Corporate Inefficiency When the Costs Are Imposed on Third Parties

Dan Crawford | February 1, 2010 5:43 pm

by cactus

Corporate Inefficiency When the Costs Are Imposed on Third Parties.

Long time readers may recall that I had some issues with Norton Anti-Virus, which led to my uninstalling the thing from every computer I own (plus my mom’s computer) back in 2007. Planned obsolescence in the computer world being what it is, I don’t even have those computers any more.

In the process, I discovered its very, very difficult to get Norton to understand you have cancelled your service. There’s no phone number to call (unless you want to pay for tech support), no e-mail address where anyone responds. So I got a bill a year later, in late ’08. And again, in late ’09, according to AmEx bill. Now AmEx has strict instructions not to accept any charges from any Symantec organization again. If I get charged for anything from Norton again, I’m cancelling my AmEx card. But what incentive does Norton have not to bill me? They seem to have set up a structure where its cheaper for them to continue billing me for services they are not providing me than to stop. Put another way – it is cheaper for them commit fraud than it is for them not commit fraud. Of course, the costs get imposed on others, in this case, me.

A similar example – we recently bought a house, and are planning to install a home security system. So we got a land-line, after being a cell-phone only household for a few years. At present, we leave the landline with a ringer off.

See, Darnell is getting something on the order of 3 to 10 calls an hour. Now, you may be wondering: who is Darnell? Sadly, I couldn’t tell you. But someone thinks he owes someone money (Norton perhaps?) and I guess there are several collection agencies on the case. Now, the first hour (and I mean, the first hour) we connected up, we were telling the collection agencies that called, politely, that we had just gotten a new number from Time Warner. A few hours later we were later we were literally yelling at them to stop calling. That evening, we hooked up an old answering machine the old owner of the house had left behind. Most of the callers don’t leave messages, but a few do. Every so often, I simply erase the entire lot without listening to them.

Darnell keeps getting calls all the time despite the fact that we’ve had this number for a few weeks. Now, before the phone number was assigned to us, it had to lay fallow for a while (30 days? 60?). The collection agencies spent that time dialing and getting messages from the phone company indicating the number was no longer in service, and apparently it didn’t occur to any of them to take the number off of their list. The reps that call here get an answering machine that indicates someone other than Darnell is at the number, but it doesn’t occur to any of them to take the number off the list either. Or more likely, it does occur to them, but the incentive structure set up by the firm discourages them from doing so, assuming they even have the freedom of movement to do it.

Its easier and cheaper, apparently, for these companies to engage in a denial of service attack of indefinite duration on third parties like us than it is for them to do the right thing, which would involve taking up issues they might have with Darnell with Darnell. As an aside – I just hope no previous resident of this home has ever skipped bail as I really don’t want any bounty hunters breaking in at 2 in the morning. Someone is very likely to get shot if that were to happen.

But anyway, all this reminds me of what I was taught in my econ classes, much of which I now regard as bull#$%#. I remember having a discussion with one prof about whether there was any need for government regulation at all. I noted that there are times that a company might make a mistake that had irrevocable consequences to their customers – perhaps a company might, in the course of saving money, inadvertently poisoned one customer out of a million. Shouldn’t the government regulate that? The response was that if a company did poison one customer out of a million, the bad press and whatnot would discourage consumers from buying from that company, and their competitors would have an incentive to do better – perhaps killing one person out of ten million, which in turn would lead to other companies killing an even smaller proportion of customers, until we (and this was supposed to happen pretty quickly) ended up with perfectly safe milk. I remember wondering what planet the guy was from, and whether it was an opportune time to switch to another major.

My guess, though, is that had I described the Norton scenario or the phone calls for Darnell, he would have insisted that this couldn’t happen. After all, they don’t fit with the theory.

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