Category Archives: Economics

The real appeal of Loot Crate

When you buy Loot Crate, you aren’t buying stuff. You are buying intangible, subjective experiences. The most notable of these must be the experience of getting a pleasant surprise each month. What’s in the box is merely the vehicle used to deliver the surprise, delight, feelings of exclusivity, and all those other experiences. Amazingly clever when you consider that people could basically pay Loot Crate to include their book/game/pop-culture thing/whatever in the package. Add an element of gambling – random crates contain extra-valuable goodies – and you have a model that is almost irresistible.

There is research into relationships between dopamine in the brain and novel experiences (both having and seeking), gambling, and gaming. I can’t begin to asses these findings here – not lease because I’m not a cognitive neuroscientist or behavioral psychologist. (And before anyone starts an argument about dopamine and video-game addiction, I know that some of this research is considered to be controversial – I’m not endorsing it either way.) But imagine that there is a link. We have a business that sells novel experiences (with just a hint of gambling) to gamers – who may already have elevated levels of dopamine, which may make their  subjective experiences of novelty and gambling pay-off stronger than it would be otherwise. Viewed in this light, Loot Crate’s success is hardly a surprise.

In a time when consumers in parts of the developed world seem to be buying less stuff, this business model keeps the stuff going out to consumers by tying it to the experience of novelty – something missing from the more traditional forms of shopping.

This connection of a physical product to an intangible experience or feeling isn’t new. After all, Charles Revson, one of the founders of Revlon, is credited with saying: “In the factory, we make cosmetics. In the drug store, we sell hope.”

Is this method of marketing morally or ethically problematic? That depends how you look at it, and is a conversation for another day. Whatever the case, it will be interesting to see if this business model can be sustained over time, especially if the novelty required by consumers escalates over time.

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Technological disruption of the housing market

There has been no lack of talk in the past few years about the potentially disruptive effect of technology across a range of areas. The effect on the music industry, as well as the demise of the video store are well documented, as is the supposed risk of automation to various vocations and professions.

What there does not seem to have been so much of, is a discussion of how technology might disrupt the housing market. The kind of disruption that I am thinking of is not primarily captured by the rise of apps that facilitate transactions between vendor/landlord and buyer/tenant. This might disrupt the real-estate business. What they do not do, in my opinion, is disrupt the fundamental basis of supply and demand of housing.

What I am going to sketch, very vaguely and hastily, are two ways that technology could disrupt the housing market. One relies on changing the nature of the transaction, the other on a more profound disruption of how people relate to their homes. The likelihood of either of these occurring, as well as the potential ramifications, is as much a question of politics as technology.

Disrupting power relations in bargaining

Apps such as Uber and Airbnb function to take out the middle-man – exposing buyers (and sellers) to unmitigated (or less-mitigated) market forces and individual bargaining. The residential rental and real estate market is not dissimilar. Or that is how it can appear to people on the buyers’ side. If you want to buy a house, or rent it, you face the market forces that influence the price, and then you bargain with the seller. I say ‘bargain’ – in Australia, as a renter, the main bargaining that occurs is for potential tenants to offer to pay more for a property, such is the level of rental housing scarcity in some areas. In the end, you need somewhere to live, and it has to be close enough to your place of work/study etc. Your landlord, and the real-estate agent acting on their behalf, is much less likely to have this same problem. Hence, even if you have a long record of perfect tenancy, you are bargaining from a position of such weakness, that any concession is vanishingly unlikely. This situation contributes a range of undesirable outcomes – ranging from housing stress to pressure on animal shelters as people are forced to give up their pets in order to gain tenancy.

How could this power relation be disrupted?

What if there was the rental equivalent of an ‘anti-Uber’ app? I mean this in the sense that it allows buyers, i.e: renters, to somehow collectively bargain against individual sellers.

I haven’t figured out what the methods for collective buyer bargaining would be. But a few things spring to mind:

  • Buyer rating – buyers indicate the price they wished to pay for a service, and then report on the outcome.
  • Buyers collectively decide (through peer network or whatever) what they feel the acceptable market price is. Note that sellers can’t be part of this network, lest they artificially inflate the price.

