Wednesday, August 09, 2006
The Substance of Style
Is it demand, or is it desire? Explaining what drives innovation and change in real estate.
How many times have you heard that curb appeal is half the sale? Why is it that certain ethnic groups are so keen at using tiles and marbles, whereas others prefer hardwoods and plaster? What’s the scoop behind the trend of new construction – more bedrooms, more bathrooms, higher ceiling clearance? What makes a neighborhood trendy? Why is it that fashionable colors, all of a sudden, are no longer fashionable? In essence, what is it that drives innovation and change in real estate?
Gianni Versace (1946 – 1997), perhaps the most famous Italian stylist and designer of contemporary times, and Andy Warhol (1928 – 1987), one of the major figures of the American Pop Art movement, both had an innate knowledge of one of the most profound tenets of economics, that is the production of wealth comes not simply from labor or raw materials or even intellectual brilliance. It comes from new ways to give people what they want. By matching creativity and desire, the economy will renew itself. Thus, it is imperative to abandon prejudices regarding the sources of economic value.
It follows, that manufacturing and technology generate wealth only when they make matter and information serve human desire. Desire is the true source of economic value, and the motor behind demand. So, to exploit any market – being fashion design as in the case of Versace or Pop Art as in the case of Warhol – since people want pleasure, those who bring pleasure will make the economy go, because what is bringing pleasure is anticipated status enhancement. This rule of thumb applies all the more in a big-ticket industry such as real estate.
Contrary to what most of us believe, humans do not make rational decisions, at least not pre-eminently but, rather, their conclusions are rooted into deeper sources of motivation located well within the realm of sub-consciousness. Marketers already seem to know a lot about how consumers think, but recent experiments in neuroscience have captured the full attention of Corporate America and Corporate Japan. New scanning techniques are making it easier to determine how our minds work and creating hopes in the corporate world, that companies can finally figure out how consumers are wired so as to establish new connections with customers. And the field of real estate sales is at the forefront of this scientific research.
The breakthrough behind all this is the development of functional magnetic resonance imaging or ‘fMRI’, the latest in neuroimaging technology, which displays not only the structures of the brain but also how they actually function by measuring blood flow. And the corporate world is particularly interested in how neuroimaging can be applied to study empathy, trust, deception, emotional communication, body language and generally speaking all issues that are central to human existence and interaction. Decision-making is, of course, at the top of the list.
Research, especially in real estate, indicates that consumers love novelties and, what’s more, can create novelties. Consumers are not mere passive recipients of goods and services but, rather, active producers as well. The reason is that at the basis of production and consumption there is human imagination and desire for novelty. Furthermore, when people actually ‘own’ novelties in the form of goods, they set about to convince others that the possession of such novelties shows that they have achieved a higher status, and that if others were clever enough to do what they did or to possess the same things that they have, then the others too could achieve high status and enjoy all the good things that come from it.
The continuous interaction between desire and demand on one side, and production and supply on the other side, is what rejuvenates and regenerates real estate markets through trends and innovation over and over again.
Real Estate Chronicle