Frugality and Prodigality: The Cause for the Rise and Fall of Nations.

Because Society is the Sum of all individuals, and the behaviour of one can have and impact on the outcome of the others we cannot discard the Individual in the outcome of a Nation.

Frugality or Prodigality dictates the Present and the Future of a Nation, if it Rises or Falls, if their people flourishes or becomes poorer.

To Start, we must first do an introduction before explaining how does this individual behaviour has effects on society has a whole.

A portrait of Adam Smith
Photo: DEA PICTURE LIBRARY De Agostini/Getty Images

According to Adam Smith, In the Production there are comprised Wages, Rents, Interests and Profits, when the entrepreneur decides to input capital into labouring activities we wishes to retrieve revenue from it, in order to produce he need to employ Productive Labour, this is, a labour that pays for itself and retrieves profit. Creating value over the materials and provisions we works on in order to maintain itself, the facility and the entrepreneur. The end product of this type of Labour can be stockpiled, and sold after a given period of work (day, month, year).
Examples may be: manufacturers, farmers, artificers etc.

On the Contrary, there are Unproductive Labour, these individuals despite their work being useful they do not contribute to the gross production of a society because their labour does not consist on producing goods that can be sold or stockpiled, the product of their work extinguishes itself when consumed. Examples are: Professors, The Military, Physicians, Artists, etc.

Adam Smith analyzed the condition of commercial and industrious cities across the England and Holland and discovered that the lowest ranks of society were generally prosperous and sober.
In cities where the lower class were maintained by revenue, being from rents or from public offices the people where generally pour, idle and stagnant (Rome, Versailles, Compiegne, etc)
Generally, in the cities where there was a large amount of imputed capital, there was more prosperity, on the contrary we could see only the well being of the Landlord and State Officials.
[XVIII Century]

“ The proportion between capital and revenue, therefore, seems every where to regulate the proportion between industry and idleness. Wherever capital predominates, industry prevails: wherever revenue, idleness.
Every increase or diminution of capital, therefore, naturally tends to increase or diminish the real quantity of industry, the number of productive hands, and consequently the exchangeable value of the annual produce of the land and labour of the country, the real wealth and revenue of all its inhabitants.”
- Adam Smith – An Inquiry Into the Wealth of Nations.

Capitals are increased by Frugality, and diminished by Prodigality and misconduct.

 

The Capital of an Individual can only be augmented by what he saves from his revenue, the same with the capital of a society, which is the some of all individuals.

One of the most important traits an Entrepreneur/Business Man may have is frugality, if his frugality did not save or store up, his capital would never increase.
Increasing the fund which is destined for the maintenance of the industry and productive labour naturally tends to increase the number of jobs and infrastructures that add up value in what they are employed.
Therefore, it increases the exchangeable value of the annual produce of a Nation.

 

Frugality, and not industry, is the immediate cause of the increase of capital.

Industry, only, provides the subject what frugality accumulates.

 

The portion of revenue of which a rich man annually spends is, in most cases, consumed by idle guests and menial servants, who leave nothing behind them in return for their consumption.

That portion which he annually saves, for the sake of profit that it is immediately employed as a capital, is consumed in the same manner, but by a different set of people, by labourers, manufacturers, and artificers, who reproduce with a profit the value of their annual consumption

All the Unproductive Labour is maintained by the profits gained by the business man, because, from all the production the first use of the output will be for the wages of the productive labour, and to maintain the imputed capital wasted in the process, the second use of the produce will be used to maintain all the unproductive labour and the ones who do not work at all.

 

The Prodigal Business Man Perverts this Natural Order.

 

By not confining his expense within his income, he pays the wages of the unproductive labourers with the funds that the frugality of his forefathers conserved, that were originally consecrated to maintain the industry.

Diminishing the funds destined for the improvement of his industry or the employment of productive labour, he necessarily diminishes, so far as it depends upon him, the value of the annual produce of the whole country, with it, the real wealth and revenue of its inhabitants.

With regard to Profusion, the principle which induces to expense is the passion for present enjoyment. Which, since the beginning of the 20 Century, is being prompted, and about in the middle of the century, strongly favoured in the Western Civilization, opposing to the former conservative/frugal way of living that channeled the gains of work into productive activities.

Nowadays we can find many Middle and Upper Middle Class individuals who in ancient times constituted the majority of industrious and productive activities being easily diverted from that kind of activity.

This is due a Society that was mainly conservative, but now views the business owner as someone who exploits the worker, and exploits society as a whole, only for personal gain, it is not easily considered the contribute he makes to society.

It is often heard that “Companies should pay more taxes” and that there must be more regulation on multiple aspects of business, that the Minimum Wage should rise and that coercive progressive redistribution must take place and be harsher.
All of this is a heavy burden on someone that despite contributing so much to the well being of society, is given the stamp of exploiter and selfish person.
It's in is self interest alone that he benefits society as a whole.

This Social Paradigm along with the large scale promotion of hedonistic behaviour contributed to a fairly stagnant growth since the 21 Century in the Western World.

