A few months ago I bought a MacBook Pro. This was despite reservations that I hold about the way Apple does business and was instead based upon the advice of several people whose opinions I respect and who told me that despite the machine being built by Apple, there's no better machine on which to run Windows. (I should add that I'm a software developer working with the Microsoft stack.) I was also disappointed that while most other laptop manufacturers have spent the past few iterations of their models trying to copy MacBooks, none of them rank anywhere near as highly in reviews. I'll perhaps go into the technical details in another blog post.

Suffice to say that after a few months of living with this choice, I'm disappointed. I have no real reason to be disappointed in the machine's day-to-day running, with that I'm mostly happy. You see, I had my previous laptop for over 4 years and although for its time it had a very high spec - which was the reason I opted for that model - I never liked its looks. Shallow though that might sound, I probably sit with it on my lap every day. And why would you have a girlfriend you weren't attracted to? I probably spent 18 months looking and waiting for a perfect, ticks-every-box Windows laptop. I often looked at MacBooks and asked why a Windows vendor couldn't produce something as elegant and refined. I felt I was being hard done by, though not when it came to price.

So why am I disappointed? Because in the cold light of day, once you've taken your new toy out of the box, once you've explored each corner, once you're au fait with it and it has become part of your daily routine, only then can you see what you've actually gone and done.

And to explain how I now view this purchase I'll need to take you on a journey through the 20th century to the present day. First of all I'll give an example of how things were at the start of this period, and then I'll explain how and why things have changed.

The Birth of Mass Consumerism

In the first decade of the 20th century there was no mass consumerism. As for centuries previous, most people bought only what they needed. This meant that production had never had to take place on a massive scale; if necessity is the mother of invention then there was simply no need for assembly or production lines. Into this utility-based market came Henry Ford and his Model T car. Ford's plan was that by using modern manufacturing and processing techniques coupled with the scale of economy that his ambition projected, he could sell this new method of transport at a cost affordable by people who never envisaged owning a car. When the Model T went into production on Ford's new assembly line in 1908 the cost of the touring version was $850. Due to production techniques, assembly line improvements and economy of scale feeding back into the system, by 1925 this same model sold for under $300. This allowed the Model T alone to occupy as much as 40% of the car market in the USA. Outside of the communist bloc, no single car has dominated its market like the Model T. Ford simply sold the public a decent car at a sustainable price point. The vast numbers being bought meant more professionals who could repair cars, more petrol stations, better roads, and as a consequence, Ford almost single-handedly changed transport. Read what Ford said of his car:

I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise.

I'm sure that those claims about using the best materials and built by the "best men to be hired" is something that most commodity-producing companies nowadays would also lay claim to. However, Ford immediately follows that statement with

But it will be so low in price that no man making a good salary will be unable to own one

Ford revolutionised transport - and many other industries indirectly - by deliberately selling a mass-market commodity.

By the second decade of the 20th century many large companies were following Ford's example and ramping up to mass production. This was particularly true during World War I. However, after demobilisation American industry found that it had a surplus of commodities, its industry was geared for mass production. But now there was no war. To compound the issue, many of those being demobilised now had skills and were accustomed to operating machinery, what were they going to do? Mass production had been put in place to lower costs and produce higher yields in order to drive profits. But in a utility-based market, very few were buying.

By 1927 this was a serious problem. In an interview with Nation’s Business the US Secretary of Labor James J. Davis said that "the textile mills of this country can produce all the cloth needed in six months' operation each year" and that 14% of the American shoe factories could produce a year’s supply of footwear. The article suggested that "It may be that the world's needs ultimately will be produced by three days' work a week."

That same year, in an article in the Harvard Business Review, Paul Mazur, working for Lehman Brothers on Wall Street said

We must shift America from a needs- to a desires-culture. People must be trained to desire, to want new things, even before the old have been entirely consumed. Man's desires must overshadow his needs. We must learn to sell better and to advertise better. We must convert a basic economic desire—to acquire more and more things... into actual demand for things.

