eBay and Economics

My first job was definitely of the untraditional type.  I was having a conversation with my best friend and my father about our childhood jobs, and I remember listening to them talk about working for a catering service and grocery store while I tried my hand at eBay.  As we each shared our experiences, I found myself thinking about how eBay is pure economics.  Of course, that was an obvious thought, I mean, eBay is a marketplace that connects vendors and consumers of ‘stuff’ over the internet, but when I took a minute to let this thought percolate, it certainly upholds basic economic principles.

I had known about eBay for some time; my father was an intense Power Seller in the early 2000s when the unique auction house was in its prime, selling Ugg boots and Nike Shox at ridiculous profit margins.  I can recall those early Saturday morning runs to the shoe stores to purchase several pairs of the infamous boots and watching him meticulously write descriptions for each product.  I didn’t fully understand the total operation of being a seller until I re-opened my father’s account in my sophomore year of high school.  I realized my spending habits were greatly exceeding my allowance, but I didn’t want to have to work somewhere or for someone (its a millennial thing, I guess).  I didn’t know much, so I decided to sell what I knew would make money, which was what my dad sold.  I, along with my brother, sold newly released/limited edition  Nike shoes, backpacks, and Starbucks mugs.  We didn’t make a killing, like my dad, but we always managed to have a decent amount of cash in our pockets–and it definitely didn’t hurt my resume when applying to colleges.  Looking back on these experiences, with some acquired knowledge about economics and finance, I’m better understanding the principles with which my business functioned.

Over the next several days, I will be looking at eBay through an economic lens examining technology, incentives, rationales, and utility.

Maxwell

Apple To Acquire Beats Electronics

For those living under a rock, Apple has once again made headlines as it plans to acquire current pop culture staple, Beats Electronics.  According to Apple and multiple news outlets, the deal is set to be worth $3.2 billion.  Apple isn’t the first popular brand to make such a lofty acquisition recently, as Facebook purchased messaging app, WhatsApp, for $19 billion and Oculus VR for $2 billion.  Google has also pulled out the wallet and bought Nest for $3.2 billion– certainly, none of these deals have broken the backs of either company.

Many different conjectures have been published as to why Apple has selected Beats Electronics to be aligned with the brand.  Some believe its because of Apple’s desire to hire Beats’ co-founder Jimmy Iovine, who is apparently a leading innovator within the music industry; others think its for the newly released Beats streaming service, which has utterly failed to compete against Spotify; and then there are those who simply believe Apple is floundering, running out of the creative ideas consumers have come to expect from the powerhouse tech corporation.  This final theory may hold some weight considering the fact that Apple has followed the pattern of the other aforementioned corporations’ acquisitions.

Personally, I believe Apple made this move because (A) it places another product that has huge profit margins in Apple’s current lineup, and (B) perhaps for revitalizing/merging iTunes Radio with Beats’ streaming service.  Whatever theory you believe, its definitely not the groundbreaking move that will recover some of Apple’s lost market-share to other technology companies.  Maybe Apple has some ‘holy-shit’ idea up their sleeve that we don’t know about, but until then let’s just think of this as two iconic brands getting in bed together– a la Jay Z and Beyoncé.

As for producer/rapper, Dr. Dre, he can now be regarded as hip hop’s wealthiest mogul, surpassing Jay Z and P Diddy.  Although people speculated that he would be the first billionaire out of the triumvirate, Forbes estimates that this deal will bring in about $480 million after taxes– leaving Dre $200 million shy of the illustrious billion dollar mark.  Regardless, I can’t imagine seeing a Dr. Dre album releasing any time soon, especially after this huge pay-day.

Maxwell