Law of Supply and Demand
Willingness to Pay vs. Willingness to Supply
These are all theories and frameworks in business school and society to assess why and how much people will charge and produce (and how many will pay that price).
Advertising is awesome. Appealing to aspirations and pain alleviation are great tactics. I study them, leverage them, defend against them (hopefully), and are aware of them.
Of course it makes sense to pay $1,000 for that Louis Vuitton purse, I need to validate my image.
Of course it makes sense to pay $14 for that well-drink mixed with borderline passable alcohol, I’m in a club trying to have fun and I’m paying for that experience.
But pause for a second and assess what matters in your life to live
What things are being optimized by their daily used-fullness?
We can get a backpack that holds far more of your stuff from the same factory that makes the $1,000 purse.
We can get water from a tap for free at the place we pay $14 to ingest essentially poison into our body.
We pay a valet to haul our luggage (or more accurately roll our luggage) into our room, saving us the effort and then we put on gym clothes and go exercise in the hotel gym, which we paid for as part of the price of the room…
Does that make sense to you?
So what matters to you? From a daily used-fullness standpoint, what do you use the most each day and how much did you pay for it? What is its daily used-fullness ratio?
Daily Used-fullness Ratio: Number of times used per day / price paid for it
How does that compare to that which you use less often?
Take socks. Yes, socks. I use those everyday (clean socks mom, don’t worry), and it’s pretty much bought at rock bottom prices. Compare that to say my cuff-links which I wear every so often which are far more expensive.
Sure the cuff-links reflects higher status, the materials are more “costly,” there’s economies of scale to reduce the price of socks, etc. etc. …but stop.
The fact is that the pair of socks are 1/50th the price of my cuff-links and yet used probably 5x as much. Their used-fullness are 5x that of my cuff-links, yielding 250x more daily used-fullness. There is a limit to the useful life of the socks, but assess the purchase on the relative value of use on a day to day basis compared to the price paid.
That pretty purse sits idle in your closet until just the right occasion. Socks…well if they’re clean I’m putting them on.
Take water. Humans are 50-65% water. Hydration has countless benefits, we need it to survive, perform tasks, stay energized, etc. In fact, we get it for free. And yet, we Americans on average are perpetually dehydrated.
What we do do is quickly have a glass of it in between our sips of $15+ cocktails (I am in NYC) that is filled with alcohol and extraordinarily high amounts of sugar..both of which have major health repercussions.
So we get that which is most beneficial to us and needed on a daily basis for free, don’t really value it, and then proceed to pay a hefty price tag on something that is damaging to our bodies…it makes no sense.
Sure it makes sense from law of supply and demand and willingness to pay/supply, but from a holistic perspective…
I could come up with countless examples where the daily used-fullness far outweighs the price: like toothbrushes, deodorant, headphones, underwear, lightbulbs, soap, etc. etc.
But then there are those things which we pay an extraordinary amount that have really little daily used-fullness: alcohol, cigars, jewelry, basically most things in the luxury market. These we rarely use on a day to day basis, provide little benefit, cost a lot, and have horrible daily used-fullness.
Don’t get me wrong, I love advertising and I love luxury. But on this Sunday evening, just think for a moment and appreciate those things in your life that have high daily used-fullness. They often are the things that go unappreciated. If things were priced by their daily used-fullness, Camelbak backpacks might be more expensive than Louis Vuitton purses, socks more than cuff-links, and water more than booze.
Consider yourself lucky that you can take advantage of the law of supply and demand, the willingness to pay and supply, and all the other economic theories that render daily used-fullness just a silly thing.
But for a moment, appreciate the concept of daily used-fullness the next time you go to the bar and are able to order a glass of water, ice, and lime for free. And then get back to being the predictable consumer we all are and order that toxic, sugary, overprice alcoholic cocktail….