Comment by TeMPOraL | Hacker News Reader

Comment by TeMPOraL | Hacker News Reader

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> When a pandemic rolls around, all elective care gets shut down, so hospitals lose money despite being needed more than ever.

Sort of off-topic, but I'm increasingly starting to believe that this kind of complexity in business models should be disallowed in general. I mean in particular the cases of selling something with a high margin in order to fund something else that's sold at or below costs. Be it related items ("razor and blades model") or unrelated (elective vs. non-elective care).

My usual reason is that it's anti-competitive and allocates incentives in the exactly wrong way, leading to ridiculous waste (that's how we get throwaway printers with expensive cartridges), but healthcare example points to another problem: stability. A critical system whose functionality is strongly subsidized by "extra offerings" is a system that fails when those extras aren't being bought for some reason.

In engineering, simplicity is desirable. So should it be in business. After all, transparent pricing is important for proper functioning of free markets, and such schemes confuse the pricing.

The "razor and blades model" is maybe not the best example here, as it's entirely voluntary for the consumer.

The ads convinced me to buy overpriced Mach 3 blades for 20 years, but at no time was I prevented from buying a safety razor and having cheap blades and a better shave. I could even buy one from Gillette if I really wanted to.

I'm not sure I'd want regulation protecting me from being a wasteful consumer, but I do think that something as important as a hospital shouldn't be allowed to run on whatever Ponzi scheme is momentarily profitable.

Perhaps we could regulate them more like we do banks? Something about maintaining certain critical capacity, or you lose your license to facelift?

Predatory pricing is related, but it relates to a business selling something so low it drives competitors out of business.

So I suppose if that applies where you live, and you had a business selling only the low-margin type of item, and your competitor was selling below cost, then you'd have standing for action. I'm not sure if consumers ever get a say though outside of regulatory agencies like the ACCC.

This would destroy the ability of businesses to take on fixed costs.

Or imagine a hospital that only did high margin elective care. Instead of keeping the low margin service available while it struggled financially, it just wouldn't offer any services. Winning!

Interestingly, loss/waste aversion has caused problems in US healthcare. CON laws haven't done anybody any good, save incumbent hospitals.

> Instead of keeping the low margin service available while it struggled financially, it just wouldn't offer any services.

Margins are controlled by businesses. If there was no way for anyone to do "high margin X to subsidize low margin Y", then previously below-cost prices would raise to better reflect the real costs of providing a good or service.

Then you'll find that in many cases, these "real costs" are too high for many who need it, leading many low margin services to stop being offered and many consumers turned away. Hardly a win.

Complex subsidies can broaden the market and serve the underserved, that's a win. It's classic engineering arrogance to dismiss all complexity as unnecessary or harmful, as if the economy is a passion project that should not deign to serve those who can't or won't bear the full cost of each individual product.

If there is margin on the service, it isn't really a subsidy, it's capacity utilization (building a hospital that can do 100 surgeries a year instead of a hospital that can do 45 knee surgeries a year and filling the slots with other services).

I guess you can probably re-frame your argument using some other similar measure though.

NPR has done a couple series on how dollar stores (Dollar General/Dollar Tree/Family Dollar, just search "NPR dollar general" to see the content) can setup shop directly next door to a traditional grocery store and erode the traditional grocery store out of business. Reason being - dollar stores sell only the high margin items for low prices, whereas the grocery store has the expectation that they will provide all the staples people need, even the super low-margin items like lettuce. Once a grocery store loses the competition on the high margin items, they can no longer subsidize selling the low margin items and go out of business. A real (and growing) problem in many communities.

Very much agreed. Systems thinking should be taught from kindergarten.

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