
The Locust Economy - nashequilibrium
http://www.ribbonfarm.com/2013/04/03/the-locust-economy/
======
YokoZar
While I understand the author's point comparing a wave of groupon-only
customers as a swarm of locusts moving from deal to deal, I don't agree with
lumping AirBNB in there. If a business is offering a groupon at a loss on the
hope of spurring future customers, the deal-hunters can act like locusts by
breaking that hope, causing a net loss of value.

AirBNB, by contrast, is creating _new_ supply, and that supply is in turn only
being sold to AirBNB users. As an AirBNB host, it would be very _good_ for me
if I was constantly full of people making one day stays and then disappearing
forever.

Similarly, if the businesses offering groupons were still profiting from them
at the margins even without assumptions of repeat business, then these
"locusts" wouldn't be taking value away either.

~~~
anigbrowl
_As an AirBNB host, it would be very good for me if I was constantly full of
people making one day stays and then disappearing forever._

Yes, it's like running a hotel with none of those bothersome permit,
regulatory, or customer service issues.

~~~
guard-of-terra
Hotels are a 'meh'-style business. They are either expensive or shabby. And
they don't match modern lifestyle that much. Hotels are lame. Why should one
back hotels' profits?

~~~
seiji
That's a wide mischaracterization. There's a very continuous spectrum from
eight room highway roach motels to $8,000+/night vegas penthouse suites. It's
not either dirt or gold. Most middle-ground hotels end up being okay (Best
Western, La Quinta, Holiday Inn, Red Roof Inn:
[http://www.theonion.com/articles/red-roof-inn-announces-
new-...](http://www.theonion.com/articles/red-roof-inn-announces-new-suicidal-
suite,33084/) ).

Why should one back SF over-indulgent startupwankers' profits by participating
in their closed marketplace (instead of paying for a service employing local
workers who are happy to have a job to support their family/drug
habit/whatnot)?

~~~
guard-of-terra
Most hotels are an expensive overkill when you want to get somewhere fast and
for cheap, do some sighseeing/do some job/visit some event and leave. That's
the modern lifestyle: fast, cheap, in bulk yet personalized. Why have one long
and expensive trip in a year when you can have five short inexpensive ones?

They are also misguided: I don't need somebody to sneak into my room each day
in order to "clean" it (I'm staying three days, is's not that I produce much
dirt during stay) but I would appreciate having a small kitchen and a fridge
(not minibar, those are like the stupidest thing ever).

Well, AirBNB supports your local populace directly by letting them rent out
their propety to support their family/drug habit/whatnot.

And the fun thing, it's not even a job.

~~~
seiji
_supports your local populace_

That's the operative thought. I'd rather support Rosaria The Housekeeper and
Brent The High School Junior Front Desk Clerk helping at a hotel rather than
have everything go to Overextended Hipster Douche who bought more apartment
than he can afford and now rents it out to cover his high lifestyle (plus, as
we've teased out, the Overlay Country of AirBnB fee/taxes go back to a single
company for stays all over the world. Convert your thinking into scorn for
exploitative capture, not praise for "omg amazeballs sky high rocket local
social mobile viral growth!").

At least we agree sneaky daily room cleaning is bizarre and completely
unnecessary.

(and this is hilarious: _Why have one long and expensive trip in a year when
you can have five short inexpensive ones?_ \-- have you seen my profile?)

~~~
guard-of-terra
I would choose supporting Hipster over Rosaria The Housekeeper every time.

Rosaria The Housekeeper consistently votes for scary people every time who
then do abominable things. I'll surely try to starve The Housekeeper
demographics for cash every time I can.

Or she is an illegal immigrant whose job I do not want to help create.

Overextended Hipster Douche is my Class friend, of course I'll back him.

WRT taxes, it's job of the state to regulate and tax markets. Why don't they
do that? Regulate != destroy if they wonder.

P. S. Your travel log is impressive but makes you not representative of
general trends. That is, casual travel.

~~~
rdouble
_Rosaria The Housekeeper consistently votes for scary people every time who
then do abominable things._

Neither the Rosarias or Hipsters in this country vote much at all, and when
they do it's for the same guy.

~~~
guard-of-terra
I wasn't talking about USA specifically and I predict even in USA it's bound
to change.

~~~
rdouble
Your comments don't make any sense if you weren't talking about the USA.

~~~
guard-of-terra
Why? I wrote them, they make sense to me, I've never been near USA.

------
pshc
Wow. This post is a journey. I haven't digested it enough yet, but I'm loving
the trip!

