I first used this quote in my post MBA Students – A Scourge. It was meant to convey to my readers exactly how I felt after returning to the USA after 5 years in Asia.
It seemed that everywhere I turned, there was a solicitation, a sales pitch trying to separate me from my money. Credit card offers, long term financing, product sales, warranties, rebates, so on and so on.
Well, it seems that my feeling was correct. The USA had gotten out of control in terms of all this buy, buy, buy, spend, spend, spend and it all came crashing down. Now we sit in a recession and all eyes are on the economy.
However, I’m getting the feeling that it is no longer simply a BUY THIS message, but instead the sales pitches have become much more mischievous. These days, the sales pitch has turned into a “Let us help you,” message. At first glance, one would think that the companies are doing it out of the kindness of their hearts. But, being a sales person myself, I know better.
Why write about this now you ask? Well, there are a couple of reasons. The first is that I’ve been in sales (in America) for five years now and have learned many of the tricks. The second is that I have an enormous addiction to Netflix documentaries which continually confirm my suspicions.
Now, if you’ve read the news at any time in the past year you’ve heard about legislation from Washington, you’ve winced at the horror stories from the banks and perhaps this has left you enraged.
What I’d like to offer in this post is not a diatribe, nor will it be anything to upset you further. I also won’t be going into all the complex details.
Instead, I’d like to offer it as a bit of friendly advice.
1. It is all a game.
I just got done watching Frontline specials on credit cards, Debit Cards, banks and so on. There has recently been so much anger over the tactics of credit card companies and the banks. I’d like to offer just a few observations.
Both Banks and Customers are to blame.
It would seem that you have to chose one side or the other, when in reality both are at fault. The banks are at fault for preying on the uninformed, uneducated, or simply put, people that have other things to do with their time then trying to figure out all the tricks the bank/credit card is trying to play. The consumers are at fault for spending too much money that isn’t theirs.
The banks have sales people just like any other company that sells stuff. These sales people earn commissions and thus it is in their interest to sell even if it is not to the benefit of the buyer. There are no points for empathy, or justice, or doing what is right. As I’ve mentioned before, in the USA the system is built on profits going up, not down, nor sideways. For people to stay employed, the profits have to continually go up.
Therefore, the pressure is enormous on the sales people no matter what they sell, nor if it is in the consumers best interest. The common thought in business schools is the free market works just like a well oiled machine in that the market will determine what services are needed and if they are not, they will not be around long.
Yet, the pressure to sell has become so intense that this equation is now lopsided. Since profits must continually go up, it is up to marketing, sales and overall management how to convince people to purchase what they are selling. Remember, “they want to help you.” ;)
As for the consumer, many of them are “institutionalized” and will buy into a service or product regardless of need, if the sales person can convince them to do so.
Let’s look at credit cards as an example.
At first blush, the credit card companies are not doing anything wrong. They offer a service, with full disclosure to the terms and people take them up on it. Then people spend too much money that is not theirs and cry to Washington that they were fooled.
Let’s say for example that Washington hears their cries and bans credit cards. Well, the market would still be there and the lending would take a different form.
What form could it take?
Well, the mob or any criminal gang for that matter could take over the business. They work kind of like credit card companies. The credit card companies will break your wallet with 250% interest on short term loans if you do not pay, and the mob may simply break your legs.
But it doesn’t have to be the mob. There are the Payday lenders who charge 450% interest on short term loans which is almost as bad as broken legs. Yet people still go to them. I swear when I see people walk into those places I really just want to stop them!
But instead of the mob or payday loans, let’s look at credit cards with a real life example. ME!
I’m educated, have been all over the place AND am a sales person. But I have to tell you, I probably wouldn’t have payed any attention without my experience in other countries. Coming back to the USA was like learning all over again and I asked questions instead of just accepting what was presented. Even then, all the financial offerings are extremely confusing. But here is what I’ve figured out so far.
I use a cash back card from American Express. I funnel every single purchase possible through that card. Then I pay it off every month. By doing this I can have them pay me to the tune of $1,000 a year.
As I told you, it is a game,,, and I am winning.
But even though I’m winning, the rules continually change and I have to keep on top of them. American Express did change the game and now offer two very similar cards, a “Cash Back,” and a “Cash Back Preferred.” Add to that, they did away with the old structure for new card holders but I’m grandfathered in with the old program.
