4 ms·

No offense, but this could be really bad advice. Maybe the customers who'd pay 10k for a suit won't go to some guy's living room for fittings. Or maybe the pric

by asr 14y ago

No offense, but this could be really bad advice. Maybe the customers who'd pay 10k for a suit won't go to some guy's living room for fittings. Or maybe the price of top bespoke tailors in town is comparable, because they make better use of lower-paid assistants. Or maybe, to convince a bank to make the loan he needs to move into a nicer place, he needs to show the bank he has a large backlog of orders. Or maybe he's in the middle of following your advice, just raised his price, and will shortly raise it again because he's still getting enough orders. I'm not saying you're wrong. I'm just saying we don't get nearly enough information to decide! And that's ok, because that's not the point of the article.

noahc 14y ago
And maybe it just might work... He doesn't have to jump from $4k to $10k. There's a demand curve and by raising prices from $4k to $5k and up he'll figure out where he can sit. More importantly, he's already at $4k. The person that spends $4k on a suit isn't going to sneeze at $8k. The person who spends $120 for a suit, throws a fit at $240.
- wisty 14y ago
  > There's a demand curve That's commonly believed by mainstream economists, as an article of faith. That there is a demand curve, and it always goes down. It's not always true, unless a huge number of axioms hold (none of which are true). It's most obviously not true for prestige goods, which go up in demand as price rises (and then go down as no-one is able to afford them). Demand curves can be wacky, even discontinuous ... and don't always go up. But if they don't go up all the time, then 99% of analytic macroeconomics (as it's taught) isn't analytically correct, and the communists might win.
  - noahc 14y ago
    I'm not sure we disagree that much. I would argue that: 1. There is a demand curve, or at least we can plot demand. I would agree it can be wacky. 2. It is very likely that even if we get the exact demand curve wrong, it is probably a net win for him to raise his prices given that he is turning down work.
  - yummyfajitas 14y ago
    You need only one axiom to get a demand curve: The universe of potential purchasers consists of a set of agents (i=1...N) and each agent has a reserve price R[i]. If a good is priced <= R[i], Agent[i] will purchase it. If it is priced > R[i], Agent[i] will not.
    - roc 14y ago
      The problem is that demand is not as simple as "agents will buy goods below their reserve price." Real world experience shows us that there exist luxury and inferior goods. We can quite simply see that there are (many) agents who could buy any number of walmart jeans, but would never set foot in the store. Another chunk of agents currently buy, say, Levi jeans, but likely wouldn't buy those either, if those exact jeans were a third the price and sold in a discount store. Similarly there are agents who don't give Levi a second thought, but will line up for jeans of similarly quality, trivially variable style and 10x the price. The real world demand curves for blue jeans don't look like the simple axiom suggests.
      - yummyfajitas 14y ago
        I didn't claim the law of demand was perfect or that substitute goods don't exist. I was merely pointing out that wisty was wrong to claim the law of demand requires that "a huge number of axioms hold (none of which are true)." You need only one axiom which is, generally speaking, reasonably accurate. Further, your example of jeans is trivially explained by noting that "jeans" is a broad category of goods, not a good itself. I.e., there is one demand curve for Levi jeans, a separate demand curve for hipster jeans, and a third demand curve for genuine levi jeans (not jeans that appear at first glance to be Levi, but sold by a shady discount store). Your critique of the demand curve for jeans applies much better to various demand aggregates in macroeconomics, not the law of demand for specific goods.
        roc 14y ago
        The point of discussing multiple types of jeans was to compare and contrast their demand curves. My apologies if that wasn't communicated clearly. I simply disagree that the one axiom gives us anything close to a reasonably accurate picture of what's going on. The simple curve suggests that price is it. And it's quite clearly not.
- phaus 14y ago
  And just to show how significant a 20% price increase would be: If he raised the price just $1k, that's $2k a month, or $24k a year. That would increase his take home income by almost 50%, as he claims his current income is around $50k.
  - gcb 14y ago
