Michael Eriksson's Blog

A Swede in Germany

Posts Tagged ‘Business

Follow-up II: Pinning the tail to the COVID-19 donkey

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As I wrote last week ([1]), the German government has been jumping back-and-forth on the topic of an Easter ease-up, clamp-down, or business-as-usual (by the COVID standards).

It appeared that the last bid had been “business as usual”, but, as I learned a few days later,* this was not the case. The individual German Bundesländer (“states”), to some degree individual municipalities**, are allowed to set their own rules, within some limits, and it appears that they are doing so. In the case of Wuppertal, where I live, I have been unable to find a reasonable description of the exact rules that will apply, but it appears that stores may only be visited after a “rapid test” (“Schnelltest”) during the Easter days. I am taking the safe course and treating the situation as a five-day*** everything-will-be-closed. Correspondingly, despite having been grocery shopping yesterday, I went again today to load up a little.

*I had not originally looked into the details, but merely noted the repeated pin-the-tail attitude.

**With reservations for what exact word applies.

***There appears to be some unclarity over the time spam, but my impression is that the Sunday (everything closed anyway) and the two holidays (everything closed anyway) are complemented by restrictions for both tomorrow/April 1st (ha!) and Saturday (April 3rd).

Here we have two issues: Firstly, does it really matter from a COVID-POV whether I went to the store today or whether I had done so on Saturday (as originally planned)? I doubt it. Secondly, quite a few other people seemed to have had the same idea, making the store unusually full for the time of day (and likely to grew much worse as the day progresses). Considering the governmental obsession with keeping distance, would this not make matters worse from a governmental perspective than if the store visits had been spread over several days? It would not surprise me.

The bigger picture also raises at least two other issues:

Firstly, federalism and subsidiarity. Normally, I am in favor of this more often than not; however, here we see it backfire. One of the most important points behind these principles is to protect the citizens (and other entities, including individual states and municipalities) from too arbitrary, too undiscriminating, too self-serving, whatnot decisions “from above”. If we look at the U.S. and the COVID approach of e.g. Texas and Florida, we see how this can work well.* In Germany, however, there appears to only be two approaches—hard lockdowns and harder lockdowns. Here subsidiarity does not serve to protect the citizens from the federation but to screw them over even when the federation does not. (While I have not looked into the details on other issues, my general impression is similar: if the federation does not screw something up, count on the Bundesländer to do so; if the Bundesländer do not, count on the municipalities.)

*Generally, my fears of the complete corruption of the U.S. in the wake of Biden have been slightly reduced in light of my growing awareness of the power remaining with the individual states and that the GOP might have fared better on the local level than on the federal level. (Nevertheless, the picture is very, very bleak. By the next federal elections in 2022, the damage will be absolutely horrifying, if things continue down the current path—even COVID aside.)

Unfortunately, I have no good solution to offer that would also preserve the positive aspects of federalism and subsidiarity, but a general principle might be that a “lower” entity may only ever weaken restrictions and regulations, reduce taxes, and whatnot compared to what a “higher” entity suggests. (Possibly, with some exemptions for extraordinary circumstances, say a local natural disaster or local riots.)

Secondly, communication: It absolutely, positively, must be mandatory that the involved entities communicate various rules in an explicit, clear, and timely* manner. This, notably, not restricted to COVID but in general. For instance, I have had massive problems, because my (now de-installed) gas heater was subject to various obscure, counter-intuitive, internationally unusual laws and regulations, spread over several different texts, none of which I had even encountered during my twenty-something years in Germany—until a belligerent and incompetent piece-of-shit of a chimney-sweep sics the authorities on me.** Given these laws, even discounting that they are unreasonable to begin with, it should have been the governments responsibility to inform me that I had to pay attention to certain regulations—which would have been trivial in light of both the heater being on registry and my purchase of the apartment being registered. Given the extreme size and complexity of current laws, and how often they go against common sense and/or vary drastically from place to place, the principle of ignorantia juris non excusat simply is neither conscionable nor compatible with Rechtsstaatlichkeit when the government has not actively informed the citizens or when the need for citizen to inform himself is obvious.

*To the degree that the situation allows. That e.g. an explosion in the infection rates can force a short-term measure is understandable, but this is not the case here where politicians have just been pinning-the-tail, and often concurrently.

**I will not go into details of the overall situation, but as a for instance: portions of the regulations are buried in the “Schornsteinfeger-Handwerksgesetz” (“chimney-sweep trade law”). That a regular citizen would even contemplate investigating what appears to be regulations strictly for the chimney-sweep trade is highly unlikely. Would you bother to read a “dog-groomer trade law” in order to find out e.g. whether pets must be spayed and neutered? Hardly. Would you even be aware that one existed? I doubt it. (That there is a “chimney-sweep trade law”, at all, might be seen as proof of over-regulation, even if the justification is larger than for dog grooming.)

