Category Archives: Uncategorized

Mugs, pens and USB sticks as advertisements

Several universities I have visited give free mugs to seminar speakers as advertisements for themselves. Similar branded objects (pens, USB sticks, T-shirts, baseball caps) are handed out by firms and political campaigns as part of their marketing.

The idea of giving people practical objects instead of flyers, junk mail or banners is to make the recipients use these objects (as opposed to throwing these away or storing them at the back of a closet), preferably in a public setting, and thus increase the visibility of the advertiser. For this, the more usable the handout, the better.

Unfortunately, the people ordering these objects in bulk and paying for the brand logo to be printed on these are busy administrators who do not connect the overall purpose the marketing campaign to the properties of the objects. Specifically, the mugs should have a large handle that lets more than two fingers hold it, the mug should be short with a wide mouth for easy filling and washing, and should not be too fragile.

Pens should write well and be ergonomical, not angular or too narrow. I have seen branded pens violating all these suggestions. For example, the Australian National University pens are of flimsy plastic, create ink splotches and the ink runs out quickly.

The USB sticks handed out by the University of Queensland had a metal cover which increased the USB drive’s bulk and scratchiness. Also, the USB was wide and thick, making it impossible to plug in side by side with another USB. The small capacity of the USB was also behind the times.

To advertise with an object, it would make sense to print the advertiser’s name and other relevant information in large readable font on the object. The logo is not useful unless it is already widely known by the target audience and associated with the advertiser. The readability suggestion is violated by the Singapore Management University’s mug, which has SMU written on it in complicated calligraphic script that is difficult to decipher even for someone who knows what the abbreviation SMU means.

For people to develop a positive view of the advertiser, the object should not seem too cheap or bad quality. By contrast, most free T-shirts are the cheapest ones that could be bought wholesale, made of the most threadbare and transparent cotton, which discourages their use.

Slippery sidewalk paving

In Singapore, the streets are well planned and maintained, smooth and clean like everything else. However, the sidewalks have one illogical aspect: the pavement is smooth stone, which gets very slippery when wet. Singapore is tropical and humid, with frequent rain. When initially paving the sidewalks, it would be easy and probably cheaper to use rougher covering (asphalt for example) that would not get slippery in the rain. After the smooth pavement has been laid down, changing it is of course costly, and if the locals have adjusted to the slipperiness, then switching the sidewalk cover may not be worth it.

The University of Queensland has a similar problem with the sidewalk in front of its main building. The sidewalk is coarse, like yellow asphalt with 1 cm stones in it instead of sand. One would expect such a coarse surface to provide good grip in all conditions, but unfortunately the looks are deceiving. When that sidewalk gets wet, it becomes slippery like polished glass. Again, it would be cheaper and more practical to pave that sidewalk with asphalt.

A broader point generalising the above observations is that things should be field-tested in realistic conditions before putting them to widespread use. For example, the sidewalk stones should be walked and biked on under all local weather conditions before paving a street with them.

Perhaps the smooth stones in Singapore are meant to make street cleaning easier. Still, there are materials that do not become slippery when wet and are smooth enough for mechanised cleaning and cheap enough to use as pavement.

Fund management fee paid explicitly to nudge consumers to choose better funds

Mutual funds with lower management fees have higher future before-fee returns (Gil-Bazo and Ruiz-Verdu 2009). Nonetheless, the high-fee funds have not gone out of business, so there must exist a sizable number of silly customers who accept low returns without switching to competitors. When asked explicitly, all fund investors prefer more money to less. Their hourly wage is not large enough to explain their non-switching with the time and hassle costs of comparing fund returns and choosing a new one. Similarly, many Estonians keep their retirement savings in badly performing high-fee pension funds despite the availability of dominating options (Tuleva and LHV index tracking funds). This is costing the customers over one percent of their retirement wealth per year.

By contrast, people with chronic or expensive diseases in the US often pick the health insurance plan that maximises their wealth (coverage minus premiums). This dynamic optimisation involves switching to a different plan when their illness changes. People without costly medical conditions tend not to switch their insurance even when cheaper plans with higher coverage are available.

Both the pension and the insurance plan decisions are complex, but matter greatly for wealth. Why do people pay attention to the financial consequences of their insurance choice when sick, but ignore better options among pension funds (and when healthy, also among insurance plans)? One possibility is that insurance is more salient to the sick, and the greater attention leads to better decisions. Specifically, the premiums and out of pocket payments for medical procedures frequently remind patients of the financial consequences of their insurance, but the missing returns on one’s retirement assets are not observed without explicit comparison to the stock market or competing funds. Most people do not compare their pension plan to the market, so even in retirement may not know what their (counterfactual) wealth would have been had they chosen a better fund .

