I just had a revelation about the comming economy

In My Humble Opinion
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Disclaimer: I am a server admin, I Am Not An Economist.
I was discussing the future of the stock market with a friend when a sudden revelation came to me about economy. I seriously doubt if I am the first to think of this, but let me say that I have never heard of my theory before.

The reason the economy of the US and the world is so screwed up right now is because we are in a transitional phase between 2 entirely different types of economy, the new never before experienced before.

The new economy I call “The Age of the Enlightened Consumer”.

Like I said, we are in a transitional phase right now so there are not really that many Enlightened Consumers.
First, what is an Enlightened Consumer?

An Enlightened Consumer is a consumer who, before any purchase of a good or service, researches it completely. First he(sorry gals) researches if he needs the good or service or not. Then he researches how hard it would be for him to do/make it himself. Then he researches all the companies that provides the goods or services and determines which one to go with.

That all seems like a lot of work, but with the way computers and the internet are going, it will become more and more transparent to the consumer, until almost every consumer is an Enlightened Consumer, whether he knows it or not. Most likely, anyone on this message board is already an Enlightened Consumer.
What is the Old Economy?

The old economy, which has been around for centuries, is that of Supply versus Demand. As Supply goes up, Demand and therefore price goes down. The companies who are exactly at the point where the two graphs intersect are going to do the best, get the most consumers, and make the most money. You can throw that out the window, we’re heading toward something new.
The Age of the Enlightened Consumer: The New Economy.

The New Economy has never been seen by man before. Supply vs. Demand, will not matter very much at all. This is the New Economy. It will be like this. There will be plenty of suppliers for any good or service imaginable. This will make the world go into a massive recession (like I believe it is heading now) until the providers learn and compensate. Then everything will CHANGE. The new economy will be based around Cost versus Value. Because of the Internet, supply will be so great that it will not matter anymore. This will put demand down to next to nothing. Then what will consumers want? They will want low Cost and high Value. The company that can provide the highest Value at the lowest Cost will be the good companies. You can already see this happening if you look.

Cost vs. Value has always been a factor, but never to the extent that it will be in the next couple of decades.
Disclaimer: I am a server admin, I Am Not An Economist.

Comments/ discussion /questions please.

.\Bio

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If there are not many of these “Enlightened Consumers”, what is causing the trend towards the new economy? Is there some sort of vacuum that they will fill? :confused:

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I’m in sales so strickly speaking about sales. Nothing happens until a sale is made. It’s been my experience that there may be some “Enlightened Consumers” out there but just because we have computers and the internet does not translate into an “Age of Enlightened Consumers”. It’s been my experience, for every 10 people who are offered a product; 3 will buy the product without really knowing why they bought it, 3 will never buy the product because they don’t see the need for it while 4 will buy the product BUT need to be convinced they NEED the product.

Just because someone has the investigative resources to research a particular product doesn’t mean they will actually use those resources. Even if they do the research collusion from suppliers could thwart any attempt for them to get a better price. Take the diamond cartel and OPEC for an example. If there was no cartel 1 carat “D” flawless diamonds would be selling for $10 instead of $10,000! There is a tremendous supply of diamonds but this supply is controlled by a very powerful yet small cartel which controls prices by controlling the release of product from its reserves.

Likewise if OPEC didn’t exist gasoline would cost about $.16 a gallon. Why? Because if OPEC could not controll the flow of oil prices would drop due to the competitive forces which are being countered by the collusion effects of OPEC. OPEC caused oil prices to rise and has managed to keep them artificially high since the 1972 Oil Embargo.

One other aspect you need to consider. The average consumer is VERY unenlightened when it comes to buying decisions. Visit a convenience store or go through a checkout line at a supermarket and you will see unenlightened consumers happily snapping up items without much thought as to what price/value they are receiving.

No the market is going through its natural cycle. Expansion then contraction then further expansion followed by contraction. Markets are affected by emotion just as much as by supply and demand and yet rarely affected by pure intellect, research and knowledge. By the time you have researched and analysied your pruchasing decision the good or commodity has been replaced with a better good or commodity.

