Money: An Unofficial Biography of Money by Felix Martin

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When I was 15, I received a gift from my best friend, Max—a book that would shape my understanding of money. From that day on, my friends knew that books were the way to my heart.

Yap Island’s Unique Currency: Giant Stones and a Trust-Based Economy

In the remote Yap Island, found a hundred years ago, an extraordinary monetary system thrived. The inhabitants used enormous coin-like stones with holes in the center, known as Rai stones, as a form of currency. These stones were immovable, some as large as cars, and were quarried from distant islands and transported with great effort.

What made this system work was an intricate web of trust and communal understanding. Ownership of the stones could change without them physically moving. If someone wished to buy something, like 10 kilograms of fish, they would simply declare the transfer of ownership to the fisherman. Everyone in the community would acknowledge the new ownership and the transaction was complete.

The stones didn’t even need to be seen to hold value. In one legendary tale, a Rai stone was lost at sea during transport, but the community continued to recognize its value, and it remained part of the island’s currency system.

This unique approach to money, rooted in social trust and shared belief, challenges conventional economic thinking and provides a fascinating glimpse into how value can be ascribed and exchanged in diverse cultures.

The Birth of Forwards and Futures: Lyon, 1535

In the bustling market town of Lyon, France, in 1535, an extraordinary transformation was taking place. Amidst the cacophony of sellers peddling meats, fruits, and tools, one man stood out. He had no physical products, just a fountain pen, paper, and an idea that would revolutionize trading.

This man began selling the future by signing contracts to buy wheat at predefined prices and reselling them at higher rates. This practice, known as Forwards or Futures, was a radical departure from traditional commerce. It attracted attention, skepticism, and eventually imitation. Other traders started following suit, and soon, Lyon’s market was flooded with these future contracts.

The city’s reputation grew, attracting merchants and financiers from far and wide. Banks and financial institutions took notice, and Lyon became a hub for innovation in finance. By the end of the century, it was not only France’s financial center but also the heart of Europe’s burgeoning capital market. The man with the fountain pen had set in motion a wave that would eventually shape modern stock markets.

Eric’s Adventure: Risk, Profit, and the Birth of Joint-Stock Companies

Across the sea, in the small but ambitious trading nation of the Netherlands, a Dutch trader named Eric had a vision. He dreamed of building ships to explore and trade with distant lands, but his ambition was larger than his credit. Banks and friends lent what they could, but it was never enough.

Undeterred, Eric took a novel approach. Instead of seeking credit, he asked investors to buy a share of his profits. This was a new concept, and it attracted adventurous and like-minded individuals who saw the potential in overseas trade.

Eric’s first voyage was a resounding success, bringing in profits that exceeded all expectations. Word spread quickly, and more people clamored to invest in Eric’s next expedition. His fleet grew, and so did his reputation.

However, managing the growing number of investors became a Herculean task. There were disputes over ownership, profits, and investment terms. The government, too, struggled to track who owned what and how much tax was due.

The solution was as innovative as Eric’s trading model—a centralized exchange where shares in his ventures, and those of his competitors, could be bought and sold. This was the genesis of the joint-stock company and the stock market, concepts that would define global commerce for centuries to come.

With each new voyage, risks and rewards were shared among an ever-growing pool of investors. The idea spread across Europe, laying the groundwork for modern corporations and investment structures. Eric’s vision had not only opened new trade routes but also charted a course for the future of business and finance.

John Law: The Gambler Who Shaped France’s Monetary System

John Law, a charismatic Scotsman, was a gambler, banker, and economist whose ideas would leave an indelible mark on France’s monetary system. Sentenced to death in Britain for killing a man in a duel, Law escaped to Europe, where his financial acumen caught the attention of France’s regent.

France was in financial ruin after years of war, and Law proposed a radical solution: replace gold and silver with paper money backed by land. He believed this would stimulate the economy and reduce the national debt.

In 1716, Law founded the Banque Générale, issuing paper money that could be exchanged for coins. His ideas were initially successful, and Law’s influence grew. He took over the Mississippi Company, controlling French trade with the Americas, and his paper money fueled a speculative bubble.

However, Law’s success was short-lived. Doubts about the real value of the paper money led to a loss of confidence, and the bubble burst. Law was forced to flee France in disgrace, his innovations leading to financial chaos.

Yet, despite the catastrophic end, Law’s ideas were ahead of their time. He foresaw the potential of a centralized banking system, fiat currency, and the complex interplay of economics and psychology. His story is a cautionary tale about innovation, ambition, and the fragile nature of economic systems, but also a testament to the power of ideas to shape history.

These expanded sections provide a more comprehensive view of the unique currency system of Yap Island and the complex story of John Law. By delving into the details, the narrative paints a vivid picture of these historical phenomena, offering readers a deeper understanding of the diverse and often surprising world of money.

Beyond the Stories: A Rich Exploration of Money

“Money: An Unofficial Biography of Money” by Felix Martin goes beyond the fascinating stories of Yap Island, Lyon, Eric’s adventures, and John Law. It dives into the complexities of debt, the art of printing money (seigniorage), the ideologies of capitalism and communism, the evolution from the gold standard to fiat currency, and the prominence of the U.S. dollar.

This article was edited by ChatGPT, which assisted me in crafting the storytelling, paraphrasing sentences, and verifying facts from both the book “Money: An Unofficial Biography of Money” by Felix Martin and my own memory. The collaboration has helped shape a more engaging and accurate representation of the book’s rich exploration of money and its multifaceted history.

Rules:

The suit is only dark blue or dark gray. Black is allowed only at evening events with the black-tie dress code, as well as at funerals and weddings.
The jacket is single-breasted, with two or three buttons. Length — up to the middle of the palm of a freely hanging hand. The fabric is solid, dense, without iridescence (chameleon effect), and gloss.
Trousers of a classic cut, with arrows. The length is up to the middle of the heel with one front fold above the shoe.
The shirt is white, plain, opaque (not transparent), and without pockets. Cuffs with one or two buttons are acceptable, but French cuffs are preferable, with medium-sized cufflinks of laconic shapes. The cuff should peek out from under the jacket by 1-1.5 cm.
The tie without glossy gloss, plain, muted colors (dark red, dark blue, dark gray, graphite). Small geometric patterns or contrasting stripes are acceptable. The tie should not be too wide, and its knot should not be too large. The length should reach the middle of the belt.
The belt is only made of smooth matte leather with a classic laconic buckle. The color of the belt matches the color of the shoes.
Shoes — oxfords or derbies made of smooth matte black leather. Brown shoes are only allowed in the heat. The sole is thin, the heel is 3-5 cm.
Socks up to the middle of the calf, are selected in the color of shoes or trousers. White or multicolored socks are not allowed.

These are generally accepted rules. But some politicians deviate from the rules and add their own corporate identity: Trump wears a bright red tie and printed socks; Putin most likely has higher heels. Macron sometimes wears a turtleneck under the jacket. Canadian leader Trudo wears socks with ducks and star wars. Some civilizations are also wearing traditional costumes, e. g., the Saudi Arabian prince wears a thawb (or dishdasha).

The suits are meaningful. For example, Marcon wears a turtleneck under the jacket if he expects changes from the politician’s decision. The clumsy oversized non-ironed costume can mean that person does not care about the public – Trump is one of them. Obama, at the conference against terrorists, wore a beige suit, that seemed too informal in a context of a speech on such a serious issue. A light suid is only used at weddings and on the beach.

Brands:
Putin wears Brioni and Kiton (4000-8000€). Macron wears a local brand, Jonas et Cie, for just 380€. Biden wore Ralph Lauren at the inauguration. Hart Schaffner Marx and Hickey Freeman produce suits for presidents for 3000-5000€. So, the price of the suit may be any: 400€, 3000€, 8000€ and higher.

