“The Free Market creates higher quality products at lower prices” is a tagline masquerading as an explanation, a simplification of a relationship of opposing parties down to one constant result. Any time something odd happens, libertarians et. all will say “it wasn’t a true free market”, “capitalism != corporatism”, or any number of words they define at that moment purely for rallying purposes.
These are the three parties that
marketists marketers will talk about:
- The seller,
- The buyer, and
- The other sellers.
Supposing, for the duration of this post, that other parties and factors from government to culture and infrastruture to topography are as irrelevant as they say, they are still wrong about the balance of these three, and will basically be wrong about the balance everywhere even if the model was a neighborhood garage sale, a simulation run by a class of college students, or the same simulation run by children. Communists don’t understand human nature, and Marketers don’t understand it either. Libertarians are often pointed out as having a very high population of autists, which makes sense if we look into how they see the world: “I want it, therefore I will be given it”.
Let’s start with the seller.
People driven by profit are inclined to take as much money as they can while putting in minimum effort. Wherever it can, it will attempt to maximize in these two directions: it will sell down to whatever people are willing to accept, up to whatever price they are willing to pay. The best situation is for people to give them any amount of money they want for nothing. People have heard famously about 100$ Nike shoes costing 1$ to make, but their measly 11.25% profit margin isn’t the holy grail. “Rent-seeking” isn’t it either, they barely do much better at 12%, and were only at 2% before the start of the second great depression. No, the holy grail is much higher than that. The holy grail is 100%.
They are not your friends. Their best interests are not and will never be your best interests. They’ll try to be your friends. Just like how the street hustler with the cards will tell you you’re such a pretty girl, aw thanks you’re so nice. But if they can rig the cards while making you believe you can follow them, they will. And if they can make you feel at home while getting some of their actual friends to pick your pocket, they’ll do that too. Which they of course do, in whatever form it takes for their industry.
“People aren’t that mean!”
Unless my blog is so great someone printed it out, you used it to read this post.
No need to disagree about how “the people would never stand for that”. They do. They have been for 20 years. It’s probably true in a number of other places too. So let’s talk instead about how it works and see if we can’t find out something that might predict where profit can be made, rather than waiting for
libertarians marketers to complain afterwards about how something or other wasn’t a real free market.
The reason why they believe things shouldn’t happen this way is because of the buyer. Sellers can sell for whatever they want, but it doesn’t mean anything without the buyer, and the buyer will always want higher quality at a lower price.
…”And therefore the higher quality will appear at a lower price” would be golden, maybe someday a libertarian will actually say it and then I’ll have another permanent pet toy, but that’s basically what they believe and espouse without irony or further explanation. Tell this to a child and they’d know that something’s up. How is it possible that, when two people with opposing goals negotiate, one just always wins, and wins everything they want at the cost of the other guy? No middle ground? No give-and-take? Just a “And I would’ve gotten away with it too if it weren’t for you meddling kids”?
It should be obvious that if the buyer wants something that the seller doesn’t it won’t happen either, and marketers will recognize this logic when presented with their favorite S&D graph, but completely forget it otherwise. Outside it they use quotes like
There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.
which is surprising, or unsurprising, because they don’t realize the meaning of it being a well-publicized quote about consumers, from someone who didn’t make a name for themselves on consumer advocacy, but the exact opposite. The customer can fire everyone? Really? Can someone name the last time something like that happened? Everyone hates Comcast and EA, when’s the last time something substantial happened at those companies in any direction the customer wanted? Anyone?
The biggest problem in the model is that there isn’t one customer.
Every individual transaction may be one seller and one buyer but the vast majority of transactions only exist because there’s one seller and many buyers. Only a very few businesses can be made off of only one buyer, like being an artist in the Renaissance, or being Boeing, Bechtel, Raytheon, or Tesla today. Everyone else needs a bunch of customers. It’s basically true to say “the seller”, it’s basically untrue to say “the customer”.