The higher productivity resulting from a mechanised labour market can turn out two ways: it could either do the same work in a shorter period of time, thus requiring less time spent in the workplace, or it could offer higher output. In the interests of economic growth it was the latter notion which was taken up. However, this strategy came with a warning. In a 1932 book Jobs, Machines and Capitalism Arthur Dahlberg noted that

failure to shorten the length of the working day... is the primary cause of our rationing of opportunity, our excess industrial plant, our enormous wastes of competition, our high pressure advertising, [and] our economic imperialism... By not shortening the working day when all the wood is in [the profit motive becomes] both the creator and satisfier of spiritual needs... it wraps our soap in pretty boxes and tries to convince us that that is solace to our souls.

Some did heed the warning. Kellog's, the leading cereal producer, took the radical step in 1930 of introducing a 6-hour working day. This would mean a small wage cut and workers were also required to work through what had been their lunch break. During the Great Depression this policy also meant that more jobs would be created. The employees went for it and made the most of their extra free time. Articles in Forbes and Business Week praised the local community spirit, noting the healthy state of both residents and local gardens. A government report found that

little dissatisfaction with lower earnings resulting from the decrease in hours was expressed, although in the majority of cases very real decreases had resulted

When new managers took over the company in 1937 they made a financially-tempting offer to move the staff back to an 8-hour working day, and yet the staff overwhelmingly voted against it. In fact, Kellog's actually maintained this scheme up until 1985 when it was deemed to be too out of touch. Instead, the US government put its efforts into convincing its citizens that the Paul Mazur point of view was the realisation of the American dream, and commissioned magazines and short films with titles such as Building Better Americans, The Business of America’s People Is Selling, and America Marching On. These were all quite explicit methods of getting the American public to become stakeholders in the great economic shift.

And to aid this national cause there was one man whose techniques would be called upon to subconsciously influence how people viewed their lives.

The Ego

To enable this shift in culture American industry turned towards Edward Bernays, the nephew of Sigmund Freud. Bernays had studied his uncle's work, taken it from Austria to New York City, and was now using his understanding of what drove people to specialise in marketing. At first he termed his work propaganda but as this had obtained negative connotations he switched to using the term public relations. Bernays became very successful and highly in demand by both US presidents as well as chiefs of industry. It was Bernays who persuaded women to smoke, told General Motors to think of the car as an extension to a man's... er, manhood, and arguably got several US presidents elected.

But how exactly was he doing this?

Edward Bernays pictured alongside his seminal book on Public Relations. Until Bernays' 1929 Torches of Freedom campaign smoking cigarettes was seen as a very masculine activity. By appealing to women's sense of self and suggesting that they can somehow liberate themselves by smoking, tobacco companies were able to sell cigarettes to women in far greater numbers.

Bernays' uncle, Sigmund Freud, believed that underneath every person was an irrational self, called the ego; that at heart humans were still driven by primitive, animal instincts, and that the job of society was to repress and control these dangerous forces. Freud's idea for a better society was to encourage everyone to conform, and that if everyone repressed their ego then society would become more stable.

In the opposite corner was a former pupil of Freud's, Wilhelm Reich, who came to believe that the unconscious forces inside the human mind were well-natured and that the very repression and control of this inner self distorted it and that this was what made people dangerous.

Although a former student of Sigmund Freud (left), Wilhelm Reich (right) later formed a contrasting view of what drove the individual mind. This caused conflict with Freud's followers, namely his daughter Anna, who had Reich thrown out of the psychoanalytic movement in 1934.

By the 1960s the enemies of Freud argued that the better way to build a better society was to let the self free, and that rather than repress and control it this inner self should be encouraged to express itself. What they didn't realise was that this would provide business, politics and commerce with another way to control each person by feeding their infinite desires. What came out of this was isolated, greedy individuals who became more open to manipulation.

So the key to controlling people in an age of mass democracy was to appeal to this inner irrationality and feed its infinite desires.

The New Left

By the late 1950s psychoanalysis had become deeply involved in driving business in the US, and most advertising agencies employed psychoanalysts who knew how to market products by appealing to the hidden, unconscious desires of the repressed consumer. But then, in the early 1960s an opposition had formed who claimed that businesses were manipulating people's feelings to turn them into ideal consumers. Indeed, the crux of the student demonstrations on campuses across America in the mid-60s was that the government had used consumerism to control the people and keep them docile while an illegal war was taking place in Vietnam.

