An advertising man tries to justify Capitalism

The Libertarian group, Reason, interviewed Rory Sutherland, who works at the ad agency Ogilvy in the UK. Sutherland rambled for 35 minutes and he made some interesting observations about how to market things to appeal to human psychology, but he didn’t say anything to prove that laissez-faire capitalism works better than a mixed economy.

Sutherland’s argument that the abundance of choice provided by Capitalism makes people feel wealthier is not demonstrated by the psychological studies. What the studies show is that people are less happy when they have too many choices, because they can never know if they made the right choice. Having too many choices leaves people confused and makes it difficult to make a choice, so people are ultimately less satisfied.

Sutherland made one point that I agree with when he observed that we shouldn’t try to justify Capitalism based on the idea that it is efficient, because actually it is quite inefficient and wasteful. Red Bull is a perfect example of waste. Convincing people that they should go and buy a very expensive drink in a small can to stay awake rather than drinking coffee that they can make a home is very wasteful. He didn’t state it very clearly, but I think Sutherland was trying to say that Capitalism does the best at discovering what people like and helping them discover that they like new/different things, so Capitalism gives people more freedom and creativity and helps them explore far more than a planned economy would.

Sutherland is probably right on this point, but we don’t live on a planet with limitless resources. We need planning for how to use the Earth’s resources efficiently if we want long-term survival of the human species, so we can’t leave it up to laissez-faire Capitalism, especially when talking about allocation of resources for essential things that are necessary for survival.

Sutherland makes a good point when he observes that people actually want to have on-going relationships with the providers of goods and services and that people are not rational calculating machines who are only interested in self-maximization. However, Sutherland fails to understand that laissez-faire Capitalism often destroys those on-going relationships that give people meaning and fulfillment in life.

The comment that everyone today can have the best phone in the world is trying to say that Capitalism in the phone market has led to greater egalitarianism than ever before. First of all, in most areas global Capitalism is increasing wealth inequality world-wide, so he is cherry picking to try to disprove a trend. Secondly, most people in the world won’t ever be able to own an iPhone or Galaxy S, so he is assume that most of the world is a first-world country. Third, because a Galaxy S only gets 3 years of security updates and the tech changes so fast, an old Galaxy S doesn’t have the same value as a new one, so there is still a big gap. Fourth, the Apple and Samsung have raised the price to over $1000 for their flagships and Apple has changed its policy so that it will never offer its premium iPhone X series at a cheaper price for the masses after a couple years on the market, so there really is a breech between the wealthy that can pay $1200 for a premium iPhone X series and most people who can’t.

PS: Sutherland doesn’t seem to understand why people buy Red Bull despite the fact that it tastes bad. People drink Red Bull when they want to stay awake or need extra energy, so the psychology is that the worst that it tastes, the more effective it must be, just like medicine isn’t supposed to taste good.

1 thought on “An advertising man tries to justify Capitalism

  1. Mark J. Kropf

    Choice selection is indeed complicated. Economy by cost is weighed against both need and prestige in the context of popularity or sometimes in opposition to popularity. What the consumer can afford is most of the concern and this increases with age and with more concern for savings. Prestige is important, but many are willing to sacrifice this for a semblance of prestige and will purchase knock-offs clearly not from the original source so long as the materials are not too shoddy substituting emulation for the real thing. Youth often chose to revolt from convention and select new standards both for their own identity as well as for some alternative market at a more affordable level, while yet desiring to challenge conformity by abandoning the general market.
    Luxury is often well beyond any reasonable level of budget for the majority in most markets and is especially true after periods of recession.
    What Capitalism at the general market level can do is supply true prestige items to the upper crust and a very small selection of people living at the fringe of their means and a much lower level of product to the masses. This is the role of traditional advertising.
    Capitalism is more than this however. It is a family of differing markets. A black market may exist for stolen goods and knock offs, a gray market may exist for imperfect goods or last-season’s fashions in discount stores or on line sites while a cult market may exist for counterculture materials may be found by those in the know for competing trends, used and antique clothing and furnishings and folk material productions. Advertising has a limited role for the gray market, but almost none for the other areas.
    Advertising needs to acknowledge both the limitations it has and that some idea of traditional advertising may have.

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