If it is lack of attention that causes the bad choice of mutual and pension funds, then one solution (proposed by my friend Hongyu Zhang) is to make the management fees more salient by requiring their explicit payment. For example, every month the customer has to transfer the amount of the management fee from their bank account to the fund. Financially, this is equivalent to the fee being deducted from the retirement assets like now (assuming these assets are eventually taxed the same as income, otherwise the transferred fee can be adjusted to make it financially equivalent to the deduction). The attention required is however greater for an explicit payment than for doing nothing following a lack of capital gains. Similarly, requiring customers to pay the difference between the return of their fund and the market return into the fund every two weeks would nudge them towards greater attention to their retirement account.

In practice, such a nudge is unfortunately politically infeasible. Not only would the fund industry lobby against it, but voters would irrationally perceive the required explicit payments as increased taxes. This would make the transition to transferring fees to funds from customers’ bank accounts very unpopular. If people understood the equivalence between low returns on their assets and explicit payments required of them, then they would be financially literate enough to choose low-fee, high-return index funds in the first place. Thus the problem of low-performing pension funds would be absent. To sum up, the fool and his money are soon separated, and it is difficult to protect people from their own bad decisions.

Delivered food and restaurants are unhealthy due to moral hazard

Consumers observe the taste and cost of food directly, but checking the ingredients for healthiness takes extra effort and time. Rational inattention then implies that eaters are unlikely to verify the health claims. Thus food suppliers are subject to moral hazard: consumers buy based on the healthiness they expect, not the actual ingredients the seller chooses, so the seller has an incentive to improve taste, reduce the production cost and cut price even when this makes the food less healthy.

The standard solutions to moral hazard from economic theory are verification, repeated interaction and vertical integration (selling the firm). In the context of food, safety standards and truth-in-advertising laws restrict the substances manufacturers may add and claims they can make. Regulators verify claims made and punish for illegal additives or false advertising. Also, if a food supplier is found to use unhealthy ingredients (or amounts of sugar, salt and fat), then some consumers may switch to alternate providers, which is a repeated game punishment for the original seller.

The weakness of both verification and repeated interaction is imperfect monitoring: small increases in unhealthy substances are difficult to detect, because tests are noisy and food composition varies naturally. The variation sometimes makes the amount of an ingredient exceed the healthy limit, so honest suppliers would also be punished with positive probability. Incentives are created by the difference in payoffs, so reducing the payoff of the honest decreases their motive to stay honest. The imperfect monitoring allows unscrupulous sellers to outcompete the providers of healthy food on taste and price, for example by using various tricks to circumvent the legal requirements on labelling (https://sanderheinsalu.com/ajaveeb/?p=728).

The remaining solution to the moral hazard problem is vertical integration of the buyer and the supplier, i.e. home cooking. Of course, the ingredients bought to be cooked at home are subject to similar moral hazard – unhealthy substances can be added at any stage of the production process. The risk could in principle be even larger than for processed foods and restaurant meals, but in practice, it seems that simple and unprocessed ingredients are more difficult to manipulate than prepared meals, which are a mixture of many components. Adding sugar, salt, fat or monosodium glutamate to flour, rice or dry beans without mentioning it on the nutrition label is easier to detect than the same (amounts of) additives in shrimp fried rice, bread or a burrito. Raw meats and fish do have extra salt and food colouring added, but usually less than for ready-to-eat meals.

Relative prices are another reason why there may be less manipulation of ingredients than processed foods. There is a per-unit cost of adding unhealthy substances, as well as a fixed cost due to the risk of lawsuits and fines, especially if the additives are not declared on the label. Unprocessed ingredients are less differentiated, so the price competition is more intense. The increase in the price that customers are willing to pay if an ingredient tastes better than the competitors’ may be small if price is the main dimension of competition. The slightly higher price may not justify the per-unit cost of the additives. In contrast, for processed foods the margin may respond greatly to taste, motivating manipulation of the ingredients.

The taste of the final dish is likely to respond less to manipulating one ingredient than to altering the composition of the entire food, both because the ingredient may be only a small part of the final dish and because the taste of a dish is largely determined by the seasoning and the cooking method. In this case, additives to ingredients do not improve taste that much, reducing the profitability of manipulating these.

Intense price competition motivates cost-cutting, including by substituting cheaper ingredients or using additives (e.g. preservatives) that reduce the manufacturing cost. However, if the additives cost more than they save on production cost (such as preservatives for dry goods that already keep indefinitely), then they are unprofitable to include.

