Adapt or Die (in the Unemployment Line)
by Gary North: The
Lunacy of Soviet Communist Central Planning
die: this is a free market principle. It was expounded as a fundamental
principle of society by Adam Smith and the eighteenth-century Scottish
Enlightenment. This idea was picked up by Erasmus Darwin and extended
by his grandson, Charles, who applied it adapted it
Enlightenment announced "adapt or die" as the basis of social progress.
"Adapt or die" is a principle of liberty, they argued. It is applied
most productively and beneficially on a free market, they concluded.
legal foundation of the free market is the right of private property:
ownership. This implies that at the heart of free market liberty
is the right of making exchanges: the right of disownership.
means of extending the right of making exchanges is price competition.
Prices in a free market society fall as a result of increased production,
So, how do producers find buyers for this increased production?
In most cases, through price competition. This extends the free
market to the masses.
outrages many existing sellers, who have not found ways to meet
the competition. They try to keep their customers coming back, and
new customers coming through the door, but as information spreads
about better deals at lower prices, customers depart.
to think of the free market as their personal market. They displaced
their predecessors through price competition, but they resent upstarts
who are trying to do the same thing to them. Having climbed up the
ladder of economic success through price competition, they want
to pull up that ladder by making price competition illegal. This
begins by identifying it as immoral: a form of theft.
December 10, I sent out the following message as my free "Tip
of the Week."
10: Amazon discounts of 5% per item, times 3, for a total of
the deal. Amazon is trying to get people to use its Price Check
app. It lets you go into a retail store, take a picture of any
item's bar code with your cell phone, and check the price of that
item on Amazon. Retailers
are APPoplectic (irresistible).
To get you
to download the app today and
use it, Amazon is offering a one-day discount of 5% per order,
times 3 orders, up to $15. That's an incentive to get you to shop.
Here are two more stories about this (1)
is to get greater penetration for the app by offering a deal.
Also, it's to get you to USE the app, not just download it.
I call this
very smart smart-phone app marketing.
If you own
a mobile phone, and if you plan to do some shopping today, download
the app. You can get delivery of the items before Christmas.
This tip was
time-sensitive. If I did not mail it to my list that day, the opportunity
would be lost.
Later in the
afternoon, I received this reply.
think Amazon's smartphone app is a terrible idea. Amazon is asking
people to go to other stores (including small businesses), scan
items they want, and buy from Amazon instead. Big box stores can
absorb the impact, but it's also robbing small businesses of valuable
customers and will be harmful to the economy. I can't believe you
would promote such a thing that would merely save people a few dollars
at the expense of small business. You always have great ideas, but
this one is anything but.
Here is the
cry of despair from a seller who is about to be displaced. He sees
what is coming. He will not be able to compete. He identifies Amazon's
offer as "robbing small business of valuable customers."
Robbing? This language implies that small businesses OWN their customers.
Does he really mean that making them better offers is a form of
theft? This is the implication of what he says...
sees his customers as his birthright. For example, the seller of
labor sees his job as his birthright. He can quit his job at any
time, but he wants the state to prohibit his employer from firing
him for any reason. Trade unions have always called on the state
to prohibit employers from hiring replacements when the union goes
on strike. What is the logic of this position? This: members of
the union OWN these jobs. Replacements are STEALING these jobs.
So, the unions call on the federal government to stop this theft.
This is what the National Labor Relations Board was set up to do
in the New Deal (1933-45). It has done this ever since.
for the vast majority of American workers, who were always excluded
from union membership, and who were paid lower wages as a direct
result of unions' restrictions on entry, trade unions never had
more than 30% of the labor force. Today, they have under 10%, and
most of these are members of unions that were set up by government
the back of the union movement in the United States? One thing:
price competition. The main strategy was this: companies build new
plants in southern states, which had "right to work" laws. (These
should be called "right to bid" laws.) They also moved plants off-shore
to nations in which trade unions are weak or non-existent. Then
they exported these goods back into the United States at low prices,
forcing out of business companies that were saddled with trade union
contracts and the NLRB. Union members have howled for 40 years about
unfair competition. This means any competition that exists on a
free market for labor.
against employers. Workers compete against workers. Union members
insist that employers compete against workers. They claim that employers
have an unfair advantage. "Employers steal from the workers." But
how could this be true? Employers hire workers. They need workers.
They would go bankrupt without workers. So, what the unions really
oppose is the existence of workers who offer employers a better
deal. So, unions call for the government to defend unions, which
restrict lower-priced workers, when 50% plus one of the existing
employees vote for a union. The 49% are forced to join or quit.
All non-union workers are forever shut out.
Then the employer
goes bankrupt. He cannot compete with employers who hire non-union
workers. The union members are forced into the non-union labor market.
"O, woe! O, the unfairness of it!"
This is the
universal cry of those workers in life, in any field, who discover
that their customers are free agents who do not belong to them.
free agency. It means the right to bid. It means the right to offer
a better deal. It means that it is not theft to offer a better deal.
My critic thinks
that Amazon is stealing from local sellers. But is Amazon stealing?
Or is it simply making a good deal to shoppers?
