It looks like Dr. Dre might have pulled off the heist of the century. The rapper became big news after signing a massive deal with Apple to sell his “Beats by Dre” line of headphones for a stunning $3.2 billion dollars. The headphones have been branded as “premium” in a series of ads and celebrity endorsements that have created the perception among consumers that they are among the highest quality.
But this may not be the case. Although the sound quality is considered good by those who love the brand, the product can also be put in the same category as Air Jordan sneakers, products that have a modest production cost, (and could be sold for a lower amount) but have been branded to urban consumers as enough of a fashion statement that people (even the poor) are willing to pay as much as 20 times the value of the original asset.
A New York Times story estimates that the headphones, which sell for as much as $450, only cost $14 to make. Also, Time Magazine ranks the headphones as the second to worst out of 18 brands that they reviewed in a recent article.
The moderate quality of the product hasn’t stopped consumers from eating them up, primarily because they have become a status symbol. The brand had $1.8 billion in sales last year, and have made Dr Dre, Jimmy Iovine and The Carlisle Group filthy rich.
Financial Juneteenth lessons from this story:
1) Marketers are trained to play with your head. They create value where there is none and sometimes play on your own inadequacies or need to impress the people down the street to get into your pockets. The more you are easily influenced, the more they will get you to let go of your money. This works well on black people because we’ve been taught to believe that we can purchase our dignity. This is not a mentality that leads to wealth building, and will only lead to the accumulation of material possessions of questionable quality.
2) African Americans are often fooled by over-priced brands, largely because hip-hop has bred a culture of mass materialism. Making matters worse is that many of the companies that charge high prices for low value commodities are not very interested in hiring black people, working with black suppliers or giving back to the communities from whom the wealth is extracted. So, while Dr Dre may be able to benefit handsomely by selling his Compton-based street credibility around the world, he and his handlers scoff at the idea of using their vast resources to solve the very serious social problems which exist in the city of Compton. They are able to get away with this because many black people are naive enough to allow it.