The 1973 story “Flash Crowd” describes an event in a future world in which an argument in a public location swells into a small riot. The news reports the event, spawning a social disruption that grows and intensifies with incredible speed.
In the 43 years hence, Flash Crowds – now known as Flash Mobs – have taken various forms. In 2003, 130 people gathered at a Manhattan Macy’s, wanting to buy a rug for the warehouse where they claimed to live together. This was followed by a group of 200 people breaking into 15 seconds of ‘spontaneous’ applause in a hotel. Flash Mobs have evolved into pranks, artworks, and even political movements (e.g., the Arab Spring uprising).
So it is hardly surprising that they have expanded into the public marketplace. In the mid-2000s, Tuángòu (“group buying”) emerged in China. People would use group bargaining power and the promise of a large purchase to negotiate lower prices. Versions of the model (e.g., Groupon), have arisen the world-over. All illustrate the looming power struggle between corporations and consumers – one history suggests ultimately will transition market power from corporations to consumers.
As we look at the history of flash mobs and collective buying power, we see models that tell us a lot about the role of competition in labor unions and the future of consumer rights.
Why Labor Unions are Losing Power
Labor unions are organized associations of workers formed to protect their rights and interests. This is a form of organized competition against other workers in that they create barriers to entry and effectively limit competition from other non-union personnel. As manual-intensive work has given way to globalization, a knowledge-based workforce, and increasingly networked marketplaces, the need for people with unique knowledge has grown and union membership is waning.
Simultaneously, the need for mass-produced, common goods has given way to an economy in which people can find, purchase, and recommend or condemn virtually anything in a shared online environment. This demassification already is fundamentally altering the balance of power between corporations and buyers. It is also reshaping the way Federal Governments manage consumer protection.
Think of the impact of a Yelp review –a few (possibly thoughtless) words from one consumer can result in marked decreases in revenue for the reviewed company. Just as Tuángòu provided bargaining power to temporarily assembled groups of people for scarce goods and labor unions limited competition for scarce jobs, consumer protection looks very different in a market environment where people can connect to whatever they want with almost zero restriction.
Imagine a scenario in which an individual has a unique idea for a product. They market the product through a social network and when enough interest is generated, the product gets developed. Crowd funding sites like Kickstarter or indieGoGo already exist. Their underlying premise is to fund the development of a new business and substantiate its market value simultaneously and quickly.
This demassified model is low risk and often low cost. It also may be the future of commerce.
In this new model, individuals congregate in a social network that uses the power of the union to demand that a company build an envisioned product, and then uses the power of the Tuángòu to negotiate down the cost of the product in the marketplace.
The risk of starting a company is transferred from the individual with an idea to an existing manufacturing firm. The risk of small-scale production is mitigated via price negotiation, with the union demanding the product and ensuring a ‘reasonable’ price for the group, while enabling the manufacturer to recover its costs and make a profit thanks to a guaranteed mass purchase. The risk of unfair or fraudulent business practices is mitigated by the power of the purchase union to negotiate with other willing production firms. The consumer and the manufacturer both stand to benefit. And yet, the Federal Government effectively loses the power to determine what is ‘fair’ as an open market comprised of ephemeral purchase unions takes the place as the regulator.
This future is well on its way to being realized – certainly by the next decade. It has a host of long-range impacts, including:
As a global communication network is required for this future to thrive, we expect to see new marketplace clearing houses like Groupon changing their business practice to support the near-instant association and evaporation of purchase unions. Individual designers and artists will have the ability to gain prominence and a wider market for their unique creations. And monetary transaction systems that can conduct negotiations without human involvement will arise.
A century ago, practices like Flash Crowds and Tuángòu were unknown. To improve competitive positions, individuals created massive associations that became trade unions, labor unions, and corporations. In the near future, we’re going to see those long-standing groups fall to momentary associations of individual consumers, bound by the knowledge of their temporary power.
It’s time to consider an economy where the collective actions of numerous individuals can make or break a market.
Phil Cunningham is a Senior Associate focused on the integration of technological and human processes to enable successful, large-scale IT implementation, transition, and adaptation within the public and private sectors. Phil earned his his MBA at George Mason University and his Bachelor of Science from The College of William and Mary. He currently is a PhD student in Experimental Economics at George Mason University.
Toffler Associates is a future-focused strategic advisory firm. Our Future Proof® business consulting approach helps global leaders understand how future shifts impact current decisions so they can take advantage of opportunity, manage risk, and create future value.
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