I like to refer to this as paralysis by analysis and I’ve seen its effects several times in my business life.

Here is another thought on the falacy of the “Enlightened Consumer”. Smokers and drinkers will still buy the product no matter how much the price increases. This is refered to as the “inelastic demand curve” which basically can be illustrated with one vertical line on a L graph. Cigarette and booze prices continue to rise yet consumption remains the same. An “enlightened consumer” would research prices for their product and find there is no alternative (legally) to obtain a replacement for their consumable. So either they pay the extra price, go without or go to a black market for the item (which is illegal). How many smokers quit because it costs too much? I’m guessing ZERO!

There are new economies and old economies coming and going but to make a broad statement that technology will make better consumers out of the general population is a pipe dream. Look more at population cycles, product cycles and industry cycles and you’ll have a better idea of why things happen in the market as they do.

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“low Cost and high Value”

Hasn’t it always been thus? The MEDIUM makes little difference. I think geeks overrate technology. It’s not central. It’s just a tool, right?

What techology does do is make consumers more aware. Like checking online for the specs and reviews of the car you’re thinking of getting. So now, we’re talking to a more savvy consumer. In essence, it changes nothing.

  • PW
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How does that change anything? If people have preferences that are still more-or-less rational, then nothing is really different. The laws of supply and demand are still going to be in effect. Suppose, for example, that X amount of info is available for a widget. Now suppose that the price of widgets, for some exogenous reason, rises. Should we expect the number of widgets demanded to stay constant or rise? I wouldn’t think so.

More info, and by info I mean useful information and not quantity of data, is a good thing in that it will move markets closer to the competitive ideal. That will make the economics of supply & demand even more relevant rather than less.

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One of the things I was trying to say is that the research process is going to become more and more invisible to the user. Look at priceline.com, hotels.com, and ebay.com, to name a few, they pretty much do the research for you. I predict more and more companies doing that combined with a larger and larger % of all purchases being made over the Internet. The market will reverse from the way it is now. Now, there are relatively few Enlightened Consumers, who find the best provider for them, while the rest buy the first thing they see. This will reverse while still being invisble to the consumers.

Ya See?

.//Bio

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the classical laws of supply and demand do not exist in spite of the enlightened consumer, they RELY on the fact that he exists.

Thus, as we become more elightened, the economy should follow the laws of supply and demand even more closely.

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Like SunTzu2U I’m in sales also, and your faith in the “enlightened consumer” model is touching… no, really, it brings a little tear to my eye. For every one “enlightened consumer” there are two or more lazy retards, and for a good many products I count myself in this latter cohort. For many products their immediate proximity to my shopping cart route, or being conveniently located at the same Quicki-Mart I buy my gas at, is a more compelling motivator to purchase than a deliberate cost/value decision process.

Also, as a practical matter isn’t the cost/value decision matrix just a part of the classic demand component of supply/demad and not a separate, abstracted entity?

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No offense, Bio, I like your deep insight, but you didn’t happen to be sucking down a few beers before you came up with this?

Despite the hype, the Internet is a MINOR factor in our economy right now, and will continue to be so for many years.

Customers demanding high value for low cost? When did THAT become a revelation?

Your Enlightened Consumer theory is a good one, but if it comes true, it won’t for another 10 years, trust me.

The last I checked, Wal-Mart, which sells a lot of low value for low coast, is still going gangbusters. At the other end of the spectrum, I still see malls are full of people willing to pay high cost for high value as well. Not too many people paying high cost for low value, though you might see that on QVC. :smiley:

Since when did consumers NOT research purchases?

Sorry Bio, it was a good effort, but this one’s a bust.

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Bio,

I use the internet and the services you mentioned above. My father in his 70’s uses the old fashioned telephone when booking his flight reservations while I use priceline, expedia and the like. Guess what? He and I get about the same price almost every time. In fact he has beat priceline several times by just calling around, SPEAKING to a person and getting the best deal possible. Priceline is for the more lazier type of “enlightened consumer” who doesn’t want to call and speak to another person.