No Stone Left Unturned

Tuesday November 30, 5:56pm

Having sold my share of old photo equipment I’ve seen firsthand lately the workings of Adam Smith’s Invisible Hand. By traditional definition, value is determined by what people are willing to pay. But in more conventional understanding, what people are willing to pay is as much a matter of the presentation and representation of the product as the product itself. If the manufacturer can fluff up the apparent utility or looks (or whatever) well beyond the cost of production in order to set a profitable price, then by all means there is great value to be had in convincing people to buy. Getting people to buy this way is the key to success.

Over the last hundred years or so, this has led to a world full of a brand-centric commercialization and standardized price tags that offer a presumption of the right price. Such can be handy for mass-produced and mass-marketed products controlled and delivered via automated inventory systems. Prices can be worked out ahead of time by a quiet handshake among manufacturers and stores. There is no bargaining or bidding. We then pay the stated price or walk away.

I’m not about to say this is a bad thing. If I had to negotiate every can of Diet Coke and box of spaghetti noodles I’d go nuts. So for common items – commodities – a slowly evolving standardized price structure makes sense, since I can always shop around for a slightly better deal if I really feel the urge, yet hardly feel the least bit wasteful by shopping mostly in one place.

Now along comes eBay to paint a different picture – at least in the early days before ‘eBay stores’ – prices established in the moment by real people making value decisions bidding on real items. With open bidding, the notion of a fixed price suddenly feels preposterous.  If it sells at the price I’m willing to pay then it was worth buying, and if it sells at a higher price than I’d hoped, the other buyer – from my viewpoint – was simply willing to pay a little extra for the privilege of paying extra. Who knows why I was outbid? People buy things for an infinite number of reasons and what the invisible hand suggests is how the person most willing and able to pay winds up with the item.

Even though prices are mostly fixed in the regular economy, I still have some choice. For a buck I’ve been known to happily buy a 12 ounce bottle of Diet Coke from a vending machine, and I’ve also been known to pass up a half-gallon bottle of the same stuff at a grocery store for the same price because it wasn’t on-sale that week for five cents less. I’ve recently switched methods for shipping camera lenses when I discovered how adding two more days can cut the postal charge in half. And I have a very different feeling about a 20-dollar bill in my wallet when it is among three other 20s versus the feeling of just one last bill in my possession and the need to buy a train ticket home should I lose my rail pass.

Value is not intrinsic; it is relative. And if anyone wants to debate the point, let him first point to something where everyone on the planet values the object or idea or person exactly the same way, to the same level of devotion, in exactly the same moment – and then I’ll back down. The closest thing I can imagine is the air we breathe, and thankfully, for the most part, nobody’s charging for that yet.

Enough ranting. I get this way when I hear too many gasbags speaking as though nothing can change because of some ancient rule or invented dogma. They rail about ‘family values’ not because they particularly operate from this viewpoint. Rather, like fixed store-pricing – it is so much easier to offer a fixed ideology than deal one-on-one with actual situations and people.

Ladies and Gentlemen – real life is not that simple.

Uneventfully I am riding the train tonight having recently crisscrossed under the Pike. Beyond my window the gleam of reflected street-lighting glints up into my window from the closest running rail. This window must be cleaner than most recent examples to see such details.

Through the abyss of darkness across from Wellesley College we drift and no amount of cleanliness is going to let me see anything outdoors until we crash through Natick Station on approach to our first stop a few miles beyond.

I have little direct observational evidence that we are about to stop, but the sum of my experience plus my willingness to accept a bit of doubt leads me to an acceptable level of confidence.

That, and also the fact that the train is just now rolling to a stop at West Natick!

~ by kenramsley on November 30, 2009.

Posted in Journal Two
Tags: Adam Smith, bargaining, bidding, brand-centric, eBay, fixed price, Invisible Hand