You go to a mechanic and ask for an estimate to fix your car. He says, "well, we charge by the wrench-turn. It's a buck for every ten turns."
"Wrench-turns? That seems odd. What exactly is a wrench-turn?"
"A wrench-turns is two radians."
"What? I just want to get my car fixed!"
"Well, wrench-turns are what we can count easiest—all our wrenches and power tools have meters on them, see, calibrated and audited, and so that's what we charge for. You'll get an itemized bill showing exactly which tools used how many wrench-turns at what time."
"Huh. Okay, so what's a typical number of, uh, 'wrench-turns' to fix this?"
"Here's a list of common types of customers and how many wrench-turns they average. Looks like for you, we say it averages a thousand wrench-turns."
"So a hundred bucks? I was willing to pay about $150. What about parts?"
"Parts are just capital costs to facilitate wrench-turns."
"Really? Great! I was afraid I wouldn't be able to get my car fixed this month if it was going to cost more than $150. I'm glad to hear that this thousand 'wrench-turns' only costs a hundred bucks."
"So long as you don't use more than your limit of parts, that is."
"You get three parts. After that there's a surcharge."
"Is three enough?"
"For most customers we find it's plenty. Our customers with special needs may need more."
"What's the surcharge?"
"A thousand dollars."
"A thousand bucks! For one additional part? You'll call me if I need that fourth part, though, right?"
"For your convenience, this contract authorizes us to bill you for the number of parts needed to fix your car. You don't have to do anything."
"What? I'm signing up for a hundred dollars but, without my prior knowledge, could end up owing up to a thousand bucks?"
"No, not up to a thousand dollars."
"Oh, that's a relief. There's a cap?"
"You said $1000. It's a surcharge in addition to the wrench-turn cost. If you used a fourth part, and a thousand wrench-turns, that would be eleven hundred dollars."
"Doesn't a $1000 seem like an awfully harsh penalty?"
"It's not a penalty, it just reflects our costs. It could be a new engine and we won't charge you any more. You're getting a very good deal."
"A new engine?!? But I don't need a new engine! You're saying I'd only have to pay that ridiculous figure if I used a fourth part, but do you think I'll need a fourth part?"
"Most of our customers don't need more than three parts."
"Most of the customers with a problem and a car like mine?"
"That's an average across all our customers."
"So, would that include customers who come in for an oil change or to get fluids topped up?"
"I see. And if you needed a nut, a bolt, and a washer... that would be one part?"
"No, that's three parts." He counts on his fingers. "Nut, bolt, and washer."
"Whoah. And so if you needed a single extra part, even one, I'd suddenly owe $1100."
"If you used a fourth part, the total with overage, yes. And if you used a fifth part, $2100. That's assuming you use a thousand wrench-turns, of course."
"Of cou... wait a second. What if this job took twenty thousand wrench-turns and no parts? Would it cost me $2000?"
"Do some jobs take that many?"
"Some customers find they need the sort of service that twenty thousand wrench-turns provide."
"Okay, I just can't agree to this. The idea of this open-ended contract where I don't know what's being used until I get the bill, where my expectation is of a reasonable cost, but where it can quickly escalate to... thousands of dollars! I think I need to go speak to another mechanic who doesn't charge this way. It's mad."
"You'll find that we all charge this way. Our outlays are very high; before we can service even the first customer, we have to have a garage, and hydraulics, and tools. And the metering and billing system is very expensive. This is the fairest way for you to share the costs, since you're paying for the wrench-turns you use, and no more."
"And extra parts."
"Of course, but parts are just a capital cost to—"
"—to facilitate wrench-turns, I got that. I can't agree to this. I'm leaving."
"Wait! We do find that the rare customer finds that the metered pay-for-service contract model is not for them. For such customers, we do provide alternatives."
"You can pre-pay for only ten percent more. Pay $110, and when we reach a thousand wrench-turns, or need to use a fourth part, we will stop work until you pay for a recharge."
"Well, at least that way it isn't open-ended. And you'll call me when that happens so I can pay more?"
