Tipping is not a city in China!

Nope, it's not... but Tai Ping is.

Anyway, I had a mini discussion about tipping with a friend and her cohorts on facebook the other day. Before I get into it, I just want to say that I have good manners. I recognize social norms, and I try to include them in my life. I hold elevators for people; I cover my mouth when I cough or sneeze (sometimes I even put my face inside my shirt); I usually let others go through a door before I do if we get there at the same time (Dwight: I never let anyone walk behind me, 70 percent of all attacks come from behind.) But this tipping thing is out of control. I mean, I do tip... But it's out of guilt or some weird responsibility.

So why do you tip?

Based on performance? No you don't, otherwise there wouldn't be any relationship between the bill and the tip (i.e., 20% tip) If you go to super cuts and pay 15 bucks for a haircut instead of going to a boutique and paying 50, and the $15 haircut ends up being just as good, will you tip 20% of 15 or 20% of 50? If both stylists do an equal job, the tip should be the same if it's based on performance--the same dollar amount, not the same percentage.

Also, if you tip because of performance then you have to give a $0 tip when the service is bad; you don't have to, but you should. Think about it for a second: if a waiter totally sucks at his job, should you be encouraging him to stay in the field? But do you have the guts to stiff him?

Do you tip based on need? "Oh those poor stylists who have to slave all day cutting hair, they deserve to get paid more than the salon pays them!!!" So that's my fault? The salon rips them off and somehow I have to make up for it? Why don't I just pay the normal rate, and then give my tip to charity.

Do you tip based on guilt or good manners?

This is why I tip. I feel bad if I don't... I don't want the waiters to feel like I'm a jerk.

The next question is how much do you tip?

I'm a 15% tipper. You can call me cheap, but I'm just poor. If I have to really tip more than 15% then I'll just stop going to restaurants where tipping is "suggested". Honestly, if my wife and I go my favorite sit down mexican place (Pancho and Lefty's) we end up paying about 18 bucks for the entrees, with my 15% tip I get out the door paying around 21 dollars (I pay on price before tax suckas). If we go to Cafe Rio we pay around 15. So that's a $6 premium for sitting down and having someone bring me my food. That in itself is insane, but whatever. Every cent more that I have to pay in tip just makes me want to abandon my lovely Pancho.

Now the economics of the situation.

What would happen if everyone stopped tipping? Let's go through it chronoligically.

First, waiters would be pissed. And they would gripe or quit or whatever. Nobody would be a waiter for 3 bucks an hour.

Second, restaurants would have to pay more money for waiters or else switch to an assembly line style (e.g., Cafe Rio, Chipotle, etc.)

Third, either prices would go up, or services would go down.

Prices might go up because the restaurants would have to compensate for the higher wages, and basically your tip would be injected into the price. If tips are a standard percentage, and not based on any real measurement of performance, then it's the same difference.

Service might go down because you may have to go get your own food and bring it to your table (OH NO) Or, what I think is the most likely outcome, prices would go up a bit, but servers would just make less money.

But how much are servers worth? My old friend that worked at red lobster would flirt her way to around 20-25 bucks an hour. Another friend at an Italian restaurant could handle 4 tables an hour, and make 20 dollars with ease. Are servers really worth that? Now I'm not talking about some theoretical "worth", I'm talking about the market price. Would there be enough servers if the base wage was set at $11/hr (the wage of a good grocery checker)?? I think there would be in this job market.

My point is that tipping kind of screws up supply and demand for workers. It's kind of like commission. The fact that there is a potential for 20-25 dollars per hour means that a lot of really talented people go out there and get server jobs. (And some don't make that much money) . And because there is this huge surplus of supply (waiters) the demanders (owners) can actually reduce the price they pay. As a result, we have waiters making 3 dollars an hour. Legislatures even recognize this strange relationship, and exempt these service jobs from the minimum wage.

The owners have totally duped you.

They get to

1) Charge you a premium for the experience (sit down costs more than assembly line)

2) Make you pay the labor costs (with tipping) in addition to the bill.

I know what some of you are thinking "But John, the waiters wouldn't be as good and we would lose out on the fun of going to a restaurant and being dazzled by service." I don't really think that's true. Pricey places would still have great waiters, and most places could still get great waiters for 11 or 12 dollars an hour. Do you tip teachers, mailmen, bank tellers, loan officers, mechanics, doctors, nurses, police officers, plumbers, or grocery store clerks? And do they all just completely suck?

Waiters are totally overpaid. I know, it's hard to remember all that stuff and deal with all the crap, but people would still work as waiters for less money. If not, then restaurants would just have to pay more, and so would we... but right now waiters are paid artificially high amounts because we are all guilted into paying them tips.

One final point.. why is a tip based on a percentage of the meal? Why do I pay a higher tip if the waitress fills up my soft drink rather than a water? Why do I pay more if they put a plate with a steak on my table instead of a plate of salad? It's really rather silly.

In Defense of Capitalism

The political blabber on TV is really starting to drive me crazy. The two party system is supposed to work like a rope bridge over a canyon: both sides are tight and pull really hard and that brings everyone else up (like the middle of the bridge) Most people in the United States fall somewhere in the middle, but people tend to define themselves and others based on their stances on a few hot button issues.

