The Tyranny of Low Cost Strategies and the Gospel of Walmart

High Frequency Trading is in the news again. HFT is highly computerized stock trading, which secures faster execution for bigger computers located physically closer to the stock exchange. It now amounts to over half the daily flow on the stock exchanges.  Critics argue it amounts to legalized front-running, is unethical, and should be illegal.

The issue was raised starkly in a July 24 2009 CNBC interview  wherein a critic of HFT (Joe Saluzzi) accuses a proponent (Irene Aldridge) of defending unethical behavior. Aldridge’s reply:

“How dare you accuse us being unethical! We are the ones cutting margins, you are the ones being unethical.”

Ms. Aldridge’s response captures perfectly the moral flip-flop that business has achieved in the past few decades. Never mind whether HFT amounts to front-running, involves collusive behavior by the exchanges, or is unfair to retail investors, says Ms. Aldridge – the moral high ground, the Ethical Trump Card, is Low Cost. In the name of lower prices, even fractions of pennies, all is justified.

The Gospel of Walmart

Let’s leave Wall Street for Main Street. We all know the Walmart story – low prices all the time. But as a Fast Company article wrote, back in 2007:

The giant retailer’s low prices often come with a high cost. Wal-Mart’s relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line?

If revenue were GDP, Walmart would be the world’s 25th largest economy. That is pretty big market power.

Walmart’s benefits are clear: lower prices, all the time, for millions of consumers. But along with those costs come trade-offs. The reduction of brand power. The exporting of jobs. The reduction of pay and benefits for workers in the name of lower costs to consumers.

More insidiously, what we get in the Walmart deal is lowest-common-denominator consuming. We get buyers who aren’t presented with quality alternatives, can’t recognize them if they are presented, and are trained to view low price as the primary Pavlovian trigger for purchasing.

That’s how we get tramplings at 5AM holiday store openings; that’s how the US produces twice the garbage per capita of Sweden; and I suspect (though can’t prove it) it helps us move toward becoming a nation of hoarders.

Is it all worth it?

The Tyranny of Low-Cost Strategies: Linking Wall Street and Main Street

What links high frequency trading to Walmart?  There is a common ancestor in the family tree of business thinking.

In the 1970s, thinking about business strategy took an abrupt turn – from CUS to COM.  That is, from being about the company’s relationship to its customers, to being about the company’s relationship to its competitors. (If you’re interested, the leading thinkers were Bruce Henderson, Michael Porter, and the Boston Consulting Group).

By 1980, the conversion was complete: anytime anyone said “strategy,” you knew it meant “competitive strategy.”

One of the most powerful points Porter made in his classic Competitive Strategy was that there were two successful generic strategies, and the first of them was Low Cost Producer. He who got the lowest cost got the greatest volume, which led to higher market share and higher profits, which led to lower costs, and so on. It was a road toward legal monopoly, insofar as laws permitted.

Porter’s rules were learned very well: by Jack Welch at GE, by Walmart, by the mortgage business, by Wall Street traders, and by every exec ed program in every business school in the world. It became – and I do not use the word lightly – gospel truth that the highest business good was to lower costs.

The root purpose of lower costs was to gain sustainable competitive advantage for the company. But the collateral benefit, the offshoot which could be spun for great PR, was that the consumer benefited as well. Allegedly.

This insight took only a little bit of tweaking (let’s revise Adam Smith and Milton Friedman, season with a dose of Ayn Rand and a dash of Alan Greenspan, and voila!) to come up with an ideology that said not only is low cost a successful business strategy, it is also the Key to Capitalism, which in a capitalist society is also the source of ethics. Allegedly.

This is how we get to Ms. Aldridge’s high dudgeon at being accused of unethical behavior (“Moi?!”) In this all-too-common alternative view of the world,  profit underlies ethics, business success is the root of morality, and low cost is the Ur-explanation that requires no further referent point for ethical discussion.

