Superman Spending

It looks like Shaquille O'Neal is not only a super star basketball player but also a superstar spender. Last year, it was reported that O'Neal spent his money on the following items:

$156,116 in mortgages on three homes
$31,299 in homeowners insurance
$3,345 in phone bills
$1,610 in lawn and pool maintenance
$12,775 in food
$1,495 in cable TV
$24,300 in gas
$6,730 in dry cleaning
$17,220 in clothing
$2,305 for pets
$110,505 in vacations
$26,500 for childcare

-It should be noted that Shaq also has property taxes, state taxes (he pays tax on more than one state because sports stars have to play tax in the state where the game occurs). Shaq’s salary is around $1.8 million per month. Right now he is spending close to $875,000 per month. The good news is that Shaq is probably making $200,000 a month even after spending all this money. Even though he is making over $20 million a year now my question is what will he do after he retires? Clearly, he can't keep up this type of spending. His accountant and financial advisor must be pulling their hair out when they see he is spending this much money.

Source:
http://www.theinsider.com/news/604990_Shaq_s_Personal_Spending_Habits_Obtained_My_Media

Market for Dating?

Recent advances in modern technology has provided us with great wonders. One of these great wonders has been the personal computer and internet. Starting in the early 1990's and growing expotentially since then the internet has made our lives: more fun, easier to live, and allows us to do more in less time. One unintended consequence might be online dating.

You wouldn't know it unless you watched "To Catch a Predator" but the internet has become a valuable tool for the dating world. With popular social networking websites such as Facebook, Twitter, and MySpace people can not only find long lost friends but also make new friends. Although, making friends in the "virtual world" may not seem real or authentic millions of people particpate in online dating. Launched in 2000 eHarmony matches men and women everyday based on questionaires that people fill out. The company has around 20 million users. What I find very interesting is that people will often pay for this service (a monthly user fee). In economics, this would be known as a transactions costs. However, isn't meeting people realtively easy? I guess there might be a burden for individuals who are either too busy, don't want to, or are just too scared to spend time looking for other people. To think that there is a true marketplace for members of the opposite sex is quite interesting. eHarmony reports that they marry around 236 people every day. Simple math tells us that this is over 86,000 couples per year.

The real question though is does eHarmony work better than the convential way of marriage? For instance for many centuries parents often selected possible suitors for their children often leaving little choice for the children. Before the internet people actually had to seek out members of the opposite sex. However, they were only limited to people they knew, friends their friends knew, or other connections. Now people can go online and actually find someone with similar interests. There is no empericial work on whether online dating sites produce "better" marriages than coventential ones. My best guess would be that eHarmony and other dating websites would produce better results because it makes the market more efficent.

Random Thoughts

1. I am glad Texas Tech got a new coach Tommy Tuberville (110-60 record) and has done well against top ranked teams.

2. Rachel Ray could easily fit in on Jersey Shore.

3. TCU will be so motivated they might get to the promised land.

4. Losing weight and saving money are simple ideas yet people make millions of dollars selling books about these topics.

5. Acyline might be the next contraceptive, although more studies need to be done to see if it is safe over the long term.

6. Why are there so many different fillers in the plastic surgery market? Off the top of my head I can name a few (and I am not even in the health profession industry!): Botox, Perlane, Dysport, Restylane, Juvederm

Mike Who?

Many of you have heard of the incident at Texas Tech were Coach Mike Leach "allegedly" placed player Adam James into a dark shed. No one really knows what happen. Although, no one knows all of the details I suspect a scenario like this took place.

Adam James was playing very little playing time and his father (Craig James) believed his son should have received more playing time. Craig James is an analyst for ESPN and is the color commentator for the college games. I believe that James kept putting pressure on Leach to try to help his son get more playing time. Leach most likely responded in his bizarre manor by placing Adam James in a dark shed even though James had recently suffered a concussion. Let's assume that James did every possible thing imaginable to deserve to get placed in the dark shed. Does it still make it right? My answer would be no. What is even more interesting is that Leach in a way took matters into his own hands refusing to listen to the team physician for medical advice.

This news should come as no surprise though. Leach is known as obscure, odd, and even bizarre tendencies. I remember when 60 Minutes interviewed Leach. Leach often did not speak in complete sentences, seemed to get sidetracked easily, and make weird metaphors. Texas Tech fans seem to embrace Leach with open arms. As a coach I must admit he has done some good. It should be noted that Leach’s bowl record was only 5-4. Also his winning percentage against Big 12 teams was barely 60%.

