Janus Thinking

Two articles worth sharing from the Sunday Times of London this past weekend; they both concern the idea of “buying status” through the purchase of expensive spirits and handbags.

Ordering a spirit and mixer at a bar in posh places throughout the world is increasingly becoming an exercise in name-dropping: “I’ll have a [Grey Goose or Zubrowka or Stolichnaya or any number of “prestige” vodka brands] and Coke.” This is happening for two reasons—(1) in many places (in the US certainly) house spirits can be of a decidedly dubious quality, and (2) a nice spirit is one of those affordable, aspirational luxuries that people feel can enhance their status (without necessarily enhancing their status). This name-dropping is welcomed by spirits manufacturers, because while you can’t tell a vodka by looking at the glass (unlike the immediate recognition that a handbag commands), people tend to be very loyal to their chosen spirit (unlike how a handbag might be switched by season).

Speaking of vodka and handbags—in addition to owning brands like Louis Vuitton and Dior, LVMH also owns Belvedere vodka. The other article discusses how handbags are increasingly important to luxury companies—they can be purchased easily, without the need for sizing, and net profits up to 13 times their production costs. There’s a great quote from fashion designer Miuccia Prada:

With the bag … there are no left-overs because there are no sizes, unlike shoes or clothes. It’s easier to choose a bag than a dress because you don’t have to face the age, the weight, all the problems. And there is a kind of an obsession with bags. It’s so easy to make money. The bag is the miracle of the company.

You can read the whole spirits article here and the whole handbags article here.

Will handbags remain so popular? Probably. The question is whether luxury brands can maintain their high class image while they face a threefold attack: from smaller new brands that can seem more exclusive and hip, from counterfeit bags that celebrities are starting to not mind carrying, and from the ‘unwashed masses’ who carry their bags but don’t make good brand ambassadors.

An update to this post—Damien Hirst’s For the Love of God, the diamond-encrusted skull that juxtaposes mortality and eternity,  recently sold to an unnamed investment group for its asking price of $100 million.

Hirst reportedly kept a share of the piece himself to ensure that it gets displayed. The UK’s Independent is skeptical that it actually reached the asking price, with sources remarking that it’s notoriously difficult to know the specifics of private art sales and that sales talks had previously stalled at £38 million ($76 million).

According to Richard Polsky, a California art dealer:

This is all about investment, not about art collecting. This sale keeps Hirst in the news, reinforces the demand for his work and makes everyone who spent money at the White Cube feel good about their investment.

When the value of a piece is as astronomical as For the Love of God, does the focus necessarily have to shift from art to investment?

As we mentioned in this recent post, buying a fake handbag can feel like a victimless crime. The buyer might feel good about saving money—perhaps even bragging to friends about it—and think that the luxury company won’t miss the revenue from a single bag. But purchasing counterfeit handbags and other goods might not necessarily be consequence free. Dana Thomas wrote an article for the New York Times last month that highlights several illicit activities and organizations that stem from counterfeiting:

Most people think that buying an imitation handbag or wallet is harmless, a victimless crime. But the counterfeiting rackets are run by crime syndicates that also deal in narcotics, weapons, child prostitution, human trafficking and terrorism. Ronald K. Noble, the secretary general of Interpol, told the House of Representatives Committee on International Relations that profits from the sale of counterfeit goods have gone to groups associated with Hezbollah, the Shiite terrorist group, paramilitary organizations in Northern Ireland and FARC, the Revolutionary Armed Forces of Colombia.

Trying not to sound overly preachy or like a scaremonger, these organizations should not—must not—be funded by counterfeit goods. What can luxury companies do to stop them? They can’t necessarily go after counterfeit manufacturers themselves—that’s the job of law enforcement—but they can be transparent and acknowledge that counterfeiting is a serious problem they face. Too many luxury companies worry that talking about the problem will make more people aware of it thereby tarnishing their reputations. But the counterfeit problem is real and will become worse if companies ignore it.

If luxury companies can give people a better reason to stop purchasing counterfeit goods, everyone will be better off.

