Sunday, May 31, 2009

The power of inertia

I have started blogging for the second time in life (Right now, I am mostly recycling old trash). I should manage to hold on to this tradition for 2 more weeks before going the way of most blogs. An ambitious foray into writing, a brilliant outlet for pent up energy, blah blah blah before slowly falling prey to that oldest enemy of them all, Inertia. For the physically uninitiated, (this is not a snide reference to the population that has not 'sinned' thus far), inertia is the tendency of any body at rest or in uniform motion, to continue to stay so. In other words, the tendency of human beings to become addicted to routine.

Inertia is one of the most-important and least-understood facets of existence. It is the reason why you have not gone on a holiday to a great-new place in the past 3 years, why you have spent the major part of the last 4 weekends doing the same things you did in the 4 weekends before that (watching TV), why you shut the alarm clock on Saturday morning and postpone that ambitious jogging plan. It is the gap between the thought process behind a great business idea and the actual execution behind it. Hell, it is one of the main reasons most people continue in their jobs in spite of the lousy boss and the ugly secretary.

At this point, I would like to digress a bit and clearly define inertia. Specifically, differentiate it from the often-confused-with laziness. You are lazy when your body refuses to listen to instructions from your brain; inertia has set in when the brain doesn’t bother to instruct your body. Let me state it clearly with an example. When you skip your first two gym sessions after having paid for the forthcoming 15 sessions, you are being lazy. When you subconsciously train your brain to forget that you paid for the gym-subscription and skip the next 10 sessions, you have got inertia.

People live in a state of denial about inertia. They underestimate this power of inertia and tend to gloss over it and pretend that it is not there. Life would be much better if we acknowledged inertia, and realigned our life. There are two major ways to do this.

The first method is to fight it aggressively. This has to be done very methodically and can be done only when you completely acknowledge that it is there. I will give you an example to illustrate this.

One of my friends had this problem with his alarm clock - in that it would ring and he would switch it off. Not an uncommon problem, but only that he had done this so many times that he had become conditioned to it. The alarm clock never woke him up. Every time it rang, his hand would just trace an arc, lovingly caress the top of the clock and re-occupy its original position - all without his "awareness". And every time he kept the alarm clock in a different position, his hand would just trace a different arc. He came up with this ingenuous solution to tackle the problem. Whenever there was a desperate need to get up - as opposed to generally waking up to attend classes or such - he would place the alarm clock in this tiny slot above his fan and place his chair outside his room. Every time it rang, he would have to get the chair from outside, switch off the fan, wait for it to stop (a good 2 minutes for those old-fashioned hostel fans), climb on the chair, remove the alarm clock and shut the damn thing down. By the end of it he would have the mental state of a serial killer, but would be wide-awake. Job done.

Some other gems for fighting inertia (followed by a few friends of mine): If you have to apply for new jobs and cant get the time to build your CV, call up the HR person and promise her that you will send the CV in 4 hours. If you have an 8-hour window to complete a 4-hour job, play for 4.5 hours and then start the job.

The second method and the method often preferred by me is the very simple - "Accept you have inertia and get on with life". This is extraordinarily effective and simplifies life enormously. Weekend gets planned around TV, there is a small shelf in the loo having a bunch of books, there is a deodorant bottle near your shoe-rack, you forward articles that are titled "10 mins of ogling at women can be as useful as 30 minutes at the gym" (This article was actually published in the TOI - Oh, the powers of journalists who have inertia) to all your friends and think the law of conservation of energy has a more literal meaning. No planning, no pressure, no guilt. Ah, a simpler world. The believers would say God meant it to be this way.

Unfortunately for us, we can not permanently take either of these courses, internal response favors option two, while society (read parents, stupid peers) forces you towards route one. This struggle between these two states has given birth to some beautiful business models. I will discuss a couple of these.

Gyms: Gyms are the best examples of institutions that have cracked the concept of inertia. They run essentially on the assumption that people enroll for Gyms and don’t complete their courses. I will run the economics behind a gym to explain the concept to you clearly. Lets take an example of a gym in a reasonably big city like Chennai. The gym has to be in a very good location, has to have at least 5 treadmills and corresponding gym equipment and a separate room for aerobics and such. Add a few trainers, a mini-refreshment center, the imputed rent for 4000 sq ft of area in a posh location, maintenance of a showering area, a parking lot, a watchman and some basic marketing, and you have got your self a monthly cost base of Rs 200,000 (bare minimum).

At a reasonable rate of Rs 1500 per person per month, that is a required customer base of more than 130 people for just break-even, leave alone return on capital, depreciation on machines, etc etc. Generously allowing for a window of opportunity of 5 hours each day for gymming (2 hours in the morning and 3 hours in the evening), and assuming peak efficiency in management, this implies that at any point of time there wd be more than 25 people inside the gymming area. If you have been one of the unfortunate people who has got membership for a gym and actually seen one, you will realize that there is no way there can be more than 20 people at a time inside the gym (A good gym wd have 5 treadmills, 3 each of those cycling and SFX things, 4 weird machines, and some area to do weights-training. Of these machines, at least 2 wd be dysfunctional at any point of time. There won’t even be space for 25 people to be in there).

But gyms still make money, and are popular. This can mean only one thing. A lot of people take Gym membership and don’t turn up regularly. If you were an economic geek, you wd call it capture of inertial surplus

Another example that I am big fan of and I must say, fell for comprehensively, is this concept of mobile phone rental in the UK. They have this beautiful concept of half-line rental for post-paid connections. You get a one-year contract for say £40 a month. They give this to you at half rate for the first 9 months of a one-year contract, give you the handset free at the end of the month and give you a return-flight ticket to New York if you complete your contract. This is like money in the pocket. The only catch being that while you get the rental for half the price for the first few months, you actually have to pay the full amount, get the receipt and mail to an address six-months after you have paid your bill, and get half the rental refunded. Pure genius.

The customer thinks he has got a deal for £20 a month for 9 months, the company knows that they retain the remaining half-line rental for 80%+ of the customers (market statistics prove that). And as far as the return ticket to New York is concerned, the customer sales rep will probably explain to the 3 or so people who have sent all 9 of their bills and got the refund and completed the contract that the offer was a co-promotion with the insurance company and wd not be available for the customer because he had cancelled the £15 per month insurance contract in the second month itself. Again, pure genius. These marketing guys make George Costanza seem like a saint.

Less subtle versions of these forms of revenue capture are adding "fault-prevention-charges" on your credit card bill. The brilliantly irritating we-will-cancel-it-if-you-call-up-and-abuse-our-callcenter-guys-but-are-still-giving-it-a-go-because-40%-of-cutomers-dont-bother strategy preferred by Citibank.

One of my friends actually worked in a division called "revenue-enhancement" in a large firm. Is his job description were stripped of fancy management terms it would look like "think up devious methods to extract revenue from customers". Out of respect for the group, I am withholding the name of the company, but if any of you get this weird looking "charges on messages received" entry on your mobile phone which charges up every time you receive a message when on roaming, you can safely assume my friend has earned his salary for that month.

That’s it for the day. Acknowledge Inertia. Eliminate guilt. Enjoy your weekend on the couch.

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