Leach signed an $11 million 4 year contract with Texas Tech right after Leach had a magical season with Michael Crabtree and Graham Harrell. I have a feeling Leach will go elsewhere but will not get as much as he did at Tech. Leach probably cost himself a few million dollars with this whole incident which probably could easily have been avoided. Until then Leach will be sticking with his motto, "If the dark shed fits, you must acquit".

Tiger's Bogey

So everyone has been talking about Tiger Woods this holiday season. One of the most widely known icons in the sports world has had his image severely damaged in such a short period of time. Tiger confessed betraying his wife and family. Hopefully, he will learn from these mistakes and not make the same mistakes again. What is interesting though is that Tiger is still the best golf player despite having numerous women on the side. How does Tiger do this?

Woods holds the record for most career earnings for the PGA. As of December 2009, he has made more than $92 million in earnings. In addition to his earnings Tiger had numerous endorsement deals that were worth around $100 million per year. Around October 2009, Tiger hit the $1 billion mark (not bad for someone who went to Stanford trying to get an economics degree) Not only has he made himself a lot of money he has also increased the wealth of Nike. In particular, Nike Golf which was basically unheard of before Tiger came onto the golfing scene is now a $600 million business. So how could the man that had money, fame, and power succumb to the power of one-night stands?

In a interview from 1998 with Larry King when asked about dating Tiger’s response was something along the lines of “Well I am busy so often playing golf so I really don’t have enough time to get to know someone really well”. If you were an international super athlete how much time would you have available to your family, friends, and loved ones? What seems obvious are trade-offs in life. There are trade-offs to everything in life. In this case, Tiger seemed to value other women more importantly than his family and wife. Now it seems as if Tiger is paying the price for his infidelities. It seems as if Tiger has more than an 18 whole course ahead of him.

Markets in Everything: Hair Loss

Over the past year or I have become interested in the market for hair loss. Looking at old pictures of family members and noticing some slight hair loss I wondered if I would have the hair loss gene as well. Millions of Americans lose their hair every year. Around 40 million men are affected by male pattern baldness. Male pattern baldness is what people typically think of a receding hair line. In addition to this, there can be loss of hair in the crown (also known as the vertex area).
Two people that have really influence my thinking are Dr. Sam Lam and Dr. William Rassman. Both are board certified hair transplant surgeons and take hair transplantation very seriously. Dr. Lam has posted numerous videos on YouTube, educating people on hair loss and hair transplantation, and does an exceptional job at taking complex ideas and turning them into simple understandable videos. From his videos Dr. Lam stresses the importance of education on the patient side. I completely agree with his approach. Why should you pay for anyone’s services unless you truly understand the value they are providing? Remember knowledge is power. Dr. Rassman maintains a daily journal for hair loss (BaldingBlog) with close to 8,000 entries that answer hair loss questions. I commend both gentlemen for educating not only me but thousands of others. What I have learned from my research is that hair loss occurs primarily due to DHT(Dihydrotestosterone). Genetics also plays a factor as well. From what I understand DHT plays a significant role in hair loss. The hair follicles start out as thick terminal hairs and then overtime miniaturize to the point where they can’t be seen anymore. Dr. Rassman stresses mapping out the miniaturization process. Individuals can look at their own individual miniaturization by purchasing a handheld digital microscope. The microscope allows the user to take magnify the hairs and take pictures which can be stored to the computer. This could be helpful in tracking hair loss over time.
Drugs such as Propecia and Rogaine try to slow down or reverse the miniaturization process. I should point out that both drugs were discovered by accident (Rogaine through blood pressure medication and Propecia through prostate medication). Although, there is no cure for hair loss Propecia and Rogaine are the only proven medical treatments to preserve hair. The patent for Propecia expires November 2013 which will help bring down the price. Avodart a drug commonly used for men with an enlarged prostate has seemed to show promise for hair loss in clinical trials. However, it should be pointed out that sterility was an issue in the trials. Avodart is currently not approved for hair loss treatment. What would be interesting though is if Avodart can help with BPH (enlarged prostate), hair loss, and increase sterility (less likely to have kids) wouldn’t it be the blockbuster drug for men over 50? I did a little research and wondered if DHT was a problem why not find a drug that greatly reduces DHT? A drug called acyline strongly reduces DHT to very low levels. Although, this approach might be extreme acyline is currently being studied for prostate cancer and as a contraceptive. Aside from medical intervention hair transplantation is also another way to restore hair. Hairs are transplanted from the back of the head (genetically programmed not to be lost) and individually placed into the balding areas. The process can take hours and is very labor intensive. There is actually a voluntary group of hair transplant surgeons known as the International Society of Hair Restoration Surgery. These surgeons are well trained and knowledgeable in performing hair transplants. I think it’s interesting how there is can be markets many things including hair loss. This industry still is most likely in the growing stage, and has made significant strides in such a short period of time. Perhaps one day hair loss will be a thing of the past.

