Are you a harbinger customer?

If so, stop reading MR!:

Previous research has shown that there exist “harbinger customers” who systematically purchase new products that fail (and are discontinued by retailers). This article extends this result in two ways. First, the findings document the existence of “harbinger zip codes.” If households in these zip codes adopt a new product, this is a signal that the new product will fail. Second, a series of comparisons reveal that households in harbinger zip codes make other decisions that differ from other households. The first comparison identifies harbinger zip codes using purchases from one retailer and then evaluates purchases at a different retailer. Households in harbinger zip codes purchase products from the second retailer that other households are less likely to purchase. The analysis next compares donations to congressional election candidates; households in harbinger zip codes donate to different candidates than households in neighboring zip codes, and they donate to candidates who are less likely to win. House prices in harbinger zip codes also increase at slower rates than in neighboring zip codes. Investigation of households that change zip codes indicates that the harbinger zip code effect is more due to where customers choose to live, rather than households influencing their neighbors’ tendencies.

Here is more from Duncan I. Simester, Catherine E. Tucker, and Claire Yang.  Via the excellent Kevin Lewis.

Comments

So do the residents of these ZIP codes have a lower IQ than those elsewhere?

New products tend to decline in price over time, so you can typically save a bit if you're willing to wait 6-12 months or so to purchase them, but by that time they may have already failed. If you're somebody who constantly has to have the latest gizmo to impress your shallow friends, though, you probably ignore this and just keep buying whatever looks cool, and thus get tagged with the 'harbinger' label. So...not really dumb zip codes, more like d-bag zip codes, maybe?

But surely this research resulted in a difference between Early adopters in general and Early adopters who picked products likely to fail?

Don't know, but that's really the only behavioral trait I could think of that would cause someone to be a consistent buyer of products that fail.

On the other hand, from what I gather, NYC sports fans tend to cluster into Yankees-Giants-Knicks vs. Jets-Mets-Nets devotees (or something like that), with the former group having been a lot more successful, historically, than the latter, so maybe certain people are just drawn to scrappy underdogs, and this translates into purchasing decisions, somehow, as well?

Thanks for discussing this data for this amazing blog. let me discuss this short article in this little myspace take into account friends and neighbors

Sin embargo, si por ejemplo tuviéramos four o 5 cuentas pues sería un poco mas
cansino el tener que cerrar sesión en una para después tener que abrirla con otra diferente a la que
acabamos de cerrar.

I noticed this about myself back around 1990. A large proportion of the products I liked most went out of business. For example, I thought Lotus 123 V. 3.0, with its 3d spreadsheet concept was brilliant while Microsoft Excel was pointlessly awkward.

My wife joked that I should start a new product market research company where I would make up the entire sample size because anything I liked was doomed to failure with the public.

What new washing machine should I buy?

Speed Queen.

Wild guess, but I think single male Redditor edgelords in their 20’s are one example of a harbinger in certain product categories. They are literally the opposite of the affluent female customers that companies chase after. I’m sure they disproportionately favored the Zune over the iPod. They love certain Android phones with weird, esoteric features that no one else cares about. If you’re a landlord and you’re seeing more fedoras and discarded Mountain Dew cans in your neighborhood, then expect rent to stagnate or decline. Have you seen an obese young chap in a Slipknot t-shirt arguing about Nietzche or why AMD will trounce Nvidia on cost per performance? Consider selling.

Is it simply the association with these people that destroys the appeal of the products they like? Is there anything wrong with fedoras except for the basement-dwelling neckbeards who recently adopted them?

I think it’s more of a purely negative correlation between the things they like and the things that more lucrative consumers like. iPhone users like to FaceTime their friends, but neckbeards don’t have friends so they care more about a high refresh rate and built in DAC. The iPod was great because of iTunes, but neckbeards torrented their music and were repulsed by the closed Mac ecosystem so they preferred the Zune. If surrounding apartments begin to offer fancier amenities like a rooftop patio but yours doesn’t, neckbeards will gravitate towards your apartment. It’s not that they’re necessarily poorer in an absolute sense. They will never hang out on the roof, and don’t want to pay for that. Again, it was a wild guess, but the same negative correlation logic can be applied to other groups of people (especially psychographic groups). I also use the term “neckbeard” for comedic value and don’t think any less of that type of person.