As a minor correction to [1], it appears that Merkel’s back-tracking was only partially caused by the public outcry. Another part came from a business outcry, a “we simply cannot reasonably shutdown with such short warning”. This is certainly a legitimate concern, but one that should have been obvious to the government and one which I assumed had been taking into consideration, e.g. through discussing this with relevant business organizations. Apparently, this was not the case, and that makes the approach the more amateurish. To take just one example from my own professional experiences: In my last project, the topic of bank holidays was important, e.g. to calculate payout dates, often a week or more in advance. Assume that such a date is calculated and communicated today, and arrangements are made for payouts and book-keeping, based on a certain set of bank holidays, possibly spanning several countries. Assume next that tomorrow someone adds a new holiday, retroactively making these dates incorrect. Now, how are we going to resolve this? Without massive additional effort and chain-reactions affecting other businesses, the best bet might be to just send apologies (“due to circumstances outside our control, blah blah”) and hope that no-one is sufficiently dissatisfied as to sue, shorten payments, or jump to another provider.

Written by michaeleriksson

March 31, 2021 at 12:36 pm

Follow-up: Pinning the tail to the COVID-19 donkey

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I have repeatedly compared government policy regarding COVID to pinning-the-tail, most notably in [1]. This especially regarding my local German situation.

This includes a statement that I considered hyperbole at the time:

Grab a pin-board. Pin notes with possible counter-measures on the board. Put on a blindfold. Throw darts at the board. See what counter-measures were hit. There we have this weeks policy. Next week? Who knows.

Today, I am wondering whether it actually was that hyperbolic: A few weeks ago, there was considerable talk of easing up on the restrictions over Easter, to allow this special-to-many occasion to actually take place in a reasonable manner. But, no, suddenly there was a drastic course reversal—the lockdown must be made even harsher than before, lest Easter turn into a major occasion for infections instead of celebrations. Cue public outcry—and suddenly the harsher lockdown is off the table again.

We still have a few days left. I wonder whether Frau Merkel will throw another dart …

Written by michaeleriksson

March 26, 2021 at 2:54 am

Follow-up II: Plastic bags, the environment, and dishonest companies

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To revisit the topic of plastic bags vs. paper bags (cf. at least [1], [2]), especially with an eye on irrational and environmentally counterproductive policies:

For quite some time, most grocery stores have offered only paper bags and/or only sturdy plastic bags intended for multiple use. The chain Netto has been a pleasant exception, offering “regular” plastic bags until quite recently.

Now, these regular plastic bags, the misleadingly called “one-time” or “disposable” bags, have been quite good for multiple use: they fit well in the pocket of a jacket; are sturdy enough to use half-a-dozen to a dozen times;* and when they are too worn out, they can be used for garbage.

*Possibly more, as the limiting factor in my case has been the need for garbage bags …

The intended-for-multiple-use bags are, paradoxically, inferior in this regard: they do last even longer, but are a much worse fit for a pocket and I doubt that they are better on e.g. a uses-per-quantity-of-plastic* basis. Moreover, of the two bags that I have so far tried to use for a prolonged time, one fell out of my pocket and was lost within less than a dozen uses, the other developed a tear within a dozen uses, which grew to the point that I did not dare use the bag within a total of two dozen uses.

*To illustrate the principle: If a regular bag can be used a dozen times and an intended-for-multiple-use bag uses ten times as much plastic, it would take 120 uses to reach the same level.

The paper bags are near useless for repeated use: (a) they do not take folding well; (b) they easily tear, often on first use (and once torn, they are exceptionally weak); (c) a simple rain, and Wuppertal is very rainy, can kill them even on a first use. Moreover, even on a first use, they are sufficiently much weaker than a plastic bag that care must be taken to not load them too heavily and to not have e.g. the corner of a carton in a position to poke a hole. (d) they are less useful for other purposes too, e.g. as garbage bags (vulnerable to moisture, not closeable in the manner of a plastic bag).

Looking at Netto, the first sign of trouble was in January: I visit(ed) Netto almost exclusively for the plastic bags (cf. excursion), typically loading up enough on groceries to justify two bags, which I then used while visiting other stores until the bags were re-purposed as garbage bags, after which I went back for a rare Netto visit, lather-rinse-repeat. My January visit was a disappointment, as no plastic bags were available. I had to resort to a big paper bag, which was highly impractical for repeated use, even if somewhat sturdier than most other paper bags. I was highly annoyed upon discovering the almost taunting presence of ten check-boxes on the bag, where the proud and environmentally friendly owner was supposed to mark off how many times he had used this unsuitable-for-multiple-use paper bag! Not only was this a virtual taunt, but it also displayed a customer despising attitude where the customer is considered an idiot and/or a pathological virtue signaler and/or is to be used to shame other customers into repeated use.

I gave Netto a second chance a little later, and indeed found plastic bags again.

But: Today, I was out of plastic bags again. I went to Netto—and again found only paper bags. I restricted myself to one bag’s worth of groceries, packed up and left. Barely out of the store, the bag tears to such a degree that I had to carry the remains, barely covering my groceries, in my arms. So much for the quasi-prescribed ten uses!

Considering various other issues (cf. excursion), I will stay away from Netto indefinitely.

Now, about pockets: Should it not be obvious that pockets make the regular plastic bags the preferred version? Apart from human stupidity and irrationality as an explanation why this is not the case, there seems to be a wide-spread assumption that grocery store visits are done by car. Certainly, someone traveling by car need be less concerned over what fits or does not fit well into his pockets, what might fit but fall out (cf. above), and similar. But would it not be better to remain with regular plastic bags and discourage car travel instead?

