yield management

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pages: 233 words: 67,596

Competing on Analytics: The New Science of Winning by Thomas H. Davenport, Jeanne G. Harris

always be closing, big data - Walmart - Pop Tarts, business intelligence, business process, call centre, commoditize, data acquisition, digital map, en.wikipedia.org, global supply chain, high net worth, if you build it, they will come, intangible asset, inventory management, iterative process, Jeff Bezos, job satisfaction, knapsack problem, late fees, linear programming, Moneyball by Michael Lewis explains big data, Netflix Prize, new economy, performance metric, personalized medicine, quantitative hedge fund, quantitative trading / quantitative finance, recommendation engine, RFID, search inside the book, shareholder value, six sigma, statistical model, supply-chain management, text mining, the scientific method, traveling salesman, yield management

They are analytical competitors but not very successful. Both airlines (American a bit more than United) were pioneers in adopting such analytical approaches as yield management for seat pricing, optimization of routes and resource scheduling, and the analysis of loyalty program data. While we believe that these companies would be worse off without their use of analytics, neither has fared particularly well. United has spent most of the last decade in bankruptcy, and American has barely stayed out of it. What happened? Two things have kept these firms from succeeding with their analytical strategies. One is that their analytics support an obsolete business model. They pioneered analytics for yield management, but other airlines with lower costs can still offer lower prices (on average, if not for a particular seat). They pioneered analytics for complex optimization of routes with many different airplane types, but competitors such as Southwest save both money and complexity by using only one type of plane.

According to Shigeru Komatsu, the company’s Chief Knowledge Officer (it is rare for analytics be addressed in such a role, but they are at Toshiba Semiconductor), “We have worked on standardizing performance indicators, we have built shared databases, we have made efforts to share analysis cases and results, and we have implemented analytic software such as Minitab and Spotfire DecisionSite in order to increase our efficiency in analytics.”13 One key issue with analytics in manufacturing is how well production workers can actually use sophisticated analytical tools, but Toshiba has found that visual analytics help to address this problem. “We observed that only 20 percent of the possible users of yield management software, for example, actually use it effectively. This is not only because the complicated special features make it hard to use for many engineers, but also because it only has a part of the data we need to analyze,” said Koji Kimura, the yield manager at Toshiba’s bipolar fab in Kitakyushu.14 Using the visual approach, Toshiba has been able to take an integrated approach to analytics in its business. The company combines analytics with a highly disciplined approach to quality and both operational and managerial innovation.

Well, thank goodness for me and the shareholders of Harrah’s Entertainment, Inc. that rational expectations is a far from complete characterization of managerial behavior. In short, opportunities abound to employ simple analytic methods to marginally or substantially increase profitability, especially in large businesses such as mine where a single insight can ring the cash register literally thousands or millions of times. Examples abound in casino resort entertainment, including yield management, game pricing, customer relationship management, loyalty programs, and procurement. To take perhaps the easiest and biggest opportunity in my tenure, we found that a ten-basis-point movement of slot pricing toward the estimated demand curve for a given game could enhance our profitability by an eight-figure amount and be unobservable to the guest. The fact that this slot-pricing opportunity was available for someone as simple minded as myself to find and exploit illustrates several of the common impediments to analytic management that have absolutely nothing to do with either analytic methods, data availability, or technology.


pages: 215 words: 55,212

The Mesh: Why the Future of Business Is Sharing by Lisa Gansky

Airbnb, Amazon Mechanical Turk, Amazon Web Services, banking crisis, barriers to entry, carbon footprint, Chuck Templeton: OpenTable:, cloud computing, credit crunch, crowdsourcing, diversification, Firefox, fixed income, Google Earth, industrial cluster, Internet of things, Joi Ito, Kickstarter, late fees, Network effects, new economy, peer-to-peer lending, recommendation engine, RFID, Richard Florida, Richard Thaler, ride hailing / ride sharing, sharing economy, Silicon Valley, smart grid, social web, software as a service, TaskRabbit, the built environment, walkable city, yield management, young professional, Zipcar

Waste represents the underutilization of existing resources. In business, there’s a technical term for the efficient employment of physical assets—yield management. Each flight of an airplane, for instance, requires a certain financial outlay, regardless of how many passengers it carries. The pilot, stewards, and maintenance personnel must be paid whether there are 7 passengers or 270. The fuel cost and wear and tear on the airplane are the same. Once the plane takes off with seven passengers, it’s gone, and so too are its costs and profits. Airlines have used various methods to increase the number of passengers on each flight (unfortunately including overbooking). Mesh businesses can maintain superior yield management. The density of consumer information they receive enables them to manage resources (and waste) efficiently, regularly, and well.

Some retailers offer consumers a small amount of money or credit for recycling older models. The offer is: Bring in your old device. We will recycle it and give you 20 percent off your next purchase. The retailer builds loyalty and takes a baby step toward repositioning itself as a service-oriented business. Like businesses, individuals can also achieve better personal yield management through the Mesh. WhipCar and CouchSurfing allow an individual to get more use for only marginally greater cost from his car and, well, couch. This personal yield management relies on information and information tools available to the individual through association with a Mesh business—yet another advantage of access over ownership. custom design for all. Further, in the future, customers can help determine how their Mesh ecosystem is put together. When I’ve talked to people who are involved in food co-ops, one of the things that people love is the ability to heavily influence the selection of products and vendors.

See Loans/social lending Social networking importance to the Mesh Mesh companies negative events, broadcasting on on Netflix network effect privacy, importance of and product improvement for word-of-mouth advertising See also Facebook Software getting for startup Mesh open development Software as a service (SaaS) Sourcemap SpareFoot Spride Share Standardization of products Starting a Mesh company capital needs customers, identifying define/redefine/scale stages first mover advantage marketing primary questions serendipity as factor shareable assets, identifying software, ASP model Stohr, Kate Supply chain forward and reverse integration reverse supply chain Sustainable design Swishing Taxi Magic TCHO Technology, Mesh-friendly Mesh companies TED Prize thinkspace thredUP adaptability of case study Tool sharing, Mesh companies Toyota, broken trust Transaction fees Transparency and adaptability “age of radical transparency,” and trust building Transportation efficiency communities developed for See also Bike sharing; Car sharing Travel-related services, Mesh companies Trials Tripkick Trust building basics of broken trust, examples of and customer complaints customer misbehavior, dealing with by delighting customers discoverers as trust agents lost trust, rebuilding maintaining trust negative events, impact on and privacy practices proprietary versus open control reviews, keeping perspective social networks, role of starting slow, necessity of and transparency trials/samples for “virtuous circle of trust,” Tryvertising Twitter Tylenol tragedy Upcycling Mesh companies Vacation Rentals by Owner (VRBO) Virgin Corporation, Mesh strategy Volkswagen, idea solicitation on Web Walmart customer data, use of greening of integration with suppliers Mesh possibilities for waste, created by Waste disposal and climate change as resource underutilization Waste management government initiatives for Mesh companies in Mesh ecosystem in natural ecosystem raw materials, sharing recycling and reuse services reverse value chain yield management See also Recycling and reuse services Water Legacy Wattzon.com Westmill Wind Farm Co-operative WhipCar Wilcox, Ronald Wilhelm, Eric Williamson, Oliver Wine cooperatives, Mesh companies Word of mouth, power of Work-space sharing, Mesh companies World of Goods Yelp Yield management Zipcar customer experience with Mesh model for partners Zopa Zynga Table of Contents Title Page Copyright Page Dedication Introduction Chapter 1 - Getting to Know the Mesh Chapter 2 - The Mesh Advantage Chapter 3 - Mesh Design Chapter 4 - In with the Mesh Chapter 5 - In Mesh We Trust Chapter 6 - The Mesh as Ecosystem Chapter 7 - Open to the Mesh Chapter 8 - Mesh Inc.


pages: 726 words: 210,048

Hard Landing by Thomas Petzinger, Thomas Petzinger Jr.

