It is Obvious

Chris Rick has got altogether too much to say

Archive for October, 2012

Smile – Negotiate (3)

Posted by chrisrick13 on October 30, 2012

It is obvious: silence is golden

I’m picking up on a thread I started some long time ago and then ran into trouble with an early item.  I will return to that but now: The Silent Close.

This is really a selling technique, but it is also useful in a negotiation and links to other themes.

There is the famous story of two samurai facing each other swords drawn but completely immobile.  They both know that the first to move will lose the duel so they stand waiting for the other to move.  I have seen several variants of the result but the loser was the first to move.

This technique works because we need to fill a void.  You have heard of the phrase ‘an uncomfortable silence’?  You need to make the silence as uncomfortable as you possibly can and then find a way not to open your mouth, move, twitch.  I think best is to paste a smile on your face and work at keeping it there.

If you open your mouth you are negotiating for the other side.  Indeed a lot of the time an experienced negotiator is trying to get you to do that.  It is much easier to get you to do his job for him than do it himself.  This relates to information flows further down the thread.

You have made your offer and they make their counter-offer.  If you are quiet there is nothing they can do other than reduce it or invite you to reduce yours.  If you have made the counter-offer your silence tells them you are waiting for an improvement in their offer.  Again if you talk all you can do is set the scene for movement on your offer.

You can practice this one in many places.  When someone give you a price for anything just smile at them.

Nothing is absolute alas.  Sucking air through your teeth is allowed but this is technically your counter-offer.  After the suck though you must be silent and get the smile up.

It is obvious: silence is golden often literally

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Flash! Bang!

Posted by chrisrick13 on October 29, 2012

It is obvious: good ideas arrive quickly

I used to drive a long wheelbase Landrover.  It was old and resembles a couple of girders with wheels and an engine.  As an after-thought they put a seat in.  This enabled the driver to achieve a small measure of comfort as he negotiated with the car about the direction it was going in.  We called it the beast and I had a lot of fun in it.  Often people in shiny ‘flash’ cars would dare me to keep going…and I simply did.  A lot of rubber is on the roads in South London because of the beast.  I even had a bus run into the back of us.  We drove off and the bus had to be towed.

A part of the reason, allied, to the tank nature was that the 0 to 60 time was about half-an-hour.  I said to my sons they could have the car as long as they wanted and I would run it as long as they did not buy motor-bikes.  I had one when I was young and I now realise how lucky I am to be alive today or at least have all the bits of me still connected.

For a while I trundled around my neighbourhood, and everywhere else for that matter, at the speed limit.  I was always at the head of a long convoy and people did some very dangerous things in the efforts to get past me.  In the end I increased my average speed enough so that the getting past manoeuvre became infeasible.  For increasing my speed it became safer.

Yesterday I was walking around my area through the woods and came out on to a main road.  There was a speed sign there that I noticed flashed up the car speeds as they went past.  Then I noticed that it was also putting the car number plates up on the sign as well.  How easy is it to send that information to computer somewhere?  This computer can print out the summons, assign the penalty points and demand money with menaces.  It is the obvious next step.

It is a money-making machine and quite rightly so.  I believe that people should have the freedom to break the law as long as they are prepared to pay the price and even if they are not.

The body count on this idea is a large positive one.  2,000 people were killed in 2011 on the roads.  24,000 were seriously injured.  208,000 were injured.  Cutting that number by just one with a forest of speed signs and wireless connections and raising a bit of money for the treasury sounds like a good deal to me.

Why has it not already happened?  If everyone in London obeyed the speed limits nobody would get to work in the morning.

It is obvious: good ideas arrive quickly but seem to take a very long time being implemented.

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Have you got a NEST?

Posted by chrisrick13 on October 25, 2012

It is obvious: do not trust anyone with your pension

The National Employment Savings Trust (NEST) started on the 1st of this month.  I don’t think it will affect you…but it might.  This is the scheme that requires you and your employer to put at least 8% of your salary into a pension.  If you don’t do it the government will do it for you – both company and you.  (If you are already saving in the required way then nothing happens.)