Excursion on the impact of German reductions:
In the time since my last text on the topic, I have encountered claims (but not kept references) that the number of plastic bags ending up in nature from Europe is dwarfed by the African and/or Asian numbers (to some part, because the recycling quota is much higher in Europe). If so, the bans become the more absurd, as the your-plastic-bag-is-polluting-the-oceans argument is weakened considerably, and as the first lesson of optimization is to optimize where the effect is the largest. Moreover, I have encountered claims that, contrary to propaganda, the overall environmental cost is dominated by the pre-purchase effects. If this is true, the emotional manipulation through claims about suffering animals becomes the harder to justify and the use of e.g. paper bags becomes the more disputable as they, in my understanding, have a higher pre-purchase impact on the environment than plastic bags do. As with e.g. the disgraceful attempts to banish nuclear power, even at the cost of increased use of fossil fuels, the environment might then be harmed by the very attempts to protect it.

Excursion on Netto and my reluctance to buy there:
Visiting Netto is often highly annoying, especially through a repeatedly displayed customer-despising attitude. The three most notable issues:

Firstly, advertising statements that go on ad nauseam. Where other stores, gratifyingly, appear to slowly move away from this annoying intrusion, Netto has begun to use them comparatively recently.* Indeed, I have no recollection of them occurring, or occurring more than rarely, before the first COVID-lockdown, about a year ago, when Netto began to blast the customers with ever-repeating, patronizing, and redundant messages that the customers should keep their distance, and so on, and so forth. I suspect that Netto abused the situation to push advertising through the same channel, after the COVID-related messages were phased out. This especially with an eye on the ad nauseam, which applied to the COVID messages and now applies to the advertising: other stores might play a pop song** over the loud speakers, broadcast one or two ads, play a pop song, etc. Netto has a period of silence** followed by an ad, followed by an ad, followed by an ad, followed by an ad, on and on and on for minutes at a time, before the next period of silence begins.

*Reservation: their presence or absence sometimes vary from store to store, even within the same chain. My local impressions need not reflect the German-wide situation.

**Whether pop songs or silence is preferable, I leave unstated, as these songs are often poor or even annoying in their own right. However, with music there is at least a nominal trade similar to the one of most radio stations—we give you music and in return you listen to our advertising.

Secondly, the particularly annoying and patronizing COVID statements. The aforementioned loudspeaker announcements have been largely phased out; however, the store is still plastered with signs, including the absurd message “Heute trägt man Verantwortung”—“Today one wears [or carries] responsibility”. (Presumably, as a failed joke on the wearing of masks.) The view of the customers that shines through is inexcusable, as are the attempts at cheap manipulation, shaming tactics, etc. (In contrast, a legitimate message would have been e.g. “Per city [or whatnot] ordinance, we must enforce the wearing of N95-masks. We ask for your understanding and cooperation.”.

Thirdly, there is usually only a single check-out line open, even during “rush hour”, which leads to a disproportionate risk of queuing, with the associated delays and, I strongly suspect, an increased risk of COVID spread. (Which makes the aforementioned COVID messages even more absurd.)

Written by michaeleriksson

March 18, 2021 at 5:12 pm

Another bites the dust

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Almost exactly one year ago (15th vs. 17th of July 2020 resp. 2019), I discovered that my favorite store in all of Düsseldorf had been closed ([1]).

If I had made a list of private “must visit” stores in Düsseldorf before last year’s trip, it would have contained exactly two entries: Stern Verlag (books) and the local Conrad (electronics).

I am in Düsseldorf again, for the same reason (to avoid construction noise), and wanted to visit said Conrad. As you probably have guessed, it too has closed.

Looking up Conrad on German Wikipedia, it appears that there is a total of 20 German stores left (with an additional 9 internationally). Since 2017, no less than 6 (or almost one-in-four) have closed. The Düsseldorf store is the latest, on the 15th of February 2020. I doubt that the COVID restrictions will be helpful for the remaining stores.

On the positive side, there actually are other Conrads left, while Stern Verlag was a single store and likely the second best bookstore in Germany (after Dussmann in Berlin).

Excursion on my current “must visit”:
In my current situation, my list would only have one entry: the largest of the Mayersche, which by default has become Stern Verlag’s successor as best book store. The local Saturn as the largest electronics store is a close call, but fails on the presence of a decent size Saturn and a ditto Media Markt* in Wuppertal (where I live)—there is a major size difference here too, but the Wuppertal Saturn has at least reached a “critical mass”, much unlike the Wuppertal bookstores. (Conrad was smaller, but better priced and with a different product profile.)

*Another electronics chain, perversely under the same ownership as Saturn.

Excursion on cosmic jokes:
Add in that I actually picked* a hotel that is in the next parallel street to the former location, a literal stone’s throw away, and I cannot help suspecting another cosmic joke. Someone up there is having yet another big laugh at my expense …

*Not, admittedly, by design, but I did have a “Hey, its next to Conrad!” moment when I noticed.

Written by michaeleriksson

July 15, 2020 at 10:29 pm

Relativizing problems or doing something about them

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A few words on relativizing problems:

It might seem that too many* complain** about too much that is of relatively low importance. So, you did not receive your DHL delivery? Big deal—my car was stolen!***

*Yours truly included—I do more than my fair share of complaining. This text notwithstanding, I have also often pointed to it in others.

