TLDR: Businesses that are owned by charities, and advertise that status to consumers, could potentially enjoy a significant competitive advantage over traditional businesses. For a longer TLDR, read the Introduction to the paper below.
Guided Consumption: An Exploration of a New Means of Charitable Funding
As of the writing of this paper, the primary mechanism by which charitable projects are supported is by the contributions of individuals, corporations, churches, or other organizations that elect to donate a portion of their accumulated wealth toward a cause that they favor. This activity, Giving from Normally Generated Wealth (GNGW), although capable of achieving considerable good, also faces considerable limitations. This is because the holders of wealth are manifold and possess varied motivations behind the deployments of their stores of wealth. Perhaps most critically, GNGW competes with a donor’s natural desire to use resources for herself and her family in various ways: everyday spending on necessities and creature comforts, long-term purchases, financial and education investments, and other personal spending. Consequently, many causes – such as those directed toward the needs of the global poor – do not receive adequate funding, even though these causes might be hundreds or even thousands of times more efficient for advancing human welfare than the use of wealth to increase consumption by residents of developed countries. But what if there was a way for not just donors, but consumers to fund charities? What if a consumer did not have to choose between charity and her own interests? What if a consumer could contribute to these more efficient charities but didn’t have to change her purchasing habits?
This paper seeks to explore a new method of funding charitable projects: Guided Consumption. This economic innovation enables consumers to fund projects that further their values through their routine means of acquiring goods and services. Guided Consumption is possible when three conditions are met in conjunction: (a) technologies and legal forms are available by which businesses can automatically and reliably direct some or all of profits generated to a Designated Funding Destination (“Guiding Companies”, “Guiding Firms”, “Guiding Providers”, or, collectively “Guiding Producers”); (b) monitoring and auditing system(s) are available to verify the authenticity of Guiding Producers and the projects that they fund (“Authenticating Systems”); and (c) network(s) and organization(s) are available to credentialize Guiding Producers and inform the public about them, allowing them to clearly and accurately signal these statuses as Guiding Producers and each of their Designated Funding Destinations to consumers [Networking, Credentialing, and Communication Organizations (“NCCOs”)].
The satisfaction of these three conditions would enable consumers to channel their purchasing of goods and services through Guiding Producers that correspond with the causes that they value (one possible such project for this networking and branding might be called “The Consumer Alliance for Giving”, another the “Consumer Power Initiative”). This author posits that Guided Consumption has the potential to generate more funding for charitable causes than GNGW because of a structural economic feature resultant from consumer sentiment in favor of charitable causes over the enrichment of shareholders or other traditional stakeholders within economies. Guiding Producers will enjoy a competitive advantage over the current producers in our economies that yield the benefits of producer surplus to traditional shareholders: the capacity to further popular causes through consumption of their goods and services. This advantage could be enjoyed while not necessarily suffering any corresponding competitive disadvantage over Normal Producers such as increased cost or decreased quality of products or services. This is because there is no apparent, intractable, structural disadvantage arising from the substitution of normal shareholders for charitable causes as the beneficiaries of producer surplus. Thus, this unbalanced, structural advantage should imply that Guiding Producers will naturally expand to occupy significant market-shares in virtually every consumer sector wherever Guided Consumption is possible.
Such expansion would likely have the salutary effect of counteracting wealth and income inequality by diverting the fruits of the economies of the world from very wealthy individuals and companies -- who currently own the vast majorities of rights to profits from the businesses of the world -- to popular and worthy charitable causes. These charitable projects might include, amongst others: the reduction of human suffering, the fight against global poverty, projects regarding the preservation of our world such as addressing climate change, furthering the welfare of conscious animals, and pursuing experimental projects or research that might have an outsize impact on the course of human history, by either exploring promising paths toward long-term well-being or thwarting potentially catastrophic dangers to the welfare of conscious beings.
This paper will be divided into four sections. Section I first (A) reviews the operative economic concepts of producer surplus, product differentiation and competitive advantage. Then (B) probes the latent power of Producer Selection (“PS”), inherent to consumers, to select the recipients of producer surplus- that being a subtle corollary of the transactional freedom of consumers. It then examines the current economic environment of Consumer Counterparty Indifference (“CCI”), the possibility of an economic environment of Consumer Counterparty Selection (“CCS”) and the conditions that would make a CCI to CCS transformation, i.e., Guided Consumption, possible. Section II explicates the three conditions of Guided Consumption: (A) Guiding Producers, companies and firms that use legal forms and technologies to cause them to automatically direct their producer surpluses, or profits, to Designated Funding Destinations (“DFDs”), which are explicitly set by each Guiding Producer, to a source other than normal shareholders, such as charitable causes; (B) Monitoring Systems that account for the profits generated by Guiding Producers and the faithful channeling of profits to each Guided Producer’s DFD; and (C) Networking, Credentialing, and Communication Organizations (NCCOs) that can credential Guiding Producers and inform consumers of Guided Producers that correspond with their preferred values, thus enabling CCS. Section III considers a possible pilot project for Guided Consumption, including the economic sectors that might be ripe for transition to Guided Consumption, and how this might be implemented. Section IV considers potential challenges to the ideas of Guided Consumption, both those that attack the fundamental economic underpinnings of Guided Consumption, as well as the logistical challenges in bringing about the conditions of Guided Consumption. This paper concludes by briefly contemplating the implications to world economies resultant from a transition to Guided Consumption and the profound implications of its attendant phenomenon: Consumer Power- the power of consumers to further their values through the normal purchasing of goods and services.
I. Background Economics of Guided Consumption and the Possibility of Transition from Consumer Counterparty Indifference to Selection
A. Producer Surplus, Product Differentiation, and Competitive Advantage
A few key economic concepts allow for the possibility of Guided Consumption. For the benefit of the reader who is not familiar with them, Subsection i discusses Producer Surplus; Subsection ii discusses Product Differentiation and Competitive Advantage.
- Producer Surplus
Producer surplus is one of the twin benefits of voluntary, sufficiently informed transactions between producers and consumers; the other being consumer surplus. Transactional freedom implies that such transactions would not typically occur unless there was at least some benefit to the counterparties- both producer and consumer- to a transaction. Consumer surplus is the difference in a transaction between what a consumer pays for a good or service and the maximum amount that he or she would be willing to pay. Producer surplus, also referred to as “profit”, is the difference between the price charged and the marginal costs of the production of the good or service. . So, if a store charges $6 for a pie and a consumer buys it, though she would have been willing to pay as much as $10, because she really likes pie, the consumer surplus is $4 ($10 - $6). And if the cost associated with the store being able to have the pie available for sale, including, but not limited, to the costs of its ingredients and the labor to produce it, add up to $3, producer surplus is $3 ($6 - $3). This example displays a transaction clearly benefiting both sides of the transaction, such that it makes sense for consumer and producer to take part.
Critically, and as will be explored later, consumers can choose which producers they engage with to purchase goods and services. Technically, producers share this ability to select counterparty consumers, but will generally not exercise it, selling to whoever will pay the price they command, thus maximizing profit. Conversely, both limitation on consumer resources and the declining marginal utility of consumption tend to be the limiting factors in the total number of transactions. To return to our pie shop example: if people want more pies, as long as demand for pies is sufficient to justify devoting more resources to their production; there is little reason that the means of producing them would be limited. This is reflected on the traditional supply-demand curve by an upward supply line, reflecting an increased availability of supply at higher demands, because less and less efficient resources may be justified as a means of producing a highly demanded product. On the other hand, if consumers lack a demand for pies, there is little producers can do to generate additional transactions other than lowering their price point closer to the point of ambivalence; that is, approaching marginal cost. Thus, in many contexts, consumer appetites, satisfied through consumers’ individual and collective choices in producer counterparties, is the limiting factor in the generation of producer (and consumer) surplus. The implications of this ability of consumers to select which producers satisfy their limited demand for products and services is discussed in Subsection B.
ii. Product Differentiation and Competitive Advantage
Producers compete for the producer surpluses of our economies, or profits, by differentiating products to better satisfy consumers. By differentiating their products in ways consumers like, producers secure competitive advantage over other producers and transactions through them will tend to capture a larger share of the market. Various dimensions of differentiation include price, measures of quality, and convenience, but mostly depend on the area of consumption. In sectors where there are more dimensions of product differentiation, it is often difficult to determine which producers, or firms, will capture larger market shares. This is because even if a firm is superior on one dimension, such as price, this superiority may not be decisive as against other differentiation dimensions. For instance, if Frank and Sally both own taco stands in a city, even if Frank lowers his prices below Sally’s, she may still prevail over Frank for various reasons: people may prefer the taste of her tacos, she may offer tacos at a more convenient location, people may enjoy eating at the cafeteria she provides, etc. But in contexts such as the sale of commodities, where there are less, or even just one, dimension of differentiation, superiority on a given dimension will tend to imply greater market-share capture. If goods or services are totally fungible, price is usually determinative of winners in markets. Therefore, where product differentiation potential is high, superiority along one dimension is less likely to be decisive in securing high market share; where product differentiation potential is low, superiority along one dimension is more likely to be decisive in securing high market share.
