5 ms·

I don't agree with most of this. The idea that price equals quality has long been used by merchants to extract money from consumers, not extend value. Sure it's

by latch 14y ago

I don't agree with most of this. The idea that price equals quality has long been used by merchants to extract money from consumers, not extend value. Sure it's true of some products and some companies, but overall I'd argue that at best, more expensive things aren't close to being relatively better - by any meaningful measure. A $300 meal isn't 10x better - in terms of taste (subjective obviously) or nutrition - as a $30 meal. A BMW 3 Series is a better car than a Ford Focus, but looking only at the practical reasons to own a car, it's not even close to having twice the value. In a lot of cases, brand names bring no value other than the brand. And while that can have a placebo effect, it's not more value. Medicine comes to mind as a great example. You are paying more for marketing and packaging than you are for R&D. The recent thread on memristors even highlighted that R&D costs are 1/100th of total cost, with marketing taking the lion's share. Quality items appreciate while cheap items depreciate? No consumer good should be viewed as a financial investment. If something does appreciate in 50 years, it'll be more about luck than anything else.

rythie 14y ago
I'd agree that consumer goods shouldn't be seen as financial investment. However, if anything was to increase in value it's likely to be well the known and high quality "classic" model because it takes a place in history and the company survives, not the cheap knock-off that no one will remember about or cares.
ralfd 14y ago
> The recent thread on memristors even highlighted that R&D costs are 1/100th of total cost, with marketing taking the lion's share. I read that too, but what they meant was that development of an actual product costs Hewlett-Packard 10 times as much than the research of the underlying technology. And commercialization costs again 10 times more. "Commercialization" is a catch all term, of course marketing, but for the most part this means building factories, tooling and machinery. Ramping up production is difficult and binds tons of capital investment.
meric 14y ago
Pizza sells for $6.50 at my local store, but I'm sure pizza stores would still exist if they were priced at $10 instead, except there will be less stores. As you go up in quality, it gets harder and harder to scale because..., how many celebrity chefs can you find in a city? You might find a dozen, but it would probably be very expensive to get enough chefs to staff shops in every suburb. Prices are a function of demand AND supply. It simply isn't possible to supply enough celebrity chefs at $30 a meal. If there was such a shop it will have a long line stretching out around three blocks every night. You won't get 10 times better meal by paying 10 times more; It just means the price equilibrium is 10 times higher. There's nothing to it, I don't think it is intentionally "used by merchants to extract money from consumers". They price their products at a point to maximise profit, and that's all there is to it.
mayneack 14y ago
As a personal anecdote: when I eventually stopped growing taller (~19), I started purchasing clothing and outdoor gear that was a step up from the quality of when I knew that I'd grow out of things. While not universal, I did notice a definite uptick in the durability and comfort of most things. It's obviously possible that this was a placebo effect or maybe I'm nicer to my gear now, but I've certainly been getting more out of the expensive things.
- latch 14y ago
  The placebo effect appears to be massive, at least where it's been studied (wine, for example). I'm happy to admit that, as a general rule (coughjaguarcough), higher prices indicate better quality, I just don't think it translates into better value (again, as a general rule). Sure, highly functional things, like shoes and a bed, probably warrant paying more even though the value isn't proportional. Paying 50% more for shoes that you wear 8 hours a day which are 25% better (comfort, health, style) makes sense to me. But jeans, kitchenware, cars, medicine, food, electronics..the list goes on and on where I feel that, again, in general, cheaper is better. As studies have shown, money should be spent on buying experiences...not things. It's the trip to Spain that'll make you happy, not the $1500 DSLR camera that you use to take pictures while you are there.
  - Evbn 14y ago
    For many people, taking nice photos is how they stay happy when dragged along expensive unpleasant adventures by friends and family.
  - pbreit 14y ago
    Totally disagree about "jeans, kitchenware, cars, food, electronics". All of those benefit greatly by quality (and thus cost). Medecine is a special case since so much cost goes into development (sorry, I don't believe you on the bulk of it being marketing).
    - latch 14y ago
      Apologies, as seen by GlaxoSmithKline's recent $3 billion fine for illegally bribing doctors, you are also paying their legal fees for unethical practices. (1) Also, the industry spends more on lobbying than any other industry (2) According to a study by York University, they spend twice as much on marketing as R&D (3). (1) http://www.guardian.co.uk/business/2012/jul/03/glaxosmithkline-fined-bribing-doctors-pharmaceuticals?newsfeed=true http://www.guardian.co.uk/business/2012/jul/03/glaxosmithkli... (2) http://www.usatoday.com/news/washington/2007-05-10-senators-drug-bill_N.htm http://www.usatoday.com/news/washington/2007-05-10-senators-... (3) http://www.sciencedaily.com/releases/2008/01/080105140107.htm http://www.sciencedaily.com/releases/2008/01/080105140107.ht...
bobf 14y ago
A $300 meal can be 10x better than a $30 meal. Most $30 meals are fine, but a $300 meal may be the best meal you have ever had.
- dredmorbius 14y ago
  The best meals I've ever had were generally cooked by me or someone I know personally, and were shared with good friends or family. An outdoor BBQ 20 years ago. Christmas dinners. Camp meals backpacking. Mom's home cooking after workouts as a kid. Picnics out of doors. I can think of maybe two or three restaurant meals that were memorable. The best of these a long long time ago with a girl I was very fond of, in a small rustic tavern. Expensive? No. But exquisite at the time.
  - baseh 14y ago
    I agree eating with people you love makes all the difference
    - dredmorbius 14y ago
      This includes, occasionally, eating alone, if you love the right people.
- lazerwalker 14y ago
  The key word there is can. A $300 meal may be the best meal you've ever had, but spending $300 on a meal isn't a guarantee that it will be. Conversely, it's also possible that $30 meal could be the best meal you've ever had. Less likely, sure, but possible. It reminds me of advice I've been given from friends who are really into wine: the difference between a $10 bottle of wine, a $50 bottle of wine, and a $100 bottle of wine isn't that the more expensive ones are better, it's that they're more likely to be good.
  - KC8ZKF 14y ago
    There is at least some evidence that an expensive bottle of wine tastes better because it's expensive. When the cost of the wine is unknown to the taster, the differences disappear.[1] And, when a wine is presented to the taster as expensive it is perceived as better than cheaper wines even when it is the same wine.[2] [1] http://www.wine-economics.org/journal/content/Volume3/number1/Full%20Texts/01_wine%20economics_Robin%20Goldstein_vol%203_1.pdf http://www.wine-economics.org/journal/content/Volume3/number... [2] http://scienceblogs.com/cortex/2008/01/15/expensive-wine-tastes-better/ http://scienceblogs.com/cortex/2008/01/15/expensive-wine-tas...
HeyLaughingBoy 14y ago
Be careful with that. Your "practical" reasons are not the same as everyone else's. For a financial consultant, a "practical reason" for owning a Mercedes is that it implies the owner is successful. That's exactly what you want your financial consultant to signal. From his perspective, he may be happy with the Focus, but knows that he won't get the same type of customers if they see him driving it.
efa 14y ago
There is definitely some items where the article's argument holds true. Furniture is definitely one. I can buy a Stickley table (very expensive) and my great grandkids will be using it in their home. Clothing is another. Cheap clothing degrades very quickly where quality items can last many years.

