Why The Race to Zero Dramatically Effects Emergency Survival

What is the race to zero?

The race to zero is an economic phenomenon where companies compete to have the cheapest product in a category. This means that one company will attempt to undercut another one until the prices become so low that it's no longer viable for a company to effectively compete.

In this phenomenon the consumer benefits significantly by being able to purchase goods and services at cheaper and cheaper prices. By timing things right, once expensive luxury items will become affordable and only get cheaper.

Sounds good, what's the problem?

The race for zero means that companies race to become the cheapest, while this is excellent in the short term, it will eventually have disastrous effects.

Think about this: What happens when consumer goods become so cheap that companies can no longer afford to produce the item?

Monopoly

In this scenario one of three things will happen. A company will either exit a market, go bankrupt trying to compete or become the only suppler in the market category. The one company left standing forms a "monopoly". This means a company dominates a market and in some cases only supplies a cheaper less quality product without competition. Companies once famous for creating high quality but expensive products are forced out altogether.

Disaster scenario

As consumers become use to cheap products and refuse to pay for higher quality alternatives companies will drop out of the market place. When companies close it means people will lose their jobs. As people lose their jobs, they look for cheaper and cheaper products, this drives the cycle further, like adding fuel to the fire. It then becomes a downward spiral.

The end game

The end game is worrying. As companies drop out and close up, only the most efficient or cheapest companies are left. When a company gains a monopoly they have the potential to start creeping their prices up again to take advantage of the new market dominance. Without competition to keep the prices low consumers get a rude shock.

With little to no choice consumers are forced to purchase the product at the higher price. Quality of life declines, or prices rise too high causing other economic effects.

How you can prepare

By timing things right you can take advantage of the race to zero. While in this "downward" pricing phase simply start stocking up on the critical items your family needs. Ideally you'll have plenty of things put away at a very cheap price. When prices start to escalate you won't have the immediate need for products as you'll be able to consume what you have stored away. If you build a good enough supply you'll be able to "surf" the pricing wars. Consume what you have when the prices are too high and stock up when the prices are low. The best strategy is to purchase low cost consumables that won't spoil.

By recognising the race for zero economic phenomenon and taking advantage of it you can build up a supply at a reasonable price.