Luxury Companies Hate You
On How to Avoid Being Made a Fool by Overpriced Experiences
I was driving behind a Porsche yesterday. To be specific, it was a 911 Turbo S. It looked brand new. If it was, that means it probably costs somewhere north of $275,000.
Behind this luxury sports car, a dream car for many car nerds, there I sat. My hands on the stitched leather steering wheel of my own car. Mine is not quite a luxury sports car. But it is made by the same company that makes that Porsche. My car even has a lot of features that the Porsche has. I have two-tone leather seats (heated, thank you very much.) I have a Bluetooth stereo. I have LED headlights and cruise control. I even have a turbocharged engine.
But I also have features in my car that Porsche does not have. I have a second row of seating for passengers and a trunk that can actually fit stuff.
My car is a 2014 Volkswagen CC that I bought for $11,500. That Porsche sitting in front of me cost twenty-four times what my car is worth.
But is it truly worth that price tag?
I used to always love cars. I watched Top Gear when I was a kid in the heyday of the show with Clarkson, Hammond, and May. At one point they reviewed a beautiful Mercedes. It was an absolute gem. A two-door, hard-top convertible. The model was an SL55 AMG. At the time, Mercedes claimed it was the fastest production convertible ever made.
Then, a few years later, my dad bought one.
I had just turned 16 when he bought it. It was bright red with a grey interior. He had looked all over the Northeast just to get the one he wanted. My mouth salivated at the thought of driving it.
He, of course, didn’t let me.
It wasn’t until months later that he gave me a shot behind the wheel. We lived in Massachusetts. Every year he would go on a motorcycle ride with some friends through the weaving backroads in Vermont and New Hampshire. His bike broke down in the middle of Vermont, and he needed to retrieve it. He hatched a brilliant plan, for which I am forever grateful.
The plan was for us two to drive his Mercedes into New Hampshire, retrieve the bike, and come back. I would drive his car up there so he could watch me and then drive back, with me following him on his bike so he could manage our speed. The whole trip was 500 miles. That meant 500 miles behind the wheel of one of the fastest sports cars ever made. It was the first speedometer I had ever seen that bothered to show “200 mph” on the dash.
Unfortunately, the whole trip was a disappointment.
Driving a fast car seems like it would be a thrill. However, on a normal road, it’s mundane. We drove the highway up to Vermont to make better time. On the way back, we took the backroads. Although the turns were relatively entertaining, the most excitement came when he would turn onto a road before me and I could gun it before I caught up to him and slowed back down to the speed limit. Within a few miles of the drive, my awe at the car’s power turned into a realization of how normal an experience it was to drive it.
He let me keep driving the car on occasions. I even drove it to prom. And every time I got behind the wheel, I kept wanting to feel something. That car, new, cost around $120,000. Whenever I drove it, I wanted to feel like if I were to spend $100,000 or more on a car, that it would all be worth it.
But it never felt worth it.
Driving those backroads in New England wasn’t even the most fun I’ve had in a car. Not even close. The most fun I ever had in a car was in my sister’s boyfriend’s 1992 Mazda Miata. Miata’s are little Asian two-door convertibles that are only slightly larger than a go-kart. It had cloth seats, rolldown windows, and manual transmission. One day he threw me the keys, and we bombed around the beach roads in my town on Cape Cod for nearly two hours with the top down. I probably could have bought that car off him for $5,000.
I dream of that car. I don’t dream of the red Mercedes.
Mazda wanted to give their customers an incredible experience for a reasonable price when they made the Miata. Mercedes wanted to sell the idea of a luxury sports car only to the people who could afford it with the SL.
A cheap burger joint. A $50 pair of Chuck Taylors. My used Volkswagen. What these things have in common is that they have tremendous value for their price. You will never feel scammed out of your money for having bought one of them.
Every time I eat at an expensive restaurant I feel like my money has been stolen out of my pocket. They aren’t just slightly more expensive. They are exponentially more expensive. A burger from Five Guys is $12. A burger from a high-end steak restaurant is $28. That’s not a 20% marginal increase in cost, it’s 133%.