"I also use the term “neckbeard” for comedic value and don’t think any less of that type of person."

Let us not disguise our contempt for what that word signifies. I think we'd each be very concerned if our sons became one.

Interestingly, aspects of what you consider neckbeard behavior sound like normal tech-savy old fart behavior to me, I mean, I am 42. Pirating music with Napster (or even copying casette tapes back then) was here much earlier than iTunes, so we easily switched to torrents and not gonna start paying for music. When FaceTime appeared we were like 30+ and more fixed in your habits, doing it the old way, either personal meetings or phone calls. And older people are more likely to have their friends closer to make meetings feasible, FaceTime is for those young people who are very mobile over the world. Same thing for an open architecture, MS-DOS was open, everything was open, even on the hardware level, one could and of course still can replace the CPU in a PC, so we are not gonna adopt a new trend of closed "appliances".

Rooftop patios are useful for smoking pipes or cigarettes.

Anyway it seems the young neckbeards might be following in the footsteps of tech-savy oldsters.

Will the purchasers of Teslas prove to be Harbingers?

Not with Tesla and Porsche shooting it out on the Nürburgring, no.

Because no manufactures of expensive niche performance vehicles have ever gone under.

Hey, I'm not a Musk fanboy, but I'm old school enough that I respect the track time. It says more than a zero to sixty or quarter mile. It says the chassis can hold a corner, changeovers, etc.

The Tesla Plaid Model S "finished the Nürburgring in a hand stopped 7:23 minutes."

For comparison, a McLaren 650S Spider turns in 7:35. Enzo Ferrari 7:25. Many more times here.

Apropos to nothing.

This morning the Warden made me take her to The Home Depot to buy stuff and add to my stoop labor ration.

The trip was worthwhile as I saw a brand new, convertible Bentley in the parking lot.

I don't see a person that can afford a Bentley doing stoop labor. Maybe it was Ken Langone . . .

Re: Tesla - short the stock. You're Welcome.

They were merely enjoying the car. Going to get a six pack of lightbulbs can he really fun in a Bentley.

"Will the purchasers of Teslas prove to be Harbingers?"

Tesla is a 16 year old company at this point and the first Tesla was delivered 11 years ago and production has been over 20K per year since 2013. A person that bought a Tesla in the first few years has probably replaced it long ago.

Let’s see how many cars Tesla can sell in China once the Shanghai factory is open.

Tesla is a dominatrix for their customers: long repair times, used cars sold as new, self-driving capability fraud, shitty customer service.....nothing matters, then men who enjoy punishment keep asking for more.

I was appalled by this picture from Amsterdam. A fanboi talks about 400 car deliveries while the pic is of an ugly port area. If this is the alternative to "stealerships"...I think I love the the old business model https://twitter.com/whatmattlikes/status/1177294673435664385

Back to the Harbingers issue, the Tesla customer list may be interesting for research =)

Car dealerships are as helpful as incompetent dentists. Tesla's flanking of the dealership model is the best thing they have ever done.

Flanking the dealership model are nice words in a public event or in marketing material, in reality means a ~45K USD car delivered in a pothole filled port rail yard under the rain.

...for $40K. Sounds good to me.

Agreed! The dealership model is expensive for the consumer. It certainly provided some benefit, but I expect that many consumers would do without those benefits if they could get a car sans dealership markup.

Not sure if you're being dense on purpose, but you realize all cars go through the "pothole filled port" right? And the rain is some further negative to you?

What value is there is paying to transport a car with an extra step at the dealer? It's not worth $1000's of dealer profit and the 4 hours it takes to close a deal. It's not worth having dozens of strangers test drive or sit in the car you end up buying new. Dealers don't provide much value if their big sell is "we store new cars outside in the elements for weeks/months until you buy it".

No, I am a spooky precursor. I take things up and then they hit big 2 or three years later.

Of course for MR that might have been 10 years ago ..

(If any of you still aren't on GitHub(*) and JupyterLab, hurry before that one gets too stale.)

* - necessary for the young, professional, and datasharing.

MR has had a pretty good readership since it’s start. Econ Profs were recommending it to students in the early aughts.

