How The Eternal Business of Fashion, Beauty,
Luxury and Style is Driven by Hardwired Human Nature
Daniel B. Yarosh, Ph.D. © 2014, all rights reserved
“Oh Lord, won’t you buy me a Mercedes-Benz?” Janis Joplin sang in her last recorded song four days before her death in October 1970.
Prestige consumer goods, from luxury cars to designer gowns to elite hotels, are multi-billion dollar global businesses. Everybody wants some – every country, every culture, every age. But despite the universal demand and enormous supply, there are many misconceptions about where their premium value comes from.
The biggest mistake is that these are just the most functional and therefore the most expensive version of a wide range of offerings – they’re not! They have something special that gives them a premium and their prices have become disconnected from their usefulness. In some cases, such as expensive “high performance automobiles”, their reputation is for higher maintenance and less dependability than lesser-priced cars.
They are not just a desire of rich people – everyone aspires to prestige.
They are not just found in rich countries – third world nations and cultures embrace luxury, perhaps even more than more developed countries.
They are not just things women buy – men are huge consumers of status goods.
This is not a recent trend – people made status objects thousands of years ago, and governments tried to regulate luxury goods centuries before the Roman Empire.
Most importantly, the aspiration for luxury and prestige is not a character flaw – it is a drive hard-wired by evolution into our genes and then into our brains, like hunger and thirst. But unlike these instincts, the desire for prestige is never satisfied.
Understanding the basis for this desire is not only good for business, but it provides insights into human nature, our evolutionary history, and our consumer economy.
What are these prestige goods? I call them FABULUST – for fashion, beauty, luxury and style.
Fashion goods – the core of their attraction is that they begin as rare. At first, only a few have the latest sling-back zippered shoe design, and they set the trend. Everybody wants to wear this new style, and the market complies by cranking it out and selling it in Macy’s, Penny’s and then Walmart. By the time the style is available to everyone, it is no longer fashionable. Fashion can be defined as the process by which the rare becomes common.
Beauty goods – these are goods that enhance The Human Brand (see the page on this website). People compete with each other for the best mate and most resources to provide for children and grandchildren into the coming generations. The physical appearance of the human body, The Human Brand, has been shaped during human evolution to appear beautiful so as to succeed in this competition. Many of the most salient features of men and women, such as the shape of the face, shoulders, bust and hips, are announcements of the strength of the sex hormones estrogen and testosterone that sculpt the Human Brand. These features of body shape imply reproductive potential and success in passing on genes. Gold rings and diamond necklaces convey to ourselves and others that we have the resources to succeed in this beauty contest. We use accessory goods and services, such as jewelry, cosmetics, clothing, shoes and hair styling, to further improve the beautiful sex appeal of our The Human Brand.
Luxury goods – these are costly products that pamper and cater to our every whim. Thorsten Veblen first formulated the concept as “conspicuous consumption” more than 100 years ago. The chrome and wood paneling on the luxury automobile provide little performance benefit. But they do send a signal to others that the owner is especially endowed with resources. This endowment becomes a point of competition, as one strives to exceed the other. Luxury is thus cut adrift from performance, and becomes an end in and of itself.
Style goods – these are the goods that display craftsmanship and show the extra human attention to the finished product. Styles in clothing are the additional stitching around the hems and the special angle to the cut of the lapel, that reveal thought about function and aesthetic appeal. The Apple brand electronic products are perhaps most famous for their style that conveys attention to detail and craftsmanship, and importantly they imply quality to the unseen workings of the device. Style may be a level of precision, such as that in a Rolex watch compared to a Timex watch, which goes way beyond what is required for function. Style carries a price premium that reflects the devotion of human attention, and the display of this attention enhances prestige and self-worth.
Why do we value FABULUST goods so much? The winners in our evolution into humans developed advantageous features, such as broad shoulders in men, and also at the same time the preference for such advantageous features, such as women considering broad shoulders sexy. Men with broad shoulders attracted the best mates who preferred broad shoulders, and their children had both broad shoulders and a preference for it.
Natural selection is a powerful force in spreading successful genes into future generations. A set of genes that confers only a small selective advantage, such as just a little broader shoulder span and a preference for it, can sweep through the population in just a few centuries, a very small fraction of the time it has taken humans to arrive on the scene. Today we have humans in every culture around the world who prefer in men that the ratio of waist to shoulders be 0.6, not more and not less.