by latch 14y ago

rythie 14y ago

I'd agree that consumer goods shouldn't be seen as financial investment. However, if anything was to increase in value it's likely to be well the known and high quality "classic" model because it takes a place in history and the company survives, not the cheap knock-off that no one will remember about or cares.

ralfd 14y ago

> The recent thread on memristors even highlighted that R&D costs are 1/100th of total cost, with marketing taking the lion's share. I read that too, but what they meant was that development of an actual product costs Hewlett-Packard 10 times as much than the research of the underlying technology. And commercialization costs again 10 times more. "Commercialization" is a catch all term, of course marketing, but for the most part this means building factories, tooling and machinery. Ramping up production is difficult and binds tons of capital investment.

meric 14y ago

Pizza sells for $6.50 at my local store, but I'm sure pizza stores would still exist if they were priced at $10 instead, except there will be less stores. As you go up in quality, it gets harder and harder to scale because..., how many celebrity chefs can you find in a city? You might find a dozen, but it would probably be very expensive to get enough chefs to staff shops in every suburb. Prices are a function of demand AND supply. It simply isn't possible to supply enough celebrity chefs at $30 a meal. If there was such a shop it will have a long line stretching out around three blocks every night. You won't get 10 times better meal by paying 10 times more; It just means the price equilibrium is 10 times higher. There's nothing to it, I don't think it is intentionally "used by merchants to extract money from consumers". They price their products at a point to maximise profit, and that's all there is to it.

mayneack 14y ago

As a personal anecdote: when I eventually stopped growing taller (~19), I started purchasing clothing and outdoor gear that was a step up from the quality of when I knew that I'd grow out of things. While not universal, I did notice a definite uptick in the durability and comfort of most things. It's obviously possible that this was a placebo effect or maybe I'm nicer to my gear now, but I've certainly been getting more out of the expensive things.