“We are the ones cutting margins – you are the ones being unethical.” In that statement, the transformation is complete: low cost is the new moral high ground.

Be careful what you wish for.


14 replies
  1. Bob Whipple
    Bob Whipple says:

    Hi Charrlie. PBS did a nice one-hour special on this a few years ago entitled “Is Walmart Good for America?” It is a good piece, but somewhat dated now. The points they made are the same ones you bring up here.
    The ultimate conclusion to the progression is that we become dramatically less well off in total, yet Walmart can still feel thay are doing the right thing for the country by providing goods at lower costs. Quite a pickle indeed.
    I believe the “buy American” program (which by the way was actually first championed by Sam Walton – founder of Walmart) is moving the pendulum in a positive direction. Would you agree?

    • Charles H. Green
      Charles H. Green says:


      Thanks again for chiming in, always appreciate the dialogue. I actually think I would disagree that Walmart is in fact moving the pendulum.

      Their avowed strategy, as far as I know, is EveryDay Low Prices. Their original Buy America campaign lasted, I believe, from about 1985 to 1992.

      Recently they made noise about selling more goods from the United States. The following article (admittedly a year and a half old) suggests that this “Buy America Redux” program is nothing more than people shifting purchases from consumer electronics to groceries, and that if groceries could be gotten cheaper overseas, Walmart would do that too.

      For what it’s worth, I do feel the horns of the dilemma too; we have tolerated an awful lot of consumer abuse in this country in the name of “Buy American,” supporting with major subsidies some completely silly industries like cotton and sugar. There’s also a lot to be said for foreign companies coming in to invest in our country – if Toyota can build cars in Indiana more profitably than can GM, then I’m all for Toyota doing it, and if the profits go to Japan, well they deserve it for better managing. But that’s if the jobs stay here.

      It’s complicated stuff, admittedly, and I don’t want to side with the knee-jerk jingoists who’d slap tariffs on everything, we’ve all done too well by international trade barriers coming down over the years. But neither do I want to side with mindless pursuit of the lowest possible price, which is what I think Walmart is doing.

      The real answer doesn’t lie in selective purchasing; China’s cost advantages are massive, massive, and we’re never going back to competing with them. The real answer lies in shifting their strategy, from Always Lowest Conceivable Price to something else, maybe like “Best Value.”

      • Bob Whipple
        Bob Whipple says:

        Right, Charlie. I was not suggesting that the “Buy American” movement had made a big impact on Walmart – yet. Rather, I think the movement has provided some needed back pressure in many industries that is a welcome relief to the “nothing we can do about it” mentality when trying to fight the low cost providers. The impact is slow, but I see more evidence of some healthy momentum.
        Five years ago I was telling people that I do not see any counter force to the massive loss of manufacturing jobs in the US. Now I see that the price of transporting goods is helping and the whole “Buy American” mind set is starting to make a difference.

        • Charles H. Green
          Charles H. Green says:

          For a countervailing viewpoint, see Martin’s comment (entered under my name). By that view(which I share), “Buy American” is not the solution, it is the problem. Low cost providers are not the problem; the addiction to low cost is the problem. Supply is not the problem; demand is the problem.

          As long as “Buy American” means “buy low-priced schlock at high volumes and low price points but buy it from us,” all we’re doing is protectionism and causing higher costs for consumers.

          By this view, the solution to creeping Walmartism is not to compete on costs, but rather a change in Walmart’s (and our) strategy, away from lowest-cost producer and cheapo products toward an emphasis on something other than price, price, price. Perhaps quality, perhaps value, perhaps design, perhaps service – but away from the treadmill of a business and a culture entirely based on “low price all the time.”

  2. Charles H. Green
    Charles H. Green says:

    Friend Martin wrote me ex-blog with the following comment I just had to include here.
    [Martin is a British national who lived some of his career in Europe, some in the States, and is now in the Caribbean]

    The secretary I had in Milan who came with me for translation if necessary had 10 outfits (5 for winter and 5 for summer). She bought one new outfit each year I was there, accessorized very creatively, and always looked a million dollars because she spent a lot on very few clothes.

