Limited Resources, Unlimited Wants, No Longer!

One basic economic problem is how to use limited resources to meet unlimited wants. Today, it seems that the problem is not as serious as before. We are faced with excess global production capacity, while we who are living in urban areas no longer worry about our daily living needs. Interestingly, suppliers are teaching consumers what to desire.

Consider consumer electronics, one of the most exciting corners in department stores and shopping malls. Gadget suppliers roll out tons of advertising to sell their edgy state-of-art TVs, mobile phones, Hi-Fi's, all trying to convey a message that consumers using them will start a new life, or even a new romance. i still have a problem imaging myself enjoying a 90-minute movie on a 3" screen of a mobile phone. Some friends of mine have bought 3G handsets powered with video conferencing functions only because they want to see their dogs and infant babies before getting home from work. i got a few days of excitement when i got my first camera phone, but no more.

Deflation of gadgets understated
Electronics manufacturers have more than a few headaches. A few years ago, i bought a Sony phone, before Sony and Ericsson formed a joint venture. It was a black-and-white screen, camera-less clamshell. The greatest feature of it was a built-in fishing game. That phone cost me about $2,500. i stuck to it until a few months ago when i bought a Sony-Ericsson phone for roughly the same price. This phone carries countless functions, but most of them are useless to me. Assuming that this phone is as durable as my old Sony, the real price has fallen substantially. In most countries including the US, as far as i know, statistics departments count a mobile phone as a permanent commodity and do not take into account various features it carries. They tend to overstate inflation, or understate deflation.

i would be equally happy to live with my old Sony, should there not be peer pressure, including that from my mom that i should change my mobile phone. Otherwise, i am told, i would be looking like an "Uncle" by grabbing a three-year-old model.

Recently, when I moved house, I bought a Konka 29" TV for just $1,799 in Gome. (The courageous PRC-based retailer locates its Hong Kong shop in Mongkok, one of the most competitive districts for electronics. Will it be the next Sa Sa or Bonjour that cannibalizes their mum-and-pop rivals in Mongkok?) i was tempted to buy a plasma TV or an LCD TV to better match my contemporary interior designs, and/or simply to look good. But eventually, i told myself that what makes a great TV is the contents of the shows. The primary objective of the TV for me was to watch English Premier League.

A $12,000 Plasma TV for Free...
When i walked around in Fortress (Fortress' Peking Road shop doesn't carry any thick TVs), i thought of one reason why thin TVs have become so popular. From my amateur point of view, thinness is the major advantage of thin TVs. Hong Kong's new flats are sold at $3,000-$6,000 per square foot. Two square feet cost from $6,000 to $12,000, depending on the value of the apartment. For those who live in The Belcher's, installing a $12,000 thin TV and getting in return two squares of free space, the TV comes absolutely free of charge!! If the apartment appreciates in value in the future, the value of the free space goes up. The buyer would be virtually getting a rebate.

What a convincing marketing punch! Of course, that is based on an unrealistic assumption that the TV lasts as long as the apartment does.

What makes the difference if the new TV displays the same primetime dramas from TVB? The exterior design has changed, but the contents remain a love-triangle story line, unchanged ever since the 1970's when i became conscious.

Fairy Tales are Eternal
That also tells you something about the harshness facing electronics manufacturers. A successful story line could be run over and over again for 30 years. People just love watching it. All TVB needs to do is to change the castings from Chow Yun-Fat, "DoDo" Cheng Yu Ling and Simon Yam Tat-Wah to fresh and young faces. That love-triangle story plot, among other routine programs, however, delivers $400M-plus earnings for TVB year after year. The broadcaster is expected to report a net profit of $630M for 2004 as advertisers desperately bid for the limited supply of its prime-time slots.

It's Hard to Promise New Ideas, One after Another
In contrast, manufacturers have to keep investing in machinery and molds to produce new models that sell for one to two years. Last week, Sony Corp. said its sales fell 7.5% YOY to 2.15 trillion yen (~HK$164B) for the last quarter of 2004, and operating profit fell 13% YOY to 138B yen. The TV division, which contributed 21% of Sony's electronics revenue, saw sales rise 5% YOY in the quarter, but its operating profit slid 75%. Sony's once-innovative Trinitron picture-tube sets are no longer selling, while its thin TVs aren't making money amid stiff price declines. The electronics giant would have bigger problems should there not be robust demand from the US.

Locally, contract manufacturers have boosted production capacity substantially, just to maintain a similar level of net profit.

Values that GDP Ignores
Electronics leaders Sony, Samsung and the likes sell, through enormous educational efforts, to consumers things they have never asked for. That contributes to global GDP. But is that actually improving our living standards? Do i often keep in touch with friends and relatives over mobile phones? Or do i just regard them as fashion accessories? Am i fully appreciating the value of my gadgets?

i was quite surprised to learn that Hi-Fi makers are making 7.1 sound system home cinemas, adding two speakers to the big-hit 5.1 systems which already come with five speakers. To my amusement, an ordinary person has only one pair of ears. Besides, a living room staging such a system would be clustered with wires. i felt like i upgraded my Panasonic mini Hi-Fi while playing Jacky Cheung's latest album -- Jacky Live Performance. It is a delight for those who enjoy smooth and relaxing canton pop.

No offence for fans, or users, of plasma TVs, projection TVs, 3G handsets and other high-tech gadgets. Indeed, congratulations to them for living in a parade where they can choose what they want.

Feb 2, 2005
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