The philosophical theorist Herbert Marcuse was held up as the figurehead for this movement. In 1964 Marcuse published One-Dimensional Man in which he states "The people recognize themselves in their commodities; they find their soul in their automobile, hi-fi set, split-level home, kitchen equipment". Marcuse's point was that in a consumerist, objectified society humans had become directly associated with their own possessions and therefore making these articles and commodities extensions of peoples' minds and bodies.

The philosophical theorist Herbert Marcuse was a critic of both capitalism and communism, and in One-Dimensional Man he described the forms of social repression which many were by then interpreting as economic liberation.

Marcuse argued that in a developed, technological society whose economy is based upon mass production and distribution, an individual worker had been reduced to a state of subsistence where this subsistence is simply consuming the same commodities that they in turn produce. And that by doing so Modern Capitalism had created a false assurance based upon the recognition of oneself in one's commodities. As Marcuse's Wikipedia entry states,

Most important of all, the pressure of consumerism had led to the total integration of the working class into the capitalism system. Its political parties and trade unions had become thoroughly bureaucratized and the power of negative thinking or critical reflection had rapidly declined.

The Weathermen and 1960s Counter-Culture

On the 4th of May 1970 13 students were shot - and 4 of them left dead - at Kent State University, Ohio by the US National Guard in retaliation to an ongoing student demonstration. The demonstration is commonly regarded as a response to the US' invasion of Cambodia but it actually ran deeper into the American psyche. Increasingly present at Kent State University in the days, weeks and months leading up to the fateful day were members of a radical group calling itself the Weather Underground Organization, and the members Weathermen (the name being derived from Dylan's Subterranean Homesick Blues, "You don't need a Weatherman to know which way the wind blows"). The Weather Underground Organization had grown out of a split in the SDS and in the months following this had taken to violent protest against the US government's anti-communist stance, amongst other causes. They also aligned themselves with The Black Panther movement and held anti-racism demonstrations. In short, their goal was to unite several causes and overthrow the US government. In fact, their stated goal was a form of "world communism".

The Weather Underground Organization (left) united with many causes which they felt the US government were deliberately repressing. The largest group whose cause was subsumed by the Weather Underground Organization was the Black Panther Movement (right).

This form of action was directly influenced by Herbert Marcuse, who advocated "violence of defense". Indeed, in 1969's An Essay on Liberation Marcuse advocated liberation and radical movements.

So was this violent protest the face of an intelligent, educated Leftist movement in the west? Yes. Could it work, was it successful? No. Simply put, the activists were outgunned. So instead of changing the system that surrounded them, this New Left decided to go inside themselves and change. By removing all repression that society had imposed upon their minds they were both immunising and liberating themselves. And to do this they turned to the work of Wilhelm Reich.

One of the centres for this self-exploration was the Esalen Institute which offered programs on self-expression such as Gestalt Practice. By the late 1960s the Esalen Institute was becoming so influential that it took on a political context as well as social, thus blurring the distinction. One of the investigations undertaken at Esalen was to try to unite white and black radicals in order to create a stronger, unified force that could then create a better, fairer society. "Racial Confrontation as Transcendental Experience" was meant to get the participants to reach down and expose their innermost racial feelings which had been imposed upon them by society. The problem was that the blacks did not want the whites to be part of the same group because that removed the very essence of what distinguished their group, not surprisingly it was the very essence of what made them different that gave them an identity and a reason for expression.

Or there's the case of the nuns of the Convent of the Immaculate Heart in Los Angeles whom the Esalen Institute also 'helped'. Within a year of encouraging them to express their innermost desires more than half of the nuns had petitioned the Vatican to be freed from their vows.

As we have seen, by the late 1960s these so-called encounter groups, groups where people could learn to express themselves, became quite a phenomenon across America. And they were seen as an alternative to the mainstream capitalist culture which was viewed as corrupt. Soon, young graduates across America who had been greater exposed to this sense of individualism and counter-culture, and who were more sceptical of what they saw as a corrupt mainstream, were looking for products which identified themselves as being different amidst a conformist culture: they wanted to spend their money in a way which expressed who they were.

It was exactly this culture that Marcuse had described.

