Imagine a hypothetical long-time friend of yours. You have fun together, you hang out together, you know; do what friends do. Except that over time, you notice that they’re never there for you when it counts. They don’t help you out when you’re in a rough time, they decline invitations when it’s convenient for them, they come and go in your life as they please, but they get upset if you do the same sorts of things to them. In short, they take but they never give, they stick around in the good times but not the bad.
Would you call them a real friend?
Of course not; there’s literally an idiom1 to describe exactly this sort of person.
There are lots of companies that might be described as fairweather businesses; they’ll take your money but have no incentive to stick around for you. The irony in this is that empty platitudes like “customer service” or “mutual benefit” will show up in the mission statements of these very same companies!
Mutual benefit cannot exist without mutual downside. Someone, or some corporate entity, can say that they want the same things that you do, fine. But if they get paid when everything goes right for you, but don’t have something to lose if you get screwed, then incentives are misaligned. There isn’t a reason besides moral exhortation for them not to shaft you and leave you in the lurch when, say, your laptop breaks in 6 months, after you’ve already paid.
We can see this exact dynamic playing out as the horrific effects of the “war on fat” and Big Sugar’s diet manipulation come to light. The scientists and federal nutritionists that promoted low-fat have enlarged their pockets while enlarging public waists; companies like Nabisco and their SnackWells brand helped reverse decades of declining heart disease, diabetes, and obesity. Yet for all their devastation of public health, have they had to pay any recompense? They’ve ruined the health of millions, yet even when governments and academia promote nutritional advice based on shoddy science, it’s ordinary people who have had to pay the price. All the upsides (in the form of corporate scientific grants, lobbyist money, and profitable product lines), none of the downside.
When a company or institution has this kind of relationship with its constituents, one can see that it’s easy to slide into a position of exploiter and exploited; after all, what benefit is there to help with problems when there’s nothing to gain from it? Even if some moral compulsion, some niggling feeling prevents a corporation from outright misleading its customers, it’s clear that there’s no reason to expect their treatment of customers to trend towards benevolence, which means it must either stagnate or to trend towards (perhaps unintentional) malevolence. In fact, a downward trend seems much more likely, as there are far fewer future states that lead to staying exactly the same as there are that lead towards degradation.2
This lack of accountability for the consequences of their own actions seems like a problem. Certainly, existing methods that consumers have for reintroducing this skin in the game seem insufficient; the legal system is supposed to be a disincentive for companies to behave this way, but it has become common knowledge that a large part of “winning” justice is having the bigger bank account, a situation which puts a corporation on quite uneven footing against the individual. So unless they piss off someone actually powerful, retribution is missing. Class action lawsuits certainly even things a bit, but considering the requirement on the side of consumers for mass coordination of many different people, each with their own lives to lead, vs. a single, unified entity which (presumably) has its own legal department, even then the deck seems stacked against the average Joe.
Corporate America must be held accountable for its failings to its customers.
I think that there’s an objection to this, that we don’t need greater regulation of companies; that the existing systems are sufficient because consumers, after all, have the choice of whether to purchase, whether to engage or not. So why aren’t they smart enough to just not do self-destructive things? We aren’t under any obligation to protect people from their own stupidity.3
But this is a woefully short-sighted view, 1) because the statement that consumers have a practical choice is factually incorrect in a lot of situations, but even more importantly, 2) companies have a lot more information about what is bad for the consumer than even the consumer might.
It’s easy to argue that consumers have a choice about what to spend their money and time on when we’re talking about sugary cookies. It’s a lot harder to argue the same thing when it’s companies that provide essentials of living. Realtors suffer from this exact complaint; when was the last time you ever heard someone praising their landlord company? Utilities like electricity and water are at least government-run, but internet is becoming just as much of necessity in modern life, with ISPs like Comcast and Cox becoming equally notorious for their atrocious service and complete lack of care for customer internet issues. In many places these two are literally the only choice for internet. And what about the large tech giants, who now dominate people’s digital lives?4 And, surprise surprise, none of these companies are accountable for the maladies and addictions they afflict upon their users.