One seldom exploited dimension of product differentiation is profit destination. Consumers know that their purchases generate benefits to the counterparties to their transactions, and, consequently, all else being equal, they will engage with counterparties they like. For instance, the reader might have a friend who is a barber, and, out of desire for that friend’s well-being, might choose to purchase haircut services through that friend, rather than let a stranger enjoy the profit. A prominent example of product differentiation by profit destination is that of the Girl Scout Cookies, a means that the Girl Scouts of America use to fund their various organizations and chapters. Consumers may derive a psychic benefit from the knowledge that their purchase benefits an organization that they deem worthy. Consequently, to the extent that consumers prefer supporting Girl Scouts to supporting unknown shareholders or others who might enjoy the profit, Girl Scout cookies enjoy an advantage.
This author contends that, keeping other product differentiation dimensions constant; that is to say, with identical products at identical cost, differentiation along profit destination should be decisive in securing market share. If consumers are faced with identical products that they want at identical cost, profit destination should be decisive in consumer purchasing decisions. Section II of this paper sets forth the means to set up this choice for consumers. Subsection B considers some possible reasons for why, historically, profit destination has played a minor role in consumer behavior.
B. Consumer Counterparty Indifference and Consumer Counterparty Selection, and the Possibility of an Economic Transition
Although transactional freedom and consumer appetite as a limiting factor should imply that consumers have immense power regarding the profits generated in our economies, in practice, this power has seldom been used. Regarding most consumer transactions, in the current economies, consumers are either unaware of or indifferent to what entities receive the producer surpluses from the transactions they engage. One might call this state Consumer Counterparty Indifference (“CCI”). From a strictly egoistic consumer perspective, this indifference makes sense: a consumer might confine his concern to the maximization of his own utility, and thus not concern himself with the profit generated from his consumption. However, such a view of consumers, as humans, one of total indifference toward the funding of various causes, is not reflected by the everyday activity of people making sacrifices for the benefits of others. Hundreds of billions of dollars flow every year to the charitable sector and millions of organs are donated. Simply put, there is little reason to believe that humans are interested solely in personal utility maximization.
Furthermore, it is unclear why charitable profit destination would imply any corresponding disadvantage regarding corresponding products. In our economies across the world across many markets, the owners of capital can easily substitute themselves through open markets called stock exchanges. Typically, and basically as a corollary of a CCI regime, ownership can freely shift between individuals and entities without impacting the success of firms. If one wants a piece of ownership of Apple, Incorporated, one must merely look to the stock market to find a current owner who is willing to part with stock in the company at the lowest price. Thus, it does not really matter whether Tom, Dick, or Harry owns Apple stock, nor to what extent, in terms of Apple’s production of competitive products. Of course, this analysis neglects the relationship between ownership and corporate governance, which might potentially allow for ownership composition to adversely affect governance, and thus compromise products. However, trends in corporate governance have more and more tended toward a world of stock as instruments of investment and speculation rather than means of exercising control over corporate activity. In any case, it is unclear why ownership by charitable causes rather than private entities would be an obstacle to the success of a firm. Rather, such ownership, if credibly made explicit regarding a popular charitable cause, would allow for an unalloyed competitive advantage.
Yet, paradoxically, consumer behavior in the current economy reflects an almost total indifference as to who receives producer surplus from transactions. As it stands in today’s world, when a customer goes about a department store and purchases a toothbrush, pair of pants, or a vacuum cleaner, she does not pay any mind to who benefits from the transaction other than herself. A fulsome analysis of the historical reasons that have led to the phenomenon of what this author is coining “Consumer Counterparty Indifference” (“CCI”) are beyond the scope of this paper. CCI may have some noble roots pertaining to the perpetuation of norms regarding product merit, and avoidance of allowing prejudice or negative sentiments to keep individuals from enjoying the best deals of the best goods and services.
For instance, Elijah McCoy was a black inventor who patented the automatic displacement lubricator for use in locomotives. Railroad engineers preferred this lubricator and attempted to avoid inferior copies. Given racial prejudice at the time, if consumer sentiment toward the profiter was decisive, either antipathy or lack of trust toward Mccoy as a black man would have prevented McCoy’s invention from being dominant in the market, despite being a superior product. As it happened, railroad engineers strongly preferred his product, hence the phrase “the real McCoy” emerged as an expression for a product that outstrips its many imitators. It would be quite naïve and unhistorical to suggest that CCI always defeated consumer prejudice, but accurate to describe it as a force to protect consumers from their own irrational prejudices (and benefit those who produce good products, despite irrational prejudice against them.)
Another positive aspect of CCI historically has been its implications for capital markets. Buttressed by a norm of CCI, capital may flow seamlessly to sectors with higher degree of demand. As long as consumers are unaware/ indifferent as to profit destination (and the exchange in ownership will not jeopardize control of governance), firms can trade ownership for money without concern. Consequently, firms in sectors where demand is increasing or otherwise need cash, can secure funds from the broadest possible set of investors and thus achieve the most money in exchange for an ownership stake.
Finally, CCI may have largely been a norm by default. Throughout most of human history, consumers usually did not have a particularly wide selection of product choice. Throughout all but large cities, all but the most basic goods and services were generally available through a small number of local producers. And even where producers could compete, the dimensions of product differentiation would typically overwhelm concerns regarding profit destination, in all but circumstances where the producer in question was a close family member or friend (positive CCS) or the producer was so unpopular that people would avoid purchasing through a certain company or person (negative CCS resulting in boycott). The proliferation of choice between producers on a global scale is a relatively recent phenomenon in historical terms.
Whatever virtues CCI had and has, it has two noxious features. (1) Almost by definition, those who have the greatest degrees of need and suffering will need to direct nearly all of their income toward consumption which addresses their own basic and immediate needs, and thus they will be unable to accumulate wealth, which is, under our current system, essentially a precondition to wealth accumulation through capital. (2) Those who already enjoy power and wealth will be able to expand that power and wealth to gain further control of the means of production, thus compounding their wealth and power. Consequently, we live in an unjust world where the rich get richer, and the fat dogs get further fed while the poor continue to be vacant from ownership of the means of production. Furthermore, nonhuman conscious beings- though susceptible to pain and pleasure- have no ability to gain stake in the world’s production of wealth, and thus are totally at the mercy of humans. This is not to say that there are no other forces for well-being and justice (and even components of capitalism that have functioned in service thereof). However, the tendency of capitalism to exacerbate inequality, even when not accompanied by attributes of capitalists that tend to grow our world’s wealth, such as creativity or grit, allows for a world where many cannot eat or receive an education while there are some who enjoy more and more exquisite of luxuries.
A question that naturally arises is why the current economies of the world are and have remained for centuries ones of CCI. If consumers can exercise power cost-free through transactions, why is the deliberate use of this power so anomalous? This author suspects that one reason is that there is a strong norm of not only hiding or disguising the recipient of producer surplus in transactions but avoiding the topic altogether, for consumers, is that discussion of producer surplus might generally be bad for business. Consumers might not be willing to pay as high of prices for goods if profit-margins from transactions were brought to mind. So, Producers may not wish to make explicit the subject of profit and consumers might view it simply as none of their business. Consequently, the power of consumers to channel the producer surpluses generated in our economies is largely not only unexercised, but is seldom even considered.
However, if consumers were aware of means by which they could channel their purchases such that causes that they support would enjoy the profits generated, there is little reason to believe that this would not allow for a competitive advantage enjoyed by a firm. For instance, if one is purchasing life insurance, 40-90% of the first year’s premiums is often remitted to the salesperson who sold the policy. There is ultimately not much to differentiate independent life insurance salespeople in terms of their products, because they sell products from the same companies (opportunity for differentiation might be in either persuasion of a client that they need a policy or a larger policy or in aiding a client in finding a product that best meets their families’ needs). This context, one of little opportunity for product differentiation (do I buy the same life insurance through Karl or through Sally?) as well as a diminished need for reinvestment of profit would likely be one in which firms that had the ability to differentiate by profit destination would tend to capture larger market shares. Consequently, if consumers were aware of salaried salespeople that would automatically convey their commissions toward popular charities, such as those who benefit the global poor, a significant advantage would be conveyed such that these salespeople would tend to occupy a larger portion of their sectors. One can also imagine that regarding a lot of consumer products, such as flour, ketchup, paper towels, etc., there is not much difference between the various product areas, and consumers might flock toward a brand that they knew would benefit a worthy charity.
More generally, if the conditions were such that consumers could enjoy the same products at the same cost while their activity incidentally benefits a worthy cause, they would likely do so, such that the market would transition from one of Consumer Counterparty Indifference, to become more of an economy of Consumer Counterparty Selection (“CCS”). This possibility is conditioned upon such firms existing, being able to credibly signal their statuses and that they work for popular causes, and consumers knowing about them, thus being able to channel their consumption through them. This author posits that these conditions could be satisfied by the existence of Guiding Producers that automatically direct some or all of their profit toward a charitable cause, Auditing Systems that verify that Guiding Producers are operating faithfully as advertised, and finally, Networking, Credentialing, and Communication Systems that convey this information to Consumers. These three conditions will be elaborated upon in Section II, which would activate Consumer Power, through a process this author calls Guided Consumption.
II. The Conditions of Guided Consumption: Guiding Producers, Authenticating Systems, and Networking, Credentialing, and Communications Systems
The key to Guided Consumption is the existence of firms that convey their profits, in whole or part, in accordance with a funding destination, systems that ensure the faithful execution of this process by Guiding Producers, and this information being available to consumers that they might buy accordingly. Section II discusses these conditions and how they might operate and be organized. Subsection (A) regards Guiding Producers: individuals or companies explicitly directing profit capture to a Designated Funding Destination. Subsection (B) regards Authenticating Systems: the legal forms, technologies, and bureaucracies that will serve to account for profits generated by Guiding Producers and verify that said profits either go directly to the Designated Funding Destination or are reinvested into the Guiding Producer’s company such that the Designated Funding Destination profits exclusively from the reinvestment. Subsection (C) regards Networking, Credentialing and Communication Organizations (“NCCOs”): the organization(s) that create networks of Guiding Producers, credentialize them so that the public can be aware of them and communicate to the public so that it is aware of Guided Consumption as well as what Guiding Producers they can channel their purchases through.
