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Musings Report #34 8-22-15 Why Do We Now Accept Low Quality as the Norm?
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For those who are new to the Musings reports: they are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
A Change to the Musings
Since launching the Musings in January 2011, I've occasionally tinkered with the mix of ingredients on the theory that experimentation keeps things fresh.
After 4+ years, I'm trying something new: in the last week of every month, the Musings will focus solely on one topic or idea that is particularly speculative, i.e. on the very fringes of the unfiltered swamp.
Why Do We Now Accept Low Quality as the Norm?
If we think about it, the decline in the quality of everyday tools, appliances and "stuff" is quite extraordinary, for at least two reasons:
1. Competition and free trade are supposed to raise the quality of goods and services while reducing the price.
2. Progress implies an improvement in quality and durability, not a decline.
The post-World War 2 era of globalization operated on a familiar narrative: a war-torn Country starts exporting low-quality, low-cost goods as a means of earning desperately needed revenues to rebuild the nation.
As profits poured in, quality improves, and the exporting nation's industries move up the food chain to higher-value goods.
The classic example is Japan, whose products were widely mocked for their poor quality in the early 1960s. But steady improvement (on the Deming model) eventually led to Japanese manufactured goods becoming the acme of quality: the best consumer electronics and vehicles were Made in Japan.
More recently, the rise of China as the World's Workshop seemed to follow this narrative: the poor quality of Chinese-manufactured goods was expected to rise after a few years of improving quality control.
Instead, the opposite occurred: the quality of all goods has declined. Light bulbs don't work right out of the package, devices fail after a few months of service, furniture falls apart, electrical systems get mysterious bugs, and so on.
A few years ago we bought a GE brand range, partly out of misplaced loyalty to a once-proud U.S. company and partly due to the positive reviews online.
Within the first two years of service, the oven started randomly lighting itself. Bizarre is the only word that comes to mind. A repair person diagnosed a faulty sensor, and helpfully showed us the location and type so we could order the part and replace the defective part ourselves. Had we hired the GE-approved repair service, the cost would have equaled 2/3 the cost of the entire appliance.
This is not an outlier--it is now the new norm: goods and services that are appallingly poor quality.
As Mark G. noted in Tuesday's blog entry, this level of appallingly poor quality simply wasn't available in the 1950s and 60s: anyone who wanted to buy incredibly low quality goods could not so do. The lowest quality goods in that era outlast the best quality available now.
This runs contrary to our notion of progress, and to the supposed benefits of competition.
One dynamic is the decline of real competition. When the Japanese auto manufacturers began exporting inexpensive autos to the U.S. in the 1970s, the superior quality and low maintenance costs of the Toyotas, Datsuns and Hondas forced U.S. and European manufacturers to improve the quality of their vehicles. Those that failed to compete (VW Beetles, Renaults, etc.) vanished from the marketplace because they were inferior.
Since almost everything in consumer retailers is either sourced in China, or is made to the same standards as products made in China, there is no actual competition in quality; there is only the limited competition of price.
Some companies demand better quality control in their Chinese plants--for example, Apple. But I defy anyone to present a current Apple device that will last 30+ years, like the original Macintosh computers that were made in the USA. (I booted my original 1985 Mac after it sat in a box for 15+ years--it started up fine.)
Why do we tolerate such a marked decline in quality in a supposedly competitive marketplace? Why have we so easily habituated to low quality?
The answers appear to be cultural. I suspect the mobile lifestyles of the modern work force place little premium on durability; if you have to sell everything you own every few years and buy new stuff in your next home, why demand stuff that lasts a long time?
The logic of low prices being "better" for consumers may also play a part. (This is what I have called The Tyranny of Price.) A short-term focus on instant gratification leads to a focus on buying as much stuff as possible with whatever money/credit is available. Cost-benefit analyses play no part in this calculus: only the sticker price matters.
There are undoubtedly other equally powerful cultural forces at work in this remarkable acceptance of inferior quality and the erosion of progress as the norm.
Summary of the Blog This Past Week
Is It Time to Get into Crash Positions? 8/22/15
Plunge Protection Teams of the World, Unite! 8/21/15
Yes, We Have No Bananas--or Rate Hikes 8/20/15
One Word Defines This Era: Stagnation 8/19/15
China and the Decline in Quality (and Soon in Profits) 8/18/15
China, the Hollow Dragon 8/17/15
Best Thing That Happened To Me This Week
It was nice to make a few dollars on my gold mining index call options (GDX and GDXJ).
Market Musings: Running Out of Fuel vs. Crash
In this weekend's blog entry, I postulate that the current Bull market might not crash-land so much as simply run out of fuel.
This possibility is based on two dynamics:
1. The previous cycle of expansion and decline rarely repeats because the responses to the previous crisis have changed the system's dynamics.
2. The key influence going forward is faith (or loss of faith) in central bank interventions. Once that faith is eroded, there is nothing left to keep markets elevated.
For this trust to be lost, central banks will have to launch QE 4 or equivalent stimulus programs that fail to move markets higher more than few days.
Once the central banks are seen as impotent to reverse the decline, the markets will have run out of fuel. they might crash, or stairstep down, or they might just crumble a few points every week, month after month.
We will have to remain alert to the nature and structure of the coming decline. I doubt it will replay 2008-09, as things have changed since then, and central banks no longer have the luxury of the full toolbox they had back then.
From Left Field
Celibacy syndrome strikes hard in Japanese bedrooms -- social depression writ large...
Comedy Wildlife Photography Awards 2015: the best entries so far
Teaching Entrepreneurs to Do More Than Dream Many U.S. business-school graduates can’t create a realistic profit-and-loss statement. -- decline in operational skills...
The Lowly Lightbulb Outshines Solar and Wind on U.S. Power Grids (via Joel M.)
Utility and power grid managers in the U.S. are learning that the best way to cut carbon emissions and improve efficiency is the easiest: Just change your lightbulbs.
the light bulb conspiracy | planned obsolescence (53-minute documentary)
My Generation is Just Awful, and Colleges are Making it Worse -- PC thought control is now the norm...
Self-Proclaimed Experts More Vulnerable to the Illusion of Knowledge -- file under self-evident...
Call off the bee-pocalypse: U.S. honeybee colonies hit a 20-year high -- is this true?
Miracle Farms, a 5-acre commercial permaculture orchard in Southern Quebec, Canada
AGGREGATION AND THE NEW REGULATION -- on the Amazon and Uber model
Free-Trade Treaties are Anti-Free Trade -- short and insightful....
Is This The Great Crash Of China? Steve Keen says yes...
A Brief History of the Corporation: 1600 to 2100 (via lew G.) -- excellent long read--
The whole intricate story of the corporate takeover of Bengal is told in detail in Robins’ book. Even if you have some familiarity with Indian and British history during that period, chances are you’ve never drilled down into the intricate details. It has all the elements of a great movie: there is deceit, forgery of contracts, licensing frauds, murder, double-crossing, arm-twisting and everything else you could hope for in a juicy business story.
As an enabling mechanism, Britain had to rule the seas..."
"It is the mind that maketh good or ill, That maketh wretch or happy, rich or poor." Michel de Montaigne
Thanks for reading--
charles |
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