This is a good idea as most of us are not saving enough for our retirement.  But…beware that it does not go into some government-run pension fund as it will if you show inertia.

The example that comes to mind is Ireland where the government invested the state pension fund in…their bankrupt (and corrupt) banks.

It is obvious: do not trust anyone with your pension, especially a pension company or a government

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I can’t eat an ipad

Posted by chrisrick13 on October 25, 2012

It is obvious: you can tell me what you want

What is going to happen to the UK economy?  I don’t really care as long as I am in good shape.  Isn’t that the view that we all have?

What does it mean that we are in a recession, even a technical one.  What is the difference?  A recession is when we all suffer.  A technical recession is when GDP is negative for at least 6 months.  Who cares about ‘technical’?  Are we suffering?

Indeed we are out of a technical recession…but are we still in a real one?  They have changed how they measure it so I do not know.  Also they nearly always revise the first number and mostly down.  I have also noticed that when the number is bad then factors like a bank holiday (for a wedding) are mentioned.  When they are up factors like the Olympics are discounted.  I am sure that the end of the current ‘technical’ recession will only make sure that we have a triple-dip.

Does a recession matter?  Only if you lose your job.

If I am right then we are moving to a no-growth world.  What we have now is as good as it gets.  Perhaps it does get better when we get used to it.

I have approached the no-growth idea from the impossibility of continual exponential growth and tried to think how and where we might get to.  The world is approaching from the other direction.  Oil is finite.  So is water and not much of the potable version is around.  I might say that agricultural land is finite.  So for many of the resources that we consume there is a finite amount and the amounts left are reducing.  This is the ecological approach to no-growth.

At the moment the dominant force towards no-growth is the economic one.  Too much has been borrowed and spent.  It is too much in the sense that the entities that borrowed have little chance of repaying that money.  A lot of effort (and money) is being expended to stop any large entity from defaulting on the loans that it has.  The reason for this is the derivatives market.  If any loan goes to zero value then the insurance that has been taken out on that loan will be claimed.  The lender will not go bust.  The insurer will…and then the lender will.  This how fragile the situation is.  One default will collapse the world economic system.  10 years ago Argentina did it.  It was isolated and became a pariah.  Nobody is isolated now.  Those who lost out learnt their lesson and are insured.  We are all in this together.

The central banks stepped up when Lehmans went.  AIG, Fannie Mae, RBS and many others were rescued.  If it happens again the central banks already emptied their piggie-banks.  In the words of Liam Byrne: there is nothing left.

I am back to my theme of triggers.  The US presidential election is a good one.  How many deals have been done to keep things under control until it is done?  The US ‘fiscal cliff’ is another good one but this will be fudged away.  Spain looks doomed but it might hang on a while yet.  Greece seems to be being ignored.  What about France?  Analysis of its economy is showing how similar it is to Spain/Portugal/Italy.  There might even have been lying about its economy on the same scale as Greece.

Still no trigger.  I am sure now that it will be a bank.  Somewhere a bank will shut, probably on a Friday evening.  We will get up to a different world on the Monday.  Look at Spanish banks.  If they survive into the new year start to look at the French ones.

It is obvious: you can tell me what you want but I don’t have to believe you

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We are all blind

Posted by chrisrick13 on October 23, 2012

It is obvious: the government has to stop cutting

Did you see the anti-cuts march at the weekend.  A lot of people turned out and marched in London.  They were disappointed to hear Ed Milliband say that there would have to be cuts whoever was in power.

There was a beautiful (and pointless) woman-on-the-street interview which said:  Sick of the cuts.  They are putting prices up and the bankers have just walked away.  It seems to me that she was not there to complain about government cuts.

Austerity won’t fix the deficit because the cost of cuts reduces the net effect.  A £10 cut only takes £5 off the deficit.  It needs growth to get rid of the deficit.  Indeed as Keynes pointed out, it is up to government to spend during hard times and save during good ones.  Perhaps he should have told the Labour party who spent and borrowed during good times.  Their treasury chief secretary, Liam Byrne, seemed proud that during a time when they should have set the economy ready for the next down cycle he was able to leave a note for the coalition saying: there’s no money left.

