Thursday, July 28, 2011

Price


It is not easy to determine a fair price. Fair here means the price I charge is equal to the price I am willing to pay. Usually I know what I want to charge: as high as possible (LOL!), but it is more difficult to imagine the price I am willing to pay. In my current job I have to approve a lot of purchasing, need to know their fair prices fast, and to teach my pricing strategy to staff.

Let me share my pricing strategy. The easiest pricing strategy is by comparison. This strategy works well when comparing two competing price bids.

Allow me to give one example. My teenage son bought $40 shoes at Zara in Calgary. It took him 3 months to outlast the shoes as one sole was torn apart. When I protested him for being not caring enough about his shoes, he replied that my Asics running shoes cost 3.5 times more expensive. What to do? I told him that my Asics shoes lasted for 3+ years, so even though I paid $150 for the shoes, per month I only pay $3.75, while for his shoes $13 per month. Zara shoes ended up 3.5 more expensive than Asics shoes because the latter last a lot longer. We can make the calculation more complicated by applying a constant depreciation rate, but it is clear that the Zara shoes' depreciation rate is ridicuously much higher than Asics'. This means the Asics price is actually cheaper than Zara price.

A more complicated price comparison example is the Equipment Rental Rates published by State of California Business, Transportation and Housing Agency. This list could be converted into a good estimate of a rental price for any country if I at least know the cost-of-living index ratio (using say, the Big Mac index). There are a lot of price information available in North America, but I have to convert this information to a relatively fair Indonesian prices using this approach.

One very important variable in business decision is time. (It's a pity that the time variable is often ignored in most engineering courses, except in applied mechanics and engineering economics.) A good business decision made today may be a bad decision if made 4 months later. One main reason is cash flow. So, Asics price is better than Zara price if the time horizon is > 3 years. Most business decisions need on average a 3-years horizon.

Another pricing strategy is by determining its components. This computation is good for estimating labour cost. What I usually do is to come up with the price for a unit task. For example, if I want to estimate the labour cost of building a warehouse, I would then break down this construction project to a sequence of tasks: from digging the construction site to installing the wall cladding. Each task requires a number of workers and I build the price using estimated labour cost per hour by including efficiency factor based on the number of shifts required per day and the speed of the workers based on the construction site's geometrical information.

I have previously used this component-wise pricing calculation to determine the profit margin of a contractor. I was able to get a good discount, as a result, when this information was communicated nicely. One reason I cannot just brag to the contractor that he takes too much margin above a fair price is that the pricing has to accommodate delays due to unexpected fluctuations like weather, work interruptions, and sickness. This random factor, for a competitive sector, could very well be what makes or breaks a profit margin. If I am willing to assume this random risk, then the price would be lower. It is like paying insurance premium. (That is, if I am entrepreneurial, this "random" margin is a business opportunity.)

Monday, July 25, 2011

Impact


I used to think research impact should be equivalent to the journal impact factor of a research journal, which indicates the extent the journal is cited. I believed then that my research had a significant impact when it was published in a high-impact-factor journal. It is a convenient association - really - but I have to admit a lazy one.

It is a lazy association because most researchers - as most workers - follow what their pioneers have done. University research is no different and has become an industry, complete with its leaders and followers. Researchers who founded new areas become leaders and they define research areas. 90%-plus of all researchers are followers and they naturally worry about the impact factor.

To be a research leader is a lonely road and one has to often fight a conventional wisdom. There are many examples. From Albert Eistein's theory of relativity, which was done while he was a patent officer, to Theodore Maiman's ruby laser invention, to Andrew Wiles' proof of last Fermat's theorem. It is not a stroke of luck, since Feynman has always been genius from the get-go, as it requires years of deliberate preparation and determination.

A lot of areas in physical sciences have been researched to great details. From astronomical length scale to atomic length scale. From attosecond to geological time scale. This type of research is analytical: to find the mathematical laws that govern how things behave. It is very rewarding, but once it is completed and proven by experimental data, it is really d-o-n-e.

Physical science researchers can still do applied research. One can do applied research by first knowing a problem and then working on a solution. A lot of academic research, however, work for a long time on specific areas without caring whether there are problems to be solved. Applied researchers who do their research based on working on the same area for decades usually say, "Well, we have a solution, but we are waiting for a problem." Now, that's funny and might as well be a memorable line from a Jerry Seinfeld episode. More and more I feel though that a better applied research is problem-driven, not area-driven.

