The Internet Is Changing Money

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Everybody knows that the Internet and its surrounding technologies have created a new economy: new industries, new jobs for people to develop and implement those industries, new things for consumers to spend their money on, new ways for them to literally transmit that money to merchants. This is hardly breaking news.

I have noticed that it’s also created two different, very strange kinds of a phenomenon I’ll call “value distortion.” Since this is a term that I just made up and means nothing to anyone not sitting in this chair, I will explain.

On the one hand, thanks in part to the wealth these technologies have helped create, things getting more expensive. In places where this tech-fueled growth has benefitted a high concentration of people, like San Francisco or New York or Los Angeles, there are suddenly lots of newly-minted millionaires and hundred-thousandaires walking around, and it is not uncommon to see shiny new cafes and chain restaurants offering things like $6 coffee and $12 sandwiches and a $3 bottle of water and — I swear this is real — a $4 order of toast.

Obviously, not everyone is dumb affluent enough to spend so recklessly, but things like this do help generally to raise the bar for what things cost and what people are comfortable spending on certain things. To take just one dimension of life, think about a night out. Four dollars for a can of Pabst Blue Ribbon seems insane (and it is insane) but when the next cheapest option is a $7 Corona, folks will buy $4 PBRs all night long, the better to stomach the $8 Jameson shots to follow. Every Saturday night I see people pay a $10 cover to see a band they clearly have no interest in, just in hopes that the bartender in that room is faster than the one out front. (Spoiler alert: he is.) Or a $5 cover to see if the DJ upstairs is better than the DJ downstairs. People pay $8 in New York for a cab ride that will save them all of four minutes’ walk. Or, if it’s raining, $6 for an umbrella that they know perfectly well will be inside-out before they reach the next corner.

Another example of value distortion can be seen with new parents and their support network. This phenomenon obviously predates the Internet economy, but now that I think about it has certainly been prodded along by it. For all we spent on overpriced baby stuff that we never used at all — the electric butt-wipe warmer; the portable diaper-changing station that folded into a briefcase; the slightly smaller stroller than the everyday stroller (for all those times you’re going somewhere with 12% less stroller-storage space) — that never got used at all, we could have bought a summer home and filled it with all that useless crap we didn’t buy.

But it was a baby-related gadget that led me to notice the other, odder type of value distortion, and the one I really think is interesting.

We were visiting friends upstate a few summers ago and realized we had forgotten our baby monitor. Normally, I would have lumped the baby monitor in with all the other useless crap I listed above that I paid way too much for, because unless you live in a house like Tony Soprano’s, the chances you’re not going to hear your screaming baby in the middle of the night in my experience are just about nil.

The baby monitor was needed in this case, though, because it was a warm night and we wanted to hang out at the outdoor saloon on our friends’ property, about fifty yards from their house, where our son was sleeping. (Do your friends not have an outdoor saloon? You should get some awesomer friends.)

This was a few years ago, so at the time iPhone apps were still a new thing, so when I was informed that there was such a thing as a Baby Monitor app that I could set to call my wife’s phone (or whatever phone) if the boy made any noise, I enthusiastically went to the iTunes store and searched for “baby monitor” and saw that there were a dozen of them to choose from, all with the same basic functionality, all priced at either $1.99 or $2.99. There was even one with a video function.

My buying thumb went immediately to one of the $1.99s (because even at the height of baby-onset value distortion, I knew that video baby monitors are stupid), but then stopped and hovered for a moment and I hesitated, realizing that while I had downloaded loads of free apps, I had never paid for one, so $1.99 somehow felt extravagant. Repeat: A thing that I could download from space in about 15 seconds that would give my phone all the functionality of a baby monitor — more, in fact, because you can’t set a baby monitor to call the landline at an outdoor saloon — seemed extravagant at $1.99, and $2.99 wasn’t even up for discussion.

It’s happened many more times since: an app that I can point at the sky that will fill in constellations and identify stars and planets in real time, whichever direction I point is $2.99? Gee, I dunno. An app that will let me add Hollywood-quality special effects to videos that I shoot on my phone, so my kid can shoot missiles at our car or run from giant boulders, is $3.99? Too rich for my blood. See? Value distortion.

This, by the way, is the main obstacle between me and my million-dollar idea: an iPhone app version of Castle’s Amazing Autofinder, my invention that hangs in my entry hall right above the key hooks. Everyone who comes into my house remarks on it: it’s a steel-backed map of my neighborhood, with one magnet to show where the car is parked and another to indicate if it needs to be moved in the morning for street cleaning. It has proven very useful for city-dwelling couples who share one car. So my app version would do the same thing (plus some other things that you’d have to sign an NDA to hear about), and then make me rich, except it won’t, because value distortion. Also, there’s already five different versions of this app. And, I don’t know how to make apps. So actually, there are quite a few obstacles.

But value distortion, which is definitely a thing you will soon be reading about in economics textbooks, is one of them.

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