23 Sep 2008

Some weeks ago, three friends visited me in Amsterdam. We rented them three bikes at orangebike. After a long pub night, we locked the bikes and got on my boat to have a last drink on the calm water. We witnessed a guy walking up to one of the rental bikes, unlocking it somehow and driving away with it. It took 30 seconds. Sadly, we needed a minute to reach the shore and couldn't follow him.

In the end, we had to pay 240 Euros to orangebike. Had we opted to pay three Euros more per bike, the we would have been insured and only payed 50 Euros. We didn't do that, sadly.

Why? Because we lacked information. Most people who have to make decisions about a risk within a new, complex situation, lack information. That's what the ungodly high profits in the insurance world are all about.

I live in Amsterdam for a year now and have not seen a bike robbed or heard of a friend being robbed. I thought locking your bike is enough. Well, obviously it depends on what bike you have. I suspect a difference in risk between private bikes and rental bikes. Because after we came back, the guy at orangebike said that ours was already the fourth stolen orangebike on that same day. And only in that office (they have several in Amsterdam) Thanks for that extra information! You lose several bikes a day??

When you really know the stakes of all players in a market situation, you get a better picture (like mine I know have and sketched below*). But if you lack information, betting on a risk is unfair.

As we open up so much information these days, I would really like to see a public database, fed by everyone, for information attached to risks. Information like the one I present here about rental bikes in Amsterdam, but somehow organized. Imagine you come into a new situation, like having to decide wether to insure yourself against some risk, and you get the experience and information from a lot of  customers and other involved stakeholders from the internet.

Risks, and the bets we have to place on them, are a really essential part of our lifes these days, and horribly abstract. It goes wrong all the time (look at the banking crisis). I am close to saying that it might be one of the great issues that the information age should tackle.

Not because of bikes. Although bikes are really important in this city. As you see, I take this issue pretty seriously myself :)


* Everyone but the tourist wins. Obviously, orangebike doesn't really care to have the best locks or give you a second lock for the wheel (like some other services do as I learned). They'll get their money for a new bike anyway. And as tourists normally leave the town the next day, they don't have to care about customer satisfaction. And for thieves it makes sense to go for the rental bikes. They can specialize on only one kind of lock, and all orangebikes use the same and are easily recognizable. You can walk up to one of them and break it if you are trained on the lock. And as we saw it, the whole processs looks like you're unlocking your own bike. Lastly, the insurance would stop insuring rental bikes if they wouldn't make a profit. Luckily for them, bike rental services don't really inform customers and so they don't really have to pay out recoveries a lot.

