Topic: The Chit-Chat Thread

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@themightyant Continuing this on the forum because it's too long to post in the comments. And this is the TL;DR version!

Oh gawd, anything with titles like that makes me want to kill things. Hopey dreamey feel good faff, grounded in statistics about a better world written by ideologues supporting their hypotheses for social experiments with cherry picked data and blanket statistics that reduce the human experience to a number, so long as the biggest number wins.

Emperically, life in the Americas show tremendous statistical progress as a result of the French-Indian War and the Trail of Tears. The statistics can't be denied! Now, declare that in the Navajo Nation and see how long it takes to be buried alive in the desert. I'll keep a stopwatch ready.

I'm certainly not going to derail into a conversation about the proponents of globalization or the reliance on cherry picked one sided statistics to prove the "progress" produced by it because children in Bongo Bongo now have shoes and running water while the decadent Westerners dismantle their gilded lives and become stratified rich & poor classes like the rest of the world. We're not really talking about changes in places that weren't going to be buying Xboxes anyway (but thanks to said progress there's now an elite tier of citizens in those places buying Xboxes who can build whole sub-civilizations lording it over the children that merely celebrate now having shoes... Besides, we know they're all buying Playstations anyway, like proper image-conscious egotists.) But that glosses over the negative aspects, even if it's "globally net positive" of such shifts. A great example of the effect of economies, markets, prices, and availability of resources limited by nature and global shifts in where those resources are allocated would be to research the market for hongmu (African rosewood.) It's now a banned material. Why? Because the new Chinese middle class loves now being able to buy trad hongmu furniture. And now they can afford it. Of course only a portion of the immensely sized Chinese population is enough to deplete all rosewood from the world. So the only solution? Ban the trade of rosewood entirely, since making it unreasonably expensive still didn't work. A normal material used for many things worldwide, now can't exist, or at least exists only in domestic locations that can grow it locally in small quantity, because one oversized population that gained wealth can deplete all of it almost instantly. And then they started buying cocobolo and other similar woods, so those had to get banned too. There's no free ride. It's robbing Peter to pay Paul. It's just shifting things from one group to another, raising the competition and increasing the number of people left out, even if it's the same percentage of the whole as before.

But we're not talking about ending world hunger and all the children of the world holding hands and singing in harmony. We're talking about SSD prices. And we know the little biters in Bongo Bongo will be starved to death to build SSDs for $20 and die on the factory floor so that the newly minted six figure club around the world can buy them for $400 and make the investors tremendous money to blow on Versace bags, $1000 Iphones, and Ferraris, which are selling faster than ever, while the middle finds they can no longer afford computer storage expansion they were able to easily afford a decade ago.

I've written about it before here and PS, but the most enlightening read, and I don't believe it's public currently, and it's where my "thirds" came from, was a study (not a feel good socio-economic ideological book with supporting one sided "data" on the theoretical joys of globalization) but a hard study on cause and effect in the US retail market, by a UK firm, to analyze the nature and origins of the "retail apocalypse". It's a few years old now, and I it was meant specifically for the industry.

The common narrative is that "millennials have different shopping habits than prior generations", "millennials want instragramable experiences in the 'experience economy' rather than durable goods" so the market changed when millennials replaced the older population in the market. That's what we're always told is the nature of the "retail apocalypse". But the study found a much different result. They found instead that age had almost nothing to do with it. They found that in those roughly three banded thirds of the economic spectrum, things had changed dramatically, but among each age group, millennials of a given group among those economic tiers spent effectively the same as their parents. The difference wasn't age, it was that fewer among that age group had real buying power, so they just aren't represented in that market. The "experience economy spending" of what "millennials want" is in fact what "high income millennials" want, as they're the only ones represented in the market. And as tends to be the case, they also tend to be the children of high income older populations.

They found that the recovery after the 2008 crash was extremely uneven, as I noted above, the top third has gained tremendous buying power, with rapidly rising income. With roughly static expenses, that income is nearly all discretionary. The middle has rolled back, rapidly rising costs, and mostly static wages ("raises" don't always apply, and where they do they're tied to "cost of living" and "inflation" which doesn't actually reflect the costs of living but is an esoteric calculation from the GDP and the market price of corn. No joke.) Rising healthcare, insurance, transportation, housing, food, energy, etc prices has driven the disposable income of that middle third to all time lows, and disturbingly shows a steady rollback. The same rising costs have done even worse to the bottom third that now has insufficient income to even pay for the essentials, with discretionary income out of the question.

