Business Success when there's no Middle Class

[jon.a]

What's your deal with these questions? They don't feel genuine.

What do you think?

You asked what people think.

 

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[JAJT]

There will always be producers and consumers.

I can't envision a first world society that doesn't have this.

There's lot of disagreements about which way society is going, and how income inequality / unemployment will be handled going forward (due to things like automation - which is a genuine concern) but I don't think any model says "we run out of consumers and the rich sleep on piles of money while the poor all starve to death with nothing in between".

Even the extreme-end concept of universal basic income where we just give cash to everyone out of taxes assumes people will still be able to support themselves and consume.

Literally our entire society would fall apart if people weren't buying things.

Shit - even 1984 and Brave New World (two very opposite interpretations of a dystopia) kept production as a concept that needed to be maintained.

Now - getting back to the original point of not wanting to sell to poor people - there's some logic in that. That's why "target markets" are a thing. Don't sell Ferraris to teenagers - sell them to retired Italians.

 

[MJ DeMarco]

Guys, please try to keep the politics out of it...

Discuss as if the premise were true.

Kinda like saying... "Hey, if the stock market declines by 30% this year, what will you do?"

The premise can be argued, debated, and speculated, but the question speaks to what you will do IF it occurs - not IF the market will or will not decline 30%.

Thanks!

 

[NuclearPuma]

What happened to the saddle makers with the invention of the automobile and motorcycle?

Society moved on.

 

[CPisHere]

I've been thinking about where America is headed, and when I look 20 years into the future, the Middle Class will be crushed (even more so than it's already been the past 20 years). Public policies will encourage it, and technology will enable it.

As a business owner, I don't want to be serving the Middle Class. And many of us are. The future is low priced goods/services to everyone, or super high priced goods/services to a small group.

What do you think?

*EDITED - removed the word Income Inequality because it makes people crazy.

 

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[Paul Schuyler]

Always tough to predict the future but I too think about this stuff all the time. A lot of predictions about automation and so on are pretty ominous with respect to the middle class as we know it.

But there are some pretty solid trends. Freelancing is only on the rise, and depending on which study you choose to believe it appears the economy will be largely freelance-driven in 20 years or so. So are multi-skilled careers where one career changes into 3 or 2 with a specialty and so on. You know where the lawyer switches to become a programmer and then creates legal software. Job retraining, self-education, and freelancing are all pretty safe bets in my view. As are remote working tools (telepresence), individualized services (insurance), and whatever other shovels might serve these broad trends.

 

[Kak]

This is a good discussion. I don’t have charts or proof but with the rise in cancelling cable for majority of people imo proves the majority does not have disposable income they once did. More people are in more debt than ever before. Especially the young people.

I have friends who are on suicide watch after coming to the realization their 85k piece of paper was worthless and they cannot find jobs. I watched a video a while back about this generation of people 30 and under are under a mass depression engulfed in technology and social media, losing their social skills day by day. I don’t know the truth of that theory but I will say the people I know from high school and college the majority of them are not happy with their lives. Not happy people don’t spend frivolously on things they don’t need.

The rise in canceling cable proves nothing about incomes. There are way more factors at play than expense such as alternative forms of entertainment. I would say smart TVs are a much larger reason for shedding cable.

More people in debt implies more spending, not less, the debt didn’t create itself.

Unhappy people also statistically do spend more, as a percentage of their income, than their content and happier counterparts. That, however can be a cyclical relationship. They spend because they are unhappy, and they are unhappy because they spent themselves into debt. Dopamine driven individuals have manic tendencies like this.

 

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[Kak]

I'm point out a Fact and suggesting we should put ourselves in position to succeed under such a system.

You aren’t though. You are pointing out “facts” according to popular opinion. Not actual facts.

Not that income inequality doesn’t exist... clearly it does. However the argument over it is an intentionally misguided focus.

By the world’s standards, Americans are filthy rich. The number one problem among America’s poor are health issues associated with obesity. Yeah. One American “poor” person eats more food than 5 people in Venezuela... Which, as it turns out has extremely low income inequality.

 

[Sagemoney]

I've pondered this question as well.

What I truly believe will happen(im an optimist) is automation will of course eliminate thousands of jobs and the upper class will explode in wealth, but with that automation, goods will become insanely cheap and the 40 hour work week will be reduced to say 10-20 with more vacation time and ability to persue hobbies and freedom.

The world will ironically start becoming more unscripted .

When people think automation they default to dystopian elysium esque world. I see star trek honestly.