I'm probably not that much of an old-timer. My recollection is that MR was my "home blog"(*) until I went to https://www.outsidethebeltway.com for some time, and then came back.

For the very trivial reason that OTB commenters were too anti-bicycle.

* - clubhouse

I can guarantee that if you are over 30, and still ride a bicycle, you are a harbinger.

I started mountain biking in the 80s. Went off the top at Mammoth before bikes had shocks.

I started eating phó in the 80s too!

Lifestyle defined.

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This is wacky...

Definitely. As Aussies living in the US, my wife and I find that our tastes, especially in food, are so different from American tastes that our liking a new product is almost a guarantee that it will soon be discontinued.

When we buy existing products, that is sometimes a kiss of death. Used to buy small eggs; can't find them anymore. Then the same with medium. Now we are forced to consume large eggs. Three-mile-island eggs are next! :-)

Yes, Kiss of Death is exactly the phrase that came to my mind, rather than harbinger. At our local Off-Track Betting there are several players known as pure Kiss of Death -- you do NOT want to hear them rooting for the horse you just bet.

You eat Vegemite. You deserve failure.

Maybe I had too long of a day at work, but that was legitimately the funniest thing I’ve read on this blog.

What is an Australian palate like?

Far more sophisticated than than my DC neighbors'! :-)

Walmart. Walmart shoppers have created a crisis in land fills, as most of the cheap products Walmart customers buy end up in the landfill. Yes, there are studies on Walmart's contribution to landfills. I've been to Walmart, and I am always amazed by the amount and diversity of the junk people buy there, cartloads of the stuff. Of course, much of it is made in China, so China is not only spoiling the air but the landscape in and around America's cities.

Cunning.

We have met the enemy, and they is us! :-)

Are there certain zip codes that are more likely than others to read pop-social science papers?

My father was a floor trader at the Chicago Mercantile Exchange. He once told me "if you can't pick winners, pick losers and trade the opposite". He understood harbingers of failure well.

On the floor there were always traders it was wise to fade.

So, what are the zip codes?

Hey guys wassup, how about a deep dive into Elizabeth Warren's policy proposals? I'd just love that!

That would be funny, but a bit transparent, if MR did break its silence on the parctical political economy, and public choice theories of politics.

To talk about Warren.

In the middle of an impeachment.

In the middle of another impeachment like mine...Trump won't be convicted either.

Three specific examples of these unfashionable people's choices might be helpfully illuminating.

Generally, my experience with personal computer products in the 1980s. Here are opinions I held:

- Why would you want a color monitor when you can have a much higher resolution monochrome monitor?

- Why would you want PowerPoint when you can make better charts with Harvard Graphics?

- Why would you want Excel when Lotus 123 3.0 is more intuitive and easier to build complex projects with?

My Harbinger of Doom tendencies cost me getting hired by Microsoft in 1987 because I couldn't fake enough enthusiasm for their Microsoft Office products in a day of interviews in Redmond.

Me: "Why would you want a smartphone? Pocket computer with a terrible keyboard. You are either in the office with a real computer, at home wiht a real computer, driving and thus cannot use a computer, or somewhere else where there is something more fun to do than to use a computer."

Later me: "... okay, but the keyboard is still terrible. Are netbooks still around?"

Discontinued products are not necessarily failed products. It's not clear that the authors make that distinction.

Apple comes out with new iPhones each year and discontinues older models. Designers discontinue old products on the basis of fashion trends that they themselves set.

Products that are discontinued (whether they were successful or not) are often sold off in clearance sales. Bargain hunters who are less fashion-conscious and trend-conscious may snap them up.

People with a frugal mentality will naturally cluster in certain neighborhoods, because household rent and maintenance are often among the biggest expenses. They won't want to live in a place where conspicuous consumption is de rigueur, or where HOAs make extravagant demands.

In short, this sound like correlation, not causation.

Agree with this completely, likely these harbingers are buying the lowest profit (to companies) / highest value products. And guess what, companies “cancel” or “fail” those products because they are too costly to the company. They likely do way too much research that an ordinary person would not do so their purchases seem isolated vs the general public due to being hyper optimized on highest value per dollar spent.

For housing, potentially these harbinger people are frugal so avoid buying in the popular areas that are costly but fastest growing in price. That hurts them long term but at the benefit of short term having cheaper housing.