    If he raises the price 2% I'd go to the guy two blocks down. He's not the only one, you know? Now, if they started a cooperative...
  - katabatic 14y ago
    You're forgetting to figure in withholding, self-employment tax, etc... that $24K/year increase would be to his gross income, not his take-home income. The article said he averages 2 suits a month, or $8K in gross revenue, so that extra $1K per suit would increase his gross by 25%, and his take-home by less. As a sole proprietor craftsman, there's no math that can get you a 50% increase in profit with a 25% increase in gross revenue alone. Still, not a bad deal, assuming his customers are willing to pay it (I'm willing to bet they are). EDIT: I shouldn't do numbers while eating dinner :). His take-home increase could be more than 25%, but it's unlikely to be anything close to all of the gross increase, particularly if he wants health insurance, which, if he has it at all, is probably coming out of that $50K.
    - phaus 14y ago
      I did misstate the percentages, as you noticed. I don't think that whether or not he wants health insurance should matter when talking about his income. Won't his health insurance cost the same amount if he increases his pre-tax income by 25%(I'm a bit ignorant of health insurance costs, I still have TriCare through the Army). It seems to me that even if he paid about a third of the extra $24k in taxes, that he would still be adding $16k to his current take home income, which is still over 30% more than he was making.
patio11 14y ago
Totally not offended by that comment, but I strongly disagree. It is entirely possible that he's found the correct price for a suit: two hours' labor for his core customers. It is entirely possible that the devs who tell me their clients won't pay more than $20 an hour for Rails programming are accurate, and that they're correct in thinking that they're not skilled enough to work for better clients. It is entirely possible that the Rampaging Monster of Doubt actually understands how banks do loan underwriting better than e.g. the banker who you could confirm or reject that hypothesis in a five minute phone call. But that is not the way I will bet. We're pathologically bad at this. Hiya, freelancer on HN: to a first approximation, you don't charge enough. Seriously. No information required to make that call. (This is said from a place of love. I don't charge nearly enough, either.) This guy, who produces things which rich people love and try to shove money at him for, so much so that he cannot afford to even talk to the rich people to take their money because he is so busy? This guy has our problem, too. Starving artists who are starving because they produce something nobody wants to pay for are one problem. Starving artists who are starving because they think that they are a precious snowflake immune to Microeconomics 101 are an entirely different problem. They just need business sense. The point of the article is to cry a bit about how the market economy is making true craftsmanship economically non-viable. (It practically tries to club you over the head with that conclusion.) The article is wrong. It has identified a problem to which there exists a trivial solution that will work.
- deleted 14y ago
  [deleted]
- wolfhumble 14y ago
  From the last part of the article I quote the following: "Even the richest customer simply has to wait — sometimes months — before the new suit is finished. No wonder so many pass up a $4,000 bespoke suit for a ready-to-wear Kiton version at twice the price." So customers are clearly willing to pay more, but they are not too keen on waiting two months for the suit. I guess there are clients that buy a given amount of suits every year and have time to wait, but there are other clients that buy a suit when they need one and do not think 2+++ months up front. The question is if the former group is large enough to sustain his business, and if they are willing to pay more than $4,000. The latter group have clearly the dough, but don't want to wait, so they are really not a segment he can focus on. So while hiking the price might work, it might be that the real problem here is time to market. Edit: Spelling
ibejoeb 14y ago
>Or maybe the price of top bespoke tailors in town is comparable Yup. You'll get a beautiful bespoke (not M2M, truly bespoke) suit in an elegant showroom in Manhattan with fantastic customer service for the same money. I've bought basic suits for two-thirds the price, in fact. He might have an attractive pedigree via his apprenticeship, but that's not worth three times the price to me. There is real, legitimate, similarly credential competition here.
- deleted 14y ago
  [deleted]