The actual retail economy, which we're told is showing modest gains and increases overall, was not, as the study found, what it appears. What it really found is that two thirds of the market now have reduced participation in the retail economy. The top third spends so much they compensate for the losses from the other two thirds, and then spend so much more it shows actual growth. But all the growth, and even plugging the losses, are all coming from the top third. A new gilded society.

That has a worse add-on effect. It means most of the demand in the retail economy is for ever more premium luxury goods to satisfy this wealthy tier of buyers. Formerly "middle of the road" products are no longer selling (because their customer base can't afford it), so those stores, products, and brands vanish, while high luxury items thrive as the market buying is the market for high luxury. It shifts the entire market (supply and demand) toward existing primarily to facilitate those high luxury goods. As a result, goods, stores, and services in the "middle" are unsustainable and vanish, and all that remains is luxury, and most of the consumer economy revolves around entirely satisfying the top third of society which is now more separated than ever from the rest of society, existing in a bubble, even if it's a larger group by number than before. An unstable and highly distorted market. One very prone to collapse. And when you look at the underlying state of the retail economy, which is really what, for better or worse, underpins the state of society itself in the west, and especially the US, it unmasks a never talked about in mainstream media image of a very very unstable state of the current society. The real economy exists to serve the top third of society. The other two thirds are barely participants in the economy, and nearly all retail economic activity exists to facilitate luxury for that top third. We've effectively gone baroque. Not sure if you like reading history as much as ideological books, but you might remember that tends not to end well. At all.

So back to video games, we see this trend of prices going up and up and up. And there are more and more worldwide newly minted top third customers willing to pay that, and more, for their luxury video games. Sell $1000 Xboxes, and $120 games with $600 HDDs, there's enough "top third" people worldwide willing to pay that, that you can show growth and tremendous profits. And that's exactly what Sony's been pushing on. Even Nintendo. Not so much Xb honestly, these SSDs are the outlier. But the rising population that gives numbers for that, and the fact that a lot of that growth is from booming markets of newly minted rich more than from the traditional markets in the west, it hides the fact that games, along with a lot of goods, are rapidly shifting away from the mainstream, and are becoming something no longer affordable to the middle market that used to be its mainstay. But F2P mobile games are! Which....is the single biggest actual video game market.... (Sometimes its the obvious things nobody sees.) Because in quantity, there are enough of that top third worldwide to buy in growing numbers the market looks "healthy" because it hides the fact when numerically compared to past years that an even greater mass of a lower market that used to buy no longer does.

As I said, I think that's where xCloud, Apple Arcade, Luna, Stadia, etc are going to become a bigger deal, faster, than people think. Those of us on these forums are either the top third crowd, or the people that are so deep into our gaming hobby we'd sell our appendages (or the appendages of others, not judging. Lots of children in Bongo Bongo after all.... ) to stay in the game, basically without exception. But to the 2/3 of (US society, can't say what the split is outside the US), that no longer can really afford it, cloud Subscriptions are easily going to become the mainstay of how people access video games.

Since the time of that study it's easy to observe a rapid acceleration of those trends. And with the pandemic it's a whole new level. Keep in mind grocery has seen the largest price jump since the 1960s. Roughly 20% increased price on grocery food. 30% on restaurant. Considering most people restaurant dine often because the new faster paced society where nobody tends the home means no time for cooking. We can just split that 50/50 and say 25% food cost increase. 25%. Just on food. That fully breaks the bottom 1/3, crushes the middle. Food takes a big portion of ones total income in general, and it's now 25% more. Add in housing, insurance, other expenses, rising taxes (as that top third gentrifies everything, costs associated with everything including taxes goes up!), energy at an 80-year high(!) and if you could afford a $300 HDD easily 10 years ago, you sure as heck can't afford a $400 now. Affording a $250 one is going to be sketchy in reality... But for each middle-earner that used to buy $300 HDDs and now can't afford $250 HDDs, there's 1.5 six-figure earners that would pay $600, even if there's now 4 middle-earners that can't. So the market looks "healthy" if you don't delve deeply into the numbers. The seams unravel in horrific ways if you do. And the picture it paints is of a true split society. "The K-shaped" economy it has been called (credit to someone on PS who tipped me to that after a similar discussion, I do not recall whom.) The end result is something that looks like the late 19th century.

So no, cute statements like "average consumers are willing to buy more expensive things now" couldn't possibly be farther from reality. Quite the opposite is true. Business is interested only in growing profits. So long as world population grows and the luxury market grows in sync, they can keep growing profits by selling higher luxury. But that doesn't represent the total market, or the average consumer, but an ever more detached luxury bubble, even if that bubble grows in size without growing in proportion.