**Note that I am not just concerned with someone shaking his fists at the sky or complaining to a third party at the water cooler, but also, and more importantly, with making complaints to the offending party or, when the situation warrants it, e.g. the police, the press, a “better businesses bureau”, a relevant oversight committee, …

***Fictional example: I have never owned a car. (Or, cf. below, been married. I have, however, had problems with the DHL on virtually every occasion that I have expected a DHL delivery.)

In some cases, complaints can truly be too small to reasonably bother with and/or just be a sign that humans are never satisfied—and some complaints are not justifiable for other reasons.* However, in many, even a problem that might seem small compared to someone else’s might well be worth pursuing.

*Strong candidates for all three variations can often be found in the “social justice” area, a phrase which (today; not necessarily so a hundred years ago) is usually nothing but a code for “equality of outcome”, “I want to have A, B, and C, and I want someone else to pay for them”, “I don’t care how much I got as long as no-one else has more”, or similar.

If nothing else, there is always a bigger fish, which would imply that hardly any problem would ever be worthy of a complaint, if relative size was an all-or-nothing criterion: So, your car was stolen? Big deal—my wife died! Wife? Big deal—that plane crash killed two hundred passengers! Two hundred? Big deal—the Spanish Flu killed millions!

More importantly: if we do not complain about and take actions against the small problems, the small problems will not go away. On the contrary, they are likely to increase and they will feed an attitude that allows bigger problems to flourish. This is especially important with problems involving criminal, dishonest, negligent, or even merely incompetent behavior. For instance, if everyone who has been burned by DHL would refuse to buy from online shops that use DHL for, say, a year after the event, then DHL would be faced with the choice of changing its business practices and losing business. On the other hand, if hardly anyone does, then things will continue in the same manner—if anything, they will grow worse, because DHL executives will be tempted to increase DHL’s profit margin just a little further on the cost of its contractors (implying that they have to cut the already inexcusable service level in response), and then a little further, and then a little further, … Yes: an undelivered package is a triviality compared to a dead wife, let alone the Spanish Flu, but there is still reason to complain and to act.

Or consider the general attitude: For instance, if no-one complains about governmental privacy violations to catch child-pornographers, then chances are that few complain about the same violations against drug dealers or due process violations against child-pornographers. Lather rinse repeat, as privacy violations are extended to greater and greater groups and more and more civic rights are restricted—until such a point that sufficiently many do complain. If the process is slow enough, these violations might grow sufficiently established that the protests do not come in time. The earlier and the louder we complain, the greater the chance that the problem will be kept small.

(Make no mistake: civic rights, Rechtsstaatlichkeit, etc. lose value incredibly fast when exceptions are introduced. For instance, if due process is abolished in the case of rape accusations, then someone attempting to e.g. get rid of a political opponent by framing him will forego the murder/extortion/whatnot charge and go with rape instead. Mission accomplished.)

Similarly, if customers tolerate absurdly poor service from DHL, other businesses in other fields will work under the expectation that customers will tolerate absurdly poor service from them too.

And, yes, with regard to all of DHL, governmental privacy violations, and businesses with poor service, the time to first complain is long come and gone in many or most countries—certainly, in Germany. This makes it the more important to complain loudly today, because the development will be that much harder to stem.

Written by michaeleriksson

May 23, 2020 at 11:49 pm

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German department stores (and COVID-19)

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As a follow-up to an excursion in an earlier text ([1]):

Barmen’s is, obviously, not the only city center that risks severe damage or structural changes due to the COVID-19 counter-measures. A good example is the recent claim that about half of Germany’s department stores might close (cf. a German source [2])).

As historical background, for a large portion of the 20th century, Germany had a flowering department-store business, with a number of large* individual stores and a number of chains. Over time, these consolidated almost entirely into two chains, Karstadt and Kaufhof, which both ended up struggling.

*At least by the standard of the day. While some, like the famous KaDeWe, are large even by today’s standard, others need not have been.

When I moved to Germany, in 1997, this consolidation was already mostly completed, but older names were often still in use. For instance, the big Karstadt store in Frankfurt still carried the “Hertie” name. Since then, I have seen these names disappearing, more and more stores closing, and an endless stream of news about Kaufhof and its poor profitability (including repeated owner changes and almost-bankruptcies*).

*Reminding me of the German saying “totgesagte leben länger” (roughly, “those believed dead live longer”), as it has come back from apparent death more often than Michael Myers.

About a year ago, these two chains began a merger process, which automatically would imply a reduction of business, e.g. to avoid having two large department stores from the same chain in close vicinity to each other.

Now, factor in the damage done by the COVID-19 counter-measures and we have the situation discussed in [2], where about 80 of the remaining 170-or-so stores might close.

Even apart from the drop in the level of competition and the risk that the overall “shopping opportunities” (I know of no good word) are reduced, this is highly unfortunate, because there has been a long drift towards small stores that are almost pointless to visit. For instance, a typical German* mall has just a few decent-size stores and then a barrage of “hole in the wall” stores, often with a strongly overlapping set of products, often differentiated only by what brand or which few brands are offered. (This particularly when it comes to clothes.) Effectively, a customer can take a few steps inside the store, look left and right, and determine that there is nothing to bother with. Alternatively, there is one thing to look at, which in nine cases out of ten turns out to be a waste of time, e.g. because of an excessively high price.

*I suspect that this is not limited to Germany, but my experiences from other countries are much more limited.

