Wednesday, 20 May 2009

Live blogging The Apprentice series 5: episode 9

Economics lessons from this week's episode?
  1. Flexibility in pricing creates economic value. If something is worth less to a client than your cost base will bear, they (and you) won't benefit from it unless you can bring down the costs. And if you can also capture some of the higher value to clients who do derive more value, you can reduce overall costs by sharing the fixed costs.
  2. Being competitive on price is important, but not critical - even in a commodity market
  3. Operational problems can usually be solved if you have the right product and price point
  4. If you want a sustainable, predictable business you need to keep the granularity of your sales smaller than your measurement time horizon (or your working capital)

The usual courtesy for later viewers: a blank space.

Stop scrolling now if you haven't seen the show - jump down to the bottom and read upwards.

10:30 Another show over: and just three more until we know this year's apprentice. I would love to see the story of what happened to all the previous years' winners while working for AS.

10:28 Ben gets a unanimous vote of no confidence from the panel and a nearly unanimous one from the audience. Not too surprised.

10:25 Hugh seems to like everyone. Lorraine, James, Ben - he is either a really nice guy or wants to be seen as one.

10:23 And Ben: he could easily have played the game better and pinned the blame on rocking scapehorse Debra. And high-risk strategies aren't always smart on The Apprentice, even if they have a positive expectation value, because you never have time for the long-term averages to work out.

10:21 James: mostly did what he had to do as team leader - quite rational to have had children, it seems, because that got him picked as leader and the leaders have been surprisingly safe in this series. There is something high-risk - but on balance probably smart - about the way he presents himself as a foot-in-mouth moron to the cameras. He's going to be one of the dark stars of the series when he's finally fired. I can't see him winning it - he comes across as a bit too fake (though Hugh Dennis thinks he's a "proper bloke").

10:19 Debra: actually not a bad decision to pick the horse, though it's usually rational to try to negotiate, especially when you don't have an ongoing relationship to maintain. But there is a potential irrationality in excessive attachment to her chosen product - a bit too much anchoring.

10:16 And the losers. Yasmina made two good moves - behaving well and keeping her head down in the boardroom (mostly), and more importantly being in the same (sub)team as team leader James. This gave her the chance to butter him up (and she's quite pretty) and also left lots of uncertainty about the performance of the two candidates who weren't accompanying him.

10:13 Back to the candidates: the winning team. Howard: intelligent and down-to-earth - no real issues. Kate: about the same. Lorraine: claimed to be acting on instinct which sounds irrational, but actually she knew exactly where those "instincts" came from - straightforward arithmetical reasoning.

10:11 Hugh Dennis is quite rational for that matter - points out that at the start of a task, it's worth asking why it has been set. Correctly judging the future and eliminating uncertainty are two of the hallmarks of successfully furthering your rational interests.

10:10 This show is a bit boring, so let's see whose irrationality we can spot. Alan was on form this week. Nick and Margaret are always smart. So how about the rest?

10:09 They pick up on the nice "who's responsible" line from the boardroom. One of the lines of the show. Michael Ball, unexpectedly, has a smart insight on this: "I take full responsibility for completely going along with your idea". Clearly learned from Gordon Brown.

10:08 Hugh Dennis is definitely one of the funniest people to have been on this show.

10:06 Seems that I was wrong about the price comparison - apparently it's standard practice in these exhibitions. I guess I only spend time at trade shows.

10:00 You're Fired now? Join me there.

9:59 And next week is the TV shopping task - always fun.

9:58 Interesting little point - Ben in the taxi insists he is better than James - and "probably" better than Debra too! Odd way to put it...

9:58 Next week then is the last regular episode, followed by the interviews and grand final.

9:57 So we now have four women and two men left. A nicer balance than previous series.

9:56 Debra did save herself in the boardroom - but admittedly while she's really annoying, her performances on the tasks have been OK.

9:56 But he chucks Ben out.

9:55 Alan almost looks upset to be firing someone.

9:55 On performance in the boardroom, I'd get rid of James. On the task, Ben. On the series, Debra.

9:54 James does have a legitimate defence that it was nothing to do with him.

9:53 Clever trick from Alan - getting everyone to claim responsibility for the horse.

9:51 Debra has some passion and can talk about results. James claims unconvincingly to be a leader in his company. Ben has a scholarship to Sandhurst.

9:50 Debra isn't very popular with Alan, Nick or Margaret. But we still have ten minutes until the end of the show.

9:49 Ben is trying to give evidence for how great he is. Worth doing - again bounded rationality means that whatever people remember is more true than what they have forgotten.