One of the leaders of 1960's counter-culture was Jerry Rubin, leader of the Yippie movement. By the early 1970s Rubin had undergone EST training, had severed ties with his radical past and was now extolling the notion that "wealth creation is the real American revolution". Around the same time Rubin invested in a fledgling computer company, Apple Computer, and by the end of the decade he was a millionaire businessman. Rubin had come around to the notion that he could be self-aware and happy on his own, he didn't need other non-conformists around him. As Stew Albert, another major figure in the New Left, described it, "socialism in one person... that of course is capitalism".

One of 1960's counter-culture leaders, Jerry Rubin was a high-profile activist who came to the opinion that rather than fight the government he would instead alter his opinion of what would make him happy. He went on to become a millionaire businessman and entrepreneur. Here he is pictured with John Lennon and Yoko Ono.

Rubin wasn't alone. As Werner Erhard, after whom EST is named, explained, the point of EST is to free people from their past so they can be who they want to be: Self-actualisation. There was obviously a lot of money to be made from this. If only somebody could help people to become self-actualised, couldn't this be a source of revenue? This is where the US government stepped in.

Values and Lifestyles

In 1978 a group of psychologists and economists pooled their resources at the Stanford Research Institute to undertake a programme that they called Psychological Research Values, the aim of which was to find out if, in an age of growing non-conformity, there were identifiable characteristics under which people could be grouped. SRI came to realise that there were underlying patterns to the choices people made in order to define themselves in the eyes of others. They were able to define several types in this new individualism by using what they termed Values and Lifestyles. Each of these VALs expresses a different ambition, and it turned out to be so powerful that Thatcher and Reagan were able to employ speech-writers and policy-makers clever enough to target specific individuals who would have previously been discounted for a Conservative or Republican voter. Going further, by interpreting SRI's detailed explanations for each of these VALs, producers of commodities were now able to market directly to individuals for whom a specific commodity was essential for their identity... regardless of the price.

Furthermore, by the early 1980s businesses had realised that by making the individual feel unique, they could offer them specific ways to express that individuality. In other words, the self-actualised non-conformist was by now not only a targetable consumer, but their belief in their own self-expression makes them even more lucrative. Their sense of non-conformity only adds to their marketability.

But at this stage we should maybe take a step back and look at why the economists were only now willing to listen to psychologists.

The Irrational Purchasing Mind

The traditional model that economists implemented to describe consumers' decision-making was based on cost/value. However, psychologists were able to demonstrate to economists that when it came to a purchasing decision, people were irrational. What psychologists such as Amos Tversky and Daniel Kahneman set out to prove is that pricing is a case of arbitrary coherence, i.e. each price is based not on an intrinsic value or cost-to-produce but is instead based on 'neighbouring' prices.

Daniel Kahneman (left) and Amos Tversky, whose research into behavioural decision-making and preferences was cited when Kahneman was awarded the Nobel Prize in Economics.

Understandably economists couldn't accept this. Their model had been undisputed since the Swiss mathematician Daniel Bernoulli in the 18th century, and was then added to and supported by some of the 20th century's greatest minds (von Neumann, Morgenstern, Nash), so in the minds of the economists, the Utility model was the rock upon which they built their church.

However, from the mid-1960s various psychologists (particularly at the Oregon Research Institute, ORI) had been investigating behavioural decision making. In the course of their research they stumbled over the line into pricing, cost and values. Psychologists Sarah Lichtenstein and Paul Slovic ran a series of experiments in which the participants were unable to set prices consistent with what they wanted or the choices they made. Many of these experiments implement a variant of the Ultimatum Game, an activity often used in the study of behavioural or decision-making processes. In an Ultimatum Game one player has the money, real or otherwise, and a second player is offered a share of this pot of money. The first player can offer as much or as little of their money but if the second player rejects the offer then neither player keeps the money. And there are usually no second chances. To a rational mind the second player should accept any offer made as this still leaves them with more than they had, but most participants are unwilling to accept anything less than half. In William Poundstone's Priceless the author includes a transcript of a discussion between the psychologist Sarah Lichtenstein from the ORI. The author mentions that the audio version of this is available on the web but I've been unable to find it, so I'm just going to shamelessly copy this real-world example that perfectly illustrates the point that when it comes to assigning values, humans act irrationally. In the following passage Lichtenstein is debriefing a subject who has just played the Ultimatum Game with her, and effectively lost money to her.