A. Guiding Producers: The Basic Channels of Guided Consumption
The basic channel of Guided Consumption is the Guiding Producer. A Guiding Producer can be an individual, a company, or any other organization that produces goods and/or services for consumers that explicitly designates some or all its profit for the benefit of a charitable organization. The concept of Guided Consumption allows for what this author is calling “Hybrid Guiding Producers”, which might designate some portion of their profit toward a charitable destination, and the remainder to a traditional stakeholder such as self-owners, stockholders, etc. Equity ownership of a Hybrid Producer might be split between private and charitable ownership such that the value of share value from reinvestment in the business would be split on ownership lines. Although Hybrid Producers may one day feature prominently in the economies of our world, for the sake of conceptual clarity, the remainder of this paper will discuss Pure Guiding Producers- individuals and firms for which a marginal sale exclusively benefits a charitable cause.
A Guiding Producer, by definition, explicitly creates a Designated Funding Destination (“DFD”). The Guiding Producer then accounts for its costs and calculates profit at regular intervals. This profit then will either go directly to the DFD or could be reinvested in the Guiding Producer, thus causing a commensurate increase in equity value and the ability to create even larger charitable contributions in the future. This divergence in possible avenues of profit is like the difference between stockholders sharing in a company’s profit through enjoyment of a dividend or alternatively, by a company’s reinvestment of profit, and thus corresponding appreciation of equity. The capability of Guiding Producers to reinvest profit while simultaneously benefiting charitable causes may ultimately enable Guiding Producers to compete in a broader set of economic contexts.
Guiding Producers must have the ability to perform this accounting relatively cheaply, or even without cost. Fortunately, these accounting functions are already a cost of doing business with most traditional firms, and thus Guiding Producers would not be at a disadvantage. Ideally, legal forms would exist through contracts that would commit the employees of a Guiding Producer to direct the profits they generate in exchange for a competitive wage or salary. This structure would be facilitated by technologies. For instance, a Guiding Producer may transact his or her business through a payment processor that automatically directs sales proceeds to the DFD. Finally, the business activities of Guiding Producers must be subject to audit by the systems that will be discussed in the next subsection B.
Another key point is that Guiding Producers need not be compensated less than their peers in the sector; in fact, where Guiding Producers enjoy a competitive advantage, they may enjoy a significant premium over their traditional peers. If consumer sentiment allows a company working for the benefit of charities to expand to capture a larger market sector and generate greater revenues, it may be prudent to attract the higher quality employees by paying a premium over the market rate.
An example of a Guiding Producer might be a life insurance salesperson. This life insurance salesperson might have a contract entitling them to a salary of $75,000 on an annual basis, in exchange for the commissions that salesperson would otherwise generate from the sales of life insurance policies. This life insurance salesperson may have a software platform from which policies are presented to customers and submitted to life insurance companies. The commissions then generated would automatically be sent to the Guiding Producer’s DFD. This author submits that, when rendered trustworthy by an independent auditing system, as discussed in the next Subsection B, and supported by the advertising of Networking, Communication, and Credentialing Organizations, as discussed in Subsection C, such a life insurance salesperson would have a fundamentally different experience than that of ordinary life insurance salespeople who spend the vast majority of their time trying to generate sales, rather than writing policies. But more generally, in areas of low product differentiation, Guiding Producers should be able to capture immense market-share because they offer a differentiating factor where few or no others are available.
B. Authenticating Systems- Independent Auditors Consumers Can Trust
The central premise of Guiding Producers may seem too good to be true. A consumer might ask, “How can I get the same product at the same price while at the same time helping a worthy cause? How do I know that the proceeds are actually going to charity? Consequently, it is vital that independent systems exist that confirm that Guiding Producers are doing precisely what they are advertising. Authenticating Systems are the mechanisms to ensure integrity to allay such consumer fears and allow for the potent and unreserved highlighting and endorsement of Guiding Producers.
Regarding the logistics of Authenticating Systems, it is critical that the process can be done cheaply but very reliably. Fortunately, software technology and specializations of accountants should allow for much of the authenticating process to be automated with oversight by specialists. One can easily imagine cost and profit profiles of different products being submitted for approval to Authenticating Systems, and, upon review, the accounting and profit direction process could proceed relatively automatically through software means. Blockchain technology, such as that employed by cryptocurrencies, might be one method to achieve such transparency.
Given the critical role that Authenticating Systems provide as safeguards of the integrity of Guiding Producers, one key question is what organizations and institutions will be responsible and privy to the information in the control of Authenticating Systems. A natural partner in this process would be the Designated Funding Destination Charities themselves, or partners they trust to oversee the process. This would serve two important purposes: (1) these charities would have the greatest incentives to see to the faithful activity of Guiding Producers, as the beneficiaries of their activities and (2) these charities would then be more capable of lending whatever credibility they have with the public to the project of Guided Consumption. As for the administrative process, it would be critical to involve institutions and organizations with reputations for the highest degree of integrity and reliability with the public. And it is worth considering the degree to which the information of Authenticating Systems might be capable of public access while protecting sensitive consumer and producer information to the extent possible. And once a process is in place to verify that Guiding Producers are acting faithfully, the next critical role is that of Networking, Communication, and Credentialing Organization(s), as is discussed in the next subsection (C).
C. Networking, Communication, and Credentialing Organizations- The Means of Informing Consumers
Networking, Communication, and Credentialing Organizations (NCCOs) are also vital to enabling Consumer Power, because the information that they provide allows consumers to confidently choose a charitable cause as the beneficiary of their purchases rather than a traditional shareholder. Absent consumer knowledge about the nature of Guiding Producers, profit destination cannot be a differentiating factor on the level of consumer choice. Thus, any benefit Guiding Producers would have to charitable organizations would simply be incidental to the success of the underlying business. While it is certainly the case that almost all successful businesses have not used profit destination to achieve competitive advantage, such an edge could allow for significant market-share capture, especially in markets that it is otherwise difficult for producers to gain significant competitive advantage. Therefore, NCCOs serve the function of gathering the information about Guiding Producers from Authenticating Systems, promoting awareness in the public at large generally about the concept of Guided Consumption, and informing and exciting the public about specific Guiding Producers so that they may channel their existing consumptive activity through Guiding Producers, if possible, or even modify their consumptive activity to some extent due to desire to support Guided Consumption.
As a threshold matter, NCCOs must inform people about the possibility of Guided Consumption. Consumers must be presented with a central question: why should traditional stakeholders and shareholders benefit from my purchases of goods and services and not worthy charitable causes? Essential to this idea is recruiting individuals and entities that are trusted by the different segments of our societies who can act as spokespeople for the concept of Guided Consumption with a central message: you can help people through the purchases of goods and services without compromising on quality or paying more. The concept of Guided Consumption may initially seem implausible to consumers because of how powerful a concept it is. Consumers will be initially skeptical of their own ability to help charitable causes without making personal sacrifices. Of course, Guided Consumption is not a “free lunch”, but merely a deliberate substitution of traditional stakeholders to transactions with that of worthy causes. It will be critical to engage key spokespeople, such as celebrities, thought leaders, political and religious figures, and other influential people across the communities of the world to spread the core message of Guided Consumption. These spokespeople may be motivated to aid Guided Consumption by several reasons: personal benevolence, the capability to expand their own prestige and influence, and finally, money. Guided Consumption may also be spread throughout communities by normal word-of-mouth, magnified by the ubiquitous social media platforms.
These spokespeople, through various communications such as commercials, advertisements, earned media, and word-of-mouth, will also let consumers know the specific Guiding Producers available to them to transact with. As discussed in Section I, one context in which Guiding Producers will tend to expand in terms of market-share will be those of low or no product differentiation. NCCOs will be responsible for making consumers abundantly aware of the sectors in which they may engage with Guiding Producers. Essentially, the project of Guiding Producers is to occupy sectors in which they can offer identical or superior products at equal or lesser prices. The project of NCCOs will be to make consumers aware of these Guiding Producers so that consumers can channel their normal purchases through them. Even more ambitiously, the availability of Guiding Producers may even expand demand in sectors they occupy. Essentially, if consumers value the causes advanced by a Guiding Producer some consumers on the margin may engage in purchases they otherwise would not have made. Of course, the primary power of Guided Consumption will probably not be to directly increase demand, but rather to prevail over identical products and services in otherwise competitive markets.
Once Guiding Producers allow consumers the ability to choose worthy charitable causes over traditional stakeholders, Authenticating Systems ensure that Guiding Producers are operating as intended, and NCCOs inform and excite consumers about the possibilities of Guided Consumption, one compelling question will arise in the everyman or woman: why not? In the scope of a pilot project, all that needs be found is a transaction beneficiary more popular than the nameless, faceless stakeholder or shareholder of our current economies. Ultimately, the competition will be for Guiding Producers to designate profit destinations that best accord with consumer sentiment. There is little reason that Guiding Producers could not allow consumers to explicitly designate the funding destinations of their purchases. As has been explored in Section I, the power is ultimately with consumers to choose those with whom they transact, and thus, receives the producer surplus from their transactions. Once the conditions of Guided Consumption are clearly known to the public, the mechanisms for competition along the dimension of consumer sentiment will allow for significant portions of our economies to work for the causes consumers prefer.
