The Paradox of Abundance
perell.com
perell.com
Mass markets drive down median quality through price competition, while quality products move upmarket due to loss of scale. Instead of decent quality for a decent price, you end up with abundant dirt-cheap crap, and a few high-end boutiques, if they're even in your area / available for you to order from.
The text of my old comment:
The hollowing out of the middle ground seems to happen in most commoditized markets.
Take meat. Used to be you'd go to the butcher for your meat, and you'd get a reasonably good product, from a butcher who knew where the meat came from, probably even the farmer who reared the meat. That was the way almost everybody got their meat, so the fixed overheads of having a butcher shop was spread over a large customer base.
Move along a couple of decades. Supermarkets, with their more efficient logistics, eat into the meat trade. Butcher shops almost completely disappear. But supermarket meat goes through a longer supply chain with larger suppliers that have the efficiencies of scale to cope with the pricing power supermarkets have. The butcher shops that survive turn into boutiques, where their unique selling proposition is what used to be commonplace: that they know where the meat is coming from and probably know the farmer that reared it.
The market bifurcates into two basic strategies, low price and high quality (see also Porter's Cost Leadership and Differentiation).
The consumer who's willing to pay a little bit more for a little bit more quality ends up having to pay a lot more rather than a little bit more, because the pool of people who could spread the fixed costs of the higher quality is split - most go for the lowest priced product. There's a ratchet effect, where slightly higher quality products are, at the margin, increasingly expensive because there's no scale in that strategy: the more expensive they become the less uptake they get, which means they have less scale, which means they become more expensive.
In some ways it's a collective action problem: what would be a better outcome for a large group of people can't really occur because individual actions can't sustain a stable state change. In other ways - many, if not most economists believe this - it's a better outcome overall, because more people get to use the bargain basement product.
But I think people in the middle are usually worse off in commoditized markets.
Additionally there are a lot of assumptions that go into proving that markets have Nash equilibria, such as convex utility functions, and perfect information, which is often not true in reality.
early on, markets tend to grow to an unsustainable number of participants, and then as participants figure out marketing and their own strengths and fits, they start to whittle down. in the best markets (for consumers; but that are also sustainable for providers), you'd have maybe tens of competitors (i.e., not 3 or 300), depending on market characteristics (like being capital-intensive or not, free cash flow restricted or not, etc.).
the problem with our markets is that we've long given up on providing the right amount of regulation to maintain that consumer-optimum, which can be stable in isolation, but for which the highly dynamic politico-social context often destabilizes. so it takes work and vigilence to maintain the optimum, and we don't have that in most (all?) markets.
Russian might pilot stole a jet and came to America. For a time be thought grocery stores were fake American propaganda. He traveled the country to find out why we had so much. https://www.amazon.com/Mig-Pilot-Final-Escape-Belenko/dp/038...
Our capitalist system produced so much food that socialist countries thought it all fake propaganda.
Most "luxury" products are a big marketing spend, combined with an emphasis on components and finish the customer can notice easily, ideally by sight. For things where consistency is more important than specificity, this works ok. For example, you almost always want the mass market engine, not the bespoke one tuned by the artisan mechanic. I don't think it's nearly as true for food.
one layer deeper, favoring fair and free markets really means that we should favor markets that have mostly small and mid-sized compettitors and entirely eschew large ($100MM+) corporations where the paradox of abundance applied to scale (relative to the individual) turns employees inwards toward harvesting the abundance for themselves rather than toward serving the market, and where economies of scale and scope wane in most markets.
First time I've heard of this term. Reminds me of what happens with house price inflation due to lower interest rates.
one good example is furniture. I don't care about furniture, but I do need a bed, a couch, etc., so I just buy the cheapest reasonable pieces I can find at walmart or ikea. there's a good chance I might move far away in the next few years. when/if that happens, I'll just sell or give away all my current furniture and buy new shitty versions wherever I end up. I'll probably recoup a lot of the money by renting a smaller uhaul and not having to pay professional movers.
"In reading the history of nations, we find that, like individuals, they have their whims and their peculiarities; their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first [...]
"Money, again, has often been a cause of the delusion of multitudes. Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper [...] Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
— from his book, titled: 'Extraordinary Popular Delusions and the Madness of Crowds'
Not that I personally agree with this ideia.
He should have re-read that paragraph.
Does someone understand the graph btw ?
Also I do agree that this era is selling obesity in many forms and that the high frequency noise, flood, paradox of choice is unhealthy.