Either way, the system has to allow for the power of the collective of buyers to be brought to bear against the individual sellers in some way, (as well as sellers’ collectives). Thus an Uber driver, landlord, or vendor who sets the price unreasonably high needs to expect a loss of business from the buyers’ collective. For example, the buyers’ collective has decided, by as yet undetermined means, that the price for a given good or service is $100, but an individual vendors sets their price at $110. What the seller can (somehow) expect is less business from the buyers’ collective. Thus they are encouraged to keep prices as low as possible, even if some buyers are not part of the collective.

Where this might not work is in the case of seller’s markets where the good or service is scarce, and that good or service is essential – i.e: housing in much of Australia

In one sense, the effectiveness a renters’ collective might be stymied in a situation where renal property vacancy rates are low and property prices are high – people need to live somewhere. But where geographic concentrations of collective members are high, landlords are stuck too – especially if they need someone to rent the house in order to maximise the tax benefits of negative gearing as occurs here in Australia.

So it might be that the renter’s collective would need to provide some benefit to landlords. If there were, for example, some reason why a landlord might choose a collective member for a rent of $300 per week, rather than a non-member for $310, then we might have something. Obviously, the renter’s collective can supply a ready source of tenants. Whether or not they would be good tenants is another question. The interests of most members of the tenancy collective would not be served by having members who were bad tenants – they have to be at least as good as the average tenant in the eyes of the landlords & property agents – probably better. Thus the renters’ collective needs some way of managing this that is not prone to being gamed by the rent-seeking property owners and those who profit from them.

As I said, I have not worked out the details, but the bones of the idea are there, and I think it would be worth exploring.

Disrupting experience

There is another way that we may disrupt the housing industry – by disrupting our experience of the reality of where we live. This will not change that people have to live somewhere, but it could change where they choose to live, which could alter the kind of real-estate that experiences relatively high demand.

I was thinking about disruption and evolution of the music industry. In the past, people bought vinyl LPs, then cassette tapes and then, more recently, compact discs. Now, we download information, and our programs turn that information into the music we hear. If the thing people really wanted was circular vinyl discs with grooves in them, then the aforementioned innovations would never have been commercially successful. (Though some people do still buy LPs). Rather, what people wanted to pay for was the experience of the music. The disruption occurred when we minimised the physical object or token that had to move in order for us to have that experience.

How does this relate to housing? Surely real estate must be immune to disruption? You can’t digitize reality. This thinking is still in the mode of ‘vinyl discs’. All, or at least many, of the things that people want from housing can be thought of as experiences they want to have. All, or most, of these experiences could be provided by a properly developed Augmented Reality (AR) technology, especially if it includes a haptic interface.  Want to see great water views when you look out the window? Done. Want a view of Winterfell, Minas Tirith or Corasant? All achievable. A bathroom of finest marble? No problem (so long as your AR interface is waterproof).

You could have the illusion of living in a palace, or even outdoors, so long as you don’t walk into your physical walls, and your AR interface is more or less permanently glued to your head. The problem of interaction with the physical location can be overcome with good programming, and the likelihood is that the AR interface will be as unobtrusive as is technologically and financially viable, so don’t scoff too soon.

You could even have the illusion of continuity, security and ownership. If you have to move to another physical location, your digital home can go with you, so long as you don’t fall so far into poverty that you can no longer pay for the access to it. (Perhaps the fee will be pegged to the universal basic income?)

This second scenario seems a long way off – and that might be the case. But it is certainly conceivable. What effect would such innovations have on the housing market? I find this hard to predict. For example, a view of the ocean must surely be worth less when it is no longer restricted to those lucky or wealthy enough to live in certain geographic locations. On the other hand, there are people who will always pay a premium for the ‘real’ thing – just like the people who still buy their music on vinyl. What proportion of the population will fall into this category remains to be seen. In theory though, with an excellent AR setup and some clever programming, any utilitarian box with air conditioning can appear, to its occupants at least, as the home of their dreams. I find it difficult to image that this would have no effect whatsoever on the housing market.