Lichtenstein: I see. Well, how about the bid for Bet A? Do you have any further feelings about it now that you know you are choosing one but bidding more for the other one?
Subject (male university student): It's kind of strange, but no, I don't have any feelings at all whatsoever really about it. It's just one of those things. It shows my reasoning process isn't so good, but, other than that, I... no qualms.
Lichtenstein: No qualms. Okay. Some people would say that that pattern of responses is not a reasonable pattern.
Subject: Yeah, I could see that.
Lichtenstein: Well, supposing I asked you to make it reasonable. Would you say, well, it's reasonable now, or would you change something?
Subject: Actually, it is reasonable.
Lichtenstein: Can I persuade you that that is an irrational pattern?
Subject: No, I don't think you probably could...

[...] There are a few things to be said for the quaint virtue of self-consistency, though. Inconsistency in prices is different from inconsistency in music tastes. Behind every corner stands a sharp character ready to profit from prices gone askew. That practically everyone's normal, thoughtful pattern of price setting presents an ongoing arbitrage opportunity was a shock. Consider an amusing confidence game called the money pump:

Lichtenstein: Well, now let me suggest what has been called a money-pump game and try this out on you and see how you like it.
Subject: (same as above): Okay.
Lichtentein: If you think Bet A is worth 550 points, you ought to be willing to give me 550 points if I give you the bet. Does that sound reasonable?
Subject: If I were to give you... yeah, that would be reasonable.
Lichtenstein: So first you have Bet A.
Subject: Okay.
Lichtenstein: And I have Bet B, and I also have your 550 points. That was reasonable, wasn't it?
Subject: Yeah.
Lichtenstein: That I should take your 550 points?
[Both say "Okay."]
Lichtenstein: So, you have Bet A and I say, "Oh, you'd rather have Bet B, wouldn't you?"
Subject: Yeah, it's a sure thing.
Lichtenstein: Okay, so I'll trade Bet B. Now...
Subject: I'm losing money.
Lichtenstein: I'll buy Bet B from you. I'll be generous; I'll pay you more than 400 points. I'll pay you 401 points. Are you willing to sell me Bet B for 401 points?
Subject: Well, certainly.
Lichtenstein: Certainly. Okay, so you give me Bet B.
Subject: Uh-huh.
Lichtenstein: I give you 401 points, and you'll notice that I kept your 550 and...
Subject: That's right.
Lichtenstein: I gave you 401... I'm now ahead 149 points.
Subject: That's good reasoning on my part. [laughs] How many times are we going to go through this?
Lichtenstein: Well,...
Subject: Okay, I see your point you're making.
Lichtenstein: You see, you see the point, I can go through it indefinitely if I simply stick to the pattern of responses you have told me. Now that you see that in that money-pump sense that pattern of responses just doesn't...
Subject: Doesn't fit.
Lichtenstein: Doesn't fit.
Subject: It ain't so good.
Lichtenstein: ...Do you still feel that you would not want to change any of your three responses here?
Subject: I'd have to think a lot more time on it.

The example above serves to illustrate how the human mind fixates on the numbers - the larger the better - and loses focus on the cost/value. But when they presented their findings to economists the reaction was rather heated.

There was a knee-jerk, visceral rejection of preference reversal. "The first time I talked about it to a group of economists, I was astounded," Lichtenstein recalled. They were picking at it in trivial ways... asking these nit-picking little questions... It wasn't until the economists jumped all over us - and the economists were jumping all over Amos [Tversky] and Danny [Kahneman] - that I began taking seriously the incredible hostility.

For this line of research Daniel Kahneman was awarded the Nobel Prize for Economics in 2001 - Tversky only losing out due to his early passing. Importantly - for getting us back to where we were a few paragraphs ago - while Kahneman and Tversky were collaborating in the late 1970s, Tversky was based at the Stanford Research Institute, the very place whose Psychological Research Values programme had resulted in the Values and Lifestyles.

