It occurred to me that despite writing two posts on the bullshit economy, I’ve not actually explained what it is. This week, I explain what the BS economy is and provide an example.
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It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages. -- Adam Smith, The Wealth Of Nations.
Economics, the sort which most people study in high school and undergrad, teach us that if demand exists for a good (good, in this essay, can mean a product or service), supply will rise to meet that demand. Conversely, if demand falls, so too will supply. This function is meant to illustrate the relationship between buyers and suppliers—market equilibrium is when demand and supply equal one another, signaling that suppliers and buyers agree, sans coercion, on a price and a supply of a good.
The price of a product also plays a role. If a product’s price is too high, the supply of the product will outstrip the demand, creating a surplus. Priced too low, and the demand outstrips the supply, creating a shortage.
But in foundational economics, virtually no time is spent on the creation of demand.
The origin of the demand for a particular good is central to The Bullshit Economy. In our high school and undergrad economics, we’re taught to think of market equilibrium in terms of staple goods like gasoline and plumbing and discretionary goods like PlayStations and first class airfare. People need gas because it powers combustion motors and they want first class airfare because of comped bloody marys and wide seats. Although external forces impact the demand of each—an OPEC embargo in the case of gas or a recession in the case of first class flying—most of the demand for those goods is intrinsic to the good itself. The supply and the goods themselves are generated to meet demand.
At the root of The Bullshit Economy is artificial demand. Demand that precedes supply. Market equilibrium, rather than an unfettered and unspoken agreement on terms between buyers and suppliers, becomes coercion on behalf of buyers.
You possess a priceless family heirloom, an embroidered lace bonnet worn by 6 successive generations. It’s traveled from the grey skied, hardscrabble motherland, to the shores of America, all the way to your attic. Through Facebook, you happen upon a vast community of others in possession of priceless antique bonnets. The community numbers millions.
Sensing opportunity, an interloper makes their way into the community. The rapscallion invents a unique jelly that permanently stains the antique bonnets. At that years’ Antique Bonnet convention in Springfield, MO, they manage to stain millions of heirloom bonnets. Being unique, this jelly’s resistant to all existing stain removers. The only solution? A patented jelly remover, invented by the rapscallion.
Knowing they’ve got the market cornered and control the supply of jelly remover, the rapscallion charges obscenely high prices for the product. They recruit companies, who in partnership with the rapscallion, conjure financial products to help those with stained bonnets afford the jelly. Those with stained bonnets have two options, pay the price, or go without a pristine bonnet, thereby angering the ghosts of generations past and forgoing spotless headwear for future generations.
The government gets hip to it all and rules that Rapscallion® brand jelly remover has created a monopoly for itself and must share its recipe so that other jelly remover brands may enter the market. Towards the financing products created to make jelly remover affordable, both public and political sentiment sours. New laws are written that expressly outlaw the extension of certain types of jelly remover loans and cap the rates at which the remaining, legal loans can be given.
Knowing that jelly remover is vital to antique bonnet owners, other companies produce their own removers, but prices remain high due to unspoken acknowledgement by jelly remover producers of the crucial nature of jelly remover. A jelly remover cartel forms.
Noticing loopholes in the government’s ruling, new firms step in to help bonnet owners pay for the product. Instead of calling them loans and charging interest, they brand them ‘fiscal favors’. Receiving a fiscal favor requires bonnet owners to provide their bank routing and account numbers so the new entrants may provide an initial deposit into the users’ accounts...and subsequently garnish a portion of the users’ paycheck for the next 10 years. The garnishing rate shall never be less than 45% and increases from there depending on the lunar phase of the users’ payday.
Illuminated by fluorescent tube lights, lawyers examine government regulation to stay on the right side of the law and draft consumer-side terms and conditions to be agreed upon via browser checkbox. Advertising agencies staffed with lit majors from universities like Bennington, Bard, and Yale pitch these companies on which non-binary colorway will appeal to the stained bonnet cohort. Product managers fresh out of MIT and Harvard Business School ingeniously work dark patterns into each new app so as to befuddle bonnet owners into agreeing to pay more as each month passes.
It’s a shit seed, from which sprouts a shit tree, which bears shit fruit. It stinks!
Some will read this and say, “Isn’t it good that now the bonnet people can afford the cleaner for which they so desperately yearn?” Couldn’t the bonnet people just put it on a credit card, that must be better? The average credit card APR is 15.56% to 22.87%. Also, in a properly functioning economy and society, there’d be no need for these companies in the first place. The genesis of the demand is rotten.
Not every good in the bullshit economy follows this exact pattern, but many occupy a portion of the story. Uber and Lyft, for example, thrive because of loopholes in the law around what constitutes an employee versus an independent contractor. The college admissions ecosystem perpetuates because, amongst other reasons, inequality of opportunity and access.
In the coming months, I aim to expand on this by way of presenting fresh examples. In the meantime, I hope this helped narrow in on the source of the stench.
Read this also:
How do we choose which products to buy? How do we know which trends are just hype and which ones are durable? How does our sense of smell, sound, and taste impact branding? The Marketing Mind Meld is a regular exploration of all these questions, diving into questions about how human psychology and bias play into the world of marketing.
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To illustrate this week’s post, I borrowed a fake product from my favorite Stella skit (comedians Michael Ian Black, Michael Showalter, and David Wain). Enjoy.