The Psychology Of Scarcity

“When people are told they can’t have something they want it all the more. As a result incredibly powerful emotions are released which go on to drive actions often deemed irrational under normal circumstances.” – from The Psychology of Scarcity

Google is doing it with Gmail…putting a “limit” in place that, in actuality, isn’t much of a limit at all (2GB is a fair amount of email to store). But it feels like one. Ditto with the ability to “get” an “invitation only” Gmail account.

Hugh is doing it, and creating a microtulipmania in the process. He’s producing just 200 of each of his cartoons as t-shirts, and only having four designs available at a time. The interesting thing is, he’s got a huge backcatalog of designs to pull from. So, as long as he is making them available, there will always be a few hundred shirts available, as new designs could be rolled in to replace the old ones that have gone “out of print.” It feels like one needs to act “right away” in order to get a shirt, even though it’s quite possible that there will always be some available.

We see this all the time.

Among a number of interesting dimensions of this “artificial scarcity” is the emergence of secondary markets that are completely irrational. When Gmail first launched, the “undersupply” of Gmail invitiations caused a rich secondary market to spring up on eBay, with people selling Gmail invites at, well, an infinite profit.

(here’s what Andale had to say about the over eight hundred auctions over the past few months)

Completed eBay Listings (February 21 – March 20)
Listing Title…………………………………..Sale Price
100 Gmail invites 1000MB Space each//Instant delivery…$10.50
50 Fresh Gmail Invite – NO Reserve – Instant Delivery…$10.00
GMAIL GOOGLE NEW E MAIL E-MAIL ACCOUNT INVITE ON………$9.99
GMAIL 3 INVITES PLUS 1 CUSTOM AUCTION TEMPLATE SAVE……$6.99
50 Fresh Gmail Invite – NO Reserve – Instant Delivery….$6.50
FIVE 5 GMAIL ACCOUNT INVITES,GOOGLE Mail, 1GB MAILBOX!!..$5.50
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Three things spring to mind:

One: If you are the creator of something, and you have the discipline to not need to wring every short-term cent out of something you’re doing, the resulting buzz based on the scarcity comes back to you, in spades.

Two: This thinking may help to build relationships and (perhaps) community as well. If there are only a “few” of something available, connecting with others who share that thing can be a starting point for a relationship. This applies to both members of the community, as well as to between the creator of the “thing” and the community members themselves.

Three: This kind of scarcity creates a huge opportunity for arbitrageurs in a secondary market.

If the above three points are valid, the relationship-driven folks live in worlds One and Two, and the pure profit-maximization folks live in world Three. All three worlds are valid. Understand which world you’re in. And why.