Well it’s back to school time and one of the big sticker shock items in the eyes of many students is just how much textbooks cost. There was a nice little article on the WaPo recently on this, but I didn’t need to be reminded of it. Unfortunately, I believe some of my colleagues might.

The textbook market is, of course, several different markets, and much of what really angers students is the big intro course textbook, which frequently costs a small fortune. If you’re taking five intro courses as a new frosh, be prepared to be spending $1000 a semester on textbooks. Factoring in inflation, I don’t think textbooks are really all that much more expensive than they were when I was an undergraduate, but then one could buy used books, which cut the bill by about 30% after you factored in the lower cost. The ability to sell the books back at the end of the semester got you a little more. It was something, and an efficient way to recycle, too. However, publishers in this kind of area have been fighting off the used market more and more by churning editions, making custom editions for a given university, adding electronic resources of dubious nature, etc. This is all to let them keep collecting rents on textbooks by undercutting the used market. Students have, of course, replied by downloading scanned versions from torrent sites, sharing books, and so on.

Let me give you an example of edition churn. As a graduate student I taught a junior/senior level mathematics course that I had taken as an undergrad just under a decade before. (It was junior/senior level because Calculus III was a pre-requisite.) When I took the course, the book was in its third edition with a copy date of about 1980 (not exactly sure and my copy is elsewhere). It was showing its age. When I started teaching the class, the book was, sensibly enough, in its fourth edition. During the three years I taught the course it went through two version changes, fourth to fifth, fifth to sixth. It is now in its seventh edition. Even though I believe one of the authors has subsequently died, it is still being updated. Yes, it’s true the material has changed a bit, but most of the alterations were just large enough to justify a new copyright. For instance, material in the third edition was altered in the fourth but put back in fifth. Or was it the sixth? Like Dirty Harry, I can’t remember! The point is, it was rearranging deck chairs on the Titanic because the substance didn’t really change… nor should it, because it was the introduction to a topic that really wasn’t all that different. Sure the authors would add snippets of newer developments but I’m fairly convinced no one ever actually used much of the newer material—remember, this was an intro class and there’s only so much one can do in a semester. Rearranging an existing book is, of course, much easier than writing one de novo. It could probably be done as work for hire, which means the “author” provides limited input at best. Maybe one of the authors had a love child to put through college (ironic, n’est pas?) or, more likely, wanted to put a down payment on that retirement condo in Taos….

Now the reality is that faculty members—with the notable exceptions of the authors of intro books who grind through editions—are not getting rich on textbook publication. Believe me, I’ve written one. It took my co-author and I hundreds of hours and between the two of us, we’ve made a few thousand dollars on it all told. Now admittedly it helped get a good job so I’m getting paid that way, but still, I’m not exactly sipping rum punch on Bermuda after playing the back nine with Sean Connery off the proceeds. And this is to be expected. Last I checked our book has sold a few thousand copies, mostly to libraries. Here’s another example: I had a fantastic professor in grad school who taught a very technical mathematical theory class. He had amazing notes he’d put a lot of time into, all very nicely typeset in LaTeX. He just gave them away. I asked him why he didn’t publish them as a book (most textbooks in this area are dismal) and he said “I’m a full professor and won’t be promoted any higher. It simply doesn’t do me any good and would be too much work, so I just give them away for free. I’ll probably put them on Lulu eventually.” The problem, of course, is that nobody will know about his work except by word of mouth because it will not be promoted by a publisher, which is too bad. His course notes are simply that good. So there is a reason for publishers to exist. I do not begrudge them making money. They’re not in it for free, after all, but I could at least expect books that would last a references, but I believe quality has been going downhill, too, at many publishers…. especially the ones churning editions.

Beyond that, too many faculty members are insufficiently price sensitive. They simply don’t bother to look and fall for the blandishments of publishers, which include nice wine and cheese spreads at academic conferences, constant spam and direct mail, free quasi-worthless course material posted on book web sites, etc. Here’s another personal example. I teach a graduate level theory class where there are a few different textbooks. I like the one I used but it’s too advanced for most students. (I had the benefit, or curse depending how you look at it, of having the author as the instructor.) There are some other choices, most of which don’t provide enough details to be workable for my class, or else provide too many details that are really nice for me but not for students. I was left to choose between a $150 hardback and a $30 paperback reprint of an older book. I didn’t know the cheaper book well but decided it would be worth looking at it to see if it would be good for the students… the answer was yes, in fact it was better than the other more well-known text, covered most of the relevant theory well without any glaring “here’s how we do it in the days of mainframes” computational details that is always a risk for older books. That’s the one I picked. In fact, it is possible to get a copy of it for less than $10, used. The other course book can be had for $40 in paperback and I post my course notes and the extra journal articles on the class web page. Total cost: < $100, counting printing (believe me, grad students always find a way to print for cheap or free so even a few hundred pages of printing won’t cost them that much).