With a larger store, the chance of finding something worthwhile are larger, the product and price ranges are wider, it is easier to make price comparisons, …

These problems are artificially made worse, because even the larger stores (department stores included) often sort products by brand instead of e.g. type. Let us say that I want to buy a pair of trousers: in a good store, I would find wherever the dark, somewhat business-like trousers were, go to the right size grouping, and look through the various item with an eye at aspects like looks, price, and quality. In a typical larger store, as is, I have to go to section for brand 1, find the right product type, find the right size grouping, look through it, then go to brand 2, lather-rinse-repeat. In a small store, I would go to the one brand, find the right product type, find the right size grouping, look through the mere handful of candidates, and then make a decision whether to (a) buy from this particular store, (b) go to a different store, hoping to find something better, (c) go to several stores, try to make comparisons, and then go back to the best alternative. No wonder that eCommerce is beating brick-and-mortar …

Of course, in a larger store, ideal or actual, I would also stand a good chance of making several purchases at once: if I need a new pair of trousers, I can also pick up a few shirts. Not so with a smaller store, because it is unlikely that I would find both in the same store. (Sometimes, they are not both present at all in a non-trivial scope; but, even when they are, I am unlikely to find a good match for both in a single store.) In a big department store, I could find not only trousers and shirts but also e.g. a lamp and a few DVDs.

To discuss the reasons behind these developments goes beyond the scope of this text, and would likely require a lot of research, but I do note the push towards shopping-as-an-experience (rather than shopping-to-get-a-needed-product), the increased influence of the individual brands in the trade and the brand obsession of many irrational customers, and a deliberate tactic by at least some stores and/or brands to make comparisons harder, as they know that they would not come off well in these comparisons.

From another angle, chances are that increasing costs of business (notably, rent) in the more attractive city centers has favored high-markup articles, implying e.g. that the generic clothing store has been closed in favor of a Prada store.

This, in turn, could be a contributor to the failure of the department stores, as they have often stuck to a high-markup* strategy, making it unnecessarily expensive to buy there and forcing entire product ranges out. (For instance, many department stores do not sell lamps.) Now, I understand the wish to optimize profitability, but this type of action has often amounted to cutting off the branch one sits on. In particular, from my point of view, the attraction of a department store is rooted in the idea of “everything under one roof”—that I can go to one store and get all my purchases done in one go. This ideal, however, was only weakly adhered to even in 1997—today, not at all. When I do not have “everything under one roof”, when I still have to visit several different stores, and I have to pay a considerable markup for what I do buy, why should I bother? There we have one customer less, less revenue, a need to optimize profitability even further, and the vicious circle continues.

*Notably, department stores often come with a double markup: one for the brand, as highly over-priced brand products are favored, and one for the store.

As is, the likes of Walmart are closer to the department store ideal than department stores are—and at much better prices. But: the likes* of Walmart are rarely found in city-centers, requiring use of a car to reach some far off, obscure location … Sadly, I had one of these just a few kilometers away, when I first came to Barmen, but it has since closed—incidentally, leaving the (otherwise very small) mall that it anchored almost dead.

*Specifically Walmart is likely not present in Germany anymore, but stores with a similar “hyper market” concept are, if likely not to the degree of e.g. the U.S.

Excursion on suicidal optimization:
The aforementioned type of optimization, which damages long-term business development, is quite common, even to the point that the net-effect might be negative* or that a niche for upstart competitors is accidentally created. One of the first examples that I encountered was the railway connection between the very small town of Kopparberg, where I lived for most of my pre-adult life, and the rest of the world. Early on, the train had a number of halts at even smaller places. Every know and then, one of them was cut from the schedule—presumably,** because too few passengers traveled to and from them. Possibly, in any given case, this was a rational decision, but it had the effect that overall passenger load was reduced and that fewer passengers used the other stations, making the next cut that more tempting.*** The result was a continual deterioration of both revenue for the business and service for the population—and the creation of a niche for a competitor, who has by now been trafficking quite a few of these stations since the 1990s.

*Which is by no means a given, as the optimization presumably also has positive effects. It is, e.g., conceivable that the German department stores would have failed even faster without them, that the vicious circle resulted from a damned-if-do-damned-if-you-don’t dilemma.

**Likely helped by a wish to reduce travel times on the main line.

***I note that this was deep in the country-side, where almost everyone had a car, and that it was rarely worth the trouble to take the car to the next station: unless the intended train travel was very long, one might just as well go the entire distance by car as go to a further-away station by car and then taking the train from there.

Excursion on the main topics:
As to the main topics of [1], and with a strong connection to e.g. [3], I note that there have been several interesting political decisions recently, e.g. the new, insanely large, and hopefully-to-be-blocked-by-the-senate U.S. COVID-19 rescue package, or the recently finalized German pension increase. In the latter, the monthly payout is hiked for many former low earners*, the increases are, so far, unfinanced, will almost certainly come from tax hikes for the rest of the population, and they are implemented despite the extra expenditures through COVID-19. Apart from the boost in working-class votes, would it not be better to put it on ice until we know what happens with the economy and what resources will actually be available? Of course, the extra costs to finance this reform will leave others with less money available, a lesser ability to secure their own future, and a greater need for government support, be it now or in the future.**

*This also raises questions of fairness, incentives, etc.: On the one hand, many of those benefiting have done the best that they could, and might deserve a leg up in their old age; on the other, many have not. They will also have paid in much less in the pension system than most others, many will already have received considerable handouts during their working years, and this might make future generations the less likely to work hard to secure their own future, as they are taught to rely on the government to put food on the table.