 

Pushing disdain of frugality and conservative action in the others only favours the one who practices it in a concelad way.

 

An Individual must always be thoughtful and alert on this kind of stimulus, though sometimes violent and very difficult to be restrained, is in general only momentary and occasional.

But the principle which prompts to save is the desire of bettering our condition, a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave.

Incresing Fortune constitutes the Mission of the Great Majority of Man.
This, is only possible, if he has a Frugal Attitude, wisely spending his Capital.

We, as individuals, should practice frugality and be conservative over our revenue, also, we should encourage this behaviour to our friends, relatives, neighbours and generally, to our fellow men.

We can also bend the market and society when we do our purchasing decisions, choosing the ones who are industrious, energetic and devoted to their cause, being them the ones who create day-by-day a better future to society as a whole.

In politics we must be against any law and regulation that restrains economics freedom, or that punishes the success through redistribution and progressive taxation.

At the same time we should punish and discard profusion as a whole, as it is only obtained through the sweat of our forefathers and it rapidly vanishes or with the servitude of our children.

“We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude.”
- Thomas Jefferson.

16/02/2019
João R Freitas

The Loss of Identity in Luxury Automakers.

From some time on I see some Brands, specifically Luxury Auto Makers, [Bentley, Rolls-Royce, Aston Martin, Porsche, Jaguar and also Harley Davidson] Suffering from loss of identity, and also Massification.

Expert's will say it's the Brand's following the Market in order to be sustainable and also to increase profits.
And it’s true, all this companies now enjoy growing revenues and profits.

But the thing is, Until when?

Marketers are drinking the juice from the trees planted in the 20^th century, many decades and effort that built the brand’s mantra and mysticism.

When that Juice runs out what will happen?

Beyond the mystic and unconscious aspect of the brand what (emotional factor) will seduce the costumer?

 

I am talking about the Crossover and SUV Class.

Like everybody knows, SUV stands for Sub Urban Vehicle or Sport Utility Vehicle, so, normally, is a vehicle in a light truck chassis and supposedly AWD which is not classy, elegant, luxurious, and it definitely lack’s good taste.
Also, the last time I checked, there are more and more people living in cities and urban areas, so this does not make any sense.

The Crossover phenomenon, its rooted not on rational aspects, because all statements in favor are easily debunked;

• “It’s Safer”: No it isn’t, its more unstable than a sedan because it cruises higher above the ground. Its more dangerous to drive and do corners, and its more likely that the car rollover in an accident.
  Also its more heavy, so it’s harder to brake.
• “It has more Trunk and Interior Capacity”: Normally station wagons have more Cargo space and interior capacity.
• “I Can go Offroad”: In most models you will get stuck anyways, and also, the % of people that end up going offroad is insipient.
• Also its more expensive to run.

This phenomenon is rooted on subconscious aspects.

It’s the Human need to make itself noticeable and respected, a survival need.
A Big Physical presence “demands” more respect from other people, creating the illusion of a person to be more powerful and successful in life.
This, aligned with the softness of civilized/modern design, makes wonders in the Crossover consumer.

So unconsciously they feel attracted to the Crossovers because they lack the money to traditional Midprice sedans but don’t want to give up the size factor.
That’s why in the Lower and Low Middle Class you see the consumer choosing crossovers on top and bellow them, the traditional smaller models.

So, for the Low and Low Middle Class it’s normal because they lack the money, but what about the Luxury SUV’s?

The Buyer of the Luxury SUV it’s what is known by the Nouveau Riche.
People that gained some wealth within its own generation by any means, but they lack all the structure and politeness of a traditional middle or upper class individual.
In order to achieve this aspirational group they buy the Luxury SUV’s because they are bigger, with the objective of Overthrown the Middle and Upper Class.

This phenomenon would most commonly be observed in individuals who may have lower levels of self-confidence, who may perceive themselves as weaker in comparison with others.
You can find in your daily life a similar phenomenon, the barking and aggressive stance of the little size dogs, but only when they are “safe”, and the bigger, stronger dogs, quiet, calm and relaxed knowing their power.

That’s the biggest reason why you see Low Middle Class individuals that gained some wealth buying this type of vehicle, to try to achieve their aspirational group status.

This Week Rolls Royce the Most Luxury Brand in the World, Announced an SUV... An Ugly, disproportionate car, that is not meant for their traditional public.

Rolls Royce is the selected brand of Royal Families, head of states, CEO's, and any very successful person, that normally has good taste.
This type of person normally shares common traits and tastes.

Rolls Royce stands for the Personification of Luxury, Elegance and Good Taste in a Vehicle.

Do you imagine Queen Elizabeth II going on the New Rolls SUV? Do you imagine a CEO from a DJIA Listed company, driving an SUV from Bentley? It’s Pure Lack of Taste and Elegance.

I Know that brands did not abandoned their Flagship Models but opening the door to this new type of costumer, could eventually sacrifice the brands mantra and charm and with that, its traditional costumer.

Destroying the brand mantra and spooking the traditional costumers, will, in the long run, also destroy the new costumers, that will not stay loyal to something that its empty.

