make america a luxury again

make america a luxury again

Doing business in America and enjoying what it has to offer should be an experience for which companies are willing to pay a premium. It’s time to market the country accordingly.

Long time readers know my dark and shameful secret. Rather than the committed computer science nerd I appear to be, one of my degrees is in marketing, and my writing start was with BusinessWeek while it was still owned by McGraw-Hill. And all the recent thinking about our future while automation and globalization reshape the world as never before, along with many Americans’ insistence that only people who know about business can have viable suggestions to what ails us, I thought I’d put my evidence-based business hat on and consider a possible way to market the U.S. without the current Republican strategy of competing with the developing world on cost and regulation. With a little marketing and cognitive science, I think there’s a case to be made that instead of trying to make this nation into a new Wild West for global investors and U.S.-based multinationals, we should actually think about going upmarket, unabashedly flashing the expense alongside the immense benefits of doing business here. We won’t win a race to the bottom, and if we try, we’ll only hurt ourselves in the long run, and we really should not have to since the market often speaks highly of expensive things.

Now, I’m sure that of all people familiar with selling luxury to global elites with money they desperately want to see put to work, it’s Trump & Co., so in that spirit, this post is gonna be yuge and use all my best words. Actually, a lot of people are saying this will be a really terrific post. What we’re going to do is talk about how to make America look like a really great place to invest, the best. Haters will say that it’s too expensive, there’s too much tax and too many rules. Wrong! This is a great place to do business, and we could make it even better. We have people out of work right now. We do. But we don’t have to take away all the things that make them safer. We don’t have to tell them to choose between jobs, health, and education. And we don’t have to get factories on the phone and give them tax breaks to stay. We can use that tax money for terrific things, just really, really great things. But how exactly would this all work? Well, we start where most marketers do when trying to figure out their customers and what they want, they start with creating the ideal customer for what they’re offering in their minds.

Typically, for new products and services, marketers think of a person whose general traits will embody their target customer. Our target customer is an executive who needs a country with a stable rule of law, where he or she is not expected to bribe any local officials to run a business, a strong banking system, and access to a literate, healthy, educated workforce. We don’t want to cater to those who are just looking for the lowest price because when you compete on price alone, you’re appealing to what in marketing-speak rather politely calls price-sensitive customers. Generally, what we mean by that is cheapskates, people who could afford to spend more but refuse to because a deal is all they’re after. They are not very loyal, happy to run off to the next hot deal whenever it shows up, and that deal will show up because you gave up other arguments for doing business with you. Quality? Stability? Variety? Track record? None of that matters to the cheapskate, only the price. This is why states that try to slash rules and taxes to attract companies get a burst of economic activity often followed by missed tax projections and a lack of a permanent drop in unemployment. They’re not attracting investors, they are attracting bargain hunters there to extract their profit and run off.

Even worse, when you compete on price alone, drop many sane regulations, and underinvest in training and education to do so, you end up with a huge mess on your hands. Pollution sickening workers means lost productivity, a less educated workforce, taught by wildly different standards and on a really inconsistent schedule means a lack of useful skills for employers, and giving up tax receipts means rolling back the basic infrastructure on which workers and employers rely to do their business. Just like a $78.56 futon at Wal Mart is going to wear out in just a few months and may have toxic paint on it so it can be manufactured cheaply enough to be sold at that price at a profit, so is cutting corners with potential workers going to lead to the workers being far worse off and businesses not interested in hiring them. Consider that China has been paying for its industrial boom with rampant pollution and a shorter life expectancy for its citizens, so much so that it’s now seriously thinking of transitioning to green energy and automating dangerous, repetitive jobs that famously drove workers to suicide. The bill for this is going to be immense when all is said and done. Being cheap eventually gets expensive.

