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Stopping Exploitation from Being Profitable

Date: 20-Oct-2010/3:04

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I have made the statement: "It should never be more profitable to exploit a market than to educate it." It's something I say a lot, and has a very specific meaning to me which I understand intuitively. But not everyone knows what I mean when I say it. So I thought I'd take a stab at explaining it in a longer form.
Imagine a manufacturer who makes a product which they know to be inferior to a competitor's product in every way, even though the costs to build them are identical. Let us say for the moment that this is a music keyboard. On the box and in the manual they make no mention of their keyboard's limitations, or the existence of the competitor.
Fans of capitalism and evolution would point out that this situation isn't necessarily as terrible as it seems. Firstly, the market would ideally respond by valuing the better product more and thus it would command a higher price. So the inferior product would fill a niche where a person evaluating their budget and needs might choose the less expensive option.
There are other hypothetical reasons to preserve this "healthy" competition. If the people making the lesser product were to voluntarily cease production, then there wouldn't be a backup in case the superior product could not manufacture enough to fill a supply channel. Thus, some people trying to buy a keyboard might get no keyboard at all... a worse situation (in some viewpoints) than dealing with inferior hardware. Diverse efforts also allow for certain kinds of serendipity; a different design might turn out to be adaptable in new ways.
But why would anyone want to knowingly* develop an inferior product to be sold at the same or higher price as higher quality products?*
Often times those making the inferior product find they are not offered roles with the team making the better product, or would not be compensated as well if they jumped ship to help. Perhaps it's not feasible or desirable for them to work in the location where the superior product is being put together. Maybe the team making the superior product is managed by a larger entity whose values and principles--when looked at beyond just the scope of the product itself--are unpalatable and there is a desire not to join them because of this ideological difference. Perhaps they do not think the product is inferior (even if the evidence points to the contrary).
What bothers me is when innocent people are caught in the crossfire. In the music keyboard example, I listened to the radio when I was a kid and wanted to make music myself. For Christmas, I wanted the fanciest keyboard I knew of...the most expensive model at the local Sears. The Yamaha "PortaSound" PSS-680:
Yamaha PSS 680
My aspiration was to make music. But it should have had a giant warning on the box: "JUST A TOY. NOT USED BY PROFESSIONALS." The entirety of it was a fraud...from the "100 voices" that were all a slightly different kind of buzz. Guitar was bzzzz, piano was whrrrbzzz, and so on until you got up to voice 99, which was popcorn: crack, pop. (Gee I can think of tons of songs that will come in handy for...)
Even the keyboard demonstration was a lie. You pushed a button and heard a fairly interesting (for the time) demo song. But no one composed that on the keyboard itself with its miniature keys and terrible excuse for multitrack recording. While not obvious to me at the time, I know enough now to tell you that it was constructed on a MIDI editor on a computer and then copied in afterward. It's laughable to suggest that somehow the on-board recording tools could be used to achieve that level of composition, by anyone but some kind of garbage-keyboard-savant.
Especially for children, it's not easy to tell what's a toy and what isn't...if the marketing is specifically designed to prey on your hopes. Similar crushing stories happened to me when arcade games were translated to home consoles and computers, and the box art and graphics on the back were worlds apart from the lousy shovelware that had been hacked together to trade on the brand.
Bear in mind, the people at Yamaha may have done a good job of providing a neat toy to a market at a cost that was less than the real instruments. Same with the home games. I can see these serving a niche, and as an adult I could probably use that keyboard to teach the properties of FM synthesis, ADSR, etc. But it was destructive: my musical aspirations were deferred for decades because I blamed myself for not being able to get anything that sounded like what was on the radio out of that machine. And I know I'm not the only one who's suffered due to the "not my problem" attitudes of marketers. Think of the children.
From my perspective, there is a problem with any society whose governance model and culture allows there to be a situation where one can profit more from exploiting a market's naivete than the profit you would be given to educate the naivete out of the market. The economic engine itself--and the rules that govern it--must be changed to punish the former and reward the latter. Indeed, both punishment and reward must come into play in order to balance the transaction.
Admittedly, with the Internet we have more potential to research and protect ourselves, in a caveat emptor / buyer beware sense. But this research would be easier if those with something to sell were honest. We must find ways to reward honesty and punish dishonesty to bring about that balanced point where it is no more profitable (and hopefully less) to exploit a market than to educate it.
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