Source: RBC.ru

I love buying premium products. I buy everything I need and I afford any hobbies I want. But I don’t become poor after purchasing all of this stuff. And most of the time I only pay 20-30% of the item’s price. How can I afford to buy an iPhone for 300€? How do I get money after buying an expensive camera? Let’s learn about depreciation.

When you buy stuff, look at 3 things: a lifetime of a product, It is hard to break, for how much will I be able to sell this stuff in the future?

Buy 1-year-old stuff

I don’t buy new iPhones, Macbooks, cameras, or bikes (i hope soon I will add cars here). Instead, I buy 1-year-old items. For example, I bought iPhone 11 pro 256 GB just for 600€, while the 12th was priced at 1200€. This iPhone was in perfect condition and was just 6 months old. I keep it already for 2 years and I can sell it for 450€ (Sep 2022). However, I broke Face-Id while swimming and now I have to give a discount and sell it for 300€. The total cost of an iPhone usage was 300€, or 150€ per year or 12.5€ per month.

Some people sell their 1-year-old phones to buy new ones. They sell it for 50%-70% of the price. That means, that to have a new iPhone each year, a person should pay a difference of 600€ between the initial price and selling price, or 50€ per month. But if you wanna have the previous model and keep it for 2 years, the monthly payment is just 12.5€. It is 4 times cheaper to have the previous model. If you keep the old model for a longer time, maybe you can even pay 10€ per month. To clarify, it does not mean that you pay someone € each month, it just shows how much value the phone loses every month.

Depreciation is the value, that an item loses each month or year. It is also treated as the real cost of usage of a good. In theory, you should take the price of a good when you bought it and the selling price after the expected time of usage. Then you subtract these prices and divide them by the number of years or months that you plan to use that stuff. For an iPhone 14, it will be (1200-600)/3 = 200€ per year if we assume that we use a 1200€ iPhone for 3 years and sell it for 600€.

Depreciation can be counted linearly, or more complicated. For easiness, assume that in the first year the item loses the same cost as in the next 2 years combined.

Used items are Inflation-free. That means if the price for new models goes up, the used items will cost the same as before. It is just a rule. For example, in Russia, there is huge inflation in cars. The previous models of a car cost 100k€ 1 year ago, the new model cost 300k€ due to the import restrictions. We could imagine, that if these cars still have the same engine and interior, the price for the one-year-old car should also rise dramatically. However, it is not the case. For example, the used Audi Q7 of 2020 with 50k km costs 70k€, while the new one of 2022 costs 250k€. The only difference between them is the small adjustment in the exterior and interior.

Different countries have different prices. For example, I bought a used camera, Sony a7 II for just 570€. When I came to Russia, it appeared that I can sell it for 1.2k€. So, I can sell it here and get a 600€ profit. It is known as Arbitrage. It is when you profit from the difference in prices without risk.

Buy high quality

Don’t buy low quality. Such items are easy to break, and their lifetime is short. You will not be able to sell it, so you just throw it in the rubbish bin after some time. Keep in mind that cheap low quality items are sometimes made with the child force and in poor worker conditions. And by buying and throwing the bad quality items in the rubbish bin, you are polluting nature.

High-quality items last long, show prestige and are beautiful and comfortable.

Also buy new

Not every item can be bought or used. Don’t buy used headphones, parachutes, or stuff you know nothing about. For example, I want to buy a bike for 2.8k€. It is expensive. I could probably find the one-year-old bike, but I don’t know how to check the bike for quality, or I don’t want to change the details. In such situations, I can either hire a professional or ask a friend for help. Or just buy a new one. The bike, for example, has a lifetime of 7 years on average, and then the depreciation will be 2800/7 = 400€. Of course, a bike can be sold even for 1000€ in 7 years, because we can change details and make repairments each year, but let’s assume that we do nothing. So, the cost of a bike will be 33€ per month. It is not too much for high quality.

What about fashion

Fashion is complicated. The fashion houses know that people want to be trendy, and the style changes each half a year. I don’t know if it is a good idea to buy used clothes, but it is a good idea to buy expensive classical outfits. For men it is easy – just buy suits for 2k€ each and use them for a decade. Buy good shirts, t-shirts, and 8 pairs of shoes for different events. The men’s classics change too slowly. There are also trendy casual outfits that should be changed more often.

For women, it does not work. Fashion for women is much more important. It is a way to show her status and prove to herself that she is the most beautiful. However, some brands like Burberry don’t change their fashion style too often. Gucci can also be worn for a quite long time. I recommend not buying the brand stuff, but quality stuff. Don’t be a crank and don’t buy an item with huge brand logos. Instead, buy something attractive. You will never find a brand on a 5k€ dress and suit.

When buying new clothes, remember how can you combine them with other clothes or whether you already have enough outfits for some occasions. Maybe you just need to buy high-quality t-shirts instead of 20 t-shirts with cheap prints. I have an excel file, where I put all the wardrobe items in my Austrian house. It appeared that I have items, that costs 6000€ in total. But I have only a few things that cost more than 100€. I understood that I have too many cheap clothes up to 25€. And the thing is that I wear such clothes for 1 or 2 years. The expensive items, however, I wear for a much longer time. I also found out that I have 5 suits, and 4 of them cost less than 200€ each.

I hope, after reading this article, you will buy quality stuff for lower prices and will afford anything you want.

(the prices are being updated as well as information till 15th September) Let’s say, we open a coffee shop on the street, where we sell only espresso. How much should the price be? And what difficulties will we face when opening?

One-time purchase

• Coffee machine – 15000€
• furniture – 5000€
• tools and accessories – 500€
• brand development – 1000€
• card terminal – 50€
• certificate and legal procedures

Monthly purchase

• Rent – 1000€
• Electricity – 1000€
• Employees – 5700€
• cleaning, accountant, lawyer, insurance – 500€

Per-cup purchase

• disposable cup – 0.1€
• coffee beans – 0.4€
• card commission – 2%

Certification

To sell Coffee, you need approval from the state. In Vienna, it is WKO (Wirtschaftskammer Organisation, or economic chamber in English). By the way, you don’t need it if you sell beverages in cans or bottles and if you sell simple food, like sandwiches, but you can only have max of 8 guests inside of a cafe. Not our case.

Rent

We rent a coffee shop on the ground floor of the shopping street. Let’s say we pay 1000€ for 20 m2 and expect to have 15 customers per hour on average. You may also find an already equipped coffee shop and just pay an auflösung (price for the furniture and equipment).

If only one employee works in a coffee shop, you don’t need a toilet by the law. Baristas can work at different time and then they will be treated as one employee in WC questions.

The place should have clean water, a sink, air conditioning, heating, and low humidity. If humidity is high, the beans can become bad. If there will not be air conditioning or heating, the employee will not be able to work in a coffee shop by the law. For example, in the UK when the temperature is less than 16 degrees celsius the employee is not allowed to work. In Austria, I found only the maximal allowed temperature of 32.5 degrees. And we will have to pay the employee even though that the shop is closed.

We also need to take insurance that covers all the things inside, especially the coffee machine.

Electricity

Based on https://www.statista.com/statistics/1271527/austria-monthly-wholesale-electricity-price/Statista, the price for 1 Megawatt was 359$ on July 2022, while before it was just 30-50€. The high prices for electricity are compensated by lower rent prices as well as governmental help.

Coffee machine

The coffee machine is the most expensive stuff inside of a coffee shop and is as important as beans. There are two main brands – La Cimbali, La Marzocco. both of them cost from 10000€ to 15000€. La Marzocco is more traditional, while La Cimbali tries to implement new technologies in the coffee machine. La Marzocco attracts coffee lovers, and they are ready to pay a premium for coffee made in this machine.

read about the difference between La Marzocco and La Cimbali

Why is it so expensive? This is due to the pressing mechanism. By the way, Espresso got the name from “press”, the process of pressing the ground coffee and water flowing through it. The pressure a coffee machine can do and the boiling process is the most important in coffee brewing. The machines are made out of thick metal, which makes cleaning easy. These machines last for decades (in the museum of Salzburg I have seen the model of the 1950th that can still work well).