I am in direct
marketing. I have been for 35 years. There are two questions that
a direct-market seller must overcome in his advertising copy:
market sales piece that does not overcome these two questions will
I came out
of academia in much the same way that Abram came out of Ur of the
Chaldees. I found out early that the brighter students ask the same
So do brighter
Let me apply
this to local business. A local business has higher costs. The customer
asks: "So what?" The business has to keep a showroom open. So what?
It has to pay sellers on the showroom floor. So what? It has to
pay sales taxes? So what?
cares little or nothing about the costs of business. He cares about
the price he has to pay for whatever he wants.
A local seller
sees Amazon as competing unfairly. So what?
As a television
viewer, I prefer to watch programs rather than advertisements. Yet
I like ads more than most viewers do. I write ads, and I have studied
ads for over 50 years. When I was 10 years old, I wanted to write
ads when I grew up. Yes, I'm kind of weird. At age 10 or 11, I came
up with a slogan for Stopette, the first spray-on liquid deodorant,
a slogan that Gillette discovered a decade later. Nevertheless,
I prefer shows without ads.
For me, the
digital recorder is one of the great inventions of all time. I can
set it to record a show. Then, when I watch it at my convenience,
I fast forward through the ads.
Think of the
billions of dollars of wasted ad expenses that are imposed by TiVo
and its competitors. The captive audiences are no longer captive.
They are free to choose. They are free to choose to fast forward
The ad agencies
and the TV networks do not bother to cry, "unfair!" They would look
silly. Besides, there is nothing they can do about it.
There is not
much that a local store can do about smart phones and shopping apps,
either. Technology does advance.
The store can
remove the UPC bar codes from its products. That might help a little.
But then it will cost more to maintain inventory control. It will
slow down sales time. The seller wants the advantage of computerized
inventory, but he does not want the loss of sales due to smart phone
apps that let customers know who is selling goods cheaper.
me of the bicycle companies that demand that tariffs be placed on
bikes made abroad, but who fight steel tariffs that make manufacturing
sellers want to milk the system. But they also want to restrict
upstart new sellers' access to the teats.
FLOW OF INFORMATION
The flow of
information on the World Wide Web is beyond anything conceivable
20 years ago. It is changing the world in every area of life. It
is undermining established governments, businesses, and guilds.
This is to the benefit of those who pay the bills.
casualties are the world's postal services. They are unionized.
They are monopolies. They are the poster children of government-restricted
services. They are going bust. Email is killing them.
They hike prices.
They get less revenue. They reduce services. They get less revenue.
They cannot find ways to stop the spread of digital mail. One by
one, nation by nation, they are shrinking.
the Yellow Pages. Once upon a time, they had almost no competition.
They did not offer price breaks. They did not offer the normal 15%
discount to ad agencies. They did not innovate. Today, they are
not in a position to impose prices on business owners. Their revenues
are falling. Google lets us search for a product by zip code. It
offers maps with those little tagged markers. We can read ratings
Pages publishers worldwide are gaining traction with new digital
products, slightly offsetting declines from the traditional print
versions, according to the newly released sixth edition of BIA/Kelsey's
"Global Yellow Pages™" report. BIA/Kelsey expects revenues from
print and online directories to decline globally from $23.4 billion
in 2011 to $22.0 billion in 2015, representing a compound annual
growth rate of 1.5 percent. . . .
53 percent of global Yellow Pages revenues will be digital, compared
with 29 percent in 2011. Some of the world's largest directory
organizations, including Yell Group and Seat Pagine Gialle, are
setting a much more aggressive course, projecting roughly an 80/20
balance of revenues favoring digital by 2015. Markets that are
currently or will be majority digital by the end of 2011 include
Denmark, Finland, France, Italy, Norway and Sweden.
In short, here
is the rule of survival in a free market: "Adapt or die." Innovate
or die. Meet customer demand or die.
This flow of
information has only just begun. As tablets and smart phones get
cheaper, the number of users will increase. In a decade, the world
will be different. In 40 or 50 years, it will be unrecognizable.
Why? Because most of today's establishments will be ancient history.
The gatekeepers are standing at the gates, but the walls are crumbling.
I call this the Jericho process.
is the heart of this process. Here are a few laws of the Jericho
Bandwidth will get cheaper.
2. Core memory will get cheaper.
3. Chip speeds will get faster.
4. The number of users will increase.
5. Price competition will get stiffer.
to the central law of our civilization: information costs will decline
exponentially. They have since the 1890 U.S. census. The
key article on this is here.
At the heart
of the free market social order is this principle: the right of
exchange. This implies the right to bid. The right to bid produces
a universal response: price competition. The free market extends
its dominance by means of price competition. Price competition is
at the heart of the extension of liberty.
So, use those
smart phone aps. Use Google. Look for a better deal. As a shopper,
you would be wise to learn the tools of information-gathering.
you see what deals are out there, you will see that the flow of
information is increasing. The offers are increasing. Price competition
lead you to a conclusion as a producer, meaning a seller: either
adapt or die. You do not own your customers, any more than you,
as a customer, are owned. You are a free agent. So are they. You
are looking for better deals. So are they.
You can stand
on the edge of this revolution and wring your hands. You can cry
out: "Unfair competition!" This will not save you from extinction.
It will only slow you down.
North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 20-volume series, An
Economic Commentary on the Bible.
2011 Gary North
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