airline deregulation, buy and hold, centralized clearinghouse, Charles Lindbergh, collective bargaining, cross-subsidies, desegregation, Donald Trump, feminist movement, index card, low cost airline, low cost carrier, low skilled workers, Marshall McLuhan, means of production, mutually assured destruction, Network effects, offshore financial centre, oil shock, Ponzi scheme, postindustrial economy, price stability, profit motive, Ralph Nader, Ronald Reagan, Silicon Valley, strikebreaker, the medium is the message, The Predators' Ball, Thomas L Friedman, union organizing, yield management, zero-sum game

The Sabre system was overflowing with priceless historical data, years of bookings from which American could deduce how many days in advance vacationers tended to book to San Juan, how many days in advance business travelers booked to Detroit, in May as opposed to September, on Tuesday as opposed to Friday, in the morning versus the afternoon or evening. Every flight had a unique profile. Crandall wanted his staff to monitor the rate of actual bookings in various fare categories, compare them to the predicted rate, and then adjust the inventory of variously priced seats accordingly. To this tedious yet tremendously meaningful process Bob Crandall gave the leaden name of “yield management.” Responsibility for yield management was assigned to Barbara R. Amster, who had become one of the few women to attain a senior position in the boys’ club of commercial aviation. She did so on pure genius, and a comfort level with computers born of having started out in the New York office as a telephone reservationist on the early Sabre machines. When she undertook the assignment in the late 1970s Amster had 30 clerks up to their chins in keypunch cards.

It took one’s breath away: fare cuts of 70 percent, in some cases more. DFW to New York: cut each way from $344 to $99. Fort Wayne to Chicago: cut from $125 to $39. This wasn’t just the odd route here or there to compete with Braniff or New York Air or People Express. This was almost everything. Crazy Eddic pricing had reached the major airlines. Every seat must go! American had out-People Expressed People Express. Because he had no computer systems and no yield management, Don Burr would have to offer every seat on any given flight at the price Bob Crandall was offering on a fraction of his. Crandall was only too happy to let Burr sell a cheap seat to anyone that American had turned away for the sake of a passenger paying the full fare. Within minutes of American’s announcement, all airline stocks plunged; investors braced themselves for the bloodiest fare war ever.

Though a novel experience for millions, flying did not long remain a glamorous one for most. As something sold cheaply, flying was no longer something most people felt the slightest compulsion to dress up for or otherwise regard with marvel. Where families of the 1950s and 1960s had scheduled excursions to the airport observation deck to watch the planes, they could now simply schedule reservations and fly on the planes. The magic of “yield management” alone far from accounted for the widespread accessibility of air travel. For one, the ultralow fares were increasingly subsidized by much steeper fares charged of business travelers. For the airlines the net effect was salutary. While discount fares were plunging rapidly, the average of all fares was declining only slightly to 11 cents a mile in 1986, from 12 cents a mile two years earlier.


pages: 387 words: 110,820

Cheap: The High Cost of Discount Culture by Ellen Ruppel Shell

barriers to entry, Berlin Wall, big-box store, business cycle, cognitive dissonance, computer age, creative destruction, Daniel Kahneman / Amos Tversky, delayed gratification, deskilling, Donald Trump, Edward Glaeser, fear of failure, Ford paid five dollars a day, Frederick Winslow Taylor, George Akerlof, global supply chain, global village, Howard Zinn, income inequality, interchangeable parts, inventory management, invisible hand, James Watt: steam engine, Joseph Schumpeter, Just-in-time delivery, knowledge economy, loss aversion, market design, means of production, mental accounting, Monkeys Reject Unequal Pay, Pearl River Delta, Ponzi scheme, price anchoring, price discrimination, race to the bottom, Richard Thaler, Ronald Reagan, side project, Steve Jobs, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, traveling salesman, ultimatum game, Victor Gruen, washing machines reduced drudgery, working poor, yield management, zero-sum game

But if you aren’t Wal-Mart, you need a more nuanced pricing strategy than ‘everyday low prices.’ ” Tracking all the variables and boiling them down into such a “nuanced” strategy is as tough as predicting New England weather. Mathematically-based price optimization is not new. Airlines and hotels have relied on it for decades. When a flight starts to fill or a hotel runs short of rooms, yield management ensures that prices go up. Likewise, when rooms or seats aren’t filling fast enough, prices go down. This phenomenon is not reliably linear; many of us have had the experience of booking a flight or hotel room and watching it become cheaper over time. Yield management requires anticipating trends before they happen and discounting or raising prices well ahead of the actual events. Like hotel rooms and seats on an airplane, many consumer goods and services are in demand for a limited time period, so the timing of discounts is crucial.

As one industry insider told the Wall Street Journal, “Amazon.com’s biggest mistake was getting caught.” The same was true for Apple when it sharply reduced the price of its iPhone just a couple of months after putting it on the market. Customers complained that this was simply not fair and that it made them lose faith in the company. A close cousin to price rationing is the equally familiar “yield management,” whereby airlines and hotels moderate prices depending on demand. This practice is widespread and largely (if grumpily) tolerated. We have come to accept the idea that the guy sitting next to us in the back of the plane might have paid far less than we did for the seat. “Price discrimination is considered fair if it takes place for a socially acceptable reason,” Sarah Maxwell told me. Of course, “socially acceptable” is determined by context.

perfect competition Peters, Tom Pollan, Michael Pollin, Robert pork industry positioning prices on menus potatoes Potomac Mills poverty, in China Predictably Irrational (Ariely) Prevor, Barry ”Price and Brand Name as Indicators of Quality Dimensions for Consumer Durables” (Naylor) prices discounting (See discounters/ discounting) elasticity manual labor-intensive products and maximum price regulations, during World War II, minimum price regulations overcharging theory of (See pricing theory) price tags pricing theory anticipation auctions behavioral responses to prices context of transaction expectations manipulated by price loss aversion natural versus market value neuroscience of emotion and numbers, meaning of positioning prices on menus promotions psychology underlying rational maximizing model of consumer choice, flaws in rationing regret Ultimatum Game utility maximization theory yield management primary processing system, of brain priming Principles of Political Economy and Taxation (Ricardo) productivity gains in real income declines despite gains in Professional Service Association promotions ”Prospect Theory: An Analysis of Decision Under Risk” (Kahneman and Tversky) prudent man psychology of consumer behavior pull of the salient Raleigh, Sir Walter Ralph Lauren Ramakrishnan, Rama rational maximizing model of consumer choice, flaws in rationing of goods price RC2 Corporation rebates breakage free instant mail-in recession, of 2008, Red Lobster reference pricing regret Retail Merchants Association Reyes, Isabel Ricardo, David rice Riceland Foods Riedinger, Jeff Roberts, Paul Robinson-Patman Act Roosevelt, Franklin D.


pages: 482 words: 125,973

Competition Demystified by Bruce C. Greenwald

additive manufacturing, airline deregulation, AltaVista, asset allocation, barriers to entry, business cycle, creative destruction, cross-subsidies, deindustrialization, discounted cash flows, diversified portfolio, Everything should be made as simple as possible, fault tolerance, intangible asset, John Nash: game theory, Nash equilibrium, Network effects, new economy, oil shock, packet switching, pets.com, price discrimination, price stability, selective serotonin reuptake inhibitor (SSRI), shareholder value, Silicon Valley, six sigma, Steve Jobs, transaction costs, yield management, zero-sum game

Everyone is made better off if, instead of going head-to-head in every niche, each firm picks a territory that it has pretty much to itself. Territory can be defined by geography, product type, service specialization, or the characteristics of target customers. So long as these segments are not too closely related, the companies are unlikely to be tempted to compete with one another on price.* With each company reigning in its particular niche, the industry will have what is known as effective yield management—in which customers who are willing to pay more for an item will get the opportunity to do so, because their choice resides in a particular niche and they are not tempted to buy a lower-priced alternative in another niche, even if the two purchases look essentially equivalent to someone else.† From a cooperative perspective, price coordination is largely a matter of the effective positioning of firms across industry subsegments.