The Labour Party has stopped attacking the government for its cuts.  What is happening is that the government are cutting expenditure at such a rate that even should they get it to zero by 2016 the debt in the meantime will have tripled.  I can bring in my body-count mechanism here.  Though I will say it in simpler terms.  If the debt goes to £2tn then what are the interest payments each year?  At 2% that is £40bn a year.  This is about a third of NHS expenditure.

There are two choices.  Either we spend less to allow the government to pay off the debts from income or we earn more when no cuts will be needed and the excess income can be used to pay off the debts.  Actually there are some more options.  We can default or we can keep borrowing until nobody will lend.  None of those options are either very likely or very pleasant.

I suspect that the easiest way out is to keep borrowing and default.  This seems to be the Labour strategy.  To cut spending and repay is a long hard road.  I cannot think of any way that we might earn more in the world today.  We enter the race to the bottom.  When we can live on a dollar-a-day we can compete with China, India, Brazil.  This makes the austerity of a few cuts seem trivial but we’ll all fight to have anything cut but our own lifestyles.

It is obvious: the government has to stop cutting but it has to start before it can stop

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It’s still a gas – good idea 1439

Posted by chrisrick13 on October 22, 2012

It is obvious: question everything

I was at a friend’s house who has electric heating.  He has a cheap overnight tariff which warms up what are essentially blocks of concrete that put heat into his house during the day.  So he has to keep an eye on the weather forecast.  No wonder it is not a very popular way of heating a house.  He is going to put gas central heating in.

The cheap overnight tariff is so that the cost can be brought down to match the cheapest heating method which is gas.  The electric companies have a fiction that they can run their generating stations at a constant rate if people can be persuaded to use electricity when demand is low and the cost savings of this can be used to encourage people to consume at times convenient to them.

If gas is so cheap a source of energy why am I only using it to heat my house?  Why don’t I supply electricity to my house via a gas-powered generator?  I can use the excess heat from the generator to warm my water or heat my house in winter.  I can turn it on when I am using lots of electricity and any excess I can put back into the national grid and have the electricity company pay me.  If it is cheap enough then I can run it all the time and probably make a profit.  Maybe I can set up my generating business from my garage!

It is obvious: question everything because a lot of the answers are very interesting.

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Government follows my policy suggestions…

Posted by chrisrick13 on October 22, 2012

It is obvious: I know what I am doing

…nearly.  It was pleasing to see that David Cameron read my blog on how to handle energy company charging and announced that as policy the next day.  The shame is that he did not read it properly.  Lawmakers seem to have, what I consider, the fatal flaw of only enacting law that needs a lot of careful watching.  Whereas I am all for laws that are self-regulating – much like markets if governments don’t meddle.

I admit that I have one small improvement which is what threw our leader.  At the end of the year if the customer discovers that they were not on the best tariff they are not refunded the difference, but in line with that famous marketing quote they will refund double the difference.

My whole proposal costs nothing for the regulators of the energy companies.  There are plenty of consumers and consumer groups out there who will do all the checking.  It only needs a small arbitration panel to consider all disputes because 99.9% of consumers will be content.

What David Cameron did not spot was that the mechanism I proposed would move the energy companies to having just one tariff.  Indeed that was a bleat I heard.  So what is wrong with having one tariff?  The cost of a watt is the same whoever you are.  The cost of getting it to you is constant and is a matter of physics.  It does not matter if you are man or woman, rich or poor, black or white.  So why is a tariff needed?  It is all about maximizing profit.  Clearly, as a consumer, I don’t need tariffs.  They work against my interest.

I have no provenance but I heard of a survey that found that even if it cost them more consumers preferred to pay it for clarity in what they were paying.

Why would we pay more if there was a single tariff?  I see no reason for it.  What I see is that some people who energy companies prefered to sell to and were offered a lower price paid for by those who had to pay a higher price would see their energy bills rise.  Over the population of energy consumers energy prices would at worst be constant.  At best with their charges exposed to public scrutiny energy companies would be forced to compete on price by being more efficient than their competitors.  Perhaps better customer service would be a deciding factor.

It is obvious: I know what I am doing even if I’m wrong.  I wonder that the government does.

