Sunday, December 29

Julius Ceasar and Veblan Effect

At 23, Julius Caesar was a junior politician on the way up.

But he had an advantage: confidence and brains.

Sailing across the Aegean Sea, he was captured by Sicilian pirates.

They demanded a ransom: 20 talents of silver.

(That's about 620kg, worth about $600,000.)

Caesar told them they were being ridiculous.

He couldn't possibly allow himself to be ransomed so cheaply.

The pirates hesitated, they were confused.

Caesar insisted the ransom must be raised to 50 talents of silver.

(Around 1,550kg, worth about $1.5 million.)

Now the pirates didn't know what to make of this.

Normally, their captives tried to escape as cheaply as possible.

They didn't understand what was going on.

But if he said he would double the ransom, why argue?

They let Caesar's men go back to Rome to raise the money.

And in Rome, in his absence, Caesar suddenly became very famous.

No-one had ever been ransomed for such a vast sum before.

He must be very special, he must be incredibly important.

That ransom demand put Caesar on the political map.

He had just invented the Veblen effect.

Although Thorstein Veblen wouldn't give it that name for another 2,000 years.

The Veblen effect is when consumers perceive higher-priced goods to be worth more, simply because they cost more.

Caesar had effectively made himself a Veblen brand.

He'd placed a value on himself greater than anyone in Rome.

But, as far as anyone in Rome knew, it wasn't him who had done it. 

It was an independent valuation.

So it must be true.

And because Caesar was now so highly valued, his men had little trouble raising the ransom money.

They returned to the island and freed him.

But Caesar wasn't going to allow the pirates to keep that sort of money.

As a now important and famous man, it was easy to raise a force.

He hunted down the pirates and took back all the money, plus everything else they had pillaged, then executed them all.

So Caesar was now both very rich and very famous.

And in time, with that same combination of confidence and brains, he became ruler of all Rome.

And he presided over the golden age of the Roman Empire.

Expanding it from Spain to Germany, from Britain to the Middle East.

Because Caesar knew that reality begins in the mind.

So the most important piece of real estate in which to stake a claim is the human mind.

How you stake a claim in the mind is by creating a perception.

And how you create that perception is by controlling the context.

Control the context and you control the mind.

Control the mind and you control reality.

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