Monday, January 16, 2006


I Admit It, I've Called It "The Post Awful" More Than Once

The Washington Post has an article about the future of the Post Office.
The USPS is often a marvelous organization, but it's also a symbol for the effects of constant meddling by bureaucrats, politicians, unions, and big business interests. It is a horse designed by a committee, a camel. I didn't say dinosaur.

Much is made about how the Post Office has to deliver to every address, no matter how remote. I'm not aware of any restrictions that UPS, FedEx, or others have in this regard: at one time they did, and I presume that they still do.

And as far as the idea of just having one person visit an address and it being cheaper? Nah. One of the paradoxes of economics is that it never works out that way. There's things called "division of labor" and "specialization" and "competition" and "competitive advantage." None of these lead to a singular delivery service or delivery person. That chaos of trucks going from business to business is the marketplace working to deliver the lowest total cost. When you look at the costs of sending packages over time, that chaos has been an incredible boon to customers and businesses. Its efficiency means that we can shop on the Internet looking for the best price of goods, anywhere, and have the assurance of getting exactly what we ask at historically low costs in a comparatively very short time.

What needs to be done? What they'll never do... free the postal service from government regulation. It will have two to three years of horrible chaos and disorganization. Just like airline fares, telecommunications services, prices will drop, delivery will improve, and creativity will replace inefficiencies. For years, the postal service has been protected from the marketplace. That's one reason why its efficiencies are not known or understood. Prices only go up. Costs are just shifted to mailers as the postal service claims to offer discounts. The discounts only result in more byzantine and confusing regulations. It just becomes a shell game for cost accountants.

One of the reasons is that prices are fixed. UPS, FedEx and others were able to adjust prices in the recent energy price spikes and stayed profitable. When prices are fixed, consumers never understand the nature of what they are buying. It also means that prices cannot fall. Trying to work in a tight budget almost always means cutting around the edges, trimming here and trimming there, doing something better now and then, but not changing the core of a business. Trying to work when customer dollars can easily go somewhere else always forces a reinvention of a business.

UPS, FedEx are often cited as parcel specialists that would not be interested in distributing mail. What never gets into the argument is that by law they cannot get into that business. They only got into businesses that they could get into. In fact, there was a suit years ago, where the Post Office tried to sue FedEx because they were allowed only to deliver "urgent letters" and not regular documents or letters. They sparred in court a few times; I found this link on the Internet. There are many other situations as well; the postal service can't offer discounts. It can't negotiate fees with mailers. It can't adjust prices for seasonality to balance its workload. It can only accept mail in its own system; it can't offer customers "your newspaper can be delivered here" or "we'll accept all of your packages at your PO Box" or "you can send this by UPS or FedEx or by Express Mail." No, you have to go to a UPS Store or an office superstore to get some of those services and get access to choices.

Businesspeople hate free markets; one of the strangest things of "common wisdom" is that they love them. Economist Bruce Bartlett explains it well: "The last thing most businessmen want is a free market, where they must compete, slash prices, continuously innovate, suffer narrow profit margins and live constantly on the edge of bankruptcy. They would much rather have assured profits, monopoly positions, price supports, trade protection and the other trappings of a corporate welfare state." Free markets mean that there is a significant risk of loss. That fear of loss is what stimulates investment to reduce costs and a bias for action to confront realities sooner than waiting for a commission and hearings to determine what their prices will be. It would be a vastly different Postal Service that would result, but the fear of change will keep the camel well-fed.

As I'm writing this, I know Harrisville, RI's late postmaster Roland Rivet is turning over in his grave. Roland was one of the pleasures of having a business in our small town, a postmaster who loved the mail and loved his customers, and always took that extra step. On Sundays, he would stop by and wash the stations two panel trucks. He thanked us for buying postage for our survey mailings, saying that we could have gone anywhere. He gleefully assigned us business reply envelope permit number "Oh-Oh-One" as he read it to me over the phone back in 1990. His death in 1997 was met with a string of postmasters just counting the days for their retirement. He was different than the other postmasters, and it showed in the people who worked with him. What was different about Roland, and he didn't know it, was that he was an entrepreneur who loved his business. It just happened that his business was a little post office in a tiny New England town. His work in the bureaucracy was never rewarded by the marketplace, just by a schedule of salary levels based on seniority and volume that some far-away committee established. And that's the shame of it: there are some marvelously talented people in the Postal Service, numbed by the ideas of job security and stability, which become paramount, and dims their enthusiasm and creativity... so much so they forget they have those capabilities.

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