A few months ago, I visited a newly developed area in Waikiki called the International Marketplace. The International Marketplace is not new, per se.
International Marketplace
Following an increasing number of new developments and renovations on Oahu, the ‘old’ International Marketplace, and all its tenants, were bulldozed in favor of shinier and fancier new tenants.
Out with the old?
The ‘old’ International Marketplace featured a large outdoor market. More “swap meet” than bright and shiny outdoor mall, vendors here once set-up shop at small kiosks, hawking t-shirts with funny sayings, island-inspired jewelry, and the like. It was a great place to bring friends and family visiting or to take a leisurely stroll; plenty of shade and always good people-watching.
Here’s your hammer, here’s your walkie, and here’s your stud-finder…beep beep beep beep beep… oh oh, it’s working! Tee-hee-hee…!
A couple of years ago, rumors began to swirl that the end was near; the International Marketplace would meet its maker (in the form of total renovation). Not long thereafter, the rumors were confirmed: the quaint little shopping spot would close in order to build The International Marketplace 2.0: Return of the Money. Ok, that’s not the actual name given to the project but it might as well be. How come? Because businesses (or in this case, more specifically, the developers) act with purposeful behavior. ‘Out with the old, in with the new’ doesn’t come cheap! If they’re putting so much money into “fancy and shiny” new tenants, it’s because they see an opportunity to make MUCH MUCH MUCH more money (in order to cover the cost of their investment as well as netting a pretty penny). It is safe to assume, the decision was made after intentional and deliberate decision-making. What could have possibly been the catalyst for this intentional and deliberate decision? (Remember…it’s all about the benjamins!)
Mo’ Money
People, consumers, businesses, developers….everyone acts with purposeful behavior and with rational self-interest (WARNING: ENORMOUS ECONOMIC CONTROVERSY AHEAD).
The demolition and subsequent rebuild took a few years, during which, the International Marketplace was a regular topic of conversation among friends and colleagues. It was clear that people were sad that this whimsical and unique shopping spot would soon be replaced with yet another boring ol’ shopping mall. What was less clear to me, was how much time and money anyone was actually spending at the International Marketplace. Regardless of how much “character” this place created, no one was actually visiting or spending their money. People were generally more upset at the prospect of this place closing, than the fact they hadn’t been in years. In other words, it was truly lacking in the “benajmins” department.
π=TR-TC
Profit equals total revenue, less total cost
Businesses exist to make a profit. That is the purpose of business (yes there are some exceptions, but they are few and far between, so we’re gonna stick with the big picture and not squabble the anomalies). If a business can find a (relatively inexpensive) way to make more money, they will. They care far less about your feelings and complaints, UNLESS it’s translated into transactions at the cash register. Next time you’re sad about the quaint-little-XYZ store closing down in your neighborhood, use your wallet instead of your mouth. Use your dollars to support businesses/causes or whatever you love (coined, the almighty ‘dollar vote’) because profit comes down to total revenue, less total cost, and is the mechanism to communicate in a capitalist society (in which we live).
And what about the ENORMOUS ECONOMIC CONTROVERSY? The above illustration depends heavily on the fact that businesses are rational and act according to their own self-interest. A rational business will choose more money over less to preserve their self-interest. However, understand that the terms rational, self interest, desired outcome, pleasure/satisfaction shape the way consumers (i.e. people) and businesses behave. They are also completely subjective. What you like is different than what someone else likes. What motivates you is different than what motivates someone else. For example, at what level of hourly pay would you put in fewer hours at work and take more time off (leisure time)? I think if I made a cool million a year, I’d work less and spend more time doing things I find fulfilling (I’m looking at you Hot Economics). Accounting for personal perspectives, the controversy surrounding purposeful and rational behavior becomes much less controversial and more useful to apply in everyday life. Businesses Want All your Money. Not just some of it. ALL OF IT. Sure, this becomes a bit more hairy for someone conducting an empirical analysis or peer-reviewed study, but for the average consumer, it’s fairly straightforward. Given some consideration for unique perspectives, businesses (and consumers) mostly act rationally with their own self-interest in mind.