See Marketing Aetna Aggression avoiding costs nature of Airbus Aircraft industry Airline Deregulation Act Airline industry barriers to entry buyouts customer loyalty programs deregulation direct competition avoidance government regulation hub-and-spoke system industry map market segments market share stability price competition in returns technology travel agent relations yield management AMD (Advanced Micro Devices) Intel v. America Japan v. manufacturing productivity American Airlines America Online. See AOL Amoco Anheuser-Busch Coors v. market share stability Miller v. operating margin returns Antitrust violations AOL (America Online) Apple Computer applications competitors growth dilemma history IBM and industry map market share stability Motorola and notebooks operating margins positioning profitability returns synergy vision Aramco Arkwright, Richard Armstrong, Michael Assets valuation Atari AT&T Auction houses Autodesk Automobile industry acquisitions customer captivity differentiation economies of scale globalization’s influence Bargaining.

See also Nintendo competitors customer captivity diversification home v. arcade industry map Japan’s market segments retail industry successes and failures technology, Walgreen’s Wal-Mart bargaining power concentration strategy cost advantages economies of scale expansion geographic advantages history industry map Kmart v. management marketing strategy monopoly benefits operating margins profitability real estate returns, Target v. warehouse club Walton, Bud Walton, Sam Warehouse clubs War games Welch, Jack Wellfleet Windows Macintosh v., Woodruff, Edward World War IIstrategy Xbox Xerox Yahoo! Yield management Zero-sum games *The Justice Department had demanded that AT&T restructure in some way, but the company itself was deeply involved in formulating the strategy by which the Regional Bell Operating Companies were spun off. *Most differentiated products also compete in markets where there are no barriers to entry, so differentiation, as we will illustrate, is not sufficient to protect a firm from the ravages of a highly competitive market.


pages: 436 words: 76

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

"Robert Solow", Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, Berlin Wall, Big bang: deregulation of the City of London, business cycle, California gold rush, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Edward Lloyd's coffeehouse, equity premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, financial innovation, Francis Fukuyama: the end of history, George Akerlof, George Gilder, greed is good, Gunnar Myrdal, haute couture, illegal immigration, income inequality, industrial cluster, information asymmetry, intangible asset, invention of the telephone, invention of the wheel, invisible hand, John Meriwether, John Nash: game theory, John von Neumann, Kenneth Arrow, Kevin Kelly, knowledge economy, light touch regulation, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, Pareto efficiency, Paul Samuelson, pets.com, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, Right to Buy, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, telemarketer, The Chicago School, The Market for Lemons, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Vilfredo Pareto, Washington Consensus, women in the workforce, yield curve, yield management

In 2001 the pool was scrapped and replaced by arrangements much more similar to those of the world oil market. 21 Incentive compatibility is a key objective of a market economy and a specific objective of the electricity pool. But only perfectly competitive markets achieve full incentive compatibility. Once sellers or buyers are sufficiently large for their behavior to influence the price, they begin to behave strategically. Yield Management ••••••••••••••••••••••••••••••••••••• In perfectly competitive markets, the price that equates supply and demand emerges through spontaneous order as at San Remo. In markets that are less than perfectly competitive, a seller decides what price to charge. Balancing supply and demand becomes a business objective, rather than the outcome of a decentralized process. One of the most sophisticated such markets is the market for airline seats.

Airlines have more or less the same number of planes and seats available every day. Once they have decided the size of their fleet, their capacity is fixed. But demand varies widely. Empty seats on planes are as useless and as unprofitable as flowers left wilting when the San Remo { 152} John Kay market is closed. But San Remo is a competitive market, in which no one fixes the price. Airlines face only a few competitors. They have sophisticated computer packages-yield management systemsdesigned to enable them to monitor the balance between supply and demand. These systems are fed basic information-when Easter falls, the date of the Super Bowl, what happened last year. The objective is not to fill the plane, but to maximize revenue from the flight. An airline would rather have some empty seats than a planeful of passengers all on discounted tickets. It hopes to sell seats at high prices to business passengers in a hurry and at lower prices to price-sensitive tourists.

A trade that benefits the parties involved will have consequences for others if it affects the terms on which other people can trade. And this is often true. When a plane is about to depart with an empty seat, it would be a Pareto improvement if the seat was filled by a passenger willing to pay anything at all. But the airline won't do this, because if seats were regularly available for next to nothing whenever one was empty, this would affect the behavior of full-fare-paying passengers. Airlines have the sophisticated yield management systems of chapter 12 to handle precisely this problem. Their aim is not to fill the plane, but to strike a balance between filling seats and obtaining good prices for seats. If they could read minds and gauge exactly how much each passenger would be willing to pay, they could engage in perfect price discrimination 7 and achieve Pareto efficiency. But of course they can't. So free trade leads to Pareto efficiency only in perfectly competitive markets because only perfectly competitive markets are free of these incentive compatibility problems.


pages: 393 words: 115,217

Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries by Safi Bahcall

accounting loophole / creative accounting, Albert Einstein, Apple II, Apple's 1984 Super Bowl advert, Astronomia nova, British Empire, Cass Sunstein, Charles Lindbergh, Clayton Christensen, cognitive bias, creative destruction, disruptive innovation, diversified portfolio, double helix, Douglas Engelbart, Douglas Engelbart, Edmond Halley, Gary Taubes, hypertext link, invisible hand, Isaac Newton, Johannes Kepler, Jony Ive, knowledge economy, lone genius, Louis Pasteur, Mark Zuckerberg, Menlo Park, Mother of all demos, Murray Gell-Mann, PageRank, Peter Thiel, Philip Mirowski, Pierre-Simon Laplace, prediction markets, pre–internet, Ralph Waldo Emerson, RAND corporation, random walk, Richard Feynman, Richard Thaler, side project, Silicon Valley, six sigma, Solar eclipse in 1919, stem cell, Steve Jobs, Steve Wozniak, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tim Cook: Apple, tulip mania, Wall-E, wikimedia commons, yield management

Thirty years before Big Data became a Silicon Valley buzzword, American discovered big data. Crandall set up a division to use that data to extract maximum dollars per seat. The technique, as expected, was given a very boring name: yield management. The frequent flier program that American invented around this time, which built customer loyalty, and the SuperSaver program, which filled empty seats with last-minute bookings, were much more visible. Other airlines quickly copied those ideas. But the behind-the-scenes, unglamorous, locked-in distribution channel from Sabre and the yield-management techniques from Big Data were almost impossible to copy, for many years. Those changes saved American. Few people go wild for a reservations system. Most people have eyes only for the more glamorous types of loonshots.

“politest”: Bender, 490. “if you don’t win” and “Where were you?”: Maxon. “batshit”: Petzinger, 55. “academic eggheads”: Petzinger, 102 (“Crandall does not recall the comment but does not deny making it”). “kerosene in his blood”: Rubin. The pie industry: AA innovations: Cohen; Petzinger; Reed; Rubin. Quotations: “legalized warfare”: Rubin. “cannibalistic”: Zellner. “Tuesday as opposed to Friday” and “yield management”: Petzinger, 304. JT and Lindy: C. A. Lindbergh (CAL) flight and mania: Berg, 112–32, 135–63; CAL, AoV, 70–83; Jackson, 271–77, 305–25; Van Vleck, 42–44. Prior attempts: Connor; Jackson, 369–70. CAL, Trippe, Latin America: Bender, 100–101; Berg, 172–75, 191; CAL, AoV, 83–96; Van Vleck, 56–64; Daley, 60–68, 484. S-38: Bender, 182–85, 100–101; Davies, 12–13. Radio navigation, Fatt crash: Aeronautical—1929, 108–9; Aeronautical—1930, 52; Bender, 155–63; Daley, 43–55.