Of course America has cleaned up its act in many ways already. It has clean air, invests heavily in renewable energy, its infrastructure mostly needs to be updated and given a fresh new coat of paint, and its people theoretically do have access to advanced healthcare that allows them to live longer, healthy lives. There are nuances lost here, I know, but we will get back to them. For now the important point is that we’ve transitioned past the need to pollute to survive, economically speaking. It’s a market for medicine, high tech, and military equipment as well as a financial hub. If it tries to undercut China and Vietnam on making clothes or widgets, it’s not playing to its strengths, and it can get robots to do most of the work. In fact, despite the myths, lots of stuff still gets made in America, over $6 trillion worth. It’s just done with machinery rather than humans, a trend that started back in the 1980s. The big stumble was not preparing people for the transition and letting the cost of healthcare and education skyrocket, trapping millions from training for a new job or starting a new business were health benefits not an issue.

Republican elites react to this with ire, demanding that we cut our tax rates and make it as cheap as possible to run a business in America, that we owe it to people to make sure the have as many employers as possible who aren’t being ran out of the country with regulations and the cost of doing business even though it’s one of the best places to own a company on the planet. At the same time, as we just covered, a cheap employer looking for the biggest tax break and lowest cost isn’t necessarily our best bet. If anything, we need to think about taking America upmarket. Sure, we may not be cheap, we’d tell the world, but you get what you pay for. How could this possibly work? Well, consider the cognitive science and business of luxury, starting with an example involving one of my favorite things of all time, sushi.

sushi

Perhaps this is the right time to come clean and identify myself as one of those coastal elites who keep getting mentioned in the press. You see, I live in LA, the second top GDP contributing metro area in the nation. It’s an extremely large city and if there’s one thing in which it excels, it’s variety in pretty much everything, especially restaurants. If you visited Santa Monica Pier and are feeling up for seafood, you could treat yourself to a $20 sushi lunch. Or you could hit the beaches in Malibu and make a reservation at the ocean-facing Nobu for a $500 dinner experience. Wait, what the hell? How does the same thing cost 25 times as much? Who in their right mind would spend hundreds on something available for what you paid for parking? How different would that sushi taste? Why is a sashimi assortment $7.95 over at a sushi bar in Venice going for $30 in Malibu? Is it higher quality? Is it a more expensive, rarer cut? Or does your mind play tricks on you and you expect a more refined, richer taste because of the price and atmosphere? The answer to those questions is yes. And we’ve tested this again and again.

You see, people often respond to cues that give ordinary objects a great deal of pull. For example, the latest premium lines of Chase’s credit cards are not plastic, but aluminum to create that the industry calls the plunk factor. They are meant to signal status and in cities where the well to do are expected to be low key, they’re a quiet identifier that you’re doing quite all right. How? Well, holding heavier things makes us think they’re more important, hence a card heavier than a normal one draws raised eyebrows and suggests that it’s a serious thing representing a hefty amount of cash. We can also be fooled with something that looks expensive, as wine critics are very often fooled by experiments in which cheap wine is poured in bottles of high end wineries and is suddenly judged as far superior to itself. The same can also be said of luxury cars like Acuras and Infinities, which are basically built out of basic models of Hondas and Nissans respectively, with some upscale materials or extra widgets and a sportier tuned suspension, and priced far higher than a sibling model. The softer textures, brighter colors, cleaner lines, and gizmos built into the dashboards fool us into thinking it’s nearly handmade.

But not all luxury products are necessarily just slight trickery. There are real examples of artisanship and handcrafting in very upscale goods and an extra touch to high end services. Many parts of Ferraris are indeed handmade and customized, and numerous supercars feature materials that vastly improve handling and performance but would make mass produced cars completely unaffordable. Concierge services for the wealthy can do many things which few people don’t even think of requesting. And while the fish for that sushi in Venice is probably perfectly fine, it might have spent a day or two in the fridge while the fish at Nobu was delivered a few hours prior and prepared with a specially honed secret sauce by the chef, and the sake came from a distillery you’d ordinarily have to travel to Japan to buy from. For those not set on price as their only purchase criteria, paying more is an investment.

