SDC Weekly 41; Status Quo Bias; Watch Pricing Deep Dive
OnlyWatch coming soon, Dynamic pricing, NFL economics, watch manufacture myths, Rolex big date, Spacetime, How planes fly, and the trillion dollar equation.
“Everything feels unprecedented when you haven’t engaged with history.”
Hello 👋 and welcome back to the SDC Weekly. Today, you’ll find answers to the questions posed above, and you’ll find the older editions of SDC Weekly here. This may be the longest SDC Weekly yet, so make sure you have a coffee and some snacks handy!
OnlyWatch
First off, OnlyWatch is back! This interview with Luc Pettavino explains the audit is complete;
The auditors’ report certifies the financial statements for the last three years and states that the financial situation we have presented is true and fair, as well as the fact that it is in accordance with our purpose and the standards which we are subject to. It also certifies that the association's funds are used in accordance with its purpose. - Luc Pettavino
Christie’s is still their auction partner, and Luc reckons the Only Watch sale could open as soon as 10 May 2024.
The Watch Register
The Watch Register recently issued their 10-year Anniversary report. They discuss their own transformation over the past decade, from a human-led investigative team to a global database utilising advanced algorithms alongside human oversight, processing over 200,000 searches annually. It emphasises their database’s growth and success in matching and recovering watches. Despite challenges, such as competition from other database services and the rising threat of watch counterfeiting, they of course explain how crucial they are for many stakeholders, including law enforcement, insurers, and watch industry players. Unsurprisingly, they advocate for increased collaboration and standardisation of serial numbers to combat watch crime effectively. They also had some positive quotes from Chrono24, Sotheby’s Metro police and ADs. Here’s a couple of their charts, and a BBC article covering them too. Great PR, to be honest!
Fake watches
This article discusses the rise of fake and franken watches in the US, with an estimated 23.3 million of them circulation. Apparently over 20% of watches for sale in NYC are fake too (see chart below). Worrying stat for me, was that ~80% of counterfeit watches today are classified as “super-fakes” vs. 5 years ago when only 20% were good enough to dupe experts. Oh, and frankenwatches accounted for 21% of all fake watches purchased in the US (in their sample; in reality there are probably even more).
Dynamic Pricing
You may recall when Wendy’s made news last month, as their CEO mentioned the company would be implementing “dynamic pricing” in 2025 by investing $20 million in digital menu boards with “AI capabilities.”
“We expect our digital menu boards will drive immediate benefits to order accuracy, improve crew experience and sales growth from upselling and consistent merchandising execution. Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and day part offerings along with AI-enabled menu changes and suggestive selling.”
He said this during a quarterly earnings call, to investors who you would expect value the idea of using AI to improve efficiency and create value. Turns out, most customers back in the real world weren’t too keen on this… Despite how this might reduce demand, and potentially speed up service and increase quality, they were less enthusiastic about the prospect of pulling into the drive-through to see the cost go up by 30% on the fly. It is the unpredictability which didn’t seem to sit well. Wendy’s later issued an announcement to say it never intended to raise prices at times of peak demand, and only intended to lower prices when store traffic was slow.
Just remember, dynamic pricing isn’t new at all. Not in the fast food world, and anywhere else for that matter. In fact, we’re probably more used to it than you might think. Airlines and hotels always have surge pricing during holiday season, and on weekends. Even your Uber will cost more when there are fewer cars around. We don’t like it, but we still use these services. Even the WSJ is talking about this, explaining how many restaurants, supermarkets and other businesses are taking advantage of this approach.
You may have bought cinema tickets in a ‘two for one Tuesday’ deal… that’s 50% off on Tuesdays. You have also probably seen ‘happy hour’ in your favourite bar, or delayed travel to enjoy ‘off peak fares’ on public transport. Fundamentally, the idea of dynamic pricing is implemented by discounting the full price, as opposed to increasing it during peak times. (Don’t talk to me about airlines, I hate them, and that’s a different story entirely!)
