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Fads and Fashions: Why Are They So Rapidly Rich?

Explore the concepts of information asymmetry, earning curves, positional goods, and tournaments in understanding the rapid success of fads and fashions. Discover the reasons behind their popularity and the impact of these trends on various industries.

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Fads and Fashions: Why Are They So Rapidly Rich?

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  1. Mercers’ School Memorial Professor of CommerceMichael Mainelli Fads And Fashions If They’re So Bad, Why Are They So Rapidly Rich?

  2. Outline • Information asymmetry • Earning curve – the labour theory of value • Fads or fashions? • Positional goods • Tournaments • “To infinity and beyond…” “Get a detailed grip on the big picture.”Chao Kli Ning

  3. Trust in Rationality £5

  4. Sour Coupés

  5. Sellers > Asymmetric Markets • Buyers cannot assess quality before a sale is made. • Sellers know the quality prior to sale and gain by passing off lower quality as higher. • Sellers have no credible disclosure technology or method. • The market lacks effective public quality assurances (by reputation or regulation). • The market lacks effective guarantees.

  6. Information Asymmetry

  7. Earning Curve - Water • RBS, sale of Southern Water to JP Morgan £4.2bn • Water Aid, public donations ('06) £16.9m • Philip Fletcher, part-time chairman, Ofwat, p.a. £100k • London plumber, weekend rate, per hour £150 • Sewage worker, starting salary (p.a.) £13k • Kona Nigari seawater mineral concentrate, 2 oz £16.25 [Management Today, December 2007]

  8. Earning Curve – The Sun • UK spend on suntan lotion, p.a. £146m • Judy Naake, founder, St Tropez fake tans, wealth £45m • Antonio Banderas, Police sunglasses endorsement £1.5m • Solar physicist, Rutherford Appleton Laboratory, p.a. £29k-£34k • Deckchair attendant, Blackpool beach, per hour £5.94 [Management Today, June 2007]

  9. Earning Curve - Coffee • Value of the global coffee industry: £41bn • Nestle, profit ('06): £3.8bn • Howard Schultz, Starbucks founder, net worth: £560m • Store manager, Caffe Nero, p.a.: £17k-£22k • Winner, Singapore Barista Championship prize ('07): £335 • Fairtrade coffee grower, Peru, 10.5-hour shift: £1.50 [Management Today, May 2007]

  10. Earning Curve – Interior Design • Ingvar Kamprad, founder, Ikea, personal worth £8bn • Sir Terence Conran and family, worth £68m • Laurence Llewelyn-Bowen, licensing deals, £20m • Junior interior designer, p.a. £15k-£18k • Charles Eames’ Ottoman chair, value £1.5k • Painter and decorator, London, per day £160 • Part-time sales assistant, Habitat, per hour £4.89 [Management Today, October 2003]

  11. Earning Curve - Boats • Peter Ratcliffe, CEO, P&O Princess ('02) £2,504,768 • Captain, Royal Navy, p.a £65,218-£72,083 • Cruise director, liner, per month £3,800-£7,500 • Ship-builder, UK, p.a. £14,000-£25,000 • Waitress, Queen Elizabeth 2, per month (minimum) £846 • Yacht skipper, per week £125 • Helmsman, RNLI lifeboat £0 [Management Today, August 2004]

  12. Fad?

  13. Fad Or Fashion? “Se un’idea è più moderna di un’altra, è segno che non sono immortali né l’una né l’altra.” “If one idea is more modern than another, it is a sign that neither one nor the other is timeless.” Carlo Emilio Gadda (1893 – 1973)

  14. Fashion?

  15. Typical Risk/Reward Reward Likelihood Risk

  16. Fads and Fashions - Risk/Reward Reward Fashion Fad Likelihood Risk

  17. Positional Goods

  18. Tournament Competition

  19. To Infinity And Beyond … Professions • Information asymmetry • Localized conformity • Positional goods • Tournaments

  20. To Infinity And Beyond … Fat Cats

  21. To Infinity And Beyond … Globalisation

  22. Uni-Dimensional

  23. Discussion • Does the internet move us to infinity and beyond lemon markets? • Does globalisation lead to tournaments of higher inequality?

  24. Fads and Fashions:If They’re So Bad, Why Are They So Rapidly Rich? Thank you! “Get a big picture grip on the details.”Chao Kli Ning

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