The main difference is Cash Back doesn’t have a yearly fee but may pay back less until you spend over $6,000. The preferred card has a $75 yearly fee but will pay more upfront. Add to the complexity, the purchases fall into different categories, each payback amount being different from .5% – 6%. This means I have to figure out the following:
a.) Which purchases fall into which bucket
b.) How much I spend each month and keep a tally
c.) Understand which percentages fall into which categories and which apply to both cards.
Seems like a lot of work! I did sit down and did my research but was unsure of the outcome as it would involve a lot of math and at least a day of digging up records and calculations. So, even though I’m all those things I said I was, these things are damn confusing since the rules keep changing.
At the end of the day, I’m not too concerned about it because Amex still pays me a lot of money and from all the websites that do analyze credit cards it seems like I have one of the best.
So, to win the game, I did say yes to the salesperson (after doing my research), I understand it is not my money, and the worst thing in the world to me is a fee.
Now let’s look at banks.
The first rule is to hate any and all fees. Never ever let them charge you one!
Recently there was a proposal to start charging $5 a month if you use your debit card. There was a huge uproar and the banks backed down. But for me, I don’t give a rat’s ass about the debit card. In fact, I may even side with the banks on this one. Debit cards are a convenience for the consumer. Back in the 80s there were no debit cards and we often payed with cash! In fact, I am used to paying in cash since I lived in Japan and Vietnam.
Besides people, you should funnel all your purchases through one major credit card that pays you cash back anyway, so who cares about debit cards! You shouldn’t be using them at all!
To sum up my thoughts on this, let’s look at the chain of power here and who really has it. It is my contention that YOU do.
The Government – The government makes laws to try and protect the consumer since their constituents are upset now.
Banks – The banks are smarter than the government and will find ways around these laws and employ other tactics to separate you from your money.
Consumer – THE BOSS! The consumer should be smarter than the banks and find ways around all of their fees and not pay them one damned cent. Besides, I just showed you how to do it with your credit card. Make the banks/credit card companies pay you!
The problem here? Well, many people don’t think about what is going on with their money AND SPEND TOO MUCH!
Again, why do they do this? Well, I think it is because many are “institutionalized,” or simply put, have grown up in a culture that makes them believe money is free and they should buy everything they set their eyes on.
They go into Mr. Big Bad Bank, and meet Miss Slick Salesperson who tells them money is free, they walk out all starry eyed and go straight to Nordstroms so they can buy things the society tells them they should have.
Now, I understand that many have fallen on hard times. I understand this. But what also must be understood is that easy access to money doesn’t make it YOUR money and nobody would lend it to you unless they made a profit off it. Profits mean getting back more than was lent out which means you have to pay more than you borrowed.
Bad, bad bad.
Just think about what Grandma would say to all this. What if you could sit down with (preferably a depression era Grandma) Granny and explain how the credit card works. First of all, could you explain it and if you did you might just convince yourself to pay off the balance every month. If one couldn’t do this, then maybe Granny simply wouldn’t understand why anyone would borrow, say, $40, if in the end, they ended up paying $140 for the privilege?
So, yea, I think I’ve come full circle with all this financial stuff. At first, I was uncomfortable with the hyper-consumer culture that America had become. After the economy crashed, I became angry at the banks and Wall Street that made it happen. Then I was angry with both at the same time.
Then I got over it and realized the following two things.
1. Consumers – Live in very affluent country, spend too much and want the government to help them. After living in Vietnam I don’t have so much sympathy anymore. Hell, we don’t have to go to Vietnam, we could go back to our own ancestors who came here with nothing and didn’t rely on the government or credit cards.
2. Banks and Corporations. - Greedy bastards all of them. They make the most of their money by preying on the uninformed. But what is a bank or a corporation? They are made up of consumers themselves, of people who are also trying to earn a living and thus must always sell more of what people really don’t need. If they do really well, then maybe they would get to be an executive and make millions!
Now, take a debt ridden consumer and tell them they can be a corporate executive and make millions if they wish but it will be at the expense of the “uninformed” people. I ask you, what percentage of people in this money crazed culture would say no?
On one hand, you can have millions if not hundreds of millions of dollars and on the other hand, your sense of social justice, of fairness. Be reminded however, that you’re only one executive in one company and if you went for the “fairness” side you’re really not going to change the system, would hurt profits thereby putting people in your company out of work and at the end of the day the only thing you accomplished was losing your own job.
Interesting how things work isn’t it?
Greed, selfishness and the unwillingness to help others. It didn’t work out so well for the Roman empire and I wonder how long it will be until it breaks this current Empire.