I urge any of my colleagues reading this to consider how many extra hours flipping burgers McDonald’s or peddling clothes at Abercrombie & Fitch, or, worse yet, how many extra dollars their students have to go in debt, before piling on all the extra books.

The current restaurant trend is tapas. For those of you who don’t dine out much at “nice” places, American-style tapas involves a bunch of small dishes of mostly quasi-Mediterranean “fusion” food ordered a la carte, which are sampled by everyone at the table “family style.”

Pah.

I don’t pay good money to have to pass a bunch of stupid little dishes filled with pretentious food I don’t understand around a table. Tapas can return to whatever culinary fad hole it crawled out of as far as I am concerned.

This rant is inspired by two recent events, my reading of this Dec. 5, New York Times article and my going to a Japanese “japas” restaurant with some relatives on roughly the same day. (I name no names to protect the innocent and guilty both.) I’d been to the restaurant a few years ago and liked it quite a bit, but the menu had changed from being more traditional Japanese restaurant, which always had a fair bit of a la carte on the sushi menu, of course, to “japas.” There were no entrees at all, just a long list of small dishes mostly priced between $3 and $8, with a few over that. No clue as to what they were, no clue as to what goes with what, how big anything is, and so on. The waiter was a useless ‘tard (both kinds). Now I’m not especially fond of Japanese food but can usually find something decent on the menu, for instance one of the Japanese adaptations to please the Western palate, shrimp tempura. There was a shrimp dish (“sweet shrimp”) which I ordered hoping that it was shrimp tempura… when the plate showed up with small shrimp in the shell with heads still on I realized the answer was a resounding no. Sure they were breaded and fried but definitely not shrimp tempura and definitely not satisfying either. I ended up ordering something else which was OK… but of course added to the bill, which added to my dissatisfaction. More on that below.

Basically, the whole phenomenon is just an upscale reinvention of an old American classic: the buffet. The big difference is that at a buffet, all your choices (as incoherent they may be) are laid out in front of you and are usually pretty simple stuff like mac ‘n’ cheese, steamed vegetables, overcooked roast beef, etc. With tapas, you’re sitting down at your table facing a menu with a blizzard of dishes. Some are straightforward, such as mixed olives or bread and olive oil, but most suffer with vague, pretentious fusion cuisine titles like:

  • “Roasted beets with goat cheese vinaigrette”
  • “Hazelnut-crusted wilted arugula with maple goat cheese vinaigrette”
  • “Rabbit with wilted arugula, goat cheese and nuts”
  • “Watermelon goat cheese salad with citrus vinagrette”
  • “Wild bighorn sheep sausage with blueberry mustard goat cheese vinaigrette.”

Goat cheese and vinagrette for EVERYONE! The standard tapas menu is the culinary equivalent of “feature vomit.” Given the questionable edibility of most fusion cuisine, it’s none too far from being the actual, honest-to-goodness kind, too, especially after one’s third Grey Goose appletini in two hours, coupled with those cigarettes “smoked only on weekends.” Unsurprisingly, the Spanish—inventors of tapas—practice it more sensibly. Basically, it’s bar food, something Americans aren’t exactly ignorant of. That’s right, tapas is just the Spanish version of buffalo wings, peanuts, fries, etc., except it’s olives, bread with toppings, etc., which restaurateurs in the US have convinced the public should cost a bundle. And who ever thought bar food was a good deal? 😉

Diners are, as the New York Times article linked above, supposed to like this because of Americans’ desire for more choice, whether we need it or not. As far as I’m concerned, tapas is just another way to fleece me out of my hard-earned money while making me agonize over picking a meal, but I’m one of those seemingly relatively rare people who hates shopping, and tapas brings all the joy of accessorizing to the dinner table. Behavioral economics tells us that, from the standpoint of the retailer, tapas makes sense: Many small transactions are more easily overlooked than larger ones and it’s easier to get diners to spend more thereby. Of course my discontent is also understandable—too many choices and too many transactions can be disconcerting. If you want a nice short introduction, look at Swarthmore psychologist Barry Schwartz‘s little book The Paradox of Choice, which explains quite nicely why more choice isn’t always better for our own well-being. (Read this review for a short course.) In a nutshell, each choice we have to make involves cognitive effort on our part, and a comparison with all the other choices we could have made but ended up rejecting. All this comparison is tiring and opportunity cost is a stone-cold bee-otch, if you’re aware of it. Schwartz characterizes two basic ideal-type cognitive styles: maximizers and satisficers. Maximizers carefully compare their options. Satisficers, by constrast, are willing to settle for “good enough” and move on. Evidently I am a “maximizer” when it comes to meals at good restaurants… and, at least according to Schwartz, maximizers are unlikely to be happy about what they get because they spend more time comparing their options, paying attention to opportunity costs, and so on. Tapas is, therefore, pretty much guaranteed to piss me off. (I’m better at satisficing in other choices, fortunately.) I admit a lot of this is my descent to fogey-ism. I don’t like the “mix tape on steroids” that is the modern Ipod playlist and I never play albums on shuffle either. I hate surprise parties. I have a decidedly unfashionable desire for a coherent whole, be it an album or a meal, and tapas (of whatever variety) doesn’t deliver it for me. The fact that it’s a way to run up the tab just nails it.

