fortunes. But it's not like my actions caused the death of the lady whose Onkyo receiver I bought from her sister for $3 and eBayed for $55, or caused the criminal actions of the bankrupt nonprofit whose 8 rack-mount servers I bought for $5 each and resold for $75 - $150 a piece. The way I see it, I'm offering liquidity, giving individuals and creditors money for something that they otherwise wouldn't want. And I take my share of risk - I've bought tons of stuff that turned out to be broken, missing parts, or not worth what I thought. I've also bought plenty of stuff that turned out to be harder to sell, including a new in box APC rack mount UPS for $250 - despite the fact that it's normally an $800 piece of equipment, it's still sitting in my basement because I haven't found a buyer yet, and it weights a metric crapload.

Pawnshop owners and eBayers might benefit from people's mistakes or bad luck, but they didn't cause it, and they perform a necessary function in converting assets into cash. Much like debt collectors and repo men, they perform a function that isn't always pretty, but is essential to the economy.

Back to school...

When you work for a college like I do, the start of the semester means thousands of students flooding the school, professors coming back to their offices after weeks away, and a flurry of effort to make sure that they are taken care of.

But this semester, it also means I'm going back to school, for the first time in two and half years, when I finished up my MBA.

See, a few months back I looked at my life and decided since it wasn't really going anywhere, personally or professionally, I should try something new. One of the perks of working for a college is that I get to take classes basically free. We've got a number of grad programs, but I didn't really think I wanted to take any more business classes, and I didn't want to get swamped in code in computer science. So I decided to apply for our Educational Technology program, which is aimed at getting teachers familiar enough with using technology in the classroom to take a lead role in their schools. Granted, I'm not a teacher, and the program is aimed at k-12, not college, where I work, but I figured there would be some crossover.

There were other reasons - we got new management a few years back, and one of their priorities has been on how students and faculty use technology in the classroom - much of the new opportunities have been aimed at that. So I figured enrolling in the program would show I was interested in that kind of thing. It also hasn't escaped my thinking that most teachers are women, and that, well, this could be a good way to meet girls. While I don't expect to get a date out of this, I figure meeting new people can't hurt. Plus, it will give me something to do - I like to be busy, and figure time in class or doing homework is probably a better use of my time than random web surfing.

But now that it's starting, I'm starting to second-guess myself. I figure I won't fit in - the only non-teacher in a class of teachers - and that probably won't endear me to the faculty either. My final in one of the classes is the first day of a conference that I would otherwise be able to go to in Vegas, related to my job- so now the classes are hurting my career, because I can't seem to make my boss understand why skipping a final is not a good idea.

But we'll see. I figure if I'm too miserable or suck too much at it, I can always stop taking classes - all I basically lose are a few hours twice a week for class, plus however long I spend doing homework. And maybe it won't suck and I'll be pleasantly surprised.

Business models that puzzle me... GPS companies...

On New Year's Day, I went on a hike with an old college roommate and a bunch of his friends. Afterwords, we went out to grab something to eat. Since I had my Tom-Tom, and drive a bright yellow truck, one of the women who went followed me. Unfortunately, the interchange that Tom-Tom sent me on was redesigned after my maps were made. I went the wrong way, she went the right way, and I ended up gettting there about 15 minutes late, although part of that was that I had to stop and get gas since I was almost out.

Anyway, the moral of the story is that I ended up ordering a new Tom-Tom. eCost had a refurbed Tom-Tom One - a slightly updated version of the one I have now, with a better mounting bracket - for ~$60 shipped after rebate. It includes new maps for the first 30 days, so I'll get a current map. I figure that I can probably sell my old TomTom for $30 or so at a Hamfest or on eBay, so I'll have a new GPS with new maps for $30.

What is odd is if I wanted to buy new maps for my existing TomTom, it's $55. They do have a map update service where you get 4 new maps in a year for $40, which sounds like a great deal until you read the fine print and realize that it makes you pay full price for the first map.

I'm really puzzled by this business model. Why is it cheaper for me to buy the hardware and software than just the software? After all, software has a near-zero marginal cost - it costs next to nothing to distribute an additional copy, especially as a download. If I could get an updated map for $20 or so, I'd buy it - it would save me the hassle of transferring all my favorites to the new device, installing POI's, ect. But when it's the same price for a new device as the maps, and I can resell my old device, it's a no-brainer.

The only thing I can come up with is that TomTom wants to keep up/increase market share, and they figure that means keeping the price of the device low so that new customers buy it. Since they can't separate new customers from old ones - there's no way to price-discriminate, as an economist would say - existing customers like me get an advantage. The other thing I can think of is that they figure that people who insist on super-up-to-date maps are people who really need them - businesses, people who drive for a living, ect - and they are willing to pay whatever to get them. To use another econ term, they are price-inelastic.

I do wonder if a GPS company would do better if they sold the maps cheap instead of making it cheaper to buy a new device. I feel like I'm buying a new PC just to get a copy of Windows, but if it works...