What’s the difference anyway? Discount the price, or increase during peak… if they did the math and made the price ‘the same’, would this not leave consumers indifferent? Well, no… because, psychology matters!
When there is dynamic discounting during off-peak times, discounts will be viewed as a benefit for the consumer… conversely, if there is a dynamic increase in price during peak times, this will be viewed as a penalty!
This old McKinsey paper discusses dynamic pricing, and explains how doesn’t have to be extraordinarily complex, but it does have to be strategic and disciplined:
Consumers expect airfares to change constantly, but they expect the price of a jar of pasta sauce or a bottle of shampoo to stay fairly consistent. Ensure that all algorithm-recommended price moves are aligned with your brand and with the desired customer experience. Establish and enforce strict pricing guardrails. Your prices shouldn’t fluctuate so dramatically that they confuse and alienate customers. If customers perceive price changes as random, unfair, or disconnected from your value proposition, they’ll simply shop elsewhere.
So how about pricing luxury watches? We will explore this in more detail below.
Let’s dig in.
ScrewDownCrown is a reader-supported guide to the world of watch collecting, behavioural psychology, & other first world problems.
Paid subscribers get access to this newsletter when it drops. Free subscribers usually get two weeks later.
⚠️ NOTE TO SUBSCRIBERS:
Some email applications may truncate this post. You can read it all online here or click on “View entire message” at the bottom.
Thanks for reading!
🤔 Status Quo Bias
Do you prefer perpetual calendar chronographs or time-only watches? You can probably answer this fairly quickly, but what is going on in your head? Whenever you’re making a choice, your brain goes through a decision-making process.
Time for another tangent…
Professor Alan Sanfey and his colleagues once investigated people’s brains1 while they played the ultimatum game. The ultimatum game is a social experiment where one person gets a sum of cash and offers another person some portion of this cash - the second person then decides whether to accept or reject the offer. If accepted, both get the money as proposed; if rejected, neither gets anything. Now if everyone was completely rational, they would accept any amount of money, because anything is better than nothing, right? Turns out, people get upset when they perceive the offer to be unfair.
Sanfey found as offers became more unfair, the anterior insula, a part of the brain associated with negative emotions like anger and disgust, became more active, indicating growing outrage. At the same time, the prefrontal cortex, involved in goal orientation, was still found to be assessing the situation. This showed a struggle between emotion and reason in decision-making. Basically when the insula was more active, players rejected offers out of spite, but when the prefrontal cortex dominated, they accepted them. In the words of Boston Manor… “If I Can't Have It, No One Can.”
In his book, Descartes' Error, neuroscientist António Damásio refers to René Descartes’ separation of the mind from the body (mind/body dualism) as an error - because reasoning requires the guidance of emotions and feelings conveyed from the body. In this article you can read about a chap called Elliot. Patients like Elliot, who had damage to the part of the brain processing emotions, struggled with decision making despite having their cognitive abilities intact. Brain scans revealed damage to the frontal lobes which impaired his emotional responses.
Thing is, even if you aren’t a neuroscientist, you probably already know that our emotional brain can affect judgement. Heck, just ask any parent! Adolescents in particular, often exhibit impulsive behaviour due to their immature frontal lobes, which are crucial for decision making. Teenagers’ brains are wired (more so than watch collectors) to prioritise immediate rewards, even when they understand the long-term consequences. Willpower, associated with the prefrontal cortex, plays a key role in evaluating risks and rewards. This region interacts closely with emotional circuits, balancing gratification-seeking impulses with long-term considerations. Our ability to consciously weigh risks and rewards distinguishes human decision-making from that of other animals2, allowing us to anticipate future outcomes and derive pleasure from future possibilities. I have written more on the brain here, and here if you’re curious.
As a watch collector, you already know the thrill is in the hunt; in the pursuit of your next watch. We are basically like Jean-Paul Sartre in pursuit of his conquests.
“He took enormous satisfaction in the conquest but little pleasure in the sex (and so he usually terminated the physical part of his affairs coldly and quickly).”
