VIPs only: Why the exclusivity economy is booming
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Illustration: Sarah Grillo/Axios
One of the fastest-growing areas of the economy is clubs selling exclusivity — persuading the very rich that behind certain politely guarded doors lies an expanse of grass that's especially green.
Why it matters: Positional goods have historically mostly been material — the bigger house, the nicer car, the fancier handbag. Increasingly, along with the rest of the economy, they're becoming experiential.
- While the price of concert tickets has soared in recent years, inflation in VIP tickets has been off the charts, with premium Taylor Swift tickets changing hands for upwards of $50,000 each.
What they're saying: Exclusive clubs are "sort of the industry du jour," Jennie Enterprise, the founder of the Core Club in Manhattan, told the FT's Josh Chaffin.
- These clubs also tend to create anger among those who don't get into them. The FT's Janan Ganesh argues that the "eternal friction between people with cachet and people with cash" helps explain much of the rise of today's resentful populism.
- Some are permanent, but pop-up events also drive millions of dollars in revenue from individuals wanting to be in glamorous places.
Zoom in: Joseph Bien-Kahn of Front Office Sports has a great profile of Medium Rare, a company that grossed more than $15 million from putting on four events in Las Vegas over the Super Bowl weekend.
- One of those events was under the Sports Illustrated banner and included a single table that was sold to law firm Paul Weiss for $175,000. The magazine qua magazine might be doing very badly indeed, but the magazine qua brand is doing better than ever.
- SI The Party, which took place in Las Vegas on Super Bowl weekend, set a record for most money generated at a nightclub party in Las Vegas history, brand owner Authentic Brands Group told Ben Strauss of the Washington Post.
How it works: Exclusivity is worth real money, even when it's entirely artificial. In an NBER experiment, subjects increased their willingness to pay for t-shirts and art prints by 50% to 60% when members of their group were randomly excluded from bidding on those items.
- That's why it's important that clubs are seen to exclude a significant number of people who would like to become members. When Soho House, for instance, developed a reputation for accepting too many applicants, it ran into serious financial problems as a result.
Reality check: Beyond a certain level of wealth, the ultra-ultra-rich tend to be less insecure — and therefore less willing to pay for positional goods. As Medium Rare founder Joe Silberzweig told Bien-Kahn, "Billionaires never want to pay for anything."
The bottom line: Cities like New York and London are seeing a rash of members' clubs opening up. That's a great way of persuading a very large number of people that they're all part of a very small and exclusive group.
