Wednesday, June 12, 2013

Pay to Play: The high costs endemic to the psychology of entitlement

Stephen R. Poteau, Ph.D.

There is a persistent, growing belief that as technology inevitably progresses, more ‘stuff’ should be cheaper and/or free. It used to be that only the tech-savvy could illegally download music, movies, software and the like, but today, a large sector of the population engages in illegal downloading. Free sounds great, but in the words of Alice Cooper, ‘Nothing's free, eventually nothing's free’ (from the album, The Last Temptation). What are the hidden costs of free books, music, movies, and whatever else your little heart desires?

I recently attended a talk that featured the technologist wizard and author of ‘Who Owns the Future?,’ Jaron Lanier. And I don’t use the descriptor wizard frivolously. Lanier was at the forefront of many of the developments in the computer world that radically changed society (he worked at Atari, popularized the term ‘virtual reality,’ helped Walmart become the giant it is via the creation of extremely large databases that assisted in undercutting competitors, and the list goes on). Lanier’s idea, which in my opinion is presented as more on the fringe than warranted, is simple: pay people for the data that they provide online and have people pay for the data they consume online. He envisions this panning out on the scale of small micropayments, not large dollar amounts. The current system, according to Lanier, is untenable and undermines and threatens the economic structure of a capitalist, democratic society. A small, concentrated few accrue wealth under the current system. The number of employees at major social networking sites is far smaller than the number employed when Ford opened up his factories for automobile production. Even worse, their wealth is based on information YOU provide for FREE (and willingly).  Essentially, the person with the biggest computer (and therefore, memory, and therefore, database) wins. Information translates into dollars, and currently, information is more asymmetrically distributed than ever with no signs of tipping the scales back toward equilibrium. 

Take Facebook, for example. You set up an account, garner hundreds of friends, and ‘like’ whatever comes across your profile that fits your fancy, and instantly, that valuable information is stored ‘in the cloud’ for other companies to access. Every post you share and every post you consume works in the favor of another company: it is free advertising. More than advertising, the number of shares/likes, previously shared/liked products, and the profiles of those who share/like products are all data indicators companies desperately rely on. These data are valuable because the pulse of the people is information that companies need in order to predict supply and demand markets, beat competing prices, and ultimately, get your vote via sales. The more data acquired, the more accurate the prediction will be. The more accurate the predictions are, the more potential for enormous profit. Has Facebook paid you? Not a cent. You, the ‘free’ consumer, are also the commodity (the majority of Facebook revenue is advertising). The same applies to other ‘free’ social platforms like Twitter (Lanier humorously noted, every tweet on behalf of the Occupy movement was, ironically, self-defeatist.), Instagram, and Vine. But, by and large, the general sentiment of the populace is that ‘free’ not only makes life easier and more pleasant, but is a birthright in the digital age. The psychology of the youth, teens, young adults, and adults across the board appears to be one of entitlement.  

To illustrate the costs of the psychology of entitlement via a more tangible, baneful example, let us consider differential pricing.  According to, differential pricing is a ‘method in which a product has different prices based on the type of customer…’ (among other factors like method of delivery, etc., but we will focus on the ‘type of customer’ aspect of the definition) ( To engage in differential pricing, a company must first know enough about you in order to pitch a price you are most likely to concede to paying. Based on your cookies (i.e., your web-browsing history, preferences set on various websites you frequent, etc.), an individual profile is formed which includes things like past purchases and the amount you paid for these commodities. Here is where the psychology of entitlement and informational asymmetry comes into play to create an uneven economic playing field. As consumers, we feel entitled to get the best, cheapest deal and search online for that good deal just as previous generations took the time to clip coupons.  The difference between the two, however, lies in the informational transaction that takes place when searching for that deal online versus clipping a coupon. That is, a circular with coupons gathers negligible identifiable data about you as a consumer whereas a company like Amazon knows more about you than you think. The internet bots of Amazon set prices according to the your profile, which is assembled via the data you have provided based on the psychological premise that you are entitled to pay as little as possible for a book, a movie, a vacation…you get the point.  Amazon has been guilty of differential pricing as early as 2000, though they have chosen to describe it as experimental. If you booked a vacation online to Maui for $2500 and I booked a similar vacation for $1500, the price Amazon gives us for the identical book we want to read while on the beach drinking through a hollowed out coconut will be different. Your book will cost more than mine because your profile (based on your cookies) indicates that you are willing to pay more. This is a perfectly legal practice (so long as individuals are not targeted based on race, gender, religious denomination or nationality)( and has been documented on major news media outlets like CNN and The New York Times ( but hasn’t gained traction in the public’s consciousness.

Both Facebook and Amazon are demonstrative of a larger trend: wealth is being redistributed in a manner deleterious to anyone outside of the upper echelons of technological ability and literacy. One would think that our proclivity for a just and fair world would deter most from engaging in such an unfair system, but the opposite is the case. Perhaps as individuals, we feel immune to such unfair practices and that we are merely beneficiaries of our own digital prowess while hunting for that good deal just like grandmom clipping coupons. Perhaps this hunt has psychologically primed us to feel entitled to pay as little as possible or illegally download free commodities. The irony, however, is that we are only doing ourselves a disservice and continue to line the pockets of already wealthy corporations whose CEOs are quite content with this Faustian bargain. Our psychological posturing comes at a significant cost not only to us as individuals, but also to society as it reshapes the economic landscape. So the next time you feel a sense of entitlement, consider the ramifications of your thoughts, feelings, and micro-behaviors that contribute to macro-level consequences.