This is a function of how our brains experience rewards, whether from sexual conquests, risky deals, addictive substances, or buying watches. The brain’s reward system comprises complex circuits involving various regions, from ancient to modern. Neuroscientist Hans Breiter’s fMRI-backed research, in collaboration with SDC-favourite Professor Daniel Kahneman3, revealed brain areas responding to drugs also react to money, chocolate, sex, and other rewards like new watches. Dopamine, a neurotransmitter, plays a crucial role in regulating the brain's response to rewards, adjusting its appetite and expectations. I wrote more on dopamine here.
Neuroscience studies challenge economists’ assumption that people work solely for the utility derived from money. Research by Stanford neuroscientist Brian Knutson4 revealed that the nucleus accumbens, a brain region associated with reward anticipation, becomes highly active in response to the prospect of receiving money. The key thing to note, is the activity peaks before receiving the reward, suggesting that anticipation, rather than the reward, is what drives arousal. Knutson compares the nucleus accumbens to the accelerator in a car with regards to our drive for rewards, while the prefrontal cortex acts like our steering wheel… directing our reward-seeking behaviour toward specific goals.
Ok, tangent over. Despite having an answer to the question I posed at the start, there were many steps you went through to get to that answer. Any decision-making process involves several steps: identifying the decision, gathering relevant information, identifying alternatives, weighing the evidence, making the choice, implementing the action, and reflecting on the outcome5. You’re trying to achieve a desired result by considering and evaluating different options. What the tangent above set out to highlight, is how this outcome will be subject to a lot of fvckery from your brain, which will often throw rational thought into the bin.
Now let’s deviate from the script and consider how you think about decisions in the past. The purpose is to determine how much you suffer from the Status quo bias. If you tie your (neck)ties the way your father taught you, that is a status quo bias. If you went and found out all the different ways to tie a tie, and then picked one you prefer, that is personal agency.
If you are still in the career chosen by your ignorant 21-year-old self which you find boring but which pays the bills, that is status quo bias. If you’re pursuing the career you enjoy and perform well at, this is personal agency. In rare circumstances, these are one and the same… but quite often, this is not the case.
If you are holding on to watches which you bought years ago, but no longer enjoy or use, that is a status quo bias too! It may be too difficult to sell them, or you worry about sentimental value… whatever it is, it is still a bias to keep things the same.
The link to decision making is apparent - it is a decision to do nothing.
An interesting thought experiment I read about recently is to imagine you were playing your own life as a video game, with your real-self as the main character. Now think about a few things… What would represent ‘points’ in this game for you? Is it money? Popularity? Then, how would you live, in your video game? Would you stay in the same place you stay now? How would you spend your time? Do the in-game choices align with your actual life choices? If going to the pub every night ‘scores points’ in the game, and this aligns with your real life, then what have you seemingly attached value to?
The status quo bias is probably more applicable to many other aspects of life:
Are you with the person simply because you’re with the person?
Are you staying in that career simply because you are in that career?
Are you living in the same area simply because that’s where you live?
Those topics are a bit serious, and we talk about watches and first world problems around here… So instead, think about how many people just keep buying sports Rolex watches because, that’s what they buy and that’s supposedly what they like. Is it really what they like, or is it what they know how to do with the most ease? Or those who just keep accepting allocations from Patek because, they are big Patek collectors and Patek is what they know and trust. That’s a status quo bias. This is decision making on autopilot, with the brain circuitry being hot wired to get a quick reward so they can go back to the anticipation of something else.
I will leave you with this quote from Peter Thiel:
Looking back at my ambition to become a lawyer, it looks less like a plan for the future and more like an alibi for the present. It was a way to explain to anyone who would ask—to my parents, to my peers, and most of all to myself—that there was no need to worry. I was perfectly on track. But it turned out in retrospect that my biggest problem was taking the track without thinking really hard about where it was going.
🧠 The Psychology of Watch Pricing
A price is more than just a number. Pricing, or interpreting a price, is like psychological ballet… where perception pirouettes alongside product value. This is especially true when it comes to something like a luxury watch. The price tag can evoke a spectrum of emotions and judgments in potential buyers, and it can also influence competitors and other market participants. But what exactly drives these perceptions, and how do they influence consumer behaviour?
