Laziness and Capitalism
By @edent
· capitalism choice utilities · 2 comments · 750 words · read ~454 times.
We moved house recently. It's always fun to see what choices the previous owners made - orange paint in the bedroom? Yeuch!
While some choices are purely subjective - those light fittings? - other choices are simply illogical.
Let's take water meters. Anyone in the UK can get a water meter fitted for free. The alternative is that the water company literally make up your bill!
"Hmmmm, four bed house. Probably means kids. Lots of baths, I reckon. Bet their washing machine is ancient. Let's charge them loads!"
After receiving the first extortionate bill from Thames Water, I booked a free meter fitting. A chap came one day to assess the suitability of our supply (it was fine) then a few weeks later another guy turned up and spent 30 minutes fitting it.
Our water bills are now 50% lower than they were before.
Virtually no effort, and I'm saving hundreds of pounds per year. Why wouldn't you do that?
It was the same for Gas and Electricity. The previous owners were on what looked like the most expensive tariff possible from British Gas. A few clicks of a mouse and we were switched to a competitor with far cheaper prices.
I know the previous owners had Internet and phone access. I know that they were available during the day to let workmen in as needed. I also happen to know that they were on a fixed and limited income.
So why would people in that situation not engage in one of the few redeeming features of capitalism? Were they too lazy? Did they not know that switching was possible? Did they simply not like money?
I think the reason is that the cumulative effect of choice in every sector of our lives acts as a significant mental tax. The repeated demand that we should "shop around" and "compare the market" and "get the best deal" is incredibly inconvenient for most people.
Every single day we're bombarded with the message that someone, somewhere, is offering a better deal on:
- Car, home, health, travel, insurance.
- Petrol stations.
- Groceries.
- Bank accounts.
- Internet packages.
- Phone line rental.
- Credit cards.
- TV subscription services.
- Gas, electricity, water.
- Gym membership.
- Pension funds.
- ...
And so the list goes on. Is it any wonder that people simply opt-out of this process? Every time my home insurance comes up for renewal, I sigh. It means a couple of hours of my free time comparing prices, negotiating with my current supplier, switching to the new supplier, making sure that I have a copy of all the new details - now multiple that time-sink by every item on that list.
For people without excellent financial skills, it can all be very stressful. Trying to work out the best deal, what the catch is, when the money will be taken, whether prices will go up, is an incredibly frustrating task.
This lack of switching is a recognised problem.
Solutions
The UK is awash with advertising telling people to switch supplier - and, admittedly, counter advertising encouraging people to stay - so I don't think awareness is the issue.
Essentially, there are two options.
- Abolish Capitalism! This is not without its problems... That said, if every driver is mandated to have car insurance, would it not make sense to have a single player market, perhaps funded through general or specific taxation?
- Create meta-providers.
Imagine that you signed up to a "meta-provider" of services - home insurance, for example. Once you became a member, the service would automatically switch you to the cheapest deal every day / month / year. No more worrying about slogging through tedious forms - just fire and forget. Like having a very efficient butler.
This is, essentially, how most people treat their investments such a pensions. I'm not a stock-market expert, so I pay a small commission to a professional who (hopefully!) gets me the best deal.
In this hyper connected world, there's no reason why we can't use algorithmic trading robots to turn the tables on predatory capitalism and automatically extract the best value from the market.
If I had the energy, that's exactly the start-up I'd create. An automated service to switch you to the cheapest possible provider at every opportunity. Set up an account once and then never have to worry about whether you're on the best deal again.
Of course, getting people to switch to it is another story...
You have no idea of the changes which are coming
High frequency comparison shopping bots. Switch providers automagically every few seconds looking for the absolutely best deal. If traders can do it, why can't consumers?
We can't switch energy providers that easily; it is a process that takes 6 weeks, although there is a mandate to bring it down 24 hours. But with regards to the previous inhabitants: if you have built up a substantial debt with the energy company, you most likely can not switch until the debt is cleared. Only when you move are you able to say that you are a new inhabitant and thus you need a new provider and account on the meter with whatever energy company you want (and the debt from the previous account owner would not be disclosed to you). It could be something like a debt or miscommunication that would keep them locked forever.
Even if you have a debt, you should be able to go on the cheapest tariff, but dealing with debt that you can never repay, only service, is unbelievably stressful, and many people don't want to think about it or look.
It is also very likely that the previous inhabitants had a cheap fixed-length tariff, and then simply did not look or did not notice the tariff after the tariff length got switched to the default, and thus most expensive one. Energy companies count on that.
As far as meta-buyers go, that's exactly what Martin's Money Saving thing does: you can join their energy club and every year you will be warned when your tariff is expiring, and how they are negotiating club-only deals for members with the Big 5. Comparison sites on the web do that too.
It will take for Smart Meters to be ubiquitous before fast switching can be guaranteed.