Why not? Genuine question, because my job is pretty much nothing but cost-benefit analysis of fixed-cost projects which pay off a small amount every year, and the calculation you describe as ‘not how you do cost-benefit analysis’ is almost exactly how I would do a cost-benefit analysis of this kind (although I wouldn’t phrase it as $1200 / hour because that’s clunky, I’d probably talk about a percentage return on investment). I rate the probability that I am wrong here as extremely small, but if I am wrong I really need to hear it, and have the problem explained to me.
If I were totally comitted to getting the most accurate answer I’d add a couple of complications that katydee doesn’t—for example;
I would discount against the possibility that GoodSearch no longer exists in 2040 (and discount future earnings more generally),
I would try to estimate a probability that I’d need to reconfigure my settings in the future, and estimate timings for that (if both Chrome and GoodSearch are still around in 30 years I’d be surprised!)
But ignoring these complications for the moment I think it is totally accurate to say in 2040, “I have donated $16,000 to charity since 2014”. I think the $1200/hour rhetoric is unhelpful, because it implies that you could earn another $1200 by working another hour, when in fact you don’t actually ever earn $1200 (well, I suppose you do after about a decade) and you can only earn the money over a very long period of time. I would probably describe it as a ‘Nominal Rate of Return of X% per annum over Y years’, compared to a nominal rate of return of almost zero percent per annum if I don’t search with GoodSearch (it is possible my advertising generates a multiplier effect which has a tiny positive externality on me, but I’d expect this to be almost totally negligable)
OK. First of all, super-kudos for this response, and I apologise if I’ve come across as uncivil, which I probably have.
I don’t have a problem with your reasoning that, all other things being equal, earning some money for charity for what you’d ordinarily do is better than earning no money for charity for what you’d ordinarily do. I have a problem with how you appraise the value of ten minutes of work.
So, your reasoning:
It will take ten minutes to change your search settings
Changing your search settings will earn 50 cents a day for charity
Over one year, that’s ~$130
That’s ~$130 { in the implicit context of one year } for ten minutes work
There’s nothing else you can do in the next ten minutes that will earn $130 { context-free }
Therefore rather than working a marginal ten minutes you’re best off changing your search settings
Why one year? This seems a completely arbitrary selection, and yet it absolutely determines the value you’re comparing to your opportunity cost, (which in your worked example you specify in $/hour, so not in the context of one year). You could specify five years as your time-horizon and your expected value for that ten minutes would be huge, or two hours and it would be tiny.
Fundamentally, the money is generated by future search activity, and even though this search activity is “free” in the sense that it’s happening anyway, it’s not actually free for purposes of cost-benefit analysis (it still carries an opportunity cost), and you still need to consider it as an input, otherwise you have no reference for the time horizon over which you generate outputs. It is in this context that I consider it ineffective. Just because the output is generated by effort you’re already exerting does not mean this effort is being used efficiently.
Don’t worry about the tone, opportunity cost is that hinterland where it is too complicated to explain to someone who doesn’t get it in one sentence, but too fundamental not to need to talk about so it is very difficult to judge tone when you’re not sure whether you can assume familiarity with economic concepts.
It sounds to me like we basically agree—the cost of switching search engine is ten minutes (assumption) and this pays off about 50 cents a day for forever (assumption). This makes cutting off the analysis at one year arbitrary, which I agree with. You also have to compare the effort you put into searching with anything else you could do with that time, (even if you would have been doing those searches ‘naturally’) for the purpose of correctly calculating opportunity cost.
I think we disagree on the final step—if this is to be ineffective you need to be able to find an activity which is a better use of my time than conducting those daily searches. Since my primary contribution to charitable causes is from my salary, and I use a lot of Google in my job (I would be fired if I didn’t do internet searches because I would be totally ineffective) I can’t think what else I should be doing—what is a better use of my time than doing those searches? Assume we’re only interested in maximising my total charitable giving.
The only math needed is to decide how much benefit is lost using Goodsearch vs. whatever search engine you currently use—if it’s slower, less effective relevant-stuff-finding engine, etc, then it might very well not be worth it. Maybe Goodsearch is like AOL circa 1997? Or equivalent to Asking Jeeves?