Therefore, the price of the used coffee machine is still high. For example, a woman sells La Marzocco Ep for 5900€, that she bought in 2017 while the new costs €11900. Ps., this model is not produced anymore, and I found only one seller. For such a price, you may buy better models of La Marzocco.

To count the price of usage of a coffee machine or depreciation, we subtract the selling price from buying price, for example, 15000€-10000€= 5000€, and divide the years that we use the machine. Let’s say, 5 years. 5000€/5 years = 1000€, or 83€ per month.

additional coffee machines

Some people like Moka, the 50$ pot with 2 separate levels: water and ground coffee on the lower level. The pot is boiling on the stove. The brown liquid goes to the higher level, which is Moka coffee. When the higher level of a pot is full, the coffee is ready to be served in cups. I, personally, don’t like such a coffee due to the lack of foam and too huge amount of water per gram of coffee. Italians love it and drink it every breakfast instead of tea.

Coffee beans

• Price of arabica – 40€ per kilo
• 10g for each portion, or 0.40€

For coffee shops, we use the finest coffee beans. Usually, they are not sold to households, but to coffee shops.
For each espresso, we need 10 grams of ground coffee.

Coffee beans can be kept 4 months after roasting, later they lose their taste.

Tip: Portuguese love espresso that is made of ground coffee that is left after making the first espresso. They think that there is less caffeine inside this coffee. They ask to pour the coffee into the second cup. For the barista, it costs just a second cup (0.10€) and hot water. The used ground coffee will be anyways in the bin. You may either set a small price for such coffee or even give it for free to get loyal customers.

We don’t count sugar and cinnamon, they cost just a cent per cup.

Cups

We don’t have sitting places. We could use the bar table as in Italy, but we have only disposable (1-time use) cups for simplicity. The average price of bio cups is 10 cents. If you want to have your cups, use 10 cents as the price for cleaning, and use of a cup, which includes the price of buying the cup (e. g., porcelain espresso cup for 9€ each), the risk of breaking and stealing.

We expect 1 customer every 4 minutes (15 cups per hour). We are open daily from 8 am to 9 pm (13 hours per day). 13 hours * 30 calendar days = 390 hours, or 5850 cups per month.

Employees

Baristas are paid hourly. They come 30 min before opening and leave 30 min after closing. They clean stuff and count the inventory. It is 15 hours per day. A person can’t work more than 8.5 hours a day in Austria and must not work more than 40 hours per week (I’ll check this information). We need 4 baristas – 2 for work days and 2 for weekends.

Tip: the less a person earns, the less % of taxes are to be paid in Austria. This is due to the progressive taxes.

First, we pay for social contributions, which is nearly 18%. If a person earns 18000€ of earnings, then an employer pays 3500 of social contributions, you pay 21866$ gross. We pay taxes from income – contributions, 18000-3500 = 14500. Then we deduct 11000 of non-taxable amount 14500-11000 = 3500 and take 20% of taxes which is 700€. But taxes are deducted from the income of a person, not from your payments. The real income of a person will be nearly 17300€.

In our example, we pay for 7-hour work for each worker. All of them work for the salary for barista, which is 12€ per hour. It totals 7*12 = 84€ per day or 1680€ per month for work-day baristas and 672€ for weekend baristas.

We pay 2040€ and 816€ to baristas. In total, it is 2040*2 + 816*2 = 5712€ per month.

Count

Fixed costs per month: Rent (2000€) + cost of use of the Coffee machine (83€) + Salaries (5712€) + other costs (600€) = 8400€ approximately per month

For simplicity, we count furniture in rent, tools, accessories, and payment terminals in other costs

Variable costs per cup = beans (0.4€) + cups (0.1€) + terminal use.

We also need to pay VAT if we earn more than 30000€ in profit. The VAT is the tax per selling of an item, which totals 20% of the final price. But we don’t pay so much. We deduct 20% from the goods that we have bought – 20% from beans and cups, or 10 cents. In the EU the majority of the goods produced and sold over EU are tax-deductible, even the coffee machine is tax-deductible, it is 16.6€ per month. The same with the rent, however, if you buy a place, it is an investment, that is not tax deductible.

To get the break-even, 5850cups*(price*(1-terminal commission(2%))-variable cost(0.5€)) – fixed costs(8400€) = 0. To find the price I created an online program:

I found that with the price of 2€ we are break even and even make revenue of 141$.
We pay pay taxes from profit, 23.1%. Our profit is 108€.

open a program. Change the number and find the best prices and amount of cups to be sold

As you have seen, the coffee shop cannot sell espresso for less than 2€. The next time you go to the coffee shop keep it in mind.

Educational advertising brings value to a person. The reader learns, explores new themes, and obtains new values. Let’s see an example:

Alex wants to buy coffee beans. Alex knows nothing about coffee beans. Alex does the next actions:

1. He googles “how to choose a coffee.
2. Alex opens the most relevant blog.
3. He reads the article, for example this one.
4. Alex reads about roasting, types of beans, such as Robusta and Arabica, tastes, and storing a coffee.
5. Alex clicks on a suggested article about choosing coffee producers.
6. He finds the best coffee and a producer based on his preferences, even without tasting it.

Alex finds out that he can buy these coffee beans in a shop that runs this blog. Alex trusts the coffee shop website because the website educated him. Moreover, Alex sees that the guys in this coffee shop know the business and know everything about coffee. Alex is loyal to them and is ready to buy a product. Even if the price is higher.

The coffee shop could also show their expenses. The customer then understands a fair price for coffee and sees how much the company profits from it. If the customer, Alex, got from the blog precious information, he will reward the company with this profit (margin). And Alex will continue buying from this coffee shop if the company brings him more and more value.

Alex will recommend your blog to friends or educate them himself, and he will more probably give a link to your website. Alex will not recommend some bullsh*t; that is why the product that the company sells must have a high quality. Otherwise, Alex is scammed.

The blog and articles are assets of a company. A blog is a property that belongs to a company. Articles can also be posted on foreign resources, such as business journals (in Russia: vc.ru or Journal.tinkoff.ru), personal blogs (to be paid), or social networks: YouTube, Instagram, TikTok, Telegram, etc.

blogs and articles are powerful tools to attract customers. In my projects, I use articles as the primary source of attracting customers, investors, and employees. For example, I posted an article about bicycle lockers and in 1 week, I got 7.5k views, 100 likes, and 100 comments. I made new connections with 3 interesting people in Austria and got 5 contacts of people interested to help in a project and help with production. I also made a survey in this article, in which 500 people participated. I understood the demand and price for a parking spot in a given sample. I paid nothing for this blog but spent 4 hours of my life.

Youtube videos are also assets. Videos require more time and equipment. It is harder to link to a video, and the information from the video is harder to access. For example, you want to compare 2 coffee beans. You are interested in the type of coffee, size, and taste. You can easily find it in a table in a text, but if you watch a video, you search for a timestamp where the table is shown. To find information about taste, you should listen to a whole video or a fragment that you also have to find. But the video gives you a picture: a cup in which you pour a coffee, a foam from coffee, the foam elasticity, videos from picturesque places where the coffee was taken, and the roasting process.

Videos are great to show the process of production or properties, and use of a product. for example, seven miles coffee shop shows educational videos of how to brew coffee, recipes, competitions, and funny videos. They sell coffee beans online and sell coffee drinks in cafés. They have 150k subscribers, and I am sure they don’t spend too much money on ads.