Virtual Competition by Ariel Ezrachi, Maurice E. Stucke

Airbnb, Albert Einstein, algorithmic trading, barriers to entry, cloud computing, collaborative economy, commoditize, corporate governance, crony capitalism, crowdsourcing, Daniel Kahneman / Amos Tversky, David Graeber, demand response, disintermediation, disruptive innovation, double helix, Downton Abbey, Erik Brynjolfsson, experimental economics, Firefox, framing effect, Google Chrome, index arbitrage, information asymmetry, interest rate derivative, Internet of things, invisible hand, Jean Tirole, John Markoff, Joseph Schumpeter, Kenneth Arrow, light touch regulation, linked data, loss aversion, Lyft, Mark Zuckerberg, market clearing, market friction, Milgram experiment, multi-sided market, natural language processing, Network effects, new economy, offshore financial centre, pattern recognition, prediction markets, price discrimination, price stability, profit maximization, profit motive, race to the bottom, rent-seeking, Richard Thaler, ride hailing / ride sharing, road to serfdom, Robert Bork, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Skype, smart cities, smart meter, Snapchat, social graph, Steve Jobs, supply-chain management, telemarketer, The Chicago School, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, Travis Kalanick, turn-by-turn navigation, two-sided market, Uber and Lyft, Uber for X, uber lyft, Watson beat the top human players on Jeopardy!, women in the workforce, yield management

Peter Schmidt, “At Elite Colleges—Dim White Kids,” Boston Globe, September 28, 2007, http://www.boston.com/news/globe/editorial _opinion/oped /articles/2007/09/28/at _the _elite _colleges _ _ _dim _white _ kids/?page =full. 6. Federal Trade Commission and U.S. Department of Justice, Horizontal Merger Guidelines, para. 3. 284 Notes to Pages 87–90 7. Ibid. 8. Barry C. Smith, John F. Leimkuhler, and Ross M. Darrow, “Yield Management at American Airlines,” Interfaces 22, no. 1 (1992): 8–31; Paul Davies, “Airline Ties Profitability Yield to Management,” SIAM News 27, no. 5 (1994), cited in R. Preston McAfee and Vera te Velde “Dynamic Pricing in the Airline Industry”: “This number may be inflated for several reasons. First, it includes sales of yield management strategy to others, as opposed to American’s own use of the techniques, although the value of American’s internal use is put at just slightly less. Second, it incorporates “damaged good” considerations in the form of Saturday-night stayover restrictions, as well dynamic pricing.

As competition authorities recognize, “Arbitrage on a modest scale may be possible but sufficiently costly or limited that it would not deter or defeat a discriminatory pricing strategy.”7 Dynamic Pricing Price discrimination differs from dynamic pricing, where prices change in response to changes in supply and demand. The airline industry was one of the first to profit from dynamic pricing. Early estimates from the 1990’s suggested that American Airlines, which many consider to have pioneered dynamic pricing, made, at the time, an extra $500 million per year through its yield management.8 Today, dynamic pricing is pervasive in the airline industry, with frequent changes to pricing and availability of seat class—all aimed at maximizing profitability—by estimating customers’ flexibility, outside options, and reservation price. Similar practices are common in many other industries, from hotels to sporting events. They may be used in brick and mortar outlets or online. For instance, retailers may change prices based on the time of purchase, the availability of competing products, or the diminishing desirability of the product.


pages: 133 words: 36,528

Peak Car: The Future of Travel by David Metz

autonomous vehicles, bike sharing scheme, Clayton Christensen, congestion charging, crowdsourcing, David Attenborough, decarbonisation, disruptive innovation, edge city, Edward Glaeser, Just-in-time delivery, low cost airline, Network effects, Richard Florida, Robert Gordon, Silicon Valley, Skype, urban sprawl, yield management, young professional

The main idea for achieving this is ‘road pricing’, also known as ‘congestion charging’ and implemented in central London. By charging for use of road space, particularly when congested with traffic, some people decide not to travel, or to travel at others times, leaving more room for those who travel needs are more pressing. Air travel already uses something like demand management to set fares—known as ‘yield management’, the now familiar flexible pricing introduced by the budget airlines and adopted generally for short‑haul flights. This allows the airlines to offer bargain prices on less popular flights and to those who can book early, and to make an acceptable overall return by charging more for popular routes, busy times and late bookers. Demand management through flexible fares would allow the sensible development of air travel in the face of constrained capacity at Heathrow.


pages: 138 words: 40,787

The Silent Intelligence: The Internet of Things by Daniel Kellmereit, Daniel Obodovski

Airbnb, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, barriers to entry, business intelligence, call centre, Clayton Christensen, cloud computing, commoditize, connected car, crowdsourcing, data acquisition, en.wikipedia.org, Erik Brynjolfsson, first square of the chessboard, first square of the chessboard / second half of the chessboard, Freestyle chess, Google X / Alphabet X, Internet of things, lifelogging, Metcalfe’s law, Network effects, Paul Graham, Ray Kurzweil, RFID, Robert Metcalfe, self-driving car, Silicon Valley, smart cities, smart grid, software as a service, Steve Jobs, web application, Y Combinator, yield management

Taking a step back and looking at the big picture, one could argue that the largest potential arises from the fact that machines become more effective in doing what human beings have done in the past. As we showed in chapter 3, humans and machines work best in tandem when humans capitalize on their own creativity and intuition while machines handle data gathering, analytics, and algorithms. Already today, many systems run highly optimized with little or no human intervention, such as manufacturing, logistics planning, yield management, certain medical research, autonomous driving, and flying. Many more industry sectors will rely on machines in the future, which will take over most of the operational functions better and more precisely than humans. The Singularity University is a nonprofit learning institution in Silicon Valley that is trying to foster knowledge and thinking in this field. According to their own proposition, they aim to “assemble, educate and inspire a cadre of leaders who strive to understand and facilitate the development of exponentially advancing technologies and apply, focus, and guide these tools to address humanity’s grand challenges.”31 While this sounds like a bold statement, many of the pieces that support this vision are coming together right now, and such programs are gaining tremendous traction.


pages: 356 words: 51,419

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by John C. Bogle

asset allocation, backtesting, buy and hold, creative destruction, diversification, diversified portfolio, financial intermediation, fixed income, index fund, invention of the wheel, Isaac Newton, new economy, passive investing, Paul Samuelson, random walk, risk tolerance, risk-adjusted returns, Sharpe ratio, stocks for the long run, survivorship bias, transaction costs, Upton Sinclair, Vanguard fund, William of Occam, yield management, zero-sum game

What’s more, even if bond managers add a few fractions of 1 percent to the funds’ gross returns, they rarely overcome the fund expenses, fees, and sales loads involved in acquiring their services. Bonds vary in riskiness. While these costs make the task of improving returns far more difficult, overly confident bond fund managers may be tempted to take just a little extra risk by extending maturities of the bonds in the portfolio. (Long-dated bonds—with, say, 30-year maturities—are much more volatile than short-term bonds—say, two years—but usually provide higher yields.) Managers also may be tempted to increase returns by reducing the investment quality of the portfolio, holding less in U.S. Treasury bonds (rated AA+) or in investment-grade corporate bonds (rated BBB or better), and holding more in below-investment-grade bonds (BB or lower), or even some so-called junk bonds, rated below CC or even unrated. Heavy reliance on junk bonds to increase the income generated by your portfolio subjects your bond investment to high risks.


pages: 192 words: 75,440

Getting a Job in Hedge Funds: An Inside Look at How Funds Hire by Adam Zoia, Aaron Finkel

backtesting, barriers to entry, collateralized debt obligation, commodity trading advisor, Credit Default Swap, credit default swaps / collateralized debt obligations, discounted cash flows, family office, fixed income, high net worth, interest rate derivative, interest rate swap, Long Term Capital Management, merger arbitrage, offshore financial centre, random walk, Renaissance Technologies, risk-adjusted returns, rolodex, short selling, side project, statistical arbitrage, stocks for the long run, systematic trading, unpaid internship, value at risk, yield curve, yield management

By definition, convertible bonds are fixed-income securities with the added attraction of giving holders a stock option to buy shares of the underlying company. As the underlying stock rises, the value of the convertible bond should also rise. Investors are protected on the downside, because even if the stock falls, the bond will simply fall to the level where it is in essence a straight bond. c01.indd 9 1/10/08 11:00:57 AM 10 Getting a Job in Hedge Funds High-Yield High-yield managers invest in noninvestment-grade debt of companies that show significant upside potential. Objectives may range from high current income to acquisition of undervalued instruments. Managers focus on assessing the credit risk of the issuer. Some of the available high-yield instruments include extendable/reset securities, increasing-rate notes, pay-in-kind securities, step-up coupon securities, and splitcoupon securities.


