Robin Hanson argues that our preference for product variety is costing us dearly:

It is interesting to wonder what sort of lifestyle we could manage if we worked three to ten times fewer hours on average. And it occurs to me that we could probably work far less, and still have just as much stuff, of just as high a quality, if only we’d sacrifice product variety.

Imagine that we made just as many cars, houses, clothes, meals, furniture, etc., each one just as big with just as high quality materials and craftsmanship. But instead of the making these in the stupefying variety that we do today, imagine that we made only a few standard variations, and didn’t update those variations as often. A few standard cars, standard clothes, standard meals, etc. Enough variety to handle different climates, body sizes, and food allergies, but not remotely enough to let each person look unique. (An exception might be made for variety in music, books, movies, etc., since these are such a tiny fraction of total costs.)

It’s a seductive concept. I mean, ten percent more is a whole lot. And all we’re sacrificing is the ability multiple things to choose from of the stuff we want? That seems like such a small price to pay. Indeed, it’s a price that we pay with great regularity. Levittown was built on the notion that people wanted houses and that if you sacrificed choice you could put unprecedented numbers of people in homes. Master-planned communities work on the same premise. It’s also an argument you hear in the Costco/Walmart wars. Costco is able to save people money because they have a significantly smaller product range while Walmart relies on other things.

Could we take this to its logical conclusion? Would we receive enormous dividends if we tried? I can’t dispute Hanson’s numbers – I have no idea if they’re accurate – but even if I concede them I am hesitant largely on the basis of what it would do to innovation.

In the comments, Hanson disputes the notion that variety and innovation are intertwined, but I have a lot of difficulty imagining how that’s not the case. Let’s take smartphones. Apple has, to say the least, a very limited product selection for the iPhone. Now, a whole lot of people love this. They reap the benefits that Hanson refers to. What about us Android holdouts? Would we accept all of the limitations of Apple if we could cut down the costs so considerably? I have never owned an iPhone and never plan to, but I absolutely would.

But would our version of the smartphone actually look like an iPhone? Wouldn’t an iPhone merely be “product variety” of the smartphones that came before it? So we wouldn’t all have iPhones, we’d have HTC Wizards or something even more rudimentary. That’s assuming that a smartphone isn’t considered a “variety” of PDA, which I actually think is a fair assumption. Even if the vast majority of product varieties are purely about aesthetics or self-image (which is debatable, depending on how you look at it), those few that aren’t are very, very important.

Presumably you could address this by arguing that every deviation from the standard must be justified on the basis of actually innovation. Of course, the more exceptions you carve out, the less savings you see. You might have to demand that once an innovation is accepted as the standard, everyone must adopt it. Otherwise you would have a whole army of products with different capabilities for some to save money and others to maximize product quality. Standardizing features presents its own problems. A reworking of the economy or at least of how innovators are compensated, if there’s any innovation still ongoing.

All of which is to say that the theory itself does sound attractive, but the complications involved represent serious concerns and compromises that would almost certainly undermine the entire project (and, I suspect, become subject to a great degree of rent-seeking).

I know some people object to the notion that “the market has solved this” but to some extent it already has. As mentioned, Apple maintains some degree of cost control on the basis of the uniformity of its products. Levittowns are constantly being built with a minimum of variation because of the savings that occur. But without nearly so much sacrifice of tomorrow’s innovation.


Category: Market

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