Now, there are a lot of problems in developing world. Most have to do with structural poverty, where someone becomes poor - not because he does not work hard - because he is trapped in a conspiracy of low wage, low skills, and low opportunity. A question worth-solving is how do we solve this structural poverty. I don't care whether efforts to answer this question can be published in a high-impact-factor journal, but it is definitely a question worth-solving.

These developing-world problems may look at first glance like mostly social or economic problems, but a lot of them have strong physical-science components. Basically, the economic problems - in my opinion - have the same underpinning: how to increase purchasing power of the poor. It means manufacturing costs need to still go lower to reach the poor billions without sacrificing the environment.

The social problems also have another common underpinning: how to empower the poor through education and civil actions. Internet technologies can help solve these social problems if done at low or no cost. A school system that is faster than 12 years to complete will help young generation to acquire practical skills and thinking frame that will help them adapt continually as they work.

When I think about these developing world problems, I face a dilemma whether to plow ahead with doing research by following my curiosity. "Am I not wasting my time?", I often ask myself. It was one the reasons that made me decide to take a leave from doing research and to spend time living in Indonesia.

Tuesday, July 19, 2011

Doaku


Aku rasakan kemurahanMu
Semua untuk keluargaku
Aku cuma ingin sendiri

Buktikan langkahku benar
Anugrahi yang kucinta
Tak perlu tunggu surga

Beri kita kekuatan sepadan
Biar yang benar menang
Saat musuh menerjangku

Jangan biarkan aku sakit
Berbaring lama tanpa ajal
Sudahi cepat waktuku tiba

Sunday, July 17, 2011

USD 2.35


I have been in Jakarta for 2 months and have eaten out at least one meal each day out of convenience. I have tried prices from Rp. 5,000 to 100,000 per meal. Here in Jakarta, food quality is not proportional to price. I can squeeze food expense if I have ample food quality information, which means I have to be adventurous.

My equilibrium meal price that balances wallet, health, and taste seems to sit at Rp. 20,000 (USD 2.35) per meal in Jakarta.

I had bought breakfast and lunch meals for Rp. 7,000 from roadside food stalls in Jakarta. I accumulated a 50:50 record of upset stomach for that price but haven't gotten bad diarrhea yet (thankfully). The food was not bad or rancid, but I suspect there are food stuff used that are "too strong" for my stomach; they could be overused frying oils, food coloring agents, unsanitary water, fly infestation.

My observation was proven again today. I had vegetable-salad rice combo lunch (aka nasi pecel + tempe) for Rp. 10,000 in Denpasar (located in Bali island) and I felt nauseous 1 hour after that. (It was almost likely due to stale vegetable or peanut sauce.) Luckily I took Pepto Bismol from our Balinese friend whom we visited in Legian. I drank a lot of tea and it seemed to have helped. The symptom went away after 5 hours.

Denpasar's living cost is similar to Jakarta's. In other cities the equilibrium price could be lower due to cheaper cost of living. In Bandung, for example, I won't hesitate to eat a Rp. 15,000 meal. In Solo, I can safely eat out for Rp. 10,000.

If I approach the equilibrium price from the upper bound, there is no need to spend a Rp. 50,000 meal or above, unless in a business meeting.

I am clearly ripped off if I pay more than Rp. 20,000 in a roadside food stall. Furthermore, I feel I am being ripped off if I pay above Rp. 20,000 even if still below Rp. 50,000 at most restaurants. I usually pick the cheapest food at a fancy restaurant, and I can always find a Rp. 20,000 meal there.

The USD 2.35 equilibrium price is what Jakartans pay when they eat out including ice cold sweetened tea. I usually ask for hot unsweetened tea (at no cost) if the price is rather steep to stay at my equilibrium price target.

Overtime I could train my stomach to meet the chemico-physical demands of lower than USD 2.35, but I am reluctant to risking it now (having had two bad food poisoning cases last year).

Having said all of these, if you are ever stuck with little options and are hungry, pick a roadside food stall with the most costumers. The food there is likely more fresh. Pick also a safe bet: steamed rice and fried or BBQ chicken. Don't try hot chilli paste (sambal pedas) unless you have a death wish (LOL!).