The only good tapas experience I’ve ever had was a few years back in Minneapolis. The restaurant was not my choice, but I was with friends…. The waitress had the sense to suggest that we “course” the meal and let the kitchen take over. She asked us for a basic list of our preferences and went back to the kitchen. So “choice”—if you want to have a good experience, anyway—is an illusion, too.

WordPress divider

Aside: You may notice the “fascism” tag. I have decided—out of deference to Angry Midwesterner—to tag all my rants with “fascism” from here on out. I give it a fig leaf of justification with Spain’s experience under the dictator Generalissimo Francisco Franco, the man about whom Adolf Hitler said “I would rather spend two hours in the dentist’s chair than have another meeting with him.” Franco would have enjoyed tapas. So there. 😛

In what appears to be continuing series in credit card malfeasance, I would like to preface by saying that it applies to one issuing bank/card marketing company and not necessarily to all such entities. However; card marketing companies are like lemmings — where one goes, they all follow, so I wouldn’t be surprised that what I describe here could be happening elsewhere.

The story starts in the typical manner: an offer letter shows up in your mailbox for a credit card. It may have a low teaser rate or may be an affinity card with your favorite sports symbol on it (“The Chief”). You decide that you will send it in. It says your rate may be “as low as” 3%. “As low as” means that if you pay all your bills in gold boullion, pay them before they are due, and add on every enhancement offered, you get the 3%, otherwise you pay the 24% like everyone else. What happens is that to generate a marketing list, card marketers go out to the credit bureaus with a set of criteria (say FICOs between 650 and 680) and get a list of names and addresses—the “pre-pull”. They make the offer and for those who return the business reply envelope, they do a post-pull and then give you the rate that the credit risk model says you deserve, taking into account allowances for things like the current interest rate margin (profit).

Now typically, (here is the cross-sell again), these offers for a credit card come packaged with a lot of enhancements like a) lost and stolen card protection, b) travel rewards, c) extended warranties, or d) discounts. These may be via opt-in/out boxes or actually packaged together. So when the application is sent in, you may be signing up for “enhancement products” on the card if you don’t read VERY carefully.

A recent trend I’ve noticed is for credit cards to be offered at a checkout counter. Now this is actually a good marketing strategy — using your existing relationships with a customer. This shift is occurring as marketing professionals scour for new ways to reach you. Five years ago, the direct mail response rate was 1.3%. The last time I looked it was .04%. Since it costs postage, printing, processing charges, etc. to send an offer, the CPA or cost per booked account is is getting larger and larger. If you are at a checkout counter at a store and the clerk says something like “Do you know you can get a 10% discount if you use The “Store Branded” Master Card —would you like one?” — well, that is pretty enticing.

So you apply for the credit card. This usually takes the form of a “take-one” application in industry parlance. In the particular case in mind, you fill out the application form, including your SSN, and hand it to the checkout or customer service person who enters the data into “The Program”. The application sails away to the issuing bank, who owns The Program, and they run the post-pull and model and presto, you have a credit card, often within minutes. The stores even have a card-not-present payment option to allow you to use it right away. The CPA for this type of offer is much lower than shotgunning direct mail out to the general population, which happens to own an average of five credit cards anyway. And even with the 10% discount giveaway added, the CPA is less than traditional direct mail marketing methods.

What about those enhancement products? On the form I obtained, in order to sign-up for an enhancement, you have to either sign a blank that says you want the product, or sign that you decline the product. This set of required signatures is, however, on another panel of the application tri-fold. I asked what happens if you ignore the blanks and turn in the application without signing either accept or decline? “The Program” won’t accept the application without one or another. [Note the positive reinforcement of the cross-sell opportunity rather than default to a no-sell.]

