6 ms·

Very good points. I wonder why many consumers act like that. I understand that companies prefer to rent or lease because of tax avoidance and/or lowering overh

by frik 11y ago

Very good points. I wonder why many consumers act like that. I understand that companies prefer to rent or lease because of tax avoidance and/or lowering overhead (fixed costs) (because of inflexible accounting programs, blabla). On the otherside, as a consumer (and if you have the money and your interest is longterm), why not just buy it? Why rent/lease something? In the long term you are better of buying it. Renting/Leases are always more expensive in the long run. Also owning something is a lot more rewarding, relaxing, (and it can be used many years later) than handling some leased/rented subject with utmost care.

jacquesm 11y ago
Because people have been conditioned to think in terms of their monthly pay they like to allocate it by the month rather than to save and then spend one time. Saving requires long term thinking and planning, monthly allocation requires a horizon not much longer than a month. Also: instant gratification. Of course they get burned but that won't stop them from repeating the same mistakes over and over again.
Florin_Andrei 11y ago
> I wonder why many consumers act like that. Because in the short term all these things are convenient and attractive.
nostrademons 11y ago
I've got a hypothesis, but it's kinda out-there. It has to do with shifting time priorities across society. The generations that grew up in the 50s-80s could be reasonably confident that the world a decade later would be more or less what it was before. Fashions would change, social movements would get started, more home appliances would be introduced, but as long as nuclear war never happened, the basic economic underpinnings of society wouldn't change too much. And so it made sense for them to buy things for the long term, because the purchase they made now would still be relevant & useful in 20 years. Starting with the Netscape's IPO in 1995 and perhaps exacerbated by the fall of communism in the early 90s, that changed. Even before they came of age, Millenials had witnessed the dot-com boom & crash (in which many of their elders lost their life savings); obsolescence of PCs every 2-4 years; 9/11; the rise of MP3 sharing and then its clampdown; the rise of cellphones, their replacement by smartphones, and then the 1-2 year upgrade cycle of continually getting a new smartphone; the 2008 financial crisis; manufacturing jobs moving from the U.S. to Japan to India to Bangladesh to China to Southeast Asia; and the rise of sharing-economy companies providing services that you previously needed to buy a product for. Many have also been personally burned by investments in skills that were supposed to be a sure thing, like taking on $100K in student loan debt and not being able to get a job afterwards or landing your dream job and then being fired or laid off 3 months later. The combined effect of all these is to send the message that the future is not worth planning for. There will be better products on the market in 2 years. There will be new services. That skillset that's so hot right now may be completely obsolete. The education that everyone says is crucial to your future won't get you a damn thing. The financial investment that's up 400% now may crash to zero tomorrow. You may have to move to a new city to find work, or to follow a significant other who needs to find work. When the future becomes radically unpredictable, it makes sense to buy for the here-and-now, because the durable product you carefully invested in may be useless anyway.
- jacquesm 11y ago
  This trend was already well underway in the 70's. Especially in things like consumer electronics, vehicles and furniture. Cheap credit drove it in the US, miniaturization (Moore's law) and cheap overseas labor added to it and drove it abroad. You can see it clearly in things like tool and machinery quality. 60's stuff is nigh on indestructible and still in use today, 70's stuff is gone as if it never existed.
  - tezza 11y ago
    Hmm. 1960s was a particularly fashionable decade so less of it was thrown away. Lots of Art Deco stuff survives (1920s) for the same reason although the manufacture was quite poor. Also Plastics technology improved and started to be widely used during the 1960s. This took into the 1970s to be widespread.
- pjc50 11y ago
  This sounds very plausible to me. The world is uncertain enough that it's safer to pay for it month by month rather than risk a stranded investment in the wrong thing. The only "stable" investment is real estate, which has therefore shot up in price. Physical "durable" goods are by comparison very cheap.
  - jacquesm 11y ago
    That's flawed reasoning. The uncertainty should cause you to save before you spend and to own rather than rent on a contract that you can't get out of. After all, even if you have a stranded investment it will not cost you more for the next x months. But a rental agreement will usually have termination conditions that need to be met and if you can't get out of it then you're much worse off than if you owned the item outright. The biggest money maker for such subscription type purchases are impulse purchases. Buy now on cheap credit, pay a premium for a long time on top of the value of the item. And for those type of purchases if you were to do them with money saved over time you probably wouldn't buy them at all. (And your life would be better, not worse, all this stuff is really owning us.)
chongli 11y ago
On the otherside, as a consumer (and if you have the money and your interest is longterm), why not just buy it? Why rent/lease something? In the long term you are better of buying it. Renting/Leases are always more expensive in the long run. I don't see how you can say that is the case for everything. Look at Netflix. Most stuff people watch only once. Why buy a bunch of discs to collect dust on your shelf?
- jacquesm 11y ago
  But they wouldn't and that's exactly the rub. You'd trade them or re-sell them. Ever tried to re-sell a once-viewed netflix movie? No? That's because you can't. The doctrine of first sale does not apply to services, only to goods. And a movie packaged as a service is a lower cost to deliver and a bigger chance of another sale.
  - chongli 11y ago
    Sure, but I also don't try to re-sell a chewed stick of gum. Netflix is <$10/mo. For that you can watch hundreds of hours of TV and movies. Are you saying you would buy all of that content individually and later resell it all? Who has time for that? Never mind the losses you take in the process; you'd likely lose way more than $10 anyway.
    - frik 11y ago
      Where does it end? Do you use a flat-rate meal delivery service or eat everyday at the same all-you-you-can-eat restaurant? Instead of buying ingredients to cook a meal at home or going to different restaurants? Consuming a flat-rate service from a single vendor is alright for the internet connection, but for many other things it asks for troubles in the long term. Back to movies: DVD/BlueRay gives a lot better experience than streaming. The movie is in higher resolution, with many more audio options and not forget the bonus/extra content that alone is worth something and often quite interesting and funny.
      - jacobr1 11y ago

by frik 11y ago

jacquesm 11y ago

Because people have been conditioned to think in terms of their monthly pay they like to allocate it by the month rather than to save and then spend one time. Saving requires long term thinking and planning, monthly allocation requires a horizon not much longer than a month. Also: instant gratification. Of course they get burned but that won't stop them from repeating the same mistakes over and over again.