But this isn’t even the most serious problem. Saying that the consumer should be relied upon to choose what’s right for them belies the assumption that the consumer even can choose what’s right for them. What if they don’t have all the information they need? Because the fact of the matter is that the company has a lot more information about their product than the consumer does, including the potential risks and downsides. What reason do they have to reveal this to the people they’re selling to, when all it would do is impact their bottom line? Look at how tobacco companies had internal studies showing the potential cancer risk of cigarettes for years, yet never disclosed these to the public, instead enlisting the surgeon general to promote cigarettes as “healthy.” Big Sugar did the exact same thing when studies they commissioned showed no link between high fat consumption and heart disease.5
Even if there are multiple choices available to the consumer, there’s nothing stopping all of them from enacting manipulative policies or revenue models. They have the incentive to do so; no collusion is even necessary. Combine this with the fact that it’s very easy for companies to hide that they’re exploiting people, and the ability to choose becomes meaningless; what does the choice matter if you’re being lied to?
What can we do when the institutions we depend on to live our lives have no incentive to help us?
↥2 It may even be that, absent some form of systematic way of aligning a company’s incentives with that of the good of its customers, degradation (of what we might call “customer service”) will always happen. As a simplified model: if we assume that any move or initiative to provide service to the customer can be axed to cut costs, and that companies will optimize for their own profit, then the equivalent of simple “Brownian motion” amongst the official policies and implicit attitudes will inevitably cause alignment to trend away, and never towards, the customer. Perhaps this is why people always seem to notice a decline in the quality of a brand across time.
↥3 Aside: I am not generally in favor of extra regulation on corporations, just in this one specific case. A lot of regulation I think actually hurts either consumers or small businesses; for example, many cities have extremely onerous restaurant permit policies, which often means that only established franchises with the deepest pockets are able to move in; this is an issue that is dear to my heart, because it means less diversity and a less delicious food scene. But this isn’t isolated to the food industry; policies like requirements for barber’s licenses and Louisiana’s absurd requirement for florists to be licensed essentially just act as old boy’s clubs that keep out newcomers, often enshrining racism by preventing immigrants, who might not have as much fiscal leeway, from starting their own businesses.
Another example is the institution of complex rules and tax audits that companies, big or small, must satisfy in order to be allowed to operate. This often pops up in the financial industry; since there’s nothing preventing a Congressperson from being hired by, say, a bank after their term in office, they can simply vote for some new, convoluted regulation on, say, what percentage of liquid assets a financial institution must maintain in proportion to their investments, and then get hired (at a generous salary) at a firm on Wall Street, since they, having drafted the legislation, know all its loopholes! Indeed, the more convoluted and onerous the legislation, the better for getting someone hired, since their hiring firm can simply get around it with their expertise, while smaller, perhaps locally-grown banks and credit unions get priced out of the market, not having the capability and expertise to deal with the new regulation. So more regulation can actually hurt consumers by entrenching the established players even more deeply; overregulation hurts just as much as deregulation.
See also: GDPR and why Google and Facebook didn’t push back that hard on it
↥4 A lot of hullaballoo is kicked up about antitrust law, mainly because companies have figured out ways to get around it. How, after all, is Google not considered a monopoly, when they basically own search? What about Facebook, when they own social networking? Funnily enough, antitrust law only applies to mergers and acquisitions of companies. If a company manages to just hire and grow their way to a monopoly, antitrust doesn’t apply at all. And this is… exactly what has happened with major tech companies. Perhaps the people who drafted that particular legislation simply didn’t anticipate that that was even a possibility? And certainly they couldn’t have predicted the amount of leverage that the internet has given to anyone with a computer and the know-how to run a server.
↥5 People are pretty good at not taking obvious risks. No one is going to take things that look like coin flips when their livelihood is on the line. But problems like tobacco and sugar hide risks that are subtle, extremely rare, take a long time to manifest, or are otherwise easy-to-sweep-under-the-rug, and these are the kinds that companies need to be prevented from deemphasizing. For example, while index funds are an excellent long-term investment, they are not suitable for containing all of one’s wealth; there is nothing guaranteeing that you will not lose everything you’ve put in tomorrow, a fact that has been conveniently left unsaid by those who happily collect fees (however slight) from hapless investors. Put another way, if you only put your wealth in the stock market, and not other, more secured financial instruments, given enough time you will lose. This is not baseless fear-mongering either, as anyone depending on retirement funds during and after the 2008 financial crisis had to learn the hard way.
Intentionally Irrational