**This particular reform, alone, is unlikely to have much of an effect, but the overall pressure on the citizens is enormous: a major reason why the current level of pensions, social security, health insurance, … is “needed” is simply that the population pays so much in taxes, pension fees, social-security fees, health-insurance fees, …, that their ability to build own buffers and to pay running costs through earnings is limited. In a twist, this is a partial parallel to the previous excursion, as every change makes the situation worse for the population. (But it is, arguably, an anti-parallel when comparing the train company and the government, as the government benefits from the increased reliance of the population on the government.)

Written by michaeleriksson

May 16, 2020 at 11:02 am

COVID-19 and state support

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As the COVID-19 crisis and restrictions are slowly ending in Germany, the calls for support from the state are increasing—everyone and his uncle wants to receive (or already does receive) support, be it unemployed workers, businesses on the verge of bankruptcy, an opportunistic automotive industry, or cities/municipalities/whatnot.

On the one hand, the damage done to the economy is mostly to blame on the government imposed counter-measures (rather than COVID-19, per se), which makes it hard to deny these requests from an ethical point of view. (Not that I expect e.g. the typical politician to understand this, however.)

On the other, who is actually eventually supposed to pay for this? When the demands for support are this large and wide-spread, the state cannot just fiddle a little with the budget and create space for handouts—and it certainly does not have an immense surplus to spread on the needy. Where will the money come from? Printing money ups inflation and, indirectly, destroys wealth. Borrowing money only postpones the problem. Increasing taxes just pushes money back and forth, while incurring waste. (Someone receives a support check from the state’s left hand and a new tax demand from the right.) Cutting in the existing expenses will be both hard to justify politically and take a long time, even when it comes to bureaucracy and waste.* Considering the strong Leftist tendencies in Germany, I fear that the “solution” will ultimately be that the “rich” must “show solidarity” with the “poor”, which is implemented e.g. by the government simply confiscating large portions of wealth (hypothetically, 20 % of all bank assets above 100.000 Euro). A perpetuation of the highly unethical and abused “Solidaritätszuschlag” seems likely—a “temporary” tax of the past thirty years, which, before COVID-19, finally seemed to approach the end of its life.

*And even here, the cuts will do damage somewhere, which might require additional intervention and/or reduce the beneficial effects of the handouts. (But, to avoid misunderstandings, apart from the political obstacles, I would consider this the best way to go, as those damaged will often lose an unfair benefit, e.g. that of being employed for life as a civil servant while being incompetent and lazy, and as the long-term societal effects are likely to be positive.)

The most that can be hoped for is some degree of redistribution of damage, but this hardly ever ends up fair either, and often implies that the smart, hard-working, economically prudent, whatnot pay for the dumb, lazy, wasteful, and/or you-name-it. The COVID-19 countermeasures have hit more randomly than, say, regular career or business success, but it has not resulted in a “negative lottery”. For instance, a business with a sounder original economy, greater buffers, less debt,* fewer unnecessary costs, …, will be less endangered than a less sound business—but which will receive more governmental support and which will tendentially be at risk for an additional tax payment? Similarly, the individual who has saved as little as 100 Euro a month during his working life will be more likely to come out of this without needing help than the one who has consistently spent the same 100 Euro in a bar or on a bigger apartment.

*In a bigger picture, this is a strong indication that running businesses in debt and deficit, even be it to achieve growth and in the hope of future profits, is a dangerous strategy. (Often for the individual business, even more often for society as a whole.) Here very considerable rethinking might be beneficial. Generally, everyone, individuals, businesses, municipalities, …, should strive to build buffers instead of living on credit.

Indeed, just like COVID-19 kills far more among the elderly and those already in poor health than among the young and healthy, the counter-measures will kill struggling business first. (But also, unfortunately and unfairly, small businesses, which could have very negative effects on the “demographics” of businesses.) Compensation then risks saving businesses that would have failed anyway comparatively soon and might well still fail despite the compensation within a year or two—and if they grab onto COVID-19 as an excuse, we might see a larger scale repetition of e.g. the decades long German coal-industry subventions. This amounts to a great waste of money and could additional skew competition in a manner that is harmful for society.

Then there are those who might fake or grossly exaggerate a crisis in order to get compensation that they do not at all deserve …

It would have been better, had there been fewer and/or less drastic countermeasures, with (a) less damage* and (b) a greater justification for letting business developments run their course without support. As is, the situation is extremely poor with no good answers. I do suspect, however, that erring on the side of too little compensation will be the better way to go.

*And note that even a comparatively small change in damage can have a large effect on the businesses (and more generally, persons, entities, whatnot) that are close to the border of failure, e.g. in that being closed one week less or one week more can be a make-or-break criterion, as can having a tenth of the normal revenue vs. being closed entirely.