There was an article (I forgot where sorry) which claimed that difficulty and depth was more in tune with how our system works. You don't progress by doing thousands of nanosteps. Maybe I'm too masochist but I think it works better. Deep moves, deep rest, repeat.
Yes. A market with decent products for a fair price bifurcates into mass-market crap and high-end boutiques. See my other comment - I think it's a correct observation.
Read "The Obesity Code" if you want a more detailed description with a lot of links to papers and studies for more info.
I'd love to see an staring obese person.
Most obese people are suffering from something called "internal starvation", which is a byproduct of insulin resistance. The mini-lecture on fat biochemistry is here[0].
[0] https://youtu.be/2PdJFbjWHEU?t=4388
[1] https://healthcareinamerica.us/what-exactly-is-insulin-resis...
Those who benefit from the food abundance seem to explore the variety of what's available. They have a wider range of food experiences and therefore a broader spectrum of choices.
For food, it's
The strip mall choices vs. 'farm to table'.
What's the spectrum for information?
Vox Clickbait vs. ?
Growing up in the Midwest, every pear I ate was as hard as an apple. Typically picked before they were ripe and mom didn't ripen them. As an adult in California, the first fresh picked, fully ripened pear I ate was incredible. Juice dripped down my arm, potent pear flavor, sweet like ice cream. How does one have a similar epiphany with information?
By becoming a paying subscriber. Gated content isn't tweaked for search algorithms and primitive human psychology and therefore always better (if it's not a scam).
This is a hard problem. It's not like, with food, where you can go to an area where some kind of food is actually better and experience it (or not as easily). Even giving someone who's been on a poor information diet better quality content they may not recognize it or even accept it (in contrast to the extreme difference between a well-ripened pear and a still hard one).
Culturally, an emphasis needs to be placed on better education with a focus on critical thinking. Individually, reading broadly and interacting with people of opposing views and differing cultures helps a lot. If you grow up in an insular community and are told, "The others are heathens", you will internalize it and find it difficult to appreciate their statements (whether fact or opinion or somewhere in between) and consider them. It also helps to become somewhat detached and critical of your own views, self-questioning (not self-doubt) and introspection allow you to start separating your beliefs (opinions and interpretations of facts) from your knowledge (the actual factual basis for beliefs, if it exists). Then you can start reforming your beliefs and better reflect on the beliefs and statements of others.
Normally, pears must be picked green. If they ripen on the tree, they get a grainy texture that most people hate. They aren't like tomatoes; they can ripen just fine after being picked.
Ripening a pear is certainly difficult. The skin is fragile. Pears are easy to bruise. It is very common for a pear to rot before ripening. Be really careful. Also, avoid buying pears with any sign of rot already starting at the bottom end, such as white fuzz.
To get pears home safely, I place them on top of soft things like bread, and then I place them separately into my car.
I disagree. I think it has way more to do with the fact that creating noise or uniformed posts, content, etc., even up to the point of sloppy journalism, is produced in such a higher quantity than good and information-rich sources just because it is easier to produce.
"Never attribute to malice that which is adequately explained by stupidity". Or, in this case, ignorance / laziness as a substitute or part of that stupidity.
How does the analogy with online information work?
Gresham's Law in financial case is underpinned by two things. First, it is in core interest of every market player to pay with low quality money only; but it is not in interest of every reader to consume or even pay for low quality content only. Second, Gresham's Law only works when an outside authority forces you to accept bad money at the same value as good money; but there isn't really any equivalent of fiat money in journalism. You do not have to click on clickbaity articles at the same rate as on quality ones.
We really need to stop using Hanlon's razor when discussing businesses at scale. It is a great rule of thumb for everyday people, who are much more careless than malicious. With business though, there is too much money to be made by being shady and then hiding behind plausible deniability to always give the benefit of the doubt.
Outside hospital billing companies make mistakes all the time. It seems adequately explained by stupidity...until you realize the mistakes heavily tend in favor of overcharging. If the people who designed the system are benefitting from a systematic error, don't use Hanlon's razor.
If a delivery driver leaves your package at the wrong house, it's almost certainly an honest error. If a near monopoly delivery service constantly loses packages while heavily advertising package insurance, then there might be a reason they aren't improving their internal processes. (this isn't in reference to anything, I made up an example that could be either)
Anyway, off my rant and to your specific example: In the case of journalism...if clickbait headlines about stupid controversies outperform well written articles, then I have to think media executives know exactly what they're doing when they tell a journalist to bang out a dozen garbage articles a day.
