Category: Saul

Labor · Saul

Opportunity Cost of Interviewing

Jadrian WootenLeave a comment

Jimmy is invited for an interview regarding a copier salesman position with Neff Copiers. During the interview, it is noted that Jimmy’s resumé shows his previous but recent employment as a lawyer and the interviewers are curious why he would want to switch into sales. From their standpoint, going from a legal career into copiers’ sales seems like a demotion.

Upon making his case, Jimmy takes the chance to analyze his decision from a cost-benefit analysis standpoint. He admits that he doesn’t have traditional sales experience, which would definitely be a significant cost to Neff copiers, if he gets employed by them. The tradeoff is that his skills as a lawyer are transferable to a sales job because it still involves “selling” to different people. His argument is essentially that the skills he gained as a lawyer are general, human capital, which can be transferred to a more traditional sales role.

Before leaving, he decides to come back and make his case using the foundational economic concept of opportunity cost. While they wait to interview more candidates, they are giving up that opportunity to see if he can really do it. When hiring candidates, there are a variety of quasi-fixed costs, and many students don’t recognize that the cost of hiring a worker goes beyond their wage. The second half of this scene provides and excellent chance to explore the opportunity cost of not only the missing salesman, but also the two managers who could be doing other things with their time. Jimmy’s story about his experience with copiers is an attempt to make the opportunity cost of waiting seem more real to the two managers.

Once Jimmy gets the job he highlights how dumb the two are because they know nothing about him. He argues that there they haven’t done their due diligence in hiring because he could be a crazy person. This level of asymmetric information in labor markets is why the search process can take longer than traditional competitive models suggest.

Looking to emphasize jus the human capital aspect and transferability of skills? Check out the clip that includes only the beginning of this scene.

See more: Asymmetric information, Better Call Saul, cost benefit analysis, general human capital, hiring costs, human capital, interviewing, labor, opportunity cost, search costs, skill transferability, specific human capital

Labor · Saul

General Human Capital from a Legal Career

Jadrian WootenLeave a comment

Jimmy is invited for an interview regarding a copier salesman position with Neff Copiers. During the interview, they not that Jimmy’s resume shows his previous employment as a lawyer until shortly before the interview and they are curious why he would make such a drastic change. From their standpoint, it seems like a demotion to go from a legal career to a sales job.

Jimmy takes a chance to analyze his decision from a cost-benefit analysis standpoint. He admits that he doesn’t have traditional sales, which would definitely be a cost of hiring him. The tradeoff is that his skills as a lawyer are transferable to a sales job because it still involves “selling” to different people. His argument is essentially that the skills he gained as a lawyer are general human capital and can be transferred to a more traditional sales role.

This scene is the shorter version of a longer scene, which includes Jimmy arguing in favor of his employment from an opportunity cost perspective. If you have the time, check out that clip!

See more: Better Call Saul, cost benefit analysis, general human capital, human capital, interviewing, labor, skill transferability, specific human capital

Labor · Saul

General and Specific Human Capital for a Paralegal

Jadrian WootenLeave a comment

Jimmy and Kim are looking for a paralegal for their new firm, but they both have very different needs. Jimmy is in a rush to get through the interview because he has a commercial airing later and the phones will be busy. During the interview, they ask some different screening questions to see if the applicant is qualified. During the interview, Kim asks why the candidate wants to leave her government job with good benefits for a paralegal job. She notes a variety of unpleasant conditions of working with the DMV, notably the bureaucracy.

People are willing to accept lower levels of compensation if the working conditions are more pleasant. This scene is a good example to use when discussing compensating differentials. Workers are not only income maximizers but instead care about the non-pecuniary aspects of employment. Another component of the interview was the identify particular skills she may possess, either general or specific. While the candidate isn’t familiar with specific training associated with being a paralegal, she highlights some of the general human capital that she believes would aid her in her new role. These include patient and attention to detail, as well as interacting with elderly clients. She also notes that she has experience with Microsoft Word and Excel.

See more: Better Call Saul, compensating differential, general human capital, human capital, interviewing, labor, skill transferability, specific human capital

Jesse · Market Structures · Saul · Walter

Cooking Again

Jadrian Wooten

Back in the office of Saul Goodman, Walter and Jesse try to sort out some of their recent misunderstandings. In the process, Jesse finds out that Walter is soon to start producing methamphetamine without him and under the employment of their associate, Gus Fring. When Walter is asked about how much he stands to gain from this new partnership, he simply responds, “It is $3 million, for three months of my time.” Saul knows that this large amount of money needs to be laundered and immediately offers his services for a 15% fee. However, as a prospective customer for money-laundering services, Walter is well aware of his bargaining power and quickly counters Saul’s offer with a 5% fee. Saul attempts to negotiate a high-enough fee by sequentially proposing 14%, 13%, 12%, and 10% fees. In each scenario, Walter’s response is unchanged, “5%”. Single buyers, or monopsonists, have the market power to reduce the acquisition price, just as a monopolist has the market power to limit the quantity supplied and therefore increase market price to maximize profits.