"For your convenience, at any time you can check the garage, and if you don't see us working on your car, you can come into the office and pay for a recharge."
"Um. Okay.... Will you give me an estimate of how much more work is remaining when I pay for more?"
"That's the convenient thing about this plan for our customers, there are no estimates! When you pay another $110, you get another hundred wrench-turns, and you also get topped off to three additional parts."
"So then I'd have six parts."
"Three additional parts. If we hadn't used any parts up to that point when you recharged, you'd still have three parts remaining. If you had used three parts, you'd get three more parts. It's all for your convenience so you don't have to think about it."
"Um... I'm actually not sure. That almost sounds reasonable... but something still bothers me about it."
"Many of our customers find the pre-paid plan right for them, even if they could pass the credit check for other services."
"You didn't mention the credit check. But that's not what was bothering me, I just can't quite put my finger on it. Wait! What if I know this job is going to take five parts, but they're cheap parts?"
"Parts are just capital costs to—"
"Yes! I know. Wrench-turns. Just answer my question. I need five, cheap, parts."
"Well, we do have another option. It's much less efficient and we'd rather our customers not use this because it can encourage them to use more service than they need—"
"—more than I need? What on earth do you mean by that? What I need is for my car to get fixed. Never mind, I don't want to know. Go on."
"—but we do offer unlimited service plans."
"Oh? How much is it?"
"How much is what?"
"Your unlimited service plan."
"— Which — oh, for pity's sake, why am I still talking to you? ...I guess I'll bite. I think I'm going to regret it, though. How can there be more than one unlimited service plan?"
"It just depends on how much service you want to be unlimited. Do you want a plan with a thousand wrench-turns and three parts, five thousand wrench-turns and ten parts, or ten thousand wrench-turns and eighteen parts?"
"But you said it was unlimited!"
"It is unlimited. Up to those amounts."
"And when you go over the limit?"
"It's an unlimited plan, there is no limit."
"You said it's unlimited up to those amounts."
"Yes, those are the defined plan service levels."
"It's an unlimited plan."
"You're mad. You're absolutely mad, do you know that? So what happens when you go over the... what did you call it? Your not-limits?"
"The defined plan service level. It depends on whether it's wrench-turns or parts. In the case of parts, each additional part costs $1000."
"A thousand... but that's the same as the other options!"
"Pending credit check, it does not include the additional 10% convenience fee for the pre-paid option."
"Right. But how can you call it 'unlimited' then?"
"It's unlimited wrench-turns."
"But you said it's a defined something or other. What if I go with the thousand-turn plan, what if you need to use two thousand turns?"
"After a thousand turns, you'll continue to get our great wrench-turn service, merely at a reduced speed."
"What reduced speed?"
"You'll get the superior service of one wrench-turn every minute."
"Is that a lot? How many turns do you do per minute before I get to the limit?"
"There is no limit with the unlimited plans."
"Ugh! The... defined..."
"The defined service level? Under the defined service level, those wrench-turns we do at up to a hundred per minute."
"A hundred! So if my repair takes two thousand turns, and I do the pre-paid or the fee-for-service or the bigger..." You wince. "...'unlimited' plans, it'll be done in twenty minutes, but with the thousand-turn plan it'll take over sixteen hours? Three days, assuming you work on it eight hours a day?"
"Speeds up to a hundred wrench-turns per minute. It could take longer. Most customers see an average of fifty wrench-turns per minute up to their defined service levels."
"I see. But that's still forty minutes versus three days. I guess to be on the safe side I'd better go with the five-thousand plan. How much does that cost?"
"Five hundred dollars."
"$500! But that's how much the fee-for-service would be, and I may not even use five thousand turns!"
"At fee-for-service, you'd pay more for additional wrench-turns. With this plan, you get unlimited wrench-turns at the reduced speed, and the security of up to ten parts."
"Out of curiosity, what percentage of your customers opt for this?"
"Huh. I guess people ran the numbers and it made sense. $500, but no more, huh. That's comforting to know I won't end up owing more than that."
"Unless you use more than ten parts."
"But ten parts must be enough, right? I'll take it."