So there is it, two very different ways that I imagine technology could alter the housing market. Both have technological, social and political impediments. An app that enables an effective collective of tenants is technologically viable right now, but would be politically unpalatable in any country where landlords and rent-seekers are so well-connected to politicians, such as is the situation in Australia (where they are often one and the same). An augmented-reality system, capable of the feats I describe, is some way off – though it could be as soon as years, rather than decades. The point is that the bricks-and-mortar side of housing may not be as immune to disruption as people think.

Ethical Living, Personal Choices and Political Change

I recently read Forget Shorter Showers: Why Personal Change Does Not Equal Political Change by Derrick Jensen. He argues that that individuals making environmentally appropriate choices as consumers is problematic for a range of reasons. He is particularly hard on the concept of simple living as a political act. I’m going to look at the reasons he gives, and then take the argument a little further. Many people, either explicitly or not, see simple living as a more ethical (or sometimes moral) choice of behaviour. I will show that this individualized concept of ‘ethical living’ is itself ethically problematic, though this conclusion depends on accepting at least some of Jensen’s premises.

So why does personal change not produce the results we might want? Jensen notes several instances where individual consumers, even taken together as a group, are not the major users of a resource or the major contributors to a problem. An example given is that consumers take shorter showers in reaction to water shortages, but that residential water consumption is only a small percentage of the total used – most going to industry and agriculture.  His article does not cite sources as such, but this seems consistent with the figures supplied by the USGS here. A similar situation exists here in Australia with agriculture  (if not manufacturing) using significantly more water than domestic consumers.  The point is that the actions of an individual, in this case, how long your showers are, are not what is causing the problem, directly at least. So in one sense, certain forms of individual action might be just plain ineffective at achieving their stated aims.

I think there is a bit more to this that it seems. In terms of effectiveness, and depending on what conditions you place on a hypothetical scenario, very different outcomes might be likely. Consider the idea, that personal change on that part of individuals can’t affect certain changes because it isn’t individuals who contribute to the bulk of the problem, whereas industry or corporations does. In a nutshell, even if all consumers cut back, industry rolls on and the destruction continues. However, I think this is a problem of degree rather than anything else. I have to ask, what is industry making and who are they selling it to? If enough individuals stopped consuming certain products, then surely the industries that support the manufacture of those products must either adapt or ultimately fail. So why don’t they? A large part of this in the cases mentioned above is that not enough around the world people stop consuming enough different products. Consider water use in the US. To reduce overall water usage, not only do consumers in that country need to use less water, but consumers everywhere need to stop buying products manufactured/grown using that water. Hypothetically, if everyone in the world had shorter showers but still consumed like crazy, we would still face water shortages. Alternatively, if enough people everywhere stopped consuming to a great enough extent, then maybe our showers could be as long as we liked. Where water use in agriculture is concerned, there is a possible Malthusian factor though – maybe we have too many hungry mouths to use less water. I would dispute that this is necessarily the case as it is at least possible that agriculture in the US could make more efficient use of water. A similar situation might obtain for problematic areas such as carbon pollution.  What should be noted is the sheer enormity of such a change in behavior and massive unwinding of our current economic system that it might entail. As I’ve speculated elsewhere though, degrowth does not have to be such a bad thing. Clearly if enough people stopped consuming enough different things, then something would change. So what is exactly is Jensen getting at?

Jensen presents further reasons why the approach of simple living as a political act fails.

The first is that it is based upon the idea that humans inevitably damage their environment. Now, I’m not an expert on whether or not this is, as Jensen states, a ‘flawed notion’. But I’m certainly willing to entertain the possibility that it isn’t necessarily true.This notion certainty assumes a very one dimensional and non-dynamic conception of ‘environment’ – as if it s a separate thing from us humans.