Picture this: You stroll into a random watch boutique in Dubai Mall… You notice an interesting dress watch in the display, and it is surprisingly attractive; but… you’ve never heard of this brand. You ask to see the watch, and the salesperson asks you to take a seat, and brings the watch to you on a tray… you know, the usual treatment. It turns out to be even better up close, and you ask for a loupe to examine the movement and finishing under magnification. This is unlike anything you’ve ever seen; It is literally flawless, with perfect striping, immaculate interior angles, and you’re now genuinely confused as to why you have not heard of this brand before. As you’re about to try it on, you notice the swing tag, and it has a price on it:
Scenario 1 - AED 30,000. You don’t know the exact exchange rate, but you think to yourself, “this can’t be right?” You know the exchange rate is roughly 5:1, so it’s around £6,000… but how is this possible? What’s the catch?
Scenario 2 - AED 500,000. You don’t know the exact exchange rate, but you think to yourself, “how the fvck have I not heard of this brand, when they are selling the most amazingly finished pieces at over £100,000? … “Is this a scam watch, or am I just not as well-informed as I thought?”
As both scenarios highlight… People will always question how and whether something is worth its price. Studies have shown, consumers rely on price to determine quality of products. This phenomenon, where people use price as a proxy for quality, is known as the price-quality heuristic.
What does the literature say…
I started looking for specific studies, but ended up in a bit of a rabbit hole reading research papers. Instead of trying to weave the papers into the text, it was easier to leave references below6, and summarise everything with a few overall takeaways. Appreciate this is not a doctoral thesis, and there are tens of thousands of papers on these topics; I tried to strike the right balance between thoroughness, and brevity:
Price as a Clue in Purchase Decisions: Price is considered a significant cue that consumers use when making purchasing decisions. Even though you can buy fewer items when the price is high, researchers suggest consumers still don’t always perceive higher prices negatively. Instead, price can be viewed as a signal of product quality, elegance, and status.
Association between Quality and Price: Following from the previous point, the research suggests consumers generally believe higher prices imply higher quality. This association is commonly observed across various product categories, but authors suggest that will vary depending on the context - for example, a 500k Richard Mille is not necessarily perceived to be of higher quality than a 200k Patek.
Price Image: Price image is a subjective and multidimensional concept influenced by emotional factors we associate with products or services. Our perceptions of price are built through a complex process and will never reflect the actual price of the brand or product. Well-known brands, with strong reputations, can positively influence perceptions of value, leading consumers to prioritise brand reputation over price when making purchase decisions. For watch collectors, this is all too familiar, I’m sure.
Relationship Between Prices, Brands, and Perceived Value: Brands serve as tangible representations of meanings, values, attributes, and experiences associated with a product or service. The perceived value of a product is determined by the balance between perceived benefits and sacrifices (I will cover this separately). The brand and price act as heuristic cues, simplifying consumers’ evaluation processes, especially when there are no other quality (value) indicators. In some ways, this is like an invisible triangle… Brand, Price, and Value - in the above Dubai example, we perceived value in the piece, but had no idea about brand value, and so the price was the ‘cue’ for us to determine how we feel about it. More on brand power here. I will come to this later, but this ‘brand value’ is actually more difficult to measure than you might think!
Attribution Theory: According to Attribution Theory, consumers may attribute a low price to certain products as an indication of inferior quality. This perception can influence their willingness to purchase such products, particularly if they perceive any risk associated with the lower price. We see this happen when seemingly valuable watches are selling at insane discounts, for instance on JomaShop or eBay.
Consumer Behaviour and Price Awareness: The research suggests consumers who are more aware of pricing tend to be more engaged when purchasing products. Additionally, consumers may prefer lower-priced products within the same category over higher-priced alternatives, especially if they perceive a good balance of quality and affordability. Tudor, anyone? Also, as a side note, how much of Tudor’s perceived quality do you think comes from having Rolex as the parent company? This is precisely the reason why I suggested recently that Patek should launch a new, cheaper brand in their portfolio. Now, officially, a researched-backed suggestion (lol).
