Planned Obsolescence — A Crisis of Capitalism
I have a graveyard of dead hair clippers. I am keeping them as souvenirs, an exhibit of the wastages abundant in our 21st-century capitalistic economy. I bought cheaper ones, and I bought expensive ones. They are all designed to fail sooner. The most expensive one cost 4 times as much as the cheapest one and lasted twice as much. I thought it would last 4 times as much as the cheaper ones.
Way too many consumer products are purposefully designed to have a shorter useful life. No this is not about products from China alone. This is about our entire 21st-century civilization. This is about a rogue form of capitalism. It is a crisis, even though no one wants to recognize it as such. It is a direct result of Monopoly Capitalism. Planned obsolescence exists because the economic setup is rife with monopolies and oligopolies.
You wonder why technological progress is not yet reaching escape velocity when it was predicted to be closer to that point by now. It's because our entire economic system has gone rogue.
Planned obsolescence is the business strategy being implemented by most companies in most industries. They purposefully design products to limit the life cycle so that consumers can come back to buy again. This is not a conspiracy theory. This is a ‘legitimate’ business strategy.
It is done in a variety of ways:
- re-styling of the same product with no fundamental differences
- psychological obsolescence — making the older model unfashionable
- use of inferior materials in critical components (especially the single point of failure areas)
- Using a layout of components that is predetermined to be troublesome sooner
- Prevention of repairs
- Systemic obsolescence — this program is no longer supported.
They want you to “own something a little newer, a little better, a little sooner than is necessary”.
Talk about the excessive use of glue and tiny little screws for something that any normal person can visibly see that a larger screw is needed. Naked eyes can see it without performing any stress test.
It all began with the light bulb cartel that conspired to reduce the lifespan of a bulb from 2,500 to 1,000 hours. General Motors exec Alfred Sloan implemented his own version for the car industry in 1924 and it's all over now. Obsolescence is no longer left to time, it is planned and built into the product. It is done either via the actual design of the product or clever marketing that makes you want a newer product even though the product is not fundamentally different from the one you already got.
Cars that were supposed to last for 20 years are now lasting for a decade, after which the planned obsolescence kicks and the car starts to give you many problems. Planned obsolescence in the days of Alfred Sloan at GM is nothing compared to these days. Cars are computerized these days and that's where the problems kick in, and you can’t fix them. You need a new ECU, and it needs to be paired with the key, setting needs to be adjusted et cetera. You end up forking a whole lot. You decide to sell it for spares and buy a new one.
This is true for most consumer durables. There is no point in calling them consumer durables anymore. Older fridges used to last for 15+ years, now they say the life expectancy is 12 years, but do you really believe that. You will be lucky if your new fridge lasts beyond 8 years. Some brands die after 3 years. They intentionally use poor material for the lining that distributes gas, so when there is a gas leak, your local repairs guy can't really fix it.
Another loose component on the fridge is the compressor which is deliberately de-engineered to last for three years, after which you have to replace it. The price of the replacement part will shock you. It costs an arm and a leg. A significant fraction of the total. The local approved dealer will advise you to buy the replacement part, but your intuition will tell you to save and buy a brand-new fridge. I personally experienced this. When I sold my fridge, the guy who bought it showed me a graved yard of dead fridges that were newer than mine.
If you are driving a Renault Kwid and get into a minor accident that dents your bumper, right fender, and fender line, the cost of repairs will get close to 20% of the price you paid for a vehicle. This is not an exaggeration. Yes, there is planned obsolescence by the car manufacturer but then the insurance oligopolies and their authorized dealer friends get in on the party, racking up the price of everything. The quote gets to R27,000 plus your excess of R5,000 and now you have to pay R32,000 for a car that you bought for R165,000. The fender could have been panel-beaten to straighten it a little bit and apply paint. Hell no, they want you to buy a new one. And why did they put a plastic bumper on a car? This type of planned obsolescence is subtle. It's meant to milk you via replacement parts that are super expensive.
Washing machines, microwaves, TVs, and cell phones also suffer from planned obsolescence. Apple is the biggest perpetrator of planned obsolescence. It exists in several layers.
- Prevention of repairs — try to repair an iPad. You can’t even open it.
- Costly replacement parts — try to perform a screen replacement of an iPhone.
- Psychological obsolescence — release a newer model that is exactly the same as yours but exists to make your older model feel inferior and outdated
- No battery replacement mechanism. You cannot open it and put in new batteries. Once your battery is no longer functioning at its best, that's it, you live with it, or you buy a new one.
- Software — the software version on this iPad is no longer supported.
No, it's not about Lowering Costs — It's about Repeat Purchases
It is tempting to think that Planned Obsolescence is about cost reductions. It's not even about that. The goal is to get repeat purchases.
You would think that the $10 sensor that is designed to fail and jeopardize an entire electrical gadget that cost a thousand bucks is simply cutting costs. The manufacturer could have done with a $20 bucks sensor in there, but he doesn't want that to happen. Doubling the cost of the sensor (from $10 to $20) would elongate the lifespan of the gadget by two years.
