A Fair Price for a Loaf of Bread or a Community Battery

Consumer Capital is a method to set a fair price for a product without a competitive market. A reasonable price is one where the buyer and seller share the profit on the loaf of bread. We can never know the optimal price, but we can know if the price is fair.

To produce a loaf of bread requires an investment of Capital. Someone has to supply the money for the ovens, the raw materials, the bakery and hiring and paying staff before there are sales. Intermediaries like banks and equity partners usually supply the money. With Consumer Capital, future consumers provide the money. Consumer Capital has the following advantages.

  1. It locks in the first customers.
  2. It gives consumers a voice in investment decisions.
  3. It gives a return on investment with discounts, not money.
  4. It sets a fair price that consumers will accept even with monopolies.
  5. Every sale supplies Capital for further investment.
  6. If intermediaries use Consumer Capital, it increases the Productivity of their Capital, and their prices will be fair.

Savings in Capital

  1. One of the high costs of business is acquiring customers and retaining them. Making customers investors encourages them to stay with the business and reduces acquisition and retention costs. It alerts a business to problems by measuring the loss of investors and customers.
  2. A difficulty with many businesses is they become over-capitalised. They spend a lot of money on increasing sales instead of reducing costs. Consumers investors want lower prices first and will accept increased sales, but only if it leads to economies of scale.
  3. If the return on Capital requires no money, this reduces the number of sales needed and makes many businesses — particularly those with large Capital expenditures viable. It is a significant saving in Capital required for economically viable investments.
  4. Setting prices in a free market is difficult because of the delay in knowing what competitors offer consumers outside the market. Consumer Capital allows fixed prices using marginal costs plus adjustable Capital returns.
  5. Making existing Capital available immediately after a sale can double the rate the business uses the same Capital. It is crucial for businesses that have large loans or shareholdings. They can replace their loans with Consumer Capital and save on the cost of loans or equity. For governments, this is particularly important as it potentially halves the amount of Capital and hence taxes a government needs to build infrastructure. It is vital as a way of retaining government because it diverts returns on Capital from private equity to voting consumers.
  6. Intermediaries provide valuable services, and the costs of their services will drop if financed with Consumer Capital. For example, Banks provide new Capital; if their Customers own them, their services will cost less. The hierarchy of Capital distribution becomes a fractal model rather than a top-down hierarchical model. It makes the sayings “the customer is king”, and the “customer is always right” have real meaning.

Consumer Capital Efficiency for Bread

Consumer Capital gains its efficiency because it moves faster and is available for use earlier than loan or equity Capital. Assume the profit from Capital for a loaf of Bread is $2 a loaf.

If the Capital is equity, then all the earnings go to the shareholders. Let us say they receive a $1 dividend each year, then it is one year before the 1$ is available, and the other $1 only becomes available several years later when they sell their shares.

With Consumer Capital, there is no dividend as the consumer pays less, so the $1 is available before bread purchase. The other $1 is given immediately back to the purchaser for use.

The productivity of a given amount of Capital has increased because it costs less to transfer, and the new Capital is available immediately for further use. The Capital does not sit still but is available for use with every sale.

With equity, Capital sits stationary in assets. Consumer Capital moves quickly and is available for reinvestment, and there is no cost to move it.

Productivity of Capital Movement

Capital depreciates over time, but it produces more if invested. An efficient Capital system is one where Capital moves to new investments as quickly as possible, and the movement is cost-free. The dominant financial system moves Capital slowly in large blocks, and it is expensive to move because it is risky.

Consumer Capital moves each time there is a sale, so it moves continuously in small amounts. Because it is part of a payment, it is cost-free. Consumer Capital prevents the buildup of large amounts of stationary Capital. The Productivity of Capital increases from the savings in the cost of movement and the increased value from the speed of movement.

Both equity and loans can be changed to Consumer Capital with no change to the operations of existing systems.

Setting up a Community Battery

Consumer Capital makes Community Batteries economically viable in any community. They are feasible because Capital spent within the Community is used efficiently, and the Community reinvests the earnings from Capital. The steps to set up a Community Battery are:

  1. Establish a Non-distributing Cooperative of households behind the transformer from a high voltage line to a low-voltage line.
  2. Finance the Community Battery from households and Bank Loans as Consumer Capital.
  3. Negotiate with the local electricity distributor to receive electricity from member households with solar panels for no cost, allowing the distributor to use the battery for frequency and voltage control.
  4. Negotiate with the Energy Regulator to sell and buy at the five-minute energy prices.
  5. Distribute income to loans, member investors, operations, consumer members and finally, a Capital Reserve. The Capital Reserve, plus any new investments, will purchase more Community Batteries.
  6. If earnings do not cover the above, then Community investors reinvest their funds. If they do not wish to reinvest, they can sell to other or new members of the Community.
  7. If there are excess earnings, the Community will invest in member insulation, savings, batteries and solar panels.
  8. The Cooperative will use Consumer Capital suppliers wherever possible as they will offer fair prices.
  9. Members will be encouraged to use Consumer Capital retailers and other Consumer Capital suppliers.



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Kevin Cox

Kevin works on giving individuals control over their online information - particularly their financial information with local communities.