Consumers in the information age.

Buying anything today means weighing scores of options with little information other than that provided by slick ad campaigns. But help may be on the way.

As we approach the twenty-first century, advanced industrial nations face a growing epidemic of consumer confusion. In 1800, a typical American

had access to fewer than 300 products on sale in his or her hometown, one retail establishment (a country store), and approximately 500 feet of retail space. In contrast, in 1993 a typical American in a metropolitan city of a million people has access to more than a million consumer products, thousands of merchants, and 15 million square feet of selling space. Moreover, our product choices are much more complex--computers vs. cotton, life insurance vs. pickles, surgeons vs. blacksmiths.

The result is that consumer confusion now pervades almost every decision that consumers make--both the life-shaping decisions such as choosing a home, doctor, spouse, job, preschool, college, or financial plan, as well as the small decisions such as choosing a VCR, light bulb, credit card, or evening's entertainment. Anyone who has recently tried to select a life insurance policy or differentiate among 30 stereo systems will immediately grasp how many purchasing decisions are based on hunches, sales pitches, brand reputation, or sheer fatigue rather than on genuine awareness of value.

These poorly informed decisions, made by millions of people every day of the year, profoundly influence the moral, social, and economic world around us. Indeed, the inefficiency resulting from consumer confusion today may be costing the U.S. economy as much as $1 trillion per year. That is close to $10,000 per family per year--a hidden tax that adds on average 20% to the cost of every product we buy. Imagine: The last product you bought might have cost 20% less or lasted 20% longer if you were perfectly informed about your options.

It is possible that many good products don't even get produced because consumers have no feasible way of distinguishing the superior from the average. As venture capitalists frequently comment, the landscape is strewn with the wreckage of fine companies that built great products--about which no one had ever heard.

Consumption Is Time Consuming

The typical American now spends 9% of his or her nonworking, non-sleeping time gathering information about products, according to studies by sociologists and media specialists. That comes to approximately 950 hours per year per family, or about four hours of information gathering for every $100 spent. The single most visible component of this figure is the approximately 18% of network and cable TV time devoted to advertising. Americans spend more than 30.6 billion hours watching TV ads every year. Studies show that most consumers find a majority of these ads a nuisance--if only because the ads they see are often the same ads they've already seen dozens of times before or are for products they'll never want.

Not included in these figures are the frustration, lost time, and maybe even poor health resulting from making an ill-informed purchase. One problem with such figures is that they are inherently nonquantifiable because they relate to the quality of life. For example, how do you quantify the consequences of:

* Failing to videotape an important TV show because you bought a VCR too difficult to program?

* Living in a less-than-perfect house because you couldn't spare the time to look at every possible house that might have suited your needs?

* Developing a chronic disease and dying an early death because food labels provide such poor nutrition information?

* Suffering from an unnecessary pain the rest of your life because you couldn't find good information for choosing a doctor?

In short, the problem of consumer confusion isn't the problem of buying the wrong toaster, annoying as that might be. It's a problem costing the economy billions of dollars in waste and billions of hours in lost time, not to mention the immeasurable suffering and loss of useful products resulting from people's inability to cost-effectively judge the quality of the vast variety of products and services.

Toward an Information Age Consumerism

Resolving the advanced industrial world's consumer-confusion problem will require a paradigm shift in thinking. First and most importantly, it will require recognizing the existence and extent of the problem; that is, the loss of money, time, energy--even health and happiness--that results from making uninformed buying decisions. Second, it will require substituting an Information Age consumerism for the present, outdated Industrial Age consumerism.

Advanced countries need a new consumerism. This new form of consumerism should not be based on direct government regulation of business, as the United States does through the Federal Trade Commission or through state consumer-protection offices. Rather, it should be based on a high-quality information infrastructure that will revolutionize the private-sector economics of selling information to consumers.