As a consumer, would you be willing to pay $1,010 instead of $999.99 for your gadget to last for five years instead of three? The answer is always yes. You see, the cost compromise on the sensor is deliberate. It is an insignificant cost of the total cost of the car. Cost is not compromised across the board because as a buyer you would quickly notice it. This is why you see gadgets that are still fairly new on the outside being thrown away because the core has a broken sensor that caused a problem son the entire computer chip and got it burnt.
The actual goal is not to lower costs but to guarantee repeat purchases. All the other manufacturers are faced with the same dilemma. Because we are living in an era of oligopolies, you don't really have a choice because they covertly cooperate. It's game theory. They choose not to compete on product durability because doing so is a lose-lose scenario where they all lose and the customer wins.
No, It's Not About Innovation — It's about Sales Growth
Take Apple, for example, the shifts from one model to another in the early years represented pure innovation. There were real differences between a newer model and an older model. This is no longer the case. Even customers are struggling to perceive the differences they market aggressively.
If companies do not play around with planned obsolescence, they would not achieve the sales targets demanded by financial analysts. This is the problem with a constant desire for growth. Even when markets are saturated, the capitalist system still demands growth. The growth has to come from somewhere. If you cannot innovate faster enough, then come up with a little gimmick to make customers want to buy again so that you can grow your sales numbers.
Ignore the fact that anyone in America who wants a functional iPhone already has one, and most people who wanted an Apple iPhone already have it, and it's fully functional. Markets do get saturated. It is a reality we have to live with. This reality is unwanted by the system designed for growth at all costs, even if the growth is illusory.
What if Apple could go for 3 years without releasing a new iPhone. Wall Street will punish the company because sales growth will be slow, or even negative. But in those three years, Apple will be able to work on recognizable product improvements and real innovation. The system wants them to release every year. I didn't even know that we are getting to iPhone 14 now. I last kept track of this when we were at iPhone 3. How did we go from 3 to 14 that quick? It's the obsession with growth that drives planned obsolescence.
It's a stupid system
The insatiable appetite for growth in saturated markets is the reason for all of this. If we were to check how prevalent this whole thing is, we would be shocked by the results. It's pervasive. It’s everywhere
Why is this system so dubious?
The Broken Window Fallacy by French economist Bastiat explains the answer. A careless son of a good shopkeeper happens to break a pane of glass. Now the shopkeeper has to hire a glazier to fix it. The glazier gets paid. Observers might say it's okay, the glazier has to live. If the careless son doesn't break the glass, the glazier will go out of business. The money spent on fixing the window pane is income for the glazier who proceeds to spend it elsewhere and on and on it goes, in rounds, stimulating the economy. The fallacy in this kind of thinking is that of thinking the shopkeeper would not have spent that money on anything if the son didn't break the glass.
If it's good for the economy, that the careless son breaks window panes, why don't we do it for the whole street? Move around at night breaking window panes, so that families will spend money on the glazier, who will spend it elsewhere.
Planned obsolesce is exactly similar to the glazier deliberately breaking your windows at night so that you can come back to buy more window panes tomorrow. Whenever his income is low (i.e., needs growth) he sends a naughty area boy to knock out your window pane. The surprising thing is that you are okay with it because every time he comes he brings a fancier window pane, more stylish.
This is our entire consumer durables section of the global economy. What a waste!
Gross Misallocation of Resources
The misallocation of resources is gross. Instead of using one car in two decades, you are forced to use two. Families are buying a new fridge every three to five years instead of one fridge lasting for a decade. My collection of dead hair clippers is a symbol of waste. These are resources that could have been used for something else.
This is the Invisible Hand of the markets misallocating resources. Can any sane economist prove to me that my collection of dead hair clippers is not a misallocation of resources? Purposefully designing something to break at a certain point in time is simply wastage.
Incomes that could have been used to buy other goods and services that enhance life and welfare are used to buy the same product over and over again (repeat purchases) to satisfy growth mandates. What growth is this? Whose growth is it anyway? What kind of growth is this?
Companies manufacturing the same product twice, consumers buying the same product twice is waste. The labor involved, the raw materials, and the time spent, is spent in vain.
How Much is this Costing Us?
I have not yet found a comprehensive study that calculates the annual value of planned obsolescence. As a quick guide to illustrate the monstrosity of the value, consider Apple’s revenue of $365 billion. If a conservative 30% of this is comprised of sales that are there simply due to planned obsolescence, then we can say Apple’s planned obsolescence cost us $109 billion.
Then we go to Microsoft, and their licenses with built-in obsolescence, and we go to GM, and finally go to Chinese manufacturers. The global cost can easily run into trillions. Trillions of waste! The economic apparatus is built upon perverse incentives. A specific type of greed should not be justified as self-interest.
Global GDP is $84 trillion. What percentage of this GDP is an unnecessary result of planned obsolescence? No one really knows, and no one really cares.