Arbitrary Coherence

So far we've discussed how advertisers and marketeers can sell a product and even raise its price simply by suggesting that it forms part of your identity, and to people in the latter half of the 20th century up until today this is a very powerful method of selling something. In fact, it's so powerful that advertisers and marketers can even reduce the amount of information about a product and sell it simply by appealing to your sense of self, how you want your peers to see you.

In this famous Levi's Jeans advert there are no words spoken about the product. Rather, the imagery and its connotations are used to appeal to the youth market.

There's one other tactic that I'd like to explain: anchoring and priming. These are actually two perspectives on the same phenomenon, and here's an example given by the psychologist Dan Ariely in his book Predictably Irrational in which he finds an offer for subscribing to The Economist:

  1. Online version only: $59
  2. Print version only: $125
  3. Print and online versions: $125

Ariely found that 84% of people chose option 3. Wouldn't you agree that it looks the best value? After all, you're getting both versions for the same price as just the print version - what idiot would choose the print version only option? Ariely then removed the second option - the one that would be a pointless purchase anyway - and surveyed people once again. Let's be clear about what he offered them:

  1. Online version only: $59
  2. Print and online versions: $125

Strikingly, 68% now chose option 1. Apparently they're not so bothered about the print version. What this tells us is that these values are actually set arbitrarily, and that taking the print version only option was never actually a realistic expectation on the part of the seller. The print version only option was simply there to make the both option look better value. In actual fact, the print version only option was an anchor, it primed you into selecting the option that the seller wanted you to select like an illuminated neon arrow.

Let me give you another example. You go out to buy a new washing machine. You see that your chosen seller has two washing machines:

  1. EM-31, costing 200 Euros
  2. EMX-32, costing 320 Euros

You take a close look at their features and upon realising that they're quite similar, decide that there's no way you're going to be taken in by the inclusion of an 'X' on that more expensive model. That's just to fool people, isn't it? You've almost made your mind up when you realise that there's another washing machine sitting next to those two. You hadn't noticed it until now because washing machines are normally white and this third one is actually a rather classy-looking grey. You now have a third option on your list:

  1. EM-31, costing 200 Euros
  2. EMX-32, costing 320 Euros
  3. MX-2013, costing 845 Euros

845 Euros? Wow, you didn't come out this afternoon to spend 845 Euros on a washing machine. That's more than you'd ever thought you'd spend on a washing machine in your life! Having said that, there's something about its differentness that makes it look like an 845 Euro washing machine. If you had that model people would take a look at it and know that you're the sort of person who spends whatever it takes to keep your household running smoothly. Plus, it would add a sense of elegance to your utility corner that you've never seen in any friend's house. You ask yourself, aside from its looks, what's different about it, what separates this model from the EM-31 and the EMX-32? The manufacturer must have some new technology that perhaps spins your clothes in a new way, adds soap in an intelligent manner rather than all in one go. Maybe it's silent? Whatever it is, the manufacturer must have spent some time researching this new technology and producing the new parts that it would need, hence the price tag, right?

But then you decide that it's just too much to spend. You hadn't bargained on buying a new washing machine at all until the pile of dated junk that you still have at home broke down. Perhaps 845 Euros is too much to spend out of the blue. Turning back to those first two from a few minutes ago, you now feel a bit silly for buying that entry-level base model, the one that offers no distinguishing features and probably comes with technology that's been thrown into washing machines since the 1970s. You start to reason that perhaps some aspect of that new technology from the MX-2013 has been put into the EMX-32 and that is why the EMX-32 costs over 50% more than that base model. And if that EM-31 is old technology, how long is it going to last? How long before all your friends have classy-looking grey washing machines and are laughing at your Neanderthal white model?

So you decide that in the interests of future-proofing your kitchen you had probably better take the EMX-32. And in doing so you've just fallen for their anchor; you were primed by the attraction to a model that, as is often the case, very few people are expected to buy. The purpose of the MX-2013 is not to get your clothes any cleaner, be kinder to the environment, use the washing powder more intelligently or make less noise; the raison d'etre of the MX-2013 is to prime all those who stand in front of it and look at its price tag.

The author of Priceless, William Poundstone, has a blog with several great examples of this.

