Archive for August 3rd, 2009

Cash for Clunkers Surprises its Critics … me included

August 3, 2009

I still don’t get it, but obviously I was wrong when I bet under on Cash for Clunkers (C4C). I disn’t think it would generate much showroom traffic, let alone sales.

Bit by all reports, C4C is the hottest promotion since Hoover UK almost bankrupted itself by offering free plane tickets with the purchase of a vacuum cleaner.

Where did I go wrong ?

First, I assumed that the $4,500 government rebate was just a replacement for a trade in allowance.  So, only real clunkers – worth less than $4,500 as a trade – would be advantaged.

Second, I assumed that clunkers were being driven by downscale folks who didn’t have the scratch for brand new rides – who bought used cars and drove them until they died.  These folks, I thought, wouldn’t be able to step-up to buy new cars.

Apparently, many rich folks make their teenage or college kids drive hand-me-down cars – maybe to humble them.  Dealers are saying that these are the clunkers being traded in.  So, the kids get fancy new bumpers for their Obama ‘08 stickers.

Third, and most important, I underestimated naturally pent-up demand. According to an analysis by Edmunds.com “in any given month 60,000 to 70,000 “clunker-like” deals happen with no government program in place .. over 100,000 buyers put their purchases on hold waiting for the program to launch.”

OK, I missed on the program’s initial take-up, but I still see problems:

1) Reports say that the bulk of deals are for non-Detroit brands. Oops.

2) Easy prediction: fraud will be prevalent, e.g. clunkers showing up on used car lots instead of scrap heaps.

3) It’ll be hard to go off the needle.  Over the past few years, auto companies have tried – with only modest success – to wean the market off deep price rebates.

Let’s see what happens when taxpayer-funded discounts end.  Hmmm.

Maybe they won’t. Ouch.

Even so, gotta admit that it makes me smile to see the President touting Cash for Clunkers as his administration’s hallmark stimulus initiative.  That alone is worth a couple of billion dollars.

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Source for Edmunds data
http://online.wsj.com/article/SB10001424052970204619004574324350084909302.html?mod=djemEditorialPage

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Posted in Autos - Travel | 1 Comment »

Summer Read: The Numerati

August 3, 2009

The Numerati, Stephen Baker, Haughton Mifflin, 2008

Ken’s Take: I read it so you don’t have to.

I was really excited when the TV show “Numbers” launched.  Being a quant guy, I thought the concept of solving crimes by using math analysis had a ring to it.  Disappointment set in (for me) when they started focusing on the characters and their relationships instead of the numbers.  Oh well.

I was equally as excited about the prospects for The Numerati … and about equally as disappointed.  Nice topic, but way too superficial.

The central premise of the book is good: prolific data accumulation (including mucho private data), integration of massive data sets, high speed data access and processing, sophisticated statistical models and data mining algorithms, and an increasing number of uses and users … is making all facets of life more and more numbers based.

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Specifically, Baker provides some anecdotal examples of numbers-in-use:

  • In the financial markets: credit scoring by bankers and credit card companies started the snowball rolling …
  • In the workplace: some companies are already trying to derive behavioral profiles of employees that can provide insight re: how to motivate them, which teams to assign them to, and how to build a leveragable database of employee skills and interests.
  • In the store: some retailers are combining market research behavioral, and financial information to more closely target products and promotions ..  think of it as loyalty carding on steroids with a dose of customer profitability management.
  • In politics: the Chicago machine controlled precincts, the Bushies went after “values” segments and swing voters, and the Obama folks micro-targeted and “rolled up” using social marketing methods (e.g. Facebook, Tweeter). 
  • On the blogs: some companies routinely scour the population of blogs to find references to their products that can be consolidated into a real time view of how the products are being perceived.
  • In the war on terror: neural data networks are processing a constant stream of information and electronic communications, hoping to spot behavior patterns that might provide an early warning of potential terrorist activity …  think “Patriot Act”
  • In the doctor’s office: electronic medical records appear to be gaining traction, providing docs with real time access, distributive capability (i.e. sending the info to other docs), and “evidence-based” analysis of best practices.  The looming questions: scalability and privacy.
  • In the heart: mate-finding sites (e.g. E-Harmony) are getting increasingly sophisticated – using behavioral and deep-psyche info and concepts to make the perfect matches.

Bottom line: For businesses, quant analytics used to provide a competitive edge.  Now, they are required just to compete. 

For individuals, kiss privacy good-by and expect to be increasingly targeted with customized products and promotions.

“These statistical tools are going to be quietly assuming more and more power in our lives.  We might as well grab the controls and use them for our own interests.”

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Posted in Analytics, Book Summaries | 1 Comment »