Below are the links for Dr. Lam and Dr. Rassman
http://www.hairtx.com/
http://www.baldingblog.com/

NCAA: It's In The Game

College football is a big deal. Every Saturday afternoon thousands across the nation flock the stands to see their favorite college team play. While many more watch their favorite team on television it is pretty obvious that college football is a big deal. The NCAA is a voluntary organization that involves over 1,281 institutions. In essence the NCAA sets rules for colleges to follow in regards to sports athletic programs. For instance players that are going to be recruited to play college sports can’t take gifts or money from booster clubs or schools. Two movies that illustrate this are “Blue Chips” and “Johnny Be Good”. College sports are a big business. In 2008, the total revenue generated by the FBS (Division 1 schools for football) was over $41 million. Clearly, this is as much as some publicly traded companies make. Although this seems like a lot on average each school loses around $2.46 million dollars. Right now there are 120 Division 1 schools. No one really talks about this though. In a way it could be seen as the darker side of the NCAA. I wonder why no one talks about this darker side of college sports. It should be pointed out that large schools such as the University of Texas and Ohio State are the only few that produce a large revenue stream for their schools. Most of the revenue comes from licensing and merchandising.

The general viewpoint is this romantic notion that college athletes go to these “football factories” and somehow get an education while at the same time supporting their school on the field with their displayed skills and talents. In addition to this, college players receive very little compensation for their work. Yes, these players get scholarships and maybe room and board but aren’t they providing something of value to consumers. For instance, people pay to see minor league baseball teams and players get part of that in the form of their contract. College players however don’t get paid for their performance even though the minor league players and college players are similar. While the college might provide scholarships and room and board to star players the marginal cost to the school is close to zero. Why not have a market for college players to compete and get paid for their services? Paying players would also reduce the number of scandals in recruiting. If players could sign contract with colleges they would have less incentive to take bribes from booster clubs or school officials. Also many of these players don’t go on to a professional career (even if a player gets drafted a very small minority turn out to be good). Under a contract system players could get paid and save up money to prepare for life after football. The book “Friday Night Lights” shows what happens to student athletes after high school. One of the main characters” Boobie” Miles is one of the most sought after high school players in the country. Unfortunately, Boobie gets injured and tears his ACL and blows his dreams of playing college football. In addition to Boobie, most of the players in the book really didn’t think about life after high school football (Brian Chavez is the expectation who goes to Harvard). These players are only left with the highlights their glorious playing days and really don’t have limited options regarding life after high school. If college contracts were possible it might give these student athletes more of an incentive to go to school.

Although, it would be nice to see the NCAA give high school athletes contracts I doubt it would ever happen given the NCAA would like to believe that their players are on the field to get an education and support their school. If anyone looks at history though clearly this is not true given the scandals in college sports. The biggest example of this was SMU and the payola scandal in the 1980’s which forced the NCAA to give them the death penalty (not allowing SMU to compete for the 1987 football season). I don’t know how many programs engage in this behavior but I believe the NCAA underestimates the amount of side deals that are made because college players aren’t allowed to sign contracts.

Flying the Friendly Skies

Today I just got back from Houston for Thanksgiving break. I took a plane because I felt a 17 hour car trip would seem a little too long. Instead of driving I took a plane (Southwest) first from Houston to Dallas then from Dallas to Lubbock. There were some light showers and there was some turbulence. For some reason in the air I didn’t feel as safe as if I was in the car. I suppose many other people feel the same way. I saw an article recently that showed that airplanes are 7 times safer in 2008 than in 1989 (1.4 fatal accidents per million as opposed to .2 fatal accidents per million). Technology, regulations, and more experience in the air have made all of this possible. When I was walking off the plane I peeked into the cockpit to see what type of instruments the pilots used. I kid you not the dash area and whole cockpit area looked as if it was a little laboratory with all kinds of dials, switches, and display screens. Pilots now have technology and safety features that the Wright Brothers could only dream of!

