Kodak and the Post Office (Thomas Sowell)

Creators Syndicate ^ | January 10, 2012 | Thomas Sowell

[jazusamo]

The news that Eastman Kodak is preparing to file for bankruptcy, after being the leading photographic company in the world for more than a hundred years, truly marks the end of an era. The skills required to use the cameras and chemicals required by the photography of the mid-19th century were far beyond those of most people — until a man named George Eastman created a company called Kodak, which made cameras that ordinary people could use. It was Kodak's humble and affordable box Brownie that put photography on the map for millions of people, who just wanted to take simple pictures of family, friends and places they visited. As the complicated photographic plates used by 19th century photographers gave way to film, Kodak became the leading film maker of the 20th century. But sales of film declined for the first time in 2000, and sales of digital cameras surpassed the sales of film cameras just 3 years later. Just as Kodak's technology made older modes of photography obsolete more than a hundred years ago, so the new technology of the digital age has left Kodak behind. Great names of companies in other fields have likewise vanished as new technology brought new rivals to the forefront, or else made the whole product obsolete, as happened with typewriters, slide rules and other products now remembered only by an older generation. That is what happens in a market economy and we all benefit from it as consumers. Unfortunately, that is not what happens in government. The post office is a classic example. Post offices were once even more important than Eastman Kodak, and for a longer time, as the mail provided vital communications linking people and organizations across thousands of miles. But, today, technology has moved even further beyond the post office than it has beyond Eastman Kodak. The difference is that, although the Postal Service is technically a private business, its income doesn't cover all its costs — and taxpayers are on the hook for the difference. Moreover, the government makes it illegal for anyone else to put anything into your mail box, even though you bought the mail box and it is your property. That means you don't have the option to have some other private company deliver your mail. In India, when private companies like Federal Express and United Parcel Service were allowed to deliver mail, the amount of mail delivered by that country's post offices was cut in half between 2000 and 2005. What should be the fate of the Postal Service in the United States? In a sense, no one really knows. Nor is there any reason why they should. The real answer to the question whether the Postal Service is worth what it is costing can be found only when various indirect government subsidies stop and when the government stops forbidding others from carrying the mail — if that ever happens. If FedEx, UPS or someone else can carry the mail cheaper or better than the Postal Service, there is no reason why the public should not get the benefit of having their mail delivered cheaper or better. Politics is the reason why no such test is likely any time soon. Various special interests currently benefit from the way the post office is run — and especially by the way government backing keeps it afloat. Junk mail, for example, does not have to cover all its costs. You might be happy to get less junk mail if it had to pay a postage rate that covered the full cost of delivering it. But people who send junk mail would lobby Congress to stay on the gravy train. So would people who live in remote areas, where the cost of delivering all mail is higher. But if people who decide to live in remote areas don't pay the costs that their decision imposes on the Postal Service, electric utilities and others, why should other people be forced to pay those costs? A society in which some people make decisions, and other people are forced to pay the costs created by those decisions, is a society where a lot of decisions can be made despite their costs being greater than their benefits. That is why the post office should have to face competition in the market, instead of lobbying politicians for government help. We cannot preserve everything that was once useful.

[jazusamo]

Thanks for the heads up on John’s book.

[Cyber Liberty]

Rots of ruck getting that film developed, FRiend.

[Vigilanteman]

But if people who decide to live in remote areas don't pay the costs that their decision imposes on the Postal Service, electric utilities and others, why should other people be forced to pay those costs?

This is the 1% of the time I disagree with Dr. Sowell.

The founders, in establishing a postal service with uniform rates, recognized that there were certain benefits in encouraging its citizens to live in remote areas and, as such, minor subsidies (such as mail service) were not only permissible, but necessary.

People who live in remote areas provide valuable public benefits such as promoting road and infrastructure maintenance, services to travelers, a first alert system against invading armies or natural disasters and economic enterprises which provide food, fiber and natural resources to population centers. As such, minor subsidies such as a universal postal system, is necessary to tie them to the rest of the country.