That argument makes a giant chasm of an assumption about the mechanism of the market.
In fact, the main driver of the market is the profit motives of publishers and advertisers.
Whilst it is true that one way to profit is to provide sustained long term benefit to consumers, that isn't the only viable business model. A competing model - short term appeal to consumers with long term negative health impacts - co-exists in the market and competes for attention and spending.
Also as you said, the publishers and advertisers have a lot of the power, and they know exactly how to push the buttons of our human biases and clickbaity titles to get clicks, regardless of the quality of the actual things they are advertising.
EDIT: I commented too quickly. The author quickly indeed verifies that the opposite is happening :)
Customers can crave things that harm them. For example, alcohol and drugs. An efficient market will provide them with whisky and crack for very low price, if this is what they want.
Same with bad journalism. Internetesque clickbait is just another form of tabloid journalism, and tabloids usually sell really well. Daily Mail sells a lot more copies than Financial Times.
https://c.pxhere.com/photos/ac/d2/hercules_statue_greek_anci...
Turning to the point on Steroids. I used to work out at the type of gym the author describes. People were mostly in Greek statue state (can’t say I’m included) and did not appear to be on steroids. I moved away from the coasts and the gym next to my home clearly has at least a history of steroid use. Everyone is gigantic. The gym is near several schools with sports programs. The lifts are all very heavy. They do not look like a statue. More like a Marvel movie character. I’d be surprised to find much steroid use in the health focused gym world as no one really expressed the same values. They wanted to look good and live a long life. They were not looking to lift heavier and heavier or look like a walking mountain.
They generally just eat a variety of simple foods in moderation, and perform low impact, longer lasting light exercises like walking or calisthenics.
“Sogen Kato was believed to be the oldest man in Tokyo up until 2010 when officials finally entered his apartment and realized that he had died at the age of 79 in 1978. His death had been kept a secret by his family who were collecting his pension. This lead to a huge search for all people over 100 years, and it turned out that Japan couldn't document the whereabouts of 234,354 supposed centenarians.”
Not sure how many roids the fit during Greek times had.
This isn't about steroid use, there is some aesthetic popularity to body fat levels that are probably not actually healthy, as well as some pretty dubious dietary practice that also overlaps in practice with the same population.
On the other hand the regular exercise part is clearly positive.
It's a truism masquerading as a profundity.
I believe he is correct.
Most of the options on the market are in a race to the bottom regarding price, with a tiny minority being in a race to the top regarding quality. In abundance competition makes cheap things get cheaper, and good things get better.
The majority of the market will gravitate towards lower "price" and most options will target that, pulling down the median compared to scarcity. The smaller percentage of the population will afford to target the high quality thus pushing the maximum achievable higher than in scarcity.
Profit is the driving force in every rational market and the quality/price tradeoff is a huge factor in valuation of goods. A big problem is information asymmetry. Consumers must be experts on every product they buy while producers only have to be experts on the products they sell. Some consumers do not prioritize being experts on food and so undervalue nutritional/dietary properties and overvalue appearance, flavor, and convenience which require less expertise. A related effect is the paradox of choice making it difficult to judge the best value from a selection of seemingly identical products and this may also play a role in poor nutritional choices.
The problem is excaserbated by mass advertising that promises foods are healthy or meet certain dietary guidelines while eliding the fact that the products should be eaten sparingly and not as a staple, or by directly advertising that a cheap food is shiny and yummy.
You're right, the reason I said "price" in quotes is that it's usually both intellectual and financial. Very few can afford to be experts and make the right choice, then pay for that choice.
The confusion related to the driving force is that people imagine more choices means more competition, and this must bring lower price and higher quality. In reality profit is the driving force and profit can come just as well from low cost, low quality as from high cost, high quality. Abundance brings in a drift between these 2 ends of the spectrum, you get extreme low cost with low quality, and extreme high quality with high cost.
Most people have no intellectual budget to afford identifying the correct option, or the financial budget to acquire it. This gets compounded and has some network effects so the more low price, low quality choices they make, the lower their chances of gaining the necessary budget to recover.
Customers get to outsource the detailed choices to the retailers and the retailers enforces the desired quality/cost ratios on their suppliers.
Some people may believe that -- extreme free-market libertarians being the most obvious example -- but I'd be surprised if it was a majority view. There doesn't seem to be a consensus that food safety regulations are an unnecessary irrelevance, for example.
