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Tuesday, December 27, 2005

Distribution of capital has a very serious problem

I run a number of websites, and it is my business. Problems happen occasionally, so I call up the company that provides me services to run these websites (i.e., web hosting service). I have been working on some problem recently, and I have been working with technicians at the company, but there was a miscommunication between us, so I called them today. To make a long story short, the conversation was neither pleasant to me nor to the technician that I spoke with. We had a couple of issues, but here is what was happening behind our conversion. The company wants to charge me $150 per hour to provide me a certain service; the company says that they would need 3 hours, so they want to charge $450 for the task. If you make $150 per hour and work for 40 hours a week, you would make about 300k a year, so I think it fair to say that it is rather expensive. I was not pleasant to hear that I would need to pay $150 per hour. There was also some miscommunication, so it made me even more unpleasant (I got a similar service for free in the past from the same company, but I would be charged this time if I want to get their service). My guess is that I am not the only one; there are plenty of unhappy consumers. I imagine that the technician that I spoke with speak with many unhappy consumers everyday, which makes him unhappy. What makes the situation ever worse is that there is very little that consumers get from the work (so called consulting service) that costs $150 per hour. Furthermore, the technician that I spoke with or other technicians do not get $150 per hour, so it does not make them happy, nor does it give a good reason to them to do their work well. Subsequently, consumers are even unhappier because they need to speak with technicians who are unhappy and not motivated to do good work. This is a terrible cycle (What's interesting is that I happily paid for $150 per hour to an attorney the other day; though it is the same price, since she works independently and gets to keep the most of the fee, she provides a good service, which makes up for my hesitation to pay a high price for the legal service). Senior technicians (they are often called system administrators) would do the actual work, since they are more experienced, but they do not get to keep the most of $450, either (Consequently, they are not greatly motivated, nor do they provide great service). So, who gets to keep the big chunk of the fee? Management, the company. Now, I understand that the business needs to have a structure and a large company needs to have a hierarchy; only companies with a certain size can provide certain services, so the structure and hierarchy become necessary. The fee needs to be distributed among the company, so it ends up being priced rather high. HOWEVER, is it really justified? Does it really make sense? Customers (including myself) are unhappy because the quality of service is not there. Those who speak with customers are not happy because they are not properly compensated, nor are they motivated (and this creates a terrible cycle of making both parties even unhappier). Consumers lose a lot of money while neither those who speak to them nor those who do the actual work make a lot of money. Somehow, those who are far away from the real action get to accumulate wealth. Isn't there a problem here? Isn't it possible that distribution of capital has a very serious problem?

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