This isn't to say that certain modifications to keep up with modernity aren't necessary. For example, ownership of motor vehicles is almost universal today and, as such, people living in remote ranches could be provided with post office boxes in a contract substation which they normally visit rather than right to their driveway.

FedEx, UPS or even a new startup company could bid for delivery sublicenses in a given area where it was profitable with subsidies to support delivery in other areas where it was not.

This way, the standard nationwide rate and universal service can be achieved with competition putting a downward pressure on rising costs rather than having a labor cartel (the postal union) working hand-in-glove with a government mandated monopoly to increase costs and resist reforms.

At present, nobody in the public wants to yield anything because the government monopoly-union labor cartel alliance won't yield anything to get the process started.

What may be needed is to reinstate the Postmaster General position as a cabinet level post and abolish or merge some of the money sucking minimally beneficial newer cabinet posts such as education, energy and homeland security theater.

[Chuckster]

Adapt or die.

[massgopguy]

Correct. It was all developed for industrial use. Newspapers and Magazines. Huge hardware made by Kodak subsidiaries. No one in Rochester thought to apply it to use by “ordinary people”.

[GATOR NAVY]

Who said UPS or Fed EX is cheap(er)? UPS has just raised their prices by 5% and adds a fuel sur chorge on top of that.

No one said UPS or FedEx is cheaper. The operative phrase Sowell uses is "If FedEx, UPS or someone else can carry the mail cheaper or better than the Postal Service..."

And while the Constitution establishes the postal service, there is nothing in it that says the USPS needs to operate in the manner that it does.

[massgopguy]

The fate of Kodak reminds me of its founder’s death.

[rockinqsranch]

Thanks for the ping jaz. We have to get the Federal Government the “H” out of so much of what is really none of their concern. The States should be responsible for their own, and the Federal responsible for only that which the Constitution states.

We have to end this creeping Socialism, and not by ending the creeping part.

[zeestephen]

---

“The brilliant man who should have been our first black president writes the simple truth again.”

---

I've often thought about that, and long before Obama appeared on the scene.

I know some people claim that Sowell lacked the personal ambition, or the vanity, to run for president.

But this man is truly guided - and energized - by political principle and historical reality.

Unlike Herman Cain, I think Sowell may have understood there were things in his personal life that would likely disqualify him as a Conservative from political office.

I will forever reject the idea that women and Blacks could not be elected president until quite recently in American history, and then, only as Democrats.

If the Republican Party had a Margaret Thatcher or a Thomas Sowell available in the 1960’s, we would have nominated them.

[bert]

The road is called the Mookie Dugway. It descends doen the side of cedar mesa to the expansive desert floor below. It is a narrow gravel track with vertical sides.

To say it is scary is understatement. There is nothing but a spectacular view at the top and no town for miles and miles. Ditto the bottom, flat desert, the Valley of the Gods.

My sphincter was tight and my wife was gripping the seat with clenched whitened hands. We rounded one of the switchback hairpins and lo and behold...... a big brown UPS van coming up.

We thought we were at the enn of the desolate earth and there was UPS to shatter the vision.

BTW...... go there if you get a chance

[afraidfortherepublic]

Exactly and that is the very point they keep missing. UPS and Fed Ex is NOT cheaper, by a lot. A UPS overnight letter costs me between $30-$50 depending upon the time of day that it is delivered. The cheapest UPS package/letter I can send is around $9, depending on where it goes and how heavy it is.

USPS is dirt cheap by comparison. I use USPS Priority Mail whenever I don’t need trackability.

The USPS should upgrade its methods and join the 21st century, rather than be abolished.

The point is that every time someone writes an article about this topic, they use UPS and Fed Ex as a comparison, and they are not comparable at all.

[ctdonath2]

Kodak was afraid to adapt, lest it annoy what it considered customers.

