Consumer sovereignty

0:01- So I want to introduce you to the idea of consumer sovereignty. So when we talk about consumers, we're talking about the people deciding what they want to buy, or in certain cases, what they want to consume. In most cases, it's you and I when we go into a store where we are picking what we want.

0:18And we say sovereignty, when you think of a sovereign, you oftentimes think of a king or a queen. And sovereignty says, who has the power here? And so when people talk about consumer sovereignty, it's really this idea that in a market you have the producers, the people who make the the things to sell and then you have the consumers, the people who decide what they want to buy, what they wanna spend their money on.

0:41And consumer sovereignty really refers to the idea that the consumers have the power here and they can dictate what ends up or what the producers end up doing. For example, let's talk about the 1970s. I know that was way before many of y'all, but in the 1970s, it was very fashionable to have very large cars.

1:00And when oil prices and especially gas prices were low, consumers were like, yeah, I like to have a big car that's super long and it looks whatever, it feels cool, et cetera. But then as soon as there was an oil shock in the 1970s and gas prices went up and you even had shortages and people waiting in line, all of a sudden consumers started saying, Hey, maybe we don't want to have a car that gets 12 miles to the gallon.

1:23Maybe we want something that's a little bit more fuel efficient, et cetera. And so, regardless if it was up to the producers, to the car manufacturers, it's more work for them to change their car models. It's more work for them to redesign to become more fuel efficient.

1:35So they wouldn't have made the decision on their own. But they saw that consumers started opting for smaller cars, and in many cases, back in the 70s, imported cars. And so that made producers say, "Okay, I sense what is happening in the market. I too should make smaller cars."

1:52Something very similar is happening these days with electric vehicles. Even 20 years ago, electric vehicles weren't taken too seriously. People didn't view them as "real cars" that many people would want to build and a lot of the industry didn't build those cars.

2:08But as people became more conscientious about energy prices, about climate change, and you have some producers who are willing to take a leap forward, folks like Tesla, they showed the other producers that actually consumers are willing to do this. And many folks started to gravitate to those.

2:25You could see what happened to the stock price of companies like Tesla. And then that started to affect with the other producers. Once again, the other producers, it's a lot of work to retool their factories, to redesign cars, to think about how you do with electrical infrastructure versus gasoline infrastructure.

2:40But when the consumer, the sovereign consumer, the consumers and charts said, "Hey, I like these electric cars. I could really imagine myself driving this around." Then all of the other producers and most of the other producers said, "Okay, we're going to step up to the plate there."

2:53So as you see fashion trends, fashion trends are usually not dictated by the producers. Sometimes marketing can have an effect on people's minds. So that's maybe the producers trying to influence that consumer sovereignty. But at the end of the day, if consumers say, "I want wide leg pants now", well the producers are gonna start producing that.

3:12And you say, "Now I want narrow leg pants." They're gonna produce that now. And so the important idea here is obviously the producers are making things. In theory, they could produce anything they want, but if they wanna sell them and if they wanna sell them for a good price and if they wanna make a profit doing it, they better be listening to what the sovereign consumer is telling them.