Videos get old fast. In 4-6 years, the videos become old, and just a few people will watch them – there are competition and design trend changes. With a blog, it is easier – you may edit text and add fresh information. In a blog, you may also change the design theme – just make some changes in a code, and that’s it.

why not use ads

Ads are also powerful. However, an advertisement mainly works if a company has enough money to provide many ads and show them constantly on different sources. If a company stops the ad campaign, the new customers will stop coming, and the existing customers will leave. Profit in companies that rely primarily on ads and don’t have a brand, like Coca-Cola, will be small or even a loss. Let’s see 2 examples:

T-Mobile is a cellular carrier, that decided to enter the Austrian market. Austria already had a market leader – A1. T-Mobile had to enter the market fast and take a huge market share. Marketologists decided to attract people from Vienna, the capital of Austria, by showing ads offline in a city.

Marketologist placed ads on all available banners in Vienna: on houses, highways, train stations, and even banners on trams. There were no banners left so A1 could not post ads anywhere in a city. The ads were shown for 2 weeks everywhere, and in the next weeks, the number of banners was decreasing. Everyone knew about T-mobile after this campaign, and thousands of people became customers of T-Mobile.

The company spent millions of dollars on such an advertisement. Nowadays, the company does not make too many ads and I have even forgotten about T-Mobile, and only after meeting with a marketing specialist from T-Mobile I learned about that case. That means, that ads should stay everywhere to remember a brand.

Casper Sleep company that produces matrasses and sells them online never made a profit. However, Casper Sleep went to IPO on NASDAQ, and the market capitalization was at a max of one billion dollars. Casper sold matrasses via Instagram ads and other sources (as well as any other company).

To acquire one customer, the company pays hundreds of dollars, and with all the costs, they sell mattresses at a loss. The idea was to make a brand like Coca-Cola, but it did not happen. Investors understood that such business did not work and sold their shares. As a result, a company was delisted from NASDAQ, with market capitalisation of 280m$.

Save contacts

If you visit events or talk to new people, you need to leave contacts. The most popular ways are to show a QR for LinkedIn or Instagram, tell a phone number, or give a business card. From my experience, When I write a phone number, I have only time to write the name and the name of the organization – it takes 1 minute to do the whole process, It may sound a little, but when you talk with 40 people on one event, these 40 minutes become tremendous.

I had a problem at a summit in St.Gallen with the LinkedIn QR code – I did not find how to open it. I spent 2 minutes with a person trying to understand where the QR code was – in the end, we just changed the phone numbers (we could also find the names on Linkedin, but we did not do it). And also, people have a thousand connections on Linkedin, so your contact will be one of the thousands of similar contacts. But I still think that LinkedIn is the best social business network.

Business cards are the easiest way to show leave contacts. Within 5 seconds, the business card is in your interlocutor’s hands (companion’s). Also, millennials and older people use business cards by default – they expect to get the business card from you. That is why I use business cards.

Old card

The first 100 business cards I made when I was 16, I was making a project coldcaller.ru. I wrote in Russian: “hello! I am Daniill Kovekh, a Founder of Coldcaller.ru”, my phone number and a corporate email. I put a QR code linked to a website on the other side. I used a white background and black text. I used capital letters without serifs (grotesques) that were tall and narrow. I used the mid-price matte paper so that I could write on it.

New card

In April, I made 150 business cards with a new design. These business cards are personal and for universal use. I pointed out the name of a blog as a header. This is the primary information because, in a blog, a person finds all the links he can be interested in – CV, Linkedin, Projects, and the art shop. I don’t need QR on a business card because Koveh.com is easy to write and remember.

I wrote my email daniil@koveh.com on one side. I didn’t add the telephone number – first, I have different phone numbers: 2 phone numbers in Russia and two phone numbers in Austria, and soon, 1 in America. So, mentioning any will not mean that I respond from the telephone. The email, as well as the domain koveh.com, remains unchanged forever. Moreover, I don’t want to give my telephone number to everyone, and it should remain private.

I mentioned skills: Art, Architecture, Finances, Investing, Data science. I also mentioned that I know 3 languages: English, Russian, and German. I am not planning to learn new languages to a high level, so the information will be actual for a long time. I also wrote consulting and projects, because I create my projects (AKA startups, but I don’t like this word, It is now a synonym for “looser”), and make consultations on Investments, Marketing in the real estate market, and I am planning to consult about Architecture, Construction, and Urban Planning, as well as investments in Art, Wine, and Real Estate.

To make a business card interesting, I made an infinite stripe of skills I offer. The idea is that these skills are infinite, but later I decided to end with the starting word so that it looks like a separate printing or a pattern.

The words in the middle are huge; the margin from the borders compensates for the size. I Increased the letter-spacing because the letter “V” has too much white space at the bottom. I chose the serif fonts – they are easy to read.
The letters also remind me of Russia, especially the letter “M” reminds me of Moscow. The letter is unique because it has two different serifs: Linear serif and curved serif.

Unfortunately, I ordered an American card size, that is longer than the standard credit-card size.

Customer analysis is the essential thing for innovation and any business. It is tough to understand customer perception. Like the case with Coca-Cola:

Coca-Cola Story

Once, Coca-Cola decided to make a blind test of Coke and Pepsi. It appeared that only 40% chose Coke, so Pepsi appeared tastier. Coca-Cola decided to create a new taste that would be better than Pepsi. And Coca-Cola made it! They started to sell the new Coke.

It was the biggest mistake of Coca-Cola. People started boycotting Cola and even making protests. Once the CEO Golzueta was asked: “How can you sleep when you just sold the American Dream?”. He answered: “I sleep like a baby. I wake up every hour crying”. They Kept the old Coke.

The problem was that Coca-Cola did not know why do customers buy their product. The focus on the physical, chemical part of a product (like taste or color, or a form of a bottle) can be dangerous. Coca-cola assumed that taste was the central aspect of buying Coke, but it was irrelevant for customers.

Smart customer analysis is critical for success. We use this model to understand the demand. What makes people buy a product? People buy preferred products based on subjective perception. There is no direct 1 to 1 transmission. There are also other factors. People may perceive something, but sometimes they won’t care about this perception.

Coca-Cola assumed a product property that the problem is with the formula of Coke, and the taste must change it. However, it appeared that this perception was very weak. The taste made a little different for people. However, people wanted to drink an old taste to feel the taste of centuries.

Kano Model

is a heuristic model, a framework for the classification of product attributes. The core of the Kano Model is that the improvement of all product attributes is not a good idea.
Customers may not care about different attributes.

Washing machine company decided to make a new machine with 5000 modes. It was unnecessary because people usually use 1-3 programs. The company was proud to sell so many modes in a machine, but as you understand, no one was buying this machine, at least for a higher price than other machines.

Basic attribute

If an attribute is below the performance attribute, then the customer will not care about any improvement there; it is given for granted.

Excitement attribute

This is the essential attribute – if the company does not improve the attribute – it is not a problem; however, if the company does, customer satisfaction will skyrocket.

Dont blindly maximize the performance!

Conjoint analysis

Most used statistics used in practice. It displays the info on the importance of attributes. It allows learning if there is a linear relationship between attribute level and the resulting value for customers or there are “jumps.” E.g., it shows how many customers we lose by making the price higher.

Strengths:

1. Data collection is pretty natural – we compare the overall product
2. Not overstraining participants
3. Requirement to make a trade-off decision (“not everything is important” inflation)
4. Detailed results
5. Identification

Weakness

1. Only a small number of attributes is possible. You can use the adaptive conjoint method instead.
2. Importance of attributes depends on the span of attribute levels.
3. Assumption of independent attributes only holds for the modular products. If we make the integral approach, the soup approach, the interaction between different attributes plays a significant role. In the modular, Sushi approach, different sushi types don’t interact with each other.