The second reason is that “it incorrectly assigns blame to the individual”. This is, I feel, at least slightly contentious, because while individuals are not directly responsibly for certain things, they do play a role in maintaining the political status quo. Yes, individual choices as consumers don’t lead to social change – but many people making these choices are quite happy with that arrangement and thus should bear some responsibility.

The third reason is that accepting the definition of ‘consumer’ as a political choice cuts off other legitimate avenues of social and political resistance. I am not sure if it is the case that if people think of their ethical and environmental choices in terms of them being one sort of consumer or another, that this leads to them eschewing other forms of political expression. But if it is the case that you think that your choice of bottled water or footwear makes a bigger difference to the environment than who you vote for, I’m intuitively inclined to say that you are mistaken.

The fourth reason given is a little more complicated. If every action in an industrialized economy is destructive and the best we can come up with is non-participation in this economy, then the ultimate form of non-participation must be death. (That’s my reading of it anyway). I’m not sure how to call this one. But I do appreciate that for some, the symbolism would seem quite compelling.

Jensen’s claim is that simple living cannot produce broad and deep social and political change. I think that if enough people everywhere lived simply enough, that profound changes would occur. In the context of a finite system, this must be at least likely. The point that Jensen is driving at, is whether or not simple living as one’s only political act will lead to widespread change. I’m not sure I can properly test this claim, but offer the following observation. Unless your choice to live simply, in and of itself and without any further political or social action on your part, convinces a lot of other people everywhere to live simply, then the answer must be that your act will not.

If your aim in living simply is to follow something like the Categorical Imperative, then it can seem like your choice is nonetheless justified. This is because if we universalize the choice to consume less, we have (for those who believe in degrowth at least) an acceptable outcome. However, if we universalize the idea that individual choices in consumption would be the only political act one would undertake, then we have a situation where adverse political and social outcomes are possible. Simple living does not, in and of itself, negate the possibility of fascist or feudal political systems – even if it did somehow achieve the desired environmental ends. And that is before we even include the possibility of the choices we make as consumers being subject to duress, structural restriction or manipulation. The disconnect between patterns of consumption and the political situation is a key weakness with the idea that if everyone just buys less everything will be OK. If you do not address the politics, then things might not be.

Likewise, a simplified utilitarian analysis of simple living  as the sole political act indicates that it is possibly problematic (even if we leave out the possibility of problematic politics). If we assume that the this act does not lead to positive changes, then surely it does not do much for ‘utility’, however you want to measure it. The utility of an individual act of living simply is different to the hypothetical utility of everyone living simply.

This is where the other key mistake in reasoning regarding simple living could be. If you live simply enough, then yes, it might well be the case that if everyone did it, that the environmental outcome would be positive. But they don’t, and they won’t just because you do. Unless there is reason to think that your choice will lead to many people making the same choice, you are not actually achieving much at all and it is a form of ‘magical thinking’ to believe otherwise. If you thing you have an ethical or moral obligation to hep the environment and this is the only thing that you do, I would argue that you have not met this obligation.

So there you have it.  If simple living – the act of an individual deliberately consuming less – is the only political act this individual undertakes, there is no guarantee that environmental, social or political changes will follow. This is because a reduction in consumption has to be very widespread to even have a chance at achieving these aims and it is unlikely to become widespread without additional political or social action. In addition, cutting oneself off from political participation, except for choices in consumption, even if it were widely adopted, would be no protection against adverse political and social outcomes. The effects of your choice as an individual, or even a large community, should not be confused or conflated with the hypothetical effects of everyone living as you do.

None of this means that there is no point to living simply and sustainably, and being more mindful of what you consume – it’s a choice that many people enjoy and it does help. But, by itself,  it only helps a little. If you desire political or social change, or if you think you have a deeper ethical or moral obligation to the environment, then (at a minimum) you need to convince more people everywhere to live as you do. This means that your choices as a consumer are no longer your sole political act. And this, I think Jensen would agree,  would be a good thing.