Florin_Andrei 11y ago

> I wonder why many consumers act like that. Because in the short term all these things are convenient and attractive.

nostrademons 11y ago

I've got a hypothesis, but it's kinda out-there. It has to do with shifting time priorities across society. The generations that grew up in the 50s-80s could be reasonably confident that the world a decade later would be more or less what it was before. Fashions would change, social movements would get started, more home appliances would be introduced, but as long as nuclear war never happened, the basic economic underpinnings of society wouldn't change too much. And so it made sense for them to buy things for the long term, because the purchase they made now would still be relevant & useful in 20 years. Starting with the Netscape's IPO in 1995 and perhaps exacerbated by the fall of communism in the early 90s, that changed. Even before they came of age, Millenials had witnessed the dot-com boom & crash (in which many of their elders lost their life savings); obsolescence of PCs every 2-4 years; 9/11; the rise of MP3 sharing and then its clampdown; the rise of cellphones, their replacement by smartphones, and then the 1-2 year upgrade cycle of continually getting a new smartphone; the 2008 financial crisis; manufacturing jobs moving from the U.S. to Japan to India to Bangladesh to China to Southeast Asia; and the rise of sharing-economy companies providing services that you previously needed to buy a product for. Many have also been personally burned by investments in skills that were supposed to be a sure thing, like taking on $100K in student loan debt and not being able to get a job afterwards or landing your dream job and then being fired or laid off 3 months later. The combined effect of all these is to send the message that the future is not worth planning for. There will be better products on the market in 2 years. There will be new services. That skillset that's so hot right now may be completely obsolete. The education that everyone says is crucial to your future won't get you a damn thing. The financial investment that's up 400% now may crash to zero tomorrow. You may have to move to a new city to find work, or to follow a significant other who needs to find work. When the future becomes radically unpredictable, it makes sense to buy for the here-and-now, because the durable product you carefully invested in may be useless anyway.

jacquesm 11y ago
This trend was already well underway in the 70's. Especially in things like consumer electronics, vehicles and furniture. Cheap credit drove it in the US, miniaturization (Moore's law) and cheap overseas labor added to it and drove it abroad. You can see it clearly in things like tool and machinery quality. 60's stuff is nigh on indestructible and still in use today, 70's stuff is gone as if it never existed.
- tezza 11y ago
  Hmm. 1960s was a particularly fashionable decade so less of it was thrown away. Lots of Art Deco stuff survives (1920s) for the same reason although the manufacture was quite poor. Also Plastics technology improved and started to be widely used during the 1960s. This took into the 1970s to be widespread.
pjc50 11y ago
This sounds very plausible to me. The world is uncertain enough that it's safer to pay for it month by month rather than risk a stranded investment in the wrong thing. The only "stable" investment is real estate, which has therefore shot up in price. Physical "durable" goods are by comparison very cheap.
- jacquesm 11y ago
  That's flawed reasoning. The uncertainty should cause you to save before you spend and to own rather than rent on a contract that you can't get out of. After all, even if you have a stranded investment it will not cost you more for the next x months. But a rental agreement will usually have termination conditions that need to be met and if you can't get out of it then you're much worse off than if you owned the item outright. The biggest money maker for such subscription type purchases are impulse purchases. Buy now on cheap credit, pay a premium for a long time on top of the value of the item. And for those type of purchases if you were to do them with money saved over time you probably wouldn't buy them at all. (And your life would be better, not worse, all this stuff is really owning us.)

chongli 11y ago

On the otherside, as a consumer (and if you have the money and your interest is longterm), why not just buy it? Why rent/lease something? In the long term you are better of buying it. Renting/Leases are always more expensive in the long run. I don't see how you can say that is the case for everything. Look at Netflix. Most stuff people watch only once. Why buy a bunch of discs to collect dust on your shelf?

jacquesm 11y ago
But they wouldn't and that's exactly the rub. You'd trade them or re-sell them. Ever tried to re-sell a once-viewed netflix movie? No? That's because you can't. The doctrine of first sale does not apply to services, only to goods. And a movie packaged as a service is a lower cost to deliver and a bigger chance of another sale.
- chongli 11y ago
  Sure, but I also don't try to re-sell a chewed stick of gum. Netflix is <$10/mo. For that you can watch hundreds of hours of TV and movies. Are you saying you would buy all of that content individually and later resell it all? Who has time for that? Never mind the losses you take in the process; you'd likely lose way more than $10 anyway.
  - frik 11y ago
    Where does it end? Do you use a flat-rate meal delivery service or eat everyday at the same all-you-you-can-eat restaurant? Instead of buying ingredients to cook a meal at home or going to different restaurants? Consuming a flat-rate service from a single vendor is alright for the internet connection, but for many other things it asks for troubles in the long term. Back to movies: DVD/BlueRay gives a lot better experience than streaming. The movie is in higher resolution, with many more audio options and not forget the bonus/extra content that alone is worth something and often quite interesting and funny.
    - jacobr1 11y ago