EDIT: found [http://www.ribbonfarm.com/for-new-
readers/](http://www.ribbonfarm.com/for-new-readers/). Onto the Kindle you go.

~~~
jjsz
Thanks, if it wasn't for your comment I wouldn't have subscribed. On Feedly
[0] he only has 2k subscribers. If anyone knows similar blogs like this, I'll
like to know where I can find them. There really needs to be a Discovr [1]
Blogs. It would be just as great if they get pinged and they say they're
working on it :-). Currently I'm subscribed to H+ [2] and Singularity Hub [3].
I made a Reddit post asking the same question recently. [4]

[0] [http://cloud.feedly.com/](http://cloud.feedly.com/)

[1] [http://discovr.info/about/](http://discovr.info/about/)

[2] [http://hplusmagazine.com/](http://hplusmagazine.com/)

[3] [http://singularityhub.com/](http://singularityhub.com/)

[4]
[http://www.reddit.com/r/Cyberpunk/comments/1iq9qx/](http://www.reddit.com/r/Cyberpunk/comments/1iq9qx/)

~~~
msutherl
Hang out at Ribbonfarm and you'll come across occasional links to other blogs
in a similar vein. Venkat is top notch though.

------
gbraad
I do not completely agree with the usage of the term, as Locust economies are
economies like in China. When they do not have enough resources of themselves,
they will swarm and find these abroad and cause lots of issues. For example
with the needed infant formula (milk powder, esp after the milk problems in
China with melanine) they will swarm to foreign countries and buy these in
massive amounts and cause shortages in the country of origin. This even
concerns building materials (steel), energy resources (oil), etc etc.

The milk powder issue for example happened in the Netherlands and in many
other countries; partly caused by producers not knowing how to deal with this,
but also by people within the country shipping large amounts (seen as
smuggling), selling on Taobao.com. Just google for "Dutch milk powder China".
This is just one of the examples... There are now even export restrictions
between Hong Kong and China for the amount of cans you can take across the
border. Just look at some of the pictures on
[http://badcanto.wordpress.com/2012/07/08/hong-kong-
netizens-...](http://badcanto.wordpress.com/2012/07/08/hong-kong-netizens-on-
new-zealand-milk-powder-shortage/milk/) related to this.

Note: relating to the article I believe the vision is narrow since it only
talks about Groupon... Also, his point is not a survival means as the
grasshopper/locust metaphor would indicate.

~~~
lukifer
Take the term "locust" (and Venkatesh's writing style in general) with a grain
of salt.

Long-time Ribbon Farm readers know that he tends to declare "local variables"
with his terminology, pegging down certain metaphors for the purposes a
specific discussion. That need not collide with or invalidate other uses of
the same word or idea.

~~~
klibertp
When someone uses a specific, pejorative, widely associated with disaster
(plague of Biblical scale, no less) word for a "local variable" he's being
intellectually dishonest, or manipulative, or both. One generally can't just
read a word locust and think "harmless", "cute", "needed" and such as a first
thought - and that's exactly what this rhetoric aims for. That's the reason
why I won't read the article. It's perfectly possible to use neutral language
for presenting a point convincingly; I can't be bothered to read authors that
didn't even try to do so.

~~~
1123581321
What did you read instead?

~~~
klibertp
The comments here, as usual :) It's a habit of mine to read through all the
comments before reading the linked article to decide whether it's worth
reading.

If you think that my conclusion is wrong and you can quote a bit of the
article to back it up then that's good, too!

~~~
aangjie
See that's the 1% vampire behaviour. Relying on HN readers to comment on an
article before deciding to read it. So those of us who read the article would
be the 90%. Aha who's the 9% then, mods?

~~~
mdda
The 9% would be the bloggers - in particular those that left 'real jobs' to
become part of the new wave of commentators.

Yes, they can produce huge volumes of readers when they get an HN hit, but
once they've thoroughly exhausted the pent-up ideas that had been percolating
for the previous decade, they realize that the only way to sustain themselves
is to become increasingly sensationalist (since it's almost impossible to have
earth-shattering ideas on a strictly weekly basis).

------
TheMagicHorsey
Look guys, this author just falls in love with his own analogies and leaves
reality far behind. The Jefersonian Middle Class (as he calls them) isn't made
up of a bunch of Groupon-client failures. They don't survive on business that
has been aggregated by swarming platforms like Groupon and Living Social.
Small businesses are built on relationships, consistent delivery of value, and
return customers. The author seems to understand that there are business that
don't give a shit about Groupon ... but I can't understand we he treats them
like rare special birds. I don't know who he is, but maybe he is an academic,
or some sort of isolated professional that doesn't have much experience or
contact with small businesses. People don't abandon their usual vendors,
partners, and suppliers for some Groupon deal that they know isn't
sustainable. Also, people don't abandon the local cafe, diner, restaurant, and
bar, because they occasionally use a Groupon deal. These swarming platforms
might be a problem for non-performers or those that don't deliver a good
product or service, but for those that do, businesses isn't like the horror
story the author describes. This is the case of a bullshit story, well
written, and designed to climb the Hacker News ranking ... while having
absolutely no relation to reality. A lot of fancy analogies ... and absolutely
no substance. This guy clearly wants to coin some term that gets picked up by
the press and by the community, so he can have some fame as the guy who coined
"The Locust Economy" or some shit like that.

