Advertising really is evil
Before I get into the meat of this argument, I'd like to preempt something:
I know, I know - it's often easy to criticise the status quo without appreciating just how good we've got it.
For example, have you noticed how often people criticise that capitalism isn't fair?
Intuitively this argument makes sense - something doesn't feel right about privileged kids getting a private school education and easy corporate jobs, while a farmer's kid toils away for low pay to provide us with fresh produce to eat.
But while it might not always be fair, even the worst-off individuals are usually much better off under capitalism than they would be otherwise.
Consider the fact that someone on minimum wage can buy a basket of fruit and vegetables from a local grocery store for an hour's pay.
Think about the journey those groceries had to take to get there, and all of the costs involved.
1. Before being planted, the seeds started their life in labs developed by teams of expert scientists to be immune to common diseases.
2. When choosing where to plant them, the farmer relied on research in ecology to prevent disease and soil erosion, for example by using crop mixing and crop rotation.
3. While they were growing, agricultural machines and drones were used to maintain the crops by providing water, fertiliser and scanning for weeds, and then finally harvesting them.
4. After being harvested, technological innovations like snap freezing and refrigeration kept the produce fresh as trucks delivered them from farm to warehouse to local store, with efficient delivery thanks to supply chain optimization.
5. Lastly, it arrives at the local store and an employee puts it on the shelf. For every person you see in store though, there are many more in head office managing the operation and analyzing the data, for example using forecasting algorithms for predicting demand so they can keep the shelves well stocked during busy times.
All in all, to get a single basket worth of vegetables to a supermarket shelf relies on the direct work of hundreds of individual, and thousands more researchers and engineers, and wouldn't even be possible at all without societal-level institutions like universities funded by millions of individuals.
It may seem odd to say that all of this hard work, insight, and ingenuity is due to capitalism.
But in the same way that the theory of evolution describes how a few basic incentives of self-preservation can ultimately lead to intelligent life, capitalism describes the basic incentives of profit that when harnessed through free markets can produce abundance for all.
So it's in this vein that before I get into the core of my anti-advertising crusade I would like to first point out that advertising provides us with a lot of great things.
For example, any person with a phone and internet connection can enjoy the following:
1. For free you can use google's servers, valued at $1 billion, to search for and find absolutely anything you want online, and you can use literal satellites in space to guide you anywhere you want to go on earth from your phone.
2. For free you can enjoy a lifetime's worth of high-quality entertainment through TV, radio, and youtube, and maintain all your social and professional relationships with facebook and linkedin - collectively all relying on billions of dollars of infrastructure.
3. You can access social services that are subsidized by advertising - like newspapers, public transport, and shopping centers.
It is therefore not lightly that I make the following claims:
- Advertising really *is* evil.
- we're better off without it.
- we need to somehow envisage and move towards a world without it.
- If we fail to do this we're doomed to be miserable in a world of abundance, and we need to act fast as we're entering a pivotal age of automation.
OK so now that's out of the way, let's get into the core breakdown of advertising:
Why do I think advertising is so bad?
I think the core problem with advertising is that:
1. It is extremely inefficient.
2. Its costs vastly outweigh it's benefits, and as a result:
3. The only reason it is economically viable is because the costs are largely borne by the consumer and society rather than the advertiser.
I view advertising as similar to trawling for fish - the approach is to cast a wide net and not care about collateral damage.
As way of demonstration, imagine a website that provides a service which costs $10 per person to maintain.
To stay financially secure they need to charge their customers somehow - consider the different ways they could do this:
If the owners of the website just charge people for it directly then people could just pay $10 each.
What about if they use advertising? Well they still need an expected $10 per person, but now they have to extract it using a method with several overheads.
So rather than consumers paying $10 each, they'll be passed on the total of $10 plus the overheads.
What exactly are these overheads? Well overall there are 3 main costs associated with advertising:
A - Costs and overheads directly born through the advertising process. E.g. market research, ad space, and wasted advertising to people not in the target audience.
B - The direct cost to the customer of altering their perception and judgement to nudge them in the direction of buying the products. E.g. A skilled telemarketer that convinces you to buy a set of steel sushi knifes.
C - Costs that rely on common knowledge and changing societal values about status and signalling. E.g. the marketing of luxury goods as status symbols.
Now from the advertiser's perspective, a successful ad campaign requires that the profit from changing the customer's preferences (B) outweights all costs of advertising (A) as well as the profit required for the business.
So overall we have that Profit = $B - $A, where in the case of the website we required a profit of $10 per person in order to pay for the website.
But note that this equation doesn't depend at all on C. They only care about changing societal perceptions in so far as it affects the target audience's spending habits, i.e. B, and so the costs of C can be very large without concern, since they're not borne by the advertiser.
To make this all a bit more tangible lets break these costs down with an example:
If a luxury watch maker wants to promote their watches they might buy a billboard showing a well-suited James Bond wearing their watch, alongside a caption with phrases like 'eternal class' and 'expert swiss craftsmanship'.
In this case A represents costs such as hiring the actor, photographers, and renting the billboard. B represents purchases of watches that wouldn't have otherwise happened by the target audience. C represents the costs and damages to societal perceptions - for example fuelling consumerism and a focus on status.
