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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

#31

Post by kgermino »

mcherm wrote: post #25
pacaro wrote: post #24

To the list of industries where there is a built in x10 on all quotes add Weddings...

But that is for a different reason... it's not increased pricing because of increased risk, it's increased pricing because of increased willingness to pay combined with a sense of "more costly must be more valuable".

I would think that risk could be a part of it (or at least risk mitigation)...

If I were a photagrapher, I would likely want to charge more for a wedding then say the engagement pictures (or other portraits) which have a similiar amount of effort. If I have a problem with a portrait I might need to call them back in to reshoot. If theres a problem with the wedding pictures I'm stuck.

The workaround is better preparation, more people, more equipment, etc. All this costs money.

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

#32

Post by TheAmazingIdiot »

monochromatic wrote: post #28
ComputerGuru wrote: post #14

Earlier quoted context omitted.

The best thing you can do for comments like that (esp. when they're made by "green" accounts) is to just downvote and ignore. They'll be downvoted to grey, then deleted. The accounts will be hellbanned in time (comments autmotically deleted, posts only visible to poster). Replying only clutters the discussion.

Never heard of hellbanning, but I'll keep that in mind. Cheers

Hellbanning is precisely why I have showdead on. There have been some notable users (creators of products and various websites) whom they were hellbanned for no apparent reason. Having showdead on shows even them, however you still cannot comment to them directly.

I think I've only seen 2 or 3 spam posts on dead. And a few 'special people' whom are hellbanned. In a nutshell, the S/N does not get noticeably worse with showdead on.

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

#33

Post by fotbr »

mcherm wrote: post #25
pacaro wrote: post #24

To the list of industries where there is a built in x10 on all quotes add Weddings...

But that is for a different reason... it's not increased pricing because of increased risk, it's increased pricing because of increased willingness to pay combined with a sense of "more costly must be more valuable".

I've shot weddings before. You're partially right, wedding parties are willing to pay, and pay well. The flip side of it is that they can be some of the absolute worst clients possible, and you only have one chance to get it right. So a lot of the "wedding markup", at least in regards to photography, comes down to "how much do I have to get to make the headache and stress worth it?"

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

#34

Post by sukuriant »

dkokelley wrote: post #23

An interesting discussion on risk. Here's another consideration, you can self-insure to an extent by changing processes to minimize risks. If you must charge $10 to wash a Ferrari because your risk model says that it will cost you $5 in mistakes, use a different process to lower mistakes. Let's say that instead of the standard wash process you use for regular cars, you take extra time on the Ferrari, using your best…

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.

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

#35

Post by dkokelley »

sukuriant wrote: post #34
dkokelley wrote: post #23

An interesting discussion on risk. Here's another consideration, you can self-insure to an extent by changing processes to minimize risks. If you must charge $10 to wash a Ferrari because your risk model says that it will cost you $5 in mistakes, use a different process to lower mistakes. Let's say that instead of the standard wash process you use for regular cars, you take extra time on the Ferrari, using your best…

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.

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

#36

Post by sonnyhe2002 »

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.

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

#37

Post by TheCowboy »

CodeCube wrote: post #2

Wow, great discussion on risk. The only thing I would add to the discussion is that before you try to model risk, you should read 'The Flaw of Averages', by Sam Savage - http://flawofaverages.com/ Put simply, any real risk model should probably avoid being a 'single number', but a range of probabilities. This models the distribution of possibilities much better and helps you make better decisions.

'Fooled by Randomness' by Nassim Nicholas Taleb is also a good book I frequently recommend to people trying to comprehend probability or randomness.

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

#38

Post by sonnyhe2002 »

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 employees and improve your quality of service, so that the probability is low enough, now you charge back the same $5 for a fararri carwash.

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

#39

Post by nazgulnarsil »

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…

the idea that discriminating against a riskier class of people is morally wrong is responsible for much of our financial woes.

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

#40

Post by callmeed »

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, most class actions suits against McDonalds have been thrown out [1]. Malpractice lawsuits and the like are very numerous, on the other hand.

* >> I think this model is just wrong and charging any customers more due to profiling should not be practiced by any company*

That's absurd. The entire insurance industry is based on this. As is any financial product that takes your credit score into account.

[1] http://www.bloomberg.com/news/2010-10-27/mcdonald-s-obesity-...

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