consumer behaviour – My Mental Model

Is Fashion an Exercise in Prejudice?

The majority of my clothing budget for the last 5 years was spent on suits. For the banking industry, it’s a uniform. You show up in in a nice suit, well put together, and people assume you’re on top of your game. If you show up in something less, people start to ask what happened. It’s almost like wearing your resume.

I always liked my suits. They were all tailored so they were among my most comfortable clothes. They had a lot of personal detail like lining, monograms, etc. It was also easy to come up with a bit of style, almost like the suit was a template where you just had to pick a few colors that went together. For the first time in my life, people actually thought I had style.

So I left banking in January and now I work in the cannabis sector. I don’t really wear my suits anymore. I look for excuses to wear them here and there, and still suit up for big meetings with old colleagues, but the suit now carries baggage with it. In banking, the suit was an exercise in putting your best foot forward. In cannabis, the suit seems to represent the establishment, corporate greed, and a lack of liberal values. Ironically, I’ve been dealing with far more prejudice in this environment than I ever did in the ‘corporate’ world.

The Cannabis industry seems to be filled with entrepreneurs and employees who hold a great deal of distrust for ‘business people’. The suit is the uniform of such people. If you see someone in a suit, it’s best to assume they’re a threat. Lovely.

All good, I’m adaptable. I started to break out the jeans, sweaters and t shirts that hadn’t seen much action over the last decade and made an effort to be a little more casual. Casual wasn’t necessarily more comfortable, but it seemed to fit the environment and I really didn’t mind it. Eventually, one of the founders started poking fun at my style of casual clothes (probably rightfully so), and suggested that we do a shopping trip in the near future where she would introduce me to some modern fashion.

That was last week. I basically let her lead the way through the shopping district and tried on everything that she put in front of me. For her, the focus was on making me appear ‘softer’. I don’t mind soft.. Lions, tigers and bears are plenty soft.

Pretty quick, I was told no V-neck shirts. I didn’t bother asking why because I’ve heard that V-necks are for douche bags at least a few times. I didn’t know that douche bags were so geometrically inclined but was annoyed that they apparently ruined the 6 V-neck t-shirts I had at home. Personally, I don’t understand why the V-neck or U-neck would hold any relevance, so I decided it was best to go with the flow.

Next came pants. I grew up wearing baggy jeans, and it was awesome. There was plenty of room to move around, they were comfortable, room to put stuff in your pockets, and they would still fit if you grew a bit. Around 2010, I remember going shopping at the local hip hop store for another pair and finding out that they were now only selling skinny jeans. I was told this was the new style, and ended up buying a pair. I literally wore those jeans less than 5 times until I dropped them off at the salvation army 5 years later. The tapered leg looked a bit silly with my shoes at the time, but it was mostly an issue with comfort and function. I have a big bum and big thighs to begin with, but squeezing into these made me look and feel like a sausage. Things wouldn’t fit in my pockets and everything got super-tight in all the wrong places when I sat down. As you can imagine, I was not looking forward to pants shopping in 2017.

Most of what I tried on looked like spandex and was not comfortable. For me being able to move around and sit down without discomfort seems like a reasonable prerequisite for buying clothes. If they fit well when you’re standing like a manikin but start to burst at the seems when you sit down – they don’t fit. I had some resistance on this claim from the fashionista, but I stood my ground. One of my comments was that the pants were so tight than I wouldn’t be able to put anything in my pockets (keys, wallet, cellphone). She said that’s why I needed to start carrying a man purse.

Let me get this straight… I’m supposed to sacrifice functionality, comfort, range of motion, and money, to buy clothing which is more in-line with today’s expectations of how people should be expressing themselves through fashion.

Isn’t fashion supposed to be self-expression? If my brand of self expression was classic, timeless, functional, and comfortable, shouldn’t I be steering clear of skinny jeans? Or do I start wearing the uniform of the socially acceptable? As a kid, I remember seeing everyone wearing wide-leg jeans and casting prejudice on people who wanted to wear skinny jeans. With the cyclical nature of fashion, now the dynamic is apparently reversed. With that knowledge, there’s no way I can buy into the dynamic of one being right and one being wrong.

By the end the trip, I bought 3 pairs of pants. 2 will have to be altered to fit my over-sized legs and bum. The other may never see the light of day, although I’ll concede that they’re quite comfortable.

Whether you’re wearing a suit or dress, khakis or ripped jeans, wing-tips or flip flops, we all need to get better at judging people on who they are. There is absolutely creativity, artistry, and personal expression in deciding how you dress, but replacing your clothes on a frequent and ongoing basis to conform to fashion standards set by others is downright silly. Almost as silly as assuming that someone who wears a suit is a corporate douche bag, or assuming that someone who rocking dreadlocks is a lazy stoner.

