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Recalling Matt Yglesias’ post about why AOL is a giant scam reminds me to share my opinion that a large swath of the American economy is, if not quite a scam, predicated on exploiting the set of conditions I like to refer to as DLIPS– desperation, laziness, ignorance, poverty, & stupidity. Some of these businesses, like AOL, are essentially scams, but many others are not scams but merely exploitative. Good examples of this are payday lenders, of course, but also many other more “reputable” firms.

Sometimes firms can become DLIPS firms even though they didn’t begin as one. A good example of this is Borders. Why would you ever purchase anything at Borders when you can get it on Amazon? Essentially the answer was “never” but of course if you were too poor to have internet access, too lazy to comparison shop, didn’t know Amazon existed, or needed that gift right now, or were just dumb, then you might get something at Borders. In tough economic times that stopped being enough to keep the firm afloat and unlike Barnes & Noble they couldn’t convince people to buy their non-DLIPS eReader product so they tanked. Best Buy is also another DLIPS firm that I think is doomed. Another firm is the jewelry repair place in the mall across the street from my office that tried to charge me $30 to change the battery in my Fossil watch when Fossil will do it for $10.

I think we are going to see more DLIPS businesses tank as money gets tight and knowledge becomes cheaper. Competition will become fiercer, so payday lenders may soon be replaced by Wal-Mart or a similar store. And as more people have smartphones with barcode scanners fewer people will be willing to pay the large premiums that you pay to buy books and electronics in brick-and-mortar stores. If I were the kind of person to gamble in the stock market I would be shorting firms that have a primary DLIPS customer base.

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