Excursion on Barmen:
I live in Barmen, a part of the German city of Wuppertal. Just a few hundred meters from my house is the local city center, once flowering. Even during my few years here, I have noticed a continual drop in stores, presumably driven by a mixture of the general brick-and-mortar crisis and the establishment of a major new mall in Elberfeld (another part of Wuppertal). This possibly aided by a drift towards shopping in nearby Düsseldorf. Of course, such decline leads to a vicious circle, where every store that closes makes it less attractive to shop in Barmen than in Elberfeld, shifting even more of the commerce away, which risks more store deaths, … Add in the negative consequences of the COVID-19 countermeasures and this could end badly.

Written by michaeleriksson

May 7, 2020 at 7:53 am

Exponential growth, the economy, and the damage of poor government

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Skimming through a recent article on UNZ, and with the topic of exponential growth on my mind through COVID-19, I cannot resist an item on my backlog: how poor politics and politicians harm economic growth—with dire long-term results.

As I try to keep my blogging down, I will not give this backlog item more than a fraction of the attention that it deserves, but:

Firstly, growth rates accumulate multiplicatively over time and, if constant, lead to an exponential growth. Ditto, if varying growth rates are replaced by a geometric* average. The implication is that even apparently small differences in growth rates can have enormous consequences over time. For example, compare two economies with a growth rate (fix or as geometric average) of respectively 2 and 2.5 percent. The yearly difference might seem like nothing, but look at the difference over e.g. 70 years, which could be viewed as more-or-less the experience span of a single individual. 1.02^70 ~ 4, while 1.025^70 ~ 5.6; giving a 4-fold “new” size of the economy compared to a 5.6-fold. The one with the marginally higher grow rates is then roughly 40 % larger than its competitor at the end of the 70 years; or, in absolute terms, 1.6-times-the-size-of-the-original-economy larger. Where would you like your grandchildren and great-grandchildren to grow up?

*As in multiply-and-take-the-nth-root, and as opposed to the add-and-divide-by-n used by the “regular” or arithmetic average.

With greater differences in growth rate, the end results explode apart. For instance, 1.04^70 ~ 15.6 or almost four (!) times as large as the “1.02 economy”. If growth rates remain even approximately as they are, originally-poor-but-fast-growing countries like the “tiger economies” will necessarily outdo originally-rich-but-slower-growing economies (like the US or Germany). The original richness can cover up the difference in growth rate for a long while, but sooner or later the advantage runs out and the tables turn.

Obviously, economies that are both poor and and low in growth will do disastrously—one reason why socialism and poverty is so dangerous, as the poverty leads to calls for socialist politics, which stunts growth, which keeps poverty going, … (cf. below).

Secondly, current economic policies in many Western countries do a lot, as a side-effect, to artificially keep economic growth back. This especially in countries that have a strongly Leftist take on policy, where the focus is on re-distributing the existing cake instead of making the cake larger. For instance, high taxes and bureaucracies keep enterprising individuals back; high employment costs* make it harder to be competitive and reduce the willingness to expand, especially taking the step from a one-man company to having even that first employee; attempts to compress differences in income/lower the GINI coefficient reduce the rewards for competence and hard work, make it harder to get the right employees in the right positions,**; etc.

*Which includes more than the actual salaries/wages/whatnot. These can be problematic enough, but then add half a fortune of additional taxes, fees, whatnot for the employer to pay …

**E.g. because someone who would have worked in field A due to a higher salary than in field B now chooses field B; because someone who would have put in extra overtime, if he kept the pay, does not when the government takes most of it; because someone would have taken extra responsibility for a significant earnings increase, but does not when the increase is small; and so on.

To this I note that there is considerable empirical evidence on this issue, as with China (discussed in the linked to article), the Venezuela of the last few decades, the old East vs. the old West Germany, etc.* Indeed, Germany’s likely greatest period of growth, the Wirtschaftswunder era, coincided with the likely most free-market-friendly politics of its history, while the current, slow growing, Germany has redistribution mechanisms, social security and health-insurance costs, whatnot, that might fit the Sweden of the 1970s.

*But I caution that looking at any given individual example is tricky, because a multitude of factors can play in, e.g. that West Germany received help from the US while East Germany was exploited by the USSR. Looking at the totality of examples, however, the picture is quite clear.

Could the current Germany or the current US reach and sustain “Chinese” growth rates? Possibly not—and even the Chinese have been having trouble doing so for quite a few years. However, they could easily do better, say in getting that 0.5 % of extra yearly growth. That they fail to do so could be seen as a crime against future generations to the same degree as undue pollution can.

In the long run, it really does pay better to get a fix proportion of the growing cake than a growing proportion of the fix cake. If in doubt, note that a growing cake can help everyone, while a growing proportion of a fix cake means that someone else has less.

Note on inflation, etc.:
Above, I have ignored topics like inflation, purchasing power, “per capita”, whatnot. They have no effect on the principles discussed, and, indeed, the exact same examples can be used if e.g. a growth rate is declared to be adjusted for this-and-that. However, they can lead to a different set of numbers that are realistic—and, in doing so, they will tend to increase the importance of higher growth (unless the higher growth is correlated with a higher inflation or whatnot). For instance, in the original economies, assume that the growth rates were “naive” and without considering inflation, and that inflation, in both cases, is 2 percent per year. The one economy will be more-or-less stagnated while the other will still grow, even be it considerably more slowly than before. In the one case, future generations are stuck on the level of past generations; in the other, they see still see significant improvement.