The problem with the old consumerism is that government is an inherently inefficient and inept arbiter of the marketplace. Under the old consumerism, regulations multiply, become very expensive and impractical to enforce, and, unless curtailed, frequently do more harm than good. This old consumerism wouldn't be necessary if the mass media were completely effective in their avowed role as watchdog and informant. The problem is that the mass media, based on outmoded technology and riddled with inherent inefficiencies and conflicts of interest, have been only modestly effective in this role.

The significance of the new information infrastructure is that it makes it profitable for independent information sources to provide high quality, convenient, and affordable information to consumers, thus becoming the critical arbiters in the consumer's day-to-day decision making. Ultimately, what this infrastructure means is that, wherever consumers are and whatever they are shopping for, they will be able to painlessly and affordably ask what amounts to a trusted, expert "friend" what to do.

In a sense, these independent information sources will empower the average consumer to access knowledgeable opinion about purchases in the same way that senior executives routinely do today. That is, consumers will be able to designate agents to make their decisions just as executives can designate subordinates or outside consultants. As a result, consumers will be able to make decisions as efficiently and knowledgeably as corporate America can.

This information infrastructure (i.e., the New Consumerism) has three tiers: technology, agents, and clearinghouses.

Information Technology

If we expect to have informed consumers, a new telecommunications policy must be developed, which will require: (1) a fiber-optic network reaching into every home; (2) the reallocation of terrestrial electromagnetic spectrum ("the airwaves") to support digital, interactive, and cellular broadband services; and (3) a high-definition TV (HDTV) standard that has sufficient flexibility to achieve magazine-quality images--a far higher standard of quality than any of the HDTV standards the U.S. Federal Communications Commission plans to adopt in 1993.

The United States is decades away from achieving any of these goals, however. For example, under current policies, the United States won't have a complete fiber-optic network until the year 2035. By contrast, Japan expects to have such a network in place by 2015. U.S. spectrum-allocation policies are even more outdated, with most of the spectrum allocated for one-way broadcasting of mass media and based on the technologies and needs of early-twentieth-century America. Finally, the United States has built its HDTV policy around the spectrum limitations and competitive weaknesses of today's terrestrial broadcasters. It needs to develop an HDTV policy that exploits technologies of the future, such as direct-broadcast satellite and optical fiber. And it needs to do so with a vision about how HDTV will be used other than "more of the same."

Information Agents

Futurists who talk about the emerging Information Age invariably talk about the growing importance of information agents. The role of the information agent--the twenty-first-century analog to today's mass media--is to help the user wade through the overwhelming amount of information now available. But for these agents to be efficient, new public policies will be needed that will help them overcome the mistrust and legal liabilities that hobble today's independent information providers.

One such policy might involve a simple agent-certification process to guard against conflicts of interest. The rationale for such a policy is much like that for legally sanctioned trademarks designating place of origin. These traditional trademarks (popularly known as brands) serve two functions. They prevent one company from appropriating another company's name, thus giving companies an incentive to build superior products and cultivate reputation. They also make it much more efficient for consumers to comparison shop. Instead of having to thoroughly examine each product before purchase, consumers are able to rely on the reputation associated with the product's trademark.

Similarly, a special "no conflict of interest" certification or trademark for future information providers would allow these companies to reap financial rewards for providing impartial information. It would also vastly reduce the current effort needed by consumers to find trustworthy information sources.

The government sector already has such conflict-of-interest certification, such as financial-disclosure rules for the election or appointment of politicians, judges, and high-level government employees. These rules were instituted because financial conflicts of interest are otherwise hard to detect. They serve to enhance the efficiency and trustworthiness of government. The voluntary certification of information agents would merely extend this principle to a select part of the private sector.

Even more effective information agents could be assured if certified agents could be protected from libel suits. This change would allow agents to express frank but verifiable product evaluations with relative impunity.