Patrons in Malibu are betting that the experience and quality of a night at Nobu overlooking the Pacific Ocean will be worth the price, much the same way a homeowner who wants quartz countertops and hardwood rather than formica and laminate despite the much higher price knows what she chose will last for many years with little wear and tear and won’t need expensive replacements unlike the cheap materials. In their minds, they’re not wasting money or being ripped off, they’re making a prudent decision, going by the proverb “I’m not rich enough to buy cheap things.” And that’s who we want investing in America, those who are in it for the long term and know that a decent investment now will bring big benefits down the line, and whatever they spend here will also give them more customers as they grow. Their well paid, healthy, and educated employees with easy access to job training on a moment’s notice can adapt to fill their needs and stay productive for years on end. And as they and the market their salaries create hum along, that’s perfect for the business to keep delivering steady returns to shareholders in a less volatile, more consistent manner. And shareholders love that.

History shows that over the long haul, banana republics do not fare well, so trying to turn America into one, claiming that it’s good for business is akin to taking a Maserati, putting it in a lot next to a Kia, and asking $500 less than the Kia as its price keeps dropping just to say you sold it. An advanced economy works well by providing the basics to its citizens, then empowering them to go out and be productive, and whatever tax deal it brokers does not bank on anticipated economic gain to make up for the shortfall so much so, a missed projection impacts said basic services like happened in Kansas and Ohio this year. I really firmly believe that treating post secondary education and healthcare as privileges to be earned rather than basic services to which all taxpayers should be entitled is what puts so much hurt on those left in the dust of globalization. We can blame experts who said that people would transition to new jobs, but we’d then miss that the cost of doing so rose as much as four times faster than median incomes, effectively putting training for that transition out of reach and opening the door for predatory for-profit colleges eager to claim they were that transitional bridge.

But none of this means that the free market has failed us or that we need to somehow tame the evils of capitalism, as some die-hard Republicans who’ve read this far may be getting ready to assume I’ll say next. Quite the contrary in fact. What I’m trying to do is advocate tweaks to how we’d fuel that free market and position ourselves not to shortchange our citizens or sell out an important resource to a parasitic investor, and encourage entrepreneurs to start new businesses. We’re a premium place to do business and we should be demanding what we’re worth in the market. If we’re no longer catering to cheapskates, we are selling peace of mind and stability to both foreign and domestic investors with an engaged, healthy, hyper-literate workforce. Add some heavy investment in IT and AI, and many of these tweaks can actually end up cutting government bloat, consolidate agency missions, and start to weed out bad actors who live on said government waste. Capitalism is a tool to be wielded with care and precision, not used as a blunt object on every nail in sight, especially when that nail is actually a screw and the surface is tile, not drywall. So with that in mind, let’s tweak capitalism a bit.

money laundering

First and foremost, we have to deal with healthcare. Unless you live under a rock, you know that premiums for insurance are out of control and we now have to buy policies that refuse to cover more and more. Having one entity take care of basic healthcare needs would allow this entity to make a lot of money saving deals, consolidate a lot of overhead, demand lower and lower prices with better quality, and finally forcing the FDA to accept drugs made and approved in first world, highly regulated nations would introduce much needed competition into the American pharmaceutical market. If we can assure citizens that should they get sick, they can go and see a doctor and don’t need to pay hundreds of dollars for a simple visit should he run a diagnostic test the insurance company doesn’t feel like covering, we’d have a lot more productive and healthier workers. Insurance companies could then sell extra coverage and services, on top of the basic needs taken care of by a vastly expanded and cost-effective Medicare for those who want preferential service. Of course every time this comes up there’s a furor funded by those who rely on the hidden places in the arcane, opaque, obfuscated model of the dysfunctional excuse for healthcare we have today to make their living, parasitizing workers and businesses like bulimic leeches.