If I were to redesign the fashion industry, everything would be done to custom measurements. We all come in different shapes and sizes, most people do not fit ‘off-the-rack’. Then we would have fabric designers. People who create the different prints and fabrics of the world because that’s what they love to do. Then we have the clothing architects who build the blueprints of the clothes we want to wear. Then we would have the option for custom details that make those items truly unique. Finally, manufacturing would take place where ever it made economic sense. We should be closing in on the fully automated manufacturing of clothing within the next decade so picking up a few items of clothing at your local shop should be a non-issue sooner than later.

If we could decentralize the design and manufacturing of clothing, then it would no longer be major designers and retails looking to set fashion trends and rotate them for the sake of new inventory. It would be the designers of the world, and the people who identify with their designs. With greater decentralization comes a more transparent view of what the world’s fashion really looks like. With a clearer perspective, comes a greater understanding and with a greater understanding, there’s less room for prejudice.

Once we get there, I may invest in a clothing line. I’ll call it something pragmatic… like Function. These clothes would be designed by an algorithm that considered:

Custom measurements for sizing
range of motion for the cut
climate and intended use for fabric
Personal requests around functionality for things like zippers and pocket

The algorithm would take all these details into consideration, and then produce a piece of clothing with all the required specifications, with the least amount of fabric, at the lowest cost. Each piece would theoretically come with a perfect fit, unrivaled comfort, made with the most strategic fabric, and designed with the functionality of the wearer in mind. The clothing would also be made for the lowest cost possible, with the least amount of fabric possible – leading to great value and an efficient sense of style.

Pretty sure it’s all going to look like spandex eventually.

The Future of Real Estate – Part 2 (The Solution)

In my last post, I detailed the problem with real estate – it’s too expensive.

People have been trained to want to buy real estate without understanding what makes a good real estate investment. The system in place allows us to amplify those bad decisions by spending 5x more than we were able to save, effectively spending the next 20 years paying it back. Because it fit into our monthly budget, we were never overly concerned with the cost. The market has now figured that out and in many major cities, is testing our upper threshold of what we’re willing to pay. When you test that upper limit of what people are willing to do, they start thinking outside the box.

The best recent example, which I had mentioned in the last post is how high oil prices gave rise to an environment in which Tesla could be successful. So the fun question that we get to answer here is what high real estate prices are creating. Prices have reached a point where all kinds of businesses are coming out of the wood work with ‘alternative housing’ ideas. Most of it is in its early stages now, but we have some very cool options in the pipeline.

3D printed homes. If you don’t know what I’m talking about, do a quick search. Additive manufacturing is most likely the future of manufacturing, and I can’t see why it won’t also be the future of building homes. If I were to guess, I’d say that the future of construction is automated and the further we progress in that direction, it’ll look like a giant 3D printer. While they’re not ready for the market yet, I’d be surprised if we didn’t see some market ready options within 10 years.

Shipping container homes. Shipping containers are relatively inexpensive, structurally sound, and made from recycled materials. They also apparently double as pretty cool homes. The genius in this approach is that we’ve figured out we can build a modern, livable home out of just about anything.

Mobile homes. Not trailer park mobile homes, just homes that are mobile. One of the more interesting designs that I’ve seen was of micro suites which could easily be moved from building to building. For individuals who like to move around, their suite would just move with them from city to city. For others mobile homes are about getting off the grid. One of the coolest ideas in the pipeline are self-sustaining, modern, smart, mobile homes. Everything from solar panels to water filtration would be built into the home itself, allowing for you to put your home down on any piece of land you’d like.

Modular homes. While 3D printed homes certainly don’t qualify, almost every other new style of alternative housing falls under the category of modular (including container and mobile homes). Modular homes are such a broad category because it’s really referencing the production process rather than the final product. With modular homes, each section of your home is manufactured centrally, then shipped out to your location to be installed. That’s a big deal.

Right now, an average home is built like a Rolls Royce: with hand tools and a 6 month wait-time. What we need is an effective assembly line for homes and that’s what modular housing is looking to tackle. By building in modules, fabrication can be done centrally and then shipped out to the buyer for installation. That central, and streamlined fabrication process means that a home can be built in a couple weeks and with far fewer resources. We’re quite possibly looking at a genuine disruption in how homes are constructed, especially when the build time and cost are a fraction of our current options.

What about the land though? Real estate is always a two part conversation because land is pretty useless without a house to put on it and a house is pretty useless without land it put it on. It’s very possible that as houses become less and less expensive to build, people are just going to charge more for land, effectively providing the same end price. Again, this is what happens when we understand the price of something but not its value. That’s ok though, because I see a solution on the horizon for the cost of land as well.

Land is not unlimited, but we are not even close to using up what we have. What’s really limited is land near urban centers. Urban centers tend to have the most desirable jobs so people move to the city. There’s more people who want to live there than land available so demand exceeds supply and the price goes up. The solution thus far has been densification – finding ways to put more people in the same area and large residential towers are the result. The problem with densification is that the city’s infrastructure rarely keeps up and we simply end up with congestion. Yes you get to live in the city, but good luck getting around and doing things.

There’s more than one way to solve this problem though. Rather than trying to accommodate more people in the city, why not motivate them to leave the city?