You could also—even if it’s a best-in-the-market engine functionality wise—decide whatever advertising you are exposed to has some negative value, but I’d take that to be largely preferential if there was no loss of performance.
If Goodsearch is an equally valuable search tool to your current, then switch. It would be like refusing to put a Goodgarbage or Goodvaccum or Goodkitchentable in your home that promised to yield $0.01 to charity per use.
It’s just a search engine. Assuming it’s functionality remains equal to other leading search engines (maybe a big “if”), then it’s a simple, one-time 10-minute switch in exchange for an ongoing $0.01 per search...or $XX.XX per year.
It seems to me this would be a pretty effective little fund-raising tool for a large(r) organization. Get a church congregation or school to change their search engines over to Goodsearch and fund charitable projects each year.
Well, if we were to approach this seriously, there a few more factors in play.
On the benefits side you need to estimate the expected length of time that this scheme will be operational. It’s not just GoodSearch being around, it also them continuing to offer the same rate (and the price of generic eyeballs has been going down since as far back as I can remember and shows no signs of stopping) while providing adequate service.
You also need to figure out the appropriate discount rate since $1 in 2040 is quite different from $1 in 2014.
On the costs side you need to estimate how many additional reconfigurations you might need (browsers change, config files become corrupted, etc. etc.). Also, every time you find find a particular Bing search inadequate and need to re-search using Google, that’s more time cost which could easily swamp the initial 10-minute estimate. If you believe the Bing search to be inferior to Google you should also include the opportunity costs of missing something important without realizing it.
More importantly, you need to realize what the main cost is—it’s not reconfiguration time, it’s you allowing yourself to be tracked by Bing, etc. (that’s what the advertisers are actually paying for). That cost is hard to estimate and probably depends on the individual, but it exists and ignoring it is unwise.
P.S. By the way, it turns out Goodsearch doesn’t donate 1c/search. It donates 50% of its revenue—that’s quite a different thing.
I agree with everything you’ve said, but I would point out that I already allow myself to be tracked by Google, so the true cost is only the difference between the ‘badness’ of Google and Microsoft.
Why not? Genuine question, because my job is pretty much nothing but cost-benefit analysis of fixed-cost projects which pay off a small amount every year, and the calculation you describe as ‘not how you do cost-benefit analysis’ is almost exactly how I would do a cost-benefit analysis of this kind (although I wouldn’t phrase it as $1200 / hour because that’s clunky, I’d probably talk about a percentage return on investment). I rate the probability that I am wrong here as extremely small, but if I am wrong I really need to hear it, and have the problem explained to me.
If I were totally comitted to getting the most accurate answer I’d add a couple of complications that katydee doesn’t—for example;
I would discount against the possibility that GoodSearch no longer exists in 2040 (and discount future earnings more generally),
I would try to estimate a probability that I’d need to reconfigure my settings in the future, and estimate timings for that (if both Chrome and GoodSearch are still around in 30 years I’d be surprised!)
But ignoring these complications for the moment I think it is totally accurate to say in 2040, “I have donated $16,000 to charity since 2014”. I think the $1200/hour rhetoric is unhelpful, because it implies that you could earn another $1200 by working another hour, when in fact you don’t actually ever earn $1200 (well, I suppose you do after about a decade) and you can only earn the money over a very long period of time. I would probably describe it as a ‘Nominal Rate of Return of X% per annum over Y years’, compared to a nominal rate of return of almost zero percent per annum if I don’t search with GoodSearch (it is possible my advertising generates a multiplier effect which has a tiny positive externality on me, but I’d expect this to be almost totally negligable)
Where is the error in my reasoning?
OK. First of all, super-kudos for this response, and I apologise if I’ve come across as uncivil, which I probably have.
I don’t have a problem with your reasoning that, all other things being equal, earning some money for charity for what you’d ordinarily do is better than earning no money for charity for what you’d ordinarily do. I have a problem with how you appraise the value of ten minutes of work.
