Price Controls, Big Macs, and the Bezos Rule

Why anecdotes are better than data, and what that means for Kamala Harris’ poorly-received plan to cap the price of food.

Jeff Bezos said he learned while running Amazon: “When the data and the anecdotes disagree, the anecdotes are usually right.”

I’ve been thinking about the Bezos rule—one that’s wildly counter-intuitive to what almost every expert and professional believes—and what it means for Kamala Harris’ poorly-received trial balloon to cap the price of food.

MCDONALDS IS NOW A LUXURY

Back in February, the CEO of McDonalds said on an earnings call that sales had collapsed among Americans making less than $45,000 a year. Essentially, they could no longer afford McDonalds.

The median income based on Census data is $47,960. The number of households who earn that amount is about a third. For a third of America, McDonalds is now a luxury item.

Think about that.

McDonalds is just one example of something happening across the economy—Subway, Starbucks, Chipotle, and on. Many ordinary people no longer believe they can afford what was, until recently, the smallest joys we took for granted as the staples of American life. Restaurants are pushing to win back customers with gimmicks like five-dollar meals, but none of that changes the basic problem. Grabbing a cheap taco is no longer something an awful lot of Americans believe America allows people like them to do.

Some scolds will say people shouldn’t be eating fast food anyway. It isn’t healthy, and if you can’t afford it you should make a ham and cheese at home for less. These types, no doubt living comfortable lives with safe jobs and nice houses, will say those struggling to hold their meager finances together shouldn’t be buying a morning coffee at Starbucks. It’s wasteful spending they need to recognize is out of the budgets of folks like them. In the words of Alec Baldwin’s character in Glengarry Glen Ross, coffee is for closers.

This is dangerous. People aren’t just machines grinding away until they’re ground down into dust. Small occasional joys are what keep people engaged in the world in order to keep on going, especially those with harder lives than you. Their ability to buy a sugary treat, a fashionable pair of shoes, a popular toy their child loves, or a ticket to a comic book movie to escape into a few hours of pointless fun, is what makes their burdens bearable. Buying a decent cup of coffee before eight hours they don’t particularly like isn’t a wasteful perk. It’s what keeps people feeling human, and therefore keeps middle-class nations like America humming along.

PEOPLE EXPECT THE SYSTEM TO PROVIDE THEM A DECENT LIFE

Often when I read about ordinary Americans who feel prosperity and security is slipping away, I next read about experts and professionals citing data that everything fundamentally is fine. Yes, we had a nasty burst of inflation, but now it’s coming down. Wages are trending up. Corporate profits are good. The American economy remains an engine of prosperity. According to the charts and graphs, the data that we measure, when measured in the way we’re accustomed to interpreting it, says there’s no problem. Americans are okay.

On the other hand, there’s this stream of anecdotes. The anecdotes say a lot of supposedly middle-class Americans feel hopeless about their lives. There’s inflation and rising food costs. There’s despair at ever buying a home. There’s student loans they never will pay off. There’s the knowledge that, no matter how well they perform in or sacrifice for their jobs, they will be cast adrift at any moment because some spreadsheet said so. There will be no more gold watches for decades of loyal service.

People worry about vanishing mobility trapping them in their current circumstances forever. They complain about arbitrary and bureaucratic HR regimes ruling over them through fear and controlling their personal lives. They worry about the precarious gig economy. They fear dwindling opportunities when they next will need a job. This is in addition to upheavals in family structures, culture, and the ways we live, impacting their security and opportunity.

America since the Second World War was a middle-class society of mass opportunity and prosperity. People could go to school, plug themselves into the system, do something useful, and work hard, and they would be okay. They would get a home, a secure job, a car, money to send their kids to college, and the material comforts of a basic life. This was part of the American Dream they believed America promised them.

The kind of wonks who staff governments and campaigns, and those of us who write political essays on Substack, often fail to appreciate this critical reality: what a lot of ordinary Americans want is simply to have a good life. They’re not looking to become a rockstar, found a company, become a senator, or change the world. They’re not trying to beat the world. They expect to put in a hard day, be treated with respect, do something meaningful, and then grab dinner with their family without having to worry too much about tomorrow. This is what they expect from The System—as long as they put in the effort to do their part, The System will ensure they’re basically okay.

Wonks and professionals, on the other hand, are creatures of the details. We’re the types who care about the abstractions. We think in flow charts, org charts, responsibilities, and spreadsheets. We care about political parties, institutions, and ideologies. We know who is doing what, and think distinctions between government and private entities are important. We don’t think about what The System is doing. We care about what certain policies, institutions, and people are doing. Talking about The System instead of its various constituent parts is itself among this group a mark of naivete. When something has gone wrong, we blame the cogs misfiring while absolving from responsibility ones we don’t believe should be involved.