by asr 14y ago

noahc 14y ago

And maybe it just might work... He doesn't have to jump from $4k to $10k. There's a demand curve and by raising prices from $4k to $5k and up he'll figure out where he can sit. More importantly, he's already at $4k. The person that spends $4k on a suit isn't going to sneeze at $8k. The person who spends $120 for a suit, throws a fit at $240.

wisty 14y ago
> There's a demand curve That's commonly believed by mainstream economists, as an article of faith. That there is a demand curve, and it always goes down. It's not always true, unless a huge number of axioms hold (none of which are true). It's most obviously not true for prestige goods, which go up in demand as price rises (and then go down as no-one is able to afford them). Demand curves can be wacky, even discontinuous ... and don't always go up. But if they don't go up all the time, then 99% of analytic macroeconomics (as it's taught) isn't analytically correct, and the communists might win.
- noahc 14y ago
  I'm not sure we disagree that much. I would argue that: 1. There is a demand curve, or at least we can plot demand. I would agree it can be wacky. 2. It is very likely that even if we get the exact demand curve wrong, it is probably a net win for him to raise his prices given that he is turning down work.
- yummyfajitas 14y ago
  You need only one axiom to get a demand curve: The universe of potential purchasers consists of a set of agents (i=1...N) and each agent has a reserve price R[i]. If a good is priced <= R[i], Agent[i] will purchase it. If it is priced > R[i], Agent[i] will not.
  - roc 14y ago
    The problem is that demand is not as simple as "agents will buy goods below their reserve price." Real world experience shows us that there exist luxury and inferior goods. We can quite simply see that there are (many) agents who could buy any number of walmart jeans, but would never set foot in the store. Another chunk of agents currently buy, say, Levi jeans, but likely wouldn't buy those either, if those exact jeans were a third the price and sold in a discount store. Similarly there are agents who don't give Levi a second thought, but will line up for jeans of similarly quality, trivially variable style and 10x the price. The real world demand curves for blue jeans don't look like the simple axiom suggests.
    - yummyfajitas 14y ago
      I didn't claim the law of demand was perfect or that substitute goods don't exist. I was merely pointing out that wisty was wrong to claim the law of demand requires that "a huge number of axioms hold (none of which are true)." You need only one axiom which is, generally speaking, reasonably accurate. Further, your example of jeans is trivially explained by noting that "jeans" is a broad category of goods, not a good itself. I.e., there is one demand curve for Levi jeans, a separate demand curve for hipster jeans, and a third demand curve for genuine levi jeans (not jeans that appear at first glance to be Levi, but sold by a shady discount store). Your critique of the demand curve for jeans applies much better to various demand aggregates in macroeconomics, not the law of demand for specific goods.
      - roc 14y ago
        The point of discussing multiple types of jeans was to compare and contrast their demand curves. My apologies if that wasn't communicated clearly. I simply disagree that the one axiom gives us anything close to a reasonably accurate picture of what's going on. The simple curve suggests that price is it. And it's quite clearly not.
phaus 14y ago
And just to show how significant a 20% price increase would be: If he raised the price just $1k, that's $2k a month, or $24k a year. That would increase his take home income by almost 50%, as he claims his current income is around $50k.
- gcb 14y ago
  If he raises the price 2% I'd go to the guy two blocks down. He's not the only one, you know? Now, if they started a cooperative...
- katabatic 14y ago
  You're forgetting to figure in withholding, self-employment tax, etc... that $24K/year increase would be to his gross income, not his take-home income. The article said he averages 2 suits a month, or $8K in gross revenue, so that extra $1K per suit would increase his gross by 25%, and his take-home by less. As a sole proprietor craftsman, there's no math that can get you a 50% increase in profit with a 25% increase in gross revenue alone. Still, not a bad deal, assuming his customers are willing to pay it (I'm willing to bet they are). EDIT: I shouldn't do numbers while eating dinner :). His take-home increase could be more than 25%, but it's unlikely to be anything close to all of the gross increase, particularly if he wants health insurance, which, if he has it at all, is probably coming out of that $50K.
  - phaus 14y ago
    I did misstate the percentages, as you noticed. I don't think that whether or not he wants health insurance should matter when talking about his income. Won't his health insurance cost the same amount if he increases his pre-tax income by 25%(I'm a bit ignorant of health insurance costs, I still have TriCare through the Army). It seems to me that even if he paid about a third of the extra $24k in taxes, that he would still be adding $16k to his current take home income, which is still over 30% more than he was making.

patio11 14y ago

Totally not offended by that comment, but I strongly disagree. It is entirely possible that he's found the correct price for a suit: two hours' labor for his core customers. It is entirely possible that the devs who tell me their clients won't pay more than $20 an hour for Rails programming are accurate, and that they're correct in thinking that they're not skilled enough to work for better clients. It is entirely possible that the Rampaging Monster of Doubt actually understands how banks do loan underwriting better than e.g. the banker who you could confirm or reject that hypothesis in a five minute phone call. But that is not the way I will bet. We're pathologically bad at this. Hiya, freelancer on HN: to a first approximation, you don't charge enough. Seriously. No information required to make that call. (This is said from a place of love. I don't charge nearly enough, either.) This guy, who produces things which rich people love and try to shove money at him for, so much so that he cannot afford to even talk to the rich people to take their money because he is so busy? This guy has our problem, too. Starving artists who are starving because they produce something nobody wants to pay for are one problem. Starving artists who are starving because they think that they are a precious snowflake immune to Microeconomics 101 are an entirely different problem. They just need business sense. The point of the article is to cry a bit about how the market economy is making true craftsmanship economically non-viable. (It practically tries to club you over the head with that conclusion.) The article is wrong. It has identified a problem to which there exists a trivial solution that will work.

deleted 14y ago
[deleted]
wolfhumble 14y ago
From the last part of the article I quote the following: "Even the richest customer simply has to wait — sometimes months — before the new suit is finished. No wonder so many pass up a $4,000 bespoke suit for a ready-to-wear Kiton version at twice the price." So customers are clearly willing to pay more, but they are not too keen on waiting two months for the suit. I guess there are clients that buy a given amount of suits every year and have time to wait, but there are other clients that buy a suit when they need one and do not think 2+++ months up front. The question is if the former group is large enough to sustain his business, and if they are willing to pay more than $4,000. The latter group have clearly the dough, but don't want to wait, so they are really not a segment he can focus on. So while hiking the price might work, it might be that the real problem here is time to market. Edit: Spelling

ibejoeb 14y ago

>Or maybe the price of top bespoke tailors in town is comparable Yup. You'll get a beautiful bespoke (not M2M, truly bespoke) suit in an elegant showroom in Manhattan with fantastic customer service for the same money. I've bought basic suits for two-thirds the price, in fact. He might have an attractive pedigree via his apprenticeship, but that's not worth three times the price to me. There is real, legitimate, similarly credential competition here.

deleted 14y ago
[deleted]