# lastedited 05 Oct 2008
follow comments per RSS     
  on05 Oct 2008 - 10:40 fromJan
Ha! The thief works for them. But honestly, each time we rent a car, A and me negotiate anew whether or not we should buy the top-up (usually similar in price to what we pay for the car for a whole weekend) in order to reduce the excess from 600 to a mere 100 quid. We never do in the end. And we never needed it so far. And the betting also works a great deal on fear, I think: Usually the rental guy says to me in a low voice: »You know...600 Pound is a lot of money...«. And when I helped a friend buy a computer, the salesperson kept telling her what could (and probably would) go wrong and that she should get 12 months trouble shooting for the price of ten, cause I wouldn't always be around to help.
  on11 Nov 2008 - 22:22
  on11 Nov 2008 - 22:24 fromnewyorker wwwhttp://newyork.com
Dear Nicolas: Re: bike rental, are all tourists 'suckers'? http://www.nicolashoening.de/?blog&nr=84 *Why pay attention? My background: NATIVE New York City cyclist. Have had bikes stolen. Even Kryptonite locks have NO INSURANCE in New York City. Grad school. Use to live near Columbia U., which is in poor minority area, Harlem, NYC, USA. *Why is this important? AIG, Wall Street, and 'failure of rating agencies' about CREDIT CRISIS. Sub-prime BAILOUTS cost governments AROUND the world! http://www.costbenefitanalysis.org/glossary.htm Adverse Selection : principle that says that those who most want to buy insurance tend to be those most at risk, but charging a high price for insurance (to cover the high risk)will discourage those at less risk from buying insurance at all When a negotiation between two people with asymmetric information restricts the quality of the good traded. This typically happens because the person with more information can negotiate a favorable exchange. This is frequently referred to as the "market for lemons." Strategy: question the clerk! if you were I, would you buy insurance? my 'police clerk friend' will tell me how many bikes stolen? how many? poker strategy: even if the clerk WANTS TO TELL YOU THE TRUTH, his boss is watching with a camera. Assume he wants to extract the most money from a 'tourist', sucker. Most bike rentals are inferior. Asymmetric information tends to limit quality of products exchanged, adversely selecting the lower quality cars/bikes. Strategy: get your bike from a local person. Eat at a Chinese Restaurant, where the family owns and EATS there. *** Strategy: screening http://nobelprize.org/nobel_prizes/economics/laureates/2001/public.html Stiglitz showed that an uninformed agent can sometimes capture the information of a better-informed agent through screening *** http://yuchaoyingjoan.wordpress.com/page/2/ Solutions to asymmetry information: 1. Hidden actions: The principal develops incentive contracts (Mechanism) 2. Hidden types: the informed party can use signaling while the uninformed party can use screening Analogous Case Study: Used Car Trade: Seller proposed warranty/build reputation (signaling). Buyer do a mechanic check on the car (screening) Hurricane Katrina and U.S. failure of levees in New Orleans. Authorities, even the U.S. President 'knew nothing.' quote: "Doing heck of a job, Brownie." These 'flood cars' (electrical wiring will rot out) are sold AROUND THE WORLD. Summary: the fault is yours. Seller did NOT signal quality. Buyer did NOT do proper screen test - contact police for records of rental bikes stolen because of inferior lock. *suggestion #1 use psychological technique. "Good cop, bad cop." I heard a rumor that your locks are easily broken. Is that so? My good friend here really wants to recommend bike tour to the entire hotel (made up a good story.) *Why does "good cop, bad cop" technique work instead of 'forensic science.'? *Factoid: 80% of crimes in America solved by 'confession.' Not sure whether that includes 'torture.' Handbook of interview research By Jaber F. Gubrium, James A. Holstein *suggestion #2: Add an additional lock and resell it. *suggestion #3: rent bicycle from students, who NEED the money. students cannot easily 'flee' like criminals. *** Does America have an insurance problem? Over 40% including 'working poor' have NO MEDICAL INSURANCE.
  on11 Nov 2008 - 22:36 fromnewyork wwwhttp://none.com
Why do intelligent persons who design PSO and OTHER algorithms make easy suckers? http://www.kyivpost.com/nation/30791 1.)intelligence in one area does not mean intelligence in ALL areas. 2.)lack of understanding of psychology of self deception. Florida, Walt Disney World. lots of fog. Some drivers SPEED UP, since cars 'seem far away.' 3.)many do NOT know that they do NOT know. http://www.fooledbyrandomness.com/ http://www.fooledbyrandomness.com/imbeciles.htm The Black Swan: Quotes & Warnings that the Imbeciles Chose to Ignore 4.)Nobel Prize winners are geniuses at FAILURE. http://en.wikipedia.org/wiki/When_Genius_Failed When Genius Failed: The Rise and Fall of Long-Term Capital Management "Weapons of Financial Mass Destruction" - Warren Buffet.
  on11 Nov 2008 - 23:00 fromnewyork wwwhttp://none.com
Boaters in tourist areas Killer may receive punishment of 60 hours of service, NO jailtime. Confirmed danger to public, including driving on wrong side of road. Highly public tourist areas near Tampa, 2 hours from Orlando, Walt Disney World. former governor of Florida is Jeb Bush, the younger brother of current President George W. Bush. http://en.wikipedia.org/wiki/Jeb_Bush Some call the disasters under President Bush, lack of caution or 'disregard of insurance.' New Orleans Flood; Iowa Corn Belt flooding; California LA wildfires; Credit Crisis; Iraq and Afghanistan and Pakistan; etc. http://www.tampabay.com/news/publicsafety/accidents/article899388.ece Man gets careless driving ticket in St. Pete Beach crash that killed woman By By Leonora LaPeter, Times Staff Writer Published Tuesday, November 11, 2008 3:43 PM ST. PETE BEACH — The driver of a van that ran off Blind Pass Road last April and killed a woman has been charged with careless driving. The traffic citation carries a fine of $141 to $500 and up to 120 hours of community service. Rimar was driving his van on Blind Pass Road just before noon April 10 when he veered onto the sidewalk in front of Fortunato's Italian Pizzeria and struck Seth and Heather Whalley, who were visiting from North Carolina. Heather Whalley, 33, died two days later. "It certainly seems woefully inadequate," said Seth Whalley, a 34-year-old chemist who lives in Massachusetts with the couple's three children. "I don't know what else to say about it. I guess I'm feeling speechless." Rimar has been issued 21 traffic citations in Pinellas County, including speeding, running a stop sign and driving on the wrong side of a divided highway. St. Pete Beach police investigator Robert Micklitsch said he gave Rimar the ticket Monday after he learned last week that State Attorney Bernie McCabe would not file criminal charges against Rimar. Rimar had several prescription drugs in his system, prosecutors say, but toxicology tests showed they were at "therapeutic levels." Since he was not impaired and he wasn't driving recklessly before the accident occurred, prosecutors said they did not have a criminal case against Rimar. Rimar, 35, said Tuesday he could not comment on the case at the request of his attorney. *** The Law of Higher Education By William A. Kaplin, Barbara A. Lee Page 204 British tourist sued car rental company ... from the United States, created a special duty, said that court, to warn the foreign tourist of "foreseeable criminal conduct" ... *** Perhaps an extreme example. But the 'rate of medication' in the U.S. is quite high compared to the world. The rate of 'BIG GAS GUZZLERS' is quite high compared to bicycle riders.
  on12 Nov 2008 - 10:15 fromNic wwwhttp://www.nicolashoening.de
Thanks for all the input, newyork (Though the last stuff is a bit too much here, I guess :) Though you can always win by screening (I'll look more into that research, thanks for the hint), and I should be intelligent enough to devise a scheme for such a situation, it is a problem that you just can't do it all the time, because then you have no life. Somewhere, at some point you will have to trust people to save time and effort. That is a real optimization problem I am also thinking about here. Granted, I could have had a better instinct why this would be a market that is to be approached with caution. But I hinted in the article why I think I was fooled.
You are seeing a selection of all entries on this page. See all there are.