Learn more in the video

A

Absolute advantage. when country a can produce a good cheaper than another.
Accounting cost. actual expenses + depreciation for capital equipment.
Actual return. return that an asset earns.
Actuarially fair. situation where an insurance payment = the expected payout.
Adverse selection. market failure, where companies sell products of different qualities at a single price due to asymmetric information.
Advertising elasticity of demand. % change in quantity demanded resulting from 1% increase of advertising expenditures.
Advertising-to-sale ratio. advertising expenditures/ sales
Agent. the Individual employed by a principal (director) to achieve the principal’s objective.
Amortization. Policy of treating a one-time expenditure as an annual cost spread out over some years.
Anchoring (якорность). Tendency to rely heavily on one prior piece of information when making a decision.
Antitrust laws. Rules and regulations prohibit actions that can restrain competition.
Arbitrage. the practice of buying at a low price in one place and selling higher in another.
Arc elasticity demand. price elasticity that is calculated over a range of prices.
Asset. Something that provides a flow of money or services to the owner.
? Asset beta. constant that measures the sensitivity of an asset’s return to market movements and, therefore, the asset’s non-diversifiable risk.
Asymmetric information. a situation in which a buyer and a seller possess different information about a transaction.
Auction market. a market in which products are bought and sold through formal bidding processes.
Average expenditure curve. supply curve representing the price per unit that a firm pays for a good.
Average expenditure. the price paid per unit of a good.
Average fixed cost. Fixed cost / the level of output(?).
Average product. Output per unit of a particular input. 
Average total cost. Firm’s total cost / the level of output. 
Average variable cost. variable cost / the level of input.

B

Bad. the good that is less preferred than more.
Bandwagon (массовое движение)effect. when a person buys something because others do it either. Positive network externality in which a consumer wishes to possess good in part because others do. 
Barrier to entry. Conditions impede (block) entry by new competitors. E.g., when the prices to start are too high or if the monopolists prohibit you from being a partner with anyone.
? Bertrand model. Oligopoly model in which firms produce a homogeneous good, each firm treats the price of its competitors as fixed, and all firms decide simultaneously what price to change.
Bilateral monopoly. Market with one seller and one buyer.
Block pricing. charging different prices for different quantities (“blocks”) of a good.
Bond. contract in which a borrower agrees to pay the bondholder (the lender) a stream of money
Bubble. An increase of price not based on fundamentals of demand or value, but instead on a belief that the price will keep going up.
Budget constraints. Constraints that consumers face as a result of limited incomes.
Budget line. All combinations of goods for which the total amount of money spent = income.
Bundling. Practice selling two or more products as a package.

C

Capital Asset Pricing Model (CAPM). Model in which the risk premium for a capital investment depends on the correlation of the investments return with the return on the entire stock market. (If your return less the market return, then you’ll be paid on this amount?)
? Cardinal utility function. Utility function describing by how much one market basket is preferred to another.
Cartel. Market in which some of all firms explicitly collude (cooperate in a secret by the unlawful way), coordinating prices and output levels to maximize joint profits.
Chain-weighted price index. Cost-of-living index that accounts for changes in quantities of goods and services.
?Coase theorem. Principle that when parties can bargain without cost and to their mutual advantage, the resulting outcome will efficient regardless of how property rights are specified
Cobb-Douglas production function. q = AK^åL^ß, where q is the rate of output, K is the quantity of capital, and L is the quantity of labor, and where A, å, and ß are constants.
Cobb-Douglas utility function. U(X, Y) = A^å*Y^(1-å), where X and Y are two goods and a is a constant. 
Common property resource. a resource to which anyone has free access.
Common-value auction. Auction in which the item has the same value to all bidders, but bidders don’t know. That value precisely and their estimates of it vary.
Company cost of capital. Weighted avatar of the expected return on a company’s stock and the interest Tate that it pays for debt.
Comparative advantage. situation, in which country 1 has an advantage over country 2 in producing a good because the cost of producing the good in 1, relative to the cost of producing other goods in 1, is lower than the cost of producing the good in 2, relative to the cost of producing other goods in 2. 
Complements. two goods for which an increase in the price of one leads to a decrease in the quantity demanded of the ofter.
Completely inelastic demand. Principle that consumers will buy a fixed quantity of a good regardless of its price.
Condominium. A housing unit that is individually owned but provides access to common facilities that are paid for and controlled jointly by an association of owners. 
Constant returns to scale. Situation in which output doubles when all inputs are doubled. 
Constant-cost Industry. Industry whose long-run supply curve is horizontal. 
Consumer Price Index. Measure of the aggregate (совокупный) price level. 
Consumer surplus. Difference between what a consumer is willing to pay for a good and the amount actually paid. 
Constant curve. curve showing all efficient allocations of goods between who consumers, or of two inputs between two production functions.
Cooperative. Association of businesses, or people jointly owned and operated by members for mutual benefit. 
Cooperative game. game in which participants can negotiate binding contracts that allow them to plan joint strategies.
Corner solution. a situation in which the marginal rate of substitution of one good for another in a chosen market basket is not equal to the slope of the budget line.
Cost function. Function relating the cost of production to the level of output and other variables that the firm can control.
Cost-of-living index. Ration of the present cost of a typical bundle of consumer goods and services compared with the cost during a base period. 
Cournot equilibrium. Equilibrium in the Cournot model
Cournot model. Oligopoly model in which firms produce a homogeneous (same) good, each firm treats the output of its competitors as fixed, and all firms decide simultaneously (at the same time) how much to produce.
Cross-price elasticity of demand. Percentage change in the quantity demanded of one good resulting from a 1-percent increase in the price of another.
Cyclical industries. Industries in which sales tend to magnify cyclical changes in GDP and national income

D

Deadweight loss. Net loss of total (consumer and producer) surplus.
Decreasing returns to scale. Situation in which output less than doubles when all inputs are doubled. (Less productive if more products)
Decreasing-cost industry. industry, whose long-run supply curve is downward sloping.
Degree of economies of scope (SC). Percentage of cost-saving resulting when two or more products are produced jointly (together) rather than individually. (Mb means by one or two companies)
Demand curve. Relationship between the quantity of a good that consumers are willing to buy and the price of the good.
Derived demand. Demand for an input that depends on, and is derived from, both the firms’ level of output and the cost of inputs.
Deviation. Difference between expected payoff and actual payoff (выплата).
Diminishing marginal utility. principle that as more of a good is consumed, the consumption of additional amounts will yield smaller additions to utility (выгода, практичность, польза). The more you consume, the less you need to get the benefit.
Discount rate. The rate used to determine the value today of a dollar received in the future.
Diseconomies of scale. A situation in which a doubling of output requires more than a doubling of cost.
Diseconomies of scope. A situation in which the joint output of a single firm is less than could be achieved by separate firms when each produces a single product. 
Diversifiable risk. Risk that can be eliminated either by investing in many projects or by holding the stocks of many companies.
Diversification. Practice of reducing risk by allocating resources to a variety of activities whose outcomes are not closely related.
Dominant Firm. Firm with a large share of total sales that sets the price to maximize profits, taking into account the supply response of smaller firms.
Dominant strategy. Strategy that is optimal no matter what an opponent does.
Double marginalization. when each firm in a vertical chain marks up its price above its marginal cost, thereby increasing the price of the final product.
Duality. Alternative way of looking at the consumer’s utility maximization decision: Rather than choosing the highest indifference curve, given a budget constraint, the consumer chooses the lowest budget line that touches a given indifference curve.
Duopoly. Market in which two firms compete with each other (Airbus and Boeing).
Dutch auction. Auction in which a seller begins by offering a relatively high price, then reduces it by fixed amounts until the item is sold.

