In times of panic, people can be too clever for their own good
Even in the worst times, there’s money to be made. If there are shortages, the person holding a desired product has the potential to become very rich. But what if the person with the product had a hand in creating the shortage in the first place?
The New York Times focuses on one man, Matt Colvin, who has made a living for several years by spotting trends, buying popular products cheaply, and then selling them for a profit. In ordinary times, that’s a smart business tactic, but in extraordinary times it stops looking clever and starts looking sleazy.
According to the Times, Matt and his brother, Noah, quickly realized that the coronavirus would cause people to buy sanitizing products. The two brothers went on a buying binge, with Noah buying and Matt selling:
Over the next three days, Noah Colvin took a 1,300-mile road trip across Tennessee and into Kentucky, filling a U-Haul truck with thousands of bottles of hand sanitizer and thousands of packs of antibacterial wipes, mostly from “little hole-in-the-wall dollar stores in the backwoods,” his brother said. “The major metro areas were cleaned out.”
Eventually, Matt had amassed 17,000 bottles of hand sanitizer, plus a variety of other in-demand products, such as face masks and wipes. He was initially able to sell the items online for “crazy money,” but then Amazon and other online retailers such as eBay cracked down on profiteers. People who continued to charge exorbitant prices for precious (but once ordinary) commodities found themselves barred entirely from the sites. This left Colvin and others like him with lots of products but no outlets.
There are several issues the story raises.
First, one has to be impressed by how prescient Matt was to recognize that there would be a run on protective products.
Second, to the extent this was business as usual for Matt – he’s been buying hot properties for years and selling them for a marked-up price -- should Amazon and other outlets have the right or power to bar him permanently from the site once the panicking is over?
Third, what happens to the products these profiteers have stockpiled? The New York Times article describes two parallel scenarios: People like Colvin have garages, or even warehouses, full of sanitizing products, gloves, and masks, even as hospitals are desperate for gloves and masks, and ordinary people are equally desperate for hand sanitizers and wipes:
Mr. Colvin is one of probably thousands of sellers who have amassed stockpiles of hand sanitizer and crucial respirator masks that many hospitals are now rationing, according to interviews with eight Amazon sellers and posts in private Facebook and Telegram groups from dozens more. Amazon said it had recently removed hundreds of thousands of listings and suspended thousands of sellers’ accounts for price gouging related to the coronavirus.
As noted, Colvin has 17,000 bottles of hand sanitizer. Another man described in the article, after making a $35,000 to $40,000 profit on masks, still has 1,000 more masks on order.
The article says that many of these profiteers are already being investigated for illegal price gouging. However, it says nothing about getting these now-valuable products to hospitals or putting them back on the market at reasonable prices. Indeed, because of the Times' article, Colvin confirmed he’d be unable to sell anything. He's now looking to donate the products.
Fourth, and fundamentally, is this kind of profiteering immoral? John Stossel has made the argument that “price gouging” is a form of information that tells suppliers what products people want – and Colvin relies on that theory to justify what he did.
However, if you read Stossel’s article, he’s talking about stores and manufacturers that are already in the business of making or marketing the product. In that case, if they can charge more, they have an incentive to provide more. Stossel's scenario is different from one in which a person helps create a shortage in order to profit from it.
The former situation shows the marketplace at work; the latter is more akin to hostage-taking, with a valuable product as a hostage. Looked at from that perspective, Colvin and others like him are not helping the marketplace; they genuinely are profiteers.
Those who got so excited by the money they could make that they missed the moral implications of their acts, should rethink what they did and follow Colvin's lead by donating their collections to hospitals that are truly in need of these supplies to treat people who actually have coronavirus. (I have first-hand information from a doctor that his hospital is running out of protective gear for doctors because these products have vanished from the marketplace.)
Even if the panic we're seeing in America is unnecessary, that doesn't change the fact that we need these products to "flatten the curve" and prevent the horrible outcome the media likes to envision. Stockpiled articles that the owners cannot market need to be brought out of the warehouses and garages and put where they'll do the most good.