Monroe and Krishnan’s Price-Quality-Value Model: Monroe and Krishnan conducted studies to investigate how perceptions of price influence perceived quality, sacrifice, and value. They proposed a model where the perception of price, rather than the actual price, positively affects consumers’ perceptions of quality and sacrifice, ultimately influencing their willingness to pay.
Influence of Buying Experience: Kwon’s study explored how the shopping experience at a store impacts consumers’ perceptions of price, quality, and value. The findings suggest that the overall shopping experience, rather than just price or quality perceptions, significantly influences consumers’ perceptions of value associated with a retail store. This helps to explain Rolex’s insistence on selling in-store and not selling online - something covered in a previous SDC Weekly.
Objective Price vs. Perceived Price: One study talks about perceived price - which is the subjective interpretation of the price by consumers. Basically, it is a consumer’s interpretation of factors such as brand reputation, perceived value, quality perceptions, and contextual cues. This is where groupthink and social media messaging can impact a price quite heavily. The ideal situation is when the perceived price and the objective (retail) price are closely aligned. Easier said than done.
Perceived sacrifice: Namely, what consumers feel they are giving up, or sacrificing, in order to acquire a product or service at its given price. Perceived sacrifice is supposedly influenced by how consumers interpret the impact of price on their own financial resources, lifestyle, and overall well-being. So, when consumers perceive the price of a product to be high relative to its benefits or their financial situation, they are more likely to perceive such a purchase to be ‘too great a sacrifice’. Value, therefore, is measured relative to their own sacrifice, not in relation to the product or service itself. It is subtle, but I found this extremely logical and insightful, and since it is logical, it is unsurprisingly contrary to the usual perspectives we hear about! Think about it; when someone says “it’s not worth the money” what they mean is “it’s not worth the money to me.”
Brand luxury: This table7 highlights the inconsistencies and challenges across many different studies - yet, all they were trying to do, was define the concept of brand luxury! So, the paper concluded all these inconsistencies in typologies and the difficulty in finding any previous studies to support a subsequent one, underscores there is basically no proper consensus regarding brand luxury. So when you consider the “invisible triangle” concept I made up earlier… this becomes yet another unknown, or rather, a highly subjective one (just like value itself).
Enough theory, let’s move on…
Now, you’re a smart collector, so you’re already aware of the shenanigans in the industry today. Richard Mille is selling status symbols, many new independents are popping up and charging huge sums for bang average watches… Clearly you already know that the interplay between price and perceived value is anything but straightforward.
In the above Dubai scenario where the price was unexpectedly low, you would be experiencing cognitive dissonance because the price may deviate from what you perceived that watch to be ‘worth’. If it is high, you are likely to think it is more valuable, and if it is low, you are likely to be wary about it being poor quality or worse (counterfeit, broken, false marketing etc.). Also, there is another tangent on zero-price, but I added to footnotes instead8.
The aforementioned cognitive dissonance - where your perceptions differ from what the price seems to suggest - really highlights the delicate balance between perceived value and pricing strategy. What this means, is brands should be aligning the prices they set, with consumer expectations - otherwise they will never be able to foster trust and confidence in the brand.
The thing is, we aren’t just talking about random goods… we’re talking about luxury watches: these are objectively insane goods, with ridiculous prices. Thorstein Veblen was an economist and sociologist who is best known for coining the term “conspicuous consumption” in his 1899 book The Theory of the Leisure Class9. Veblen critically analysed the consumption habits of the wealthy and questioned their values. He coined the terms “conspicuous waste” and “pecuniary emulation” (striving to meet or exceed someone else’s financial status)10. Veblen’s work led to the concept of a Veblen good. These are designer, luxury goods with a strong brand identity, the demand for these goods increases as the price increases. This is because consumers consider it to be an exclusive status symbol i.e. a product that is consumed conspicuously.
