What is a Veblen Good? - Exponential Economy #4 - YouTube

Hi, today from Singen, Germany

Today we will be talking about Veblen Goods. What are Veblen Goods?

What is it all about? I'll tell you in the next part.

In order to explain to you what are Veblen Goods, I will start with explaining to you

price and demand in the traditional economy

with so to say normal goods

For most goods in the economy you have this curve of price and demand

And this curve shows... and if you studied MBA, you have seen that curve many times

This curve shows that the higher the price, the less demand there is in the economy for that good

So, if you want to sell more goods of that type, you should lower the price

and then there will be higher demand, you will sell more of that goods

but there are special goods that were identified by American economist Thorstein Veblen

Thorstein Veblen wrote the book "The theory of leisure class" in 1899

and in that book he described the phenomenon of conspicuous consumption

So, every class in the society, generally, wants to be like the class above them

and they aspire, so to say, to the lifestyle maybe and spending habits of that class.

and this causes this phenomenon that there are goods in the economy, so called luxury goods

that are not boughts because they are needed in life

They are bought because of the conspicuous consumption

meaning to show off, to show that you are wealthy, that you have a lot of money

and that you can afford something like that

and for those special goods, this simple rule, economic rule of price and demand doesn't apply

for those goods it is not the case that the higher price, the lower the demand

for those goods there is an opposite relation

meaning the higher the price, the higher the demand for those special luxury goods

because these goods are not boughts in order to satisfy your need, to consume them

for example to [...] your hunger or something, no!

No, these goods are bought to show off

The higher the price, the better the ability of that good to actually show off

and to prove that you can afford something, that you're a wealthy man

So, for these luxury goods, there is this relation that the higher the price, the higher the demand

because then this good is considered a better, Veblen Good

so, that's why it is called a Veblen Good, because Thorsten Veblen identified the special goods and defined this opposite relation

to the normal goods in the economy

So, what are the examples of Veblen Goods?

For example, luxury cars, jewerly, fasion, art pieces, maybe brand goods

and of course, billionaires... some billionaires realized that there are goods like Veblen Goods and this is a great business opportunity

because with Veblen Goods, with these luxury goods your margins, your profits are generally unlimited

because the customers, they don't pay for the so to say intrinsic value

or the cost of the production, it's not related, the price of these goods is not related to the cost of production

You can demand as much as you want for these goods, because they are not bought for the usage itself

They are bought to show off and to say, "I can afford to pay that price"

For example, Bernard Arnault owns LVHM

This is a corporation that owns 70 luxury brands,

70 of the most popular luxury brands in the world, Louis Vuiton, Hennessy, Moet... what else?

Good examples, Sephora, Tiffany, Chopin, Dior, Bulgari, Givenchi, all these brands and many more belong to LVMH

and Bernard Arnault became and is right now the third wealthiest person in the world with a networth of 114 billion dollars as of today

and I spent a week in Monaco once on a boat of a billionaire friend and I was like vice versa with a boat of Bernard Arnault

His boat was slightly bigger and I could look generally into the bedroom of Bernard Arnault in Monaco on his boat

So, you see you can take adventage of that in business, I wonder what other examples of Veblen Goods you know?

How can you use that phenomenon in your life, in your business? Write your thoughts about that, your examples in the comments below that video.

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One day they will thank you for that. I talk here a lot about economy, about busienss, about how the best entrepreneurs in the world think and act

How the self made billionaires think and act. I talk here also about money, sometimes about cryptocurrencies.

So, if you like this video, you will certainly like my other videos. I invite you to watch them. That's it for today.

I wish you a fantastic day, let's do something extraordinary today.