No need for a car when automated drones drop off groceries, self driving cars to ride share to work or work remotely. Sure a few people will become trillionaires but obviously they deserve it because they've made society a more efficient and free place.

So to sum it up, you have to stop looking at the rich as some evil class who will hoard wealth while millions starve to death aka Elysium. In reality most are just a bunch of problem solvers looking to improve humanity and with those improvements they gain wealth while society gains liberty. A win-win.

 

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[NuclearPuma]

Question your assumptions.

The lower class has shrunk and the upper class has grown.

The shrinking middle class is people moving into the upper class.

That is a good thing.

 

[Kak]

What's your deal with these questions? They don't feel genuine.

Why don’t you think my questions sound genuine?

Do you think there’s no way someone could possibly question the palpability of income inequality?

Do you believe everything you’re told to believe?

 

[CDM]

My take is simply that the pool of potential customers with disposable income is shrinking.

Source?

Oh wait... here’s one:

Interactive charts by the OECD

It would seem your assumption is incorrect.

 

[NuclearPuma]

Innovation and efficiency gets rid of boring menial jobs people tend to hate. Maybe their displeasure is a personal defect in modern society as gratefulness is in short supply.

The invention of the washer and dryer and roomba gave servants less to do.

The robotic arm that cooks hamburgers means someone is not having to stand over a hot greasy stove flipping burgers for hours.

Population dynamics predicts that human population will reach a peak then a rapid decline due to exhaustion of resources faster than they replenish. This is not a technology driven process but instead just a fact of population explosions. It happens to animal populations and will happen to people. This is when you need to be worried about fewer customers and also being positioned in the world to survive it.

 

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[ZCP]

What i see from my kids is they don't buy anything.....
They need a smart phone, a ps4, and time.
No cars, no sound systems, no going to the mall.
They want to hang out with their friends. Whether it is fortnite or on the basketball court. Very social.
Not really into buying a bunch of stuff. Content / skins / packages for their online players.
Pizza. Occasional movie. Few bucks for uber.

Eventually they will get out and get jobs and have kids and buy houses / cars / etc. Seems the new play though is for online content, subscription boxes, and experiences they can have with their friends...... (they just spent $70 on wrestlemania and watched with friends.... they had a blast for 4 hours and loved it)....

 

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[Kak]

I've been thinking about where America is headed, and I see the trend of income inequality getting worse and worse.

When I look 20 years into the future, the Middle Class will be crushed (even more so than it's already been the past 20 years). Public policies will encourage it, and technology will enable it.

As a business owner, I don't want to be serving the Middle Class. And many of us are. The future is low priced goods/services to everyone, or super high priced goods/services to a small group.

What do you think?

What do you believe income inequality is?

Why do you think income inequality is a problem?

Why do you think income inequality is growing?

 

[Sagemoney]

What i see from my kids is they don't buy anything.....
They need a smart phone, a ps4, and time.
No cars, no sound systems, no going to the mall.
They want to hang out with their friends. Whether it is fortnite or on the basketball court. Very social.
Not really into buying a bunch of stuff. Content / skins / packages for their online players.
Pizza. Occasional movie. Few bucks for uber.

Eventually they will get out and get jobs and have kids and buy houses / cars / etc. Seems the new play though is for online content, subscription boxes, and experiences they can have with their friends...... (they just spent $70 on wrestlemania and watched with friends.... they had a blast for 4 hours and loved it)....

I see so many people mentioning this and with the impending death of the shopping mall, I started thinking that land could be replaced with massive social entertainment centers like a theme park but on a smaller scale. Throw in VR/AR, rock climbing, gaming lounges, weed lounges, trampoline zones and whatever else kids love to do now all under one roof.

Not trying to derail the thread.

 

[EsJay]

Just yesterday night I watched Michael Moore's Documentary Capitalism I don't necessarily agree with all the points but had similar thoughts and raised quite a few serious questions.

As corporates drive for profits and efficiency, specially with all automation, robotics etc and start dismantling employed middle-class I really can't imagine how economics will work in future society.

If there are no consumers (aka middle class) how will corporations survive? Businesses's' own survival is very much dependent on strong earning middle class. If there is no middle class who will Walmarts, Targets and Fords will sell their products to? Only Ferraris and Lamborghinis (aka selling only to few) can't drive economies and is not a sustainable model.

One possibility I see, is going back to past before industrialization which essentially was a fastlane society where most of the middle class had their own small businesses employing few people within each.