Pricing strategies
Studies11 highlight the role of luxury goods in shaping identity and social perceptions, revealing that consumers often derive emotional satisfaction from conspicuous consumption, using luxury items to construct and communicate their desired self-image to others. Let’s put this into a framework, so we can better understand how to view watch pricing in the context of all other pricing strategies.
Helpfully, I found a BCG paper which presents what they call a Unified Theory of Pricing. They argue existing approaches to pricing often lack cohesion and fail to fully leverage pricing as a strategic tool for business growth. To address this, they propose a Strategic Pricing Hexagon, which integrates various pricing concepts into one cohesive framework. Before presenting the hexagon, they start with this:
This basically outlines a traditional approach to pricing, where businesses typically consider costs, competitors’ prices, and customer value as separate inputs in price calculations. In this conventional perspective, customer value establishes an upper limit or maximum price, while the costs to produce and sell set a minimum price. Competitive prices then help determine where within this range a company’s price could/should fall.
They then argue these three factors become more impactful when viewed in conjunction, rather than in isolation.
Next they present 4 pricing frameworks and overlay them with the initial 3 fundamental inputs, which results in seven distinct pricing approaches.
These seven pricing approaches offer different strategic perspectives for making pricing decisions, with each one suited to specific market characteristics and business goals.
Next, they opine on how market characteristics, including the concentration of buyers and sellers, the diversity of customer needs, and the variety and differentiation of offers, influence the suitability of different pricing approaches12.
This build up to what is finally presented as the Strategic Pricing Hexagon, which outlines seven distinct pricing games, each tailored to address specific market conditions and business objectives:
Uniform Game: Players in the Uniform Game optimise prices across all customers, balancing volume and margin. This works well in markets with lots of buyers who have similar needs, served by many comparable sellers. (Think retailers and consumer goods)
Value Game: The focus here is on aligning prices with the perceived value of goods being sold. Companies defend this value through marketing and storytelling, particularly effective when the product’s economic and emotional value exceeds competitors’ products and the market consists of many buyers who differ from one another. (Clearly, this is where luxury watches fit well)
Choice Game: The Choice Game is supposedly all about behavioural economics, leading customers’ decision-making through price differentiation relative to alternatives. (Think restaurants or software suppliers) In my opinion, many lower-end watches also fit into this category, which makes some sense since they aren’t really ‘luxury’ goods.
Custom Game: The Custom Game is pretty self-explanatory; companies do customised deals with individual customers in competitive environments. This tends to result in a price which is set by competition. (Think B2B deals)
Power Game: In the Power Game, companies negotiate deals to maintain market power in concentrated markets with limited differentiation among offerings. (Think high-tech suppliers like ETA)
Cost Game: Companies in the Cost Game compete by driving their own costs down, and do well in commoditised markets with fragmented seller bases; typically using a cost-plus pricing approach.
Dynamic Game: We’ve already been through this one above; Here, pricing is adjusted in real-time to respond to supply and demand signals. This works best for businesses with adjustable capacity, perishable inventory, , undifferentiated products or fluctuating demand from a broad customer base.
Concluding discussion
With the academic theory and formal business strategy bits out of the way, there is probably too much to chew on. Let’s try anyway. Value based pricing, is about subtly figuring out a customer’s willingness to pay for a good or service. We have seen the popularity of this rising in recent years, but the market decline has highlighted how this is one of the most difficult strategies to execute well. The reason is simple: to price based on value, a company must be able to accurately calculate (predict) the perceived value (i.e. the customer’s willingness to pay) - but remember, this willingness to pay does not remain static. Customers may be willing to pay more in a bull market versus a bear market. They may also be willing to pay more when perceived status value is higher (hype) as opposed to non existent (remember the Vacheron Overseas hype which has since died?).
This highlights yet another challenge with value based pricing - the perception of one brand, in relation to its competition, is also not stationary or consistent… and pricing itself, can impact the perception of a brand and send improper signals such as arrogance. This has happened with many Richemont brands, and even if we ignore Vacheron Constantin, the recent Piaget launch proved yet again, Richemont has no idea how measure value. Panerai was once hyped, and not it isn’t. Remember Franck Muller? How about Rolex bubblebacks?
