1. “New Learning” Barnard’s Inn Hall Holborn London EC1N 2HH Tel: +44 (0)20 7831-0575 Fax: +44 (0)20 7831-5208 Email : michael_mainelli@zyen.com www.gresham.ac.uk © Gresham College 2007 Mercers’ School Memorial Professor of Commerce Michael Mainelli Fads And Fashions If They’re So Bad, Why Are They So Rapidly Rich?

2. www.gresham.ac.uk © Gresham College 2007 Outline “Get a detailed grip on the big picture.” Chao Kli Ning Information asymmetry Earning curve – the labour theory of value Fads or fashions? Positional goods Tournaments “To infinity and beyond…”

3. www.gresham.ac.uk © Gresham College 2007 Trust in Rationality £5

4. www.gresham.ac.uk © Gresham College 2007 Sour Coupés

5. www.gresham.ac.uk © Gresham College 2007 Sellers > Asymmetric Markets Buyers cannot assess quality before a sale is made. Sellers know the quality prior to sale and gain by passing off lower quality as higher. Sellers have no credible disclosure technology or method. The market lacks effective public quality assurances (by reputation or regulation). The market lacks effective guarantees.

6. www.gresham.ac.uk © Gresham College 2007 Information Asymmetry

7. www.gresham.ac.uk © Gresham College 2007 Earning Curve - Water RBS, sale of Southern Water to JP Morgan £4.2bn Water Aid, public donations ('06) £16.9m Philip Fletcher, part-time chairman, Ofwat, p.a. £100k London plumber, weekend rate, per hour £150 Sewage worker, starting salary (p.a.) £13k Kona Nigari seawater mineral concentrate, 2 oz £16.25 [Management Today, December 2007]

8. www.gresham.ac.uk © Gresham College 2007 Earning Curve – The Sun UK spend on suntan lotion, p.a. £146m Judy Naake, founder, St Tropez fake tans, wealth £45m Antonio Banderas, Police sunglasses endorsement £1.5m Solar physicist, Rutherford Appleton Laboratory, p.a. £29k-£34k Deckchair attendant, Blackpool beach, per hour £5.94 [Management Today, June 2007]

9. www.gresham.ac.uk © Gresham College 2007 Earning Curve - Coffee Value of the global coffee industry: £41bn Nestle, profit ('06): £3.8bn Howard Schultz, Starbucks founder, net worth: £560m Store manager, Caffe Nero, p.a.: £17k-£22k Winner, Singapore Barista Championship prize ('07): £335 Fairtrade coffee grower, Peru, 10.5-hour shift: £1.50 [Management Today, May 2007]

10. www.gresham.ac.uk © Gresham College 2007 Earning Curve – Interior Design Ingvar Kamprad, founder, Ikea, personal worth £8bn Sir Terence Conran and family, worth £68m Laurence Llewelyn-Bowen, licensing deals, £20m Junior interior designer, p.a. £15k-£18k Charles Eames’ Ottoman chair, value £1.5k Painter and decorator, London, per day £160 Part-time sales assistant, Habitat, per hour £4.89 [Management Today, October 2003]

11. www.gresham.ac.uk © Gresham College 2007 Earning Curve - Boats Peter Ratcliffe, CEO, P&O Princess ('02) £2,504,768 Captain, Royal Navy, p.a £65,218-£72,083 Cruise director, liner, per month £3,800-£7,500 Ship-builder, UK, p.a. £14,000-£25,000 Waitress, Queen Elizabeth 2, per month (minimum) £846 Yacht skipper, per week £125 Helmsman, RNLI lifeboat £0 [Management Today, August 2004]

12. www.gresham.ac.uk © Gresham College 2007 Fad?

13. www.gresham.ac.uk © Gresham College 2007 Fad Or Fashion? “Se un’idea è più moderna di un’altra, è segno che non sono immortali né l’una né l’altra.” “If one idea is more modern than another, it is a sign that neither one nor the other is timeless.” Carlo Emilio Gadda (1893 – 1973)

14. www.gresham.ac.uk © Gresham College 2007 Fashion?

15. www.gresham.ac.uk © Gresham College 2007 Typical Risk/Reward Risk Reward Likelihood

16. www.gresham.ac.uk © Gresham College 2007 Fads and Fashions - Risk/Reward Risk Reward Likelihood Fashion Fad

17. www.gresham.ac.uk © Gresham College 2007 Positional Goods

18. www.gresham.ac.uk © Gresham College 2007 Tournament Competition

19. www.gresham.ac.uk © Gresham College 2007 To Infinity And Beyond … Professions Information asymmetry Localized conformity Positional goods Tournaments

20. www.gresham.ac.uk © Gresham College 2007 To Infinity And Beyond … Fat Cats

21. www.gresham.ac.uk © Gresham College 2007 To Infinity And Beyond … Globalisation

22. www.gresham.ac.uk © Gresham College 2007 Uni-Dimensional

23. www.gresham.ac.uk © Gresham College 2007 Discussion 1. Does the internet move us to infinity and beyond lemon markets? 2. Does globalisation lead to tournaments of higher inequality?

24. www.gresham.ac.uk © Gresham College 2007 Fads and Fashions: If They’re So Bad, Why Are They So Rapidly Rich? Thank you! “Get a big picture grip on the details.” Chao Kli Ning