III. Pilot Project: Thoughts on the Implementation of Guided Consumption
Although Section I described the general economic conditions and the possibility of the transition to an economy in which consumers factor profit destination into their economic activity and Section II described in broad terms the conditions that would make that possible, the question remains: how do we get from here to there? Section III addresses the components of a pilot project for Guided Consumption. Facilitating this process, this author envisions a charitable corporation that is currently being called the Consumer Power Initiative (“CPI”). CPI, acting through its officers, would be responsible for seeing the conditions of Guided Consumption be realized in concrete terms. This section of this paper is intended to be a series of ideas to illustrate how a pilot project might function, and the author would like to emphasize openness as to ideas that might be able not only to generate funds for charitable causes, but also to show the world that significant portions of its economies can work for the furtherance of well-being and justice. Subsection (A) evaluates a few different fruitful market sectors for a pilot project, and how Guiding Producers might function in those sectors. Subsection (B) discusses in more concrete terms the roles of Authenticating Systems and NCCOs in the pilot project: informing and exciting the world of consumers about the new way in which they can change the world and the ways that they can do so today. Subsection (C) considers possible profit destinations for the pilot project. Subsection (D) considers the possible funding mechanisms, through charitable and investment funding sources to meet CPI’s budgetary needs and how value propositions can be proposed to these funding sources.
A. Possible Promising Market Sectors for Guided Consumption-Sales or Other Sectors Fueled by Commissions
i. Sales or Other Sectors Fueled by Commissions
One area that, by nature, might be one of low differentiation, is that of sales. In this context, by a sales sector, the author is not referring to the competition between varying products in services, but rather the competition of mediums of sales of the same goods and services. Salespeople, platforms, and other mediums of sale compete to sell the same goods on dimensions of persuasion, convenience, and others. Pertaining to salespeople, it can also be difficult to generate sales because of a conflict of interest between a potential buyer and salesperson: if a salesperson is working on commissions, she is not, at least in the short run, always incentivized to meet buyer’s needs, but rather to sell her product, and thus maximize commissions. Sales platforms, on the other hand, can compete along lines of convenience and network effects. For instance, eBay and Amazon compete to offer the same goods most conveniently and cheaply to buyers, while also having the broadest selection of products available, so buyers will not need to scour multiple (or even just more than one) sources to find the items they want and need.
Guiding Producers would enjoy a natural advantage in sales for multiple reasons. One reason is that which is applicable to Guiding Producers generally in a Guided Consumption environment: popular profit destination. Guiding Producers in sales would work on salary from an external source, rather than earning commissions based on generated sales. Instead of benefitting an individual salesperson or benefiting the wealthy shareholders that are connected with an online sales platform, consumers will know a worthy charity benefits from their purchases. Through the work and advertising of NCCOs, the public will be aware of the availability of Guiding Salespeople or Platforms through which they can channel their normal purchasing. They may even become motivated to buy something they otherwise would not have. Consequently, the segment of the sales market-share that is already sold on the product generally will naturally gravitate toward Guiding Producers in sales, whether they are salespeople or platforms, because it offers a chance to offer support to very worthy causes while purchasing the same product or service at the same price.
Another opportunity for advantage of Guiding Producers over Traditional Producers is their alliance with NCCOs, which will allow consumers to become aware of the market sectors in which Guided Consumption is possible and consciously consider whether or not products and services in those sections are available that could improve their lives. As will be discussed further in Section B, NCCOs will be making consumers of the world aware of the possibility of helping people through their normal purchases, but also letting them know the sectors that it is possible. Consequently, many of those who come to Guiding Producers in sales will already be “sold” and looking for the medium by which to buy. This would allow for Guiding Producers in sales to specialize differently than traditional salespeople. Rather than being motivated like a traditional salesperson would be- trying to make a sale, and the biggest sale they can- a Guiding Producer can specialize in getting a product or service that best suits an already-sold customer’s needs. Thus, Guiding Producers in Sales may be able to leverage their salary compensation and association with a good cause to become trusted guides in the products and services they deal.
Other areas in which commissions are generated for an agent’s work in a transaction, such as a real estate agency, could also be a fruitful area for Guided Consumption to operate. Like life insurance salespeople, the limiting factor in a realtor’s income is usually their ability to generate sales. If a set of real estate agents were able to differentiate themselves from competitors by being able to say that their commission would go to a popular charity, this would potentially enable them to generate significantly more business. At a 2.5% commission a realtor who could sell 40 properties a year would generate an income (less costs) of the average value of the set of houses sold. Potentially, if a campaign was successful in energizing the public as to the merits of Guided Consumption, tens or even hundreds of millions of dollars could be channeled to charities which would otherwise have gone to armies of realtors, insurance salespeople, or other sectors working on commission.
Given the low initial startup costs, a great place for the Consumer Power Initiative to start might be Dropshipping. Dropshipping is a business that consists of providing a platform to sell the products of others, called Suppliers, who will produce the product and ship them to buyers. The job of the Dropshipper is to advertise the product and to provide a platform, typically a website and/or an app, for people to make the purchase. The Dropshipper receives a percentage of the sale in exchange for marketing and providing a platform for Suppliers to sell their goods. The reason that this market would be a great place for the Consumer Power Initiative to explore initially is because there are very few upfront costs, such as creating a website. This would also provide a way to promote consumer awareness of Guided Consumption. Consumers would know that when they purchase from our affiliated Guiding Producer Dropshipper, instead of their purchase benefiting Amazon or some other store that works for wealthy shareholders, it would benefit a charitable cause. The website would also contain links to learn more about the Consumer Power Initiative as well as links to directly donate and/or learn more about the charities that we support.
ii. Widgets and Components
Because Guiding Producers will tend to have substantial and even decisive advantages where there is less room for product differentiation, there may be the possibility of Guiding Producers upstream in the production of goods that eventually reach consumers. This author is by no means an expert in chains of production, but my understanding is that firms compete in the production of components and widgets which companies use to create their end products. By widgets and components, this author means the basic components that go into making other parts. Because the methods of efficiently producing these widgets and components in their most effective configurations are generally available, it may be an area where obtaining a competitive advantage is difficult.
For this reason, a Guiding Producer might be able to obtain significant market-share by offering a differentiating factor where it is difficult for other firms to offer any differentiation. A Guiding Producer selling its widgets and components would be able to tell prospective buyers that the product a customer is considering buying uses parts that were bought from a company whose profits go wholly to worthy charitable sources. This status could be readily conveyed in the form of a sticker that would convey this certified status. Ideally, because the ability to confer this worthy aspect to consumers would not imply an increased price or decreased quality, such a Guiding Producer might be able to outcompete others in its sector. Essentially, if there is minimal or no difference in choices upward in the chain of production, one coffeemaker, for instance, would not want to cede the differentiation offered by association with a Guiding Producer of the components and widgets that make up the products.
iii. Sectors with Sympathetic Monopolists- Intellectual Property, Concerts, Works of Art and other such Goods and Services
Another potentially fruitful sector to explore would be those sectors, or rather subsectors, in which there may be monopolists who are inspired by Guided Consumption and want to either commit to donating the proceeds of their products to a charitable cause or accept lump sum payments from the Consumer Power Initiative in exchange for the rights to those proceeds. In sectors pertaining to intellectual property, producers often are able to obtain monopolies for a period of time regarding the reproduction of their works. And, of course, artists by nature have monopolies on their own performances or produced works of art. These producers could be variously and complexly motivated: they may genuinely wish to allow worthy causes to benefit from their art; they may wish to advance their image and reputation by being associated with Guided Consumption; and/or they may wish to make a premium from the Consumer Power Initiative that they might not be able to obtain otherwise.
Having popular artists as Guiding Producers offers the opportunity for effective synergy with NCCOs because a popular artist as Guiding Producer would serve a dual role as a Guiding Producer (generating profits for charitable causes) but also as a part of an NCCO (popularizing and spreading awareness of Guided Consumption as a means of doing good in the world). One can imagine a popular artist generating even more public good will for him or herself not only by directing the proceeds of concerts, digital downloads, CDs, visual artworks, etc., but also by shining a spotlight of the larger project of enabling consumers to do good through purchasing goods and services, not merely the goods and services such as those provided by the artist, but also many other goods and services.
Guiding Producers could also explore luxury good areas by allowing wealthy people to virtue-signal by wearing a clothing brand or accessory. This use of Guided Consumption would be different from a “tiebreaker” strategy referred to before, where a Guiding Producer would ideally produce an identical product at the same price, allowing a popular profit destination to win over an otherwise ambivalent consumer. Partnering with a philanthropic designer could enable to further a look that would convey a brand of looking luxurious and fashionable while helping worthy causes.
iv. Other Low Differentiation Consumer Goods Sectors
There may be various other subsectors within consumer goods in which there simply are less differentiating factors in which the distinction of your purchase helping a worthy cause could be a tie-breaking feature. Perhaps normal, as opposed to fancy, dishware, might be one area in which consumers are looking for serviceable, as opposed to exemplary products. Perhaps basic consumer goods such as detergent, toilet paper, paper towels, etc. would be fruitful areas. Market research could reveal sectors in which there is a struggle for various brands to compete for consumers, and profit destination could prove decisive in achieving significant market share.