Demand for cooking ingredients may also respond less to price and taste than for restaurant meals or delivered food (raw ingredients may even be an inferior good, but eating out is more like a luxury good). In this case, there is a range of fixed costs of unhealthy substances for which adding these to ingredients is unprofitable, but to processed foods profitable.

Eggs boiled in an oatmeal cooker

In addition to rice cookers, multi-cookers and egg boilers, there are devices specifically for cooking oatmeal, even though a rice cooker would do the job just fine. Perhaps the reason is that the minimal cooking time is shorter for oatmeal than for rice, so an oatmeal cooker speeds up the process compared to a non-programmable rice cooker. A programmable one could of course be set for the shorter cooking time.

The normal cycle length of rice cookers (30-45 min) and oatmeal cookers (20 min) is longer than the 12-15 minutes it takes to hard-boil eggs. However, overcooking a hard-boiled egg does not worsen its taste or texture significantly in my opinion, unlike for meat or vegetables. It turns out that oatmeal does not stick to eggshells that much, so eggs boiled in a cooker together with the oatmeal can be rinsed off quite easily.

Boiling the eggs and oatmeal together saves either time (if there is only one device available for cooking) or the labour of washing one more cooker (when using separate ones for eggs and oatmeal). Even with a dishwasher, disassembling a cooker, putting it in and taking it out of the washer and reassembling takes a few minutes. Rinsing the eggs is quicker.

Ventilation switch that detects odours

Many homes in the US have a switch to turn on the ventilation in a toilet or bathroom. Also, all kitchen range hoods and laboratory fume hoods I have seen must be manually switched on and off. Of course the ventilation could be run continuously, but this would be noisy, waste electricity and remove warm air (or cool air-conditioned air in hot weather) from the building. For toilets, bathrooms and kitchens, the main reason to ventilate the room is only temporary – removing odour or humidity.

An untapped business opportunity is to produce a switch that detects odours or humidity and turns on the ventilation just long enough to remove these. Humidity detection is easiest – just connect a hygrometer to the switch. Detecting smelly gases such as grease vapour in the kitchen, hydrogen sulfide, methanethiol and dimethyl sulfide in the toilet may require spectrometry or a chemical reaction. Laboratory gases are probably the most difficult to automatically detect due to their variety.

Parking space availability detection from the air

Much fuel and time is wasted by drivers zigzagging through a parking lot looking for an empty spot. Some parking garages have automated systems for detecting which spaces are empty and directing drivers to these using electronic displays or coloured lights on the ceiling. Drivers of course prefer to spend less time looking for a space and to find places closer to the exit, so providing availability information gives a commercial parking building a competitive advantage and reduces traffic and pollution inside it. The same availability information would be helpful for outdoor parking lots, including the tops of garages that are open to the sky.

A business opportunity is to develop an app that uses either satellite images or cameras on drones or surrounding structures (highrises or streetlights) to detect empty parking spaces and direct the drivers to these. The cheapest black and white security camera is sufficient to distinguish a car from an empty rectangle of asphalt. Even at the busiest times, such as the peak shopping hours on Saturday afternoon, the parking availability info only needs to be updated about once every 30 seconds to be maximally useful. The only hurdle for this system is the placement of the cameras, because buying two satellite photos per minute for every parking lot may be expensive for the app provider. Drones may not be permitted over urban areas. The owners of the structures surrounding the parking lot may ask for payment to allow camera installation on their property. Of course, permissions should not be a problem if the surrounding buildings are retail establishments who profit from more customers parking closer to them, but the upper floors of tall buildings are typically offices or residential spaces.

Food security is a manipulative term

Food security is a manipulative political code phrase designed to scare people and thereby make them support agricultural subsidies, as I have written before. The fear is created by association with sieges before the age of gunpowder, where castles were starved into submission. In modern times, no enemy is silly enough to try to surround and starve a country that is not a city state (e.g. Singapore), because any enemy with a large enough force to prevent food from getting into a country is also strong enough to conquer it quickly by frontal attack. Even unintentional starvation is a public relations disaster (e.g. Yemen), as is a war that drags on, but a quick takeover without too many casualties (e.g. Crimea) actually increases the conqueror’s leader’s popularity in internal politics.

Even if an enemy was stupid and tried to starve a country, the defense against this is not farm subsidies, but many distributed small stockpiles of food. Farms as a food supply are easy to destroy by firebombing the crops and livestock from the air. A small number of large centralised stockpiles are also vulnerable. However, if each household is obliged to keep n months’ worth of non-perishable food at home, then starving the country into submission would take at least n months and bombardment would not shorten that period.