E

Economic cost. cost to a firm utilizing economic resources in production.
Economic efficiency. Maximisation of aggregate consumer and producer surplus.
Economic rent. Amount that firms are willing to pay for input less the minimum amount necessary to obtain it.
Economics of scale. a situation in which output can be doubled for less than a doubling of cost (So then more, then more effective production).
Economics of scope. Situation in which joint (совокупный) output of a single firm is greater than output that could be achieved by 2 different firms when each produces a single product.
Edgeworth box. a diagram showing all possible allocation of either 2 goods between 2 people or of 2 inputs between 2 production processes.
Effective yield (rate of return). percentage return that one receives by investing in a bond.
Efficiency wage. Wage that a firm will pay to an employee as an incentive not to shirk (стимул чтобы не уклоняться от работы, тем самым уменьшая безработицу).
Efficiency wage theory. Explanation for the presence of unemployment and wage discrimination which recognizes that labor productivity may be affected by the wage rate.
Elasticity. Percentage change in one variable resulting from a 1-percent increase in another variable.
Emissions fee. Charge levied on each unit of a firm’s emissions.
Emissions standard. Legal limit in the number of pollutants that a firm can emit.
? Endowment (пожертвование) effect. Tendency of individuals to value an item more when they own it than when they don’t.
Engel curve. Curve relating the quantity of a good consumed to income. 
English auction. Auction in which a seller actively solicits progressively higher bids from a group of potential buyers.
? Equal marginal principle. Principle that utility is maximised when the consumer has equalised the marginal utility per dollar of expenditure across all goods.
Equilibrium (market clearing) price. Price that equates the quantity supplied to the quantity demanded. 
? Equilibrium in dominant strategies. Outcome of a game in which each firm is doing the best it can regardless of what its competitors are doing.
Excess demand. When the quantity demanded of a good exceeds the quantity supplied.
Excess supply. When the quantity supplied of a good exceeds the quantity demanded.
Exchange economy. Market in which 2 or more consumers trade 2 goods among themselves.
? Expansion path. Curve passing through points of tangency between a firm’s isocost lines and its isoquants.
Expected return. Return that an asset should earn on average.  
Expected utility. Sum of the utilities associated with all possible outcomes, weighted by the probability that each outcome will occur.
Expected value. Probability-weighted average of the payoffs associated with all possible outcomes.
? Extensive form or a game. Representation of possible moves in a game in the form of a decision tree.
Extent of a market. Boundaries of a market, both geographical and in terms of range of products produced and sold within it.
? Externality. Action by either a producer or a consumer which affects other producers or consumers, but is not accounted for in the market price.

F

Factors of production. Inputs into the production process (e. g. Labor, capital, materials).
First-degree price discrimination. Practice of charging each customer her reservation price.
First-price auction. Auction in which the sales price is equal to the highest bid.
Fixed cost (FC). Cost that does not vary with the level of output and that can be eliminated only by shutting down.
Fixed input. Production factor that cannot be varied.
? Fixed-proportions production function. Production function with L-shaped isoquants, so that only one combination of labor and capital can be used to produce each level of output.
Fixed-weight index. Cost-of-living index in which the quantities of goods and services remain unchanged.
Framing. Tendency to rely on the context in which a choice is described when making a decision.
Free entry (or exit). Condition under which there are no special costs that make it difficult for a firm to enter (or exit) an industry.
Free rider. Consumer or producer who does not pay for a nonexclusive good in the expectation that others will.

G

Game. Situation in which players (participants) make strategic decisions that take into account each other’s actions and responses.
General equilibrium analysis. Simultaneous (одновременное, синхронное) determination of the prices and quantities in all relevant markets, taking feedback effects into account.
? Giffen good. Good whose demand curve slopes upward because the (negative) income effect is larger than the substitution (замещение) effect. (e. g. with luxury good when price is low, then demand falls, or cheap fast food or cheap fruits**. if it’s to cheap, then people will be afraid to buy it).

H

Hicksian substitution effect. alternative to the Slutsky equation for decomposing price changes without resource to indifference curves.
Horizontal integration. Organisational form in which several plants produce the same or related products for a firm.
Human capital. Knowledge, skills, and experience that make an individual more productive and thereby able to earn a higher income over a lifetime 

I

Ideal cost-of-living index. cost of attaining a given level of utility at current prices relative to the cost of attaining the same utility at base-year prices.
Import quota. Limit on the quantity of a good that can be imported
Income effect. Change in consumption of a good resulting from an increase in purchasing power, with relative prices held constant.
Income elasticity of demand. Percentage change in the quantity demanded resulting from a 1-percent increase in income
Income-consumption curve. Curve tracing the utility-maximizing combinations of 2 goods as a consumer’s income changes.
Increasing returns to scale. Situation in which output more than doubles when all inputs are doubled.
Increasing-cost industry. Industry whose long-run supply curve is upward sloping.
Indifference curve. Curve representing all combinations of market baskets that provide a consumer with the same level of satisfaction. (2 indifference curves can’t intersect).
Indifference map. Graph containing a set of indifference curves showing the market baskets among which a consumer is indifferent.
Individual demand curve. Curve relating the quantity of a good that a single consumer will buy to its price.
Inferior (подчинённый) good. A good that has a negative income effect.

Infinitely elastic demand. Principle that consumers will buy as much of a good as they can get at a single price, but for any higher price, the quantity demanded drops to zero, while for any lower price, the quantity demanded increases without limit.
Informational cascade. An assessment (e. g., of investment opportunity) based in part on the actions of others, which in turn were based on the actions of others.
Interest rate. the rate at which one can borrow or lend money.
? Intertemporal price discrimination. Practice of separating consumers with different demand functions into different groups by charging different prices at different points in time. (Hardcover and paperback books difference at a price is high)
Isocost line. Graph, showing all possible combinations of labor and capital that can be purchased for a given total cost.
Isoelastic demand curve. Demand curve with constant price elasticity.
Isoquant. curve showing all possible combinations of inputs that yield the same output. 
Isoquant map. graph combining a number of isoquants used to describe a production function.

K

Kinked demand curve model. oligopoly model in which each firm faces a demand curve kinked at the currently prevailing price: at higher prices, demand is very elastic, whereas at lower prices, it is inelastic.

L

Labor productivity. Average product of labor for an entire industry or for the economy as a whole.
Lagrangian. function to be maximized or minimised, plus a variable (the Long-range multiplier) multiplied by the constraint.
Laspeyres price index. Amount of money at current-year prices that an individual requires to purchase a bundle of goods and services chosen in a base year / cost of purchasing the same bundle at base-year prices.
Law of diminishing marginal returns. Principle that as the use of an input increases with other inputs fixed, the resulting additions to output will eventually decrease.
Law of small numbers. Tendency to overstate the probability that a certain event will occur when faced with relatively little information. 
Learning curve. Graph relating amount of inputs needed by a firm to produce each unit of output to its cumulative output.
Least-squares criterion. Criterion of “best fit” used to choose values for regression parameters, usually by minimising the sum of squared residuals between the actual values of the dependent variable and the fitted values.
Lerner Index of Monopoly Power. Measure of monopoly power = excess of price / marginal cost as a fraction of price.
Linear demand curve. Demand curve that is a straight line.
? Linear regression. Model specifying a linear relationship between a dependent variable and several independent (or explanatory) variables and an error term
Long run. Amount of time needed to make all production inputs variable.
Long-run average cost curve (LAC). Curve relating average cost of production to output when all inputs, including capital, are variable.
Long-run competitive equilibrium. All firms in an industry are maximizing profit, no firm has an incentive (стимул) to enter or exit, and price is such that quantity supplied equals quantity demanded.
Long-run marginal cost curve (LMC). Curve showing the change in long-run total cost as output is increased incrementally by 1 unit.
Loss aversion. Tendency for individuals to prefer avoiding losses over acquiring gains.

