Alchemy: Turn Knowledge Into Gold, by Soundview Executive Book Summaries, Soundview Executive Book Summaries, March 1991.

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Redefine Recession
School for Life
Will Japan Bury the West?
 

DEMAND-SIDE ALCHEMY
     Economists and Alchemists alike would agree with the Elizabethan philosopher Francis Bacon who observed, "Money is like muck, not good except it be spread."  The point of money is to be spent.
     Supply is useless unless it can be matched with some corresponding demand.  If consumption doesn't keep pace with rising income, prices fall, jobs are lost, economic growth grinds to a halt.
     Fortunately, demand does keep pace with income: Real per capita income in the U.S. rose 174 percent between 1940 and 1987, while real per capita consumption spending rose 172 percent.
     As advancing technology provides us with new products or processes which induce changes in our basic behavior, it both defines and determines the nature of human demand.  Before the inventions of the the electrically powered agitator-type washing machine in 1922, for example, people simply didn't wash their clothes all that often.  Most clothing was constructed to require a minimum of laundering.  Shirts came with detachable collars and cuffs.
     But once it became possible to wear a clean shirt every day, without tremendous effort, freshly laundered clothing became a staple of middle-class decency.  Technology created a need that previously hadn't existed, and by the mid-1930s, detachable collars and cuffs were a thing of the past.

     The new needs technology creates--how many of you can't live without a car phone?--generate demand in a self-fulfilling cycle that will continue as long as technology continues to advance.

Quantity and Quality Demands
     When consumers' quantity demands those for more of what they already have (food, clothing, etc.)--are satiated, quality demands kick in.  Quality demand is the desire for a new and different model of a product.
     From 1960 to 1980, the number of homes containing a television set rose from 90 to 98 percent.  Then quantity demand kicked in: The number of homes containing two or more televisions rose from 11 to 60 percent.  With quantity demand satisfied, consumers yearned for better TVs--those with giant screens, remote control, and stereo sound.  Consumers, it seems, replace some of their quantity purchases with the improved products made possible by advancing technology.
     As long as technology continues to advance, better products will be developed every year, and the process will start all over again.  By purchasing the new products technology makes available, you are, in effect, boarding an Alchemic train of virtually unlimited demand.
     In the Alchemic world of unlimited technology, there is no limit to your "real needs."  While economists may argue that what is available is a function of what you want, the Alchemist recognizes that what you want is a function of what is available.  New products plant new ideas in your mind, but they also provide you with choice--one of the most potent stimulants of demand.