With this said, people like myself and others sometimes feel a little unsafe when flying the shear evidence that flying is the safest form of transportation. My theory on why this may be true is that people have some kind of bias to where they believe even though the statistics say one thing events occur often more than they really do. An example of this would be to ask people how often they believe an airplane crashes. It should also be pointed out that anyone who watches the news or reads the newspaper might be lead to believe that airplane crashes happen occur more often than when they do. What people fail to realize is how unsafe other forms of transportation are such as driving, riding a bike, or even walking. More people die from these accidents than from fatal airplane accidents. Although, it might be hard to convince people that flying is safer than walking.

Another reason I think people tend to be fearful of flying is that they are not in control of the airplane. Pilots are delegated this duty and passengers are just along for the ride. Individual passengers really have no say in how the pilots fly which takes some of the control away from the passenger. One question that comes to mind however is that since people know that not all pilots have the skills and experience why not have differential pricing for different pilots? In practical terms this would be hard to carry out. First off pilots do basically the same thing which is to get you to your final destination. Second, crashes or accidents happen so infrequently it would be hard to quantify this through price. Also factors such as the weather could have a major influence on how people perceive their pilot even though pilots only have so much control. I would file this under 99% theoretical and 1% practical.

People should be aware that flight safety has greatly improved over the past 20 years and it will continue become more advanced. As the number of flights increase airline companies, researchers, and plane manufactures will be able to make safer planes. Next time you are in the airplane just remember if you were able to survive the trip to the airport you will survive the plane ride.

Source:
http://www.livescience.com/culture/090601-air-crashes.html

One of My Heros

I use to believe that the minimum wage could actually help people until I took economics. I use to believe that politicians were good people and did everything that helped everyone. I use to think many things until I was introduced to Dr. Walter E Williams. Dr. Williams is a professor of economics at George Mason University. Although, I have never met Dr. Williams I have been influenced by his ideas along with other intellectuals. Dr. Williams's excellence comes from the fact that he is able to take complex ideas and explain them in a way that anyone can understand. One of his professors Armen Alchian (an economist from UCLA) explained that the true way you know if you really know something is if you can "explain it to someone who doesn't know a darn thing about it". This concept is clearly shown in his weekly syndicated column and through other writings of his.

The first time I saw Dr. Williams as on Friday February 9, 2007 on Kudlow and Company. I remember listening to him and thinking this is a smart man. Sure enough I did some searching online and I found an interview with him via Wikipedia. From this point on I began reading his work and became introduced to other intellectuals such as Milton Friedman, Thomas Sowell, along with many others. Clearly, this one man introduced me not only to economics but to a different way of thinking. I would regard Friedman and Williams as libertarians and Sowell as a conservative. Although, Sowell does favor some libertarian ideas. Williams did a one hour podcast interview on EconTalk (excellent program) hosted by Russ Roberts where he talked about starting out as an economist and why he truly believes what he believes. I posted the link to that interview below. The only critique I have with Dr. Williams is that he tends to repeat the same ideas over and over. This in a way is good because he is consistent and doesn’t flip flop on his ideas but can get old at some points. Still I truly regard him as an important person in shaping my intellectual journey. My point is that it is interesting how one person can lead you down a path of different ideas and people.

Williams on EconTalk:
http://www.econtalk.org/archives/2006/10/walter_williams.html

The Poor Getting Richer

While many people like to show how the poor are getting poorer and the rich are getting richer this clearly is not the case. Often times people complain of how the poor can't make ends meet. My response might be what ends are they trying to meet? Data from the Census bureau confirms that the poor have improved their quality of living over time. For instance only 3.4% of people below the poverty line in 1984 were able to afford VCR's by 2005 more than 92.2% of the people below the poverty line had a VCR. Technology, innovation, and competition brought down the price of VCR's and other goods so everyone including the poor could afford them. In addition to this the "poor" now almost all have telephones, refrigerators, stoves, and air conditioners. Another point to consider is if you asked a poor person what country they would live in I would be willing to bet money that a majority of them would say the United States. This of course doesn't say that the United States or capitalism is perfect. However, people must understand that in a world of scarce resources there are alternatives. Believing that there is some perfect system or utopian world is nonsense. Many times people complain of companies such as Nike or Wal-Mart participating in child labor. While this is an unpleasant situation people don't realize that people in these countries have very few alternatives. Employers have very little incentive to pay these people nothing given the employee some options in their employment. Some factories are flooded with so many applications that it takes months to hire people because so many people are trying to apply to these sweatshop jobs. My point however is that capitalism does help even the poor people even though you will hear how the poor or worse off and the rich are getting richer.