24 June 2015

The Tyranny of Average Cost

When I concocted the phrase 'tyranny of average cost', I thought it was a new description. I've spent the last bit of time searching the innterTubes for that phrase, and nothing comes up. I suppose I should copyright it.

More to the point, there are a couple of pieces on Seeking Alpha, dealing with Apple. More, still, to the point, is that the argument is really about the problem of unit volume, price, and average cost. Seeking Alpha tends to have not the brightest bulbs in the candelabra. With tech and healthcare moving toward evermore capex, variable cost drops as a percent of total, and thus the vendor needs evermore volume to cover cost. Cheap Chinese hands don't mean much when the amount of labor in the widget is minuscule. As mentioned before: if only the X% can afford the Z widget, in short order, the X% won't be able to either because price rises on lowering volume. There's a reason a Chevy costs less than a Mercedes. There's also a reason so much headway has been made in medicine since the 1950s: (largely) universal employer based health coverage provided the funding, which funding didn't exist before then. The Right Wingnuts won't admit this, of course; they assert that only They deserve quality healthcare. Without widespread usage, even the X% couldn't float the boat.


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