The process of determining what prices to charge customers might sound like a subject ranking somewhere between the prosaic and the arcane. But the Atlantic’s Jerry Useem explores how that process works in e-commerce today—and the result is deeply engrossing and revealing. The article is called “How Online Shopping Makes Suckers Of Us All,” and Amazon and Google play a large role, as you might imagine. Jeff Bezos’s company, the piece reports, recently had 59 openings listed on its jobs site just for economists. Indeed, the thinking of John Nash, the mathematician featured in “A Beautiful Mind,” figures in here. The article argues that we consumers have unknowingly returned to an era with no set prices. There’s such a surfeit of insightful passages that I really struggled to limit my selections. (The writer opens with an anecdote about price fluctuations in so-called pumpkin spice, which explains the reference to seasonal pie ingredients below.)
It may come as a surprise that, in buying a seasonal pie ingredient, you might be participating in a carefully designed social-science experiment. But this is what online comparison shopping hath wrought. Simply put: Our ability to know the price of anything, anytime, anywhere, has given us, the consumers, so much power that retailers—in a desperate effort to regain the upper hand, or at least avoid extinction—are now staring back through the screen. They are comparison shopping us.
… The price of a can of soda in a vending machine can now vary with the temperature outside. The price of the headphones Google recommends may depend on how budget-conscious your web history shows you to be, one study found. For shoppers, that means price—not the one offered to you right now, but the one offered to you 20 minutes from now, or the one offered to me, or to your neighbor—may become an increasingly unknowable thing. “Many moons ago, there used to be one price for something,” Dolan notes. Now the simplest of questions—what’s the true price of pumpkin-pie spice?—is subject to a Heisenberg level of uncertainty. Which raises a bigger question: Could the internet, whose transparency was supposed to empower consumers, be doing the opposite?
Useem explores how this process works, including by examining the roles played by companies Boomerang, a start-up that helps retailers make pricing decisions:
[Boomerang] built a massive system that tracks prices and has informed billions of pricing decisions for clients ranging from Office Depot to GNC to U.S. Auto Parts. But its software engine isn’t built to match the lowest price out there. (That… would be a simple algorithm.) It’s built to manage consumers’ perception of price. The software identifies the goods that loom largest in consumers’ perception and keeps their prices carefully in line with competitors’ prices, if not lower. The price of everything else is allowed to drift upward.
The face-off between consumers, ever eager to save a few pennies, and the companies that sell to them has always involved some gamesmanship (indeed, Useem makes some interesting points about what companies gave up when they eliminated haggling many decades ago). Now, if this article is any indication, consumers—even those armed with the latest coupon-gathering app—may need to up their technological game.
The Secrets of CEO Performance
An entire industry, it seems, exists to quantify and assess what makes CEOs succeed and fail. So “What Sets Successful CEOs Apart,” in the Harvard Business Review, is hardly plowing new ground. But it stands out for the depth of the research: a database of 17,000 assessments of C-suite executives, worked over by an elite team of consultants working with economists at the University of Chicago and Copenhagen Business School and analysts at SAS. They identify “a fundamental disconnect between what boards think makes for an ideal CEO and what actually leads to high performance. That disconnect starts with an unrealistic yet pervasive stereotype, which is shaped in large part by the official bios of Fortune 500 leaders. It holds that a successful CEO is a charismatic six-foot-tall white man with a degree from a top university, who is a strategic visionary with a seemingly direct-to-the-top career path and the ability to make perfect decisions under pressure.” Here’s the nub of it:
Our findings challenged many widely held assumptions. For example, our analysis revealed that while boards often gravitate toward charismatic extroverts, introverts are slightly more likely to surpass the expectations of their boards and investors. We were also surprised to learn that virtually all CEO candidates had made material mistakes in the past, and 45% of them had had at least one major career blowup that ended a job or was extremely costly to the business. Yet more than 78% of that subgroup of candidates ultimately won the top job. In addition, we found that educational pedigree (or lack thereof) in no way correlated to performance: Only 7% of the high-performing CEOs we studied had an undergraduate Ivy League education, and 8% of them didn’t graduate from college at all.
… And when we compared the qualities that boards respond well to in candidate interviews with those that help leaders perform better, the overlap was vanishingly small. For example, high confidence more than doubles a candidate’s chances of being chosen as CEO but provides no advantage in performance on the job. In other words, what makes candidates look good to boards has little connection to what makes them succeed in the role.
The authors go on to identify four traits “that successful chief executives tend to demonstrate … that prove critical to their performance.” None of those traits will shock you. Still, this article is useful in distinguishing between image and actual performance.
Best In Business Listening: Where’d All Those “Holidays” Come From?
NPR’s Planet Money podcast devotes an episode (look for number 765) to what it calls a “journey to the center of the holiday-industrial complex.” If you’ve ever wondered how what one person dubs “holidates”—National Potato Chip Day, Certified Nurses Day, and the like—are seemingly born by the minute, you’ll want to listen to this. A reporter decides to pick a single such designation, “National Splurge Day,” as a means to uncover the mysteries of the process. Some media sources resist (one tells him that “no one is going to talk to you on the record about this”). And he uncovers some odd Congressional history: In the 1985-86 session, 227 of the 664 bills passed by the U.S. house and senate involved creating commemorative days, weeks, or months. Eventually the reporter tracks down the ultimate written repository of holidays. In the pages of this weighty tome, after scanning past the alphabetical listings for National S’mores Day, National Soul Food Day, and National Soyfoods Month, he finds the key to the identity of the person behind National Splurge Day. The result is surprising—spoiler alert: I’m about to give the secret away—one person is responsible for inventing 1,900 holidates. Okay, the fact that the woman in question is in the public relations business is not a jaw-dropper. Yet she turns out to be animated much more by romantic loss (a heart that was shattered decades ago) than by any desire for pecuniary gain. So before you observe Pay A Compliment Day, Hug A G.I. Day, or Lost Penny Day—all created by the person behind National Splurge Day—you owe it to yourself to listen to this podcast.