Wednesday, June 23, 2004
Say you run a typical medium sized organization that has a need for strong security and reliability on your Internet connection. Do you spend $50k on a fancy Cisco router and super firewalls, or do you just plug in one of those Linksys deals they're pretty much giving away these days?
You think to yourself, "I'm an important law firm/hedge fund/software company and I can't trust my data and security to some free piece of junk. I'm going to protect myself with the top of the line model." Good thinking. Except for the fact that they are basically the same thing. Both setups are vulnerable to the most skilled and determined hacker, and both setups prevent the vast majority of security issues. Performance is also irrelevant, because unless you are a big company the connection coming in to your building will probably be the bottleneck anyways. For the vast majority of companies, there is no practical difference.
This is an example of a paradox pointed out in a recent speech by Charlie Munger where "if you want the physical volume [of units sold] to go up, the correct answer is to increase the price." This pretty much goes against all of microeconomics (except that crazy giffen good crap), and his point was that it's probably a good idea for economists to know some psychology.
What is the point of all this crap I'm spewing? The point is that sometimes you just have jack up your fee to some obscene amount. The big client doesn't want their legal mumbo jumbo done by the guy with a shingle out front who charges $50/hour. They want to pay $500/hour. The investment bank doesn't want their trading system programmed by the college student who will work for free pizza. They want that same guy a year later wearing a suit and being pimped out by Accenture for $150/hour.
Oh, and no one wants a $20 ho.
You think to yourself, "I'm an important law firm/hedge fund/software company and I can't trust my data and security to some free piece of junk. I'm going to protect myself with the top of the line model." Good thinking. Except for the fact that they are basically the same thing. Both setups are vulnerable to the most skilled and determined hacker, and both setups prevent the vast majority of security issues. Performance is also irrelevant, because unless you are a big company the connection coming in to your building will probably be the bottleneck anyways. For the vast majority of companies, there is no practical difference.
This is an example of a paradox pointed out in a recent speech by Charlie Munger where "if you want the physical volume [of units sold] to go up, the correct answer is to increase the price." This pretty much goes against all of microeconomics (except that crazy giffen good crap), and his point was that it's probably a good idea for economists to know some psychology.
What is the point of all this crap I'm spewing? The point is that sometimes you just have jack up your fee to some obscene amount. The big client doesn't want their legal mumbo jumbo done by the guy with a shingle out front who charges $50/hour. They want to pay $500/hour. The investment bank doesn't want their trading system programmed by the college student who will work for free pizza. They want that same guy a year later wearing a suit and being pimped out by Accenture for $150/hour.
Oh, and no one wants a $20 ho.
