market failure concept from economics called a “Market for Lemons.” Let’s say you have a used car you’d like to sell. It’s a pretty good car. But the problem is, you can’t prove it’s good. For all the buyer knows, your car is actually a *lemon–*a used car that seems fine on the day it’s purchased, but is actually going to break down in horrible ways days later, after which you are long gone with the money and the buyer is screwed. As it so happen, your actually good used car–a *plum–*is not a lemon, but because you can’t prove it’s not a lemon, you can’t charge the price a plum should command. This sucks for anyone trying to sell a plum.
The average selling price of any used car in the market depends on the ratio of plums to lemons because every buyer’s price is discounted by the risk of getting stuck with a lemon. So long as there’s even a few lemons in the market, the average market price for a used car will always be slightly lower than what a genuine plum would go for in a world where where buyers could accurately distinguish them.
This means sellers of plums start to take their merchandise off the open market. If you can’t sell your plum for what it’s actually worth, you might as well drive it yourself until it’s dead, give it to a family member, or sell it off the open market to a friend who knows and trusts you. The problem is, now there’s one less plum on the market, which increases every buyer’s risk of purchasing a lemon, which means the average selling price of all used cars goes down, which means more plums leave the market, and the vicious cycle continues until you’ve got nothing left but a “market for lemons (View Highlight)
Note: The article discusses the concept of a “Market for Lemons,” which is a market failure in economics. It explains that sellers of good used cars, called “plums,” cannot price them correctly in the market due to the presence of “lemons”—used cars that appear to be good but are actually poor in quality. This drives the average market price down and causes sellers of plums to take their merchandise off the market, leading to a vicious cycle of decreasing prices until there is nothing left but lemons in the market.
when was the last time you answered a phone call from an unknown number at a time you weren’t expecting a call? Back in the early 1990’s it would never occur to me not to answer the phone, even though caller ID had yet to be invented, because 90% of the time it was a genuine human being someone in my family knew personally. (View Highlight)
With AI chatbots, not only can you effortlessly spin up a bunch of unique and differentiated messages, but they can also respond dynamically as if they were a person. (View Highlight)
