Everything is too cheap. Gas is too cheap. Food is too cheap. And our computers, gadgets, and phones are far too cheap.
Now, before you string me up with a made-in-China $1.99 rope from Wal-Mart, hear me out.
Im a capitalist. I believe in free enterprise. The open, competitive marketplace is a good thing, and generally leads to innovation in efficiency that drives down the price of materials, manufacturing and distribution, resulting in affordable prices for consumers. Consumers make choices based on their own criteria, which includes low price or value for money.
At least, thats the way its supposed to work.
Unfortunately, the system is broken. Free markets require the free flow of information. And because of globalization and many other factors, information isn't flowing freely. Consumers don't have all the facts. Producers don't have all the facts. Nobody has all the facts.
The one fact everybody has is price. So we've come to rely on price far more than any other factor.
Let's look at one small example. When I go to the Verizon store to buy a cell phone, the only fact I am really sure of is the price of the handset. It says, right there: $199. That's what I know.
But all the other facts relating to the purchase are less certain. Will the company provide satisfying tech support? How much will I really pay for wireless service? Is the screen going to break in my pocket? Was the phone made with child labor? Were the workers who made the phone exposed to toxic chemicals that gave them cancer?
If I knew all these facts, I would take them into consideration. But I don't, so I won't.
Because we buy mostly on price, companies achieve the lowest price by cheating on the areas where buyers have less or no information. They'll stick it to me on tech support, use shoddy materials, hire an outsource manufacturing firm that lies, cheats, abuses workers, hires children for the assembly line and poisons the environment.
As I pointed out in this space last week, Apple detailed what happens in Chinese factories pressured by Western companies to keep driving manufacturing costs down, down, down. Apple discovered faked health and safety certifications, bribery, child labor, the use of toxic chemicals, severe worker abuse and much more. Laudably, Apple took strong action to address the abuses they found.
Such transgressions don't come out of nowhere. Manufacturing companies compete with each other in bidding wars to achieve the lowest cost for manufacturing. If you don't bid lowest, you don't get the business. So they bid lower than the price that's possible if you do everything above board, and make their money by cheating, lying and abusing both employees and the environment.
Manufacturers demand the lowest prices because you and I demand the lowest prices.
The factories Apple hires are among the best in China. What about the factories that make the ingredients in your multi-vitamins, the fabrics in the clothing you wear, the clocks, toothbrushes, lamps, power tools and everything else we buy at discount stores like Wal-Mart, Target, Costco and others?
We have zero information on this, so we buy on price, essentially guaranteeing abuses.
Wireless carriers have a sweet thing going, too. They take a phone that costs $700 without a contract, and they sell it to you for $200 with a two-year contract. Is that a good deal? Who knows? Maybe they're making $1,000 on a $700 phone. The whole carrier racket is to profit by charging you less for the knowable price, and more for the unknowable price. The uncertainty and fogginess surrounding the actual value of wireless service *is* the business model for wireless carriers.
In every sector of the economy where we make purchase decisions based mostly or entirely on price, everything turns to garbage.
Flying on airplanes used to be a pleasurable luxury. Now, we buy tickets on price alone. As a result, flying has become miserable, with rude cabin crew, nickel-and-dime pricing on food, water, luggage and so on. Airplanes are dirty. Seats are cramped. Travel has been ruined.
When you try to cancel your cable service, or get tech support for various cheap products, you get horrible phone run-around. It's not uncommon to spend an hour, two hours or three hours on the phone trying to get some simple change made to your account or to fix something that's broken. Now were pawned off on an automated interactive voice response system that never seems to have the option were looking for or were transferred to some offshore tech support person whose accent we cant understand and who has no power to fix our problem. You bought some cheap gadget or service, and now you're paying for it.
Free online services are too cheap, too. We all love the price of Gmail, Facebook, Twitter and other services -- free! But of course, it's not like these companies aren't making a killing. They make a fortune, in fact, polluting the Internet and our minds with advertising, selling our privacy, and ignoring user requests for customer service.