Ask Ariely: On Kopi Luwak Coffee, Financial Advisors, and Christmas Cards
Here’s my Q&A column from the WSJ this week — and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.
During a recent trip to Los Angeles, I stopped by a coffee shop offering a very expensive coffee called kopi luwak, or civet coffee. I asked about the steep price, and the barista told me the story of the special process required to make this coffee: A catlike Indonesian animal known as a civet eats coffee cherries and then poops out what are basically beans. People then collect these “processed” beans and use them to make a highly unusual brew that’s said to be smoother than its journey. It can sell for hundreds of dollars per pound. I was curious but not interested (or brave) enough to buy it—let alone drink it. Can you explain why are people willing to pay for this?
First, I think you made a mistake. You should have paid up and tried a cup—in part because you are still clearly curious about it, in part because it would have made a much better story (and what are a few dollars compared to a good story?). So next time you pass by a coffee place with kopi luwak, try it—maybe even get the double shot with hair and all the trimmings.
As for civet coffee’s quality: The promotional material that I found says that civets know how to pick the best coffee beans and that their digestive systems ferment the beans, reducing their acidity and providing a much better coffee. (I have no idea how this works, but the story caught my curiosity too.)
So why are people willing to pay for so much for civet coffee? It’s probably for the novelty and the story—and because the amount (and type) of labor involved is clearly so much higher than your average cup of java. People are generally willing to pay more for something that required more effort to produce even if the product itself is not better—and civet coffee sounds like a prime example of this effort-based-pricing principle.
Finally, I wonder how much people would be willing to pay had the beans passed through not an Indonesian animal but an American human. My guess: That’s too strong a brew for any of us.
Are financial advisors a wise investment? Mine charges me 1% each year for all my assets under their management. Is it worth it?
It is hard to know for sure. But the fact that many financial advisers have different hidden fees suggests to me that they themselves don’t think that people would pay if they charged for their services in a clear and upfront way.
To help you think about this question in your own life, let’s contrast two cases: In case one, you are charged 1% of your assets under management, and this amount is taken directly from your brokerage account once a month. In case two, you pay the same overall amount, but you send a monthly check to your financial adviser.
The second case more directly and clearly depicts the cost of your financial adviser, providing a better frame for your question. So, put yourself in the mindset of the second case, and ask yourself if you would pay directly for these services. If the answer is yes, keep your financial adviser; if the answer is no, you have your first action plan for the New Year.
Every year, when Christmas comes, I feel an obligation to send Christmas cards to everyone I know, and every year, the number of cards I send gets larger and larger. It is now officially getting out of hand. Can I switch to sending cards only to my really close friends?
It is fine to send cards only to your good friends. I don’t think anyone left off the list will be offended, and you will also reduce their feeling of obligation to send you a card next year. And if you really want to eliminate the Christmas-card frenzy, there is always Judaism.
See the original article in the Wall Street Journal here.