Huge corporations: My best friends

It seems to me that people who are critical of our economic system believe to a large extent that producers have an unfair advantage over consumers. They think that corporations—a word that critics of free enterprise do everything they can to sully—essentially hold all the cards.

Sometimes it might appear that way, but when you start to assemble a list of large companies that have gone out of business you realize that consumers do, ultimately, wield sufficient power to balance the equation.

Consider Blockbuster. Okay, technically it’s not out of business yet, but when you roam the corridors of corporate America shouting, “Bring out your dead,” Blockbuster is definitely going to get tossed into your cart.

At one time Blockbuster seemed to dictate what we would pay for video rentals. Remember all the late fees? Eventually consumers moved on to more appealing video delivery companies.

There is a natural ebb and flow in the economic contracts between consumers and suppliers. There are times when producers seem to have the upper hand. Corporations can charge a hefty price for their products when they make an innovation that gives them clear superiority over their competitors. We see this especially in technology and pharmaceuticals.

However, the competition soon catches up and then more power goes to consumers who can be picky about price points and various competitive features between products.

My first computer was a Commodore VIC-20. This little machine was the world’s first computer to sell over one million units. Despite this, the company is defunct today. Consumers walked away from it.

That little computer by the way, cost $300 when it was introduced in 1980. That would be about $850 today. This was a computer that had less than 20 kilobytes of memory. Yes, 20K. Consider the computer that $850 would buy today.

A critic might say that computers are more powerful and relatively less expensive today because of technological innovations. This is, of course, true. But, run the entire scenario through your mind. How long could producers get away with making and selling a computer with 20K memory for $300. Not very long. (The Soviets tried producing consumer goods using that tactic and you can see where it got them.)

In other words, consumer demand for those low power computers dried up. Consumers wanted more for their money. This is what drives innovation.

I’m old enough to remember when Pan Am was “the” international airline to fly. I suppose that most people today only know the corporation for the small appearance it makes in the Leonardo DiCaprio movie, “Catch Me If You Can.” It seemingly controlled international air travel.

Today, it’s a very interesting chapter in commercial airline history.

Maybe the best example of consumer power involves the Coca-Cola company. Can you imagine a more powerful global corporation than Coca-Cola? I don’t think so, yet all its corporate muscle couldn’t sell consumers on “New Coke.” The company took a major bath on that product.

If you still think that corporations are all powerful, I suggest you go start your own corporation and see how far you get trying to manipulate consumers. Oh, but you say that you’re talking about big corporations, not little startups.

Okay fine, but try to get big by ignoring consumer demand. Then, once you are big, try to stay that way by ignoring consumer demand.

So far that strategy hasn’t worked so well for AOL, Newsweek, Hummer or Woolworth’s.