Book-A-Day 2010 # 156 (7/10) -- Priceless by William Poundstone

Priceless is the latest book by William Poundstone, a writer I blush to realize I've been reading since I was in high school. (I first discovered him from Big Secrets, his first book, and its follow-up Bigger Secrets, which are exactly what they sound like, examinations of trade secrets and other big questions of our times.) It's a book about pricing, subtitled "The Myth of Fair Value (and How to Take Advantage of It)" -- though it only tangentially provides plans for ways to exploit other people's mismatched ideas of fairness. (There is something called "the money pump," but it requires either a research university set-up or a very ingenious organizer, since it involves "buying" and selling different games.)

Priceless starts off as if it's going to be an in-depth look at the German consulting firm Simon-Kucher & Partners (SKP), which Poundstone notes has a staggering, and central, effect on the pricing of major players in nearly every category of consumer goods. But Poundstone instead wanders through the academic background that SKP monetized -- perhaps because academic monographs are easily available to be studied and quoted, and the employees of SKP were not -- and ends up without a strong central spine for his book. Priceless does tell the reader a lot about behavioral decision theory (and its financial offshoots), as well as the theory of coherent arbitrariness, but it does that in bits and pieces, as Priceless entertainingly wanders its way through 57 chapters that often don't clearly lead from or to each other.

So Priceless tells a lot of small stories instead of one large one, and it fails to follow up on its lede; SKP is mentioned here and there throughout the text, but that firm's activities are never central, and Poundstone never makes good on his early promise to show SKP's influence on the pricing decisions of companies such as UBS, Hilton, Volvo, Adidas, Lufthansa, Nokia, Microsoft, and Bayer. (To quote only a few names from a long list Poundstone provides on pp.6-7.)

Along the way, though, Poundstone does give a good overview of the history and state of the art of the academic study of price theory, and makes the important discoveries of that field -- to simplify hideously, that humans primarily decide between differences in prices rather than between actual prices themselves -- clear and compelling. Priceless is a useful book to anyone who sets or influences prices for their business, though not of direct interest to those who are purely consumers of priced goods.
Book-A-Day 2010: The Epic Index
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