Re:How Allstate’s auto insurance algorithm squeezes big spen...
by munificent on Tuesday February 25, 2020 @05:25PM
(#22418164)
I like to think of this as "attention arbitrage".
Bank fees are a good example. To you and I, an extra $3 bank fee is annoying but not worth allocating enough of our attention to avoid it. We aren't in the business of spending our whole damn day minimizing random bank fees.
But bank administrators are in that business. They spend their whole day trying to figure out how to maximize thieir profit and when they roll out a fee they can apply to millions of customers. There are enough customers hit by this they could summon enough total attention to push back, but the attention is divided among all those people and easily conquered. Meanwhile, the bank's effort to apply that fee is concentrated among a small number of people whose very job it is to do stuff like this.
So banks and other businesses discover cases like this where the quantity of attention they are willing to devote to something is larger than what any individual customer is, and that's where they squeeze.
Bank fees are a good example. To you and I, an extra $3 bank fee is annoying but not worth allocating enough of our attention to avoid it. We aren't in the business of spending our whole damn day minimizing random bank fees.
But bank administrators are in that business. They spend their whole day trying to figure out how to maximize thieir profit and when they roll out a fee they can apply to millions of customers. There are enough customers hit by this they could summon enough total attention to push back, but the attention is divided among all those people and easily conquered. Meanwhile, the bank's effort to apply that fee is concentrated among a small number of people whose very job it is to do stuff like this.
So banks and other businesses discover cases like this where the quantity of attention they are willing to devote to something is larger than what any individual customer is, and that's where they squeeze.