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The "Wash my Ferrari" Problem: A Meditation on Risk

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Re: The "Wash my Ferrari" Problem: A Meditation on Risk

#41

Post by sonnyhe2002 »

callmeed wrote: post #40
sonnyhe2002 wrote: post #38

Mr. car washer. By your argument, McDonalds should charge twice as much for a big mac to fat people because they are more likely to get health problems and sue McDonalds. I think this model is just wrong and charging any customers more due to profiling should not be practiced by any company. Assuming that your formula is correct. Don't raise the price because of the probability and risk. You should train your employe…

>> Mr. car washer. By your argument, McDonalds should charge twice as much for a big mac to fat people because they are more likely to get health problems and sue McDonalds. No, The consequences of faulty equipment or service are fairly acute–i.e. someone dies or something is damaged right away . I think long-term consumer risks like obesity and lung cancer are different than what the author is referring to. Also, mo…

The McDonalds was just an example. Your points about lawsuits to being thrown away against McDonald, is irrelevant. Whether people successfully sue McDs or not, is not the point, McDs should not charge more to certain people. Do you agree? Yes, the insurance industry do charge more depending on the person. But my point still remain, The model is Bad. Besides if you have a SET price, you should not change it because of probability or risk per person.

Re: The "Wash my Ferrari" Problem: A Meditation on Risk

#42

Post by stickfigure »

sopooneo wrote: post #29
noonespecial wrote: post #26

I always figured this was one of the "grey" advantages startups have. For a very short time, a startup has so few assets that an entire class of risks exist that will simply put it out of business. When you're brand new, it doesn't matter if you damage a Honda or a Ferrari, either way, you're done. This gives you a slightly evil and transient advantage that let's you temporarily undercut the established players by ju…

But couldn't knowledge of this fact by your potential customers make them wary of giving you much business, thus canceling out your advantage?

Yes and yes, but not necessarily. Customers do not have perfect information about the market, and especially not about the inner workings of your company.

Re: The "Wash my Ferrari" Problem: A Meditation on Risk

#43

Post by brandoncapecci »

sonnyhe2002 wrote: post #36
brandoncapecci wrote: post #30

The price of a car wash should take into account the aggregate probability for any car to get damaged. The idea that one would price discriminate via the exact make and model is absurd and when I stopped reading...

brandon, you are right. This article is just flawed.

Why am I getting downvoted for this? I am not making any commentary on price discrimination but instead, saying that the artificially created scenario could at least be more approachable for readers.

Re: The "Wash my Ferrari" Problem: A Meditation on Risk

#44

Post by its_so_on »

brandoncapecci wrote: post #43
sonnyhe2002 wrote: post #36

Earlier quoted context omitted.

brandon, you are right. This article is just flawed.

Why am I getting downvoted for this? I am not making any commentary on price discrimination but instead, saying that the artificially created scenario could at least be more approachable for readers.

Brandon, a couple of technical questions. First, you talk about the "probability" of any car getting damaged. But surely a car wash is not qualified to act as an actuary (if it was it should immediately shut down all operations and do acturial consulting work instead). So a car wash company isn't faced with a "probability" of a car being damaged - it's faced with a "price" for being insured.

Clearly if the amount of the coverage (again, in this artificial scenario) is less than you can "fix" a Ferrari for, then perhaps they should turn Ferrari's away if they are very risk-averse. (again, all this is in the artificial model.)

But if the insurance-company says, "We can increase your coverage to (cost of fixing the ferrari) for a difference of (difference)" then the only way they can possibly pay that difference is by lowering their margins on every car wash, or by discriminating and factoring that difference only into the appropriate washes.

all this is more correct than your claim, isn't it? (again, in the proposed model.)

incidentally, I consider the proposed model to be extremely braindead. A car wash is not actually going to pay for any damage, and if it did it certainly would never actually pay for a museum-quality paint job, and if it DID then the price would not be ten bucks per car wash, a shop that can afford these kinds of lavish customer catering and appeasement would be starting at fifty dollars or something.

What actually happens is there is a sign saying they disclaim all responsibility for any damage. What also actually happens is normal price discrimination.

so I think a clever answer to "Why are you charging me more just because I have a ferrari" is "only ferrari owners would care about a small scratch from a CAR WASH, and we don't get many of you, so we have to charge you more to pay for that there sign there (point to large disclaimer sign.) Ten bucks please."

Re: The "Wash my Ferrari" Problem: A Meditation on Risk

#45

Post by Tycho »

When people talk about risk (and return) I always feel like there's something I'm missing, something I don't get. Can never quite put my finger on it.

