Is Your Time Worth Nothing?

 

“Yes, the harvester-combine has been invented. No, you can’t use it.”

 

In many white-collar and no-collar office jobs that don’t pay overtime, there’s implicit pressure to stay on the premises as long as it takes to get things done. The most malleable employees embrace this, bragging about how late they stick around. In other words, how much free labor they surrendered.

“I was here until 8 last night.” 
“I stayed until midnight.”
“Guys, I’ve been here since Saturday.”

And so continues the saddest game of one-upmanship ever. This is madness dressed as servitude. The immediate reactionary argument is, “You have to do it if you want to get ahead”, so here’s a real-world example of how futile the practice is.

Your humble blogger once worked at an ad agency (oh what the hell, it was this one. That bridge got napalmed a while ago.) At this particular agency, as at many businesses that hire lots of relatively young people, it was understood that employees were to work past the de jure end of day codified in the company handbook. Weekly, and usually several times a week, they’d remain until way past dark, finishing projects and giving of their time. Leaving on time was an anomaly and raised stares all around. Sometimes it raised more than stares, as other employees would openly question anyone who dared to leave the premises and enjoy life once that day’s employee-employer covenant had been fulfilled.

If a salaried employee honors her end of the bargain, and works productively during the hours prescribed in the company handbook, what recourse does that leave for the employer? Where does he get to exercise any discretion? 

Christmas bonuses, of course.

From the perspective of a ruthless and manipulative boss, this is a magnificent situation. You know that most employees are far too timid to discuss salaries with each other, nor will they even discuss any one-time only payments. Therefore you can mete out favors of varying sizes among your employees, and only you and your inner circle will know who’s getting rewarded for their service and who’s getting cold gruel.

Unless you’ve got two employees who conspire to expose the ruse.

This same business had the ludicrous practice of soliciting donations among the employees to buy Christmas gifts for the two owners, one of whom is Jewish. No joke: the executive vice president would go cubicle to cubicle, asking employees to hand over more than a few bucks (suggested donation: $20) to contribute to the fund that would buy the bosses something they’d forever treasure. This in a company that at its zenith had 160 people in its employ.

Maybe in the company’s nascence, when there were 8 employees and the bosses might have had to reach into their own pockets to cover payroll, would this have made sense. But after several profitable years, the executive vice president was still soliciting donations for this charade. That the owners played along, pretending to have no knowledge of the forced largesse being assembled on their behalf, was part of the game. Even better, they’d never utter a word of thanks.  The best you could hope for was a message from the executive VP remarking on how much the owners liked their gifts, insincere emails of gratitude being beyond the owners’ capacity. Better still, the executive VP either had a poor memory or didn’t care. One year she claimed that the funds collected went to buy iPods for the owners, even though they’d received iPods the prior year.  The owners almost certainly just pocketed the cash, but that didn’t stop one employee (no one connected with Control Your Cash, though we wish it were) to send an email to the executive VP, and cc everyone, asking if he could have one of last year’s iPods.

Department heads were employed as sergeants in this money grab, placing additional pressure on their underlings to cough up contributions. Most employees complied, admitting that it was because they feared that the size of their donations correlated to the size of their upcoming bonuses. In that respect, “donating” almost became an investment. Almost.

Ultimately, two employees – friends who shared an office and were close enough that they spoke candidly to each other about how much money they made – conducted an experiment. They happened to draw the exact same salary, and agreed that one would give $20 to the Christmas fund, while the other would hold his ground no matter how much he was pressured not to.

A week later, their bonuses came. And differed by $500.

Again, the consensus opinion among employees – the vast majority who didn’t leave at 5:01 every day like the building was on fire, that is – was that the only way to get ahead was to stay behind. But doing this doesn’t tell your boss that you’re upwardly mobile. It tells him that he can drastically lower his labor cost numbers when submitting bids for new business.

A little estimation showed that the average employee at this joint stayed a total of 7 hours, after hours, every week. Times 50 weeks, that’s 350 hours. Pay the necessary $20 tithe, and for a net $480 in personal profit after showing oneself to be an obedient and generous employee, the net benefit to staying late was…

$1.37 an hour.

So technically, employees weren’t giving their time away. They were merely working for less than a fifth of minimum wage.

The point isn’t that this is a story about the most heartless boss this side of Simon Legree. The point is that unless you’re his niece or son-in-law, your boss is probably doing something similar, but at least being more discreet about it. Both participants in the Bonus Test quit long ago, but the Christmas alms practice continues.

If you want to do volunteer work, give Catholic Charities or your local animal shelter a call. But don’t donate the time you spend doing what you do professionally. If you don’t value your time, why should anyone else?