latch 14y ago
The placebo effect appears to be massive, at least where it's been studied (wine, for example). I'm happy to admit that, as a general rule (coughjaguarcough), higher prices indicate better quality, I just don't think it translates into better value (again, as a general rule). Sure, highly functional things, like shoes and a bed, probably warrant paying more even though the value isn't proportional. Paying 50% more for shoes that you wear 8 hours a day which are 25% better (comfort, health, style) makes sense to me. But jeans, kitchenware, cars, medicine, food, electronics..the list goes on and on where I feel that, again, in general, cheaper is better. As studies have shown, money should be spent on buying experiences...not things. It's the trip to Spain that'll make you happy, not the $1500 DSLR camera that you use to take pictures while you are there.
- Evbn 14y ago
  For many people, taking nice photos is how they stay happy when dragged along expensive unpleasant adventures by friends and family.
- pbreit 14y ago
  Totally disagree about "jeans, kitchenware, cars, food, electronics". All of those benefit greatly by quality (and thus cost). Medecine is a special case since so much cost goes into development (sorry, I don't believe you on the bulk of it being marketing).
  - latch 14y ago
    Apologies, as seen by GlaxoSmithKline's recent $3 billion fine for illegally bribing doctors, you are also paying their legal fees for unethical practices. (1) Also, the industry spends more on lobbying than any other industry (2) According to a study by York University, they spend twice as much on marketing as R&D (3). (1) http://www.guardian.co.uk/business/2012/jul/03/glaxosmithkline-fined-bribing-doctors-pharmaceuticals?newsfeed=true http://www.guardian.co.uk/business/2012/jul/03/glaxosmithkli... (2) http://www.usatoday.com/news/washington/2007-05-10-senators-drug-bill_N.htm http://www.usatoday.com/news/washington/2007-05-10-senators-... (3) http://www.sciencedaily.com/releases/2008/01/080105140107.htm http://www.sciencedaily.com/releases/2008/01/080105140107.ht...

bobf 14y ago

A $300 meal can be 10x better than a $30 meal. Most $30 meals are fine, but a $300 meal may be the best meal you have ever had.

dredmorbius 14y ago
The best meals I've ever had were generally cooked by me or someone I know personally, and were shared with good friends or family. An outdoor BBQ 20 years ago. Christmas dinners. Camp meals backpacking. Mom's home cooking after workouts as a kid. Picnics out of doors. I can think of maybe two or three restaurant meals that were memorable. The best of these a long long time ago with a girl I was very fond of, in a small rustic tavern. Expensive? No. But exquisite at the time.
- baseh 14y ago
  I agree eating with people you love makes all the difference
  - dredmorbius 14y ago
    This includes, occasionally, eating alone, if you love the right people.
lazerwalker 14y ago
The key word there is can. A $300 meal may be the best meal you've ever had, but spending $300 on a meal isn't a guarantee that it will be. Conversely, it's also possible that $30 meal could be the best meal you've ever had. Less likely, sure, but possible. It reminds me of advice I've been given from friends who are really into wine: the difference between a $10 bottle of wine, a $50 bottle of wine, and a $100 bottle of wine isn't that the more expensive ones are better, it's that they're more likely to be good.
- KC8ZKF 14y ago
  There is at least some evidence that an expensive bottle of wine tastes better because it's expensive. When the cost of the wine is unknown to the taster, the differences disappear.[1] And, when a wine is presented to the taster as expensive it is perceived as better than cheaper wines even when it is the same wine.[2] [1] http://www.wine-economics.org/journal/content/Volume3/number1/Full%20Texts/01_wine%20economics_Robin%20Goldstein_vol%203_1.pdf http://www.wine-economics.org/journal/content/Volume3/number... [2] http://scienceblogs.com/cortex/2008/01/15/expensive-wine-tastes-better/ http://scienceblogs.com/cortex/2008/01/15/expensive-wine-tas...

HeyLaughingBoy 14y ago

Be careful with that. Your "practical" reasons are not the same as everyone else's. For a financial consultant, a "practical reason" for owning a Mercedes is that it implies the owner is successful. That's exactly what you want your financial consultant to signal. From his perspective, he may be happy with the Focus, but knows that he won't get the same type of customers if they see him driving it.

efa 14y ago

There is definitely some items where the article's argument holds true. Furniture is definitely one. I can buy a Stickley table (very expensive) and my great grandkids will be using it in their home. Clothing is another. Cheap clothing degrades very quickly where quality items can last many years.