pages: 268 words: 76,702

The System: Who Owns the Internet, and How It Owns Us by James Ball

Bill Duvall, bitcoin, blockchain, Chelsea Manning, cryptocurrency, don't be evil, Donald Trump, Douglas Engelbart, Edward Snowden, en.wikipedia.org, Firefox, Frank Gehry, Internet of things, invention of movable type, Jeff Bezos, jimmy wales, Julian Assange, Kickstarter, Leonard Kleinrock, Marc Andreessen, Mark Zuckerberg, Menlo Park, Minecraft, Mother of all demos, move fast and break things, move fast and break things, Network effects, Oculus Rift, packet switching, patent troll, Peter Thiel, pre–internet, ransomware, RFC: Request For Comment, risk tolerance, Ronald Reagan, Rubik’s Cube, self-driving car, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, Skype, Snapchat, Steve Crocker, Stuxnet, The Chicago School, undersea cable, uranium enrichment, WikiLeaks, yield management, zero day

This made the task for publishers all but impossible: how could you work out which ad network would actually make you more money, given they all defined views differently and the supposed headline figure of CPM was useless? O’Kelley’s idea was to try to build a quick dashboard tool to help publishers track which ad network would actually make them more money, once you factored in all of their requirements. ‘I built a yield management widget, basically, that would try to figure out which ad network to allocate to, based on which would make the most money. But it didn’t work, because the ad networks were too dumb.’ In other words, the ad networks weren’t sure what yield they could expect to get off a particular advert either, as they weren’t very good at tracking their own revenue. So O’Kelley’s independent widget for publishers became part of a wider system: his company sold better software to ad networks to help them track how much a given advert would yield.


pages: 406 words: 88,820

Television disrupted: the transition from network to networked TV by Shelly Palmer

barriers to entry, call centre, commoditize, disintermediation, en.wikipedia.org, hypertext link, interchangeable parts, invention of movable type, Irwin Jacobs: Qualcomm, James Watt: steam engine, Leonard Kleinrock, linear programming, Marc Andreessen, market design, Metcalfe’s law, pattern recognition, peer-to-peer, recommendation engine, Saturday Night Live, shareholder value, Skype, spectrum auction, Steve Jobs, subscription business, Telecommunications Act of 1996, There's no reason for any individual to have a computer in his home - Ken Olsen, Vickrey auction, Vilfredo Pareto, yield management

Or, commercials can be created that include different offers at different times of the day, or even if the stock market is up or down. Dynamic advertising offers video broadcasters a near live, reactive tool to communicate with consumers. Copyright © 2006, Shelly Palmer. All rights reserved. 11-Television.Chap Eleven v3.qxd 3/20/06 7:27 AM Page 155 Addressable Dynamic Ads 155 Addressable Dynamic Ads Aside from yield managing manufacturing or retail capacity in real time, dynamic ads can also be used to customize content based upon viewer location, behaviors or preferences. When all of these attributes are combined, the system is said to have addressability. Many people confuse addressability and dynamicism, but they are different functions. As we have discussed, dynamic ads change based upon business rules. Addressable ads are ads that can be addressed to a specific set-top box, computer, person, household, u Dynamic addressable neighborhood, town, city, DMA, region, time zone or any combination thereof.


Istanbul Travel Guide by Lonely Planet

car-free, carbon footprint, low cost airline, supply-chain management, the built environment, urban sprawl, yield management

That said, there are a number of Sultanahmet hotels that seem to have melded the best of both worlds, delivering quietly elegant interiors with Anatolian or Ottoman flourishes. Rates & Reservations Hotels here are busy, so you should book your room as far in advance as possible, particularly if you are visiting during the high season (Easter to May, September to October and Christmas/New Year). Recent years have seen significant fluctuations in tourist numbers in İstanbul, so most hotels now use yield management systems when setting their rates. This means that in quiet times prices can drop dramatically (sometimes by as much as 50%) and in busy times they can skyrocket. As a result, you should treat our prices as a guide only – it is possible that the price you are quoted will be quite different. Note that most hotels in İstanbul set their prices in euros, and we have listed them as such here. Lonely Planet’s Top Choices Hotel Empress Zoe Atmospheric boutique choice near Aya Sofya perfectly balancing charm and comfort.


pages: 400 words: 88,647

Frugal Innovation: How to Do Better With Less by Jaideep Prabhu Navi Radjou

3D printing, additive manufacturing, Affordable Care Act / Obamacare, Airbnb, Albert Einstein, barriers to entry, Baxter: Rethink Robotics, Bretton Woods, business climate, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, cloud computing, collaborative consumption, collaborative economy, Computer Numeric Control, connected car, corporate social responsibility, creative destruction, crowdsourcing, disruptive innovation, Elon Musk, financial exclusion, financial innovation, global supply chain, IKEA effect, income inequality, industrial robot, intangible asset, Internet of things, job satisfaction, Khan Academy, Kickstarter, late fees, Lean Startup, low cost airline, low cost carrier, M-Pesa, Mahatma Gandhi, megacity, minimum viable product, more computing power than Apollo, new economy, payday loans, peer-to-peer lending, Peter H. Diamandis: Planetary Resources, precision agriculture, race to the bottom, reshoring, risk tolerance, Ronald Coase, self-driving car, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, six sigma, smart grid, smart meter, software as a service, standardized shipping container, Steve Jobs, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, transaction costs, Travis Kalanick, unbanked and underbanked, underbanked, women in the workforce, X Prize, yield management, Zipcar

In this way, the company can accurately forecast demand and supply, react faster and better to market conditions, maintain lower stock levels and keep costs down. A frugal services revolution GAPPAA.ORG Companies are finding new, highly effective and affordable ways to deliver services or services bundled with products. Such business models include: software as a service (SaaS) in computing; power by the hour in aircraft engines; massive open online courses (MOOCs) in education; hub-and-spoke and yield management models in airlines; online retailing; and cloud computing. By flexing their assets, airlines such as Southwest Airlines, easyJet and Ryanair have created a new, low-cost market segment for flyers within the US and Europe, and have succeeded in challenging long-haul incumbents. First, the low-cost carriers rebased the existing airline business model by maximising the time that their most valuable assets – their aircraft – spend in the air, and reducing the time they spend on the ground.


pages: 290 words: 87,549

The Airbnb Story: How Three Ordinary Guys Disrupted an Industry, Made Billions...and Created Plenty of Controversy by Leigh Gallagher

Airbnb, Amazon Web Services, barriers to entry, Ben Horowitz, Bernie Sanders, cloud computing, crowdsourcing, don't be evil, Donald Trump, East Village, Elon Musk, housing crisis, iterative process, Jeff Bezos, Jony Ive, Justin.tv, Lyft, Marc Andreessen, Mark Zuckerberg, medical residency, Menlo Park, Network effects, Paul Buchheit, Paul Graham, performance metric, Peter Thiel, RFID, Sam Altman, Sand Hill Road, Saturday Night Live, sharing economy, side project, Silicon Valley, Silicon Valley startup, South of Market, San Francisco, Startup school, Steve Jobs, TaskRabbit, the payments system, Tony Hsieh, Travis Kalanick, uber lyft, Y Combinator, yield management

Guesty, a professional management service for hosts, started by Israeli twin brothers, is one of the largest: hosts give Guesty access to their Airbnb accounts, and it handles booking management, all guest communication, calendar updating, and scheduling and coordinating with cleaners and other local service providers, for a fee of 3 percent of the booking charge. San Francisco–based Pillow creates a listing, hires cleaners, handles keys, and employs an algorithm to determine best pricing options. HonorTab brings a minifridge concept to Airbnb. Everbooked was founded by a self-described yield-management geek with expertise in data science who saw the need for dynamic pricing tools for Airbnb hosts. One of the biggest chores that hosts often need help with, for example, is turning over keys to guests. It can be hard to always arrange to be home when the guest arrives, especially if the host has a full-time job, or is out of town, or when travelers’ flights are delayed. Clayton Brown, a Stanford Business School alum living in Vancouver who worked in finance, started using Airbnb in 2012 to list his apartment whenever he traveled on business, and soon identified the key-exchange process as his biggest point of friction.