We also evolved brain regions that pay attention to our preferences. The universal ideal waist to hip ratio in women is 0.7. When men were shown pictures of women before and after cosmetic surgery that improved their waist:hip ratio to be closer to the ideal of 0.7, specific regions of the men’s prefrontal cortex were activated only by the “after” pictures.
People’s brains also pay attention to what goods others possess, as indicators of social status and reproductive potential. People desire FABULUST goods to signal their worth and standing (“She’s got bling!”). How strong is the desire for status? More than enough for people to give up money for it without getting anything else in return. Surveys show most people would rather have $100 when everyone else has $50, rather than $150 when everyone else has $300. Up to 30% of people are willing to spend more just to exceed their neighbor. It is the signal that FABULUST goods convey that gives them value independent of their function or usefulness.
FABULUST goods are demanded by the ancient and universal human instinct for status and prestige. This instinctive nature means that it arose early in human evolution and spread around the globe, making it a universal desire. In young developing countries of Asia it may appear in the purchase of traditional luxury cars, while in mature developed countries like the US it may appear as a preference for new artisan crafted beer. They are not just the preferences of the old money, but the first things a newly rich entertainer in Russia or Brazil wants to acquire.
The instinct of FABULUST means that it is hard-wired in our DNA. The genetic program rolls out the FABULUST desire in our behavior, beginning with brain circuitry. We are programmed to establish our relative status in a group at an early age. Recent research in fMRI (functional magnetic resonance imaging) of the brain reveal localized regions within the prefrontal cortex that respond to status challenges (“she also has the Louis Vitton bag”) and fear of losing position (“I didn’t know Mercedes made that model in a convertible!”).
These regions are involved in evaluating goods and making purchasing choices – meaning that many economic decisions are fundamentally not rational evaluation of utility, but more complex calculations of usefulness and status signaling wrapped up in FABULUST. These decisions may not follow classical supply-and-demand formulations, but they are hardly “irrational”.
We may feel the FABULUST drive in our decision to purchase a luxury watch as an “emotional” response, but that does not make it any less important to our survival and reproductive success than the need to tell time. The pursuit of FABULUST is not immoral, any more than is searching for food or a mate. It becomes immoral when the desire detracts from other valuable survival aids, like family and friends.
If it seems like the pace of the search for FABULUST has accelerated recently, it has. The rise of the middle class in Europe, North America and Japan has created an enormous increase in disposable income, ready and willing to compete for status. Ubiquitous communication means everyone, everywhere, knows what the latest status symbol is – which more rapidly advances the cycle of exceeding the latest status symbol. The rise of free trade and mass distribution of consumer goods also accelerates the pace of fashion, where the rare becomes common all that much sooner. The perpetual search for something rarer, more precious, more stylish outpaces the ability of established brands to innovate and satisfy the status urge – meaning the end of brand loyalty. And finally, the falling birth rates in developed countries combined with the rising rates in developing countries leads to “old” cultures looking for new status symbols and “young” cultures just discovering the old brands and symbols of wealth.
The great fallacy about FABULUST is that other people have to see the symbol for it to have value – Thorsten Veblen first described it as “Conspicuous Consumption.” Recent research shows that this is not true. A sizeable fraction of luxury purchases are unknown to all but the purchaser, and many of the most valued FABULUST goods, such as bathing accessories and lingerie, are not displayed at all. The brand names of other goods, such as lipstick and makeup, are not carried on the goods in public.
People buy FABULUST just to demonstrate to themselves that they can afford it, as a sort of confidence builder. These actions activate brain pleasure centers that overcome the loss aversion of spending money. Self-signaling of status is an important driver of the luxury goods market. People also intuitively understand this. They don’t condemn people who display FABULUST while keeping their private goods simple and common. They don’t demand consistency and they view such neighbors as discerning shoppers.
Because FABULUST is about sending the right signals, luxury brand names are vulnerable to losing their value if they are viewed in the wrong setting or are able to be faked. In one of my surveys two-thirds of people would changed their minds about buying designer jeans if they saw them displayed in the window of a thrift shop. Goods stewards of FABULUST know that placement and authenticity must be vigorously defended.
Our social contract was hammered out over millions of years of evolution in a small part of Africa, and as humans spread around the planet over the past 40,000 years little of that has changed. We value reproductive success, and we all look for it in The Human Brand and FABULUST possessions. The eternal competition for FABULUST is hard wired in our genes, programmed in our brains, and part of our natural behavior. Once we understand this, our “irrational” choices and “guilty pleasures” will be more clearly seen as the survival instinct that drives the multi-billion dollar global prestige goods market.