Saturday, July 16, 2011

Cinta


Kemarin mataku basah dua kali
Tak kuasa, begitu saja mengalir
Lewati desa pura sekitar Ubud
Lihat tari Bali elok menggoda

Aku bersyukur bertemu
Cinta yang telah lama hilang
Wajah perempuan berberas tiga
Kaki lelaki bersarung kotak
Pekat hijau daun bertebaran

Aku bisa tinggal di pulau ini
Mereka tahu nikmati hidup
Berbaju putih memuja dewa
Gelak hangat tawa senyum
Kokok ayam di pagi hari

Airport



Airports in Indonesia have a lax security system. When I saw this the first time a couple of years ago I was worried. But I now understand why it is much more casual than in North America. 

Indonesians do not appear worried at all individually with this lax security system and regard airports no differently from other transportation terminals. They arrive with their big grins in their faces and tease each other - so much so that even my teenage son cannot fathom. The airline counter staff are much more relaxed as well. I was never asked to show my ID by most domestic airlines so long as I bring the e-ticket. That's all they care about: that I paid my ticket and show my willingness to fly.

At one of my domestic flights, my plane was 1-hour delayed and I could walk back past the security system to buy dinner. When I asked whether I could pass the security gate and come back later, the guard smiled at me and said "of course, you can." He understood there are delays - a lot of them - and allowed us to pass for meal. 

North Americans would be upset if they see that the airport security personnel act in a relaxed manner like that. Although they would complain with too much security, but in the end they obey the tighter security rules. Such tighter security rules will never stand in Indonesia. Indonesians here are just more trusting to each other.

Trusting each other does seem naive since Indonesia has had terrorist bomb attacks before, but Indonesians accept fate with more forbearance. I used to see this as ignorance, but I am not sure anymore since victims of such attacks are by definition randomly targeted. Wouldn't it be wiser to accept such fate with forgiving hearts? 

Bottom line: I am not worried with the lax security system in Indonesia. Because frankly Indonesia does not have international security concerns; it never has aggresive foreign policy. 

It is a valuable lesson when I understood the difference and it shows that the developing world has a different mentality and a set of ideas different from developed world.

Wednesday, July 6, 2011

Sederhana


Saya cuma iri orang yang lebih merdeka dari saya. Karena mereka sebenarnya lebih tahu arti hidup. Saat saya ditanya teman baik baru saya apa itu sukses. Dan saya jawab seperti itu: jika saya merdeka maka saya sukses.

Makanya saya bingung dengan pemimpin politik yang haus terus kekuasaan. Jadi pemimpin seperti itu tidak merdeka: kemana mana diikuti, dikawal, dan diteropong. Apa gunanya hidup seperti itu? Disanjung orang tapi sebenarnya semua ada maunya. Hanya maunya si pemimpin yang tidak kesampaian. Maka, jadi pemimpin haruslah berani, biar urusan cepat selesai. Biar cepat merdeka. Tapi banyak yang tidak seperti ini. Mungkin pikiran sederhana saya tidak mampu mencerna pikiran canggih pemimpin-pemimpin politik kita.

Merdeka buat saya jalurnya dua. Yang pertama adalah kemerdekaan finansial. Ini yang hampir semua orang upayakan dengan bekerja keras. Semakin kaya semakin merdeka. Ini benar. Tapi ini bukan jalur satu satunya. Karena pada akhirnya, kesenangan yang kaya tidak ada bedanya dengan kesenangan yang miskin. Tidak percaya? Coba anda pikirkan lagi.

Jalur kedua yang lebih mantap - dan sederhana akhirnya - adalah melatih jiwa untuk tidak tergantung ke apa pun. Ini yang diajarkan oleh Buddhism: no attachment. Ini juga diajarkan Islam, menurut teman baru saya, walau saya lupa istilah Islamnya. Dasar pemikiran tingkat kemerdekaan ini adalah tidak ada yang kekal di hidup ini. Semua berubah: umur, rupa, otak, harta, teman, istri, anak, semuanya.

Apa kemudian kita tidak mencintai anak istri kita? Ya tentu tidak, karena anak hasil buah cinta saya dan istri saya. Anak itu saya yang membuat, jadi saya yang bertanggung jawab mendidiknya. Istri saya juga dulu saya yang melamar, jadi saya yang bertanggung jawab mencintainya. Tapi apa yang saya harapkan dari mereka tidak melebihi apa yang bisa mereka berikan. Jadi tidak ada sedih jika saya ditinggal mereka. Atau saya meninggalkan mereka.

Merdeka memakai jalur kedua pasti langgeng karena tidak tergantung saya kaya atau miskin. Merdeka itu akhirnya disederhanakan menjadi denyut jantung dan desah nafas tiap detik.