pages: 350 words: 103,988

Reinventing the Bazaar: A Natural History of Markets by John McMillan

"Robert Solow", accounting loophole / creative accounting, Albert Einstein, Alvin Roth, Andrei Shleifer, Anton Chekhov, Asian financial crisis, congestion charging, corporate governance, corporate raider, crony capitalism, Dava Sobel, Deng Xiaoping, experimental economics, experimental subject, fear of failure, first-price auction, frictionless, frictionless market, George Akerlof, George Gilder, global village, Hernando de Soto, I think there is a world market for maybe five computers, income inequality, income per capita, informal economy, information asymmetry, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John von Neumann, Kenneth Arrow, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, ought to be enough for anybody, pez dispenser, pre–internet, price mechanism, profit maximization, profit motive, proxy bid, purchasing power parity, Ronald Coase, Ronald Reagan, sealed-bid auction, second-price auction, Silicon Valley, spectrum auction, Stewart Brand, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, War on Poverty, Xiaogang Anhui farmers, yield management

Internet sellers are able to offer deep discounts just before the flight or the game, earning revenue from seats that otherwise would have been empty. Without the instant two-way communication the internet provides, it would be hard to implement this pricing flexibility. The rapid flow of information about consumers’ tastes that comes from online ticket sales works in the other direction as well, allowing sellers to set higher-than-normal prices for flights and games that turn out to be especially popular. Techniques known as “yield management” separate price-sensitive customers from price-insensitive customers, allowing the seller to charge a higher price to the latter. Customer-tailored pricing is not new: before the internet, airlines charged lower ticket prices to those who booked a week in advance or were willing to stay over Saturday night, and higher prices to those who wanted the flexibility of last-minute purchases. The internet, however, has brought more tailoring of prices to individual demands.


pages: 371 words: 101,792

Skygods: The Fall of Pan Am by Robert Gandt

airline deregulation, Ayatollah Khomeini, Berlin Wall, Charles Lindbergh, collective bargaining, hiring and firing, invisible hand, Maui Hawaii, RAND corporation, Tenerife airport disaster, yield management, Yogi Berra, Yom Kippur War

Delta was one of the first airlines to construct a hub-and-spoke system, concentrating its activity at “hubs” like Atlanta, Dallas, Cincinnati, and Salt Lake City, with feeder routes—“spokes”—radiating outward to its hundreds of satellite destinations. The “Big Three”—American, United, and Delta—had all prospered under deregulation, developing hub-and-spoke networks, frequent-flier programs, computer reservations systems, and sophisticated yield management strategies that enabled them to overwhelm their regional competitors. While American and United, both flush with cash, spent over a billion dollars buying up the routes of Pan Am, TWA, Continental, and Eastern, Delta had held back. “We sit around quietly doing our thing,” Delta’s president, Whit Hawkins, liked to say, “while the rest of them go around killing each other.” But now, down in Atlanta, the thought was occurring that perhaps they had sat around long enough.


pages: 298 words: 43,745

Understanding Sponsored Search: Core Elements of Keyword Advertising by Jim Jansen

AltaVista, barriers to entry, Black Swan, bounce rate, business intelligence, butterfly effect, call centre, Claude Shannon: information theory, complexity theory, correlation does not imply causation, en.wikipedia.org, first-price auction, information asymmetry, information retrieval, intangible asset, inventory management, life extension, linear programming, longitudinal study, megacity, Nash equilibrium, Network effects, PageRank, place-making, price mechanism, psychological pricing, random walk, Schrödinger's Cat, sealed-bid auction, search engine result page, second-price auction, second-price sealed-bid, sentiment analysis, social web, software as a service, stochastic process, telemarketer, the market place, The Present Situation in Quantum Mechanics, the scientific method, The Wisdom of Crowds, Vickrey auction, Vilfredo Pareto, yield management

Word-of-mouth: information that is passed between people, as opposed to messages from a company to people (Source: Quirk) (see Chapter 6 BAM!). Year over year (YOY): the means of comparing data from one year to the next. For example, to compare online holiday retail revenue from last year to this year (see Chapter 6 BAM!). Yield: the percentage of clicks versus impressions on an ad within a specific page. Also called ad click rate (Source: IAB) (see Chapter 6 BAM!). Yield management: yield and revenue management is the process of understanding, anticipating, and influencing advertiser and consumer behavior to maximize profits through better selling, pricing, packaging, and inventory management while delivering value to advertisers and site users (Source: IAB) (see Chapter 6 BAM!). Zipf’s principle of least effort: an information-seeking client will tend to use the most convenient search method (see Chapter 3 keywords). 272 Glossary References [1] Johnson, S. 1755.


pages: 369 words: 120,636

Commuter City: How the Railways Shaped London by David Wragg

Beeching cuts, Boris Johnson, British Empire, financial independence, joint-stock company, joint-stock limited liability company, Louis Blériot, North Sea oil, railway mania, Right to Buy, South Sea Bubble, urban sprawl, V2 rocket, Winter of Discontent, yield management

Traditionally and in most countries, railway fares were set by the mile, although on some urban railways, so-called ‘scheme’ or zonal fares would group several stations together for the same fare. This was first applied in the British Isles on the Bakerloo Line in 1911. British Rail, as it had become, decided to try to manage its traffic better by increasing peak period fares and reducing off-peak fares, a system sometimes referred to as yield management and practised by low-fare airlines. Of course, a railway is not an airline and the system did not ensure even loadings throughout the day or throughout the week. In the late 1960s, it was also decided to impose higher fare increases on lines with more modern rolling stock or a better service, with one of the lines treated in this way being that between London and Brighton. The new fares structure simply meant that optional travel, filling trains in the off-peak, was much reduced.


pages: 472 words: 117,093

Machine, Platform, Crowd: Harnessing Our Digital Future by Andrew McAfee, Erik Brynjolfsson

"Robert Solow", 3D printing, additive manufacturing, AI winter, Airbnb, airline deregulation, airport security, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, backtesting, barriers to entry, bitcoin, blockchain, British Empire, business cycle, business process, carbon footprint, Cass Sunstein, centralized clearinghouse, Chris Urmson, cloud computing, cognitive bias, commoditize, complexity theory, computer age, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, Dean Kamen, discovery of DNA, disintermediation, disruptive innovation, distributed ledger, double helix, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Ethereum, ethereum blockchain, everywhere but in the productivity statistics, family office, fiat currency, financial innovation, George Akerlof, global supply chain, Hernando de Soto, hive mind, information asymmetry, Internet of things, inventory management, iterative process, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, joint-stock company, Joseph Schumpeter, Kickstarter, law of one price, longitudinal study, Lyft, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Marc Andreessen, Mark Zuckerberg, meta analysis, meta-analysis, Mitch Kapor, moral hazard, multi-sided market, Myron Scholes, natural language processing, Network effects, new economy, Norbert Wiener, Oculus Rift, PageRank, pattern recognition, peer-to-peer lending, performance metric, plutocrats, Plutocrats, precision agriculture, prediction markets, pre–internet, price stability, principal–agent problem, Ray Kurzweil, Renaissance Technologies, Richard Stallman, ride hailing / ride sharing, risk tolerance, Ronald Coase, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Pinker, supply-chain management, TaskRabbit, Ted Nelson, The Market for Lemons, The Nature of the Firm, Thomas Davenport, Thomas L Friedman, too big to fail, transaction costs, transportation-network company, traveling salesman, Travis Kalanick, two-sided market, Uber and Lyft, Uber for X, uber lyft, ubercab, Watson beat the top human players on Jeopardy!, winner-take-all economy, yield management, zero day