M

Macroeconomics. branch of economics that deals with aggregate economic variables, such as the level and growth rate of national output, interest rates, unemployment, and inflation.
Marginal benefit. Benefit from the consumption of one additional unit of a good.
Marginal cost. Cost of one additional unit of a good.
Marginal expenditure. Additional cost of buying one more unit of a good
Marginal expenditure curve. curve describing the additional cost of purchasing one additional unit of a good.
Marginal external benefit. Increased benefit that accrues (наращивает процент) to other parties as a firm increases output by one unit.
Marginal external cost. Increase in cost imposed external as one or more firms increase output by one unit.
Marginal product. Additional output produced as an input is increased by one unit.
Marginal rate of substitution (MRS). Maximum amount of a good that a consumer is willing to give up in order to obtain one additional unit of another good.
Marginal rate of technical substitution (MRTS). Amount by which the quantity of one input can be reduced when one extra unit of another input is used, so that output remains constant. 
? Marginal rate of transformation. Amount of one good that must be given up to produce one additional unit of a second good.
Marginal revenue. Change in revenue resulting from an increase in output by one unit.
Marginal revenue product. Additional revenue resulting from the sale of output created by the use of one additional unit of an input.
Marginal social benefit. Sum of the marginal private benefit + marginal external benefit.
Marginal social cost. Sum of the marginal cost of production and the marginal external cost.
Marginal utility (MU). Additional satisfaction obtained from consuming one additional unit of a good.
Marginal value. Additional benefit derived from purchasing one more unit of a good.
Market. Collection of buyers and sellers that, through their actual or potential interactions, determine the price of product or set of products.
Market basket (or bundle). List with specific quantities of one or more goods. 
Market definition. Determination of the buyers, sellers, and range of products that should be included in a particular market.
Market demand curve. curve relating the quantity of a good that all consumers in a market will buy to its price. 
? Market failure. Situation in which an unregulated competitive market is inefficient because prices fail to provide proper signals to consumers and producers.
Market mechanism. Tendency In a free market for price to change until the market clears.
Market power. Ability of a seller or buyer to affect the price of a good.
Market price. Price prevailing (преобладающая) in a competitive market.
Market signalling. Process by which sellers send signals to buyers conveying information about product quality.
Maximin strategy. strategy that maximises the minimum gain that can be earned.
Method of Lagrange multipliers. Technique to max or min a function subject to one or more constraints.
Microeconomics. a branch of economics that deals with the behavior of individual economic units – consumers, firms, workers, and investors – as well as the markets that these units comprise.
Mixed bundling. Selling two or more goods both as a package and individually (MB like gel and shampoo for gifts and normally separately)
Mixed strategy. Strategy in which a player makes a random choice among two or more possible actions based on a set of chosen probabilities.
Monopolistic competition. Market in which firms can enter freely, each producing its own brand or version of a differentiated product. 
Monopoly. Market with only one seller.
Monopsony. Market with only one buyer.
Monopsony power. buyer’s ability to affect the price of a good.
Moral hazard. when a party whose actions are unobserved can affect the probability or magnitude of a payment associated with an event.
Multiple regression analysis. Statistical procedure for quantifying economic relationships and testing hypotheses about them.
Mutual fund. Organisation that pools funds of individual investors to buy a large number of different stocks or other financial assets.

N

Nash equilibrium. set of strategies or actions in which each firm does the best it can given its competitors’ actions. 
Natural monopoly. Firm that can produce the entire output of the market at a cost lower than what it would be if there were several firms.
Negatively correlated variables. Variables having a tendency to move in opposite directions.
Net present value (NPV) criterion. Rule holding that one should invest in the present value of the expected future cash flow from on investment is larger than the cost of the investment.
Network externality. Situation in which each Individual’s demand depends on the purchases of other individuals. (If everyone buys Tesla, I buy too)
Nominal price. Absolute price of a good, unadjusted for inflation.
Noncooperative game. Game in which negation (опровергающие) and enforcement of binding (обязывающие) contracts are not possible.
Nondiversifiable risk. Risk that cannot be eliminated by investing in many projects or by holding the stocks of many companies.
? Nonexclusive good. Good that is difficult or impossible to charge for its use, and this good can’t be excluded from consumption.
Nontrivial good. Good for which the marginal cost of its provision to an additional consumer is zero (e. g., a game license for the second friend)
Normative analysis. Analysis examining questions of what ought to be.

O

Oligopoly. Market in which only a few firms compete with one another, and entry by new firms is impeded (barrier)
Oligopsony. market with only a few buyers.
Opportunity cost. Cost associated with opportunities forgone the firm’s resources are not put to their best alternative use.
Opportunity cost of capital. Rate of return that one could earn by investing in an alternate project with similar risk.
**Optimal strategy. -Strategy that maximizes a player’s expected payoff.
Ordinal utility function. Utility function that generates a ranking of market baskets in order of most to least preferred.
Overconfidence. Overestimating an Individual’s prospects or abilities.
Over-optimism. An unrealistic belief that things will work out well.
Over-precision. An unrealistic belief that one can accurately predict outcomes.

P

Paasche index. Amount of money at current-year prices that an individual requires to purchase a current bundle of goods and services / the cost of purchasing the same bundle in a base year.
Pareto efficient allocation. Allocation of goods in which no one can be made better off unless someone else is made worse off.
Parallel conduct. Form of implicit (скрытый) collusion (сговор) in which one firm consistently follows actions of another.
Partial equilibrium analysis. Determination of equilibrium prices and quantities in a market independent of effects from other markets.
Payoff. (выплата) value associated with a possible outcome.
Payoff matrix. Table showing profit (or payoff) to each firm given its decision and the decision of its competitor.
Peak-load pricing. Practice of charging higher prices during peak periods when capacity constraints (ограничения) cause marginal costs to be high (e. g., in winter people need ski, but the production is restricted).
Perfect complements. Two goods for which the Marginal Rate of Substitution (MRS is how much of one good you’re ready to give up for another) is zero or infinite; The indifference curves are shaped as right angles.
Perfect substitutes. Two goods for which the Marginal Rate of Substitution of one for the other is constant.  
Perfectly competitive market. Market with many many buyers and sellers, so that no single buyer or seller has a significant impact on price.
Perpetuity. Bond paying out a fixed amount of money each year forever.
Point of elasticity of demand. Price elasticity at a particular point on the demand curve.
Positive analysis. Analysis describing relationships of cause and effect
Positively correlated variables. Variables having a tendency to move in the same direction.
Predatory pricing. Practice of pricing to drive current competitors out of business and to discourage new entrants in a market so that a firm can enjoy higher future profits.
Present discounted value (PDV). The current value of an expected future cash flow.
Price discrimination. Practice of charging different prices to different consumers for similar goods.
Price elasticity of demand. Percentage change in quantity demanded of a good resulting from a 1-percent increase in price.
Price elasticity of supply. Percentage change in quantity supplied of a good resulting from a 1-percent increase in price.
Price leadership. Pattern of pricing in which one firm regularly announces price changes that other firms should match.
Price of risk. Extra risk that an investor must incur to enjoy a higher expected return.
? Price rigidity. characteristic of oligopolistic markets by which firms are reluctant (unwilling) to change prices even if costs of demands change.
Price signaling. form of implicit collusion (скрытый сговор) in which a firm announces a price increase in the hope that other firms will follow suit.
Price support. Price set by government above free-market level and maintained by governmental purchases of excess supply.
Price taker. Firm that has no influence over market price and thus takes the price as given.
Price-consumption curve. Curve tracing the utility-maximizing combinations of two goods as the price of one changes.
Principal. (Director) Individual who employs one or more agents to achieve an objective.
Principal-agent problem. Problem arising when agents (e. g., firm’s managers) pursue their own goals rather than the goals of principals (e. g., the firm’s owners).
Prisoners’ dilemma. Game theory example in which two prisoners must separately decide whether to sell the other prisoner out or not**. if he does, he will not get a sentence, when another gets ten years; if they both don’t confess, then they get one year, and if both confess, then they will get 15 years (Time can differ).
Private-value auction. Auction in which each bidder knows his or her individual valuation of the object up for bid, with valuations differing from bidder to bidder.
Profitability. Likelihood that a given outcome will occur. 
Producer Price Index. Measure of the aggregate price level for intermediate products and wholesale goods.
Producer surplus. Sum over all units produced by a firm of differences between the market price of a good and the marginal cost of production. 
? Product transformation curve. Curve showing the various combination of two different outputs (products) that can be produced with a given set of inputs.
Production function. Function showing the highest output that a firm can produce for every specified combination of inputs.
Production possibilities frontier. Curve showing the combinations of two goods that can be produced with fixed quantities of inputs.
Profit. Difference between revenue and total cost.
Property rights. Legal rules stating what people or firms may do with their property.
Public good. Nonexclusive and non-rival (неконкурентоспособный) good: the marginal cost of provision to an additional consumer is zero, and people cannot be excluded from consuming it.
Pure bundling. Selling products only as a package.
Pure strategy. Strategy in which a player makes a specific choice or takes a specific action.

