A week in summary: Scrutinising Black Friday and Rocketing to Mars

  • This year, deals have been springing up all over the place in not so seasonal patterns. Black Friday deals therefore haven’t been as comparatively good when viewed from the lens of many products and services having already been offered at discount. Furthermore, many of the great sales are online rather than in-person.
  • The rich have gotten richer with COVID-19, with 31 new billionaires this year. Last year in November 2019, Elon Musk had a fail when his claim of the Cybertruck’s armour glass fell flat during a live demo. Tesla stocks dropped a little and his net worth was around $23.6 Billion. This year, November 2020, in this one year, his net worth has skyrocketed instead by nearly 6x up to $130 Billion. He’s now the 2nd richest person in the world, just behind Jeff Bezos with some claiming Tesla isn’t just a car - it’s a club.
  • Salesforce in a battle with Microsoft, may buy Slack to compete with Microsoft teams. Salesforce has been a huge winner in the work from home market due to the pandemic (they also acquired data viz software Tableau last year), whilst Slack hasn’t been so successful in capitalising on this opportunity.
  • TikTok gains another 7 day extension week to resolve US ownership. The biggest advocates trying to save TikTok, who even file court appeals on their behalf - 20ish year olds creators, some of them making significant sums per video through sponsorships. Other Chinese software companies face similar challenges in India.
  • Hacker houses are making a comeback. Exhausted with the current mode of remote schooling at Stanford and Yale, Kendall Titus and Coco Sack have created Womxn Ignite, a hacker house for women majoring in CS fields. Others included Maker Manor.

Black Friday Deals - Are they really deals?

According to the consumer group Which?, nearly 9 out of 10 Black Friday deals are actually available for the same price or less earlier in the year.

There may appear to be some great deals during Black Friday. Some of them encourage you to take the final step and buy something that you have been eyeing for a while. Black Friday however is no longer what it used to be. The Economist notes that Black Friday typically attracts more than twice the foot traffic of any other annual shopping periods in the U.S. This year however, due to COVID-19 and a greater reluctance to be elbowing someone for heavily marked down goods, retailers have stretched Black Friday from a 24 hour spree into several week long ones. Holiday discounts have started as early as October 11th.

Prior to the November UK lockdown, retailers along Oxford Street, Europe’s busiest shopping street was lined with heavy discounts. This increased shopping spending and high street retail discounts was spurred on perhaps by the boost from pedestrian footfall from the Eat Out to Help Out initiative during August where the UK government subsidised dining in by 50% on up to £10 per diner per meal.  

When it comes to buying online, a shopper can more easily access an array of prices across channels. They can also purchase digital goods whether it be software or content. A popular shopfront for such digital creators is Gumroad where an independent maker such as the Cyber Plumber can offer massive discounts for Black Friday.

Screenshot taken 27th November of the Cyber Plumber's Black Friday Sale

So when it comes to online deals, are these actual discounts to the usual price or just a sales strategy?

To do so, let’s look at a notion called psychological pricing.

Four of the main pricing seller mental model tricks are artificial time constraints, charm pricing, innumeracy and price appearance.

Artificial time constraints is a seller strategy to promote a sense of ‘urgency’ to the buyer. Playing on customer fears of artificial demand for a product - limited buy - running out… the seller tries creates an effect that the supply of the demand is limited and encourages the buyer to bring forward their purchase.

During Black Friday, the Hustle employed The Brex strategy of the fake email forward for their newsletter pricing.

It was a strategy which was shortly employed by a bunch of others:

The strategy worked for The Hustle with their product Trends having in $15K in sales in 15 minutes of the email’s release (as tweeted by Steph Smith, a writer for The Hustle). What they and a few others who shortly copied the same strategy did is called price framing. By framing the price for the consumer as a must not miss deal, they created a perceived ‘higher value’ with an urgency for the potential customer to purchase now rather than later.

There’s another two other reasons for why The Hustle chose $99 as the price for Trends. The first is they utilise the tricks of Charm Pricing and Price Appearance which is where the seller tries to create a perception that their offering is cheaper than it is. Using $99 makes it far more appealing to the potential buyer. It seems a much better deal than $100 as just two digits. It is also better than $98 as the price seems to be ‘just right’ for what they ‘usually’ charge. Psychology experiments recommend using the numbers of $95, $97 and $99. The number pricing being chosen on what it is supposed to contrast.

Just take a look at Udemy’s fake ‘massive’ discount as an example of how well artificial time constraints, charm pricing and pricing innumeracy works. With constant 90% discount and $10 courses to urge buyers to get the course ‘NOW’.

Another strategy is playing on people’s innumeracy. Dominos and Pizza Hut tend to do this their 2 for 1 deals. Although getting two for one is the same as 50% (and oftentimes these 50% are on marked up prices), people exhibit a preferential purchasing behaviour in the former over the latter.

One needs to be wary about pricing. Without naming names, one of the above organisations gave a Black Friday deal which was very close to what was their normal pricing anyway. There are indeed some good deals but to avoid falling into regret, apply the purchase pause mental model.

In more positive news…

Check out what Bart Decrem, one of the leaders of Mozilla's Fix The Internet Initiative has to stay about entrepreneurship and keeping positive. Having previously founded Tapulous (one of the first viral iOS game hits with TapTapRevolution) and another 25 #1 iPhone app hits - Bart's a serial entrepreneur. With his involvement in Disney's mobile games division as SVP and in launching FireFox 1.0, we explore what it was like for Bart to leave Belgium for Stanford, being in the middle of the Paypal Mafia silicon valley hype, how to be an entrepreneur and what matters most for the journey of entrepreneurship.

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