Once we've been exposed to one option, we can't make our brains forget about it while weighing up similar options. No matter how outlandish it seems, like it or not it's still a subconscious factor. All that our decision-making processes are concerned about is whether the prices are in line with each other, so long as paying more gets you something different. Your decision-making processes do not weigh up the cost/value factor assigned to this price. This is arbitrary coherence.

So to summarise so far, we have seen that people no longer buy commodities based on the cost/value weighed against the usefulness of the commodity. Instead money is exchanged in order to better define oneself in their VAL category.

We have also explored how prices are not set with any relation to the cost or value to the product. Rather, the price is set as an indication where in the marketplace of that product the manufacturer wishes to position their product. Linking back to the first point in this summary, by raising or lowering the price the product or commodity can be targeted towards different VAL types.

And when we looked into arbitrary coherence we saw examples whereby our decision-making can be influenced by something that we're not expected to purchase, but whose presence is simply to widen the pricing window that we're looking through. Dan Ariely also conducted an experiment in which the subjects were asked to write down the last two digits of their social security numbers before bidding on basic items. Those subjects were then asked to consider which items they would be willing to spend that number on, i.e. if the last two digits of their social security number were an amount of money. Those subjects with the higher digits were uniformly willing to pay more for items than subjects with lower numbers were prepared to spend on the same items. Even though these two digits were arbitrary their decision-making process was unable to discount them as a realistic price.

Apple and the New Left

There's a scene near the start of The Pirates of Silicon Valley, the dramatisation of the events leading up to Microsoft bailing-out Apple in 1997. The film starts with Steve Jobs onstage at MacWorld, explaining to his devoted customers that he's come to an agreement with their chosen enemy, Microsoft. A few minutes in, the film jumps back to the early 1970s where we see a young Steve Wozniak and Steve Jobs running down the street as part of some extinguishing student protest. This is how Steve Jobs wanted to be seen: ever the activist, still listening to Bob Dylan and striving to build products that would free you and I from the repression imposed by large corporations. And that by choosing to go down the Apple path his products would become an extension of ourselves, expressing who we really were. This is the same form of 'individualist socialism' that Jerry Rubin bought into: individualism as a means for wealth creation. By encouraging people to express their inner desires through consuming the same commodities, people simply fall into well-defined categories. And once they have fallen into these Values and Lifestyles categories the only future they can see is one which requires them to spend increasing amounts to continually demonstrate and feed their VAL type.

Remember that quote at the start of this post?

We must shift America from a needs- to a desires-culture. People must be trained to desire, to want new things, even before the old have been entirely consumed. Man's desires must overshadow his needs

Now compare that with something Steve Jobs said to Business WeekCorrespondent Andy Reinhardt while he was still the interim CEO of Apple

people don't know what they want until you show it to them

Or put another way, Apple aren't selling something that you need, they're selling something that they need to make you think you need. Or how about that quote from Henry Ford regarding his Model T.

I will build a [...] for the great multitude... It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise.

If you swap the car specifics for, say, an iPad then this is remarkably similar to many quotes by Apple's executives. Indeed, they use these "best materials" and "best men to be hired" claims as justification for their premium costs. But let's not forget that Henry Ford added something else.

But it will be so low in price that no man making a good salary will be unable to own one

Can Apple really make the same claim? Compared to Apple, Henry Ford looks like a philanthropist. What changed between Henry Ford and Steve Jobs is our view of why we buy. Our basic needs haven't changed. Rather, our perception of ourselves with manufactured needs has been superimposed,

My Irrational Decision

So why did I buy a MacBook? I'll be honest about it, I fell for a pricing anchor. I was frustrated because I had been looking for around 18 months for a perfect Windows laptop, I felt let down that Apple buyers were being offered a great piece of hardware (in all honesty software was never a factor) that didn't come with a fingerprint-attracting black glass lid, or an array of red, flashing LEDs around the side, that some of my options still used a physical drawer for the optical drive (my last two laptops haven't had this), or a colonnade of physical buttons allowing me to play CDs without fully booting the system... These were all gimmicks that might have impressed the teenage me in the 1990s, but haven't we graduated? Don't we live with technology now rather than just marveling at it? Our technological commodities are appurtenances that we carry around with us daily and some aspects wear thin pretty quickly. I didn't want to be sold a car that didn't look as good as someone else's while being told that although it doesn't look as good, it still has the same engine underneath. And isn't the engine really the only part that matters. I didn't want to have to explain to other people that although my laptop looked a bit dated it actually had the same engine underneath as theirs had, and isn't the engine the only part that really matters? Well, in all honesty, no it's not.