Retail film sellers liked the model of film, requiring end users to visit the store 3 times: buy film, return film, get prints. Digital photography of course threatened this model, and retailers threatened to drop Kodak products entirely if Kodak started pushing toward digital. Viewing retailers, who buy in large bulk, as the customer it was decided to not annoy them. Thing is, it’s the end users who decide what to buy - not the retailers. End users decided to switch to digital en masse, went to whoever provided good digital cameras & processing (ex.: HP) at the time, the retailers adapted, and Kodak was left unable or unwilling to catch up. End users wanted the ease of digital imaging more than the resolution and color depth of film, which was incompatible with corporate ideals and cash-cows.

That’s not to say Kodak didn’t have good ideas or the ability to make ‘em happen. They made awesome high-end digital cameras, and worked on digital cinema projectors, but were too beholden to retailers and too enamored with the then-superiority of photochemical imaging to disrupt the film model.

At the key moment, the technology was there to implement Eastman’s “you push the button, we do the rest” even better than he envisioned: take picture, photo prints appear in mailbox. That could have been huge, and at least extended the physical prints market. Alas, my influence there was minimal at best at the time...

[trumandogz]

“Retail film sellers liked the model of film, requiring end users to visit the store 3 times: buy film, return film, get prints.”

And Kodak should have seen that model as being cumbersome to the consumer and forged ahead with at least storage devices.

[pabianice]

How about a bit of honesty here? The PO charge for mail is ridiculously cheap and unsupportable. 44 cents to send a Christmas letter and picture from Boston to Guam? Come on. The PO is on the hook because people demand cheap government services that have to be paid by everyone.

[cuban leaf]

Yeah, and the Chinese invented gunpowder and paper. That gave them fireworks. When westerners got their hands on it we got canons and books.

[RitchieAprile]

Be provided with?

At whose expense? When I lived in the stix where the USPS
would not deliver mail I had to rent a PO box in town at my own expense. Its only fair that those who choose to live
off the grid ante up for a box.

[trumandogz]

“The PO charge for mail is ridiculously cheap and unsupportable. 44 cents to send a Christmas letter and picture from Boston to Guam? Come on. The PO is on the hook because people demand cheap government services that have to be paid by everyone.”

Exactly.

If you were to go into a meeting of businessmen and present a model of a proposed business where customers could send a letter from Boston to Guam for .44 cents, the businessmen would laugh you out of the room and then call the nearest psychiatric hospital to have you thrown into a rubber room.

[ctdonath2]

It is the point. What you miss is the federal monopoly.

Arguing “can’t compare because there’s no competition” is inappropriate when competition is illegal.

Nobody else is allowed to deliver “first class” mail. From time to time someone tries, and proves they can do it much cheaper than USPS - until the latter finds out, and shuts them down for violating the legal monopoly.

UPS & FedEx _could_ do the same no-tracking no-guaranteed-date cheaper, as they’ve already got trucks out there. BUT, since the closest they can legally get is inherently more expensive “courier” services, they cost more.

Eliminate the unfair subsidy & monopoly, and UPS & FedEx would win the competition outright. Insofar as the Constitutional obligation to provide Post Offices, they could do so akin to public libraries - which thrive despite bookstores (with or without to-your-door delivery).

[D-fendr]

Kodak has great R&D and their digital products are top rate. So what happened?

I heard from someone within the company that Kodak knew there would be a transition from film to digital and planned strategically for it. The problem was it happened much sooner and faster than they planned - by about five years.

I was following digital at the time and it shocked me how quickly it became dominant.

But, even so, Kodak should have moved faster once the revolution took hold. Perhaps it was their size, maybe an IBM-like problem. Perhaps a problem with pensions and making big changes quick.

[ctdonath2]

A similarly absurd package delivery model was once submitted by a student as a class project. The professor wrote on the paper “presentation & thoroughness warrants an A, but you’re getting a C because the notion is absurd.”

And thus FedEx was born.