    When I got back to the States I was assigned an aide to assist me with the role. In the two years she worked for me I never saw her in the same clothes twice; but she rarely had clothes that were remarkable. She spent a lot on a lot of clothes but not much on each outfit.

    That pretty much sums up the difference between the need for a differentiation strategy in Europe and a low cost strategy in the US.

    Now, US union folk are into acquiring stuff, but, as with my assistant, more cheap ‘stuff’ is better than less ‘super quality ‘stuff’. So if you’re going for the middle class market, you’re absolutely into more cheap stuff. Add to that, going down the cost curve since Reagan has meant outsourcing.

    So, the union man’s buying habits were at the heart of why he was increasingly becoming unemployed.

    Yes it’s a simplification but, I think, an accurate one.

    • Franklin
      Franklin says:

      Friend Martin’s American aide sounds something like my late mother. My mother was frugal but liked to shop, so she ended up buying lots of cheap clothing. (She preferred Marshal’s to Walmart.) She also was a physician, so she could have afforded expensive goods. She just did not think that way.

  3. Franklin
    Franklin says:


    There are a lot of disparate threads woven together in that post, and I am going to argue with several of them.

    First, Walmart is a bad illustration of your two of your theses. Whatever it’s failings it is not because it doesn’t put its customers first. It has been an aggressive competitor, but in the service of customers. Providing them inexpensive goods is its foundational ethos. You are absolutely right that it is tough with its supply chain, and that has had negative consequences for American workers. One can use unethical
    means to ethical ends. Still, giving people bargains is in itself an
    ethical, perhaps even a noble goal. Second it was a well established business before the sea change that you describe in corporate attitudes took place. While tiny compared to its current size, it was a very substantial company when Michael Porter published “Competitive Strategy. I doubt if that book had any impact on Sam Walton or his immediate successors.

    Second, your description of Porter’s “Competitive Strategy” doesn’t match my memory. It is over 30 years ago that I read it, so maybe I don’t remember it perfectly, but it seemed much more descriptive than prescriptive. The brilliance of the book was in clarifying the relative negotiating power of businesses of various sizes in various relationships and circumstances. A reader of that book was going to be able to understand a lot of stuff that had been going on since the invention of trade. There are serious ethical issues in those power relationships, and Porter did not discuss them in ethical terms. I personally think that was a reasonable decision, as the complexities of the ethical discussion would have vastly expanded the size of a large book, and distracted from its analytic clarity. Nonetheless, I think there was a value to the book consistent with your ethos. A small businessperson that reads the book may avoid some of the serious risks inherent in working with larger ones. The larger companies may have learned some things that enabled them to better screw unwary business partners, but I kind of think they would have known how without Porter. The material on being lowest price, or lowest cost was about the least interesting, as the least original. Adam Smith wrote about pin factories in the 18th century and the efficiencies that specialization brought. I am sure the blacksmiths of the 1770s felt they were facing unfair competition. Ned Ludd and his followers certainly believed they were wronged when machine weaving put the handweavers of of business in the early 19th century. John D. Rockefeller was the low cost producer of kerosene, and Henry Ford of automobiles. They each put hundreds of less efficient competitors out of business, but they improved the lives of their customers.

    I think Bruce Henderson (who was the founder and leader of the Boston Consulting Group) was a lot more pernicious. He was harmful because he was wrong. His ideas do fit your thesis about lost customer focus, but they more solipsistic than competitive. He was less interested in the relations between businesses than within them. BCG had two important ideas, the Experience Curve and the Product Portfolio Matrix. The experience curve was a very interesting idea , and has a genuine foundation, learning curve which is a documented
    phenomenon for people, and fit the performance of American military
    manufacturing during WWII.. Henderson and BCG expanded the notion to an inherent constant improvement with experience. The more experience the more improvement consequently the larger the company the more experience, thus greater efficiency than smaller ones, and an inherent and ever increasing competitive advantage. Therefore the largest businesses would inherently be more efficient than smaller competitors, and their competitive advantage would not only be sustainable, it would increase. If this were true a lot of once huge American firms would still be market leaders, rather than out of business. (And the story of Ford and GM in the1920s should have been an adequate disproof.) If BCG ever discussed the actual mechanisms of underlying the experience curve, I
    never heard about it. But the idea does have merit. Toyota and other Japanese auto manufacturers actually managed their experience curve.