B. Authenticating Systems and NCCOs in a Pilot Project: Creating Awareness and Trust While Eliminating Friction to Power Guided Consumption
For Guiding Producers to be vehicles of Consumer Power, rather than producers that incidentally generate funds for charitable causes, consumers must be aware of Guided Consumption as a means by which they can generate funds for charities through their purchases and they must also trust Guiding Producers to operate as advertised. Finally, to maximize the amount of market-share in each sector to realize, the Consumer Power Initiative should eliminate any frictions which might make it easier for a consumer to have his or her wants or needs more easily met by a traditional producer, where a guiding producer could satisfy those needs.
i. Authenticating Systems- Transparency and Cross-sectional Buy-in
To allay the concerns of the skeptical consumer who views the premises of Guided Consumption- benefiting charities through purchases with no personal drawback in terms of price or quality- as too good to be true, the highest degree of transparency consistent with consumer privacy as well as validation from sources consumers from all over the world trust, is essential. One possible mechanism for transparency is the automatic and anonymized registering of purchases that could be available online. Then, if someone bought a good or service through a Guiding Producer, he would receive a receipt with a reference code. He could then enter that reference code in a website, and verify the purchase made, the amount paid, the associated producer cost in generating the item, and the profit generated, as well as how that profit was directed. Of course, most buyers probably would not engage in that degree of investigation, but the fact that a system is available that allows them to, would tend to promote trust in the process.
In addition to transparency, validation from sources trusted by the many segments of consumers all around the world could also promote trust in Guiding Producers. Of course, that the charities themselves have access to the books of the Guiding Producers who serve them could go a long way in addressing consumer holdouts. But perhaps even more critically, the general project, as well as the trustworthiness of its implementation, is likely to be more successful if groups and individuals which hold sway over segments of societies around the world align with the goals of the Consumer Power Initiative. Consequently, outreach to various influential cultural, ideological, political, religious, intellectual, and other groups may be critical to reaching and persuading the largest consumer base. The notion here would be to hear and address the concerns of the influencers of the world to the extent possible without compromising the broader goals of the Consumer Power Initiative.
ii. Creating Awareness and the Conditions of Frictionless Participation
Even with the existence of Guiding Producers and systems to ensure that they can be trusted, the consumers of the world still must know about them. Given a global economy, the declining marginal cost of advertising, and the capability of ideas to go viral and reach hundreds of millions or billions of people overnight, a potent and calculated campaign to reach the consumers of the world should ultimately cost a miniscule fraction of the billions and even trillions of dollars generated for charitable causes, by shifting larger and larger portions of the economies of the world to Guiding Producers. Critical to note in considering the cost to impact relationship is that the benefit to charities from a successful pilot project would not simply be those funds generated in the pilot project, but also those extending into the future from a new economy, a significant portion of which working to benefit charitable causes.
Some of the reach of the Consumer Power Initiative is likely going to be the product of earned media. Many of the issues that Guided Consumption is trying to address, such as the elimination of global poverty and the creation of a more just relationship with animals, are the same issues that many of the world’s religions, political groups, thought leaders and influencers, and other groups are interested in helping to address. If these organizations can be assured that Guiding Producers can be trusted, and that the charities that they benefit are worthy and support their shared goals, they may view it as in their interest to encourage those with whom they have influence to purchase through Guiding Producers, or consider working as a Guiding Producer themselves. If the Consumer Power Initiative is doing its job in creating contexts in which the choice to buy through a Guiding Producer does not entail a cost in terms of cost or quality, and in fact, may confer a consumer advantage, as illustrated in the sales context, many organizations and communities of the world merely must spread awareness.
Another cost involved in transactions is that associated with a consumer’s finding a producer that meets his or her needs. Consequently, another purpose of the Consumer Power Initiative is going to be concisely emanating into the public consciousness the commercial sectors in which Guiding Producers operate. Thus, if a consumer finds him or herself in need of such a product or service, they naturally will think to use it as an opportunity to do some good. A simple and user-friendly website and app also would be available to help a consumer quickly determine what local or global, as applicable, Guiding Producer is available to meet his or her needs. A central premise of Guided Consumption is enabling consumers to further charitable causes without making personal sacrifices. The cost of goods and services does not merely include the explicit price in dollar terms, but also the hassle associated with obtaining the item on the consumer end. Fortunately, this is a cost that traditional producers also need to compete to eliminate for consumers in their sectors. And with economies of scale as well as the good will be generated by the project, the Consumer Power Initiative should have much at its disposal to help ensure that the path of least resistance on the consumer end is the one that leads to a Guiding Producer.
C. Possible Funding Destinations
In formulating funding destinations for a pilot project, there are a number of factors to consider. Firstly, this author, and by extension, the Consumer Power Initiative, is interested in generating funds that most efficiently increase well-being and reduce suffering of conscious beings. However, consumer interest is ultimately the engine that enables Guided Consumption to potentially divert the profits from industries to charities. Consequently, it is critical that the initial charities affiliated with the Consumer Power Initiative are not only effective at doing good, but also resonate with the consumers of the world. For this reason, this author is inclined to think that an effective funding destination would be charities that address human welfare. For instance, GiveWell is a nonprofit that assesses from an empirical standpoint where donors can make the largest impact on global health and development. The charities endorsed by GiveWell would likely be excellent candidates as funding destinations because their top charities, with projects like preventing children from contracting malaria, are both very cost-effective in doing good, and would be generally popular with consumers. Conversely, there may be many programs that could be very promising and cost effective of advancing the welfare of conscious beings on a long-term basis by reducing the likelihood of catastrophic risks but are less likely to immediately motivate consumers.
Another factor in motivating consumers is the ability for them to make a difference locally, captured by the expression “charity begins at home.” A discussion of the relative merits of donating to local causes versus evaluating where globally funds can make the greatest difference goes beyond the scope of this paper. But worth evaluating is certainly how to make the funding destinations most attractive to consumers. It is conceivable that some consumers in wealthy or moderately wealthy countries could be put off by transactions in which the entirety of the producer surplus of transactions goes to causes thousands of miles away when they see need for support of individuals within their own communities.
One possible way to make for an attractive funding destination would be a simple hybrid approach. One such approach would be that half of the producer surplus generated by a transaction with a Guiding Producer would go to the Maximum Impact Fund of GiveWell, thus generating potentially enormous sums for a very efficient means of advancing human welfare. The other half could be distributed according to a consumer’s choice, among a selection of worldwide charities that meet minimal various standards. For ease of transaction, there could be a default selection made in accordance with a consumer’s zip code in whatever country that they are in, which would correspond with a very well-considered regional charity. Thus, a consumer would, by default, direct half of the profit associated with their purchase toward assisting the global poor, and the other half toward helping the needy within their own communities. This author’s “50% global, 50% local” idea should be merely viewed as one attempt to address the question of how to aid effective charities, while also tapping into the hearts of consumers in a compelling manner.
D. Generating Funds for a Pilot Project
Of course, a Pilot Project would need funding: to pay the Guiding Producers, so that they can accurately advertise 100% profit going to a charitable cause; to support the technologies and systems that audit Guiding Producers; to advertise and otherwise inform the public regarding Guided Consumption; and for miscellaneous other expenses. Currently, this author sees two possible sources of funding for the Consumer Power Initiative: (i) charitable funding and (ii) investment funding.
i. Charitable Funding-
Charitable funding derives from individuals and organizations that view the goals of the Consumer Power Initiative not only as aligned with them, but also as the most effective, relative to other causes they might support, in furthering those goals. Because of the high impact potential of Guided Consumption to vastly increase charitable funding through channeling consumption, a rational organization or benefactor valuing CPI’s goals would donate, provided that there was an even small chance of success. Of course, as hopefully this paper should help persuade the reader, once the conditions of Guided Consumption are attained in the appropriate market sectors, there is little reason to believe that Guiding Producers will not be able to generate funding for charitable sources many times more than the associated costs.
This author believes that at least one area for a pilot project should be relatively low-cost and capable of beginning without much funding. This would be Dropshipping: the Consumer Power Initiative should be able to develop an online store at which people can purchase items. This platform should have an advantage over others given that consumers will know that the profits that go to the platform will directly benefit a charity. This website would have information about the Consumer Power Initiative, and its broader goal of facilitating the creation of other companies like this platform, that would work for a worthy charitable cause rather than for individuals’ benefit. Hopefully, the interest generated by the public will provide a compelling reason for other benefactors to further the broader project.
Because the Consumer Power Initiative will be competing against thousands of charities in the world for the dollars of those who wish to do good, it is essential that CPI engages in strong research to support its contentions that different areas would be good candidates for Guiding Producers. Consequently, support will probably come in phases, the earliest of which will probably be the most difficult. The earliest charitable donations would be to pay for full-time staff to engage in fundraising, networking, and research. The early phase of CPI is essentially developing the infrastructure to support the idea. CPI, at this stage, will want to work with partners in academia and industry to determine how best to implement a pilot project. A key goal for the early stages of CPI will be conveying the idea of Guided Consumption and persuading a sufficient number of wealthy/smart/influential people to support the project with the resources they have available. Potential early help might come from those who CPI allies have personal relationship and also are persuaded in the potential of Guided Consumption. Other early allies might be the target charitable beneficiaries of CPI, such as GiveWell.