And these customers don’t know each other – meaning if one guy is screwed the others won’t know, and if they do, they won’t care. Even if they do know, does it mean anything beyond an Angry reaction on Facebook? Does it affect the seller in any significant way?
A big thing happened a little while back; United Airlines beat up a customer to unreasonably get him off a flight, all recorded and known around the world minutes after it happened thanks to the wonder and ubiquity of smartphones. Reddit’s subforum for cat videos had nothing but pages and pages of stuff on UA, and apparently UA’s stock dropped by more than $1 Billion USD. Stock market being, we’re told, a reflection of consumer opinion.
Here’s a graph of UA stock. Can you tell me when the incident happened?
Are you looking for the biggest drop? It’s not so obvious is it. It’s somewhere in these last three months. Here’s the graph for the last year, which won’t help either.
The other problem is buyers generally don’t know anything about the product. It’s easy to say people want a higher quality product at a lower price, which is how you know it’s just a marketing line. Chasing the words will only lead you into the predetermined holes. In abortion you’re “pro-choice” or “pro-life”, but how can you say you’re against choice or against life?
Let’s ask an answerable question: How does a buyer know something is higher quality?
When you think of an average person looking up products to buy to fulfill a particular need, and they’re not simply buying the same thing they’ve bought before, they’re not just doing whatever their friends said, and they’re out looking for whatever is the best actual thing for the job, what do you think of?
That’s right. Reviews. Or if it’s Amazon/Yelp, not even the reviews, just the rating distribution. It better be mostly 5/5’s and have 100+ reviews or forget about it. The other routes would be it’d be whatever the bigger review magazines said, or if in a physical store whatever the Sales Associate™ said, or some brand with trustworthy-looking graphic design.
People don’t know what they’re buying and are buying only because they’re told to.
“Well what else could it be?”
Reading specsheets. i.e. Looking at the actual thing money is being paid for.
The reviews part is important too but we’ll get back to that in a bit.
When switching to a new case a while back I bought fans for my computer, a few Fractal Design Venturi HF-14s. Aside from positive reviews, I bought it because I knew a bit about what the product would actually do based off of what it said. Rubber corners means fan vibration doesnt lead to noise. Multi-size means I can use a larger fan i.e. push more air through my smaller components. It’s not a sleeve bearing so it’ll last longer. There’s a number for how many dB’s of noise it’ll make. There’s a lot of other stuff too which I don’t know how to read, but of what I do know, and I know some, it looked pretty good. Here’s their page on the product (backup link).
I also got a new fan recently because it’s summer and it’s hot, a Honeywell 7″ Power Air Circulator, but only because my mom had one too and I fiddled with it beforehand: quiet, small, high airflow, and the rotation is stiff rather than flimsy. But if I hadn’t had this experience, I wouldn’t have gotten it, because there’s nothing about it I can find beforehand that makes any sense. There’s no specsheets on it from Honeywell. On a Venturi box most of the specs are listed on the back. On the Honeywell box are:
- 3 Powerful Speeds
- Turbo FORCE Power
- 25% Quieter
- SAVE up to 20% on Energy Bills
and that’s it for specs. The back is in Spanish.
7″ and 3 speeds are the only specs on the box, everything else, including the stuff I did bother to list, is nonsense. I can tell you how much noise a Venturi makes, says right on the box, 26.5dB. I wouldn’t know if it makes 25 or 27, but I know what 20, 30, and 40dB are so it gives me a rough idea. “25% quieter” doesn’t tell me anything. Quieter than what?
25% quieter claim is based on internal sound test (#08-017) comparing model HT-900 to another similar sized air circulator, HT-800.
What’s the problem with listing the number on the box?