As demonstrated in the recent Morgan Stanley report, many brands currently seem to be pursuing a premiumisation strategy; that is, selling products at wildly inflated prices to imply they are selling better products. As far as I can tell, this is short-sighted and foolish.
Logic suggests there should be a variable component to all watch prices. Returning to an image shared above:
There should be a price floor, and a variable range of possible prices based on market conditions, market (resale) prices, brand sentiment, relative popularity of watches in the brand’s catalogue, and any other qualitative measures which can add meaningful insight into what a customer might be willing to pay. Brands can update prices quarterly instead of randomly, and all the qualitative insights should be measured and monitored. Executives’ KPIs can even be linked to these measures. If there is a sudden negative sentiment around a brand, the executives of the brand should be made to answer for it.
At its core, as we have now discussed at great length, the perception of price is a multifaceted construct which is influenced by cognitive biases, social norms, relative value from competing products, and individual values to name but a few factors. From the price-quality heuristic to the allure of the status value of luxury goods, consumers navigate a complex landscape of price signals and perceived value judgments when they are evaluating watch purchases. For watch brands and marketers, understanding these psychological dynamics is crucial for crafting pricing strategies that resonate with consumers and reinforce brand equity. Most importantly, however, is the fact that brands seem to all be gearing up for production increases (apart from AP apparently, as discussed last week) while expecting people to swallow their price increases too. This seems stupid, to be frank.
Beneath the surface of every price tag lies a symphony of emotions, perceptions, and desires waiting to be discovered - the thing about all of these things, is that they can shift from being overwhelmingly positive, to inexplicably negative. The companies in question should figure out a way to maximise value in both cases, and this is impossible without allowing prices to come down from time to time.
“It is up to you to give life meaning, and value is nothing but the meaning that you choose.”
— Jean-Paul Sartre
📌 Links of interest
🏈 How the NFL makes more money than any other sports league in the world. (12 mins) - possibly the most interesting video I watched all week. Enlightening, really.
🏭 The Myth of the Watch Manufacture with
. (7 mins)👀 Rolex might be doing ‘a Lange’ and developing a big date watch, based on this patent. Here’s a tiger dial patent too, admittedly less interesting.
⚙ The Reymond Brothers and Their Chronographs - A Guide to the Valjoux 23/72.
💚 La Fondation Modus is planning to finance action programs that develop and promote sustainable mobility solutions in the canton of Geneva - fun fact, it is owned by Rolex.
🌠 A Tale of Two Roths: The story of how a chance meeting led to a unique commission.
👹 MrBeast Strikes Amazon Deal For Biggest Competition Series in TV History.
🌌 Delving into the mysteries of spacetime.
✈ What makes airplanes fly? This is a deep dive, looking at the forces generated by the flow of air around the aircraft’s wings. (Only for serious geeks)
☠ What to do when you don’t know what to do.
🎪 Here’s the Elon Musk interview that got Don Lemon’s show canceled
🤡 The Squatters of Beverly Hills - after a fugitive doctor abandoned his mansion, an enterprising group of party throwers slid in the front door.
😎 The 30 coolest streets in the world.
⚱ The British watch market is enduring one of its longest periods of contraction in a decade. Unsurprising, isn’t it?
🍎 Apple may hire Google to power new iPhone AI features.
🗺 A visual timeline of the largest cities from 3000 BCE to modern times. (10 min)
🚀 SpaceX Launches Starship into Orbit; It completed most of its ~hourlong test mission - detaching from the Super Heavy booster and cruising about halfway around the world - before losing contact on reentry and likely breaking up over the Indian Ocean.
☢ Reddit is listing tomorrow. Their IPO Filings Reveal Hopes and Fears.
👩🎓 Why students should engage deeply with studies, and not just focus on grades.
🦙 LVMH’s Loro Piana Relies on Free Labor in Peru for $9,000 Vicuña Sweaters.