This, I presume, is meant to be a closed loop control but the customer service people are always busy and are under pressure to complete the application processing as quickly as possible. I asked if they ever just checked a box to get on with it —“No, That would be cheating” was the response. A particular person, of whom I have previously referred to in conjunction with credit cards, applied for a card in this manner, not signing up for the enhancement. She left both signature spaces blank. Strangely, the application, which was returned to her after the data entry procedure, had some handwriting which differed from hers. An accident?

I asked the checkout clerk, a young guy, if they received incentives for pushing credit cards. Yes they did. I asked whether they got cash incentives or the manager-will-beat-you less type. [My daughter , working in a department store as a clerk, was continually subjected to harassment for not meeting her ‘quota’ of store cards. She quit.] He laughed and said more like the second rather than the first.

At this point let me state that this is completely legal. The best marketing builds on existing relationships. The only caveat is that perhaps it’s not that good of an idea to have customer service clerks enter data under pressure and under incentives to meet application quotas. And further; it’s not a good idea to take applications and transfer data to their terminal where the customer really can’t view what is being requested in their name. Card processors do this by optical character recognition at high rates (and with low error rates) and leave out the human component. I also wonder where that application goes, the one with your personal data and SSN on it, after the data is entered into The Program.

That is how instant credit can work. Here is how typical direct mail applications work. The application arrives at card processing entity where the application is scanned, post-pulls are done, analysis run and card is priced (interest rate set). Plastic is generated and shipped to customer with sticky label that says “To activate card, call number 800-613-4395”. So far so good. Now the scam……

Let’s suppose that the customer, in an attack of buyer remorse, upon receiving his plastic decides that he doesn’t need another card, so he just cuts up the card. That is to say, the card is never activated.

20 days later he get a statement with a $29.00 or some such charge against his card. It might be for an extended warranty plan or a card protection plan, but the customer knows that he cut up and never activated the card. He disregards the statement. (Most likely he never opens it because he knows he doesn’t have that card.) After 30 days, the card gets hit with interest (e.g. 24%) plus $29 late fee. Balance is now $58.58. Second month passes — another interest and late fee. Balance is now $88.75. Account is deliquent 60 days, letter is sent. “Why is is this bank bothering me” — into the garbage. Another month, another late fee. Balance now $119.53, and so forth until you get a phone call. “I don’t owe you anything”. Suppose the card holder was sub-prime and they were given a credit line of $500. After a while, the accumulated balance exceeds the credit limit and they get both a late fee and an over-limit fee.

In the particular case I am speaking of, customers had run up balances of $1500 or more having never activated their card. Not to mention royally screwing their credit histories at the bureaus.

A regular merchant could never post a settlement against an unactivated card as this is a principle barrier against merchant fraud. But the issuing bank, who usually also runs either an enhancement business unit, or contracts for one, OWNS the cardholder masterfile. By masking out the activation character position in the master file by means of a COBOL program,they can run the enhancement sales orders against the master file and ‘force post’ the enhancement product sale. The pretense is that this is valid and legal because the customer indicated a desire to purchase the enhancement, even though the product is an enhancement against a non-active account.

Pretty good. Enhancement products can generate the highest profit margins at the bank, and drop right to the bottom line. Now if they could only convince the FTC and the lawyers litigating aginst them in class action suits.

While the 12AngryMen wax philosophic on the issues of our time, I thought it would be perhaps useful to forward a bit of knowledge to our dear readers. Let me preface this missive by stating that in a previous life, I developed banking and on-line software for a credit card marketing company. While the company I worked for was not above certain ethically challenged marketing efforts, I assure you that it never decended to the levels described herein. I know — my group wrote all of the applications. One has to, however, admit to a bit of grudging admiration for the deviousness inherent in this bit of subterfuge.

Usually I make purchases on-line using my card and a bit of software called Shopsafe which produces one-time cards with a specified expiration date and a specified credit limit. This is a practice I heartily recommend by the way. Unfortunately other members of my family are not so circumspect. The following is an analysis of what happened and how it happened.

Upon receiving a monthly statement, my wife reviewed the card statement and noticed a charge for $9.00 from a company called WLI.ReservationRewards.com. I immediately recognized the charge as an after-marketing or cross-sell result from some purchase made by my wife. A quick search revealed what I expected. The on-line site my wife visited was eBags.com (which happens to be listed on the previous link.) Intriqued, did a little CSI work and uncovered the logic and process involved. The following is a bit technical, but if nothing else, skip it to the recommendations at the end.