Come at the assigned hour, leave at the assigned hour. Your employer is not your superior, he’s your equal partner in an exchange: your time for his money. You wouldn’t give the checker an extra 10% at the supermarket, so how is this any different?

**This article is featured at the Carnival of Personal Finance #321-The Fraud Edition**

Thank You, Netflix. And No, That’s Not Sarcasm.

“What’s that? You’re going to cancel your subscription?! That is an issue of great national import!”

People are never satisfied.

2-year old Netflix replaced standard movie rentals with its famed subscription model in 1999. The model worked almost the same way that it does now: you paid $x a month to rent as many movies as you wanted, but no more than three simultaneously. Those movies were then, in a sense, yours. You could hold onto them until the Cubs win a World Series and never incur a late fee. The only incentive you had for ever returning any movie in its postage-paid envelope was to receive the next movie in your “queue”. (Well, that and the monthly fee, a sunk cost.)

No one remembers this, but the original x was 26. At the time even that seemed almost self-destructively low, being the price of 2 or 3 standard movie rentals + late fees from Blockbuster. Here you had this upstart company that seemed to have more ambition than business sense (standard operating procedure at the height of the dot-com bubble), and which for a miniscule price let you watch as many movies as mailing speeds would permit.

You probably remember that Blockbuster was the immovable leviathan of the movie rental business back then; and that largely thanks to Netflix, within a few years Blockbuster filed for bankruptcy and today is as good as dead. What you might not remember is that Netflix simultaneously defeated a competing unlimited-rental service founded by the Goliath of American retailing, Walmart. The Bentonville Bruiser fired the initial volley in a price war, offering a similar service for $19 and relying on sheer girth to sustain any short-term losses.

Netflix was small and wiry enough to withstand hits, though. It didn’t require its customers to commit to contracts, but by getting a credit card number and billing customers automatically, Netflix had a sure revenue source. (It’s amazing how many people will agree to automatic billing then never think about it again, rather than taking the easy steps to cancel.) Plenty of Netflix’s $26-a-month subscribers were paying for nothing, or next to nothing.

If a company can profit delivering nothing for $26, it can profit delivering it for $18. Or $12. For a disinterested observer, it was fascinating to watch Netflix’s response to undercutting and see how low it could go.

The answer was $6, later $7. Netflix reduced its prices to the point where movies-by-mail became almost the least expensive entertainment available, surpassing street musicians and closing in on porch-sitting. If you wanted to receive movies via download and disc, you paid $10. (NOTE: Netflix prices vary by plan – for instance, the company offered $5 plans for people who wanted to rent no more than one disc at a time. This post largely refers to the company’s most popular plans.)

This is more a rule than a generalization, but for a company to stay competitive – especially one built on price – it has to:

  • anticipate technology
  • cut costs.

DVDs and Blu-Ray discs are enjoying a great run as the dominant physical media in their genre, but in the long run they can’t compete with instant downloads. Especially not as the medium of choice for a company such as Netflix: after all, those discs still need to be mailed to customers, and postage accounts for almost ¼ of Netflix’s expenses.

So a couple of weeks ago, Netflix took the logical and ineluctable step of steering customers toward instant downloads and away from discs. Instead of getting unlimited downloads and 3-at-a-time physical rentals for $8, you had to pick one or the other. Netflix then halved the company into a DVD unit and a streaming unit, each of which will profit or lose money on its merits. All in all, an eminently reasonable way to conduct business.

The public outcry would have been quieter if Netflix had replaced its entire catalog with snuff films. 80,000 people registered their opinions on Netflix’s Facebook page, most of which were negative. Analysts, whose business is more to issue opinions than to analyze data, estimate that Netflix’s forward thinking could result in 2 million people unsubscribing. Let’s assume that’s true, which it isn’t, and that all 2 million cancel tomorrow. That means that Netflix will still have added more than half again as many subscribers over the past year (15 million to 23 million.)

By Netflix’s own numbers, three-quarters of new subscribers never take possession of a disc. Within a couple of years, the idea of receiving DVDs in the mail will be as quaint as that of riding your horseless carriage to the general store for dry goods.

Netflix’s transient status as America’s most hated company will be over before you know it. (BP still sells plenty of gas.) Consumers with a sense of entitlement will either realize what a great deal they have with Netflix, or fall for Blockbuster’s aggressive new last-ditch courtship. Either way, they win.

In the meantime, it’s shocking to see how demanding customers can be. “Offer me an inexpensive, efficient, convenient means for watching movies? One that my grandparents would have killed for? One where I don’t have to trudge to a store, and possibly not even to my mailbox? No, that’s not enough. I want more.”