Once again we require a positive profit via the equation Profit = $B - $A, and once again we don't care about effects on C outside of our target audience. So if we reach 1000 middle-aged wealthy men, then we don't care if we've also caused 1,000,000 people who can't afford the watch to feel a bit inadequate.
Or as another example, if a Victoria's Secret ad successfully reaches 1,000 adult women in their target audience, then they don't care if they've also caused 10,000 teenage girls anxiety as they fixate on their attractiveness.
In fact children are particularly likely to fall under C, since they don't have much of a budget for consumer goods, but are highly impressionable.
What is the magnitude of these effects? It's hard to say, but when you take into account all of these costs I think it might be possible that for every $10 raised from ad revenue there's an additional $100 or $1000 worth of indirect costs and damages, and the vast majority of which fall outside the target audience.
Advertising companies are not only aware of these societal effects but in fact embrace them. Producers of luxury goods such as watches and cars don't restrict their advertising to their wealthy target audience, instead opting to reach the largest possible general audience. The reason? Because the value of these status symbols for the wealthy is actually derived from the fact that other people covet them.
In his advertising guide book 'The Business of Choice: Marketing to Consumers Instincts', Matthew Wilcox writes ‘Aston Martin’s long-term relationship with the James Bond franchise is all about making the brand recognized by people who will never own one, clearly establishing that those that do buy one know they will be sending a strong impression to other people.’
Why is it such a problem that the advertiser doesn't have to pay these costs?
Remember at the beginning how we talked about capitalism and free markets?
Economists have a phrase for costs of production borne by society at large rather than the producer or consumer: 'negative externalities'.
Most economists agree that free markets are very efficient ways of producing fairly priced goods, but there are a few problems where free markets fail, and one of them are negative externalities. The classic example is how a factory that pollutes a nearby river might still be very profitable, because neither it nor the consumer has to pay for the damage, and so it won't be 'priced into' the product.
Although it's an atypical example, I believe that advertising is the single largest source of negative externalities in our society. It flies under the radar because while a factory polluting a river is viscerally unappealing, most advertising is designed to be viscerally appealing, like beautiful people wearing nice clothes or artistic high contrast photos.
Remember that graph at the beginning that shows how GPD per capita has skyrocketed in the 20th century? Well despite our rapidly increasing wealth it appears that happiness has remained relatively stable.
Advertising might be a crucial part of the problem, where it plays a role in exploiting what is known as the hedonic treadmill - the tendency for people to re-normalise their happiness as they acquire new goods.
While consumer products are optimised to fulfil desire, advertising is optimised to create it, and the most profitable desires are the ones that can't be easily satiated and require ongoing maintenance.
Thus advertising that fuels the hedonic treadmill is extremely profitable, and a lot of advertising will gravitate towards facilitating zero sum games.
Zero sum games are situations where one party's loss is the other party's gain, and they can lead to huge resource sinks and arms-races.
These commonly occur in nature. For example, bats use echolocation to hunt for moths, so some species of moth evolved echolocation to hear the bats. This led the bats to evolve more complicated strategies such as adjusting volume and using frequencies outside the moths hearing range, while the moths evolved even more sophisticated strategies such as sonar jamming and sonic mimicry.
This can continue indefinitely and can be very costly for both parties, while neither ends up better off than in the original status-quo.
In the world of consumerism the most obvious zero-sum games are for status symbols, such as swiss watches and diamond necklaces. The idea is that there's only a certain amount of status to go around, since status depends on ranking rather than absolute qualities, and so it often ends in a race to the top for the rarest and most prised items.
This is an obvious example, but I'd wager that in fact most advertised products are involved to some degree in a zero-sum game. They're designed to be compared with other people and products, help reinforce a desired social trait, or diminish the value of an older product to motivate you to replace it.
Some other classic examples that prove ripe for advertising:
Beauty
A literal zero-sum game in an evolutionary sense, beauty is naturally comparative and a great candidate for an expensive arms race. As a result the beauty industry is huge, and largely powered by advertising.
Socially desirable identities
There are many possible examples of marketable social identities, but the most direct example is having good taste and fashion - or rather the appropriate taste for a given sub-culture. Similar to beauty these are naturally comparative and require regular maintenance cost.
Consumer electronics
Due to the constant improvement of technology, this industry will always provide options for profitable new products. Advertising facilitates the hedonic treadmill by constantly stressing the importance of new features, making older products feel redundant, and turning the latest high-end products into status symbols.
In all of these examples the most profitable advertising must:
- Help establish the latest trend (be it clothes, cosmetic, electronic, etc.), so it is best placed to profit off it, or can move it in a more profitable direction.
- Ensure that the life-cycle of the trend is short-lived, so that there is room for the next trend once this one has been well-adopted.
- Imbue it into collective knowledge so that those who obtain the product know they'll be sending a clear signal to those who don't. Hence similar to the Aston Martin example it's important that the latest iphone be not only desirable but also easily recognisable and distinct from other phones.
I hope you've found this interesting, and please let me know your thoughts and comments.
Hopefully I've given you an impression of the effects of advertising on individuals and society at large, and how it might be exploiting psychology and the hedonic treadmill to keep us unsatiated and unhappy.
In part 2 I'll discuss how I think we can move away from advertising, and why the best timing is right now as we enter the automation age.