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Published Apr 15, 2023

No Mercy / No Malice: Scarcity

Scott Galloway and George Hahn delve into how scarcity in both business and personal life influences value and relationships, examining Snap Inc.'s market strategies and the luxury sector while reflecting on life lessons from immigrant family experiences.
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  • Snap Strategy

    Snap Inc.'s business strategy hinges on the concept of scarcity, a tactic that has been skillfully executed by its bankers. explains that only 14% of Snap's shares were made available for trade, creating an artificial scarcity that bolstered the stock's value 1. This approach mirrors the luxury market's strategy of maintaining exclusivity to drive up perceived value.

    Even if a Birkin bag or Snap shares are not intrinsically worth $14,000 or $25 a share, if scarcity supports the price, then God bless them.

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    However, as more shares are released, Snap's unique market position may be challenged by competitors like Instagram Stories, which mimic its offerings 1.

       

    Luxury Shift

    The luxury market is experiencing a significant shift, with brands like Hermes surpassing traditional giants like Nike in market capitalization. notes that this shift reflects changing consumer values, where artisanship and exclusivity are gaining ground over mere brand awareness 2. This trend is evident as luxury firms like LVMH and Kering outperform consumer goods companies in stock gains.

    Awareness via social platforms has created a generation of empty calorie brands.

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    The decline of linear TV and the rise of social media have further accelerated this change, as brands famous for being famous lose their enduring appeal 2.

       

    Scarcity Economics

    Scarcity plays a pivotal role in business economics, particularly in the luxury sector. highlights how brands like Hermes and LVMH leverage scarcity to create a supply-demand imbalance, driving up prices and brand prestige 3. This strategy is not just about limiting supply but also about crafting a narrative of exclusivity and urgency.

    Scarcity is key to irrational prices. Beachfront property is scarce and, regardless of the economic cycle, always in demand.

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    By controlling supply, these brands can dictate revenue flow, much like managing an oil well, ensuring sustained profitability 3.

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