    The product portfolio matrix made the experience curve the basis for the internal investment decision
    making of large corporations. CEOs following his advice destroyed a lot of viable “cash cow” businesses by starving them of adequate reinvestment. In order to invest in “star” growth businesses. Most of those investments never paid off.

    Finally, High Frequency Trading. I looked at the interview you cited, and on the one hand there was a man conflating HFT with front running. You can have front running without HFT and HFT without front running. HFT is a major source of revenue for the stock exchanges, which means investing would be more expensive for low frequency traders without it. That doesn’t make it ethical, but it does create some societal benefit. Ms. Aldridge is wrong that this benefit intrinsically makes her activity ethical, but I think her reaction is forgiveable given that Mr. Saluzzi was trashing her profession for sins many of its members were not committing. In any event, for a buy and hold investor, or a mutual fund investor, HFC is irrelevant. Because HFC practitioners are making tiny amounts of money per share on huge investments their activities largely reduce volatility in large stocks, and they don’t trade in small one. HFC will cost retail investors pennies on some trades, and give them pennies on others. A small active investor could be on the wrong side of a lot of these trades and be hurt, but it will be a statistical anomaly. For the investing community as a whole (to distinguish from traders) the net impact is lower transaction costs, and no impact on the long term changes in values of individual stocks or the market as a whole. Those occasion when a glitch in a computer program actually affects a stockprice significantly, it offers the astute small investor a buying or selling opportunity.

    In summation, I don’t think High Frequency Trading and Walmart can be compared in meaningful ways, and the theories of Michael Porter and Bruce Henderson are irrelevant to either.

    • Charles H. Green
      Charles H. Green says:


      Thanks for a terrific response; I am very grateful to have someone like you spend the time and interest to share your obvious familiarity with this territory. And I have to give you props for the phrase “ethical fruit salad.”

      OK, let’s see.

      I agree that you can have HFT without front-running, and you can have front-running without HFT; they are different things. But I wasn’t claiming they were, merely that there were cases where that was a reasonable charge.

      Ms. Aldridge’s answer, unlike yours, didn’t rest on “there are cases and there are cases,” but rather on, “but we’re providing lower costs.” In other words, she invoked lower costs as a way of trumping a legitimate ethical inquiry.

      Was she provoked? Yes, she was, as you rightly noted. But I think you would agree she probably meant it; we often speak the truth under duress.

      I see you as being on Aldridge’s side in this debate, i.e. in your words, “For the investing community as a whole (to distinguish from traders) the net impact is lower transaction costs, and no impact on the long term changes in values of individual stocks or the market.” In other words, lower costs are the ultimate economic (I’m not claiming ethics here) rationale.

      I am on Saluzzi’s side in this debate. I believe that the relentless focus on costs exposes us as a society to dangerous side effects. In the case of HFT, it exposes us to flash-crash scenarios, greater incidences of Black Swan events, and overall larger volatility. As Saluzzi notes, greater volume does NOT necessarily translate into greater liquidity, and to conflate them is to ignore risk. The tendency to end the analysis at “lower costs” ignores far greater risks at the systemic level. That’s more relevant to consumers than the fractional improvement in costs per transaction; it has contributed to the decline in trust of individual consumers in the equity markets. That’s non-trivial.

      To make the parallel with Walmart, the relentless focus on price, price, price which is the heart of Walmart’s strategy has some serious knock-on effects as well, the most obvious of which is US employment and wages, but can be extended to cultural vapidity as well (see Martin’s comments below).