For example, if you support late-term abortion, your pretty much considered far left even if you are right leaning on everything else. Or if you are completely against homosexuality and gay marriage, you are, more-often-than-not, considered a right winger.

Our differences and the two wings are supposed to bring everyone higher, not create a deeper chasm.

Right now, capitalism is a hot topic in the political sphere. But capitalism is about economics, not politics. It is an economic theory, or system, or whatever, that operates on a set of loose rules: if more people want iPods than Apple can make, the prices go up; if consumers are knowledgeable then a merchant who sells crappy goods won't last very long... etc.

It drives me crazy to hear about how capitalism is evil, or that the poverty in this country is due to "the free market." Capitalism isn't a faith, or a lifestyle, or a person--it's a description of how a system works. Capitalism isn't bad; greed and selfishness are bad. And for some reason, people who support some sort of hybrid socialistic capitalism think that greed and selfishness will go away if we have enough regulation. Does that really make any sense to anyone? Greed and selfishness only go away if people learn to be kind and loving, and if everyone in the world was kind and loving, it really wouldn't matter what economic system a country used.

Okay, I'll admit it: capitalism doesn't make everyone rich. I'll also admit that "poor" has to exist in order for "rich" to exist. Honestly, "rich" is always defined in relation to something else. And what we consider to be poor now would have been a luxurious lifestyle a few centuries ago. Capitalists generally understand that results aren't going to be even... but capitalists also understand most people would give up guaranteed mediocrity in exchange for nearly endless opportunity. And so we enter the classic debate of free markets vs. government.

Those who oppose freedo... ah hem...I mean, free markets, are quick to point out the underprivileged people who are left behind. The rich have better schools and better health care. Millions of Americans are uninsured, and millions more lost half of their retirement because of the free market. "If we just provide proper regulation and more government support, millions of Americans will have better lives." Well I think that's fantastic. I think everyone should have health care and everyone should have a great education. We can argue all day over whether the government or consumers would do a better job of deciding where money should go, but that's really not the point. The true issue concerns the future status of all of the amazing things the markets and capitalism have done. Almost every modern convenience you have in your lives was brought about by competing companies fighting for dollars. Universities in this country are generally regarded as the best in this world, and that is largely due to the fact that they have to compete for prestige and the best students. We need to address the 10% of the economy that isn't working very well, but we cannot do it at the expense of the other 90%.

Now, this isn't an argument against redistribution of wealth (we'll save that for later). This is an argument against the government getting in the way of freedom, innovation, and creativity. Every dollar the government spends is one dollar that someone else doesn't get to decide how to spend.

Lets examine the big bad wal-mart for a minute. First I want to compare walmart to the federal government.

Number of civilian employees--Federal Government: 1.8 million; Walmart 1.4 (approx)

Total Revenue--Federal Government about 2.5 trillion; Walmart: about 400 billion (Paid 7 billion in taxes)

Total Long Term Debt-- Federal Government: Approaching 12 trillion; Walmart: 32 billion.

Debt as a percentage of total revenue-- Federal Government: 480%; Walmart: 8%

So yeah... it's obvious that Walmart is the one stealing all of our money.

But really, even with the loosest lending of 2005 walmart could never have gotten away with the kind of debt that the federal government swims in. Walmart could pay off all of their debt in a year and a half with PROFIT only. The federal government doesn't have any profit.

Now I know some of you (like anyone is actually still reading) are saying that the government has a lot more to take care of... and you are right. But take another look at those numbers. Do you really think we will ever be able to pay that debt? Is that really a responsible way to run a country?

But wait... lets go back to assuming the federal government is this angelic think=tank of business superheroes for a moment. One of the problems with walmart and its domination of the free market is that it is allegedly forcing smaller stores out of business. "See what capitalism does! Pretty soon we'll only be able to shop at walmart, and soon they will raise their prices and enslave us all!" So what is the free market solution? Well, walmart dominates for a few more years and everyone shops there and everyone else goes out of business... and then walmart can get away with poor standards and greed because there isn't any competition, and then smaller stores have the opportunity to compete again. This would take a lot of time, and the damage would be done.

What's the government solution? Fine or tax?

So the government could just take money from Walmart and send it to the other stores. But would the other stores really have the incentive to improve? And even if they did, how would the government decide which stores get the money? Another question is whether that money would even make it down to the little stores, or would the debt machine eat it all first?

But there is another solution: The other stores could just figure out a way to compete. It's already happening all over the place. Grocery stores are becoming more specialized, and offering new products; many drugstores are going toe to toe with walmart and offering $4 prescriptions, and some retail chains are even willing to match walmart pricing.

The economy is just far too large for anyone to really understand completely. But capitalism is one of the freest forms of freedom. Elections only come around ever couple years, but you get to vote with your dollars every single day. If walmart has the best selection you can vote for them, if nebraska furniture mart has an innovative sale you can cast your ballot.

I understand that there are a lot more issues to discuss, and I'd be happy to talk to anyone about it. (i.e., the idea that a clean environment and growth are mutually exclusive, or that capitalism can't survive with the level of corruption in the country etc.)