Mar 19

Why People Aren’t Spending Money

We are in a recession. People aren’t spending money. They aren’t taking risks. We are wondering when everything is going to bottom out even worse.

Wired just came out with an edition explaining why the economy caved. I honestly didn’t read it, but it had a bunch of complex formulas on the front.

Here’s my big fancy philosophical theory:
When companies exploit both their workforce and their customers, it hurts everyone.

Take the music industry. Major record labels often pay artists very little money for a hectic lifestyle. If an artist isn’t smart and doesn’t buy the rights to his or her songs or make money on tour, the label makes a lot of money for a little work and the artist makes a little money of a lot of work.

In this equation, do people really care that much about stealing the music if they know they will go to the musician’s tour, which is the big money maker for them?

Take shoe companies. The label makes a lot of money off a little work, and the makers of the shoe are often in very poor conditions for very little money. I understand economies of scale and realize it can be better to work in a factory than a rice paddy. But when my shoes are $110 and I realize that a company spent $3 on the materials and $30 to market it to me, is it really true that we get what we pay for?

And if a company treats me poorly and I connect with someone else who has the same experience, why do I want to go back? I’M NOT PROFIT MARGIN FOR YOUR INVESTORS. I am the person who ultimately pays your bills.

The internet teaches us that you don’t always get what you pay for. Instead of going to Macy’s to buy a necklace, I can go to eBay and pay a fraction of the price from the eBay seller in China who made it. Instead of going to a major record label, I can find a musician on Pandora for free and then I can pay that musician directly instead of having a record label muck it up by trying to appeal to the biggest audience possible.

The world doesn’t have time or money for large bureaucracies. With many points of refined connections, we can act much faster and more effectively than a bureaucracy. In order for America to get out of this recession, we are going to have to embrace and nurture this new model instead of propping up broken business models. A company’s long-term worth and value to society is not its stock price. It is only its worth to its customers. Enron, AIG, GM, Ford, Sun, and just about every other fledgling corporation teach us that.

So choose wisely in this new economy. Your customers will talk about you. They will do the selling for you. If you neglect them or the employees who produce for them, you could end up in a host of trouble.

  • Eskimohorn

    The vast majority of businesses treat their customers and employees better than what you see with some of these corporate malfeasants (new word?). Not all companies are like UNorth from Michael Clayton.