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What’s in a name

Posted by chrisrick13 on October 18, 2012

It is obvious: if it looks like a duck, waddles like a duck and quacks like a duck then…

There is a lot of debate about rates of inflation.  We have many in this country and from my perspective it seems that the institutions that are using these rates choose the one that most suits them.  For example I cannot see how an inflation rate that does not include the cost of the place where you live (be it rent or buy) can realistically show the inflation rate that you are suffering.  The word ‘suffering’ is right if you are a saver!

Also what happens is that the rates are constantly re-based to a recent time.  Such is the messing about with these numbers that comparisons over a long period are very difficult to make.  I remember the Mars Bar indicator which worked as well as any other until they started changing its size and what went into it.  I prefer my body count method working out costs as a body might be considered  reasonably consistent but it is difficult to work that into an inflation measure.

My point though is that the many inflation measures might well have been created for good reasons but they have been used, particularly by government, for what I can only describe as mean reasons.  So it is with APR – the Annual Percentage Rate.  This was a well meaning idea to make it clear to savers and borrowers what interest was being paid or received to enable easy comparisons to be made.  Of course it was messed up because there are several interpretations that allow different rates to be quoted.  For example the interest rate might be 10% over the year but it is calculated every month which means that in the second month you will pay interest on your interest (compound).

There is a simple way round this and the question is why has it not been taken.  Any loan should have a ‘headline’ interest rate.  This is what you will receive if you give the money to a deposit taker and look a year later.  It is also what your loan will grow to over a year if you borrow and do not make any payments.  For borrowing they should also quote the sinking fund rate.  This is how much you will pay if you make 12 equal payments over the year ending with a zero balance.  It might be as well to quote the 5 and 25 year sinking fund total cost.  A real show-stopper would be to require credit card companies to quote the cost each year for 10 years of borrowing £100 and paying the minimum payment each month.

These numbers are unequivocal.  Direct comparison would be possible with all providers.  The true cost of borrowing would be made clear to borrowers.  I have to mention my holiday scenario again.  If you want to go on holiday and it costs £1000 you have two options.  You can save the money and go at the end of the year or borrow the money and go next week.  Assume we are living in a fairy land and you can borrow or save money at 10%.  If you go now then your holiday will cost you £1100 (ish).  If you save and go you will pay £1000 and have £100 in the bank.  After 10 years you will either have paid for 11 holidays and actually takenjust 10 or you will have paid for 10 holidays, taken 10 and have enough money in the bank to take an 11th.

You have to have a house to live in.  You cannot afford to save for 25 years while living in a hole in the ground.  Probably you have to have a car to get to work.  For anything else I cannot see why you would ever want to borrow any money to get it.

It is obvious: if it looks like a duck, waddles like a duck and quacks like a duck then…it probably is a duck unless it’s an APR

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Och Aye

Posted by chrisrick13 on October 17, 2012

It is obvious: it’s all in the negotiation

During all your time in education you were not taught this.  You would be lucky if you were given any training at work.  Yet we spend most of our lives negotiating.  If there is nobody to negotiate with we do it with ourselves.

You may not have any skills at it but it is well possible to learn all the tricks that might be played on you so you can at least counter them.  It is possible to set up scenarios for negotiation that you can work in – doing it by letter is one.  There are certain simple rules that you can remember.  For example never accept a first offer.  At the least suck your breath in through your teeth and say nothing for a while.  Often this results in a better offer and all you did was…nothing.

Another of the tricks, and the North Vietnamese did this well with the Americans over South Vietnam, is to negotiate endlessly about unimportant things.  In their case one of them was about chair positions at the negotiating table.  There were many others.  Actually negotiating about a peace settlement didn’t really take place.

Over the last few days the negotiating over the referendum for Scottish independence has taken place.  It is amusing that the Sottish get to vote and the English do not.  Were we all allowed to vote the Scottish could all stay at home on voting day for the difference their votes would make.  They would be out the union in a rush with an overwhelming ‘YES’ vote.