I've been thinking about where Amearerica is headed, and I see the trend of income inequality getting worse and worse.

When I look 20 years into the future, the Middle Class will be crushed (even more so than it's already been the past 20 years). Public policies will encourage it, and technology will enable it.

As a business owner, I don't want to be serving the Middle Class. And many of us are. The future is low priced goods/services to everyone, or super high priced goods/services to a small group.

What do you think?

 

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[Kak]

If there are no consumers (aka middle class) how will corporations survive?

Under what circumstance would there be no consumers?

If the middle class (as compartmentalized and defined by who?) were gone, where did they go?

 

[Kak]

Consumerism isn't going away. It's shifting.

Shifting how though? Prove it.

The average American income is shifting up.
The median American income is, in your words and I didn’t verify this, shifting downward.

Assuming the above is true, what does that data mean? Factually it means the majority of earners are no longer “in the middle” they have grown above it while the derelicts are still the same unchanged derelicts. This, on a whole, bodes well for consumer based businesses.

My point is you need to take whatever the label of “middle class” describes out of the picture. Median income is a bullshit statistic unless you use it to see a bigger picture.

People aren’t fleeing America. People are largely employed in America. A decent percentage of the population blows everything they make or close to it.

So, I disagree, I believe the population of people with disposable income is growing.

 

[garyfritz]

Question your assumptions.
The lower class has shrunk and the upper class has grown.
The shrinking middle class is people moving into the upper class.
That is a good thing.

That's not what Pew Research found. In a study of 229 metro areas, upper and lower class grew roughly the same: 160 metro areas showed an increase in lower-income people, 172 showed an increase in upper-income people. 203 metro areas (89%) showed a decrease in middle-income people, defined as people who make between 2/3x and 2x the national median size-adjusted household income. That data says very clearly the middle class is shrinking, with people moving up AND down about equally. (This study looks at the number of **metro areas** that changed, not the number of **people** who changed, but it should be fairly representative.)

America’s Shrinking Middle Class: A Close Look at Changes Within Metropolitan Areas

That study is 2 years old, but I don't think much has changed.

 

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[Clueless Newbie]

I've been thinking about where America is headed, and when I look 20 years into the future, the Middle Class will be crushed (even more so than it's already been the past 20 years). Public policies will encourage it, and technology will enable it.

As a business owner, I don't want to be serving the Middle Class. And many of us are. The future is low priced goods/services to everyone, or super high priced goods/services to a small group.

What do you think?

*EDITED - removed the word Income Inequality because it makes people crazy.

There is another side to this story:

Middle class might be shrinking in the US but it is expanding really, really fast all over the world. (I'm saying might because not everyone here agreed).

Take a look at the incredible growth of Bejin: 1990 - 2010

What does this mean for fastlaners?
It means that we will have a HUGE pool of people that can afford to pay us for improving their lives.

Let's say you create a kickass app that solves a huge problem.
For example: You create an addictive Iphone/Android game that teaches teenagers math.

Parents from all over the world (in the billions) would be more than happy to give you a $1 or $2 for that app. If you solve a hard problem, it will increasingly become much easier to be mega wealthy.

When economies of scale is involved, the price point can be a little as a dollar.

And, if you're worried about the US middle class shrinking, always remember, when there are huge problems, there are opportunities to provide massive value. May be your business can help people who are left behind join the middle class.

 

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[Deleted52409]

A lot of people on here won't want to hear this but basic universal income will one day be an absolute necessity.

Without it there will be everyday violence on the scale of the French Revolution. People with nothing to lose and no future will have no problem killing you.

The way I see it is that technology is eventually going to enable a form of socialism that would be capable of keeping everyone comfortable. It kind of reminds me of how humans are portrayed in the wally movie:

View: https://www.youtube.com/watch?v=s-kdRdzxdZQ


I guess we'd have to develop a hierarchy where the major decisions are made by the producers??? Regardless the future will be very interesting.

 

[CPisHere]

Income Inequality is the uneven distribution of income. Some Income Inequality is inherent in any system, particularly Capitalism, and not a problem in and of itself.

America is near it's all-time high point of Income Inequality, and it has been rising for the past 30 years. Median wages have gone down for America's Middle Class.

Extreme Income Inequality, where there is no wide distribution of income through a Middle Class, has LOTS of issues. It means there is not a large base of people with disposable income to sell to, making it harder to start/grow/own your own business. It means substantially less opportunities for the majority of children.

I'm not complaining about this. I'm point out a Fact and suggesting we should put ourselves in position to succeed under such a system.

