Blog 47: Positional Goods by Xavier Lo, FIA, FRM, MBA

Remember the blog recently on the diamond and water paradox? Somewhat related to that is Positional Goods [位置性產品], which is the topic of today. Usually when you think about how much something is worth, you generally look at how much supply and demand there is. However, with Positional Goods, the worth is also somewhat determined by its image as a status symbol [身份象徵].

Lets go through an example of this. Think about a smartphone [智能手機] maybe 10 years ago. If you remember, both of those items were very cool to own, and not many people had them. When you walked past someone with an iPhone on the streets, you would turn your head around just to get another glimpse of the phone. However, fast-forward to today, I don’t think anyone of you would be surprised at someone holding a smartphone. The fact that smartphones are so much more common to the population now means that they are no longer status symbols. You could argue that the iPhone is still more popular than other smartphones, but it is not necessarily such a big status symbol anymore.

There are many examples of Positional Goods in other industries, such as the Lamborghini [林寶堅尼] amongst cars. Even in the finance industry, there are a few high-end credit cards [信用卡] which probably don’t offer much better value or rewards to you than a normal one, but is definitely a status symbol (Amex [美國運通] Centurion, for example). Even in insurance, there are some VIP [貴賓] products or even brands which customers are happy to pay more for as it shows off their status as a high-end customer. The value of these VIP products might not be better than cheaper ones, but we are tapping into the ego [自我] and pride [自豪] of the customers to generate more profits.

Rationally, as an actuary, I try not to pay extra for any items just for that status symbol. However, I am a normal human being after all, and there’s no calculatable value that I can place on my own self-ego and pride!