No, not everyone is stupid except for you

I keep reading things that seem to fall into one of two categories: Either it's the smug expectation that authors will surely continue to overpay massively for publishing services, because authors are entirely incapable of making good decisions, or it's hand-wringing that self-publishing will lead authors to their destruction, because authors are entirely incapable of making good decisions.

Notice a trend there?

Now, we all know people who are idiots about money. We all, at various points in time, have been idiots about money. Behavioral economics seeks to answer the question, Why are people such idiots about money?

In the face of all that idiocy, it's easy to loose sight of the fact that certain concepts from classical economics, such as the supply and demand curves, actually have held up quite well over the ages. There are definitely individuals who buck that trend (RANDOM JOKE SEGUE: Two New Russians who haven't seen each other in a while are catching up. One says, "That's a nice shirt!" The other says, "Do you like it? It cost $400!" The first says, "Sergei, you fool! I know where you can get that shirt for $600!"), but when you are talking about most people in most situations, the supply curve and the demand curve do hold up. That is why price and wage controls went out with Richard Nixon.

People are economically irrational. People are more often economically rational.

Here's an example of what I'm talking about: Mercedes resurrected the Maybach line nine years ago. In that time, 3,000 people bought Maybachs, which I think we can take as evidence that people are economically irrational--we're talking about a $450,000 car that apparently wasn't even as good as the other $450,000 car out there. But in the month of July 2010 alone, Toyota sold 27,345 Corollas, an economy car generally lauded for its value. In a single month, Toyota found nine times as many people willing to buy a Corolla than Mercedes found willing to buy a Maybach in nine years.

Bear in mind that despite the fact that the Maybach sold far below expectations, it kept going as a business for nine years. I have seen any number of companies with business plans that are positively offensive in their disregard for the intelligence of consumers. And they creep along. What they don't do is flourish--they don't fulfill early expectations, they just sort of eke it out quarter after quarter.

Modern self-publishing is a very new industry--just a little over two years old. There are scams, of course, but there is also a lot of learning and communication happening among writers. Writers, even traditionally-published writers, are getting more experienced and more knowledgeable about self-publishing every day.

That's a problem if your business is run on the expectation that everyone is going to fork money over to you forever, for no particular reason. Eventually, as people learn more about what they're doing, they're have a better notion of what constitutes value in this new industry. If you don't provide value, some people will certainly pay you anyway, at least for a little while, but before long you're going to start having problems with customer retention and a lack of recommendations. You may eke along, living off old contracts or whatnot, but flourish you will not.

As for the expectation that writers will destroy the market for books with freebies or whatever, I feel like some people have taken too much to heart the idea that writers are really bad at business. I mean, sure, some are and always will be, but remember the choice used to be, get published and get screwed, or don't get published. So of course authors lined up and clamored for a good reaming. That was actually writers being Homo economicus--if you wanted a career as a writer, being published, however horrible the terms, was better than not being published.

Now there's been a sudden transition in the industry, and writers who made their bones decades ago have been slow to catch up. That's to be expected. It doesn't mean they're necessarily stupid (although it is frustrating to watch), and it certainly doesn't mean that, as far as looking after their own financial self-interest is concerned, all authors are dangerous lunatics armed with a straight razor and an itchy throat.

If free doesn't work for people, I'm telling you, the vast majority will stop doing it. If KDP Select doesn't work for people, I'm telling you, the vast majority will stop doing it. If the 99-cent price point doesn't work for people, I'm telling you, the vast majority will stop doing it.

If they're still doing it five years from now, I'm telling you, it probably worked for them.

Maybe this is my humanist side coming through, but I really marvel at the assumption that everyone must be stupid--bone stupid, dumb as dirt. One of the things I like about economics is that it doesn't assume everyone--everyone!--is just an idiot. Here's a lesson from journalism: If someone is doing something you don't understand, it means you don't understand. You need more information; you need to talk to people. Assuming instead that you are the only intelligent person in all the land just reveals how limited you truly are.