What’s that supposed to mean anyways? I need to buy your HT-800 first? Wouldn’t be the worst thing ever if I could access this “internal sound test #08-017”, but that’s also not public information. And what’s with the rest of it? “Turbo FORCE Power“? Graphic design from the 90’s doesn’t keep the hot air away. Do I need to go to the dollar store to pull examples of big bang words in fancy fonts and colors paired with products that aren’t worth the time spent in the drive over? Again, the fan isn’t actually so bad, but how would I know? Or, in obverse, I don’t know if there’s actually significantly better fans out I could’ve gotten instead of this one, because all of the stuff any of them list in their advertising is complete hot garbage.
Sure, Fractal Design could be lying to me, maybe the fan actually produces a louder 40dB instead, but Honeywell could’ve given me a trash fan and I wouldn’t be able to say anything about it because Turbo FORCE Power doesn’t mean jack squat. With the Venturi I know there’s certain other fans out there that are better at this or that, but for the size I had, and a price range I was willing to pay, it was the best in terms of airflow and noise level. I don’t know anything about the Honeywell except that I turn it on when it’s hot.
The same holds true for most people about anything they’re buying. They want something to fulfill a need, they look up what people have been saying about various products that claim to fulfill that need, they get one, and that’s it. It could be better, it could be worse. They don’t know. They don’t have a clue. And they don’t care; if they’re told it’s 5/5 stars and it doesn’t have any obvious problems for 6mo~1yr (depending on the person), it’s perfect by them. It just so happens there’s quite a lot of perfect products on Amazon and restaurants on Yelp waiting for everyone. God Bless America.
I’m not saying this way of doing things is wrong. If you can’t tell the difference in quality and you think it’s fine then for you it probably is. Let the people who care about what you see as minutiae deal with whatever they think the problem is. People only have so much time in a day anyways, no one person can be expected to be educated and perfectly informed on everything. Just recognize that you basically don’t know what you’re doing for most of the things you’re buying, you most likely aren’t getting the best, and are making decisions based off of pretty pictures and silver words.
For libertarians though:
This is supposed to be the grand ultimate force which is supposed to oppose money.
Certainly in some fields “the” customer holds more power than not, but it’s never, ever due to any populist reasoning. It’s more that a few powerful buyers with very strong opinions and very specific goals saying to the seller “I’ll make you an offer you can’t refuse”, and less of everyone else absentmindedly reciting “The meek shall inherit the earth”. Buyers who only buy a product once or otherwise only think about it and then go on with their lives have no power in any field. Buyers who are recognized as informed and thus guide others opinions on the matter – those have power. They make the changes, everyone else is just the tool. Guns don’t kill people, people kill people; you don’t fire everybody in the company the chairman on down, popular reviewers do. Maybe. I haven’t seen it ever happen. But if it happens, it’ll be because of them, not because of any stupid Hollywood-tier Power To The People crap.
The more a seller relies on buyers with opinions, the more the balance shifts towards the buyers. The less a seller can be influenced by other people in power, the more the power shifts toward the seller. For higher quality lower cost product to exist, there must be powerful buyers whose desire is higher quality lower cost products. This is the full logic chain, not “if: competition, then: better cheaper stuff”.
There’s also plenty of powerful buyers whose desire is something other than higher quality lower cost products, a topic which I won’t get into in this post. Suffice to say, shilling is a thing. A really big thing.
Read a handful of Amazon Vine reviews, and tell me how many of them you think were written by a real person. Expand to big reviewers in general. Remember, they get free products from the company and make their living off of them. See also “Sponsored Content” and “Native Advertising”. Or just look at Starbucks.
The final party is the other sellers. There’s generally not a lot of other sellers. Certainly if there’s more of them, then it’s more likely that there’s going to be variances.
But even then it’s not like it’s all competition all the time. Even amateur markets like Artist’s Alley at anime and comic conventions have organizations. However many of them there are, there’s always lot more of you. Why is it that basically every stall you go to and every poster or charm you see, they’re all selling at about the same price? It’s not like some kind of reverse auction where they’re all scouting around the place all the time, starting at various different prices and all cut down over the course of a convention so they could cut into the profits of whoever was selling cheaper.
