Which Is More Valuable: Deodorant Or Apple’s New iPhone 6s? by Barry Brownstein, Foundation For Economic Education
Many college students are eager to upgrade to Apple’s new iPhone 6s — or so my daughter tells me. But she’s not. The battery life of her $100 Android phone is at least 48 hours on one charge; her friends can’t get through the day without charging their iPhones. She’s okay with her smaller screen and its lower resolution; battery life is her value driver.
“What presidential candidate are your iPhone-using friends supporting?” I asked her.
“Bernie Sanders,” she reported, “They’re huge fans.”
Notes From Schwarzman, Sternlicht, Robert Smith, Mary Callahan Erdoes, Joseph Tsai And Much More From The 2020 Delivering Alpha Conference
The following are rough notes of Stephen Schwarzman, Steve Mnuchin, and Barry Sternlicht's interview from our coverage of the 2020 CNBC Institutional Investor Delivering Alpha Conference. We are posting much more over the next few hours stay tuned. Q2 2020 hedge fund letters, conferences and more One of the most influential investor conferences every year, Read More
Her response surprised me. It was Sanders who said, “You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country.” If Sanders thinks consumer choice is unimportant as long as we face unresolved social problems, why would his supporters feel compelled to spend their money on an upgrade to the latest marginally improved iPhone when they could be donating that money, or the time they spend earning that disposable income, to charity?
Do they experience any cognitive dissonance between their enthusiasm for Sanders and their urgency to buy the latest iPhone? Perhaps they believe they are victims of our culture’s “crass consumerism” — and that they themselves need greater guidance from above.
Or maybe they believe that if a socialist planner came to power, only those things that they think are wasteful will be eliminated. But how likely is that? Clearly those who delight in the latest iPhone are free to do so only if others are free to delight in the newest brand of deodorant.
I thought about how consumer choice and “waste” play out in my own life. Every fall, I drive 70 miles round trip to buy freshly picked apples from an orchard. Am I wasting gas and money? The apples in the supermarket might look the same as those I buy at the orchard, but my tongue tells me otherwise. Could my taste buds prevail in a blind taste test? I think so; but even if I failed the taste test, I’d be unrepentant. I believe freshly picked apples are more nutritious and less tainted by chemicals; I will continue to drive way down the road, past the supermarket, to buy my apples.
Fast Company magazine sums up an important lesson about value:
Value isn’t fixed or tangible; it rests in perceived benefit. In other words, value is in the mind of the beholder. This is a key point. Innovators work hard to understand exactly what value means to their customers so they can generate and provide it. Value is an emergent property of supplier and consumer; it cannot take place with only one or the other.
Whether we’re talking about freshly picked apples, deodorant, or the latest iPhone, understanding that value is in the mind of the beholder leads to important corollaries. No one else knows better than you what is valuable to you, and you can’t assume or decide what is valuable to someone else.
When we don’t understand the subjective nature of value, we think we can improve outcomes through government manipulation.
In his latest book, How Adam Smith Can Change Your Life, economist Russ Roberts writes that failed governmental policies are often the consequence of the chessboard fallacy, the belief that we can “improve or manipulate people who don’t necessarily want to be improved or manipulated.”
Roberts is building on Smith’s wise observation in The Theory of Moral Sentiments: “In the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.”
In other words, live and let live.
Just think of the mental bandwidth we will free up if we don’t judge others for engaging in peaceful activities around what they think is valuable.