But the experience isn’t more than twice as good. The food does not feel twice as good in my mouth. My stomach isn’t twice as full. If anything, I’m usually far less full. The high-end restaurant was maybe a bit better. But sometimes, it’s not even better at all.
Expensive restaurants know their audience: people with money who don’t care what the bill costs or people celebrating a special occasion and won’t complain about the bill because it’s a special occasion and that would ruin it.
Knowing this, what do these restaurants do? They upcharge everything. That $15 bottle of wine is now $45 for the same bottle. Want to bring your own bottle? That will be a $20 corkage fee. Their “Signature House Sauce” was just thousand island dressing they bought from Sysco.
And that “ambiance” they provide is all a game to get you to spend more for the same thing.
I watch this YouTuber Matt Armstrong. He rebuilds crash damaged exotic cars. One of the cars he is currently working on is a Bugatti Veyron. If you don’t know, Bugatti is a highly exclusive car brand that builds multimillion dollar cars.
Armstrong is pretty obsessed with rebuilding the cars himself without the manufacturers’ help. His Veyron seemed to have a simple issue that needed to get fixed. Really, he just needed to service the car. Basically, oil and filter change. He investigated what Bugatti would have charged for this service. It was over $20,000. A $20,000 oil change.
To be fair, the full service was more than just an oil change. He had to change spark plugs, a transmission pump, some filters, and some other things. These were all the things that Bugatti would have done if he got it serviced by them. He researched all the parts he needed and compared them to the price that Bugatti would have charged him for the identical part.
Each part Bugatti sold to the customer for two to five times what Armstrong paid. He finished servicing the car for $1,200. That means, Bugatti was planning on stealing $18,800 of Matt’s money if he brought it to them.
One of the most egregious examples of thievery by Bugatti was the hours they billed customers for some of the work they did. Bugatti billed 24.5 hours to service a part in the cylinders that Armstrong and his dad changed within an hour.
But this is not isolated to Bugatti. All luxury car brands have a version of these practices. And they are able to charge so much more than the actual value of the product or the service because they have built a marketing strategy that convinces their customers that it is all worth it.
And it’s not just luxury car companies. It’s all luxury companies.
A $750 bottle of wine is made of grapes that a winery convinces a wine nut are special because they can only grow in these conditions once in a decade. This is despite the fact that they don’t taste better than normal grapes in a cheap bottle of wine.
A $500 pair of jeans is sold to a wealthy buyer because the fabric is somehow rare even though it performs and feels the same as a pair of $50 Levi’s.
A $250 pair of Ray Ban sunglasses is purchased over a cheap pair despite the fact they are both made of plastic, have polarized lenses, and are made in the same factory by the same parent brand Luxotica.
At best, I’ll agree that these luxury items and services provide a marginally better experience. Audi’s seats are slightly more comfortable than my VWs. The $750 bottle of wine tastes a bit better than the $20 one. The $500 pair of jeans lasted a couple more years and had a slightly better fit than Levi’s. The Ray Bans are a bit more stylish than the inexpensive sunglasses.
But that’s it. The experiences you get from these things are never ten times that of their cheaper alternative.
And I’m sorry, if you disagree, you’re a fool. You’ve been indoctrinated by materialistic ad campaigns and the peer pressure of your friends to believe that those luxury goods are worth the exponential increase in cost. The reality is, you’re getting sold overpriced goods and services by people purely taking advantage of your willingness to pay more. The high prices are status signals. Luxury companies price their product to purposely limit how many people can afford it. Their margins are exorbitant.
Burberry famously destroyed millions of dollars of cosmetics and perfumes to prevent the sale of their goods at discounted prices to “protect the brand from devaluation.” That is marketing-speak for ensuring that the wrong type of person wasn’t able to afford their product.
The people who own and manage these companies that sell these goods have no respect for you. To be quite honest, they resent you. They’ll give you white glove service and then make 300% margins selling you something they don’t allow someone else to afford.
Those who own luxury companies are not serious people. You’re a joke to them. When the door closes behind you on your way out, they laugh as you walk away. Every day they can’t believe there are people who are stupid enough to buy their overpriced things made in sweat shops or right alongside their cheaper counterpart.
Stop allowing these “luxury” companies to swindle you. The marginal increase in experience is not worth the exponential increase in cost.