      I did not mean to suggest that Walmart has behaved unethically in any direct sense. There is nothing wrong with support of consumers, and I completely accept your description of their strategy. At the same time, the best of motivations, pursued to the Nth degree, can occasionally result in effects that are the opposite of what was intended.

      An obsession with price, or with design, or with process, can end up looking dysfunctional or even unethical, if not tempered. For examples, look at the debates around Steve Jobs’ management style, or around the early days of business process reengineering. Maybe the best example – regardless of what position you take – is the current debate in the US on abortion. Either extreme view generates ethical contradictions.

      It’d be very interesting to resurrect Sam Walton now and see what he thinks of the effect his company has had on the US.

      In the discussion on Porter, BCG et al I tried to explore the theoretical basis of this kind of thinking. (By the way, Porter would be thrilled to know someone read his material so rightly, and remembered it so well). I agree with you that Sam Walton most likely didn’t read Porter. At the same time, the fact that the average Tea Party member hasn’t read Hayek doesn’t mean they don’t repeat some of his arguments. Not all thoughts require direct linkage to have impact.

      In your (excellent) rendition of this material, let me suggest you leave out one perspective, which is the before and after of competitive strategy. When Henderson built BCG around competitive strategy, it was a conscious decision to take a backwater and build it out. Before then, strategy was about customers. After then, it was about competitors.

      I have always argued that you can’t have ethics without an Other with whom you have some potentially positive relationship. By that definition, a customer can be an Other. A competitor cannot.

      When Porter wrote his work, it was from the perspective of an academic backwater, the field of Industrial Economics, basically about how to prevent monopolies from forming (because the natural tendency of unregulated business is to collude, to get rid of competition).

      What Porter did was to cross the Charles River from the economics department to the business school and turn that work on its head. Instead of teaching government how to prevent monopolies, Porter showed businesses how to take the same ideas and get as close as they legally could to monopolistic behavior, i.e. to get rid of competition.

      The timing of the two thinkers was fortuitous, abetted by things like the invention of the spreadsheet. It took off like wildfire. In effect, business said, “This customer stuff is too hard, and it’s too indirect anyway. Let’s just focus on beating the other guy’s brains out so we can take the money directly, and not have to spend all that time and money developing products and services.”

      That tendency – and I’m not claiming it was conscious, just that it was a tendency – directly maps to the move away from an Other-focus, which I consider ethical, to a competitor focus, which I consider non-ethical, or a-ethical (not the same as unethical).

      And the point of the spear, the most obvious way in which this tendency showed, was the obsession with low cost. (You are quite right, Porter wasn’t the first to say this, but it is, like it or not, probably the thing he’ll be best remembered for, along with Five Forces).

      Welch at GE, and I have no doubt later management at Walmart, very consciously took this gospel to heart. They departed from Sam Walton’s no doubt genuine desire to bring low prices to consumers, and turned into an obsessive self-justifying death spiral of low prices, low costs, low wages, low aesthetics, low regard for communities – all justified with the mantra “but it cuts costs for the consumer,” as if that settled everything.

      It IS, in my view, exactly the same as the debate around HFT. The invocation of “but it cuts costs for the consumer,” is exactly what Aldridge uttered, and it strikes me as revealing that, in a moment of pressure, she spoke the truth – her truth – that this meant she was in fact the ethical party here, and the others were being unethical.

      I’m struggling to find a sharper, clearer way to state this insight, obviously I’m not there yet, but thanks to you Frank for forcing me to try and get a little better at it.


      • Franklin
        Franklin says:


        I wrote you a long complicated response and you wrote me a long complicated reply. Instead of replying in sequence, let me reply with the simplest issues first and finish with the more complex ones.

        If Michael Porter was never born, businesses would be pursuing the low cost strategy, as businesses have been since long before he was born.