The tools and techniques of revenue management, which have been refined by decades of research and real-world stress testing, can help greatly with this task but typically need lots of data to run well. They also benefit from being applied across lots of supply and lots of demand. In other words, they work better and better across bigger and bigger networks, and network effects are one of the defining characteristics of platforms. So, an exercise studio gains access to powerful yield management algorithms that let it maximize total revenue for each class. Airbnb hosts get pricing assistance so that their lodging is rented for the revenue-maximizing price during both busy and quiet periods. Uber drivers get “heat maps” showing them where to position themselves to maximize their chances of quickly getting a fare. Mathematically sophisticated, data-rich services like these used to be out of reach for many real-world businesses, especially small ones.


pages: 532 words: 139,706

Googled: The End of the World as We Know It by Ken Auletta

23andMe, AltaVista, Anne Wojcicki, Apple's 1984 Super Bowl advert, Ben Horowitz, bioinformatics, Burning Man, carbon footprint, citizen journalism, Clayton Christensen, cloud computing, Colonization of Mars, commoditize, corporate social responsibility, creative destruction, death of newspapers, disintermediation, don't be evil, facts on the ground, Firefox, Frank Gehry, Google Earth, hypertext link, Innovator's Dilemma, Internet Archive, invention of the telephone, Jeff Bezos, jimmy wales, John Markoff, Kevin Kelly, knowledge worker, Long Term Capital Management, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Menlo Park, Network effects, new economy, Nicholas Carr, PageRank, Paul Buchheit, Peter Thiel, Ralph Waldo Emerson, Richard Feynman, Sand Hill Road, Saturday Night Live, semantic web, sharing economy, Silicon Valley, Skype, slashdot, social graph, spectrum auction, stealth mode startup, Stephen Hawking, Steve Ballmer, Steve Jobs, strikebreaker, telemarketer, the scientific method, The Wisdom of Crowds, Upton Sinclair, X Prize, yield management, zero-sum game

He was recruited by Benton & Bowles in 1977 to run their national broadcast group; over the next twenty-two years he helped build their overseas business and also supervised the production of prime-time shows and made-for-TV movies. Throughout, he dabbled in computer software, creating the first application to measure the audience that ads attracted, and building software to manage ad inventory. “I wrote my first full-blown software system in 1973,” he said. In 1979, he built “the first Monster system—eventually two million lines of code,” he said, which became the standard yield management software that determined prices, modeled the national marketplace, and allocated ads. His last job at Benton & Bowles was CEO of MediaVest, their media buying and planning agency. In 1999, Sir Martin Sorrell, the CEO of the WPP Group, who was knighted in 2000, recruited him to become global chairman and CEO of Mindshare, a MediaVest competitor. Sorrell acquired other media-buying and planning agencies, and in 2003 Gotlieb was elevated to run them all under the rubric of GroupM.


pages: 493 words: 145,326

Fire and Steam: A New History of the Railways in Britain by Christian Wolmar

accounting loophole / creative accounting, Beeching cuts, carbon footprint, collective bargaining, computer age, Corn Laws, creative destruction, cross-subsidies, financial independence, hiring and firing, James Watt: steam engine, joint-stock company, low cost airline, railway mania, rising living standards, Silicon Valley, South Sea Bubble, strikebreaker, union organizing, upwardly mobile, working poor, yield management

InterCity was blessed too with a series of brilliant advertising campaigns devised by the Tories’ agency, Saatchi & Saatchi, notably the famous Jimmy Saville series ‘We’re getting there’. The HST saved the concept of express train travel and enabled the railways to remain competitive with the car on the now completed motorway network. InterCity was a people’s train service, with no supplement for its use, and it was so successful that yield management techniques to maximize revenue (through charging higher fares at times of peak demand), now familiar in the aviation industry, had to be developed by British Railways to choke off-peak-time demand (through cheap fares aimed at leisure customers travelling off-peak and high fares at times of the day when business people wanted to travel). A new breed of long-distance commuter emerged as it was now possible to travel daily from places as far from London as Bristol, Doncaster and even York.


pages: 520 words: 134,627

Unacceptable: Privilege, Deceit & the Making of the College Admissions Scandal by Melissa Korn, Jennifer Levitz

"side hustle", affirmative action, barriers to entry, blockchain, call centre, Donald Trump, Gordon Gekko, helicopter parent, high net worth, Jeffrey Epstein, Maui Hawaii, medical residency, Menlo Park, performance metric, rolodex, Ronald Reagan, Sand Hill Road, Saturday Night Live, side project, Silicon Valley, Snapchat, stealth mode startup, Steve Jobs, telemarketer, Thorstein Veblen, unpaid internship, upwardly mobile, yield management, young professional, zero-sum game

Chutzpah indeed. 29 A SYSTEM REFORMED? IN LATE SEPTEMBER 2019, more than 6,600 college counselors, admissions officers, and people in the enrollment management consulting business descended on Louisville, Kentucky, for the annual conference of the National Association for College Admission Counseling. The three-block radius around the Kentucky International Convention Center was buzzing with talk of yield management and recruiting tactics, recommendation letters, and application-fee waivers. School-branded stress balls, pens, and notebooks abounded. Collegewise, a college counseling firm, passed out what was by far the best swag: buttons that read “I said no to Aunt Becky,” a snarky nod to Lori Loughlin’s Full House character. There were panels and break-out sessions on using social media to drum up interest in a college, the pros and cons of early decision, and the realities of college counseling at enormous high schools.


pages: 507 words: 145,878

The Predators' Ball: The Inside Story of Drexel Burnham and the Rise of the JunkBond Raiders by Connie Bruck

corporate raider, diversified portfolio, Edward Thorp, financial independence, fixed income, Irwin Jacobs, mortgage debt, offshore financial centre, paper trading, profit maximization, The Predators' Ball, yield management, Yogi Berra, zero-coupon bond

But however much animus existed between group members and Lowell, no one could come between the two brothers. Michael Milken’s power did not go to his head in a way that impaired him as a salesman. Not long after he arrived in L.A. he called James Caywood, who had just arrived in Houston to run a high-yield-bond fund named American General Capital Management. “Mike said, ‘I hear you’re the new high-yield manager,’ ” Caywood recalled. “ ‘I’m Mike Milken. Why don’t you get on a plane, come out here, we’ll spend some time and talk about the high-yield market?’ “I said, ‘Mike, I’ve been in this business ten years as a salesman. I know it’s customary for the salesman to come to see the customer.’ “He said, ‘You know, you’re right.’ And he walked in the door one day later,” Caywood added. Milken arrived carrying under his arms two enormous files, like carousel cases, each weighing about thirty pounds.


pages: 518 words: 147,036

The Fissured Workplace by David Weil

accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, banking crisis, barriers to entry, business cycle, business process, buy and hold, call centre, Carmen Reinhart, Cass Sunstein, Clayton Christensen, clean water, collective bargaining, commoditize, corporate governance, corporate raider, Corrections Corporation of America, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, declining real wages, employer provided health coverage, Frank Levy and Richard Murnane: The New Division of Labor, George Akerlof, global supply chain, global value chain, hiring and firing, income inequality, information asymmetry, intermodal, inventory management, Jane Jacobs, Kenneth Rogoff, law of one price, loss aversion, low skilled workers, minimum wage unemployment, moral hazard, Network effects, new economy, occupational segregation, Paul Samuelson, performance metric, pre–internet, price discrimination, principal–agent problem, Rana Plaza, Richard Florida, Richard Thaler, Ronald Coase, shareholder value, Silicon Valley, statistical model, Steve Jobs, supply-chain management, The Death and Life of Great American Cities, The Nature of the Firm, transaction costs, ultimatum game, union organizing, women in the workforce, yield management

As part of this discussion, AAHOA stated that it will be identifying particular action items that it would like the franchise companies to implement, and AAHOA will also be interested in learning about other points that the franchise companies are already considering and implementing on an “as needed” basis, including: • granting the franchisees 6–12 month extensions on their construction and/or renovation projects; • postponing or suspending the introduction of any new amenities, programs, or systems until after the financial markets have stabilized and the industry is once again profitable; • increasing the franchise companies’ marketing efforts, both on a system-wide basis and at the local levels; • decreasing the royalty fees for any franchisees who are encountering severe financial hardships; … • protecting the existing franchisees by limiting the number of applications you approve for conversions or new hotels in their geographic areas, especially if there has been a downturn in reservations and occupancy rates in these areas; • assigning key personnel to meet with each franchisee to discuss individual issues concerning their respective hotels, including potential inexpensive marketing opportunities, yield management, decreasing expenses, and operating the facilities in a more efficient and cost-productive manner; and • in the event of an early termination (regardless of whether it is voluntary or involuntary), limiting the liquidated damages to no more than 6 months of royalty fees based on the amount of royalty fees the franchisee has paid in the immediately preceding 6 months. See http://www.aahoa.com/Content/ContentFolders/Pressroom/AAHOANews/MemberAlert—WorkingWiththeFranchisors.pdf (accessed October 5, 2009). 30.