9:48 A more in-depth analysis than usual between Nick, Margaret and Alan of the candidates' relative strengths.

9:46 Exhibitions are time-sensitive and you need to offer a deal to get people to buy now. Bounded rationality - people will forget what you had to sell after they leave the room.

9:44 What's more, they didn't negotiate with the vendor to be able to offer a lower price.

9:43 Although she is lining up Debra and Ben as the scapegoats for picking the rocking horse.

9:42 I do like it when Yasmina doesn't talk. Because she is much less likely to be brought into the room if she keeps quiet.

9:41 I do like it when Nick talks. They (or he) makes sure he only says sensible things that show a good understanding of business.

9:39 Quite a lot of time spent on the prize this week - Gerald Scarfe is making cartoons of the winning team. Don't fancy Lorraine's avatar much.

9:38 It has to be James or Ben to go - they have made themselves highly visible. Debra probably into the boardroom with them.

9:37 £722 for Empire: over £1100 for Ignite! The nice team won!

9:36 Alan points out that the high-value rocking horse is a very risky strategy. Of course if they had sold any, he might not have said that.

 Ben is clearly convinced that they have lost the task - he is getting his attack on James in already.

9:34 "A very interesting task" according to Sir Alan. I'm not sure I agree.

9:33 A sudden end to the show - and we're in the boardroom.

9:32 Oddly enough, they are not allowed to vary the price - and so they lose the sale. A perfect example of neoclassical economic theory - price controls reduce economic activity.

9:31 Someone is interested...but for £1500 instead of £1762. We don't know what the margin is.

9:30 Desperation sets in and the rocking horse hasn't been sold yet. High stakes - it will win or lose the task for them.

9:28 Howard and Lorraine are frustrated at not being able to work the pushchair, but they will get the hang of it pretty soon. Easy to get annoyed at the beginning of the day, but human capital develops quickly.

9:26 Pricing question: should the rocking horse come with a price tag? James and Debra realise they should probably take it off so that the child starts to like it before the parent gets scared.

9:24 Lorraine realises her negotiation wasn't so good and they may have paid over the odds for the collapsible pushchair - they can't compete with the cheaper supplier of the same thing. But I am not too worried - there's so much noise and confusion at an exhibition that price comparison is hard.

9:22 7am and they show up at the exhibition centre. I remember doing this - wandering around to look at the competition, comparing our stand to theirs, figuring out what last-minute gimmicks we can think of to grab more customers.

9:19 In a near-comedy moment, Lorraine, Kate and Howard (i.e. the likeable team) nearly talk each other out of a decision they both agree with - not to pick the birthing pool.

9:17 Debra and Ben make a good economic point: the balance between capital and labour (they don't quite put it that way, surprisingly). Labour is scarce and thus expensive - because there is a small team and a limited amount of time to sell - and so the value of capital goes up. This argues for picking a high-value product such as the £2000 rocking horse rather than the £10 headguard, which they'll have to sell two hundred of.

9:15 I'm curious about the best strategy here. Should the teams pick compatible products (for instance two high-end or two cheap things), so that the stand is attractive to a specific audience and they can offer multiple products to the same people? Or should they pick diverse products to cover a broader set of customers? A retail store would want some kind of consistency so that it has a memorable identity. But that might not apply to a stand in an exhibition.

9:13 A birthing pool supplier sold £5,000 of product at last year's Earl's Court show. Yasmina thinks that's a lot, but three days in Earl's Court must cost more than that.

9:11 Nice to see the teams being sold to by other people for once - gives us a little insight into how it's done!

9:09 Feels like there's been several tasks this series where product selection and design have been combined with selling. I guess that does highlight two of the key aspects of business, but it feels like Alan is preparing for a very specific job in his "empire".

9:05 The teams have to choose products to promote at the Baby Show in Earl's Court. Already Ben and James are disagreeing about something irrelevant.

9:00 Welcome to the Apprentice liveblog, particularly to anyone who's come over from the Guardian today. Don't forget to keep Anna's blog open in another window too (as if you wouldn't)!

Time ticks on, and so does Alan Sugar. Two hours to go and eight episodes down, the ninth of twelve Apprentices is on tonight.

Seven people remain: Raef, Lee,, that's not right. Yasmina, Ben, Lorraine, Howard, Kate, James and Debra. So if they're keeping things balanced, it's a woman's turn to be fired tonight.

Tune back in at nine o'clock and find out whether the candidates obey the laws of economics or if they're (predictably) irrational.

In the meantime, I recommend Anna Pickard's liveblog at the Guardian - enjoy the Adam and Joe videos while you wait.

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