The $250 Hammer

"The $250 Hammer"

I remember being outraged when I read about the government being overcharged for tools back in the 1980's and 90's.  It angered me that companies would overcharge for goods and services AND that the government would actually pay these inflated prices.   I don't like to see anyone taken advantage of - especially not the whole country who pays for everything purchased by the government.  The story that irked me the most was about the military paying $250 for an ordinary hammer that would cost $10 or so at any hardware store.

When I was a manager at Aetna back in the 80's, I fondly remember trying to fight the good fight.  Let me explain....

The internet was new and we were still trying to figure out how to use it effectively as a company.  Access to the internet was through phone modems.  Those of you that remember AOL remember the sound it made while connecting:
Bing de Bong ding ssssssssssssssssssshhhhhhhh
That's right - we heard every electronic sound of two computers trying strenuously to connect to one another.

These modems were cheap.  I remember CALDOR'S (a department store chain back in the day) that sold America OnLine (AOL) for $29 - and you got a free modem.  The reason I remember that is because I was running a department at Aetna that had to purchase modems to connect to field offices.  EXCEPT - the modems we purchased were $250.  These corporate modems were the EXACT SAME modems that came with AOL.  I checked.  Same part number, same model, same everything.  IDENTICAL! 

Aetna had gotten a new vice president for the division that I worked in, and I remember this guy trying to tell us how rosy everything was - when we were actually being positioned for a corporate buyout (that happened in the early 1990's).  This vice president thought he could keep all of us content by having "town hall meetings" with managers - maybe 100 of us at a time.  He'd talk for a while and then take questions / concerns from the audience. 

I was invited to one of these "town halls" right after I had been billed for four of these $250 modems - and I was quite unhappy.  Back then - dang near all of us employees were also stockholders - and I certainly didn't like to waste money (don't forget I'm Swedish which equals "thrifty"). 

When it came time to take questions, I was one of the first to stand up and be recognized...  I asked why would Aetna be paying $250 for the exact same modem that I could purchase at Caldor's for $29.  The vice president stumbled a bit and said that there must be a difference.  I shot back that there was absolutely no difference, and I had checked the model numbers.  The guy was smooth though...  Without skipping a beat - he put a very concerned look on his face and said that he would have his staff research and let me know asap.  

A week later I got a call from one of the vice president's lackeys who said:  "Mr. Wistrom, regarding your concern about the modem prices, I've researched it and found that the reason we pay a bit more for our modems is that they are all completely warrantied."  My response:  "Why the heck would I buy a warrantee on an item when I could go to the store and buy 10 of them for the same price as one with a warrantee?"   The answer:  "Well - that's the way it is...."

I found a way to buy those modems from Caldor's.  I don't remember how I had to file the paperwork, but by golly I did my part to save Aetna a few bucks.  A lot of good it did me - four years later my division was sold to Traveler's Insurance.  That, dear friends will be another story for another day.

I wonder if today's companies and government pay much attention to pricing?  My bet is that there's still a lot of $250 hammers being sold.  I see it all the time with the service I sell - credit card processing.  Hey - maybe I'm on to something here!  Maybe I could launch a new ad campaign: