Overpriced

Visconti recently announced a limited edition of their acclaimed Pininfarina retractable fountain pen, made with ‘special carbon Nanotube technology’. Now, I have no idea what this means but I do know that it’s going to be an expensive pen. The regular edition costs upwards of $1000 and the street price for the LE will be a whisker under $2k. In the ensuing reddit discussion, one user said what a lot of people were probably thinking and labelled the pen as ‘overpriced’.

This is a reasonably common term in the FP market and there’s a long-running debate over whether all FPs are overpriced, relative to a humble Bic. I don’t intend to get into that debate here but I do want to explore the idea of a pen being overpriced, how it relates to my model of the FP market, and to an economic concept you might have heard about before: opportunity costs.

It’s not hard to see where the price complaint originates. Retractable FPs in general seem to be pretty popular, and the Pininfarina’s design aesthetic is one that really catches the eye and the heart. Unsurprisingly, it has won design awards and is said to have sold like hotcakes. To go back to our model of the purchase decision, users are obviously placing enormous value on this pen and many people are willing to spend hundreds of dollars to own it. Hundreds, that is, but not thousands. And when they see the price-tag as well beyond their own valuation for the pen, there is an entirely natural feeling of frustration and disappointment which, I think, leads to the claim that it is overpriced.

Even for a premium brand like Visconti, this is a pretty expensive pen. But when we think about the decision to buy (or not to buy), we have to remember that there’s two, equally important elements in play: price and value. High prices are as much to blame as low valuation for a particular transaction occurring, and it’s worth understanding why some users are willing to put a higher valuation on pens than others.

To my mind, there are two important elements: passion and opportunity costs. Passion is both easy and impossible to understand: it’s the hunger we feel, the desire to possess and to use a particular pen, the excitement we take in owning it. We are more willing to spend on pens that evoke this desire, even though they may not serve any greater utility than a Pilot Metro (or a Bic). It’s easy to understand because I think all of us feel this way for FPs in general – it’s why we devote so much time and money into the products and community – but also impossible because it’s not something you can ever really explain to someone else. I can’t explain exactly why the Visconti Homo Sapiens evokes a feverishly passionate response from me while the Pelikan M805 leaves me feeling rather cold and bored. All I can do is try to communicate the experience of it and hopefully find others who can empathise.

Finally, the nerdiest element: your opportunity costs. Your opportunity cost is simply what you miss out on when you make a decision, and understanding these costs is important because it helps us to make better decisions, by properly considering the alternatives. If you’re trying to choose between a Lamy 2000 or a Pilot VP, the opportunity cost is whichever pen you don’t choose, the other thing you could have bought with your money.

To conceptualise it more broadly, spending $100 or $500 or whatever on a new pen is money that you could have spent on another hobby or something else entirely. We need to weigh up just how much satisfaction or pleasure we’ll get from each potential purchase, and choose the one that will make us happiest. For someone with a lot of different interest, it’s hard to justify spending more and more money on pens because there are so many other ways to find satisfaction. One pen is not simply competing against another, but all the other hobbies and interests a person has. For someone who only really has one hobby (like myself), it’s easier to justify spending more on pens because there’s less competition for that money.

Some of you might be wondering why I haven’t mentioned income yet, which often strikes people as the most important part of the purchase decision. The simple answer is that it only works by changing the opportunity costs. For someone with a small income, the opportunity costs are substantial: putting $15 into a Pilot Metropolitan might mean $15 that can’t be spent on some necessity, like food or rent, and so their valuation of a Metro – how much they are willing to spend on it – is necessarily very low. In spite of considerable passion and desire for the pen, even at that price, it might be more than they are able to justify. For someone with a larger disposable income, the opportunity costs become smaller. It’s no longer a question of food, rent, or pens, but perhaps a question of whether to spend $100 on a new pen or whether to have dinner at a formal restaurant.  Further up the income scale, the question potentially becomes whether to spend $2000 on a new Pininfarina or a new pair of shoes.

So the value of a pen is not just derived from its innate desirability but also by our opportunity costs, determined by our incomes and by how much we value our other pursuits. Two people with the same disposable income and passion for the Pininfarina could reach completely different conclusions about its value, with one person deciding to buy and the other deciding not to. In this scenario, the question of whether the pen is overpriced is obviously subjective: it depends entirely on how much passion the individual has for their other pursuits. The term therefore has no useful meaning, except for ‘this pen is too expensive for me at this time’ (which is not particularly informative). It can only ever refer to an individual’s own perception of value.

While this post has focussed on the use of ‘overpriced’ with the Pininfarina, it’s a common criticism of brands in the FP market, particularly Montblanc. I think it’s perfectly fine for users to make subjective claims about whether their like or dislike any product or brand, or whether they feel their products are good value or not. But it’s objectionable when users forget that these judgements are entirely subjective and then make further judgements about a person. More than once, I’ve seen a user criticise Montblancs as overpriced and imply that anyone who would buy a new MB pen is foolish. To me, this view is incredibly arrogant; I really can’t think of any other word that better describes a person who believes their own values are an objective standard, and judges people on that basis. 

The simple truth is that none of us are in a position to judge anyone else’s spending choices. For most people, it is a real struggle to properly understand the pros and cons of decisions that we have to make, to weigh up the opportunity costs, and decide what will make us happiest. We lack good, reliable information and we make decisions in a cloud of uncertainty. It is orders of magnitude harder to understand what decision is best for another person, what is important to them, what will make them happiest. Even for the people we are closest to – our partners, our best friends, our siblings or children – it’s hard to know what is going to be most satisfying. The best we can do is to help by exploring different options, the pros and cons of each, and then respecting their ability to make the decision for themselves.

When we say a pen is overpriced and judge someone else for buying it, we are assuming that we understand their needs and happiness better than they do. That is really a rejection of a person’s autonomy: a supremely arrogant and disrespectful act.

One of the wonderful lessons of economics has been that people generally make the choice that appears most beneficial to them. The more I’ve come to accept and believe that, the more I’ve tried not to judge people for choices with which I disagree, and instead tried to understand the reasoning behind those choices. Of course, I don’t always agree with their reasons, but it’s much more productive to say “I disagree with your decision to buy an MB because I don’t find them to be terribly interesting pens, and they are not particularly valuable to me” than “Montblancs are overpriced and you’re a fool to fall for their marketing.” I’ve also found that the more respect you show for others – particularly those who disagree with you – the more respect you’re likely to get in return.

I realise this has been a long post but I hope that you’ve found it interesting and useful, and appreciate you reading.