In short these harbingers could just be buying at the margin, hence the products are then first to fall off a cliff.

These are the explanations that seem to make the most sense. But do they also explain why harbinger customers back political candidates who are likely to lose?

If these harbingers are doing research on consumer products, they must also be very selective in their candidates as well. Not to sound too cynical of democracy, but your average voter is going to be the average consumer and thusly more subject to the glitz and glam PR machine than these more well researched harbingers.

'Fresh off the boat', a comedy series.
Imagine a bunch of FOB from that series organizing to buy up a block of houses in a new development.

I was an early customer of Amazon, when it sold only books, but early to buy CDs from Amazon. Amazon has grown as has my buying from Amazon.

Also very early to online forums beginning in the early 80s.

Thus you should want me as an MR "customer".

There doesn't seem to be any way to prevent you from being one.

Are easy marks for scam artists likely to cluster in certain neighborhoods? Do 'boiler room' stock sales by cold-call scammers target areas where there might be retired senior citizens with lots of money whose mental faculties are in decline? (Of course.) How about places where Scientology is popular? Or where the Putnam like social-capital (Bowling Alone) is the worst and so victims are less likely to talk about their purchases of shoddy merchandise to neighbors? If so, then how much of the harbinger effect might be due to 'grifter' companies targeting particular neighborhoods, as opposed to an admittedly probably more dominant effect of the decision-making skills and resources of those living in them? If you're a company trying to unload your stock of some product you don't plan on supporting services for anymore, do neighborhoods matter? In any case, there would still be a harbinger effect whether the locus of decision making was partly the buyer and/or the seller. Finally, many smart people are easily scammed. I recall from the book The Informant that the Nigerian email scams were especially successful used on corporate executives at large companies, apparently because they thought they were too smart to be scammed.

I owned a Zune.

The question to ask: are these people making bad choices, like choosing the wrong horse at the track? Or, do they simply have different tastes than the majority without being 'wrong"? Like loving real butter 30 years ago when any new product touting lots of butter was a guaranteed fail.

Completely agreed!

It's economies of scale that cause the benefits and the costs. A colleague of mine put it succinctly: In the U.S. the marginal cost of quality is high.

Please neighbors, have sophisticated tastes like mine! :-)

Here is an article about the previous research a few years ago that coined the term harbinger customer.
http://news.mit.edu/2015/harbinger-failure-consumers-unpopular-products-1223

In the midst of all this concern about what it important, we shouldn't forget to check out this most trenchant analysis:
https://marginalrevolution.com/?s=mueller+

Leave us not forget which end is up and which is down, in these topsy-turvy times.

The mouse was the first to bite on that smelly cheese and he almost lost his head.

You implying that was me?

EdR "is a lying disaster for our Country. He should resign!"

Can't bring myself to use this one: "Schiff is a lowlife who should resign (at least!)."

"At least?" What is that, a call for ritual suicide?

One possibility is that these harbingers are novelty seekers who buy products solely because of their newness.

There's a name for us? I haven't picked a technology winner ever. Went from Betamax to Amigas to Cyrix processors to Blackberry to HD DVD.

And it's not just technology. I have a running joke with my wife that all it takes is for me to like something at the grocery store to get them to discontinue the product. I don't even bother picking a favorite coffee shop anymore- they always go out of business.

Not *definitely* saying there's a connection, but the big VW emissions scandal broke shortly after I decided I liked my Jetta enough that I replaced it with a Beetle. Diesel, of course. One of the ones affected by the emissions problems.

Why did you choose a diesel?

50 miles to the gallon on the highway. More importantly, a lower dollar-per-mile that comperble gas engines.

One possible harbinger tendency would be to see what people are gravitating toward, and rejecting it. Contrarian tendencies would be bad to pick retail market winners.

Note that "everyone likes it, but there are actual objective deficits in the offering that something else avoids" is a different position than "everyone likes it, so there must be something wrong with it." If you're perfectly happy going along with the majority but just can't in this particular case for definable reasons, then you're not a harbinger. If going along with the majority just rubs you the wrong way and makes you feel like you haven't thought about it enough, then you might be a contrarian harbinger.

People wondering what the paper actually says can read it here.

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