So, your reasoning:
It will take ten minutes to change your search settings
Changing your search settings will earn 50 cents a day for charity
Over one year, that’s ~$130
That’s ~$130 { in the implicit context of one year } for ten minutes work
There’s nothing else you can do in the next ten minutes that will earn $130 { context-free }
Therefore rather than working a marginal ten minutes you’re best off changing your search settings
Why one year? This seems a completely arbitrary selection, and yet it absolutely determines the value you’re comparing to your opportunity cost, (which in your worked example you specify in $/hour, so not in the context of one year). You could specify five years as your time-horizon and your expected value for that ten minutes would be huge, or two hours and it would be tiny.
Fundamentally, the money is generated by future search activity, and even though this search activity is “free” in the sense that it’s happening anyway, it’s not actually free for purposes of cost-benefit analysis (it still carries an opportunity cost), and you still need to consider it as an input, otherwise you have no reference for the time horizon over which you generate outputs. It is in this context that I consider it ineffective. Just because the output is generated by effort you’re already exerting does not mean this effort is being used efficiently.
Does that make sense?
Don’t worry about the tone, opportunity cost is that hinterland where it is too complicated to explain to someone who doesn’t get it in one sentence, but too fundamental not to need to talk about so it is very difficult to judge tone when you’re not sure whether you can assume familiarity with economic concepts.
It sounds to me like we basically agree—the cost of switching search engine is ten minutes (assumption) and this pays off about 50 cents a day for forever (assumption). This makes cutting off the analysis at one year arbitrary, which I agree with. You also have to compare the effort you put into searching with anything else you could do with that time, (even if you would have been doing those searches ‘naturally’) for the purpose of correctly calculating opportunity cost.
I think we disagree on the final step—if this is to be ineffective you need to be able to find an activity which is a better use of my time than conducting those daily searches. Since my primary contribution to charitable causes is from my salary, and I use a lot of Google in my job (I would be fired if I didn’t do internet searches because I would be totally ineffective) I can’t think what else I should be doing—what is a better use of my time than doing those searches? Assume we’re only interested in maximising my total charitable giving.
You’re over-thinking it.
The only math needed is to decide how much benefit is lost using Goodsearch vs. whatever search engine you currently use—if it’s slower, less effective relevant-stuff-finding engine, etc, then it might very well not be worth it. Maybe Goodsearch is like AOL circa 1997? Or equivalent to Asking Jeeves?
You could also—even if it’s a best-in-the-market engine functionality wise—decide whatever advertising you are exposed to has some negative value, but I’d take that to be largely preferential if there was no loss of performance.
If Goodsearch is an equally valuable search tool to your current, then switch. It would be like refusing to put a Goodgarbage or Goodvaccum or Goodkitchentable in your home that promised to yield $0.01 to charity per use.
It’s just a search engine. Assuming it’s functionality remains equal to other leading search engines (maybe a big “if”), then it’s a simple, one-time 10-minute switch in exchange for an ongoing $0.01 per search...or $XX.XX per year.
It seems to me this would be a pretty effective little fund-raising tool for a large(r) organization. Get a church congregation or school to change their search engines over to Goodsearch and fund charitable projects each year.
Unless Goodsearch is not a good search engine...
Well, if we were to approach this seriously, there a few more factors in play.
On the benefits side you need to estimate the expected length of time that this scheme will be operational. It’s not just GoodSearch being around, it also them continuing to offer the same rate (and the price of generic eyeballs has been going down since as far back as I can remember and shows no signs of stopping) while providing adequate service.
You also need to figure out the appropriate discount rate since $1 in 2040 is quite different from $1 in 2014.
On the costs side you need to estimate how many additional reconfigurations you might need (browsers change, config files become corrupted, etc. etc.). Also, every time you find find a particular Bing search inadequate and need to re-search using Google, that’s more time cost which could easily swamp the initial 10-minute estimate. If you believe the Bing search to be inferior to Google you should also include the opportunity costs of missing something important without realizing it.
More importantly, you need to realize what the main cost is—it’s not reconfiguration time, it’s you allowing yourself to be tracked by Bing, etc. (that’s what the advertisers are actually paying for). That cost is hard to estimate and probably depends on the individual, but it exists and ignoring it is unwise.
P.S. By the way, it turns out Goodsearch doesn’t donate 1c/search. It donates 50% of its revenue—that’s quite a different thing.
I agree with everything you’ve said, but I would point out that I already allow myself to be tracked by Google, so the true cost is only the difference between the ‘badness’ of Google and Microsoft.