As the primary vehicle of product information, such information agents would ultimately render obsolete various institutions that heretofore have served this function more imperfectly: brands, advertising, occupational licensing, institutional certification, consumer-protection agencies, and much of the legal profession. The new information agents are the defining institution of the emerging Information Age.

Information agents also become the key intermediaries between consumers and information clearinghouses. Their ability to access basic data about products and purchases would be vastly improved by a system of government-sanctioned information clearinghouses composed of certified information agents and organized and financed similarly to the Federal Reserve with its member banks.

Information Clearinghouses

There is much information of great value to society that the private sector cannot generate or collect efficiently by itself. Examples include census data (collected by the U.S. Bureau of the Census), the airline industry's on-time records (Department of Transportation), the moving industry's complaint records (Interstate Commerce Commission), mortality figures for individual hospitals and physicians (Department of Health and Human Services), campus rape statistics (Department of Education), and public companies' financial performance (Securities and Exchange Commission).

Currently, however, the U.S. government does not have an information clearinghouse and standards policy. Moreover, it is making no formal attempt to modify its policies in light of the possibilities that the new information technologies are opening up. For example, a government-sanctioned clearinghouse could compile the actual selling price of every car and car accessory at every car dealer in America. It could compile the fees charged for every procedure by every physician in the country. And it could compile college students' ratings of their professors. All this information is already gathered electronically. Assuming the cost of transferring this information from one computerized database to another approaches zero, why not make it available to consumers so they can more easily comparison shop?

To be sure, all this information could be misused. After all, information is a form of power, and every form of power has a negative as well as a positive side. The task always is to accentuate the positive side and make sure that the power is used for good purposes. In this case, it's important to keep in mind that sellers already have most of this type of product information. They keep it secret mostly because they know it could be very useful--not only to competitors, but also to consumers. From the seller's standpoint this makes sense, but from society's standpoint it doesn't. It leads to a less-efficient and less-honest market. By forcing individuals to make suboptimal decisions, it leads to a lower quality of life.

New Vision of Consumerism

As a society, we need a new vision of consumerism. The primitive way that most people now go about making their basic lifestyle decisions leads to needless waste and suffering. The goal here has merely been to set the agenda to solve these problems--not to provide a detailed blueprint.

What's holding the New Consumerism back now is not a lack of technology, but a lack of vision. Archaic Industrial Age policies toward consumption and information must be replaced with policies in tune with the Information Age in which we live. The new technology means nothing if telecommunications policy and new information institutions such as agents and clearinghouses aren't developed at the same pace as the technology.

An Information Age Consumer Bill of Rights

In the summer of 1962, John F. Kennedy introduced a consumer bill of rights. Four rights were mentioned: the right to safety, the right to be informed, the right to choose, and the right to be heard. Kennedy then endorsed a series of bills seeking new government regulations to secure those rights.

I suggest that Bill Clinton propose a similar consumer bill of rights but with a very different vision as to how to achieve them. The new vision would reflect the advances in information technology since 1962. Such an "Information Age Consumer Bill of Rights" would help justify to the American people the 1992 Democratic platform proposal to build an advanced information infrastructure in the United States. The five rights are:

1. The right to be educated about product strengths and weaknesses.

2. The right to trust sources of product information.

3. The right to state-of-the-art information infrastructure that empowers consumers to efficiently use their time, money, and energy.

4. The right of all Americans, whether urban or rural, rich or poor, to access the information infrastructure.

5. The right to privacy, preventing sellers and others from abusing personal information gained in product transactions.

About the Author

James H. Snider is a consumer-education expert who has served as a researcher at Consumers Union, the Congressional Clearinghouse on the Future, and the Harvard Business School. He is co-author of Future Shop (St. Martin's Press, 1992), which is available from the Futurist Bookstore (see page 38 for details). His address is 70 Van Patten Parkway, Burlington, Vermont 05401.

His article in the November-December 1992 issue of THE FUTURIST was on "Shopping in the Information Age."