Two of my favorite activities I have done since the start of quarantine have been joining a book club and a Dungeons & Dragons group. I look forward to these activities for weeks at a time each month.
One of the recent books we read for the book club was Good Economics for Hard Times. As with most economic books, there were things I really agreed with and things I really didn’t. The authors’ points were all well argued and persuasive, but I couldn’t help coming away thinking that many of the inverse arguments could’ve been equally well argued by an opposing expert.
One of the contentions that I found most compelling was the authors’ critique of classic labor market theory.
Traditional labor market theory posits that labor flows between economic opportunities similar to any other supply and demand resource allocation. If there are no good jobs in your town, economists would traditionally believe that you would move away in search of better economic opportunity.
The authors, on the other hand, believe that labor markets are much stickier than what traditional economic theory may have you believe. They looked at real world examples and found that people who do leave their home for economic reasons do so slowly, reluctantly, and often with the intention of coming back in a short number of years.
The authors argued that people, by-in-large, want to continue living in the community they grew up in and will resist leaving if the only impetuous is a lack of job prospects. They looked at examples of mass migrations and found that the only consistent motivator was some sort of economic, geopolitical, or environmental disaster in a home country forcing people to move elsewhere.
I think they got this right on the money.
I believe that markets are relatively efficient at a macro level, but that pockets of inefficiency exist at more localized levels. Labor market stickiness definitely seems to be one of these areas. Maybe labor flows relatively well across the economy as a whole, but zooming in to individual communities often tells a different story.
So why don’t people move when all signs point to the fact that they should?
I believe I may have found out the answer.
BECAUSE MOVING SUCKS.
It is terrible.
I can’t imagine an activity that is done voluntarily and yet is such an overwhelmingly poor and universally maligned experience.
Think about it. What other activity in life do people just accept as being absolutely terrible? Tell someone you are moving and watch as their face immediately contorts as they remember the sheer agony of their last move which they had done such a good job of suppressing right up until you had the lack of decency to bring up the topic of relocating.
At least when you go to the dentist to get a root canal you get some free toothpaste or something. (My experience is that dentists are generally lovely people and I often find myself enjoying our conversations despite their admittedly one-sided natures).
Caitlyn and I moved to Philly almost two weeks ago and I am still struggling to recover.
It was, without a doubt, our worst. moving. experience. ever.
The company never communicated anything to us and we had to constantly be proactive about reaching out to them for updates.
Our movers were 7 hours late to pick up our things and because they were so late, they had to stop midway through and resume packing the next day. We ended up leaving Columbus a whole day and a half later than we expected.
When Caitlyn called the company to ask for a discount due to the tardiness of our movers and the delay to our schedule, the owner YELLED at her for being “unamerican” by “threatening a small business during a global pandemic”. Needless to say that didn’t go over super well with me.
The packers were PAINFULLY slow and took a full day to pack up our stuff when it probably should’ve taken 2-3 hours.
They were 4 hours late to drop off our stuff in Philly after we drove late into the night to arrive in time to get our keys for the drop off window they told us.
They were careless with our things dropping multiple packages and they were careless with our new apartment leaving multiple scratches and scuff marks on the wall.
Ok, rant over.
Needless to say, it was a terrible experience. And I was paying a pretty penny for the opportunity to experience it! As I was in the midst of our move I kept thinking to myself, “why is moving so bad?”
Why is it that such a universally terrible experience can be allowed to continue.
As with most things, I believe that answer lies in structure.
I am a big believer in structure-based theories of behavior.
The structure of an underlying system determines the incentives for its actors. The incentives determine the behavior that generally follows. People may deviate, but more often than not, they will follow the path of least resistance as defined by their environment.
My guess is that moving is much the same way.
Because it is a task that everyone does, but no one does regularly, the incentives are inclined towards a terrible experience for the people moving.
It’s a large market with low barriers to entry and need for local proximity. An absolute recipe for high levels of fragmentation. This fragmentation has created a business model where much of the industry is controlled by middleman dispatchers.
These are the lovely folks who somehow know to start incessantly calling you as soon as you even so much as think about typing “movers” into that Google search bar. They aren’t the ones loading and unloading the trucks. They sign you up and then they subcontract out the actual moving to local or regional van crews.
🚨🚨DING DING DING🚨🚨
Do you know what that sound is? That, my friends, is the sound of potential incentive misalignment.
Anytime you see the word “subcontract” your alarm bell should already be going off. These dispatchers secure your business by promising lower prices than competitors. Low barriers to entry in a highly fragmented and low-differentiation industry creates a race to the bottom to compete on price.
This can often be good for consumers, but because of the middlemen involved in moving, consumers don’t get the benefit of those decreased prices.
Because what do we know will happen without a doubt as part of every move? Hidden fees! Once movers have all of your valuables packaged up in their truck they will inevitably have some reason or another why they unfortunately need to up-charge you. How convenient they let you know that as soon as they have all the leverage?
What are you going to say?
“No, thank you sir. I will not be paying that charge, but please do be extra careful with my grandmother’s priceless porcelain.”
I think not.
So you have a terrible experience where you pay more for it than you were expecting. But why don’t bad movers go out of business?
Shouldn’t the fittest survive in the darwinian capitalist markets?
The answer is usually, but not always.
Bad movers stay in business for two reasons: a lack of transparency into the industry and a lack of repeat customers.
Movers don’t care about delivering an excellent moving experience because the chances are that you are unlikely to be a repeat customer even if they did (there is some exception to this with movers that are focused on more local moves, which, wouldn’t you know it are where it seems like the majority of positive moving experiences stem from). There isn’t really an incentive for them to do so since if you do move again, it will be years down the line, you won’t remember who your mover was last time or the particulars of the move itself (remember we all try to suppress these terrible experiences).
The industry also suffers from a significant lack of transparency. Our movers had over 4/5 stars on Angie’s List. Look how they turned out. Ratings are conflicting depending where you go and purposeful misdirection is common place (look at how many local and regional movers include “United” in their name to try to get you to associate them with United Van Lines, one of the largest moving companies in the country). The best way to ascertain the quality of movers are personal recommendations, but given the low frequency and the already-cited suppressed memories, the likelihood of someone having a positive experience along a similar move to what you are about to be making is minimal.
So there you have it. One of the great mysteries of modern economics solved. Why does moving suck? Structure.
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