WLI contacts on-line companies with affinity and cross-sell agreements. Basically, no one in their right mind would sign up for this crap (My previous company sold similar enhancements. They had a 98% profit margin.) So in order to get sales, WLI has to make agreements with companies who sell stuff you actually want. They will cut a deal with the company—after you complete your transaction, link to our site for a cross-sell opportunity and we will split any sales with you 50-50. To the legimate company, this is a hell of a deal. Free money even. All you have to do is add some code pages to your web site and in return you get 50% of the till. A lot of profit for no effort.

What actually happens is that instead of linking to the site as a separate session, they link internally as another page in the same session. Why is this important? When you do a credit card transaction, any reputable company will attempt to protect your credit card data. They do this by establishing an SSL session to encrypt sensitive data on-line. Because of the stateless transactions on the HTTP protocol, it is sometimes necessary to store the card data in the event that a transaction does not run to completion. Card data are usually stored in cookies encrypted under the SSL symmetric key. Note that this is actually safe as this data is not usually stored on disk, and even if it is, it is encrypted with a 128 bit symmetric key. When the session ends, the data are automatically purged, and the data on disk is not accessible as the key is toast also. Visa and Mastercard rules state that card data should not be stored, and the CVV, the verification codes are NEVER to be stored. A lot of companies interpret this as stored on disk. So when you end your transaction, and leave your session, your card data is purged. Right? Not so fast!

Remember that the code the cross-sell company added doesn’t link in the normal sense but just continues with the session in an attempt to sell you some useless crap. By continuing the session, the application running (the cross-sell application, not the original on-line store) has access to the card data in the cookie. Most legitimate companies don’t think this through — the money is too good.

Now here is where the sneakiness gets involved. This has to be legal. That is to say, somewhere you have to say that you want to buy the product that they are selling. Further, they have to send you an acknowlegment. This can be immediate (print this page) or usually as a follow-on email. So what happens?

You get to the cross-sell page and see some gobbly-gook and decide this is bullshit and navigate away from the page. You are done with it and gone. Nope! Somewhere on the page there is a box which is checked that says “Send me this crap for $9.00 a month”. This is called opt-out and is a source of great consternation between marketing people and the FTA. [As an aside, organ donors in Europe have to opt-out to NOT become an organ donor, i.e., uncheck the box. In the United States, drivers have to opt-in to become an organ donor. The relative rates of donors in Europe is over 80% verses 20% in the United States. This is the power of opt-out and why marketeers fight for it so hard.] Clever web designers that they are, attempt to hide the opt-in box which of course is prechecked (making it, in effect, an opt-out). This could be buried in a mass of text, but typically is in a place that requires the user to scroll down to see it. A cursory glance at the page shows nothing so the user just navigates away from the page.

At this point the old javascript on-exit() script kicks in. Before the browser exists, it pulls the name, card information and everything that is required to create a new transaction from the cookie left behind by the legitimate store and posts a new form to WLI. Since this is a monthly charge, it sends all of the card data so that transactions can be recurring. This has two effects: 1) you are charged for something you don’t want, and 2) your card data is now on a server somewhere else protected by likely not very much security.

Actually, I am a step ahead of myself. Typically these deals come with a free 60 or 90 day trial period, after which the charges start to appear. To be legal they have to send an acknowlegment. Since you obviously can’t print the screen since you navigated away, they send you an email. (also grabbed from the cookie.) Unfortunately, this is a simple message couched in language such that there is no immediate charge
to catch your attention and usually with a subject line that guarantees that the email will be spam-canned immediately.

After 90 days, the more enterprising send you another email, also likely spam-canned, that let you know that the charges are about to begin and then they hit you up for the $9.00 per month. The other thing is that the fees are kept low so that they are likely to slip in under the radar in a long list of charges. Err what is that – a latte I charged at Starbucks? The billing statements are also listed as obscurely as possible.

A heck of a deal. Don’t bother calling the legitimate on-line store customer service. They are usually completely unaware that this is happening, and the marketing people are not about to draw it to anyone’s attention if they find out because their revenue stream has just jumped up.

As a service to readers I give the following advise:

  • Use Shopsafe or some similar software to generate one-time cards. Set the expiration date at minimum (usually 2 months from current date) and the limit at $5.00 over the current purchase (plus shipping and handling, etc.) Scams like this can’t work if the card is invalid (expired) at the end of the free-trial period, or if the absolute credit limit will be exceeded.
  • After you complete the transaction (the page will say this) and BEFORE YOU DO ANYTHING ELSE, close the browser. Kill it — and the session data. Then open a new browser to continue whatever you want to do. Never navigate away from a completed transaction page.
  • Read your credit card statements.

[Author’s Note: If there is sufficient interest and comments, I will be willing to expose more credit card ethically challenged activities. There are several interesting ones.]