Once the CPI team has identified promising market sectors for Guiding Producers, set forth the blueprint for Authenticating Systems, and otherwise has a strong, compelling, and specific plan for a pilot project, the time will come to raise funds for implementation, the majority of which is likely to constitute compensation for the employees of Guiding Producers, although there may be many other costs associated with advertising and other parts of the process. However, at this point, the case for Guided Consumption will likely be much more persuasive, as it will (hopefully) gained the credibility of weighty voices in various spaces of academia, industry, charity, gov’t, etc. Furthermore, the online store will have generated public support for the ideas of Guided Consumption. This author believes that after the early days of CPI, many will be interested in helping CPI allow consumers to create a more just and happy world. At this point, the notion of Guided Consumption would not merely be a notion espoused by one person in an academic paper. The author even believes that he could leverage selfish motivations of investors to accrue money to fund the project, if necessary.
ii. Funding Through an Associated Cryptocurrency
Another potential means of accumulating funds to support a pilot project would be through the creation of cryptocurrency that would be associated with Guided Consumption. This author’s familiarity with cryptocurrencies is limited, however, one insight regarding them appears to be safe: if a cryptocurrency takes off within the public imagination, a cryptocurrency will often expand dramatically in value. This sort of dramatic growth occurred in the cases of Bitcoin and Dogecoin, allowing investors to make thousands or tens of thousands of times a return on their initial investment. Because of the potential for Guided Consumption to be a revolutionary innovation that can do a great deal of good for humankind, there seems to be a reasonably good chance that, if Guided Consumption takes off, any cryptocurrencies that are explicitly associated with the movement could potentially differentiate themselves from other cryptocurrencies and occupy a significantly larger portion of the market-share for cryptocurrencies. Such an associated cryptocurrency could be called GuideCoin, or some iteration thereof.
Another potential application of a cryptocurrency could be that the technology allows for “smartcontracts”, which automatically perform certain operations with transactions. This might allow for an automatic designation of the proceeds of a transaction to a charitable source. The variety of use of applications of cryptocurrencies in conjunction with CPI or Guided Consumption generally is beyond the scope of this paper, and, certainly, beyond the understanding of this author at present.
One final thought on an associated cryptocurrency as a funding mechanism is that it only needs to be rational for an investor in expectation, regardless of whether the investment ultimately pays out. For instance, if an investor believes there is a 10% chance of GuideCoin increasing 100x in value, but in the other 90% of the times, its value goes to zero, that is easily a buy for a risk-neutral investor, even though 9/10 of the times GuideCoin does not accumulate value. This is why GuideCoin could be an effective tool for fundraising: if investors reasonably think that it could be a sound component of their portfolios, that could allow for it to be sold for the benefit of CPI, regardless of whether or not it actually ever becomes a major cryptocurrency. For what it is worth, however, this author is hopeful that GuideCoin could become a major store of value.
Final Thoughts on Section III
Please keep in mind that Section III is simply intended as an illustration of how a pilot project might be implemented and conveys a potential approach to the implementation of Guided Consumption. This author is eager, as the Consumer Power Initiative develops and benefits from the thoughts of others regarding how to proceed, to chart a course that accords with the best evaluation of available data and expertise.
IV. Potential Challenges
This author is aware that the promise of Guided Consumption- potentially redirecting the profits of significant portions of our economies for charitable benefit- is enormous. Consequently, one must consider what obstacles there might be for Guided Consumption. Might some of these obstacles ultimately be intractable? The reader can probably surmise that this author is confident that the challenges to Guided Consumption will not, in the end, be able to stop the Consumer Power Initiative. This section of the paper will address some of these challenges. This author views many more nuanced forms of the objections to be helpful in framing the project before the Consumer Power Initiative.
A. Consumers Will Not Prefer the Charities Guiding Producers Support over Traditional Stakeholders
This objection to Guided Consumption challenges the central premise on which Guided Consumption depends: a consumer would rather benefit a popular charitable cause than a traditional stakeholder. The simple form of this objection would contend that consumers, on balance, have no preference between any charities the Consumer Power Initiative might advance for Guiding Producers over traditional shareholders. A more nuanced form of this challenge might be that while consumers might prefer charitable causes, this preference will get lost in the other set of factors that go into purchasing decisions. For instance, if another product is more convenient, more attractive, cheaper, etc., consumers will disregard profit destination.
Regarding the proposition that consumers would simply, by nature, be indifferent to profit destination: this is a radically misanthropic proposition that flies in the face of charitable donations in the hundreds of billions of dollars worldwide, voluntary organ donations, and everyday experience in which human beings exhibit decency and care toward one another. The simple form of the objection holds human beings in such contempt as to state that they would be totally indifferent between a profit allocation to one of the world’s neediest people, and a profit allocation marginally improving the balance sheet of a wealthy person. In the case where there is no detriment to the consumer in terms of product quality, price, or convenience, the choice against a worthy charity in favor of a traditional stakeholder is either confusion or psychopathy.
Regarding the more nuanced proposition- that consumer would not subordinate profit destination to other factors: that is less of a fundamental challenge to the viability of Guided Consumption and more of a defining of the project before the Consumer Power Initiative. This author recognizes that the potency of profit destination fades in market sectors with large potentials for differentiation. Consequently, one of the projects of the Consumer Power Initiative as it works to implement a pilot project, is to determine the market spaces where profit destination is likely to be a decisive factor in motivating consumers. Section III(A) of this paper considers some of these areas, and this topic is to be more fully explored once expertise and thoughtfulness beyond that of this author alone are applied to the topic. And, as discussed elsewhere in this paper, the Consumer Power Initiative will be evaluating how to ensure that in sectors where Guiding Producers occupy, that they are a conspicuous and convenient option.
At the end, the basic challenge along the lines of consumer preference is fone that, if valid, would provide a reason for shelving the project of Guided Consumption. However, this proposition flies in the face of what we know about humans. On the other hand, the nuanced objection is valid: humans consistently have shown that helping the neediest often does not take precedence over other desires. Therefore, as discussed in the Introduction, extremely effective charities do not receive adequate funding. But the nuanced objection does not provide a reason to abandon the project of Guided Consumption, but rather frames the challenge of the Consumer Power Initiative in eliminating frictions for consumers in choosing Guiding Producers where they are available. The CPI’s project will be to make the path of least resistance that which benefits the charities with which it is aligned.
B. Guiding Producers Will Not Exist or Will Be Inferior, Because the Best Will Naturally Want Equity Stakes
Another challenge to Guided Consumption is the notion that Guiding Producers will not be content to remit their profits to charitable causes. Of course, were it the case that Guided Consumption would rely on producers who were willing to work for free, it would be an immensely difficult project to maintain. Therefore, this author is contemplating that the employees of Guiding Producers would be paid at a market or above-market rate. A different question is how those funds to pay these producers will be accumulated; ideas regarding this being discussed in Section III(D). But this challenge would essentially contend that opportunities within our economies for profit are difficult to discover and/or create. Something about some entity within a group of producers pursuing profit, this objection would contend, will provide them a competitive advantage over systems of producers that lack such an entity with a profit/equity stake in the venture.
Certainly, it is true that profit motive is a powerful force within the economies of our world. Individuals and groups deploy their energies, intellects, creativities, and any number of other productive capacities in large part to benefit themselves and their families. However, large portions of stakeholders within our economies do not have ownership stakes tied to a particular virtue other than that of being able to provide money that facilitates the continuation of other productive activity. For instance, when one provides capital to a company at a stock offering, the identity, capabilities, etc. of the buyer are irrelevant, in our current regime, yet this buyer benefits from the activities in which the underlying company engages. Yet, this challenge would seem to imply that a buyer with a charitable purpose would somehow undermine the project. Imagine one bought a quarter of the total stock in McDonald’s, explicitly stating that they would donate any earned dividends (or stock appreciation) to GiveWell’s maximum impact fund. McDonald’s could continue selling franchises, engaging in new marketing campaigns, etc. without the change in ownership resulting in some inferior product or delivery of it.
This author is aware that in many market sectors, the dimensions of product differentiation are many, and the advantage conferred by a Guiding Producer status may not be decisive. In many of these sectors, profit motive may play a powerful role in finding new methods of gainful differentiation or developing new methods to gain advantage on price or other factors. However, there are places in our economies for passive ownership. And where there are sectors where firms lack advantage against each other and struggle to differentiate, profit destination differentiation, as offered by Guiding Producers, could allow significant market capture.
Insofar as this challenge amounts to a contention that profit motive, and more broadly, greed by market participants, plays a significant role in our economies, it is a true observation, but not a significant challenge to Guided Consumption. Where some differentiating force arises allowing for superior products and/or better prices, Guiding Producers of the same sector, just like other firms, will be vulnerable. But in sectors with relative parity between participants, Guiding Producers will have a leg up without a corresponding disadvantage. This challenge would be persuasive regarding a much stronger claim regarding Guiding Producers, which is not what is being contended in this paper: that Guiding Producers will naturally monopolize every market sector. And, of course, such a claim would not be true: people and organizations constantly search for ways to make better and novel products and experiences more cheaply, and many of them will want to use the profit this advantage allows to inure to their personal benefit. Consequently, the ambition of a pilot project promoting Guided Consumption is rather to find those parts of economies in which such differentiation is not currently operative, using Guiding Producer status as a tiebreaker among consumers to capture significant market share, or otherwise capitalizing on advantages of Guiding Producers, such as by capitalizing on a desire by consumers to virtue-signal.