        All I know about Bruce Henderson and BCG is second hand from Business School classes and the business press so you may well know more than I do. But my understanding is that Henderson wasn’t really interested in competition the way I think about it, or the way you think about it. He did not talk about examining your competitors and responding to them. He largely treated competition as a constant environmental factor, rather like gravity. His focus was on the internal decision making functions. Nothing I have read about his work shows any interest in customers or serving them. but it doesn’t show any interest in screwing suppliers or competitors either. I doubt he had any influence on Walmart.

        You believe that customer focus is an insufficiently practiced virtue in 21st century American business. I believe that Walmart is customer focused. As you say, ideals taken to an extreme can be dangerous, and perhaps Walmart does that. The evidence is inconclusive. The Walmart advertising I have seen is about either about low prices or quality goods at low prices. They don’t advocate shop til you drop or buying things you don’t need.

        I shop at Walmart once or twice a year. The last last thing but one that I bought there was a lettuce spinner. It was inexpensive and does just I what I wanted it for. Previously I had looked in many other stores. Few had them, and they were ridiculously expensive in the ones that did carry them. Walmart was the only store I found which had it at a reasonable value. The last thing I bought there was my iPad, clearly not schlock. I have only bought groceries there once, but I have walked through the groceries sections, and the selection and quality was comparable to good supermarkets I shop at. So I think Walmart meets many of the criteria you set for ethical businesses. It seeks a long term relationship with its customers. It is less prone than most public companies to being pushed in destructive directions by Wall Street or the mantra of shareholder value. In previous generations discount retailers have tended to move up the value chain to higher profit items and customers, abandoning the customers that it began with. Walmart has not.

        Walmart is a very tough customer for its vendors, but it is also know for working with them to find constructive ways to reduce cost. I haven’t heard of it reneging on contracts or stretching out payments as many other large businesses do. Lots of other accusation are leveled against the company and I have no doubt some are true, perhaps most. I would not want to work for them. But it is good to its customers, fair with its vendors, and I don’t see how we can hold it responsible if its customers prefer to buy lots of junk instead of limited amounts of quality, as you discuss in Friend Martin’s post.

        Walmart is not angelic. It is run by fallible self interested people, as all businesses are. Certainly its success has been at the expense of competitors and their employees, but I don’t know how we can ask businesses in a free enterprise system to protect their competitors. I don’t think anyone knows how or where to draw those lines, and there are terrible dangers to society from trying. Governments intervene, and sometimes wisely, but all too often for the benefit of businesses that are performing poorly, and at the expense of consumers and economies.

        High Frequency Trading is the hardest issue for me because I understand it the least. I think that is because the limited journalism about it has not been adequate and lots of things are conflated. In the CNBC piece it is conflated with front running, and it is also sometimes conflated with the computer programs run by brokerages. We know these programs sometimes malfunction and the demands of HFT will magnify the effects of the problem, if we thought HFT were socially beneficial we would not blame it.

        If HTF it lowers trading costs for low frequency traders that is a societal plus. That does not make the activity ethical, but it does mean that the activity needs to be measurable harmful to beyond that benefit to be a problem. The journalists in that piece agreed that some HFT is arbitrage and that arbitrage is ethical and societally useful. When front running is involved, it is illegal. But as far as I can tell mostly it is zero sum game gambling, or rather gambling in a casino where the house takes a cut. That makes it a negative sum game, so I don’t know how it is viable. Nonetheless if people who can afford to gamble in legal ways, I don’t see an ethical issue. If a mutual fund engages in it with small investor money, that would be very bad, but if sophisticated investors do it on their own accounts, or in hedge funds, I don’t think stupidity is unethical.

        You did not dispute my assertion in the previous post that the impact on true investors is minimal. That leaves the issues of HFT induced crashes. The risk is demonstrably there, but I don’t know how we can tell how big it is. The Knight Trading debacle was not consequential to society at large. The Flash Crash of 2010 may have affected the economy at large, but far less than the Gulf Oil spill or the Japanese earthquakes or the Thailand floods.

