Wednesday, November 23, 2011

If I Ruled the World

I don’t want to rule the world. Not remotely. But if I did, some things would be different. I toss this idea out at various points during the semester, usually after I’ve introduced my students to a particularly controversial (or, in my view, stupid) accounting treatment. For example, if I ruled the world, debt issuance costs would be expensed immediately instead of being recorded as assets and amortized over time, large stock dividends and stock splits would be accounted for identically, and convertible debt values would be bifurcated into debt and equity portions at issuance. But I don’t (rule the world). So they aren’t (accounted for like that). And no, there’s nothing I can do to make Accounting any sexier.

Earlier this week, Hadley told me that she and her friends had been talking about Black Friday. Her friends asked her if she was going shopping on The Day. When she laughed, they asked her why. Her response was that her parents don’t like crowds, which her friends found rather amusing. Actually, Hadley is the only person in our family who DOES like crowds. And even at that, she doesn’t really LIKE them. She only likes them in one situation -- when water is involved. She hates going to the country club swimming pool because nobody is ever there. And when I was considering doing a beach vacation (insert sound of gagging) this year because Hollis has never seen the ocean, she said she didn’t think there would be much point. Why? She reasoned (quite correctly), that I would drive 10 miles up the beach so that there wouldn’t be any people around us ... and she would think that was boring. Beach vacation avoided. Win.

If you have followed our travels over the years, you’ll realize that all of our extended family trips tend to be as far away from people as we can reasonably get. We don’t take the kids to Disneyland, Washington D.C., or The Big Apple. We take them to Arizona, Wyoming, Montana, South Dakota, and Canada. Thankfully, the kids -- even Hadley -- are very much like us and eagerly anticipate these vacations. But yes, I am guilty as charged. I’m not particularly fond of people in general and I do hate crowds ... which brings us back to the whole shopping thing.

I truly cannot fathom what would induce someone to choose to go shopping on high-traffic days. Here in Texas, we have a tax-free weekend every August. Stores are absolutely swimming with people who will battle to the death to buy items at 8% off. Me? I go shopping for my kids’ school clothes a couple of days BEFORE tax-free weekend starts. There is inventory out the wazoo in preparation for the soon-to-be insanity and there’s not a shopper in sight. It is glorious. I realize that we are pretty well off and, as such, don’t really need discounts to survive. But come on, even if you drop $1000 on school clothes you’re only “saving” $80 ... and that’s assuming (falsely) that they don’t mark stuff up to compensate for it. And if you’re dropping $1,000 on school clothes then you’re not remotely living close enough to the edge for $80 to make a difference. It’s mental. And it’s doubly (triply?) mental on Black Friday. Like I’m going to get out of bed before daylight so that I can buy a flash drive for $5 instead of $15? Seriously?

So if I ruled the world, here’s how things would go.

Not wanting to stand in the way of commerce, I would permit stores to open as early on Black Friday (or Black Friday Eve) as they wanted. However, as King, I would place a steward at each retailing establishment. The stewards would be charged with maintaining order, passing out Black Friday Numbers (BFNs), and supervising the calculation of Black Friday Ratios (BFRs). What is the BFR? The BFR is calculated as the cube root of the shopper’s place in line (i.e., his or her BFN) multiplied by his or her total percentage discount on purchased items. Specifics? As each shopper enters the establishment, he or she will be given a BFN. The BFNs will be given in ascending order. At checkout, the cashier will scan each shopper’s purchases and his or her BFN. These values will be transmitted automatically to the steward’s handheld device, which will automatically calculate the resulting BFRs. I’ll illustrate with four hypothetical shoppers:

Shopper A -- Total Purchases: $250; Original Price: $500; BFN: 1; BFR = 0.500
Shopper B -- Total Purchases: $250; Original Price: $500; BFN: 499; BFR = 3.966
Shopper C -- Total Purchases: $490; Original Price: $500; BFN: 500; BFR = 0.159
Shopper D -- Total Purchases: $490; Original Price: $500; BFN: 2; BFR = 0.025

The most important thing to remember here is that BFRs are inversely related to native intelligence. In other words, low BFR scores are “bad.” In the limit, a BFR of zero would suggest the lack of any brain function whatsoever, as it would indicate that the person in question stood in line on the most insane shopping day of the year and paid the full price for everything he or she bought. So keep that in mind ... the worst-case-scenario is a BFR of zero. It is also important to note that the cube root prevents the BFN from having too large of a weight in the calculation, thereby allowing for at least SOME premium to exist among early-going shoppers who manage to secure a good deal.

Whatever the case, the above examples show that Shopper A is an idiot because he was first in line at this particular establishment on Black Friday. However, because he received a whopping 50% discount his BFR is 0.500. Contrast that with Shopper D, who was second in line. For her time, trouble, and other non-monetary costs (assuming any such things exist for this person), she received a 2% discount. As a result, her BFR of 0.025 [cube root of 2 x (500-490)/500)] is not significantly different from the no-brain-function level of zero. Meanwhile, Shopper C received the same 2% discount but wasn’t as much of a moron as Shopper D (in that he didn’t waste as much time standing in line). As a result, his BFR is substantially higher, at 0.159 (but lower than Shopper A’s BFR because Shopper C still received basically no price discount). The highest BFR -- 3.966 -- goes to Shopper B, who was #499 in line (right in front of Shopper C) but still managed to get a 50% discount. Clearly we have hierarchical ordering happening here, with Shopper D needing to be subjected to laboratory experiments and Shopper B perhaps deserving partial (but not full) forgiveness for having ventured out on Black Friday instead of staying home and reading a good book.

Moving forward, on Black Friday +1 (do we have a name for Saturday yet?), all BFR scores will be tabulated and directed to Central Processing. Couriers will be dispatched to all households containing residents with BFRs < 1. Individuals with BFRs < 0.10 will be sterilized and will have to pay for it. They’ll be happy about this, though, because the couriers will be instructed to emphasize that they’re getting it for 8% off the regular price. Individuals with BFRs between 0.10 and 0.49 will be offered the option of free sterilization or five years of staying home on Black Friday. Given the trauma associated with option B, it is assumed that most of these people will choose option A. Individuals with BFRs between 0.50 and 1.00 will be sentenced to 500 hours of community service and two years of staying home on Black Friday. Individuals with BFRs above 1 will be sent messages of stern warning and those with no BFRs at all (i.e., those who Did the Right Thing and stayed home) will be sent holiday gift baskets and many words of good cheer. The hope, of course, is that within a generation or two, much of the rabble in my kingdom will be no more. And with Prince Reagan (aka The Hermit) ready to assume the throne after my demise, I have every confidence that the future of WilkinsLand is very bright indeed.

That’s all I have for today. I hope you have the Happiest of All Possible Thanksgivings. And if you do venture out on Friday, watch your BFRs.

Peace
Mike

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