Wednesday, September 2, 2015

Value?

Seems to me there are two serious contradictions going on the world and until we get these straight we may have a harder time understanding real economics. Both stemmed from a recent trip to SF as I helped my daughter get settled into an apartment for her next year at SFSU - cost and labor vs. value.

She needed some things for the apartment - basics - a chair, a room divider, etc. We checked out some things on Craigslist and garage sales but in my limited time couldn't find everything we needed so we took a trip to Target. 

Target has been held up as an example of good business. We went to find a chair. We found a lovely little chair with a metal frame and a sewn blue fabric seat and back. It was $5.15. Great deal right! Right? I can't see how it possible the chair was $5. Yes, it was on sale for 50% off but lets look at it at full price of $10.30.

First there are raw materials the need to be sourced - metal and fabric. They then have to be fabricated. For the metal - extruded into a tube, then cut and bent to shape, then finished with a color and a clear coat finish. The fabric had to be died, cut and sewn to fit. Not only are there the costs of the raw materials but then you add the cost of a human's labor. Then it gets packaged with some plastic wrap, a few tags are attached, probably boxed in bulk, put into a container, shipped across the ocean to a distribution center, put on a truck, delivered to the store, unpacked for display. All these steps have either more materials or more human labor along the way. Then Target has overhead and needs to sell the product at a profit.

So how is it possible that this chair is only worth $10 at full price. Somehow I feel the raw material side of the picture is also more valuable than the human contribution in getting the chair to its ultimate consumer - me. And I bought it thinking I got a good deal but later thinking how the process might have caused pain for many along the way.

So what is "value"? Where does it come from? How is it determined?

Later we went to Ikea - another company held up as a good business and I have to believe the organizational skills needed to make a company like Ikea work have to be amazing. Anyone that has been to Ikea sees all the great stuff and cool design at inexpensive pricing. I wonder if the same process happens as it does with the $10 chair. 

Further, Ikea was crowded with college students like my daughter picking out beds, shelves, desks, chairs, lamps, etc. And what happens with these things after a year or maybe two of use? It all ends up in landfills which then add to the real cost of that product which rarely, if ever, is considered.

To be sustainable, we have to provide a sustainable way of life to the humans that are on this lowest wrung of the labor force. We need to plan for the real end of life of the product and consider it part of the real cost. Finally, we need to really look hard at recycling in a different way.

A nice solid wood chair from a garage sale at $10 is a far better deal. Recycled, built to last, real value, will get passed on again, etc. That is value.

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