And this is the frustrating legacy. In the cold light of day I now realise that I was looking for a laptop that reflected my VAL type. What made this more awkward is that I don't want to be part of Apple's ecosystem, I refuse to play inside their walled-garden, but they do make good hardware, I was told. This made it sound like it offered the best of both worlds.

I had previously discounted buying a MacBook Pro and installing Windows via Apple's Bootcamp because I couldn't see the cost/value return that I could see on other laptops. But then I was primed.

I was on holiday in Barcelona just after the MacBook Pro Retina was launched. I wouldn't otherwise wander into an Apple store but decided to take a look just to see what might be coming to the Windows side of the divide once the other manufacturers had re-tooled their factories to copy Apple's designs. Admittedly I was envious and I couldn't help but like what I saw (again, I was only looking at the hardware). The Windows-running laptop manufacturers are so busy competing with each other and striving to meet each others' price points that they've ignored the real hardware development side. On the other hand, in a field entirely of their own Apple are free to come up with whatever products they like. And in line with this they can charge whatever they like. There is no comparison. The only factors that an Apple buyer has to weigh up are the prices of other Apple machines. This goes further than merely arbitrary coherence, this is a virtual monopoly with a 40-50% markup where all the bases are covered by a single seller. In other words, Apple can set whatever prices they like because their buyers have no other option for comparison. There is no anchor from the competition. At the time of its launch I wondered why Apple were producing a far more expensive version of their successful MacBook Pro laptop, a version which had a display resolution that would cause a lot of websites and applications to be rendered plain wrong. And why would people be happy to pay out so much money for a machine with fewer options, that they can't repair at home, and has absolutely no viable upgrade path?

Compared to the Retina model, the standard MacBook Pro offered far more value for money. Retina? No thanks, I'll take the entry-level MacBook Pro, thanks very much. And then I'll upgrade it myself with 16GB RAM and the fastest SSD I can get my hands on, and I'll be laughing at those idiots who paid out all that money for the Retina model.

You see what's just happened?

It's actually becoming clearer and clearer with each quarter's financial reports that Apple are backing themselves into a corner. What they've done is to become so successful with their iDevices that they're now endangering their desktop and laptop sales. Indeed, Apple's desktop and laptop sales have been sliding ever since the iPad was launched. Apple's ambition has always been to knock Microsoft off its perch as the desktop computing vendor but when sales of its highly-valued and successful MacBook range start to suffer then something has to be done. Something like launching a pricing anchor that they know won't sell too well but the effect of which makes the existing line look like great value for money. Just like that subscription for The Economist or that EMX-32 washing machine.

But by buying a MacBook you get to show others around you that you're not like them. Not for you the same black Dell box that everyone has on their desks. You won't be seen sitting in a conference room with that black ThinkPad with the little red vestigial button in the middle of the keyboard. No, you'll take your MacBook and you'll choose life; you'll leave the office behind you and instead you'll hold your meetings in Starbucks where they play Bob Dylan and serve real coffee, not that instant stuff that you drank while growing up. After all, if you're going to outwardly show that you've achieved somethingthen you're going to have to pay for the same expensive coffee that other achievers pay for.

So now you feel at home, sitting in Starbucks drinking their mass-produced coffee for individuals, enjoying the complementary wi-fi. And as you look around at all the other self-actualised patrons you notice that they've all liberated their repressed minds by buying the same laptop as you. And the same phone. And they've all had the same thought about getting away from the corporate environment of the office and exhibiting their VAL by retreating to the nearest franchise of the world's largest coffee shop chain. And they're probably all hoping to expense the coffee for this meeting because unlike the coffee that you drank while growing up, Starbuck's coffee doesn't come cheap.

Being as honest as I can be, I have no reason to be disappointed in how well my Windows-running MacBook Pro runs. I only have myself to be disappointed with. Not that disappointed, mind. I'm just as irrational as the next human, after all.