Then consider that people might not share your view of what quality is.
Based on article, there was no healthy choice available.
200g of white sugar mixed with plain water will get you a long way on a bicycle. Carbs for the win.
You get a bit of that with Scottish crofters, and I suspect some of the remoter parts of Eastern Europe are only loosely plugged into the Common Agricultural policy, but subsistence farming proper is extremely hard. And of course you can't subsistence farm petroleum.
Really the OP article should talk more about quality, and be slightly less surprised that in a market system high quality (food or information) is more expensive than low quality (food or information). And ask whether the consumers have the same price-quality mapping as the author.
We have no problem getting most of our food locally, and as often than not it's cheaper than the grocery store; eggs, meat, vegetables (I'm in Canada, so not much fruit). I assume this is fairly common outside the urban centres.
We all have lots of off the cuff theories, anecdotes, and impressions of the world around us, that's great! I've got plenty. But I certainly wouldn't hoist them on everyone with blog posts, as though average informal musings about a random subject are adding some above-and-beyond value to the subject.
The website is called perell.com... I mean, it's his own website/blog, so there's no "value" on it besides "I enjoy writting about stuff and make it public on my blog".
I enjoyed his theories though.
I've found one can find healthy options at most places. It's definitely not the easy path, but it definitely can be done. Plus for most people their weight issues could be mostly fixed by controlling calories. No, you won't get the instagram body that way, but you can be in the high-normal BMI range quite simply
EDIT: ok, little caeser's maybe an exception. But here's an example from taco bell.
https://www.tacobell.com/food/specialties/power-menu-bowl Add a diet drink or have water
It's a real shame to think about the fact that the platform he so adores is heavily censored.
I wonder what this means for the long term future of the global west.
High quality information and analysis is being sequestered behind paywalls. This is exactly equivalent to Gresham's Law, where the coins with higher material value are hoarded. High value journalism is being hoarded outside the free flow of common discourse.
The torrent of low quality information and engagement driven 'content' makes it appear that there is an abundance of information. In fact in depth analysis, informed opinion and investigative journalism have always been expensive. Until recently most people would pay for it (newspapers, advertising supported news channels, paid cable) because there weren't many free information channels. This made it relatively cheap per consumer, because there were so many consumers of it.
Now there's a torrent of social media and low value comment available free. This is the debased currency, and it absolutely is hurting old media style high value journalism, which is being hoarded behind paywalls. Readerships are contracting and so the price per consumer is getting driven up, so it ends up disproportionately in the hands of elites.
To use the car salesman analogy, in your example the buyer is selling lemons and the seller is deciding to buy.
This isn't how Gresham's law is typically discusses AFAIA.
(It is how I consider it, hence my interest.)
Perhaps he intended something like https://en.wikipedia.org/wiki/The_Market_for_Lemons, that can explain people pitching bad ideas as credible due to information asymmetry.
To take a topical example, people who believe Trump are doing so because they believe he is the source of truth. They chose him over others because they think career politicians are a power-hungry liars while Trump being an outsider is telling the truth. If you start out with this premise, then everything Trump supporters do and think makes sense.
It has nothing to do with junk thoughts. It has to do with your fundamental beliefs and values.
I don't see the issue.
What I find ironic, is how much HN despises anybody who tries to make money from their work. There's a bizarre ideal here of the selfless internet "Mother Theresa," who exclusively works on open source projects and only shares things with the world out of passion.
You could spend 3 years compiling research on an extremely valuable topic and publish it for free...but if you put a newsletter sign-up form on the page, somebody here will complain about it.
Strange, considering HN is hosted by an entrepreneurship incubator.
I think that comes from biased expectations. Any time I see an ad for something promising to be high quality I am usually disappointed by the actual quality. Conversely when a free thing is linked on HN and upvoted to the front page it is very likely to actually be high quality.
Therefore my biased assumption for links on HN is that P(high_quality | asks_for_money) < P(high_quality | totally_free)
I haven't recorded enough information to know how badly biased my intuition is.
I have a freely accessible blog with 3500 subscribers, there is newsletter sign-up form at the bottom of every single article, and I haven't heard a single complaint about it ... people who actually like to read are a lot more reasonable than widely expected.
Or perhaps the prevailing culture on HN is very, very different from the wider world.
I do see how it could be read as superior if you really try (because he’s juxtaposing fortunate elites with suffering average people), but my main takeaway was the clear thinking on the parallels between fast food and fast news, and the constructive suggestion that the same solutions might apply.