Rinse, Wash, Repeat and Waste Money

As a society, we are technically getting smarter.  More people are getting a higher education and attaining degrees. Between 1980 and 2011, people who had completed a bachelor’s degree or higher increased from 22 to 32 percent, and people who’d received a master’s degree or higher increased 2 percent from 1995.[1] So why is it that we very rarely think about the quality of our decisions and why we make them?

source: flickr.com

Ever think about  the effect a marketing strategy? For example, for products like shampoo, sales doubled by simply adding one word -“repeat” – to their products’ instructions. One would think this wouldn’t make much of a difference, but it seems that it does to the so many people that bought the product that was no different from before the marketing strategy took effect. That one word increased the rate at which shampoo was being used, thus increasing the rate to which someone needed to go buy a new bottle.  Not only that, but sales of other hair products such as conditioners increased as well since washing hair more than once can dry it out. Back in the 1940’s, it was necessary due to lack of technology and advancements that didn’t allow for shampoos to get rid of the oil in hair with just one wash.[2] However, today it’s changed to where we really only need one wash. Yet we are still buying into this marketing strategy today; it’s become integral to our daily body cleansing customs that we no longer question it.

Along the line of marketing strategies, there are also products that consumers are led into buying because of who endorsed it.

source: stuffpoint.com

Products such as Nike’s Air Jordan, for example, have long been a social fad that people first bought in association to the great basketball legend of Michael Jordan, despite its hefty price tag.  I’m sure they were once good quality basketball shoes, but today people don’t really buy them to play basketball but because of the transcendent quality associated with the name or because they look good. Another example would be the Beats headphones endorsed by Dr. Dre. Although they look good, they really aren’t the best that’s out there for the price. Imagine how much money we’d save or how meaningful our decisions can be if we stop to think about them and actually do research to find their true value. It’s amazing to me how we have the Internet at our fingertips yet we don’t bother to find the information we need, or how some people believe everything they read.


What do you think? Is society getting more naive or lazier? Is quality a social fad everyone buys into? How different do you think your life would be if you’d asked more questions?


[1] “Education Attainment.” National Center for Education Statistics. <http://nces.ed.gov/fastfacts/display.asp?id=27>.

[2] Goldstein, Lauren. “Lather, Rinse, Repeat: Hygiene Tip or Marketing Ploy?” CNN Money. Oct. 1999. Web. May 12 2013. <http://money.cnn.com/magazines/fortune/fortune_archive/1999/10/11/267035/>.

CAPSIM and Chinese Government Infrastructure Spending?

While it might seem that a business simulation website and government infrastructure spending in China might be worlds apart, the underlying strategy theories and challenges between the two are very much the same.  Capsim is a web learning application that challenges users to attempt to duke it out with other real teams and computer opponents.  The essential challenge that is presented is to attempt to out maneuver your opponents in an effort to gain additional market share and subsequent profits. The Chinese government’s efforts to invest in infrastructure to stay ahead of the curve of its growing middle class needs present the same problems my team faces but with significantly greater consequences. One need not look farther than Detroit or Las Vegas to see what happens when exuberance and poor forecasting meeting economic decision making.

What is the common challenge between these two situations? Well, in a word, uncertainty. Uncertainty is the lack of true knowledge of the future environment as well as the actions of other players in the global or virtual world. While in both situations, one could attempt to forecast probabilities of what would be required to support future business ventures or population transitions or growth, no one can know for sure.  This uncertainty can doom a seemingly smart and well planned out investment today to become a nightmare tomorrow.  The Chinese policy of building 20 cities a year for the next 20 years is a perfect example of poor planning to models that don’t properly predict changes in an economy. The absolute waste of resources that that is going into these ghost cities within China reminds me of the comparison between the cost of bombs and schools made by Eisenhower at the end of this term.

I was reading a Financial Times article today about perceived overinvestment by the Chinese government  that really got me thinking about the strategy to be played in our virtual competition being fought on the web.  While moves that my team makes are truly inconsequential to my existence, investments and the forecasts that fuel them are being made in one of the largest emerging economies in the world and they may be proving to be the wrong decisions. While there are opinions and models that show both sides of the argument, the fact remains that models can be wrong.  To this end, the study mentioned in the article notes an effect of this investment on 4 percent of potential GDP as well as 10 percent of actual GDP. Considering the complete poverty that is experienced within many areas of Chinese society, one is forced to consider how this value can be better directed to ventures that would help those individuals improve their economic situations.  Added on top of this, no one can completely account for the human cost of misallocated resources. Just imagine if Albert Einstein was not given the opportunity to receive any education in his lifetime…

While this may prove out to be utter hogwash criticism of long term planning and development by Beijing, one has to recognize the reality that all of these decisions and really all of life’s decisions in general, are based on uncertainty and essentially game theory. After reading this article, I sat back and thought of other examples of terrible investments made in ventures that at the time seemed to be the greatest thing since sliced bread. Of course, each decision varies significantly in financial value; the point that really can be driven home is the absolute uncertainty of operating in a dynamic world.

What sorts of decisions have you seen or made in your personal or work life that proved to be terrible even though everything pointed to a great outcome at the time you made the decision?


China’s over-investment problem