 

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[Kak]

Income Inequality is a fact, so are median wages - even if you find it misleading.

Like I said, I'm not complaining nor am I suggesting to support Socialism or something. I'm pointing out that the Market is changing, and we as Business Owners should adapt.

I didn’t say it didn’t exist.

Disparity of outcome exists because we have equal initial opportunity.

You can’t have the one without the other.

 

[CPisHere]

I've pondered this question as well.

What I truly believe will happen(im an optimist) is automation will of course eliminate thousands of jobs and the upper class will explode in wealth, but with that automation, goods will become insanely cheap and the 40 hour work week will be reduced to say 10-20 with more vacation time and ability to persue hobbies and freedom.

The world will ironically start becoming more unscripted .

When people think automation they default to dystopian elysium esque world. I see star trek honestly.

No need for a car when automated drones drop off groceries, self driving cars to ride share to work or work remotely. Sure a few people will become trillionaires but obviously they deserve it because they've made society a more efficient and free place.

So to sum it up, you have to stop looking at the rich as some evil class who will hoard wealth while millions starve to death aka Elysium. In reality most are just a bunch of problem solvers looking to improve humanity and with those improvements they gain wealth while society gains liberty. A win-win.

You can't even mention the word Income Inequality without people assuming you hate rich people. I don't hate rich people. I'm no Socialist.

I'm a business man looking at where the market is moving. And my view is that you do not want to be relying on a large base of people with disposable income, because you will be serving a non-existent Middle Class and be out of business.

If that's your current customer base, be looking to pivot or sell.

Edit: There are also huge implications for Real Estate. I don't want to own commercial retail property, or middle class rentals. I want to own high-end homes or low-end apartment complex/rentals.

 

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[Kak]

I'm a business man looking at where the market is moving.

Dude. You keep doing this drive by. That is why I keep asking questions.

Of course you are supposed to adapt to changing business and market environments, however, you are using your EFFECT that "the middle class will disappear" to justify the cause "income inequality". You haven't even attempted to prove the assumptions... You just call them FACT and move on.

 

[Kak]

Income Inequality is not the cause of the Middle Class disappearing. It is a symptom of it. The only thing I said about the cause was "Public policies will encourage it, and technology will enable it."

I should have never mentioned the word Income Inequality because it obviously makes everyone assume this is political. It's not political.

I’m not making it political.

You made the claim the population of people with disposable income is shrinking as fact.

I disagree and am very bullish on consumerism and wanted to know how you landed on your assumption, but you think I’m just arguing with you.

Does income dictate net worth? No

Shouldn’t consumption levels be more pertinent to your argument?

 

[NuclearPuma]

So long as there is action inequality there will always be income inequality.

The alternative is slavery where actions are forced.

Every "universal income" distribution will not be spent equally across society.

You give everyone an "income" payment of $10,000, wait one month. Some people will be bankrupt and have spent it all and others will have doubled it.

 

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[CPisHere]

I was on the Lincoln website the other day because I’m considering a Continental. They have come up with a untraditional lease model. Basically you pay X per month and EVERYTHING is taken care of. You can have the car for 1 month, 6 months or 2 years... they just quote you a price and you start paying. It includes insurance too. Kind of compelling to me honestly, might be great for a company car.

Cadillac has something similar too... These big car companies must be seeing the same trend.

Although, when I leased another car recently, there was a lack of pride of ownership... I didn’t think I would care, but I kind of did.

Following the same trend of swaping and not committing to things... What if a company that owned apartment complexes across the US did the same? You could pay one monthly fee and go from place to place, furnished apartments available... 2 weeks- 6 months what ever.

My country club is like that. I can usually find a Clubcorp property wherever I go and I have access as if I were a member of that club.

The lack of interest in ownership is partially a psychological shift (ownership = higher risk), partially financially driven (people don't have cash to afford down payments/tax incentives), and partially because as businesses have responded to 1 & 2 the options are vastly improving.

This is the first I've heard about Lincoln, but we will be seeing more and more of this. Tesla's plan is to let you rent out your car while you don't need it utilizing their self-driving technology.

To take it even further, organizations are no longer wanting to "own" employees - preferring to outsource majority of non-core operations / utilize freelancers and contractors.

 

[advantagecp]

I've been thinking about where America is headed, and when I look 20 years into the future

Do you know how long Eternity is in the Fastlane? About 5 years. So stop navel-gazing and stop worrying about 'income equality' 20 years from now.

 

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