What is really meant by food security is that food prices might rise. However, in all except the very poorest countries in the world, food is so cheap that any reasonable price rise would not cause starvation. For example, according to the USDA, 9 medium baked potatoes fulfill all the nutritional needs of an adult. Similarly, people can survive for a long time eating just wheat flour and water. Wheat flour is 80 cents per kilo, and a kilo of it has 3600 kcal, which is enough for an adult for two days. The price of flour would have to rise at least a hundred times for the cost to lead to starvation in developed countries. Other emergency foods that do not go bad and can be prepared without heating are also cheap, e.g. milk powder, instant oatmeal, canned meats and vegetables.

A price rise is a financial problem, not not a real resource constraint, and as such has a financial solution – insurance. Those afraid of a price rise can use forward contracts to lock in the price. Insurance against a very low-probability event like food prices rising a hundred times is cheap (if such insurance is offered, which it might not be due to the low demand).

Stockpiling emergency food

Sometimes the media scares people into stockpiling emergency food, such as by predicting a snowstorm (or more poetically, snowpocalypse), flood, hurricane or blockade. Even if the threat of being cut off from food and other supplies was real, so stockpiling would make sense, fear often makes people act irrationally: panicking stockpilers buy the wrong quantities of the wrong products, for example dozens of toilet paper rolls and disinfectant wipe packs.

The smart way to prepare for an emergency is to list the products needed (and only those) and then calculate the necessary quantities. For example, medical handbooks such as UpToDate specify the daily nutrient need for a person conditional on age, weight and physical activity. The quantities of foods that satisfy the nutrient need can be found for example using the USDA food composition database. To find the quantity to buy for emergency preparedness, multiply the total daily food intake of the people in the household by the likely duration of the emergency (plus a reasonable safety margin). Tallying supplies is just like planning event catering or consumables for a hike: the number of eaters times the number of meals. The same simple spreadsheet-based quantity calculation applies to other emergency supplies like matches, batteries, medicine, fuel.

A natural disaster may cause power outages and less frequently a loss of water supply. Therefore emergency food should not need cooking and there should be a drinking water stockpile in the home. Contrary to this common sense, irrational emergency shoppers sometimes buy instant noodles, rice and other foods that require hot water to prepare.

Of course, the stockpile of supplies for a disaster should keep for a long time. A minor and neglected aspect of emergency food is that it should not tempt the stockpiler to eat it at non-emergency times. The temptation of course depends on the person, but chocolate bars may be a bad idea, especially in a household with children or binge eaters.

The requirements of being non-perishable, edible without cooking and non-tempting are satisfied by for example canned food, milk powder, instant oatmeal, flour (despite being usually consumed cooked, flour and oatmeal are edible straight from the pack, in contrast to rice, dry peas, beans and cornmeal).

A minor consideration is variety in the food, which helps keep boredom at bay while waiting for a disaster to end.

How to stop crutches from clicking

Adjustable-length metal crutches click with each ground contact and lifting, which some people find annoying. The reason for the clicks is that the push button used to adjust the length of the crutch is not snug in its hole, but pushes against the top of its hole when the crutch is pressed against the ground and against the bottom of the hole when the crutch is lifted.

The push button length adjustment system consists of two pipes inside each other, with holes in the outer pipe and a spring-loaded button on the inner one. Pushing the button in allows the pipes to slide relative to each other. When the button is released and pops out into a hole, it locks the pipes together. Similar push button systems are used to adjust the handle length of rolling luggage and the weight stacks of gym equipment.

To silence the clicks, the button should push against the same side of the hole at all times, which can be achieved by adding one spring. The spring should pull the inner pipe of the adjustable part of the crutch in the direction of shortening the crutch, i.e. the same direction as ground contact. Then the button always stays in contact with the same side of its hole instead of alternately hitting the two opposing sides. The reason the spring should pull in the same direction as ground contact is that the upward force on the adjustable inner pipe when the crutch bears the weight of the user is much greater than the downward force of the weight of the inner pipe when the crutch is lifted. Thus it is easier to overcome the downward force using a spring.

A homemade version of the spring is to tie a rubber band under tension to above and below the adjustment button. A bungee cord or bicycle inner tube would work as well.

The length adjustment of the crutch with a spring would be similar to that of an office chair – automatic in one direction, but requiring force in the other. When the button is pushed, the crutch shortens automatically by one hole. To lengthen the crutch, one has to push the button in and then pull the crutch in two opposing directions.