The first way you do that is by making the commute more tolerable and I think driverless cars are going to help that in a big way. For most people, driverless cars are likely to cut down on commuting times significantly. Second, commuting takes on an entirely different meaning when you’re not driving. What we think of as a 2 hour commute today, could very easily become an hour in your mobile office a decade from now. Some will still prefer to be within walking distance of their job. For others, a cool modular home, on a quiet lake just outside of town for a fraction of the price will be the more attractive option.

The other way to get people to leave the city is by providing job opportunities outside the city. It was the industrial revolution which created this population shift, but it was really the evolution of technology. Farming techniques had evolved to the point where fewer farmers were needed, just as factories were being introduced and manufacturing jobs in the cities were booming. If I were to guess, it will be technology which brings people back out to the country – and I’m thinking it’s going to be telecommuting. Telecommuting is basically working from home, but with the power of the internet and the way the job market has evolved, it’s becoming more and more feasible. Perhaps one of the biggest transitions will be when coding becomes a primary trade.

When I think of successes like Uber and AirBnB, I see a trend of decentralization. It’s taking a look at the resources we already have access to and simply using them more efficiently. My biggest issue with real estate is that it represents a remarkable inefficiency. We have more than enough land to share, but we’re willing to commit decades of our income to securing a small piece. Every dollar that we spend on a house is a dollar we don’t spend on all the other things our economy produces, yet we’re encouraged to spend 5x more than what we’re able to save. And without understanding these dynamics, we haven’t been motivated to challenge the status quo – until now.

The Future of Real Estate – Part 1 (The Problem)

Real Estate has long since been a frustration for me. Growing up, I heard the same thing that everyone else did… You should own your home because if you lose everything, at least you’ll have your home. Paying a mortgage is better than paying rent because it’s pretty much like paying yourself instead of paying someone else. Real estate is a safe investment because everyone needs a place to live.

As I developed my investment skillset, my perspective on real estate began to shift. Not only did I lack any emotional attachment to owning my own home, Now I also had a much clearer understanding for how real estate behaved as an asset within its markets. What I’ve also realized is the unfortunate reality that while your average real estate professional is aware of these dynamics, they don’t entirely understand them, and will only mention them when it helps to close a sale. If a market is overpriced, you’re more likely to hear your realtor tell you that you’ll make your money back eventually, than to wait for prices to come down.

While we’re going to dive into what the real issues around real estate are and how I think they could be solved, I think it’s important to mention that my perspective on real estate has been shaped by growing up in a city which became one of the world’s hottest real estate markets. While I have the funds necessary to own my own home, I do not. It’s frustrating because I’d like to, but my understanding of the dynamics at work prevent me from making that decision. While I’m confident in my patience, paying rent is still far from ideal.

There are several issues with real estate, and I think they all start to come undone quite nicely when we start asking why real estate is so expensive. Consider this, if we didn’t have the option to borrow hundreds of thousands of dollars that would take us decades to pay off, how much would a home cost? What if we could only spend what we had saved up?

The problem with a mortgage is that it inflates purchasing power. If you saved 100K, you can now go spend 500k on a house. Saved 200k, go spend a million. The lenders know how hard it was for you to save that first 20% as well, which is why they’ll give you between 20 and 30 years to pay it off the last 80%. Yes you’ll have a place to live, you’ll spend most of your working life paying it off. Am I the only one who thinks this sounds like financial slavery? If we all simply said no, I won’t take on a debt which will take 20+ years to pay off, we’ve set the terms on what we’re willing to pay. They can only sell at the price at which we’re willing to pay. Unfortunately we haven’t figured that out yet and we’re too used to the upper threshold of what we can afford to pay.

So what is a home worth? Not price but value. Price is what you pay, value is what you get. Well traditionally, there’s 2 parts. First you buy the land, then you build a house on it. We often find land to be expensive, but why? If I were to buy a business that produced widgets, it would have value because I could take those widgets to market and sell them. If I bought a farm, it would have value because I could take the crops to market and sell them. If I owned a plot of land, which did nothing, would it have value? Well it would be worth whatever someone was willing to pay me for it right? If the land carries no inherent value, why would someone pay me for it?

In effect, what we’re really paying for when we buy land is a reduced travel time between home and work. With a limited supply of land within the city center and a seemingly unlimited demand of people who want to live there, the markets set the current price.

The second piece of this puzzle is the cost of building an actual house. Right now, an average house takes about 6 months to because it’s treated like an individual project, and done primarily with manual labour and hand tools. Sounds like the timeline and process for a Rolls Royce.

So this is where I leave you hanging. We’re keen on city centers now, but will that always be the case? And what happens when we can start building houses like we currently build cars? Well that’s not going to happen… is it? The real question is why it hasn’t happened already. Here’s my final thought: When oil prices were low, nobody cared about electric cars. When oil prices were high, electric vehicles became a more realistic alternative. When oil prices peaked, Tesla walked into a market waiting with open arms. High oil prices delivered Tesla.

What will high real estate prices deliver?