Recovered from 9/7/2008... thanks, Wayback Machine!
I'm preparing to give an important presentation to a major financial institution from my home office. I start
the demonstration
VMWare images, bring up
the Powerpoint, sign into
WebEx, and call into the conference bridge.
I'm using a 1 year old
2.4GHz Uniden cordless
phone connected to my
Vonage ATA, and the base is maybe four feet
away on a bookshelf. A slight hum starts coming out of the phone as the prospect and salesweasel sign into the
conference call. We natter on a bit, run through the slides, and the background hum grows. Every time I speak,
it modulates into a distant howl behind my words. I try changing channels, I run around the house looking for
sources of 2.4 GHz noise I can unplug, but nothing works. Eventually I give up and switch to my
Blackberry phone. Yes, a
cell phone connection to a tower nearly a mile away is more reliable than a cordless phone connection to a base
station four feet away. Should I buy a wired phone instead? If such a beast is still available, it will be hard
to find and may not include the crucial mute button. Maybe I should buy a new cordless phone? That depends on
whether it would actually solve the problem.... This essay is about why it won't.
Why is that? My first cordless phone was a 900 MHz Sony that chugged along through several battery
replacements and finally died last year. I paid about $80 for it in the late 1990's, and I paid about $70 for
this unreliable Uniden. My wife uses a five year old 900 MHz Uniden cordless on the landline, which works fine
-- except that its range is terrible. My colleague in Portland, OR reports the same buzzing and clicking
problems with his 1 year old Panasonic cordless; my mother-in-law has the same problem with a six-month old
high-end multiline Sony, and my neighbors have issues with their two year old $30 VTech. Looking at the
Internet, I see people complaining about range, battery life, and sound quality across all phone models and
designs; no one is really happy with the quality, regardless of what they paid. People have brand new
cordless phones interfering with wireless Ethernet systems, alarm systems, and their DSL. The early generation
cordless phones are aging out of usefulness, and the new ones, to put it bluntly, suck. The basic functionality
grew better and better from 1990 to 2000, and
then it stopped improving. Why can't you buy a decent cordless phone any more?
The answer lies in a negative feature of insufficiently restrained capitalistic
markets: the inevitable race to the
bottom. Free markets allowing free information interchange will drive prices down. This is a factor that is
obviously true throughout the consumer electronics and computer industries. However, the phenomenon usually has
brakes which prevent it from speeding past a certain floor of quality. You'll have to look hard to buy really
lousy fruit and vegetables, because supermarkets know that the end-customers will not buy them. Information is
exchanged, and the final customers' goals are considered by the supermarket, the distributor, and the farmer.
By contrast, information interchange is not free in commoditized consumer electronics markets because the
consumers are unable to directly influence the construction of complex products like cordless phones. In fact,
from a free-market perspective you could argue that the consumer isn't even the customer at all.
To illustrate, let's look at buying furniture... you can choose to buy a
particle-board bookcase for $25 from
Target, or a
higher-quality $50
particle board and wire shelving unit from
Ikea. You could buy an
unfinished pine shelf for $100 from
Fenton MacLaren, or a $2000
cherrywood shelf from the same shop. Your
dollars directly influence the value of the purchase: material quality is obvious, construction quality is
obvious, and you get more or less what you pay for. Within the furniture marketplace, the customer's buying
decisions can directly influence product quality because the construction materials are obvious to all
concerned and technique is clear to anyone who wants to learn it. Furthermore, the entry cost to the
marketplace is relatively low, leading to a wide availability of
DIY and
customized solutions. If a poor
student can't even afford Target or Ikea, they can always use discarded lumber and cinderblocks or abandoned
milkcrates draped with nice cloth to produce a bookcase. On the other end of the spectrum, a millionaire
desiring built-in bookshelves made of inlaid exotic woods and diamond with a built-in computerized library
catalog system can certainly have such a thing made by seeking out a craftsman and a programmer; it's just a
matter of cost.
In bookshelves, the race to the bottom produces cheap, simple bookshelves that nearly anyone can afford to
buy, but it does not preclude the availability of high-quality bookshelves for the discerning customer. This is
free market capitalism working more or less as it should -- the lowest price is determined by exterior
boundaries such as transportation cost, shelf-rental in a store, and government regulations protecting the
safety of particle board workers. Within these constraints, the customer seeking a low price is served by
bookshelf producers struggling to find cheaper, more attractive ways to build and sell a bookshelf, while the
customer seeking quality is still able to purchase good furniture. Unfortunately, the same race to the bottom
fails in the consumer electronics space, leading to a situation in which it is practically impossible to buy
quality goods for any amount of money.
To understand why, we need to look at the construction process for a consumer electronics item. To build a
product such as a cordless phone, there are many parties and many products involved. The final product is
produced by a company which buys circuit boards, plastic cases, and packing material from other companies: the
circuit boards are assembled by companies that buy signal processors, radio transmitters and recievers,
capacitors, resistors, and assorted other components from other companies. Those companies in turn buy designs,
patents and licenses to produce these components from other companies. In other words, there are marketplaces
within marketplaces... marketplaces in which a handful of consumer electronics marketers purchase
special-purpose materials to specification from a handful of specialized producers. The consumer seeking a
quality cordless phone has no direct influence on these decisions; I have no idea what brand of radio, battery,
or signal processor my lousy phone uses, nor do I know these things about the good phones I've had in the past.
