The Rise of Economic Honesty

[Porsche-O-Phile]

I had an interesting conversation with my wife this morning while getting ready to go to work which got me thinking... One of the potential upsides to the current economic depression (and yes, I think it's a depression) is the encouragement of what I like to call "economic honesty". I'll explain for sake of discussion/comment:

For too long, there have been a number of businesses and business models that have survived solely on what I consider to be "profit padding" - stuff that does not represent a necessary good or service, or even a justifiable good or service for a reasonable person. I'm talking about stuff like the following:

"We need you to bring your car in for service - we'll inspect the fluids and rotate the tires for $250"
[in other words, "we'll have the most unqualified, pimple-faced kid in our shop tell you your windshield washer fluid is low, fumble around trying to rotate your tires (which are probably unidirectional anyway), overtorque your lug nuts and then try to sell you new wiper blades for $100 and a bunch of other service at highly overinflated prices"]

"We offer an extended warranty for your new TV for an additional $500"
[anyone stupid enough to sign up for this deserves to be ripped off, IMHO]

"Can I sign you up for extended credit monitoring? It gives you a free credit report every year and it's only $19.95 a month"
[never mind the fact that you can get a credit report for free once a year by law anyway or by simply applying for a credit line, and many credit companies offer real-time FICO tracking as a free service to their customers]

"How about enrolling in our 'new every two' program - it gives you a new cell phone every two years!"
[and why exactly does one NEED a new cell phone every two years? Plus when you do the math, it's not that great a deal anyway, just a way to keep you roped into THEIR plan instead of considering potentially better ones from competitors]

"Do you want fries with that? How about a cup full of ice with a little bit of sugar water splashed in it for an extra $2?"
[this kind of "upsell" crap really irks the hell out of me and I deliberately avoid places that do it]

"'For your convenience' we require automated recurring billing to a credit card so you don't ever have to think about making a payment!"
[in other words, "for our convenience, we're requiring unrestricted access to your bank account"]

"For only $500 we'll send you a listing of all the foreclosure properties in your area!"
[which you can get as a matter of public record from any courthouse for free]

Crap like this.

It seems to me that these kind of bogus "add-on" things that are largely just nuisances and wastes of time to anyone with half a brain out there, and the individuals/businesses that promulgate them are among the first to get "cut" in a recession or depression. People that ordinarily might casually just stupidly agree to these kinds of things because money doesn't seem to matter so much during prosperous times suddenly realize (shocked) how much they've been spending on stupid, superficial nonsense that is available elsewhere for cheaper (or free), or that they can do themselves, or that they just don't need.

It just seems to me that there are WAY too many of these kinds of industries/companies/situations whereby people try to create something out of nothing. They get away with it because of complacency during good times (and a certain amount of stupidity on the part of the public-at-large) but in a recession, they get slammed. And they should.

And that's my theory anyway - that a depression or downturn will encourage a return to stuff that really matters. Kind of like killing the weeds in the garden - at the end of the day, you have less plant material, but the ones you have are strong, healthy and viable. They matter. They can sustain themselves.

Maybe it's good to have this kind of sleaziness/laziness killed off. The sad part is it's not JUST the sleazy/lazy businesses that get hit and potentially killed...

[Dantilla]

All of my posts here at Pelican come with an iron-clad guarentee-

If not 100% satisfied, your next post is free!

[nostatic]

Originally Posted by Porsche-O-Phile

It just seems to me that there are WAY too many of these kinds of industries/companies/situations whereby people try to create something out of nothing. .

Hey, it's the housing and financial markets!

[Shaun @ Tru6]

We are moving from a manufacturing economy to a service economy. that's what happens when profits are made on overseas labor. Blame:

1. unions
2. executive compensation tied to stock price.
3. tax breaks for companies doing business overseas

[Porsche-O-Phile]

The problem is that a lot of the "services" are optional. There are certainly necessary ones, but a lot are discretionary and still more even push the limit of what I'd consider "discretionary".

