Thursday, October 18, 2007

The Very Rich Get a CLEW: Avoid "the Twinkiefication of Deluxe" by Giving It Away

In a column earlier this week, with tongue conspicuously in cheek, George Will lamented the lot of the very rich: “...they are getting diminishing psychological returns on their spending now that luxury brands are becoming democratized. When there are 379 Louis Vuitton and 227 Gucci stores, who cares?”

While I almost always enjoy reading Will, it’s rather rare that I agree with him. But I think he’s on to something here.

Will acquaints us with the Forbes CLEW index, which tracks the Cost of Living Extremely Well. Along with other “bling indexes”—Fortune magazine’s lists of stocks like Christian Dior and Richemont (Cartier and Chloe), and Citicorp’s “plutonomy” stocks such as Sotheby’s, Bulgari and Hermes—the CLEW shows how it is “increasingly expensive to be rich.”

The aspiring very rich used to achieve notoriety by acquiring so-called “positional goods”—luxuries that only people of immense wealth could afford. Sadly, when too many people become wealthy enough to purchase such luxuries, what was once exclusive and elite becomes common, and acquiring them ceases to satisfy. And so, says Will, envy increases in direct proportion to wealth, perhaps exponentially.

Thus the cul-de-sacs of “so much money sloshing around the world:"

“When 40 percent of all Japanese—and, Fortune reports, 94.3 percent of Japanese women in their 20s—own a Louis Vuitton item, its positional value vanishes…

“Now that Ralph Lauren is selling house paint, can Polo radial tires be far behind? When a yacht manufacturer advertises a $20 million craft—in a newspaper, for Pete’s sake; the Financial Times, but still—cachet is a casualty.”

We are witnessing what a University of Florida professors calls "the Twinkiefication of deluxe."

But Will sees a way out. The heavy burdens of the plutonomous might turn out to be a blessing for the rest of us: “…because the merely affluent are diminishing the ability of the very rich to derive pleasure from positional goods, philanthropy might become the final form of positional competition.”

And so Will suggests an outcome Adam Smith appears never to have envisioned: “When rising consumption of luxuries produces declining enjoyment of vast wealth, giving it away might be the best revenge.”

Of course, folks like Bill and Melinda Gates, Warren Buffett and Joan Kroc seem to have realized this a while ago. But perhaps those who aspire to outdo them will at long last learn to emulate their generosity too—learn to envy and enjoy the singular satisfaction that only comes from competing to improve the common good.

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