The Pffft Factor

A few days back I received a motor for my son’s drone all the way from some distant province of China (through ebay). The total cost was AUD 2.50! How is this possible in a world where we couldn’t even get burger for that price!

In Australia, if I tried to send an empty envelope to my neighbour who is approximately 10m away from me, through Australia post, it would cost me 90 cents! To add to that, I would have to travel to a post box and mail it! Now some simple calculations (curtesy of google) suggest that Beijing is approximately 9,000km from home and at the going rate for domestic mail in Aussie, this would cost me $810,000!! Ok, the cheapest Australia Post rate for mailing something to China was $12.25. Add to that the cost of the motor, say $1.00 and the vendor is at a loss of $10.75 already!

This got me thinking! Why is it that everything is a thousand times more expensive if a capitalistic country is involved and is it truly sustainable in a world where national borders are increasingly irrelevant (regardless of what Trump says!)

This is where the Pffft Factor comes in to play. Pffft as in lacking substance or simply hot air! The Chinese are able to manufacture a motor, market it and deliver it 9,000km away, for a mere $2.50. 1 hundredth of the amount the we would get paid for our coffee break!

The Pffft factor is the extra cost that capitalistic societies are able to heap on a product, simply to enhance their living standards. A great example is the iPhone. A few months back there was a headline that said iPhones for $2.00! When one delved into it a bit further the article said that In China one was able to purchase a phone that had pretty similar capabilities as an iPhone for a mere $2.00! So, effectively there was over a $1,000 worth of hot air that we citizens of Australia were paying for this device.

It’s not that I find anything wrong with Apple’s strategy – after all in a capitalistic society, who wouldn’t accept $1,300 for a $2.00 phone! Due to capitalism and competition, it costs significantly more than the $2.00 to dupe the public to pay for the hot air. Thumping executive salaries and bonuses, outrageous advertising costs, an army of people misleading customers (I mean selling) and of course the cost of developing an image behind the brand – these all add to the Pffft factor.

The champions of the Pfft factor are undoubtedly the Yanks. There is no American product that’s price isn’t overly inflated and Apple are the champions of the champions. There are a line of other companies queuing right behind Apple – just think any brand IBM, Microsoft or in other areas such as still water companies or sporting brands. UK products are rapidly plunging down to the same levels.

With European products at least the functionality and design tend to be of some value thereby reducing volumes of hot air! And then you get China where the phenomenon is reversed – the product is more valuable than its price!

The genius in all of this is that the iPhone is probably made in the same factory as the $2.50 phone, just labelled with an apple!

In a society where material wealth is drummed in to everyone from the moment they are born (and probably before), it is not surprising that the value set it such that Apple can easily dupe people into buying a $2.00 phone for $1,300. It’s based on the value that western and capitalistic society puts on exclusivity – having something that others don’t have. We have one of its strongest proponents vying for the leadership of this whole regime! The Donald Duck Trump made his money exploiting the stupidity of over moneyed people not knowing what to with their wealth. Capitalism is great at making the incredibly rich at the expense of the incredibly poor.

The question is, as socialist countries become the dominant economic forces of the world, can this lopsided capitalistic system survive? Time will tell.