C. The Costs Associated with Guiding Producers will Prevent Them from Being Competitive, let Alone Dominant
As has been made clear throughout the paper, Guided Consumption depends on conditions being met, such as technologies and legal forms for directing profit toward a designated destination, auditing systems, communication networks, etc. One objection might arise that these requirements raise the costs of Guiding Producers too much. Although these costs can be externalized, this merely expands the scope of the system that must be evaluated for cost-efficiency. For if a set of Guiding Producers generated $50 million for charities, but the system supporting them cost $100 million, then it would have been better, after all, if the $100 million had gone directly to support the charities. The challenger would maintain that the bureaucracy necessary to support Guided Consumption would end up costing more than the benefits derived from the activation of consumer sentiment.
The economic case for a pilot project is certainly a function of the costs associated with the infrastructure of Guided Consumption as well as the profit that may be derived for the target charities. This author, of course, believes that the costs associated with the implementation of Guided Consumption will be a very small fraction of the profit to be gained. Many of the costs will likely be minimal: computer programs can be developed to calculate costs and associated profit with products, eliminating the need for human labor. There will probably be need for some degree of human oversight for the implementation of the programs, contracts, auditing systems, etc. for Guiding Producers. The Consumer Power Initiative would also employ various experts in different areas to aid in assessing what market sectors would be ideal for entry by Guiding Producers, how to set up communication and auditing systems, and all the other problems the Consumer Power Initiative is designed to address. However, these costs are likely to be fixed or logarithmic, while being able to support activities generating profits at much higher scales.
The central advantage that Guiding Producers enjoy is applicable in every market in which consumer choice directly or indirectly affect profit. Advertising and networking operations are cost-justified even regarding specific sectors. It is not clear why the criticism lobbied here would not apply equally to any number of consumer products that have huge advertising budgets. Just as in the conventional consumer product space, if there is a feature that enables a product to significantly outcompete its rivals and the opportunity for profit is large enough, it will make sense to invest money to inform consumers of this difference.
A final factor here is that Guided Consumption, once it has reached a far enough phase of implementation, will likely benefit significantly from earned media, which will enable people to learn of the project without expending CPI funds. The idea of Guided Consumption will likely enkindle the imaginations of people worldwide and generate a significant amount of buzz without CPI paying for it. News segments, TED talks, universities, etc. will likely want to discuss a project which has the twin attractive features of being able to fund charities such that major projects of our world can be solved and/or addressed, and also enabling individuals to further their values through purchases they would already do. If this author is correct that Guided Consumption offers a critical new way that consumers can redirect the profits of economies on a global scale, the communication costs associated with informing them of this ability will be a pittance in comparison to what can be gained.
Conclusion: A World Where a Significant Portion of Our Wealth is More Rationally Directed
Although the most responsible and expeditious way to get there must yet be determined, there is no clear reason why the identities of profit recipients of consumer activity should not play a significant role the choices consumers make in the future. For the initial steps of Guided Consumption in our economies, it will most likely take off where it can be a powerful tiebreaker in competitive market sectors. But once its potency is revealed, Guiding Firms will likely come to play larger roles in many market sectors, as consumers will likely gravitate toward purchasing through firms that further their values. The new challenge for traditional stakeholders among the producers in our economies will be securing clear competitive advantages over all other firms such that consumers have a reason to depart from a default position of transacting through pro-social Guiding Firms.
Very quickly, this author anticipates that Guiding Producers will play less of a role in channeling consumer activity toward the charitable cause the Guiding Producer, or the agents behind it, prefers. This is because the most effective Designated Funding Destination will not be those preferred by any single person, but by consumers generally. This author views there as being many salutary effects of more of our world’s profits being directed by consumer sentiment: the problems of extreme poverty and the mistreatment of conscious beings will likely be largely addressed by consumer support of organizations that address these problems. Some worthy projects, such as avoiding long-term risk or investing in long-term beneficial projects, may be underinvested, although the enrichment of popular charitable projects through Guiding Producers may enable those projects to be targeted more assiduously by other benefactors. One also imagines that there will be many groups that try to influence consumers to prefer various causes.
People have long asked questions such as- if there is enough food for everyone to eat, why are some people starving? Why, if a cow, pig, or chicken can feel pain, fear, and misery, like we do, would we not consider this, in the conditions of commercial use of animals? Many brilliant minds have considered how we might mindlessly slip into nightmarish realities or destroy ourselves. Other brilliant minds consider what sorts of wonderful worlds we might create for ourselves and others with delightful new experiences and freedoms from the awful features of our current world. One reasons that the world is thoughtlessly cruel and inefficient is that the wealth generated from our purchases travels by default toward the already wealthy, in global terms, who own the means of production. Guided Consumption offers a tool by which consumers can live such that they can fight the miseries of the world and promote one of well-being and justice, without having to sacrifice for themselves or their families. Of course, where profit motive inspires people to create superior and cheaper products and services, one can become fabulously wealthy in a world of Guided Consumption. But in a world market where the tie goes to the impoverished child, we can enjoy the products of market competition while enabling a better world for all.
 As of the writing of this paper, the author has created the Consumer Power Initiative, a nonprofit meant to promote Guided Consumption.
Those of you who made it this far, thanks for reading. I'm interested in any thoughts on GC, as well as potential partners who want to try to work with me to help work toward a world where a significant portion of our economies work for worthy causes, rather than wealthy shareholders or stakeholders. Really would be interested in seeing some economists' perspective on GC. Also, I'm working on launching The Giving Store, a dropshipping operation which would direct 100% of the profits it generates to the Seasonal Malaria Chemoprevention program of the Malaria Consortium. This could generate some funds from one of the high-rated charities of GiveWell while introducing the idea of Guided Consumption in a concrete way to the world. If you want to reach out to me, I can be reached at email@example.com
I mentioned this in an email to you, but thought I'd leave it in a comment here as well just to make other readers aware of the initiative: BOAS does something similar, in the niche of sustainable baby and kids products. They started out fairly recently and have already donated 2,000 EUR to effective charities. I will check if Vincent who founded BOAS has an account here on the forum, and if so, ask him to make some general comments in this thread, on his experience.
Thanks for mentioning us Markus! I'll need some time to properly read and digest this, but will reply in full after!
I am thinking a good direction for the Consumer Power Initiative is going to be aggregating and making people become aware of Guiding Producers such as BOAS. I want to have something similar to BOAS for the States called The Giving Store.
Once we have enough awareness and get a movement going, get some experts studying the market areas where Guiding Producers would have the greatest advantage, and then fundraise to either buy out firms for charities or create our own.
I agree with ColdButtonIssues that luxury consumer goods may be a better direction in the long term. You might be well advised to run a for-profit business (perhaps dropshipping, or other money-making schemes, like buying cheap items at garage sales and upselling them on eBay, Facebook Marketplace, etc.) and use the profits to fund the start-up costs of a bigger business. I would guess that you could make ~$10,000 with 100-200 hours of work.
I recently read "Zero to One: Notes on Startups and How to Build the Future" by Peter Thiel and "The Tipping Point: How Little Things Can Make a Big Difference" by Malcolm Gladwell, and they make several points that may be useful to you to bring about your dream of using the consumer economy to fund charities:
I'd highly recommend you read these two books. I'd even be willing to share my Kindle account with you if you don't want to spend money rn.
Luxury goods might be a good avenue, but in the long run we're hoping that many businesses are replaced by guiding producers, and the companies generating most profits mostly aren't luxury companies (perhaps with the exception of Apple). I think both can be successful in guided consumption.
I had/have the idea to sell extremely high priced items that were unique. My idea was to create the world's most expensive t-shirt (was thinking like 1 or 10 million USD) with a popular artist and donate 99% of that to charity. Seemed like that kind of thing would generate a lot of PR with the right artist and buyer. I still think this might be worth pursuing, but if you want to move the broader public towards guided consumption I believe there's more to be gained in commodotized businesses that sell goods/services to millions. That's why we ended up trying to be a guided producer as a sustainable marketplace. I think I have an almost delusional faith that guided consumption (I call it profit for non-profit usually) will work and I've quit my job, bootstrapped a business and sunk quite a lot of my net worth and all of my time into pursuing it. I have a lot of skin in the game and certainly not going to give up any time soon.
The books you mention are ones that I've got recommended a lot and I'm trying to read them in the upcoming months, thanks for elaborating on some important concepts in the books!
Tomer: thank you for reading and the thoughtful response!
I agree with you and ColdButtonIssues that luxury goods, allowing for virtue signaling that could warrant the toleration of higher costs and thus higher margins. However, especially if we're talking about a long-term in which the general public is familiar with GC, it is unclear why popular profit destinations would not be used to compete in other consumer sectors. The structural advantage conferred by popular ownership is not offset by a corresponding disadvantage, and thus, where there is a meeting of the philanthropic will to create companies that serve causes and a consumer society that prefers the designated cause over a nameless shareholder GCs should tend to dominate. As I had stated in my paper, I anticipate that this advantage would be especially decisive in areas of few dimensions of product differentiation. I would be interested in thoughts as to what I might be missing in this analysis.
I'd take you up on that offer regarding the books. It sounds like they have some insights I could definitely use.