        For me, with the evidence I have seen, HFT seems ethically neutral. I would hope that knowledgable, mathematically sophisticated people are looking at the subject on behalf of the SEC and the Federal Reserve. It certainly deserves regulatory scrutiny. I think a transactions tax would be an appropriate government intervention, which would largely dry it up.

        To end with the primary focus of your blog, HFT is a transactional activity. As long as front running is not involved, I see no no issues of trust or trustworthiness. it may be the most impersonal activity in the history of business: computer talking to other computers. If front running is involved, the ethics are very different, and the sources of the trading data are committing a huge breach of their fiduciary obligations.

        • Charles H. Green
          Charles H. Green says:


          I’m going to let you have the last word on this one. There’s much more to be said, but I hope others will chime in; you and I can happily continue in the email green room. And many thanks for such thoughtful contributions.

  4. Ronald
    Ronald says:

    I read the disjointed blog post, comments & rebuttals below, and I’m still not sure what your position is… original article scolds Wal-Mart and appears to say that business drove the consumerism trend. Rebuttals say it’s not Wal-Mart’s fault, it consumers. The tie in to HFT – non-existent and tangential.

    So the point of your blog is trust. America’s middle class trusts Wal-Mart to deliver what they want – inexpensive, quality goods. If American’s didn’t want that, Wal-Mart would change their strategy because they are focused on the customer (if low cost was everything, they wouldn’t carry Apple products). As for your friend Martin, my fellow ex-pat Brit, his experience with two women is not indicative of the whole. ASDA (Wal-Mart), Cash-and-Carry (Sam’s / CostCo), IKEA, and other discount retailers in UK/Europe are destroying competition because they saw the vastly underserved lower- and middle-classes and marketed to their customers’ needs, and those consumers trust them to deliver their needs. Americans trust Wal-Mart, English trust Wal-Mart … seems like they are doing a pretty damned good job of trust.

    I must say, the line that really sticks out is this – “low cost … is also the Key to Capitalism.” WRONG! The key to capitalism is offering products that people want at a price they are willing to pay. That is capitalism defined. I’ll again use Apple as an example… iPads/iPhones/Macs are not cheap (overpriced, in my opinion), but the demand is there for easy, intuitive interfaces in sleek packaging. Apple is filling their customer’s needs with a product people want at a price they are willing to pay… again, capitalism defined.

    • Charles H. Green
      Charles H. Green says:


      Many thanks for weighing in. Let me try and simplify my point.

      I am saying that the perspective of “low cost” dominates discussion of business strategy, and of the US consumer.

      Porter articulated two generic strategies, one of which was low cost. Walmart is a quintessentially American company. Outsourcing for the sake of low cost was an American innovation. As to who drove it, business or the consumer, I’m with Martin – it’s both. (By the way, Martin clearly meant secretaries as descriptive, not probative).

      Apple is the glorious exception in the US, not the rule. The US consumer motto is, “cheaper by the dozen,” and our rallying cry is, “Act now, prices will never be lower.” Low price gets used, precisely as you’re using it, as prima facie evidence of giving customers what they want, with the justification that, after all, if they didn’t want low prices, they’d be buying something else.

      That logic has its limits. It also gets applied to consumers taking out usurious loans in ghettos (“they didn’t have to take out the loan”), to kids buying 64-ounce sugar-drenched flavor-engineered faux food (“they could’ve bought a banana if they’d wanted to.”).

      If the definition of consumer wants is consumer behavior, then the producer has absolutely no moral obligation. And I believe that’s not right; the relationship between consumers and behaviors is bi-causal.

      The HFT quote did just that: it countered an ethical argument with the protest “but we’re lowering prices.” And I’m saying it’s not a valid argument.

      You’re right, the Europeans err in the opposite direction, and I take as much glee as it sounds like you do in seeing them get their lunch handed to them for anti-consumer behavior. But there’s a limit on the other end, and we’re pushing it, IMHO.


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