Q

Quantity forcing. Use of a sales quota or other incentives to make downstream firms sell as much as possible.

R

Rate-of-return regulation. Maximum price allowed by a regulatory agency is based on the (expected) rate of return that a firm will earn.
Reaction curve. Relationship between a firm’s profit-maximizing output and the amount that the firm thinks its competitor will produce.
Real price. Price of a good relative to an aggregate measure of prices; price adjusted for inflation.
Real return. Simple (or nominal) return on an asset**. the rate of inflation.
Reference point. The point from which an individual makes a consumption decision.
Rent-seeking. Spending money in socially unproductive efforts to acquire, maintain, or exercise monopoly.
Rental rate. Cost per year of renting one unit of capital.
Repeated game. Game in which actions are taken, and payoffs received over and over again.
Reservation price. Maximum price that a customer is willing to pay for a good.
Return. Total monetary flow of an asset as a fraction of its price.
Returns to scale. Rate at which output increases as inputs are increased proportionately. 
Rist averse (opposition). Condition of preferring a certain income to a risky income with the same expected value.
Risk loving. Condition of preferring a risky income to a certain income with the same expected value.
Risk neutral. Condition of being indifferent between a certain income and an uncertain income with the same expected value. 
Risk premium. Maximum amount of money that a risk-averse individual will pay to avoid taking a risk.
Riskless (risk-free) asset. Asset that provides a flow of money or services that is known with certainty.
Risky asset. Asset that provides an uncertain flow of money or services to its owner.
? R-squared (R^2). the percentage of the variation in the independent variable that is accounted for by all the explanatory variables.

S

Salience. (значимость) The perceived importance of a good or service.
Sample. Set of observations for study, drawn from a larger universe.
Sealed-bid auction. Auction in which all bids are made simultaneously in sealed (печатный) envelopes (конверт), the winning bidder being the Individual who has submitted the highest bid.
Second-degree price discrimination. Practice of charging different prices per unit for different quantities of the same good or service.
Second-price auction. Auction in which the sales price is equal to the second-highest bid. (Hmm, what if I say an infinity on the bet of 1$?)
Sequential game. Game in which players move in turn, responding to each other’s actions and reactions.
? Shirking (avoiding) model. Principle that workers still have an incentive to shirk (=avoid) if a firm pays them a market-clearing wage because fired workers can be hired somewhere else for the same wage.
Short-run. Period of time in which quantities of one or more production factors cannot be changed.
Short-run average cost curve (SAC). Curve relating average cost of production to output when level of capital is fixed.
Shortage. Situation in which the quantity demanded exceeds the quantity supplied.
? Slutsky equation. Formula for decomposing the effects of a price change into effects of substitution (замены) and income.
? Snob effect. Negative network externality in which a consumer wishes to own an exclusive or unique good.
Social rate of discount. Opportunity cost to society as a whole of receiving an economic benefit In the future rather than in the present.
Social welfare function. Measure describing the well-being of society as a whole in terms of the utilities of individual members.
Specific tax. Tax of a certain amount of money per unit sold.
Speculative demand. Demand-driven not by the direct benefits one obtains from owning or consuming a good but instead by an expectation that the price of the goodwill increase. 
? Stackelberg model. Oligopoly model in which one firm sets its output before other firms do.
Standard deviation. Square root of weighted average of the squares of the deviations (отклонений) of the payoffs associated with each outcome from their expected values.
Standard error of the regression. estimate of the standard deviation of the regression error.
Stock of capital. Total amount of capital available for use in production.
? Stock externality. Accumulated result of action by a producer of the consumer which, though not accounted for in the market’s price, affects other producers or consumers.
Strategy. Rule or plan of action for playing a game
Subsidy. (negative tax) Payment reducing the buyer’s price below the seller’s price. 
Substitutes. two goods for which an increase in the price of one leads to an increase in the quantity of the other.
Substitution effect. Change in consumption of a good associated with a change in its price, with the level of utility held constant.
Sunk cost. Expenditure that has been made and cannot be recovered.
Supply curve. Relationship between the quantity of a good that producers are willing to sell and the price of a good.
Surplus. Situation in which the quantity supplied exceeds the quantity demanded.

T

Tariff. Tax on an imported good.
?Technical efficiency. Condition under which (different?) firms combine inputs to produce a given output as inexpensively as possible.
Technological change. Development of new technologies allowing factors of production to be used more effectively.
Theory of consumer behavior. Description of how consumers allocate incomes among different goods and services to maximize their well-being.
Theory of the firm. Explanation of how a firm makes cost-minimizing production decisions and how a firm makes cost-minimizing production decisions, and how its cost varies with its output.
Third-degree price discrimination. Practice of dividing consumers into two or more groups with separate demand curves and charging different prices to each group.
Tit-for-tat strategy. Repeated-game strategy in which a player responds in kind to an opponent’s previous play, cooperating with cooperative opponents and retaliating (make an attack in return) against uncooperative ones. 
Total cost (TC or C). Total economic cost of production, consisting of fixed and variable costs (TC = FC + VC).
Transfer prices. Internal prices at which parts and components from upstream divisions are “sold” to downstream divisions within a firm.
Tradeable emissions permit. System of marketable permits, allocated among firms, specifying the maximum level of emissions that can be generated.
Two-part tariff. Form of pricing in which consumers are charged both an entry and a usage fee.
Tying. Practice of requiring a customer to purchase one good in order to purchase another.

U

User cost of capital. The annual cost of owning and using a capital asset = economic depreciation + forgone interest.
User cost of production. The opportunity cost of producing and selling a unit today and so making it unavailable for production and sale in the future.
? Utility. (Полезность/практичность) Numerical score representing the satisfaction that a consumer gets from a given market basket.
Utility function. Formula that assigns a level of utility to the individual market basket.
Utility possibilities frontier. Curve showing all efficient allocations of resources measured in terms of the utility levels of two individuals.

V

? Value of complete information. Difference between the expected value of a choice when there is complete information and the expected value when information is incomplete.
Variability. Extent to which possible outcomes of an uncertain event differ.
Variable cost (VC). Cost that varies as output varies. 
Variable profit. Sum of profits on each incremental unit produced by a firm that means profit ignoring fixed costs.
Vertical Integration. Organisational form in which a firm contains several divisions, with some producing parts and components that others use to produce finished products.

W

Welfare economics. Normative (through norms and standards) evaluation of markets and economic policy.
Welfare effects. Gains and losses to consumers and producers.
Winner’s curse. Situation in which the winner of a common-value auction is worse off as a consequence of overestimating the value of the item and thereby overbidding (ситуация, в которой победитель аукциона с общей стоимостью находится в худшем положении в результате завышения стоимости предмета и, следовательно, перекупки).

Z

Zero economic profit. A firm is earning a normal return on its investment, which means that it is doing as well as it could by investing its money elsewhere.

Bs

the rule of acceptance

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