Sunday, February 12, 2006


the other day i looked at my wells fargo account and saw that i had been charged a $2 "PHONE BANKER" fee. no, i had not been transferring assets over the phone, or arranging some complicated financial contract with a banker on the telephone explaining everything to me patiently. instead, i had called wells fargo customer service to ask them to reverse a fee that they had mistakenly applied to my account. so, i wondered, would they charge me a $2 fee to call and ask that they not charge the $2 fee? does the house always win? on the same day, i ran across this article: Microsoft plans new PC security service for June. these disturbed me because they both appear to be conflicts of interest, at the expense of consumers.

the reason professional athletes are barred from betting on sports is apparent: those same players are in a position to influence the outcome of the event on which they are betting. thus, their incentives deviate from those of a non-betting player, whose only incentive is to play the sport as well as possible. the betting player might be in a position where it is more profitable to play as poorly as possible, at least in the short run. sports organizations seek to discourage this possibility.

similarly, if wells fargo makes money from customer service calls, they have little incentive to operate error-free accounts. on the contrary, they have an incentive to maximize the number and amount of erroneous fees to the point just below which the public might think that they are error-prone. if the customer doesn't notice the erroneous fee, it's free money. if they notice the fee, they will incur a $2 charge to fix it. the bank might attempt to justify the charge with a complaint about the high cost of employing customer service personnel, to which i would respond by encouraging them to spend resources reducing the number of erroneous fees and thus the cost of fixing them. alas, they did not discuss it with me first.

the microsoft example is also rather underhanded. if they make (rather a lot of) money from a subscription-based anti-virus service, what would compel them to invent a virus-free operating system? in this case, the sports example is even more pronounced, because microsoft is playing a game without an opponent. even if they "lose" (i.e. they create a virus-ridden operating system), there is no other game in town. of course, that might change at some point (viz. the recent popularity of firefox, a more secure browser alternative to microsoft's internet explorer), but probably not too quickly that they could not do an about-face and respond accordingly. my solution to this, of course, is to simply not use microsoft windows. it is a luxury, however, not available to many.


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