I tried to wait. Really, I did. However, with discretion being the better part of valor and me not being particularly valorous I am no longer able to be discreet. 

We, my friends, are getting ripped off. Gloriously, fabulously, awesomely, bend-over-grab-your-socks-and-hand-me-the-soap, robbed. Every last minute of every last day somebody has their hand in our pockets and it’s not for our own good.

OH NO! The realization stings you like a slap across the face on a cold day. This is the Economics Rant!

You got that one right. I couldn’t put it off any longer and some of the probing questions I’ve been receiving lately demand I write this Rant before continuing with more mundane subjects. The probing question in question goes something like: How are you going to make money at this? Valid point. Before I can give you that answer, which was my original theme for this week, I’ve got to tell you why I’m going about doing what I’m doing the way I’m doing it.

If you think back a few weeks you’ll remember I said that all economic activity flows from Consumers – you and me – spending our dough. Every last dollar comes from us. I’ll bypass the details of where all those dollars came from and we’ll start out at the point where the dollars are already there. 

You, the hard worker that you are, produce something or provide a service and get paid by the consumer of your product or user of your service. Perhaps, though, you work for a company that builds something out of something that somebody else produces. Your company then goes on to sell that product to somebody who uses it to do something else. And so on. At some point that chain comes to an end and at the end of every such chain is a Consumer. Let’s have a look how.

We’ll start out with a wizened old miner digging hard at his gallium mine somewhere in the mountains. He pulls out some gallium and sells it to a metals producer who whips up some gallium arsenide to get slathered all over some electronic components by yet another company. That company sells the components to a corporation whose entire business consists of building autopilot circuit boards and selling them to Boeing Aerospace to put into their airplanes. Where does Boeing get the money to pay to pay for the autopilot circuits? They sell their airplanes to airlines. The airlines get their money from selling seats on those airplanes – to you as you jet off to Orlando for a week at Disney.

Rubbish! You say. Airlines make their money off of business travelers. OK, exactly where does the money come from to pay for their seats? The corporations they work for sell stuff to somebody, etc., until it reaches the Consumer. Same end point if Boeing is selling planes to the Government – even if the tax dollars it uses come from a corporation.

Yeah, so what? Everybody’s got to earn a living. True enough, but the people who are robbing us are people who aren’t doing anything. How do I know this? Simple.

I worked in retail.

The company I worked for had built itself from a small west coast shop into a nationwide presence. They built their business and reputation on providing excellent products, supporting them with skilled and knowledgeable service, and doing it all at a fair price. Customers flocked to them and in doing so put just about every other similar company out of business. Eventually their business got so big that it went public – they sold stock to investors on a stock exchange. The original owners cashed out and a new corporate management team came in. At that moment the focus switched from “How do we provide the best solution for our customers?” to “How do we provide the best return for our investors?”. Once a company makes that jump the customer is screwed. 

The incident that brought this into focus for me occurred when I was putting new price labels on the shelves. One item, a rectangular block of plastic with a metal plate with some screws on it, had received a price jump of 20% over the price on the sticker I replaced. The new price was about $60. Wow, I thought, the price of plastic and metal really jumped up! I checked the computer and found that the cost associated with this item hadn’t gone up a penny. It was still about $6.00. That’s a 1000% markup. Now consider this. The corporation’s expectation was that each store would have a gross profit of just 46%. Why the absurd difference? Because the corporate focus was now on giving stock market analysts what they expected rather than giving their customers what they deserved – a fair price. Every item the company sold was priced in view of keeping the stock attractive to investors. The customer had been reduced to a mark to be taken for as much as possible.

That’s an obvious example but it gets worse. Look at health insurance. I’m guessing that most of you have health insurance and that most of those have it provided by your employer. The first group sees the costs directly and the second as money somebody else paid on their behalf. Your insurance company gets the money and the first thing they think is not “How can we use this pool of money to best serve our customers?” but “How can we keep investors interested in our company?”. The insurance companies have whole departments for “cost containment” and “benefit pre-approval”. You pay for health coverage but the companies that are supposed to pay for your care are fighting you tooth and nail not to provide any. Just to keep their investors happy. The insurance companies admit to profits in the 20% range. That means that of every dollar you spend on insurance only about 80% is going for your health care and the insurance company’s overhead. Now, who are they paying the money to? Hospitals? Sure, some of it. Hospitals are now mostly owned by corporations and they have their own gaggle of investors to cater to. Those investors also need to be kept happy by cutting costs and maximizing profits. Some of it goes to doctors but a big chunk of that is for malpractice insurance. All-in-all I bet that half of what you pay in premiums actually ends up paying for the doctors, nurses, labs, and hospital costs that you might need to use.

Half of what I’m paying??? Why, that’s…that’s…

Robbery? 

Exactly. But that’s just the way it is. There’s no way to change it.

Bullshit.

Remember, it’s all your money. Use that money to make those companies listen. It’s going to take a bit of work on your part but it will be work that ends up paying you back in any number of ways.

First, know what the things you’re buying should cost. If something seems like it costs too much it probably does. Find out who else sells the things and whether everybody charges the same. A friend of mine recently did this on a part for his boat. As a “boat part” the item cost something like $63. As a generic off-the-shelf-part the same item – same manufacturer, same part number – cost two bucks and change. For his hour of disbelief and internet research my friend was paid $60 – tax free.

Second, make yourself heard. Write emails to the companies who are overcharging you. Tell them about your experience, how much you saved, and that you’ve told all your friends about it. I also think you can be proactive about this and write them telling them what you expect as products or services. I think that if Toyota, Ford, GM, and Honda suddenly got a million or so emails that all said that the writer was not going to buy another new car until they made an electric car that would go 400 miles on a charge and looked like a Carmangia, you would see that car in the showroom by a week from next Tuesday.

Lastly, know where your money is going. For health care I made the choice to pay my doctors directly – I still think it costs too much – rather than buy insurance that covers doctor visits. I pay very little for health insurance because I’d much rather that my health care providers get my money than some guy who happened to buy stock in my insurance company. I figure I save a couple Grand a year doing it that way.

Whew! OK, Rant Over.

I’m still planning on giving you the detailed answer to the question of how I expect to make money at this game. But this little Rant may have given you a brief glimpse of what is motivating me economically. I figure that if I start with rational prices, good communication between us to know what you like, and then make sure you know why my stuff is priced like it is, then I’ve got it made. In the end though it’ll be your decision. It is, as you know, all your money.