The Economics of Unethical Behaviour

Umair Haque has a theisis that if companies tried to treat their customers correctly, then that would be better than trying to fool and screw them. He notes:

Despite what many boardrooms believe, counting on your customers' ignorance isn't a great business model. It's more like russian roulette.

His basic hypothesis is that today people are both more savvy and yearn for a more genuine relationship with suppliers, and that there is far more data around so any attempt to behave un-ethically will eventually be strategic suicide. You can see more of his writings here at HBR.

I would love to agree with him, but sadly I can't - I have encapsulated my argument in the chart above, which is a high level result of my lifetime's empirical research into the behavioural economics of consumers, which says that by and large 80% of us are sheep 80% of the time.

Thus, as you can see, roughly 2/3rds of the time all consumer sheep can be fleeced all the time. In other words you can build a very sound busness by fooling people, and the (probably more costly) approach of Being Good only impacts about 20% of the market (the right hand side)

Let us hope that Umair is right, and that this number decreases due to all the information washing around, but my (again, empirical) observation is that the dis-information washing around online is growing at a far faster rate - just look at the typical Page 1 results you get on Google when you search for any consumer good these days. And there is a good resaon for that - a lot more money and time is going into dis-information these days, and the web is a cheap place for it.

I think there was a Golden Age when early bloggers etc, who were mostly the genuine, ethical sort, were the only ones really using these new media mediums, so there was a flowering of honesty. But now a quick look at any aggregator like Techmeme or on Twitter will show that PR Spin is inexorably increasing to Olde Media levels.`Greed, of course, is always with us along with death and taxes.

Sadly, that is why we have had to invent regulation and legislation in the past..............