Category: economics

Why do stocks go up and down?

Why do stocks go up and down?

I was motivated to major in Economics because I wanted to understand human behavior and how the world works. Especially things that don’t make any sense. It’s hard to find a better example than the stock market. There are hundreds of publications and TV networks and commentators that try to make sense of something that really seems to makes no sense.

But it actually does make sense. It’s just a kind of sense that’s difficult to accept especially if you’ve invested your retirement into the market.

Let’s start with things that are often cited as reasons for stocks going up or down:

  • Company earnings
  • News stories
  • P/E ratio or other numerics
  • New product introduction
  • Layoffs

I could go on. But none of these directly causes a stock to go up or down. It’s easy to prove this by picking a company and looking at historical price moves based on one of the items above.… READ THE REST

Did I provide you with excellent service?

Did I provide you with excellent service?

It seems like every time I make a phone call to the customer service department of a big company, I get an email, a return phone call, or a postal mail survey asking how my customer experience was. They always say I was randomly chosen but that defies the laws of probability.

It’s hard to argue conceptually with the idea that you should ask your customers how they are doing. But how about this:

  • Talk to your employees manning the phones. They probably have a good idea about whether customers are generally happy or not.
  • Listen in on some phone calls and take notes.
  • If you’re going to survey, try to do a very small random selection so it’s an uncommon occurrence.

When I think of companies that have outstanding customer service (Zappos, Apple, Air New Zealand, Charles Schwab, Sonic.net, American Express), I can’t recall ever getting surveyed by them.

Spending effort to make customer service great is far better than wasting money to find out if it’s great or not.… READ THE REST

Frontline reports on the tricky issues

Frontline reports on the tricky issues

Frontline is one of PBS’s greatest gift to media. They have a great new show on derivatives and it gives a good overview of the recent economic collapse:

The Warning

In an era where all the major news organizations are either afraid to criticize a sitting administration (or even a past one) or are politically motivated rather than motivated by seeking the truth, Frontline can be a breath of fresh air.

Although the show generally has somewhat of a liberal bias, it’s interesting to note they had the courage to air another great program on the war in Afghanistan and give it an accurate, yet provocative name:

Obama’s War