Sunday, February 17, 2013

Treasure Hunt: Inside the Minde of the New Consumer - Michael J. Silverstein and John Butman

Treasure Hunt was written in the early 2000's by Michael J. Silverstein, consultant at BCG. His main thesis is that middle class consumers are becoming more savvy and hence markets are bifurcating in a low-end and a high-end niche. Companies (and individuals) who get stuck in the middle will eventually disappear. The book offers a lot of the common wisdom offered in most business schools; namely, that companies must always look for new opportunities to specialize and capture a bigger share of the market. Phrases like "the time to act is now" permeate the book. Though short, the book could be summarized in a power point presentation.

The most interesting parts of the book are the interviews with families. Silverstein interviews families  to prove his point that middle class consumers are sophisticated purchasers, able to buy goods and services from the low-end and from the high-end depending on the situation. All the families, and Silverstein mentions it explicitly, consider they struggle to make ends meet at the end of the month. In addition to that, Silverstein shows the balance sheet and income statements of those families. With hindsight, what the balance sheets say is that, most of the time, the only asset of families was the house where they lived. (which was obviously mortgaged). Considering that families had a hard time paying their bills in the happy 1990's and at the beginning of this century, I wouldn't be surprised if, today, these individuals are underwater and aree considered low-class. And, assuming that they still have any purchasing capacity, I wonder if Silverstein would would still qualify those people as savvy consumers who can distinguish between different kinds of goods.

At some point, Silverstein also shows the FED estimates on the households' balance sheet. His series ends in 2000 or 2002, so he obviously couldn't see the explosion of subprime lending and what it meant for the balance between assets and liabilities. In line with the times, Silverstein expected economic growth to last forever...

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