Cashing In On the Death of Demand

by | Aug 27, 2001 | Archives

We continue to review how we can alter our activities to benefit with demand shifts from products to services.

Yesterday's message looked at likely trends in the era ahead. These trends lead us to two ways to enhance or wealth.

The first alternative is to spot new innovations and trends in rich countries and invest in them ahead of the pack. This is what Bill Gates and his cronies did in the fifth (Information) era.

The second alternative is to look at less developed nations and see from experiences gained in industrialized countries to understand what level of needs the developing populations have. This will help you see what the citizens of these poorer nations will buy next. As America and other rich countries discard old successes for even greater ones, other less developed nations will buy the older successes.Here are some other things we can do.

Sell Imagination

In western society we now pretty much take the perfection of physical and security needs for granted. If we buy a new car, we expect it to run pretty much perfectly. This is true of most consumer products. Fewer and fewer consumers choose one car over another for the material qualities of getting us back and forth to work. We assume the car will take care of our physical needs. Instead we buy cars which we imagine fill more of our hierarchic needs. We might buy a car to enhance our social needs (for example, a mini van may be purchased to fill the love need related to our family). Many cars are purchased to enhance acknowledgement. An expensive sports car such as a Porsche has very little utility, but establishes the fact that one is special. Such a car turns heads.

Often the car will fill multiple rolls. The luxury version of a large four wheel drive sports utility vehicle (the most popular selling vehicle today) may provide the owner with a feeling of security, may fit family needs (running the kids to ball games and classes, etc.), suggest wealth and status and emote that the owner has a rugged outdoor lifestyle.

This is the Imagination Era because the reality is that all of these additional factors (which may cost a bomb) may never be used. Few people dare push the pedal to the metal in their souped up Porsche or Bentley Turbo. Not for long at least. Nature has a way of eliminating people from the gene pool that drive highways at 140+ MPH. Many owners of SUVs never turn on the four wheel drive. (Car manufacturers acknowledge this fact by now making two wheel drive SUV models.) In many instances some features contradict themselves. Fancy, light colored easy-to-stain, leather seating isn't compatible with the implied ability to navigate dirty woods, haul muddy dogs, etc. which an SUV offers.

A Huge Rising Market

Understanding the hierarchy is important because the higher people move up the hierarchy, the more they pay for the satisfaction of their needs. Pound for pound, a Chevy Caprice is a lot more car for the dollar than a top line Porsche. (The owner of the Porsche gets just two cramped seats and risks life, limb and driver's license to use the performance.) The Porsche owner is paying for something he imagines he will get beyond a car. Speed, power, friends, romance, whatever. He is paying for some type of story.

It is the implied power, the acknowledgement, the images the buyer gets that costs the extra thousands of dollars. The owner may well get this acknowledgement too because of what others imagine. As the Information Era improved productivity, it created huge markets of wealthier consumers. These consumers have moved up the hierarchy and spend ever increasing amounts on ever less tangible goods.

Today, for example, a durable watch which keeps accurate time costs about ten bucks. Any price beyond is the cost of imagination. A diamond crusted, solid gold Rolex does not keep better time than a basic Timex. But one could well imagine it does. The owner imagines that the watch speaks of wealth, prosperity and success. The story of the watch sets its price. In the Imagination Era the story will become more important than any other feature.

So how can we use this knowledge? Look for the story that is in your heart. This will lead you to markets and an evolutionary cycle that can help you assure that you'll always be able to cash in on upcoming trends.

More on the imagination era tomorrow.

Until then, good global investing and business.