All our recent talk about counterfeit goods lends itself nicely to this discussion of counterfeit wines on Slate.

The article does a nice job of discussing perhaps the largest counterfeit wine story in recent memory, a story involving Thomas Jefferson, forgery, and multiday bacchanals. In 1988 Bill Koch purchased 4 bottles of wine said to be owned by Thomas Jefferson (they were signed Th. J) for $500,000. Two years ago he had the bottles authenticated and found that Jefferson, a meticulous record keeper, had never noted the bottles and that the signatures were forged. Koch is now suing the man who sold him the wine, a German music promoter and wine merchant (best known for his bacchanalic parties) by the name of Hardy Rodenstock.

How widespread are counterfeit wines? Because many vineyards lack proper records about how much wine was produced and where it went, taste can be the best means of authentication. And according to Allen Meadows, a renowned Burgundy critic, about 10% of the pre-1960 wines that he tastes these days are fraudulent. In the article Meadows notes that in some wine circles alleging fraud is becoming a mark of connoisseurship—it “show[s] off their knowledge and the acuity of their palates.” One hopes that aspiring wine connoisseurs aren’t falsely accusing wines that only taste “young” to seem more knowledgeable than than they are.

Read the full article here.

Would you pay a million dollars to own a diamond that was created from Ludwig van Beethoven’s DNA? The proposition using of DNA as the basis for unique gems is currently being tested by a company called LifeGem, who have taken 10 strands of Beethoven’s hair to create three small (.56 carat) round brilliant cut diamonds. From those 10 strands they extracted 130 milligrams of carbon, and used that in three separate diamond presses to make the diamonds.

One diamond is going to LifeGem’s ‘Chain of Fame’ (they hope to create a series of diamonds from famous DNA), the second is going to the man who donated the hair, and the third is currently being auctioned on eBay—four days left, with a buy-it-now price of $1 million.

Is creating a diamond from DNA a respectful way to create something truly unique, personal and priceless: a great way to remember and celebrate people important to us, living or dead? Or is it gaudy, crass and unnatural, playing on people’s emotions and ‘unreal’ because it was created in a lab and not over billions of years in nature?

LifeGem expects this to be the first of many ‘celebrity’ diamonds—whether there’s public demand for them will be suggested by the results of the auction.

[via the UK Telegraph]

Following the recent New York and London Fashion Weeks, fashion has been a popular topic in the news and two stories are particularly worthy of mention in light of the counterfeit goods news we’ve been following recently.

First, this article in the New York Times discusses the speed with which copycats are taking couture designs to low and mid-range department stores—knockoff items can go from catwalk to shelf in as quickly as four to six weeks. The knockoff company discussed in the article can turn a photo emailed to the factory into a finished sample in 14 days. It can be months before the couture houses are ready to sell their wares—items from fall shows traditionally make it to high end shops by February.

Couture design aren’t subject to copyright, so fashion houses (through trade associations) are now pushing for protections similar to those criminalizing counterfeit goods in order to stop losing money from knockoffs.

But this article from the New Yorker suggests that this might not be wise. While counterfeit goods can fund unsavory black markets and activities, knockoffs feed the fashion industry in two useful and important ways.

First, the people who purchase couture knockoffs from H&M or Zara are not the same people who spend ten times as much to purchase a similar garment at Neiman Marcus. Arguably the couture houses really aren’t losing customers or business to knockoffs—and exposure to ‘couture-inspired’ designs may make young customers more willing to purchase the real thing in the future.

And second, knockoffs help the fashion industry induce obsolescence to fuel demand for new clothes. Couture houses need people to want to buy their garments season after season—what better way to make people desire new things than make them tired of what they have? Seeing ‘everyone’ wearing similar styles (through affordable knockoffs) makes neophiles willing to spend on the latest and greatest.

While counterfeit goods are clearly a problem, knockoff goods have a more symbiotic relationship with couture houses. They provide an interesting example of how businesses can be successful creatively and monetarily despite a lack of copyright protections.