This could easily be its own article, but suffice it to say that America spends trillions on medical care and sees little benefit in terms of outcomes. We’re perpetually told about the finite amount of resources available to treat us as well as the horrors of governments making decisions on whom to treat, and told to ignore the fact that we pay thousands per year to a company, which has every incentive to deny you coverage, making the exact same decisions we’re told no government should ever make. In the end, people are afraid to go to the doctor because a serious illness means serious cash they will rarely have on hand, and more neglect makes for more serious illnesses. Anyone who tells you that no one can’t afford to go to the doctor are either lying or ignorant. Having good insurance can also be a trap for people who would want to start their own business and create jobs, but can’t afford to quit and lose their benefits, as well as unable to pay for providing that benefit to their future employees. In fact, the idea that universal healthcare would stymie a flourishing economy falls flat on its face when you consider that the IMF’s list of most business friendly nations is heavy at the top with countries that have always had such systems because they provide healthy workers along with cost savings to employers who don’t need to offer it as a benefit.

Next is education. Today’s teaching by the test has been an abject failure of epic proportions, and the mind-blowing tuition fees at colleges has resulted in over a trillion dollars in debts for recent college grads. This debt has been a drag on the economy as those trying to repay loans put off buying houses and having kids to afford the monthly payments. And college costs keep on rising at an alarming rate. No wonder then that Sanders’ proposal to divert taxes to cover public colleges’ fees was so popular. It would’ve given students a chance to start their education and careers free of debt and able to buy that first home, or start families sooner. This improved accessibility would’ve also helped the employers who say that they can’t find people with the skills they want. If a new job is a quick reeducation away, paid for with our taxes, new jobs get quickly filled with qualified applicants ready to put their new skills to work and sink their earnings right back into the economy. Instead of a flood of high school students gambling $30,000 on a major, they just need to keep up with what employers say they want and worry about their GPAs.

All this ties back in to the idea that if you’re looking for the cheapest and the least regulated place to do business, America is not it, but if you’re willing to invest more money, you’ll get a healthy, happy, stable, well-educated pool of workers ready to go. And employing them means your assets are protected by stringent laws against intellectual property theft, you don’t have to bribe anyone to get yourself situated or get paperwork pushed through, you have access to a massive, wealthy, prosperous market, and the same nation that patrols the world and landed humans on the Moon, will use its weapons to make sure you run your business in peace. America is that $500 dinner with a view of the ocean at Nobu, the new quartz counters and hardwood floors, the supercar you’ll show off to your friends. You’re spending more, yes, but in return, you’re also getting a lot more. Oh you can set up a factory in very desperate failing states that will let you have literal slaves and pollute until you’ve killed everything larger than a bacterium in every other river. But as the totals for bribes pile up, or when a coup takes your factory away, or the local mob shows up for their cut, you’re going to regret your decision.

Our politicians also need to do some studying and realize that jobs are not being lost to greedy bureaucrats taxing businesses out of existence, or by that 2% of the budget spent on food stamp, but by automation and a lack of job training for those who could easily fill new careers starting to appear on the horizon. Selling the nation’s resources and people like cattle to anyone simply for the sake of saying you made a deal is like agreeing to work for a company, any company for half the salary you could request just to say you have a job, then claim that making ends meet on credit is how you will get your next job that’s bound to make you rich. You’re not going to get the big bucks if you’re not building a foundation that shows your expertise in your chosen field. America, as a nation, has shown its competence in research and high tech. It deserves to be treated as an established, premium brand that it is, not as a bargain basement deal. If we really don’t want America to turn into a Third World nation, we need to make sure we’re not marketing it like one and stop creating the conditions that are currently freezing its vaunted financial mobility, one of the first signs of long term economic trouble.

tied shoes

How often have you heard the refrain “you need to pull yourself up by your bootstraps” in response to economic hardship by someone? Well, today it’s being told to people who can’t afford boots, much less the straps with which they’re supposed to do all that pulling. And worse yet, it’s not that the boots mysteriously became much more valuable and expensive, we allowed them to become this way by declaring that the boots are a luxury that had to be earned because we were told that people were secretly hiding boots and collecting them from gullible chumps giving them away after they spent their hard earned money to fund others’ boot addiction. And despite the fact that a small handful of boot hoarders have been found, those whose philosophy would much rather leave everyone with bare feet than let even one person who doesn’t deserve shoes get a pair, will justify their stance by claiming that providing anything for anyone damages their dignity and will only lead to dependence and abuse. Which sounds less than being worried about one’s dignity and more worried about not having to contribute to the society around oneself, the good old “I got mine, you go get bent.”