To find out, I'd need to take them apart and do some significant research, and to have a good reason for doing
so, I would need to be able to find out what materials are used to build the phones which are currently
available for sale. I don't have any leverage over the quality of the phone: in the handy British parlance, I
am just a
punter.
By the time that the final product has been put on a shelf or website for the end-customer to get it, all
the quality-influencing decisions have already been made in other marketplaces. These marketplaces are
insulated from direct contact with end-user customers, and so they operate without the end-user's input. The
customer is the company which wishes to sell millions of cordless phones, not the individual who wishes to use
one or two. The result is that the customer in this marketplace has no interest in quality whatsoever, so long
as the quality/price is not bad enough to justify end-users returning the phone within the post-purchase grace
period. Rather, the customer is seeking the cheapest way to meet the bare minimum of functional requirements.
Money not spent on the basic functionality is money that can be spent on a more stylish case or a new
feature unrelated to the basic functionality. So, one can go to the store right now and buy cordless phones
with translucent cases revealing colored LEDs, multiple base stations, built-in answering machines, or even an
artificial voice to read off Caller ID data to you. What you can't buy is a phone with better basic quality,
because the phone producers have no reason to build one.
The basic functionality of a piece of consumer electronics gear is measured against an acceptable quality
threshold rather than an optimal quality threshold, because the quality is just as complex as its construction.
A rotten banana or a bad bookshelf are obvious when they fail the acceptable quality threshold. No one will
buy a stinking, soft piece of fruit. A bookshelf that breaks during construction will get returned promptly.
Similarly, a cordless phone that doesn't even pretend to work or bursts into flame when it's plugged in fails
the acceptable quality threshold. Ideally, the average capitalism customer rarely meets a product below this
acceptable quality threshold because the producer of goods is going to have significantly poorer sales as a
direct result of crossing that line.
By contrast, the producer of goods does not necessarily have a lot of reasons
or even ability to go
above acceptable quality towards optimal quality, unless the end-user has reasonable access to alernatives that
do so. For instance, here in Berkeley the produce is pretty good. You can certainly find inexpensive, waxy
fruit and vegetables at a
Safeway or
Albertson's, but you can also find very good fresh
stuff at
Andronico's or
the Berkeley Bowl for a bit more money. Additionally, extremely high quality can be bought for a fairly
high price at two weekly
Farmer's
Markets, or unpredictable quality can always be bought cheaply at
Trader
Joe's. Within this marketplace, there are a wide range of choices between acceptable quality and optimal
quality, so that I as punter can choose the best quality that my wallet will handle. I would not have the same
choice in, say, an Alaskan fishing village, because all my quality choices would be made for me by the
distributor who selected material and brought it to the company store. If I don't like their choices, too bad,
because I don't have any others. This is exactly the type of relationship that we as consumers have with the
consumer electronics makers, because we do not have the ability to recognize gradations in quality between
acceptable and optimal. The phone is a sealed unit and does not reveal its quality in the same way that a piece
of fruit or a nice bookshelf would do; only using the phone day in and day out will tell you whether it's a
good one or not. Furthermore, the phone is not the object of attention, so as long as it is performing above
the acceptable threshold, its bad quality may even go unnoticed for a time. Then once it is noticed, perhaps
even enough to be galling, what can you do? A cordless phone that doesn't work very well but still works as
well as its competitors is going to stay in the customer's home. The poor punter may return one or two models,
but once they realize that the basic functionality isn't going to improve, they will have to give up. It's
either select the best of the bad choices, or don't buy a cordless phone.
Those who remember Econ 101 will recognize this situation as collusion to limit the market, but I should
point out that it's a natural collusion rather than any sort of evil attempt to bilk the consumer. No one wants
to know how their phone is constructed, really, any more than most people want to know the construction details
of a bookshelf. However, should one want to know how to build a bookshelf, it wouldn't be too tough. One can
simply go to the library, check out a book, buy some lumber and tools, and get to work. DIY bookshelves have a
relatively lower entry barrier, and a person who enjoys the work even has an opportunity to hang out a shingle
as a custom bookshelf craftsman. I do not know of anyone with the skills or material to become a garage
cordless phone producer, though, even at the level of selecting, buying and integrating pre-built circuit boards
(which would hardly solve the optimal quality problem). Because individuals cannot easily break into this
marketplace, the gap between acceptable quality and optimal quality never gets filled.
In fact, can it even get filled at all? After all, one of the basic tenets of the consumer electronics world
is that all of this stuff would be ridiculously expensive to produce in low numbers... maybe once the quality
of basic functionality has been driven low enough, it is actually impossible to affordably produce high quality
any more at all.
There is a ray of light though, which is the highly-trained individual's ability to produce a new product.
While breaking into a commodity functionality market like cordless phones at a realistic price point is largely
hopeless, the garage tinkerer is doing very well in branches of consuler electronics that attract DIY
hobbyists. Audiophile stereo gear, computerized home entertainment convergence systems, and the recent
case-modding community are a healthy sign of growth at the edges of consumer electronics. I'd like to hear of
any one building a quality phone, too.