The vote is the easy part.  How could a separation be achieved?  The EU is going through agonies over fiscal and monetary union in the process of trying to get a federal state like the USA…and UK.  Would Scotland join the EU where they switch from big fish in small pond to very small fish?  I wonder how we would decide who could sit in parliament.  I think a lot of people would have to decide if they were English or Scottish.  For example my wife is a quarter Scottish – which passport would she adopt?  I could see the Scottish population dropping below a million as the smart people backed the percentage play.  Gordon Brown would not be able to sit in parliament, so there’s a positive.  I can think of a few others looking for other jobs.

There were those who smugly said that North Sea oil would see everyone in Scotland living a very comfortable life.  Not so smug after money stopped coming to Scotland from the centre.  Not so smug given that oil production is in decline.  Not so smug when we might be getting Falkland oil soon.  Not so smug when oil is discovered in the Atlantic and we will have access to the same fields as the Scottish have access to.

In short it is a difficult to boot Scotland out.  I could come up with many more difficulties which I should not say.  I will digress on to another negotiating point.  When anyone says there are hundreds of examples, or hundreds of reasons, or many of anything why it should go their way there is a simple way to destroy it.  Just ask them for one example.  When they give it, and they always have one, do not comment, just make a careful note.  Take as along as you like.  Treat the point with respect and gravity.  Then ask for a second.  Often you do no get it.  If you do, after noting with no comment, ask for a third.  In my experience there has never been a third.  If they complain then you are just being reasonable.  You don’t want to miss anything.  They are being lazy or, god forbid, they were lying and there are actually only 1/2/3…

So we see that Cameron and Salmond have negotiated on the referendum terms and for the second time in recent months Cameron (remember the EU treaty he vetoed – where is it now?) was criticised for a poor negotiation.  However Cameron has ensured that a simple question will be asked where it will be clear that YES is separation and NO is continuing in the union.  No fuzzy question where the answer is not at all clear.

As it stands at the moment, according to the polls, only 28% want out.  No chance SNP.

It is obvious: it’s all in the negotiation which consists of a lot more than the headlines you see

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Good idea 272

Posted by chrisrick13 on October 17, 2012

It is obvious: a lot of obvious things are not done

I hear with amusement people on tv demanding that fuel prices come down.  It is always ‘the man in the street’ which carries zero information other than that the person speaking is an idiot.  There is a global market in oil and that determines the price.  Except it does not.  A lot of the price is tax and a lot of the remaining price is the oil companies charging what they can get away with.  It is called: all that the market will bear.

I have recently written about the electricity and gas cartels, supposedly regulated by Ofgem.  It pains me that it clearly is an organisation that is not fit for purpose.  It is even more painful when there are some simple steps that can be taken to create a self-regulating system provided that the cartel ifs punished.

The first step is that every customer can choose the best tariff they can when they sign up for energy with a company.  At the end of the year (or part year on departure) the energy company must apply the best tariff for that customer, recalculating at every change.  At the end of the year, if the customer paid too much money they get a refund.

I worked on some contracts for energy suppliers.  They have all the information to do this and can do it for all their customers overnight a couple of hundred times should they care to.  They would be using unused computer cycles so there is no cost to this.

The second step is that Ofgem would create a website that every energy company had to supply their data to every day.  The numbers that they would supply is the average cost per therm or watt of customers at, say, 50 therm intervals (100 watt) over the past year.  This would give the energy companies a big incentive to get everyone on to the best tariff possible as early as possible.

Third the energy companies would have to tell every customer their energy consumption over the last year.  For part years they would have to give the actual consumption plus a projection for the full year.

I love self-regulating systems and this is one.  People will simply switch to the cheapest supplier.  the most expensive will go out of business.  Prices will move very close to each other and the deciding factor will become things like customer service.  There will also be the matter of profit.  Some companies will decide that in a competitive market they do not care to trade.  There are plenty of others that will see the chance for profit.

Ofgem would have a much simpler task.  They would have to act to prevent the cartel operating.  I do not know enough how to do that.  They would have to monitor the data on the website and find a way to check it out.  They would not have to monitor the cheapest tariff per person as a lot of people (customers) will do that job very well.

Why not do it?

It is obvious: a lot of obvious things are not done – you need to ask why.

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