As a general rule anyone with the words "solutions specialist" in their title is probably unnecessary and will be out of a job pretty soon, if they're not already. Same goes for "management seminar lecturer" or other pablum.

It's going to be messy, but hopefully we're collectively better off for trimming out this kind of deadweight.

[HardDrive]

We moved out to Seattle after the internet bubble burst. There was a gal selling her house because she couldn't get work. She was a 'whole life' coach. Basically, people paid her to follow them around and make suggestions on how they might 'do better'. At everything.

Not suprisingly, money for this valuable service dried up along with the insane internet startup companys.

I agree with you Jeff. There is to much focus on extracting money from people without providing a true 'value add'. Not to say there aren't services that are valuable, but it seems like every 2 seconds you being offered some worthless irritation.

"Would you like to sign up for our rewards card today!?!?!?!"

Yeah, blow me.

[daepp]

I was confused by the title of this thread. I think what you are saying is that the "fluff" will be eliminated.

What I thought you were getting at were the number of people who lived dishonest economic lives - on other words, they made their financial situation appear better than it really was through excessive debt.

Either way, I agree.

[jyl]

I think we're going back to simpler, less ostentatious, less wasteful living.

I don't mean like sewing our own clothes and raising our own livestock, it's not a return to the Waltons.

But less of the wasteful stuff that P-O-P mentioned. And more mowing your own yard, cleaning your own house, not paying silly sums for logo clothing, fewer Cayennes and more Hondas, fewer 5,000 sq ft houses with 5 bathrooms, no more TV in every room, etc.

You know what - I think its a good thing. Getting there will be painful, because that means industries downsize and people lose jobs (over 1MM this year, probably 2+MM before it's done). And the stock market maybe goes to 10X . . .

[RWebb]

yup - but we first have to endure people trying to sell anything but with extra "push"

some guy rang my bell today saying he delivered meat around here and had some "extra" steaks for cheap

no

great price

no

$3/steak....

[djmcmath]

I was thinking the same thing that daepp was thinking -- more financial openness, both at a personal and at a corporate (and hopefully federal) level. To some extent, the reason that we're in this mess is because of a complete lack of transparency on Wall St. Fiscal honesty is liable to lead to fiscal responsibility, which is what we desperately need on a national scale.

It also occurs to me that the more extravagant lifestyle -- where money is easy enough to blow on things like "whole life coaches" -- is largely fueled by debt. At a fundamental level, that seems irresponsible to me.

So I've had this conversation with a remarkable number of people recently (ok, like 3 different people in the last 3 months or so), where they say that they've had a paradigm shift. Instead of both parents working, maintaining a "healthy" level of debt, and living a high stress life, they've paid down their debt, shifted to a simpler life, and brought the wife home to raise the kids. Of those polled, the result is, surprisingly, more happiness and less stress.

One more story: my wife and I were looking for a house. We dropped by an open house at the local new house builder place. The house was quite nice: maybe 3600sqft total, 2 car garage, marble floors in the entryway, hardwood everywhere, a walk-in closet big enough to park my car in, full size gourmet kitchen, the works. What really blew me away was the sales-lady's attitude: "Oh, it's just the two of you? Well, you know, a place like this would make a GREAT starter home, but once you start having kids, you'll definitely want to move up into one of our larger models." Excuse me? My parents NEVER had anything this big, and they raised 3 of us with no problems.

So if this depression brings an end to that kind of stupidity, maybe there is a silver lining after all.


Dan

[KFC911]

Originally Posted by daepp

I was confused by the title of this thread. I think what you are saying is that the "fluff" will be eliminated.....

I sure hope Markus doesn't see this thread

[Porsche-O-Phile]

Interesting side note - the guy living in the building next to ours just opened a "Psychic Center" complete with a sign out front. I've yet to see anyone going inside. Maybe it was just for Halloween or something (we were on vacation that week and I came home to it earlier this week) but it just cracks me up. Talk about trying to spin something out of nothing...

