Spending the morning reading academic papers on Hermes Birkin Bags. So many interesting factoids about collectibles/ stores of value. In no particular order:

1/ Strong quality narrative bordering on folklore.

* Takes 18 hours to hand-make
* Artisans require 2 years of training
* Trainees are hired from a prestigious leather-making school
* Meticulous inspections that, if failed, result in the bag being destroyed

2/ "Secrecy and success seem to be quite correlated when it comes to the
Birkin"

"The only thing Hermès wants you know about the
bag’s availability is that you probably can’t get one.”

Boutiques don't know how many they'll get. Hermes doesn't publish sales numbers.

3/ The only ways to buy a bag directly are through meat-space relationships with Hermes dealers. And unless you're a big spender or celeb, you'll be put on a waitlist that can last *6* years. And even then you don't get to choose size or color! bruh

4/ So plebes can buy second-hand from auction-houses (e.g. Christies) or p2p marketplaces (e.g. The Real Real).

World record: $300K diamond-studded Birkin sold in 2016 by Christie's

5/ Hermes is a dominant category leader.

"Hermès makes up about "90% of Heritage's luxury accessory category’s business."

“Chanel has always done well in the secondary market, and we also sell Gucci and Balenciaga, but Hermès clearly is the leader" - Christie's

6/ When buyers get impatient with lack of access to Birkin's, they buy other Hermes products like belts, scarves, wallets, etc that are not supply constrained.

This is like Supreme (box logo sells out in <1s, bunch of other stuff sits) or Yeezy/Adidas.

7/ I've been pitched "efficient markets" for rare things like Supreme, Yeezy many times. But important to realize it's not important for them to generate revenue directly. Their primary function is MARKETING for commodity products.

8/ "Birkin bags are like currency: you can cash them out at any time.” - Emily Chan, investment banker who owns 50 Birkin bags

Long Birkin, short/be the bankers?

9/ “[Hermes} generally increase the
[Birkin] prices by between 5% and 10% annually for a new bag.” and starts around $7K

Well used bags retain 80% of value, if in great condition 100%+ (curious whether mostly due to retail price inflation.. will hopefully find out)

10/ It sounds like you can basically flip a retail Birkin for 25%+ profit as soon as you walk out the door.

That's why Hermes limits even their best clients to 2 bags per person per year (allegedly). Must have a good KYC provider :)

11/ "The annual return on a Birkin is 14.2%, compared to
the S&P average of 8.7% a year and gold at -1.5% per annum"

source: BagHunter 2016 study

12/ Fakes are rampant. “Recent studies indicate that
up to 90% of all Hermès Birkin bags sold online aren’t the genuine article.”

You'd think this is bad but I'm not sure. Some would say it costs the brand millions every year but it also reinforces the brand narrative? Wyt?

Source break: much of the above is from this paper:

digitalcommons.sia.edu/cgi/viewconten…

13/ The three things that stand out to me so far are:

1) Tactics to drive demand
2) Winner takes all-ish market

And the resulting:

3) A bag as a store of value

14/ Differs from conventional approaches in crypto in that.

* Supply is not known! Market believes demand will sustain/grow
* Participation in status games offer utility to buyers (conspicuous consumption)
* Market for Birkins is meant to be inefficient

Taking a break here. Still reading papers but think this is the high level. Lots of interesting stuff around strategy for luxury brands though (e.g. unlike conventional goods, higher price > more demand, which seems probably true for NFTs?)

A paper on how luxury brands constantly have to renew themselves and how they do it: researchgate.net/profile/Anita_…

And one on Hermes getting into digital (but keeping Birkins off the site):
ingentaconnect.com/content/intell…

Thought: the weaknesses in the "moneyness" of Birkin bags (not durable, fungible, divisible; supply is unknown; controlled by company that can invisibly inflate supply and issue Birkins to themselves) is offset by the "utility" in status games.

If the utility drops (goes out of style), the value of Birkins plummets (reflexivity).

This is a pretty big risk. I thought a few times while reading "I should buy some Birkins" but this risk seems not worth it unless wife really wants one.

Looks like world record was broken for $500K recently. Dude bought it for "content" (press coverage, IG posts, etc.).

Kind of brilliant. Like buying a breakfast with Warren Buffett.

Meta: a lot of people ask me about my reading/writing process. This is a good example. I wake up with a random thought (what's the deal with Birkin bags) and then go to Google Scholar and skim a few articles.

Live tweeting a skim of @lsukernik book recommendation

amazon.com/dp/0749464917/…

Important that luxury !== collectible but there's high overlap. And correlation to high demand:supply ratio.

1/ "The DNA of luxury, therefore, is the symbolic desire to belong to
a superior class, which everyone will have chosen according to their dreams,
because anything that can be a social signifier can become a luxury."

2/ "A luxury product, which carries a whole world with it, has to be produced in
a place that is consistent with its world."

Must maintain consistent brand narrative. Needs a physical place and a story.

3/ "Luxury has to be multisensory: it is not only the appearance of a Porsche
that matters but also the sound of it, not only the scent of a perfume but
also the beauty of the bottle it comes in."

4/ "luxury [...] must have a strong human content, be of human origin (as Karl Marx said about value and labour: gold and diamonds are luxuries and have a high value because it takes a great deal of labour to find and extract them): the object must be hand-made"

5/ "once people have tasted luxury in whatever area, it is very difficult for them to turn away from it – to come back to earth."

Ppl more likely to sell Camry and keep Ferrari during recession.

6/ Whoa this section on money is thought provoking:

* luxury is about status and identity (e.g. membership of aristocracy)
* money is just money, itself not a luxury
* money can be used to "brute force" a perception of luxury
* but true luxury requires private consumption

7/ "The man of money pure and simple is quickly threatened with a loss of social status… money all too readily becomes an aim in itself, in all too many people it concludes the teleological series once and for all."

Ending this here for now. Very interesting book. On how to devise and execute a strategy to build a luxury brand. Thoughtful about broader context. Wonder if "fashion"/ commodity, "premium", "luxury" segmentation will work for digital assets.

My main takeaway here is that "expensive" is orthogonal to "luxury." And whereas a premium product must justify its price w/ performance (e.g. Audi R8), a luxury product justifies its price with ~~dreams~~ (e.g. Rolls Royce).

Which is why luxury tends to be a better SoV