What is price gouging?

Price gouging is a term used by politicians to “prove” they are looking out for the people. It is also a term used to vilify businessmen and businesswomen.

The oil companies and gas stations are frequently a favorite target. As the price of gas goes up, those groups are accused of gouging the public. Congressmen were doing their best to look stern and chide the oil companies for their outrageous record profits. Of course, what those same politicians failed to mention was that the percentage of profit did not change for the oil companies during the spikes in gas prices, nor did those politicians mention that the taxes on a gallon of gas far exceed the profit margin on gas. Actually, the last thing most politicians want you to do is to cut back much on your driving, no matter what they say. Those gasoline taxes pay for a lot of pet projects.

What is a fair profit, anyway? Let’s do a quick comparison.

	2008	2007	2006
	Intel
Revenue	37,586,000	38,334,000	35,382,000
Net Profit	5,292,000	6,976,000	5,044,000
Percent	14.08%	18.20%	14.26%
	Google
Revenue	21,795,550	16,593,986	10,604,917
Net Profit	4,226,858	4,203,720	3,077,446
Percent	19.39%	25.33%	29.02%
	Microsoft
Revenue	58,437,000	60,420,000	51,122,000
Net Profit	14,569,000	17,681,000	14,065,000
Percent	24.93%	29.26%	27.51%
	Exxon-Mobil
Revenue	477,359,000	404,552,000	377,635,000
Net Profit	45,220,000	40,610,000	39,500,000
Percent	9.47%	10.04%	10.46%
	Wal-Mart
Revenue	405,607,000	378,799,000	348,650,000
Net Profit	13,400,000	12,731,000	11,284,000
Percent	3.30%	3.36%	3.24%
	Aetna
Revenue	30,950,700	27,599,600	25,145,700
Net Profit	1,384,100	1,831,000	1,701,700
Percent	4.47%	6.63%	6.77%

As you can see, Wal-Mart, Exxon-Mobil, and Aetna (three corporations that have been vilified by many politicians) make a smaller profit by percentage than some of the IT giants. Competition is a big factor in that.

Desire works with demand to create profit. During times of natural disaster, resources are scarce. Keeping prices artificially low in the aftermath leads to gouging. After hurricane Isabel passed through Virginia in 2003, there was a great demand for generators to deal with the power outages. Home Depot brought in generators from all over the mid-Atlantic to deal with the problem, but prices were not raised. People cued for hours for the limited resource. Some people purchased a generator and went out to the parking lot to re-sell them at a tidy profit because the demand and desire were there.

Not all gouging allegations come from natural disasters, though. Just run a Google (or any search engine) search for cell text gouging. You’ll see story after story about how the cellular service providers are gouging users for texting. That is ridiculous. I have NEVER had a cell phone company say to me, “You MUST use text messaging.” It is a luxury. People CAN do without texting. If providers can make a profit from people insisting upon using a luxury, that is not a bad thing. After all, if the price keeps kids from texting, they may actually learn how to use WHOLE words and grammar. (I know. That’s very over-optimistic of me.)

Do I think it is a free-for-all in pricing? No, any businessperson has to realize that if prices are raised too high, there can and will be customer backlash later. It’s hard to maintain desire if you piss off your customer base.

If you feel there is such a thing as gouging, please be prepared to explain how you have any luxuries (things that aren’t food, clothing, minimal shelter, or basic transportation) or have any money left at the end of the year. Because if you do have anything nice or are saving money, you must be gouging your employer.

 

Your opinion counts…or not

I told SWMBO recently that before we could consider spending money for furniture or home improvements, we would need to have a budget. That way we could prioritize things and keep our financial reserves healthy. (Yes, some people still do that.)

I hadn’t given it much thought, but today, when I came home from work, I saw a flooring sample on the table. I thought, “Uh oh, something is gonna cost me some money.” Fortunately, SWMBO allayed my fears. She said she went to the flooring store to get estimates so she could make her budget. As we looked at the sample she told me about an exchange she had with the gentlemen working at the store.

“The guys working at the store asked me if I wanted to take a sample home for your husband to see,” she said. “I told them, ‘It doesn’t matter what he thinks.’” Apparently, that elicited a sympathetic laugh from the gentlemen.

See also: True love

 

Even hockey haters will love this

Amazing.
If this kid doesn’t burn out and improves with age, he will be one to watch.

 

How to drive traffic to your blog

Late to bed, early to rise. Post like hell and publicize.

 

How to prevent TV service outages

I have to admit that I do like some of the benefits of the FCC’s push toward HDTV. A few months back, I looked at ways to save money. I looked at how many non-broadcast stations SWMBO and I watched and compared that to the amount of money we paid for satellite service. It wasn’t a difficult choice, especially considering how many times storms blocked reception. I fashioned an antenna for less than $20, based on instructions I found online and mounted it in the attic, out of sight. We pick up all the major stations of our metropolitan area, except ION, which doesn’t broadcast from the same vicinity as everybody else.

SWMBO was not happy at first, but she does appreciate how sporting events and shows about blowing stuff up don’t dominate the TV like they used to. Another benefit is that the TV is usually off on Saturday and Sunday mornings because of all of the infomercials on then.

 

Times for Reflection

Sunday I found out that I lost a fraternity brother. I hadn’t seen Gaz in over 20 years, but through the miracle of facebook, I tracked him down along with many other fraternity brothers. I talked with him on the phone a few months back. We caught up on the lost years and remembered some good times together.

I went to a school that had a lot of students from families with money. It was something to get used to with my modest background (part Californian & part redneck and fully middle class). Most of the fraternities were the typical mix of Omegas and Deltas from Animal House, but I stumbled upon the exception. The Tri-Chis were more like the Revenge of the Nerds. That was more my style. I’ve never been cool, nor have I pretended to be. These guys were down to earth. I knew I found a home while at college. Gaz had graduated the spring before I started, but he still lived in Nashville, so he would hang out with us from time to time.

Gaz had to get by for a while delivering pizzas. I remember him telling us about a time when he got robbed. I vowed never to try to get a job delivering pizzas again. Gaz was also married shortly after college, and by my junior year, he and his wife had their first child. Before the child was born they did host a party or two over at his apartment. Ah, Tri-Chi parties. Instead of the typical drinking games, one of the brothers tried to have us do silly parlor games. I don’t drink, but I would rather watch drinking games than participate in parlor games. (Did I say that the fraternity resembled the cast of Revenge of the Nerds?)

Eventually, most of the brothers I liked graduated, and we had trouble replacing them. I started doing less with the fraternity, too, until my senior year. Then it was attending fraternity functions more out of boredom than brotherhood, killing time on Friday nights before Saturday rugby matches.

Gaz didn’t live his life delivering pizzas. He eventually started working professionally for election campaigns, mostly for Republicans. He was also active in the Naval Reserve for a while. Eventually, he became an entrepreneur and a hasher.

Gaz will be missed by his children, his fraternity brothers, and all of his other friends. May he rest in peace.

 

First Poll – Your opinion is valued

Well, apparently NASA generated a lot of hype with the cartoons it circulated leading up to the dual impacts on the moon. However, people weren’t that impressed with the show. So, to get a better pulse on my reading audience, I am generating my first poll.

What do you think?