------
zanny
So don't offer discounts and avoid the swarm? I won't lie, a huge portion of
my grocery spending is under coupon books and the like, or in the long term
pattern matching when stuff is cheapest, but this is another case of, as an
individual, I can exploit mechanisms in the system to be better off. And hell
yes I will take advantage of any economic mechanism I can to save money.

You _have_ to, or else you are less prosperous than your peers that don't. It
is charity to spend more than you have to on something, and the end of the day
bottom line of your business interactions isn't your personal concern. It
might be a long term societal concern of unsustainability low prices
strangling businesses but they can't increase them in the short term or their
competitors, who are also suffocating, get all the customers.

So you can't blame people for swarming. It is a natural economic process, and
I don't think it is as do or die as the grasshopper metaphor. Even my rich
relatives will jump at discounts just to feel like they are "winning" or
"saving".

~~~
YokoZar
It's entirely plausible they still profit from your couponed purchases, just
not as much as if you had paid full price. Price discrimination is generally
the motive behind issuing coupons (which still have marginal profits), as a
"loss leader" strategy can be more effectively done through means other than
coupons

Which, incidentally, is one reason why you shouldn't be offering things at a
loss on groupon.

~~~
VLM
"It's entirely plausible they still profit from your couponed purchases"

A lot of this depends on the social conditioning that "coupons are a below
market price". This is, of course, not universally true. Last time I checked
groupon the local market was dominated by ridiculously overpriced services
marked down "on sale" to almost reasonable prices, although still too high.

There is a major regional clothing retailer where I live where about 1/4 of
the store is "on sale" at any given time, up to 50% off, in a random rotation.
The other 3/4 of the store is marked up well over 100% over "reasonable market
prices". This is how to make money in a locust economy, market yourself as a
locust feeding frenzy location, and financially manage yourself to handle a
larger inventory and smaller cashflow than a "normal" store. So one week per
month, sell socks at a normal market price, yet advertised as a "half off
sale" at $10. The other three weeks per month mark them up to about twice
market price $20 and eat the zero sales volume. The zero volume is OK; you
probably needed the break to reorder and ship and restock anyway. Its
sustainable and it works.

------
Taek
I felt like the 9% were unfairly painted as the victims of the way our economy
works, but almost everything mentioned were vulnerabilities that the 9%
deliberately opened themselves up to. By putting a deal on Groupon, they
invited the locusts to swarm them. By opening up a cheaper coffee shop next to
Starbucks, they made the business assessment that there was a market for
cheaper coffee (or whatever experience they are trying to sell). If they were
wrong, then they have fallen victim to what is normal business. If they can't
operate without using a self-defeating service, they probably shouldn't be
operating.

But there's plenty of room for smart business at the Jeffersonian level
without making yourself vulnerable to swarms. It's one of the reasons my area
has almost as many family owned diners as it does chain restaurants.

------
loopdoend
I fail to understand what Zipcar has to do with the sharing economy. Zipcar
provides short term car rentals. The "sharing" bit is pure marketing genius,
no actual sharing is involved. If I were to be incorrect here, then hotels
would be part of the sharing economy too.

------
jejones3141
Sounds to me like the converse of the left arguing about the evil of companies
who have the gall to try to minimize labor costs, especially as new laws drive
the cost of labor up. How _dare_ consumers look for deals! Let's give them a
label with nasty connotations.

If making Groupon/DealChicken/etc. offers is as self-destructive for
businesses as the author says, it will be self-correcting.

------
marshray
Maybe I'm missing it in the bulk of the article somewhere, but I thought this
claim could have used a little more support:

 _In a locust economy, the Jeffersonian middle class is a terrible place to
be. It is no accident that the worst-hit victims of the locust plagues of the
19th century were small farmers living the Jeffersonian dream handed to them
by the Homestead Act of 1862._

------
guard-of-terra
I can see how music scene can be an example of the locust economy:

There is more and more bands, each of those have smaller and smaller listener
base to the point that most listeners are musicians. Therefore musicians
consume each other ("eat each other") and not much money is involved. This
leads to proliferation of musical styles (I particularly like something
loosely described as female frontend fantasy rock, a tiny niche obviously),
which is a good thing; but we don't get universally recognized good hits from
good bands anymore, which is a bad thing.

Anyway, locust economy is a call for Basic Income.

------
ronaldx
Interesting but rather long. tl;dr version:

90% of people are like locusts/zombies, always preying on the best deals.

9% are _Jeffersonian middle class_ \- “small, local and independent”
entrepreneurs. Whenever they offer anything less than the best deal, locust
swarm will retreat, for example to Groupon and Starbucks. As such, small non-
scalable businesses are most often loss-making and generally not sustainable.

The 1% of people are like vampires, it's implied that they manipulate the 90%
against the 9%.

------
ExpiredLink
Isn't this just sociology of the masses a la Ortega y Gasset?

------
spiritplumber
This is really intersting stuff.