And will make a purely rational option when choosing for a new vehicle.
What happens now with: Fiat, Renault, Peugeot, Citroen, Seat etc…

The reason is simple and already observed in other examples of Massification and Loss of Identity like Pierre Cardin.

People tend to buy what their aspiration group buys, if they shift to other brands, like Bugatti, Lotus, Morgan, TVR, MacLaren, Koenigsegg, etc…
If this brands want to enter/master the GT and Luxury Sedan Market they can capitalize on the loss of identity of the “traditional” brands.

Jaguar introduced a Mass Market Strategy you can buy a “Jag” for less than 29.000£ (Jaguar E-Pace) also the entry level of a Crossover is a little more expensive 31.505£ (Jaguar XE) and you can go for a spin in a weak (2000cc) diesel car nothing related with the Classic 1964 Jaguar E-Type one of the most beautiful cars ever made.

They are selling at this price, basically because they already started losing perceived quality, and it will get worse….

Harley-Davidson is creating Electrical Motorcycles... Ask any Harley Owner and Enthusiast what is one of the top characteristics they appreciate on Harley's they will say the Noise and Rev's.
You take this out, with that, also the brand mantra is changed, because the Harley's Noise & Rev's is one of the pillars of the emotional and unconscious aspect of the brand.
Remove this, and you remove the soul.

Will Harley Consumers keep loyal to the brand? Or will they feel betrayed? And turn to other brands, like Indian…

I, as a Marketing Expert, but also a deep thinker on different subjects, will say there are other ways for a luxury brand to be Sustainable and Profitable being loyal to brand identity and legacy.
Identity and Exclusivity based on high quality, unique products grant higher margins. That normally translates in higher operational results.

We are frequently earing that when a brand launches an exclusive model, on the launching day all the production it’s already sold out.

A Few years ago there was a trend of very big men wristwatches, and if you noticed only Fashion and Low Price Brands followed the trend.
The Big Luxury Brands, maintained the size and style.
Rolex, Patek Phillipe and Vacheron Constantin served the “same” wristwatches.

Staying loyal to your brand identity and traditional costumers will grant you authenticity. With that Larger Margins and Sustainability.

In Marketing Academies, it is always taught the Niche Marketing Strategy, the Luxury is a quite large niche worldwide, and the definition of luxury and good taste normally doesn’t change fast and obeys to deeper notions, concepts and philosophy’s.

So Why Abandon it?

João R Freitas

Excellence: The Only Way

Excellence is the ONLY way to the success of individuals, companies and, consequently, the country.

But what is excellence? Excellence is, in a broad sense, the best possible condition of something, ranging from the simplest to the most complex. With an increasingly demanding consumer and with an increasing number of players in the market of the most diverse goods and services excellence is then assumed as a basic requirement to succeed in revenge in the market, this approach serves for all levels individual, company and country.

 

For excellence to be achieved there are 2 very important aspects to take into account, most importantly: The Personality of the Individual.

Personality, the initiative must always start from each of us, want to do more, want to do better, want to overcome the average, deep down wanting to be the best and be recognized!

Be better than anyone? Our biggest adversary is ourselves, when we allow ourselves to be corrupted by the settling plague... by "let it pass" that generates frustration in the long run. Excellence allows us to fulfill all our dreams, at all levels.

The Central Idea is, If I can do it well, why shouldn’t I do it?

As Excellence only depends on us, we can start at this very moment in the simplest things, starting at home with making the bed in a perfect way and not in any way, at work, regardless of any function, excellence can be practiced, whether to "serve coffee, a pint and a burger" as to make strategic plan decisions in companies, every individual anywhere in the organizational pyramid must cultivate excellence, not only if it increases productivity but can generate more value.

We all know that there are many ways to do our work, we learn this since the school benches, we can do what we are asked to do, and stick to it and we take an average grade or we can do more and better and take a straight A.

To all this, there is another question, that is, excellence has to be compensated in a fair way, otherwise you lose the reason to put so much effort on it.

When an individual works on his or her own account the results and their compensation occur naturally, when an individual works for others, the employer should give space to his employee if he exceeds his mission and therefore be compensated, creating a spiral of success within the organization.

The Marketing Vision must prevail. Affirming itself as the management philosophy that puts the client first, this concept must be absorbed at all levels already addressed here, as 1st Step for excellence.

In the end, what is work? It consists of a simple provision of a service that has in return the obtaining of an income. Summing up, the employer is the customer, and we the service provider, and the better the result of our work, according to classical economics theory, more perceived quality by the costumers, that want’s more quantity of that produtc, maintaining the quantity produced, the price goes up, applying the parallel, goes up the compensation given to the individual by the employer.

As the work initially done by the employee excellent quality, the employer will guarantee the maintenance of its clientele and also be able to increase the number of them, because the quality of the service, the first customers "boasted" of having had a service so well provided to their peers, we then enter a cycle of growth. Individual - Company - Country.

Excellence, an Endless Mission, but highly rewarding.

João R Freitas