redesignQuiz: Why is the back of the subway stairs protected with an enclosure?

saranordmann

The back side of the staircase

I take the subway every day, both out of necessity and because I love public transportation. The backside of the staircase in this subway station has a metal enclosure around it–what purpose does it serve? (Hint–the answer is not specific to this location.

Answer here.

The most fundamental flaw in FICO credit scoring

Rakesh Agrawal

Imagine two borrowers.

Borrower 1

  • Has a $20,000 credit limit on 1 card.
  • Is using $5,000 of that credit limit.
  • Makes $25,000 a year.
  • Has no assets to speak of; essentially a net worth of $0.
  • Has a mortgage and a car loan.

Borrower 2

  • Has a $7,500 credit limit on 1 card.
  • Is using $5,000 of that credit limit.
  • Makes $250,000 a year.
  • Has $300,000 in liquid assets.
  • Paid cash for car; mortgage is paid off.

Who is the better credit risk? Most humans would say borrower 2.

But the FICO scoring model would say borrower 1.

The fundamental flaw in FICO is that it doesn’t take into account the income or assets of the borrower. It focuses on things like credit utilization, recent inquiries, etc. Someone who makes $500,000 looking for a $25,000 line of credit is more likely to be able to repay that loan than someone who makes $30,000.

The FICO model has many, many flaws. Another significant one is that it often creates scenarios where doing the economically optimal thing reduces your FICO score. We’ll cover that in a later quiz.

A small change lets PenFed make a lot more money on credit cards

Rakesh Agrawal

photo (5)

PenFed sent me a new Visa without asking. Why?

In one case, it is “Platinum”. In another it’s “Signature.”

The interchange rates for Signature cards are substantially higher than for Platinum cards. The issuing bank can make a lot more on transactions simply by “upgrading” the customer to Signature. This is virtually no cost, aside from re-issuing the cards. There are a bunch of services that come with Signature status (like concierge), but these are low-use services of marginal value.

redesignQuiz: What’s the easiest, most productive way to improve this @uber screen?

Rakesh Agrawal2 Comments

Difficulty: Moderate. Sam got it in about 15 seconds, but she is brilliant.

One small change to this screen would greatly enhance this Uber experience. What is it?

Uber screen

redesignAnswer: What the paper clip is for

Rakesh Agrawal

I use the paper clip primarily for ejecting SIMs. I also some times use it to reset routers and other similar devices.

Other people responded: to clean keyboards (I use business cards for that) and hanging things. Most paper clips probably won’t bear much load, but you could hang light things.

Apparently there a couple of other things people discovered in that photo.

redesignAnswer – Why I was able to buy a $140 ticket for $91 on Expedia

Rakesh Agrawal2 Comments

The key to solving this puzzle was checking the dates and the times.

Airfares, as many people know, have advance purchase requirements. Although these vary based on market, these are generally 21, 14, 7, 3 and 1. The closer you get to the travel date, the higher the fares are. A 21-day advance purchase is usually the cheapest. It gets more expensive at 14 days, more at 7 and so on. (These are general guidelines; airfare pricing is mind-numbingly complicated.)

There are various systems that price tickets. (Known in the industry as GDSs.) These systems are based in different places. Virgin America uses Sabre. Sabre’s systems are in the central time zone. (Even though Virgin America itself is based in San Francisco and the flight was originating in Los Angeles.)

To me, the most logical way to test if you met the advance purchase requirement would be based on airport of departure. But it’s tested based on where the computers processing the ticket are.

My flight date was two weeks from yesterday.

So as soon as the clock struck 12:01 a.m. in Tulsa, Oklahoma, I didn’t meet the 14-day advance purchase requirements and Virgin America upped my fare to $140. But because Expedia’s tickets are processed on the West Coast, I still met the 14-day mark. So I got the 14-day advance purchase fare of $91, instead of the 7-day advance purchase fare of $140.

redesignQuiz: Why was I able to buy a $140 Virgin America ticket from Expedia for $91?

Rakesh Agrawal1 Comment

Difficulty level: Hard. But you can solve this without detailed knowledge of the airline industry.

Last night, I was trying to a book ticket LAX-SFO on July 14. I’m going to YxYY in Palm Springs and need a way to get back home. Around 9:55, I did a Kayak search, as I often do, to start the process. I saw that Virgin America had a fare of $91. I went to the Virgin America site and saw the $91 fare. After I selected the seat, I got a message that my seat was taken. I re-ran the search and saw that the lowest fare on July 14 was now $140. I checked on Priceline. Same thing.

I looked at the clock. It was now 10:03. I knew exactly what to do: I went to Expedia and booked the ticket for $91. In addition to inconveniencing me, Virgin America lost whatever they have to pay to Expedia.

Why was I able to book the ticket for $91?

Note that this is not a one-time fluke where there is a fare mistake. I have taken advantage of those in the past; I once flew roundtrip business class to London for less than $91.

If you’re in the travel industry, instead of commenting, please send your answer to redesign@agrawals.org.

The solution is here.