We could have been working 15 hours a week by now, due to the productivity gains over the years. Ask why we are not there yet. We are stuck in this planned obsolescence game of numbers. Denial is at the core of the capitalistic growth focus. The system denies the reality of saturation of a market.
If everyone has a smartphone and there is no fundamentally remarkable new innovation, it is okay to let people keep the smartphones they have until there is another breakthrough. It is not right to have people working non-stop in sweatshops to produce the same product that somebody bought two years ago but with a different cover. And it is not right for a person to pay for basically the same product that he bought two years ago. We are wasting resources.
The income and debt used to buy the same thing twice when it could have been used once is “wasted income”. Forget income. Think about the time and energy spent. It's being wasted. What a waste! You see why we are not working a 15-day work week. It's the Landfill economy that we have to frantically support. All the numbers reported as growth in this quarter are ending up as waste in the next 8 quarters. They end up in a dumpsite somewhere, polluting the earth.
Debt has skyrocketed, yet there is nothing remarkable to show about it. Why is that so? Debt is being used to finance the Landfill Economy centered around planned obsolescence.
How much is this costing us? It is costing us the 15 -hour work-week. It's costing us time, energy, and natural resources.
The wastage of natural resources and labor alone is almost the same as the wastage under the failed Authoritarian Communist Regimes.
How is this not viewed as Crisis?
This is a crisis, but it is not viewed by many as a crisis because our secular definition of a crisis is only limited to situations where there is an outcry and people are complaining. The absence of an outcry doesn't mean there is no crisis.
One problem with wasting resources is that some resources such as natural resources are not unlimited. Cobalt is a good example. Cobalt deposits are not unlimited. Capitalists say innovation will find a way out when cobalt is depleted and we cannot mine anymore. They also say the magic of recycling will solve the problem. Fair enough. Go on.
Labor is not finite; we can always find another impoverished area in the world where workers are willing to earn peanuts to produce the products that we have planned to be soon obsolete. Damn, we can even replace human labor with robots. Great!
What's the point? What are we doing?
Recycling has not yet done the magic. Robots have not yet taken over. Natural resources are actually not infinite. Innovation has not yet found suitable replacements for many natural resources.
Let us ignore these realities and say recycling has done the magic, robots have taken over, resources are infinite, and innovation is conjuring suitable replacements out of thin air. We will still be left with the question, what are doing?
We are deliberately limiting the useful life of a product so that we can create another one and buy it. What's the point? What are we doing?
We are creating “Growth” for the Capitalists and Jobs for the Boys
We are so obsessed with worshiping the Growth Gods that we have to fudge growth numbers via planned obsolescence. In order to avoid the reality of not growing sales numbers, reported profits, and market cap, we resort to ‘gaming’ the system. The capitalists want growth and nothing else. How about we divert resources to other areas where we can have real growth as a human race, like progress on cancer research, making life multi-planetary, etc. Why are we obsessed with fake growth?
We got people working tirelessly all the time for something that could be produced once. Someone will say it's good because people have jobs, if we manufacture durable products and the customer buys once with no repeat purchases then companies will not be able to employ many people. Really. Seriously. So, the system is there to create as many jobs for the boys as possible. How is this different from the failed authoritarian communist regimes in Soviet Russia and Mao’s China that created many dubious jobs because the goal was to create employment?
It's totally fucked up. We could do with less growth and fewer profits. The people can have more leisure time. We could live with less debt in the system. People could be happy and have time and resources to pursue their interests.
We can stop breaking the windows so that we replace them again.
This is a crisis of capitalism. It's a system gone rogue. It happens because nobody is monitoring it, no one is regulating it, and the regulator is sleeping. No one is centrally planning things. There are no rules. It's Laisezz Faire. The system has no way to correct perverse incentives.
Collapsing Under the Weight of its Own Contradictions
Planned Obsolescence is an example of the many contradictions of capitalism. These contradictions are a heavy burden on capitalism which will eventually fall under the weight of its own contradictions.
These are the salient problems of super-production mentioned by Marx.
How is Planned Obsolescence a contradiction? Because it goes against the idea of a free market where there is information symmetry. The oligopolistic manufacturers have an informational advantage and deliberately enhance the information asymmetry. The beautiful part of the contradiction is that it is free markets that gave birth to oligopolies. Without free markets, international oligopolies would not exist.
The second part of the contradiction is that planned obsolescence maximizes value not by necessarily minimizing costs but by maximizing repeat purchases, which maximize usage of finite resources, driving the entire ecosystem into a dangerous territory of extinction (non-existence), which by the way is the ultimate value destruction.
The micro part (at the company level) will be maximizing its own value whilst the macro part (all companies) will be collectively destroying the entire system (essentially minimizing value). The entire system is not just the ecological system, but the social system and the economic system itself. Over time the free markets are destroying themselves as people lose trust in them and their ability to resolve their needs in a mutually satisfying way. So, how do you choose to look at this? Do you look at things from a micro point of view or from a macro point of view?
Since we are talking about the entire system, a macro standpoint is okay.
From that standpoint, wtf are we doing?