This is the third part of my Cheapest is Dearest series of thoughts written down. In the first I wrote about the obsession with market share that was driven by Tesco and other supermarkets. Their mantra was “Pile it high and sell it cheap” This tactic has diminishing returns and also teaches your customers never to pay the full price. Eventually they demand cheap goods as a right, irrespective of their cost or damage to the environment and oblivious to the human cost in producing them.
The second part dealt with outsourcing, when companies stop making goods and only buy them from the factory gate.
An unintended consequence of the combination of these factors is the cost of Research & Development expressed as a percentage of the profit margin. If you cut your margin to the bone in order to compete, how can you afford R&D? If you close down your manufacturing base, where is your R&D going to take place?
Another unintended consequence is the loss of copyright and patent protection. It’s no coincidence that since manufacture was transferred to Asia the number of counterfeit goods has soared. At the moment the Western companies can claim copyright and patent rights, but it’s not beyond one’s imagination to think that this could change overnight, should China choose to ignore international patent law.
Those firms that shut their factories and gave their manufacturing processes and secrets to Asian firms may yet regret that decision.
The rise in counterfeit goods goes hand in hand with internet piracy. Once the technology had developed to the point where any text, picture both moving or still, or audio could be converted into a series of 1s and 0s, the way was open for people to exchange files without paying the owner or producer of the work. Despite every effort, no way can be found around this. Since its inception less than twenty years ago, the internet is a place where everything is either free or unbelievably cheap. The dotcom boom of a dozen years ago showed how hard it is to make money from the internet because no-one wants to pay for content.
Music was the first media to lose value. Why buy an album when you can copy your friend’s or download it from a stranger via a torrent site? The print media didn’t help when they gave music away stuck to the cover of their publications. The music business contributed to its downfall by allowing supermarkets to loss lead on chart albums, and consigning specialist music shops to history.
The other unintended consequence of the digitisation of music is that every recording made since recordings began is capable of being stored digitally. This means that any new music has to fight to be heard through the echoes of the twenties, thirties, forties and so on. All the recorded music that has survived is now available somewhere on the internet. How do you make money from that?
The cost of breaking an artist is now astronomical compared to thirty or even twenty years ago. Warhol was truly prescient when he said that one day everyone will be famous for fifteen minutes.
The unintended consequence is that it is almost impossible to make a living by being a professional musician. The music and entertainment industry is governed by the laws of Supply and Demand. Every new singer or band increases the supply side, while the availability of music online or on 24hour satellite and cable TV diminishes demand. When supply exceeds demand the price goes down.
Other areas of the entertainment industry are suffering. With the advent of cheap digital cameras and iphones, everyone can make a movie and upload it, and shows like “You’ve been framed” can only show a tiny fraction. Youtube has thousands upon thousands of videos uploaded every day and only a tiny tiny fraction go viral. Of those that do, most are viewed once and then forgotten, and nobody gets paid.
Once upon a time one would have to venture into an adult store to buy a sex tape, and the prices were higher than what you’d pay for a mainstream movie. Since the advent of digital cameras and a change in the sexual mores in the west, anyone can make a porn movie and upload it. No-one gets paid, and that’s bad for those who once made a living from the adult movie industry. Why buy a porn movie when you can watch some amateurs’ home movie? Why buy a new movie when every porn clip ever made is probably available somewhere on the net?
Back in the mainstream TV world, the rise of reality TV and docusoaps mean that schedules can be filled with programmes that are cheap to produce because professional actors aren’t used. And that’s bad for the acting profession, because supply has exceeded demand once more and that means that the price goes down.
TV Talent shows are also cheap to produce. The stars of the show- the judges get paid, but those who perform don’t. It’s an old twist on the kind of theatre talent shows like Carroll Levis. He toured the UK in the 1950s with “The Carroll Levis Discovery Show”, booking a theatre and inviting the local talent to play for nothing. The “winner” would be selected to play at a regional final. Just like X-factor or BGT. The audience would pay to watch the show. Levis got rich, and the wannabees got nothing (except their fifteen minutes of fame.) A similar show ran at the Apollo in Harlem, called “Amateur Night”.
Even the prostitutes are struggling. I read an article in the press recently that prostitutes are finding it hard to attract clients because of the way young girls on a night out dress. Yes- they dress like prostitutes and the real ones don’t stand out. With the sexualisation of our culture and the apparent willingness of girls to have sex- why pay for sex when your girlfriend is giving it away? And so on.
In the world of business it’s hard to get a paid job. Why pay someone to work for you when thousands of young people will work as interns for nothing?
What has happened to us that goods are so cheap and the supply of labour has far outstripped the demand? What has happened to the value of work?
The future is uncertain. We can expect an influx of immigrants from Eastern Europe, drawn here by the promise of riches. For most of them their journey will be in vain. They will be stranded here, unable to go back and will inevitably become the focus of anger from the local population.
Every year in the USA, thousands make the journey across the border to chase the American Dream, only to find that the America in the movies never existed.
The rich of this world, the shadowy and untouchable elite, who never pay taxes and never mix with the rest of us are already planning their escape. Some will base themselves in tax havens like Monaco, or offshore islands. Others are buying up real estate in Montenegro. When the balloon goes up, they will be long gone. Certain politicians are cosying up to the super rich in the hope that they will be awarded a seat on the last plane to leave. How else can you explain their actions?
When the dust has settled the world will be a different place. We will have new rulers.
And many people who put their trust in politicians and businessmen will curse them.