Class Acts: Service and Inequality in Luxury Hotels by Rachel Sherman

deskilling, income inequality, indoor plumbing, invisible hand, knowledge worker, means of production, new economy, pink-collar, Thorstein Veblen, union organizing, upwardly mobile, yield management

Maximizing rates, as well as the number of rooms, constituted another game. Workers tried to sell rooms at high official, or “rack,” rates (rather than cheaper corporate rates) or sell them in the more expensive categories.12 It was much more satisfying to sell an $800 suite than to sell a basic room at a corporate rate for $225, which hardly felt like an achievement. Sally, a former reservationist at the Luxury Garden, told me that yield management (maximizing revenue through rate manipulation) was “like gambling” and that she liked to do it when she was bored. Front desk workers also used “upselling” when guests checked in and seemed to need more space; they received a small commission for convincing the guest to take (and pay for) a larger room. The outcomes of all of these games were consistent with managerial objectives of selling the most rooms at the highest rates possible.


On the Wrong Line: How Ideology and Incompetence Wrecked Britain's Railways by Christian Wolmar

accounting loophole / creative accounting, Beeching cuts, congestion charging, joint-stock company, profit motive, railway mania, the built environment, yield management, zero-sum game

BR was set the target of making InterCity profitable, which was achieved with a bit of fiddling over the inclusion of high-revenue routes such as London-Norwich and the omission of loss-makers, such as trains to Barrow in Furness and Cleethorpes, and some creative accounting that ensured costs were stacked into the heavily subsidised Provincial Railways sector. Freight, too, was supposed to be profitable, a much harder target. From an annual loss of £100m in 1984, InterCity broke even a couple of years later and then became highly profitable in the boom years of the late 1980s. This was achieved by more intensive use of rolling stock, good marketing and better yield management - raising fares in markets that could bear it. Indeed, for the first time, fare rises were used deliberately by BR, under government instruction, to maximise revenue and bring down the deficit. Virtually every year from Mrs Thatcher’s election to the mid-1990s, fares went up by more than the rate of inflation, which made sense in the narrow terms of cutting BR’s losses but was nonsensical in environmental terms.


pages: 1,042 words: 273,092

The Silk Roads: A New History of the World by Peter Frankopan

access to a mobile phone, Admiral Zheng, anti-communist, Ayatollah Khomeini, banking crisis, Bartolomé de las Casas, Berlin Wall, British Empire, clean water, Columbian Exchange, credit crunch, cuban missile crisis, Deng Xiaoping, discovery of the americas, drone strike, energy security, European colonialism, failed state, financial innovation, Isaac Newton, land reform, Mahatma Gandhi, Malacca Straits, mass immigration, Mikhail Gorbachev, Murano, Venice glass, New Urbanism, Ronald Reagan, sexual politics, South China Sea, spice trade, statistical model, Stuxnet, the built environment, the market place, The Wealth of Nations by Adam Smith, too big to fail, trade route, transcontinental railway, uranium enrichment, wealth creators, WikiLeaks, yield management, Yom Kippur War

Northern Europe was a hive of productive urban centres, with Antwerp, Bruges, Ghent and Amsterdam emerging in the fourteenth and fifteenth centuries as important emporia for goods to and from the Mediterranean, Scandinavia, the Baltics and Russia, as well as the British Isles. Naturally, they blossomed further still following the opening up of trade from India and the Americas.36 These cities became magnets for merchants from far and wide, which in turn made for vibrant social and economic life and for strong civic identities. The growing populations required surrounding land to be used efficiently, prompting rapid advances not only in yield management of crops in the surrounding territory but also in irrigation techniques, such as the construction of dykes and sea walls to allow every piece of available land to be used profitably. The burgeoning size and productivity of the cities of the Low Countries and their hinterlands made them lucrative honey pots – centres which generated tax revenues, something not lost on the Spanish rulers who by luck of dynastic marriage and inheritance controlled most of this region.37 It was not long before individual provinces and cities were howling in dismay at the introduction of punitively high levels of taxation, coupled with brutally heavy-handed attitudes on matters of faith.


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The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War (The Princeton Economic History of the Western World) by Robert J. Gordon

"Robert Solow", 3D printing, Affordable Care Act / Obamacare, airline deregulation, airport security, Apple II, barriers to entry, big-box store, blue-collar work, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Charles Lindbergh, clean water, collective bargaining, computer age, creative destruction, deindustrialization, Detroit bankruptcy, discovery of penicillin, Donner party, Downton Abbey, Edward Glaeser, en.wikipedia.org, Erik Brynjolfsson, everywhere but in the productivity statistics, feminist movement, financial innovation, full employment, George Akerlof, germ theory of disease, glass ceiling, high net worth, housing crisis, immigration reform, impulse control, income inequality, income per capita, indoor plumbing, industrial robot, inflight wifi, interchangeable parts, invention of agriculture, invention of air conditioning, invention of the sewing machine, invention of the telegraph, invention of the telephone, inventory management, James Watt: steam engine, Jeff Bezos, jitney, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, labor-force participation, Loma Prieta earthquake, Louis Daguerre, Louis Pasteur, low skilled workers, manufacturing employment, Mark Zuckerberg, market fragmentation, Mason jar, mass immigration, mass incarceration, McMansion, Menlo Park, minimum wage unemployment, mortgage debt, mortgage tax deduction, new economy, Norbert Wiener, obamacare, occupational segregation, oil shale / tar sands, oil shock, payday loans, Peter Thiel, pink-collar, Productivity paradox, Ralph Nader, Ralph Waldo Emerson, refrigerator car, rent control, Robert X Cringely, Ronald Coase, school choice, Second Machine Age, secular stagnation, Skype, stem cell, Steve Jobs, Steve Wozniak, Steven Pinker, The Market for Lemons, The Rise and Fall of American Growth, Thomas Malthus, total factor productivity, transaction costs, transcontinental railway, traveling salesman, Triangle Shirtwaist Factory, undersea cable, Unsafe at Any Speed, Upton Sinclair, upwardly mobile, urban decay, urban planning, urban sprawl, washing machines reduced drudgery, Washington Consensus, Watson beat the top human players on Jeopardy!, We wanted flying cars, instead we got 140 characters, working poor, working-age population, Works Progress Administration, yellow journalism, yield management

Although deregulation was initially expected to lower airline fares, we can see in figure 11–10 that there was no change in the real price of airline travel in the decades after the 1978 deregulation act. Instead, there was an increase in the variance of fares, as airlines could now vary the price of a given seat in order to maximize revenue, charging lower fares to personal travelers able to book weeks or months in advance and higher fares to business travelers who often booked within a day or two before the flight. Increasingly complex systems of managing airline fares (called “yield management”) devised other methods of charging higher prices to business travelers, including restrictions that required those buying the lowest fares to stay over a Saturday night at the trip’s destination. However, the meaning of the price itself changed on Monday, May 1, 1981, when American Airlines stunned the industry by introducing the first frequent flyer benefit plan, dubbed “AAdvantage.” Now each customer ticket purchase was linked to a frequent flyer plan number, and miles were added to a customer’s mileage balance in proportion to the miles flown per flight.