This article was written by contributing writer Erik van Mechelen
Scarcity Done Right (and Wrong)
What do tulips, Truffles, Diamonds, and Speakeasies have in common? To me, they all involve scarcity (or have in the past, in the case of tulips).
We know Core Drive 6: Scarcity & Impatience is a Left Brain Black Hat motivator. Too much of it in a design can lead to burn out.
But at the right quantities, it can help drive desired behavior. Yu-kai has talked about how he used scarcity for productivity on his book and we’ve written about why year-end goals are more interesting than New Year’s resolutions. These examples emphasized how scarcity and impatience could amplify an experience and lead to Desired Actions and Win-States.
Scarcity is good IF you get a payoff.
Sometimes, I wonder if scarcity can change its face and blink into the White Hat region. I want to be considered the best fantasy writer in the decade from 2020 to 2030. There can only be one best writer, so this position is scarce indeed. However, in Octalysis, this is positioned more so under Core Drive 2: Development & Accomplishment than in scarcity. However, like my mom used to tell me when girlfriends would dump me: “Sometimes it’s what you can’t have that drives you, Erik.” This dual feeling of knowing it’s really unlikely to happen but believing I can get there, to me, blends scarcity with accomplishment.
What if someone knows scarcity is a thing and doesn’t like that you use it? What response might they have?
First, an example of the first asset bubble in history. Basically, people were buying futures contracts on flower bulbs that hadn’t bloomed, and the supply of suckers buying the contracts ran out (and really hurt the Dutch economy).
Initially, the scarcity of rare tulips raised the prices (CD6), but it got out of hand.
Tulips are grown from bulbs, and can be dug up and saved over the winter and replanted in the spring. They come in a wide variety of colors, some a lot rarer than others — rare hybrid bulbs can have stripes or bursts of two different colors. And you can’t be 100% certain what color you’re going to get when you replant them. In that sense they’re sort of like a baseball card or a pokemon — collectors buy tons trying to get those few rare ones.
From this, we see both CD4 and CD6 (if you want more on PokemonGo by the way, go here).
As tulips became more popular, it became something you might use to show off, if you were a rich guy — having a garden full of the rarest kind would be like having a Monet on the wall. Prices started to rise.
As mentioned, this was unsustainable and crashed back down to earth. In essence, there was a burnout in the scarcity because the scarcity wasn’t real, it was manufactured. There are a LOT of flowers on the planet Earth. A bundle of tulips go for $10 in my local grocery store, and even that feels a little expensive.
Further reading: An Embarrassment of Riches
The truffle in the above photo sold for over USD $1-million. That seems like a lot for a mushroom that grows naturally.
About 5-10 years ago truffles, a mushroom growing underground attached to tree roots, became a trend in the restaurant business.
They have a particular smell (and taste) and became an expensive delicacy.
I first came across it on food TV show where the restaurateurs upped the menu price by offering dish with truffle shavings. They were able to justify a higher ticket price for the meal by virtue of the truffle on top.
I remember getting the feeling that the restaurateurs were unfairly inflating the price of the dish just because they had a rare item. Perhaps in their mind, they were creating an ‘experience’ for their guests. It depends on the type of guest (or Player).
I remember a meal I bought that included truffle (thankfully not the $1-million dollar variety above), and getting the feeling that I was being ripped off. That’s not the kind of experience you want to give.
There is some mystery (or apparent mystery) around how these are grown, but it might not all be justified. The mushrooms live inside tree roots that grow in a certain soil that can be sniffed out by trained dogs. This isn’t that interesting, although I could write marketing material that made it sound more interesting than that (sort of like diamonds have been marketed, we’ll get to those!).
Mystery builds cache. We don’t know how they’re found or grown, which contributes to the positioning as rare and mysterious and desirable, even magical.
I later came across the following.
A restaurant owner on a TV show centered his menu offering around truffles and small-plate tasting with a wine pairing, having taken time away from restaurant business operations to understand how to acquire high-quality truffles for a fraction of the regular going rate. Investors apparently liked the idea of the potential profit margin.
When I heard this story about the restaurateur who figured out a way to make better margins, it made me ask the question, are the truffles really worth that much, then? Or, is this a case of someone through hard work finding a way to improve upon the system (and thus deserving of his increased profit margins)?
Diamond in the rough
If you’ve seen the movie Blood Diamond and read anything about the history of diamonds, you’ll already know their discovery and mining and production is complicated.
My friend is fond of saying they are a “shiny hard rock which does nothing for a relationship.
In a recent conversation he said:
So you’re giving a ton of money to a company when these stones were just lying in a mine or even on the ground in Africa. You could instead make an investment. The extra $10,000 could be $20,000 in 6 years.
He referred me to moissanite, a meteor stone and other diamond alternatives.
But in certain cultures, diamonds are very culturally embedded into the framework of romance and commitment and even love.
A scarce stone for a scarce lady, the love of your life.
Choosing not to buy a ring is an interesting choice. Or is it?
I’ll be keeping this analysis to two speakeasies in Minneapolis, MN, where I live: Volstead’s and Marvel.
First, Volstead’s. This weekend, I went with a small group down a back alley and to a door. We found a line and a small crowd of perhaps 10-12 people waiting. Wait, a line? I thought this was a speakeasy.
That should have been our first clue that things would go a little differently here.
(Don’t get me wrong, I’m familiar with lines at bars and clubs. The line creates scarcity and makes you want to check out what others are doing inside. There is social proof, too, because others are trying to get in. This also works at restaurants, events, concerts, and museums. Sometimes my mom doesn’t like eating at a restaurant unless it is 75% full.)
We waited to get in as people left the speakasy. It seemed we might get in! The crowd of 10-12 people in front of us split up their party to get a few people in. I don’t know if the others got in because we didn’t wait around to find out.
Here’s how things proceeded.
People started arriving with “reservations”.
After about 10 minutes, we inquired how to get reservations. The response from the doorman?
I can’t really say, I mean you could look it up on Google.
Before he could finish his sentence, my friend (and the rest of us by proxy) were already leaving for a nearby pub that would let us in so we could sit and have great conversations and relax.
^^^Not the view I got…
Marvel has a similar inauspicious underground feel.
There’s a man at door. If they are full, he says they are full. If you try to linger, he tells you there are no lines. The feel is: don’t stand here, go away.
Perhaps strangely, I prefer this approach to scarcity. When you go to Marvel, you don’t know if you’re going to get in. In a sense, it verges on CD7, Unpredictability (similar to gambling outcomes).
This is much better than an arbitrary “secret” reservation system. The same feel I got from an arbitrarily high price of truffle (which I didn’t even really like the taste of).
Doing Scarcity Right
It’s worthwhile taking a close look at your experiences with scarcity. Are you reacting to scarcity for good reasons?
What about experiences and products you’re creating and offering? How are you presenting scarcity into the design?