This video clip is also instructive about the price elasticity of supply. More specifically, the video clip emphasizes Saul’s perfectly inelastic supply for money-laundering services over the observed range of prices (i.e., 5% to 15%). Despite the fact that the laundering fee (the price Saul receives) is adjusted from 15%, 14%, 13%, 12%, to 10%, and finally to 5%, Saul is still willing to supply his services. The negotiation between Walter and Saul also reveals some information about Saul’s “willingness to supply”, which seems to be somewhere under or at the 5% threshold. This is simply because even at 5%, Saul accepts the proposal.

Finally yet importantly, the dialogue between Jesse and Walter, located the end of the episode and included below, may be used to frame a discussion about contracts, contract enforcement, and the role of institutions in shaping the behavior of economic agents. Jesse: “You think that this will stop me from cooking?” Walter: “Cook whatever you like. As long as it’s that ridiculous Chili P or some other dreck … but don’t even think about using my formula.” Jesse: “Just try and stop me!” While Walter is indeed the one who discovered the formula for the “blue” methamphetamine, he might have a hard time preventing Jesse from using the same formula to produce a similar good. Had this formula involved any other legal product, such a dispute would have been prevented by the filing of a patent or by a contract regarding its use, both enforceable through a functioning judicial system. However, the use of institutions as a dispute-settling mechanism is not possible in this case – methamphetamine is an illegal good, produced and consumed within a black market. Consequently, violence and the use of force tend to replace institutions in solving such issues, a substitution that generates significant external costs to society.

This description comes from Duncan, Muchiri, and Paraschiv (Forthcoming)

See more: , , , , , , , , , , , , , , 

Costs & Production · Jesse · Saul · Skyler · Walter

Specialization

Jadrian WootenLeave a comment

This clip represents a wonderful account of all the moving parts of Walter’s methamphetamine enterprise. Walter and Jesse cook, Lydia arranges and oversees the international shipments of methamphetamine, which are disguised as shipments of various chemicals between the subsidiaries of the multinational enterprise she works for, Todd coordinates the transportation operations, and Skyler is in charge of accounting and money laundering. Here, the division of labor and the comparative-advantage based specialization is what makes their enterprise successful. If one or two individuals tried to run the same operation (like when it was just Jesse and Walter), they would not be able to produce as efficiently. The downward sloping portion of the average total cost curve is the area where the benefits of specialization outweigh diminishing returns from adding additional workers.

See more: , , , , , , 

Externalities & Types of Goods · Saul · Walter

Don’t Leave

Jadrian WootenLeave a comment

Walter is about to leave, but Saul takes some time to advise against it. While it may seem like he’s doing what’s best for his family, Saul explains how law enforcement will come after Skyler and ruin Walter’s family. Walter is making a private decision about what to do and what he believes is best, but he may be ignoring all of the costs he imposes on other people by running. Saul suggests that if he truly cares about his family then he’ll turn himself in.

See more: , , , , , 

Behavioral & Game Theory · Market Structures · Saul

Meth Lab in the Basement

Jadrian WootenLeave a comment

Controversial lawyer Saul Goodman is trying to buy back Jesse’s house. Negotiations start and seem to unfold well until the parties disagree about the sale price. The couple ask for $875,000 but Saul’s client offers only $400,000. The couple and their counselor feel offended by such an offer and, while mentioning that the meeting was a complete waste of their time, start walking out of the room. They stop once Saul mentions the methamphetamine laboratory that used to be in the basement. This unpleasant, but key attribute is purposefully hidden from the buyer to keep up the value of the house. However, in this case, the prospective buyer seems to have done his homework. Unfortunately, in many of today’s transactions, the information held by sellers is not available to buyers and vice versa. In cases where such information gaps persist and are systematic, markets unravel and ultimately fail.

Also, note that upon introducing himself, one of the sellers immediately recognizes Saul as “the lawyer on late-night television.” This is because of his catch-phrase “Better Call Saul”, which is present in all ads involving his business. Differentiation is a key feature of markets in which many of today’s sellers and buyers interact. Together, these traits outline some characteristics of monopolistically competitive markets.

Finally, it is worth mentioning that Mr. Gardiner, the couple’s counselor, is ardent to get right to business. This leads Saul to remark, “I get it. Flat-fee clients, am I right?” This arrangement incentivizes Mr. Gardiner to service his clients as fast as possible and therefore maximize his hourly pay. The more time he spends with his clients, the lower his hourly pay (since it is a flat charge), and the higher his opportunity cost.

This description comes from Duncan, Muchiri, and Paraschiv (Forthcoming)

See more: , , , , , , , , ,