If I feel like being a jerk I could check with the city to make sure he has all the necessary permits. I have nothing against the guy, but I'm pretty sure what he's doing is illegal (the parcels around here are zoned residential, not commercial). Of course I know plenty of architects and engineers who work out of their garages too, so I'm a bit loath to blow the whistle on people like that. It isn't like there are crowds gathered outside at all hours or whatever...

[daepp]

It seems to me, more so every day as we sink into this current financial quagmire, that it is all related to debt. Too much CC debt. Too much mortgage debt. Too much corporate debt. Too much municipal debt. Too much state debt. And too much Federal debt. And it was all used to mask other problems and to live beyond our means.

And I love the fancy words we have for it - commercial paper, bonds, subprime, alt-a, revolving...it's all just debt. One of the single best pieces of advice I got from my depression era parents was stay out of debt.

It is the root of the problem in the markets today. The result has been an awakening or an epiphany - there's plenty of cash, but now no one want to extend more debt or get further in debt (except the government).

[competentone]

Originally Posted by Porsche-O-Phile

It seems to me that these kind of bogus "add-on" things that are largely just nuisances and wastes of time to anyone with half a brain out there, and the individuals/businesses that promulgate them are among the first to get "cut" in a recession or depression.

Yes, normally in a recession/depression the "waste" would be cut first, if we lived in a free-market economy.

Unfortunately, we live in a mixed economy with some free market action and a lot of government intervention. The biggest "waste businesses" -- the debt peddlers -- have positioned themselves so they are intimately connected with the political power brokers in the government.

If you have been paying attention to recent events in the economy, you will understand that the "waste businesses" are being kept alive through government edict and expropriated wealth from the efficient businesses.

No wide-spread "economic honesty" will arise in our economy because of the government's actions preventing it.

[Arizona_928]

Originally Posted by Porsche-O-Phile

"'For your convenience' we require automated recurring billing to a credit card so you don't ever have to think about making a payment!"
[in other words, "for our convenience, we're requiring unrestricted access to your bank account"]

.............. D'oh
I've been wondering why i haven't been getting any bills in the mail.

[livi]

Originally Posted by KC911

I sure hope Markus doesn't see this thread

Oh, but I did and that really hurt my feelings!

[djmcmath]

Originally Posted by daepp

...it is all related to debt.

+1. If we had managed to recognize, on a national scale, that debt should be avoided, we wouldn't be here. We've built a world that relies on debt to operate. Some of that has to do with personal expectations, keeping up with the Jones' and all that rot. Some of it has to do with irresponsibility: officials who know that they will not be in office when the debt gets called in, so who cares? Still more of it deals with greed -- I'm certain that this investment will do well, so I'm going to borrow more money than I could ever possibly pay back to invest in this, and then I'll be rich beyond my wildest dreams.


+1 to competentone, too -- as a responsible hard-working taxpayer, I'm livid that the gov't is bailing out the "waste" items. A year ago, we were all talking about how a bailout for delinquent homeowners was dangerous as a "moral hazard." Now the moral hazard has come to pass, and the populace, which should have said, "Let the waste go!" have instead said, "We want out bailout too!!"


I want change, but I know that the solution is to elect officials -- on a national scale -- who understand personal responsibility. The idea is so radical, though, that voter's would never go for it. I'd have to devote my life to voter education to change enough minds, to make "personal responsibility" a household term enough that people would make a difference.

Dan

[RWebb]

bailouts t homeowners are being justified to prevent a long ugly recession... i.e for the good of all of us - esp. other homeowners

you can debate if true or not...

[Hawktel]

I think things are going to change so much in the next few year on how the economy runs, and how things are made in the world that in 50 years we will not recognize it.

I think we are on a verge of a explosion in manufacturing abilities, and the way that these are undertaken, and done will change things around a lot.

[daepp]

Originally Posted by RWebb

bailouts t homeowners are being justified to prevent a long ugly recession... i.e for the good of all of us - esp. other homeowners

you can debate if true or not...

Unfortunately, the actions undertaken or proposed thus far will only lengthen this recession/depression.

My copmpany can withstand a deep downturn if it's short - but not if it is lengthy.