I guess it's something to do with wilfully gambling vs. relying on your own abilities. They seem like very different things but somehow get classified together.

Re: The "Wash my Ferrari" Problem: A Meditation on Risk

#46

Post by Dylan16807 »

sonnyhe2002 wrote: post #41
callmeed wrote: post #40

Earlier quoted context omitted.

>> Mr. car washer. By your argument, McDonalds should charge twice as much for a big mac to fat people because they are more likely to get health problems and sue McDonalds. No, The consequences of faulty equipment or service are fairly acute–i.e. someone dies or something is damaged right away . I think long-term consumer risks like obesity and lung cancer are different than what the author is referring to. Also, mo…

The McDonalds was just an example. Your points about lawsuits to being thrown away against McDonald, is irrelevant. Whether people successfully sue McDs or not, is not the point, McDs should not charge more to certain people. Do you agree? Yes, the insurance industry do charge more depending on the person. But my point still remain, The model is Bad. Besides if you have a SET price, you should not change it because o…

McDonalds can certainly refuse to sell to groups like lawyers if they have a persistent high cost from such a self-selecting group. I have no problem with this.

Re: The "Wash my Ferrari" Problem: A Meditation on Risk

#47

Post by Dylan16807 »

brandoncapecci wrote: post #43
sonnyhe2002 wrote: post #36

Earlier quoted context omitted.

brandon, you are right. This article is just flawed.

Why am I getting downvoted for this? I am not making any commentary on price discrimination but instead, saying that the artificially created scenario could at least be more approachable for readers.

Because you said the article was 'wrong' and that you stopped reading, without actually doing anything to counter the point in the article.

That's a bad way to contribute to a discussion.

I didn't even realize your point was solely about the example. I thought you were objecting to the entire argument. Bad examples are more common than termites in a snowstorm and you should focus on the meat of the article.

Re: The "Wash my Ferrari" Problem: A Meditation on Risk

#48

Post by DeepDuh »

delano wrote: post #9
chime wrote: post #3

I have seen two predominant forms of risks factored in by the larger incumbents waiting to be disrupted. One is, like the author puts it, the risk due to breakage. Be very mindful of this risk and insure against it if possible or change something to avoid/lower the risk (sorry, we don't wash Luxury cars). The other risk factor is pure CYA. Nobody wants to prepare a costing worksheet for a customer quote where your co…

Just a side note for people like me: CYA is cover your ass.

Thanks. I always thought it's 'cover your assets' but I was wondering about the 'a' all along ;).

Re: The "Wash my Ferrari" Problem: A Meditation on Risk

#49

Post by sukuriant »

dkokelley wrote: post #35
sukuriant wrote: post #34

Earlier quoted context omitted.

Just a nitpick, 'cause it was on my mind. 5$ might have been that "different process to lower mistakes". I was wondering how it could still just be $5 to manage risk of damaging a ferarri, myself.

I'm having a difficult time parsing your comment. The $5 from the article was the cost of paying out $10,000 1 in 2000 times. If a different process costs $5 to implement, then they might as well accept the risk as is.

I was trying to say: "What if they've already reduced their risk as much as is reasonable, except for special cases that they see one day every three months: that Ferrari."

Re: The "Wash my Ferrari" Problem: A Meditation on Risk

#50

Post by brandoncapecci »

Dylan16807 wrote: post #47
brandoncapecci wrote: post #43

Earlier quoted context omitted.

Why am I getting downvoted for this? I am not making any commentary on price discrimination but instead, saying that the artificially created scenario could at least be more approachable for readers.

Because you said the article was 'wrong' and that you stopped reading, without actually doing anything to counter the point in the article. That's a bad way to contribute to a discussion. I didn't even realize your point was solely about the example. I thought you were objecting to the entire argument. Bad examples are more common than termites in a snowstorm and you should focus on the meat of the article.

I somewhat misspoke. I lost interest after when I read enough to deem the article too artificial an example and lost interest. I wanted to give honest feedback and see if other people perhaps thought the example was I contrived as I did - not berate the article or the author. If I was writing myself, I would want the same sort of feedback. Do you think I'm being unfair by giving that sort of criticism?

To me not finishing something is a measure of persistent captivation. It's not the first time I fell below my minimum. After I wrote the the comment, I figured people would harass me about not finishing and that perhaps I was being unfair to the author if I missed something redeeming at the end. I finished it, wished to change the comment appropriately, but it had already been downvoted. I should have known that it's very easy to look antagonistic when you're not saying something positive but I did say explicitly what I objected to. I really was just hoping to help by nature of sharing my opinion and was totally open - hopeful even - that someone would change my mind rather than just being looked upon as some asshole who just wanted to be holistically critical.

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