💆♂️ Numb to raises and promotions, some people chase different kinds of success. (Thanks again, Aaron!)
🤼 Prof. Max Roser has been continuing the work Hans Rosling started, and recently updated this Short History Of Global Living Conditions.
⚕ Five Simple Tests You Can Do At Home To See How Long You Will Live.
End note
Honestly, this edition was long enough, so I will save you the pain of reading more.
I’m done.
Until next time,
F
🔮Bonus link: The Trillion Dollar Equation
The most famous equation in finance, the Black-Scholes/Merton equation, came from physics. It launched an industry worth trillions of dollars and led to the world’s best investments. Fun story: I actually met Myron Scholes in Cape Town back in 2008 at this International Finance Summit… quite a jovial fellow, for a finance geek!
Believe it or not, that “❤️ Like” button is a big deal – it serves as a proxy to new visitors of this publication’s value. If you enjoyed this post, please let others know. Thanks for reading!
Links to reference
Consumers' Social Media Advocacy Behaviors Regarding Luxury Brands: An Explanatory Framework
Price Perceptions and Consumer Shopping Behavior: A Field Study
Modelling consumer responses to an apparel store brand: Store image as a risk reducer
What determines consumer attention to nutrition labels? (this, and the next one seem random, but they support the idea that a combination of high quality and low-price tends to excite and attract consumers - seems logical, but here’s the receipts!)
Measuring emotional valence to understand the user's experience of software
Visual attention in multi-attributes choices: What can eye-tracking tell us?
Consumer preferences of store brands: Role of prior experiences and value consciousness
Reference Price and Price Perceptions: A Comparison of Alternative Models
People Rely Less on Consumer Reviews for Experiential than Material Purchases
Co-creating corporate brand identity with online brand communities: A managerial perspective
Zero price: Back in 2013, there was a mad rush for free ice-cream at Baskin Robbins in Dubai. Obvious question: why are people willing to withstand savage mobs for hours just for a free scoop of ice cream? It is called the zero-price effect; a special case of the law of demand, but it also has explanations based on cognitive, psychological, and behavioural biases. Here’s a paper on this specific topic if you’re keen to know more.
“People are willing to work for free, and they are willing to work for a reasonable wage; but offer them just a small payment and they will walk away.”
– Dan Ariely
Conspicuous Consumption. “What Is Conspicuous Consumption?”
“The Library of Economics and Liberty” Thorstein Veblen.
Buyers: Market characteristics related to buyers include the sheer number of customers, as well as the diversity of their needs and purchasing volumes. Within a market, customers can vary significantly in their individual preferences and buying behaviour. Some may have unique needs and preferences, while others may purchase in large volumes.
Sellers: Seller concentration refers to the distribution of market share among competitors. In fragmented markets, there are numerous competitors with relatively small market shares. Conversely, in concentrated markets, a few players dominate the market. The power dynamics in concentrated markets depend on whether one or two companies hold significant market shares or if the market share is more evenly distributed among several sellers. The level of seller concentration influences competitive dynamics and pricing strategies.
Offers: Market offerings vary in terms of complexity and differentiation. Complex products or services may require specialised knowledge and customisation, while standardised offerings compete primarily on cost and efficiency. The degree of differentiation among offers does not always correlate with complexity. For example, giant wind turbines may exhibit a high degree of standardisation across suppliers, requiring differentiation based on factors other than product features. Understanding the diversity and differentiation of offers helps companies identify competitive advantages and develop pricing strategies that can capitalise on them.
Wow, you really outdid yourself on this one 👌absolutely fascinating reading. Thank you 🙏
I had to pause reading to comment: the status quo bias applies in another way as well I mentioned in the group recently: we buy what we value, and the market, brands, influencers, fellow collectors all dictate what is valuable. In the modern social media age it’s finally finished time only watches. A few years ago it was bubble backs. Before that it was large sized watches. Before that, ultra complications. And so on. “Our” tastes are shaped in part by longer term trends none of us individually controls or is even aware of.