Here’s a prescient passage from a December 2002 Wired column by Jeffrey M. O’Brien:

In five years, (Netflix CEO Reed) Hastings sees Netflix as a $1 billion company with 5 million customers. Along the way, he may move beyond the US Postal Service — but not until broadband penetration increases and delivery costs come down. Today, it can cost more than $30 to send a DVD-quality film over the Internet. As that figure drops, Hastings will consider going digital. “In five to ten years, we’ll have some downloadables as well as DVDs,” he says. “By having both, we’ll offer a full service.”

(You can’t help but think that the success of Netflix might have something to do with Hastings’s conservative growth estimates.)

If you’re a business owner, never hesitate to embrace advancement. Netflix isn’t taking a gamble on an unproven technology here: they already did that years ago. Instead, Netflix is staring inevitability in the face and dealing with it. It’s the customers who are slow to adapt who’ll be left out.

If you’re a customer – I figure at least a few of Netflix’s 80,000 Facebook critics are reading this – be grateful and try to look at this objectively. Entertainment isn’t a utility. You don’t have an inalienable right to extremely cheap movies instead of merely cheap ones. (Technically, you can argue that this isn’t even a price increase anyway.) Companies don’t try to maximize revenue just to inconvenience you. In fact, it was all that revenue Netflix gathered from you and your ilk over the years that allowed them to reinvest the proceeds and provide you with such a desirable service in the first place. One that logic says will get even better in the years to come.

And if you still don’t like it, you can always just read a book.

 **This article is featured in the Carnival of Wealth-The Change of Guard Edition**

**This article is featured as an Editor’s Pick in the Totally Money Blog Carnival #31**

The money’s sitting there. JUST TAKE IT!




Speaking of UC-Santa Barbara, here’s some loser who couldn’t get into a better school. Carol Greider. America’s latest Nobel laureate in physiology/medicine.

A few weeks ago we got chided (chiding is a regular occurrence in our world) by the guy in change of a far more prominent personal finance blog that we occasionally contribute to.

A high school senior had a choice to make – a free ride at a demanding but obscure college, or full price ($40,000) at a heralded school in the Ivy minor League. Let’s call the first school Commuter University, and the latter Pretension College. She posted her dilemma on the site and asked commenters to weigh in.

Can you guess what people recommended? Here, we’ll do it in multiple-choice form:

__ Do whatever you think is best.
__ Either one is a good choice, there are pros and cons to both.
__ This is the time to live, not to think about financial considerations.
__ Have you thought about student loans?

__ Are you insane? Go to the school that’s offering the full scholarship.

The answers were evenly split among the first 4, with one vote for #5. You can probably guess whom.

#1 and #2 don’t even count as advice, but that doesn’t stop people from sharing their non-opinions. #3 and #4 are essentially the same (rotten) advice, which is to incur debt now and worry about the ramifications later.

The worst part is that she was going to study a hard science, too. Look, if you major in chemistry, it doesn’t really matter whether you do it at Duke or at the University of North Texas. It’s not going to impact your ability to get a job in your chosen field. Only those who employ non-scientists (sociologists, social workers, basically anything that starts with “soc-”, with the possible exception of soccer coaches) care that you went to a “prominent” school. A Harvard English degree might be more profitable than one from Cal-Santa Barbara, only because of that ridiculous concept called cachet. It’s not as if the professors at the former can inspire you to parse the meaning of Pilgrim’s Progress any better than those at the latter.

This girl was obviously bright enough to get the attention of multiple schools, but her financial acumen was the equivalent of a kindergartner’s. And along with the failure to make the obvious decision were a litany of excuses, most of them citing “life experiences” and other non-monetary considerations. Not that non-monetary considerations aren’t important in this life, but paying for college isn’t one of them. Knowing that you’re going to be incurring 4 years’ worth of student loans is like knowing that you’re going to have a gigantic credit card balance in 2015. Or knowing that you’re going to lose every game of chance you play. Or knowing that your house is going to lose $40,000 in value. The last three examples are somewhat subject to explanation, but the first one was a fixed cost that this woman gleefully embraced. The two birds in the bush are the primary motivating factors for many a young person who can’t see the giant California condor resting in her palm.

We finished our diatribe by asking an equivalent question with a slight twist, which no one (including the story’s protagonist) bothered to answer:

This time, it’s Pretension College that offers you the full scholarship. Meanwhile, Commuter University starts off your freshman orientation week by handing you a $40,000 check. Now which school do you prefer?

**This article is featured in the Carnival of Personal Finance #320-Plutus Awards Edition**