Even worse, those who made it are encouraged to say that they had no help and no one ever educated them, took a chance on them, made any sort of an introduction to boost their chances of success, and they never derived even one benefit from the public infrastructure. Not only is it demonstrably wrong with the slightest analysis, it promotes that hazardous, parasitic cheapskate mindset to which we keep coming back as a no-no for America’s future as an independent, world-leading, prosperous nation. It gives a justification to go back on the social contract, on the idea of giving everyone equal opportunity to succeed by claiming that people who make it need no help. A variation of this attitude is what doomed Greece. Yes, it’s true that Greek social benefits were unreasonably lavish. But after agreeing on them and voting for all the benefits and their costs, Greeks went on not paying their full taxes, deeming their obligations to be for suckers. Last time it needed a cash infusion, the country asked for €60 billion to get back on track. How much did its overly lax collection policies lose over the decades before? Some €76 billion.

So who exactly would want to rush to invest in a country which doesn’t pay for its infrastructure, which sees its social services rapidly declining, where the quality of education and healthcare is plummeting, and neo-Nazis have a sizable presence in government? Businesses going “hot damn, if we’d ‘forget’ to pay our taxes, no one would come after us!” and ready to exploit those in desperate need of any job, for any pay. This is where having the proverbial vintage champagne tastes on a gas station beer budget leads from a macro-economic standpoint. The solution to this is absolutely not to start selling said vintage champagne for $5.99 after watering it down, hoping the sales volume will make up for the loss you’re taking on making the inventory. It’s to remember that you’re selling a premium good not everyone can afford to buy, and invest in making sure that those who do have a great experience so they keep coming back. This means we can charge a premium and invest all the profits into making our brand better and ever more respected.

So what we’re not talking about investing taxes into giving a lot of people an education and access to healthcare simply because it’s good to do that. We’re talking about investing in people so businesses save money on training and healthcare, and have a large pool of adaptable, productive workers ready to jump in and start building, selling, coding, and brainstorming, with swarms of intelligent robots standing by to ramp up their factories with very literally inhuman speeds. And your investment will yield a workforce that could buy what you, you partners, competitors, and your peers sell, rapidly boosting your bottom line. We can definitely talk about tax breaks and getting rid of regulations that exist solely to nickel and dime you, or are being applied out of context to your operations, but we’re not going to compromise anything that lets us keep training and taking care of that potential workforce because we have a luxury brand to maintain and strengthen. And if you can’t afford it, take a risk with cheaper nations where your market power and security may not be easily guaranteed, and the workforce may not be as productive as pollution, shortages, and uneven education take their toll.

Here’s the bottom line. Advanced first world economies are expensive and have numerous regulations and massive social contracts. They demand the respect of their investors because they have much to offer, and they expect the economic output of their businesses to take care of their people who will create new businesses and fill jobs required to keep those economies going. Anyone who believes that these are bad things and they should rush to cut taxes and strip away regulations to attract anyone with an idea or a factory to build, is advocating a model that failed in many states that tried doing it long term, and which worked in some emerging markets only until the cost of living and providing social services caught up, and is now being phased out in favor of traditional trappings of advanced economies. Where there’s a profound lack of public services and people are very often trapped in their economic class since birth as governments look the other way on pollution, corruption, and snake oil as long as it’s “good for business” there is a failed state from which people are fleeing. And America doesn’t have to follow this example. It has the capital to demand more from its businesses and those who lead it to invest in the future, not drain it dry for a quick buck.

# politics // behavioral economics / economics / longform


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