Because you’re faceless, and they’re not.
Even before the internet and “price-matching”, look on any older box, you’ll find that the price was already on the product. “MSRP”: Manufacturer’s Suggested Retail Price. And basically, unless it was Christmas Shopping Season or some other special event, that was the price for that thing, everywhere. That number can’t come to exist if we accept the libertarian individualist state of nature explanation of the world, where the manufacturer simple ships the product to a distributor, who cares who actually sells it in the end, let them figure out the price themselves I already got my cut.
No, obviously there’s a supply chain, distributors and retailers which have stayed in business, have connections, and use general agreed-upon practices and markups. They talk to each other and come to agreements. They don’t just roll over and say the customer wants higher quality at lower prices, whats my competitor got, time to offer higher quality at lower prices. Unlike you, they have to deal with the other guy tomorrow, probably the day after too, and potentially ten years from now. And the other guy has a lot more impact on them then literally who. Listed MSRP hard to find these days, but its existence and disappearance suggests certain structures, structures which generally haven’t changed, structures which show more cooperation with each other than with you.
Even if they only have one meeting with each other a year, it’s probably between a couple of their bigwigs, making a deal of some sort, setting up information sharing. What’s your connection to any of these manufacturers or retailers? One purchase? Maybe one review whose star rating is seen by 50 people? A call to customer service?
And then what? You got a higher quality product at a lower price from a competitor?
And that’s why this whole system is the best, thank god we aren’t communists?
If we assume it’s an average buyer with an average product, then it comes back to the same problem as before: There’s no knowledge that it’s actually a better product. What was better was the final opinion, because of the product not breaking or reading more shining reviews or friendly customer service that happened to resolve the problem this time rather than with the nonresolution with the other company, or who knows what else; whatever it is: not the product. “The free market provides higher quality products at lower prices” is literally completely unrelated to the actual experience, to most anyone’s actual experiences, yet it’s chanted at anything and everything nonstop all the time.
What sellers actually do: Sell poorer products at higher prices.
What buyers actually do: Look at whatever has the most positive/popular reviews.
What sellers actually do: Pay well-known reviewers to review positively.
What buyers actually do: Buy anyways.
This is the actual result.
“But it’s wrong and probably illegal for them to do some of the things they’re doing, let me try and find some law that supports my argument, then I’ll show you why it isn’t actually a free market” is not relevant. Sellers in a market want to make more money while having spent less to do it, and buyers in most markets, who number in magnitudes larger than the sellers, have no clue what they’re doing, put those two together and whatever fancy jargon you make up aside, the cards always fall this way. Maybe the details differ. Nike makes 10 cents per dollar rather than 97. Whatever. But 97 is possible, is happening, and the more companies do it the happier the people are.
That’s right: The more companies profit, the happier people are to buy from them. If the marketers’ ideology was true you’d expect to see the opposite. If people were actually so concerned about lower prices then there’d be info spread around about companies producing whatever product and compare all their profits to see who made the least. Assuming all their products cost the same, this should approximately mean that whoever is profiting the least put the most money into doing the work, therefore a better quality product. What we actually see is everyone wanting to wear Nikes driving Teslas drinking Starbucks while using their iPhone.
People want to spend money on expensive things that they’re told everyone else likes. They don’t need to know what’s in it as long as it doesn’t obviously break, they just need it to have the best reviews and be on the top of all the lists and the tip of everyone’s tongue. Nevermind if it actually breaks, or how it breaks, or how soon it breaks, technology is really complicated these days doncha know? The customer service guy was nice and I like the font and logo the brand uses. I’m proud to continue to support a company that says it’s the leader of innovation into the future. Nevermind if they do or not, who cares anyways, looking at numbers and comparing stats is for nerds.
This is supposed to be the grand ultimate force which is supposed to oppose money.
It opposes with as much resistance as you’d expect.