I would say that I have do have a pretty strong belief in Guided Consumption, though my unwavering faith would regard that this phenomenon will eventually become dominant moreso than in my own ability to personally usher it in. Given an insufficiently exploited means of a structural advantage, one of these decades, someone will find a way to effectively use ownership identity to get an edge over the traditional firms. Virtually any charitable cause is more popular than the competition: nameless, rich shareholders. My hope is that the Effective Altruism community can have influence inwhich causes prevail come the advent of the age of consumer power, because they are very thoughtful regarding how to do the most good. In any case, even if there was a low probability of my success, given the magnitude of good that would accompany a successful effort, I will try to tame anything in me that urges me to stop.
I might be suited to reply to this because we've been trying to be a guiding producer (boas.co) for almost a year. I don't have a lot of time to reply so this is rather quick and dirty but it's a result of more than a 1000 hours of work. I've also studied economics so I can answer your call for an economist about the economic feasibility but am not going in depth in it now. We even have a research intern who is researching the economic feasibility of our project/guiding producers (research is probably ready in 3 weeks and I'll share). I'll try to reply to everything and feel free to DM or email me (firstname.lastname@example.org) if anyone wants to discuss further or in person.
The red team and positive points below are either my personal experience, from data we have or they are the experiences or opinions (those that I heard a lot) from others I talked to. I have probably talked to hundreds of people about this subject and this is what I hear and experience the most. Our company is in the process of validating whether this paper has merit and most results so far are positive, but there's a lot more validation to be done (most importantly how guided consumption translates to purchase intent).
Some, if not most, of these points are addressed at least in part in this paper. I'm merely emphasizing or adding to some based on my experience. I'm talking to Brad West tomorrow and wanted to put my unbiased points here before that conversation.
Red Team Points
Positive things, in my experience, about guided consumption
Red Team Responses:
1 and 2. Sorta beside the point: I can cede the point that becoming rich IS a major motivator for people to work hard, develop innovative ideas, and otherwise do great things that translate into companies that are immensely profitable. But we don’t need to be reinventing the wheel with a brand new invention or innovation (other than Guided Consumption), we can rather just be entering a competitive market equilibrium, buying one of its participants, and disrupting that equilibrium by imbuing it with an almost costless powerful weapon (I say costless because the charitable investor is not paying more than a private investor would to obtain capital, yet has a weapon in its identity that the private investor does not have.) Thus if the pre-acquisition company was worth $100 million, the post-acquisition company would be worth $100 million + X, where X is the value attributable to consumer preference toward the charity. The founder brilliance was probably what allowed that company to get to its pre-acquisition value and had made that founder immensely rich. Essentially, greed being a powerful motivation that enables excellent company performance is wholly compatible with Guiding Producers being incredibly lucrative. These objections sorta presume that the only way Guiding Producers could arise is if we had a game show pitting angelic altruistic entrepreneurs vs. a bunch of Gordon Gekko entrepreneurs.
3. You seem to be presuming again that a Guiding Producer would be a new company rather than an acquired company. I think there might be good reasons to begin new Guiding Companies given a robust social movement having taken off and good market sector research to indicate that a given sector is a robust one, but there is no requirement that a GP would have to start from scratch and could not be the product of a buyout or a leveraged buyout by a group of charitable investors.
4. You could match the features of a successful company by buying it out, keeping its existing features in place, and advertising that you should buy its products because it helps the global poor, for instance. (don’t take these answers to mean that I don’t think starting new Guiding Producers would necessarily be a bad idea- I think in some contexts- like sales- the differentiation that profit destination would provide could be enormous. I think the potential for Guiding Producer Real Estate Agents or Life Insurance Salespeople could be obscenely lucrative).
5. This is a real issue, but one that is almost certainly resolvable through corporate finance. Charities could borrow against their inflated equity to support their projects. There could also be a 5-10% allowance for private ownership for liquidity and price discovery purposes. Furthermore, if Guiding Producers are spread across enough different industries that the risks associated with them are idiosyncratic, they could form insurance pools that facilitates greater leveraging in borrowing, allowing more funds in relation to equity to be available through borrowing. Periodically, debts could be serviced and equity reestablished by dividends.
6. Hmm it strikes me as rather crazy if there was a CEO of a Guiding Producer for like a an electronics company that made $20 mil/year and a CEO of a competitor normal Producer making $20 mil a year that this umbrage at the Guiding Producer’s CEO’s compensation would cause them to screw over the charity by going with the normal Producer and thus enrich the wealthy shareholders. I think in this conversation, the real villains, if any, would be the Normal Producers.
7. Yes, Guiding Producers would have the same constraints normal Producers would have in this regard. Normal producers sometimes cash out too much to their shareholders/owners and compromise the financial stability of the business. This isn’t really an objection to Guided Consumption so much as a business reality that still applies.
8. Still this thinking that Guiding Producers have to be built from the ground-up… let the founders, angel investors, and venture capitalists do their thing, unless there is a particularly auspicious GC opportunity. Then disrupt established equilibria through the magic of a special investor who magically gets better returns (I say magical because it kind of is in that the same cost investment would yield a different return for charitable investors than other investors).
9. I call it non-psychopathy. The Consumer Power Initiative is trying to get to the point where the consumer has a virtually identical product at an identical price and the only choice is whether to help a worthy charity or line the pockets of an anonymous moneybags.
10. Totally agreed. There needs to be transparency as well as partnerships with those trusted in many communities that Guiding Producers are doing what they say they are.
11. I agree. I think the focus of CPI should be on pure Guiding Producers. There is also a concern that gamesmanship could allow for firms that donate 100% of “profit” to charities, but a deliberate effort to actually distribute almost all the money generated to key employees, with a pittance for the charity they supposedly serve. CPI will have a key role in credentialing for that as well.
12. Definitely needs to be some thought on the tax end of things. Think these issues are ultimately tractable through creative legal forms, etc. Needs to be investigated further.
13. Very interesting issue… I guess if a Guiding Producer needed to adopt the practices in its sector to be competitive, you could argue that it is still better than the counterfactual normal producer in its place. Needs to be grappled with as Guided Consumption develops.
14. Probably people care about certain ineffective and effective charities more than they do normal shareholders. There is an issue that once we reach the Age of Consumer Power, ineffective charities may be competing against effective charities for market share of their Guiding Firms. This is one of the reasons I would be interested in getting the Effective Altruist community in on this new frontier of Consumer Power.
15. They’ll figure it out eventually. I hear they’re supposed to be pretty smart.
16. The problem is that I have very little to effectively signal that I have something to say that is worth spending an hour of one’s time. The analytics page, as of the writing of this post, show that 16 uniqute devices have spent more than 5 minutes on this page. Th
Notes on positive things
Anyway, I need to get to sleep for our 7:00 A.M. (my time call)!
First of all, I'm happy to hear you're actually trying out this idea in a concrete way. I hope it works!
Have you looked at Newman's Own? It's the most famous example of this idea in the United States.
Re drop shipping: I get that it's attractive because it has low start up costs, but I'm skeptical of this choice. I think drop shippers are basically a commodity business and I doubt people would choose a drop shipper on the basis of charity alignment. I would guess the best places to do this type of product would be in fashion (TOMS) or luxury good more broadly, where people can use their purchases to signal their altruism.
Re Dropshipping: why do you doubt people would choose a dropshipper on the basis of charitable alignment? I suspect many people would prefer a charity get the profit over a private individual, especially EAs.
I also think fashion could be a good direction to go, capitalizing on a virtue-signaling advantage while forgoing the "no-brainer" advantage allowed by products with few dimensions of variability. But if you can get an apples-to-apples comparison, why wouldn't a consumer choose a charity?
I think EAs are a tiny number of people, and spend only a tiny fraction of their income on drop shipping.
In the abstract if you ask me, where I want the money to go, I would say charity. But when I shop online I really only care about price, reviews, and delivery speed.
Afaic, drop shippers don't really develop brand names or brand loyalty.
Amazon is in many ways a dropshipper with a strong brand an high loyalty(although they've gotten big also because of their warehousing). I do completely agree that people mostly care about price reviews and delivery speed. That needs to be matched, and then people might consider guided consumption. The good thing is that I believe guided producers can match the competition and then have that unique selling point of giving profits away.
Our researchers spoke to Newman's Own and I'm soon speaking to TOMS as well, and brands like these are looking at sales channels that align with their mission, and guided producers might be uniquely suited to serve their needs.
Thanks for reading it and the well-wishes!
Yes, I'm familiar with Newman's Own and that is definitely an example of a Guiding Producer. It's great that there's a charitable trust that benefits from our purchases. In my view, this feature was insufficiently exploited by the company. Initially Newman was intending not to advertise the pro-social ownership (thankfully he was persuaded otherwise). But with the degree of advertising and consumer awareness of Newman's Own's mission, I suspect it is not enjoying the degree of advantage that it potentially could if it more explicitly viewed itself as a channel of pro-social Consumer Power. Another issue would be that the product dimensions numerosity may make it not an ideal GP.
If there was a broad effort to inform and empower consumers as well as a broad representation in the economy of Guiding Producers in the economy, I believe GPs could rapidly capture market share. The key would be enabling the convenient "no-brainer" decision for consumers.
The key is indeed getting to a situation where you're matching the offering (prices, product, delivery speed, UX/UI) of the competition and that might take a very long time and cost large sums of money, so that's easier said than done. Only then does it become a no-brainer for the general public.
I agree that Paul Newman made the mistake to not publicly voice how much good they were doing. That's humble and noble, but if they were more vocal about it they might have been even more successful. Do note that they donated more than 500 million USD so they were by no means small.
hey brad! this came out recently and thought it (tangentially) related :)
You're quite mistaken... It's almost directly related