Part II · Chapter 5 · The House · lesson 7

Manufacturing a need

12 min

Builds on People respond to incentives, including the ones you did not intend

In 1900 nobody needed a refrigerator, because nobody had one and the food was bought daily. By 1960 a house without one was a house with a problem.

Something happened in between, and it was two different things wearing the same coat. One of them was a genuine improvement in how people live. The other was a commercial project to make the absence of a product feel like a deficiency.

Telling those apart is the skill this lesson is about, and it is harder than it sounds because they usually arrive together.

A need is something whose absence causes harm. A want is something whose presence causes pleasure.

The distinction is real and the boundary moves, legitimately, as societies get richer. Indoor plumbing was a want. Literacy was a want. A telephone was a want until enough services stopped being reachable without one, at which point its absence started causing measurable harm.

The commercial question is who gets to move that boundary, and what it is worth to them to move it.

Four ways the boundary gets moved

Redefining adequate. The product does not change. What changes is the standard against which the old one is judged. A perfectly functional thing becomes embarrassing, and embarrassment is a cost that can be relieved by purchase.

Attaching the product to an identity. Not "this is a good kettle" but "this is the kettle a person like you owns". Identity purchases are the most robust category there is, because a competitor with a better kettle has not addressed the actual question.

Attaching it to an anxiety. Particularly effective where the anxiety concerns somebody else — a child's development, a parent's safety, a partner's opinion. The purchase relieves the anxiety whether or not it addresses the risk, and the purchaser cannot easily find out which.

Bundling a want with a need. The need is the reason it is bought; the want is where the margin is. A car has to get you to work. The specification that gets sold is not about getting to work.

Predict

A company sells an electronic monitor for babies that tracks breathing and heart rate. Which of these best describes what is being sold?

A medical device — it reduces the risk of a serious eventRelief from a specific fear, purchased by someone who cannot evaluate whether it worksA convenience product, like a baby monitor with a screenA status product for anxious middle-class parents

Being fair about this

It would be easy to write this lesson as a story about manipulation. It would also be wrong, in a way that would make you worse at spotting the real thing.

Most manufactured needs became real needs. Refrigeration genuinely improved nutrition and cut food poisoning. Washing machines returned an enormous number of hours, overwhelmingly to women. Antibiotics, contraception, spectacles, smoke alarms — every one was a product somebody had to be persuaded to want, by companies who profited, and every one is now something whose absence causes harm.

The mechanism is neutral. Creating demand for something people did not know they could have is also the description of every genuine innovation.

Not the same thing

A need that was created and is real

The product changed the conditions of life such that going without now causes measurable harm.

Measured in: What happens to people who do not have it, compared with people who do
For example: A refrigerator, a smoke alarm, a bank account in a country where wages are paid electronically.
Chase it alone and: Dismiss the whole category as manufactured and you end up sneering at things that made people's lives materially longer.

A need that was created and is not

The product changed the standard by which the old one is judged, and nothing else.

Measured in: Whether anything is worse for the person who declines, other than how they feel about it
For example: A specialised cleaning product for a surface that ordinary soap cleans.
Chase it alone and: Assume everything you were sold falls in this column and you will underinvest in things that genuinely reduce risk.

Which is which? Put each one on a side.

A separate shampoo, conditioner, serum and mask where one product previously did
A smoke alarm in every bedroom rather than one in the hall
An annual upgrade to a device that works
A mobile phone, in a country where appointments and payments require one

Something people say

“Advertising makes people buy things they do not want.”

Why it spreads: It flatters the speaker, who is presumably immune, and it offers a single villain for a large and uncomfortable pattern of spending.
The part that is true: Advertising demonstrably shifts behaviour, or nobody would spend on it. It works best on categories where the buyer has no way to evaluate quality, and that is not a coincidence.

The stronger and more useful version is that advertising rarely creates a want from nothing. It attaches an existing want — for status, for safety, for the feeling of being a competent adult — to a specific product, and it makes that product the one that comes to mind at the moment of deciding.

Which is why the defence is not scepticism about adverts. It is noticing which want is being addressed. If a purchase is aimed at an anxiety, buying the thing may genuinely relieve it, and it is still worth knowing that is the transaction you are in.

Check

A category grows quickly and none of the products in it competes on price. What does that suggest?

The products are meaningfully different from one anotherBuyers cannot assess the benefit, so a low price reads as a worse productThere is a cartelCosts are high across the category

Who pays, who benefits, who carries the risk

Who pays. The buyer, and disproportionately the buyer who is most worried — about a child, a parent, a job interview, an ageing face. Anxiety is not distributed evenly and neither is the spending.

Who benefits. The seller, on a margin protected by the buyer's inability to evaluate the product. And, frequently, the buyer, who receives genuine relief and sometimes a genuinely better life. Both halves of that sentence are true at once and the lesson does not work if you drop either.

Who carries the risk. The buyer, who cannot find out whether it worked; and in the anxiety categories specifically, the person the purchase was made for, if the product substituted for something that would actually have reduced the risk.

Worth remembering

A need is something whose absence causes harm; the boundary between need and want genuinely moves as societies change.
Four common mechanisms: redefining what counts as adequate, attaching a product to an identity, attaching it to an anxiety, and bundling a want with a need.
Products bought by a motivated buyer who cannot assess the benefit sustain high prices, because a discount would read as lower quality.
Many manufactured needs became real needs, so the mechanism itself is neutral rather than dishonest.
Advertising rarely creates a want from nothing; it attaches an existing want to a specific product at the moment of deciding.