Worse but cheaper

Sometimes it’s possible to make something that exists (a product, service, etc) worse but significantly cheaper. In economics terms, this would be a marginal improvement to the extent that how much “worse” the thing becomes in dollars is less than how much money is saved by it becoming cheaper.

In a diverse market with all kinds of services and products at different value points, this kind of price-point on its own isn’t necessarily a bad thing. Company A might offer a kinda bad service at dirt cheap prices while company B offers a pretty good service at a pretty expensive price. They might have similar “value” (maybe expressed by something like quality - price).

The problem is that if it becomes way easier to make small changes that dramatically move price while only moderately making quality worse. Assume it’s a no-brainer for company B to save 100M dollars and only sacrifice 1M in revenue from lessened customer experience. The market dictates that company B either makes that change, or dies.

This results in a race to the bottom where everything sucks but approaches free in price.

I think this is a decent model for a large part of the first world economy today, unfortunately. Software, is AMAZING at making an existing service way cheaper but a tiny bit worse, typically by using automation and conceptual abstraction to build scale at the cost of local detail.


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