Most people don’t know or care about any of that. To them, it’s all one big System.

When McDonalds is a luxury item to a significant portion of Americans, The System is no longer working the way people expect. According to the Bezos rule, when the anecdotes conflict with the data, the data probably is wrong.

MAKING THE SYSTEM WORK FOR ALL AMERICANS

When I heard Kamala Harris and the Democrats proposed fighting “price-gouging” by instituting price controls for food, I thought the same thing most everyone in the establishment believed—it’s a stupid policy. Price controls don’t work in market systems. Markets are about turning each private transaction into a signal through its price, silently coordinating the entire economy. This is what Adam Smith’s Invisible Hand is all about. When you break a price signal, you break the entire signaling mechanism across the entire economy. The result is chaos, shocks, and shortages.

Price controls would make ordinary Americans worse off, not better.

And yet...

Saying a policy is dumb isn’t the same as saying there’s no problem. The anecdotes say a lot of Americans no longer believe The System is providing them a good life. They’re willing to show up and work hard doing something useful. The System isn’t willing to do its part, giving them the opportunity or life that they expect. They don’t care who exactly is to blame for this situation. They blame The System in its entirety. They want the people who run things to right it.

As a cherry on top this disintegration of expectations, The System is now taking away the final thing they cling to, the tiny joys that give a life some comfort. A third of Americans no longer feel they can safely afford to buy their kid McDonalds. It’s a final straw before something is going to break.

This is what I think campaigning Democrats are starting to see that the professionals and experts who run things refuse to recognize. All the professionals, experts, and managers proclaim the anecdotes are wrong. Wages and profits are up. Markets are okay. Job numbers look reasonable. Even if there’s a problem, there’s nothing much for them to do. All they have is levers to manipulate the financial system, and the rest belongs to the private economy. If Americans no longer believe their lives are decent, it’s a problem markets eventually will solve.

When the powers-that-be hear ordinary Americans who consider themselves middle-class express despair, they dismiss their complaints as anecdotal whining. I think it’s dangerous to ignore the signal they are sending.

The price control idea rushed out was knee-jerk, poorly-designed, economically dangerous, and dumb. That doesn’t mean there isn’t a serious crisis brewing we need to jump up and address.

I don’t even think it’s principally about prices or inflation. Prices are just a final straw placed onto a camel whose back is quivering before collapse. It’s about disrupted expectations, the good life, and a leadership class refusing to acknowledge frameworks they rely upon no longer work. The world is changing, which means the components of a basic good life are shifting too. An array of factors ordinary people can’t control are yielding up vastly different lives, and people don’t like where things seem to be heading. Americans do what they’re told—get an education, go to work, work hard, raise their family, and vote—but the life they’re getting back isn’t what they were promised.

I further suspect we’re no longer measuring the right things. Data isn’t reality. It’s just a proxy for reality. We built our statistics as proxies measuring the basic components of a good life in the twentieth-century industrial-era world. There’s a lot that they don’t measure and what they measure isn’t real well-being but just proxies for it. The twentieth-first-century world is a different set of rules. What we’re measuring is more the past than the future. The data might be drawing a false and outdated picture, while the anecdotes are revealing our new reality.

I don’t yet know what to do about this, or how to fix it. Nobody yet knows for sure. We’re standing in the middle of this hurricane. The world is shifting rapidly around us. It will be decades, when future Americans are looking back, until we clearly see what the source of the problems is and what possible solutions we can use to meet them. Many forces are at work, and there are plenty of people to point at who could bear some blame. I do know we should be taking this all very seriously.

America isn’t a poor country slowly moving up. It’s a wealthy superpower facing new challenges and disruptive change. In a poor society rising, a rising middle class will accept a lot because things are slowly getting better. In a rich disrupted society, the slipping middle-class won’t sit by idly as their lives gradually degrade. Americans in particular will never take kindly to the collapse of the American Dream. An America in which McDonalds has become an unaffordable luxury will not be stable for long.

I think this is all fixable. I think the next generation of Americans can have the good life they expect. However, we have to take this seriously and acknowledge we have a problem if we hope to get there. We must look carefully at the machinery of The System and see it the way ordinary Americans do—not a collection of parts but a machine judged by its results. Then we must create policies that respond to the version of America that exists today, not the one in our minds and outdated spreadsheets. We must offer creative ideas to give people the lives they expect—ones in which ordinary Americans can work hard, get treated with respect, do something with meaning, have a sense of control, and take care of their families while enjoying their own lives.

I don’t care what the numbers say. I’m with Jeff Bezos. I’m listening to the anecdotes.

I have some ideas about the forces battering America’s middle class and rearranging our expectations. I’ll be writing more about them in the future, along with ideas about what we might do to solve them and restore the promise of the American Dream.

What do you think about the Bezos rule? Join the community in the comments.