Written by michaeleriksson

April 28, 2020 at 11:55 am

Pinning the tail to the COVID-19 donkey

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Recently, I wrote that there “has been a very strong element of pin-the-tail-to-the-donkey so far”, regarding COVID-19.

Right now, we can see an excellent example of this in Germany: As the actual disease seemed to be easing up, there were signs that the counter-measures would to, including last weeks partial re-opening of stores. However, apparently, as of today, it is mandatory to use face masks in stores, which is an increased imposition* on the citizens. So, are we reducing or increasing impositions—and why? If it made sense to have most stores closed and without a face-mask imposition two weeks ago, how come it makes sense to have most stores opened but with a face-mask imposition today?

*I do not necessarily say that it is a disproportionate or ill-advised imposition. (In particular, face masks appear to bring little benefit to the wearer and more to other people, which implies that arguments relating to own choice, own risks, and citizens actually being adults are much less relevant than when it comes to closing stores.) However, it is an imposition and it is something hitherto not deemed necessary.

Possibly, a connection could be seen, that stores are opened now to cap the damage and that (mandatory) face masks are introduced to compensate for the perceived increase in risk. But if so: Why was there a delay between the opening of the stores and the face masks?

Possibly, vital new information concerning face masks has been discovered, but if so, I am not aware of it. On the contrary, the claims that I have heard so far seem to go in the direction that the benefit of face masks has been overestimated … (True, there were findings that infection through non-aerial means was less likely than originally thought, which could increase the relative benefit of face masks. However, these findings are not very recent and the change would have made more sense earlier, when the disease was growing faster.)

Possibly, the changing rate of infections and the number of known infected has led to a different situation,* and I could see that as strongly contributing to partial re-openings. It is a mystery to me, however, how a lower number of infected would lead to a greater need for face masks.

*Official statistics show a small and still shrinking percentage of newly infected and the number of currently infected is continually diminishing. (But I caution that these statistics could over- or under-estimate a number of aspects of the situation.)

That this face-mask decision appears to have come with very little warning makes the situation worse. There has been a debate about it, yes, and some individual Bundesländer (“states”) had already implemented mandatory face-masks. However, as late as yesterday, I had no idea that the this was coming today (or, necessarily, at all), be it in nationwide or in my own Bundesland.

Grab a pin-board. Pin notes with possible counter-measures on the board. Put on a blindfold. Throw darts at the board. See what counter-measures were hit. There we have this weeks policy. Next week? Who knows.

Written by michaeleriksson

April 27, 2020 at 9:26 am

COVID-19 and information harassment

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A particular annoyance with the COVID-19 situation is over-information, that entities that have no legitimate reason to speak on the topic do speak and that entities that should say something little instead bombard us with information. The result is that virtually nothing is achieved (except annoyance) while the ears and eyes are start to filter information to such a degree that something important might be missed. Of course, this type intrusive “information”, presumption to demand obedience from others without any true own expertise*, and the resulting annoyance, are all likely to contribute to recalcitrance—causing the opposite of what was intended** through psychological naivete. (This not to be confused with the extreme amount of information from e.g. newspapers, which can be similarly annoying and have similarly negative effects, but at least is a legitimate part of the business at hand. Too much, possibly, but basically legitimate.)

*What does (cf. below) a grocery store or my bank know about COVID-19 that goes beyond the informed citizen? (And: What gives it a reason to speak in addition to what e.g. governmental agencies say?) Little or nothing. A strong sign of this problem is the constant, highly misleading use of “corona” over the more specific “COVID-19” and “SARS-CoV-2”. Indeed, chances are that they are often outright misinformed through going strictly by “official channels” without applying critical thinking or considering the (legitimate, non-“fake news”) experts that have a dissenting opinion. The sad truth is that there has been a very strong element of pin-the-tail-to-the-donkey so far, even among experts, with an only slowly improving information situation.

**Unless the intention is just to fulfill some external requirement or to be able to show that something has been done, without regard to effectiveness and efficiency. Sadly, this is quite common, e.g. in politics.

For instance, earlier today, I went to buy groceries. The store was (still!) plastered with identical notices about corona-this and keep-distance-that, while every few minutes a patronizing and overly loud keep-your-distance announcement was repeated on the PA system. Why?!? Post a big sign on the entry door and be done with it! For instance, when I last logged into my Internet banking I was not allow to proceed without dealing with an intrusive blocking pop-up that requested whether I wanted to be informed about “corona” now, later, or not at all. There should have been absolutely no information on the general topic at all—and to more specifically relevant information, e.g. changes to opening hours due to COVID-19, a regular notification that “We have restricted our opening hours.” with a link to details would have been appropriate.

The general attitude seems to be that “everyone else is an uninformed idiot and we, specifically we, must inform and save the day”.

That the information/instructions provided are often contradictory from entity to entity does not help, e.g. that the one store requires a distance of 1.5 meters between customers and the other 2 meters. Sometimes even the same entity is contradictory (and/or redundant), as with the very small newspaper-and-whatnot store that I visited a few days ago to buy stamps: on the one hand, customers must keep a distance of at least two meters; on the other, only one customers was allowed in the store at any given time. And, yes, the store was large enough that a distance of two meters was possible. (Except when passing each other, but that applies to supermarkets too.)

Written by michaeleriksson

April 25, 2020 at 9:29 am