Tag Archives: alcohol

The Drinkers’ Bonus: Alcohol Intake and Increased Earnings

Drinking alcohol — and the increased social capital that it leads to — may not just be responsible for a possible increase in life span; it may increase your earnings, too.

In an analysis of both the General Social Survey and the published literature, researchers for the Reason Foundation show that alcohol drinkers earn, on average, 10% more than abstainers (pdf). This is known as the drinkers’ bonus.

Recent studies indicate that drinking and individual earnings are positively correlated. Instead of earning less money than nondrinkers, drinkers earn more. One explanation is that drinking improves physical health, which in turn affects earnings (Hamilton and Hamilton, 1997). We contend that there is an economic explanation. […]

Drinkers typically tend to be more social than abstainers. As Cook (1991) explained, drinking is a social activity, and one reason people drink is to be sociable. In the medical literature, Skog (1980) showed that moderate drinkers have the strongest social networks. Furthermore, Leifman et al. (1995) documented a negative relationship between social integration and abstinence. Whether abstainers choose not to be as social or whether organizers of social occasions involving drinking exclude abstainers is unclear. Abstainers may prefer to interact with other abstainers or less social people. Alternately, abstainers might not be invited to social gatherings, work-related or otherwise, because drinkers consider abstainers dull.

Corcoran et al. (1980), Montgomery (1991), and Putnam (2000) each made convincing cases that social networks are important for finding jobs and earning promotions. Montgomery (1991) explained that companies prefer acquaintances of employees because employees screen potential candidates and thereby reduce the cost of search. Approximately half the workers surveyed in the Panel Study of Income Dynamics found their job through friends or relatives, and one-third reported help from acquaintances in obtaining their job (Corcoran et al., 1980). Therefore, a person with more contacts will have more labor market options (Burt, 1997). Granovetter (1995) suggested that a large quantity of weak ties or friends-of-friends may be most important to garnering the best job offers.

Thus, if social drinking enables greater social networks, it will also increase earnings. In terms of search theory: the more one drinks, the more people one knows, and the more people one knows, the lower the marginal costs of search.

The study is packed full of excellent references to published studies (as you can tell from the above excerpt), so I suggest reading the accessible (and very short!) report. It’s also worth noting footnotes four and five, describing how this is just like all investments in capital, in that an optimal level exists: “you must drink more than 21 drinks per week to earn as little as a non-drinker”.

via @phila_lawyer

Drinking Levels and Mortality Rates

Despite the various and severe health risks that come with drinking, abstaining from alcohol appears to increase your risk of dying prematurely. The reasons for this are not clearly known, but it is thought to be because drinkers are more likely to belong to a community (albeit one that drinks), and a feeling of community is strongly correlated with happiness and longevity.

Even after controlling for nearly all imaginable variables — socioeconomic status, level of physical activity, number of close friends, quality of social support and so on — the researchers […] found that over a 20-year period, mortality rates were highest for those who were not current drinkers, regardless of whether they used to be alcoholics, second highest for heavy drinkers and lowest for moderate drinkers. […]

These are remarkable statistics. Even though heavy drinking is associated with higher risk for cirrhosis and several types of cancer (particularly cancers in the mouth and esophagus), heavy drinkers are less likely to die than people who don’t drink, even if they never had a problem with alcohol. One important reason is that alcohol lubricates so many social interactions, and social interactions are vital for maintaining mental and physical health. […]

The authors of the new paper are careful to note that even if drinking is associated with longer life, it can be dangerous: it can impair your memory severely and it can lead to nonlethal falls and other mishaps […] that can screw up your life. There’s also the dependency issue.

The correlations between alcohol intake and various health outcomes (both positive and negative) is confusing and varied. A few things seem to be for sure: it can be good and it can be bad; no causation has been proven; and the effects differ between the sexes.

Update: I forgot to link to the published study (Holahan et al., 2010)… the Results section is the one worth perusing. For those without full access to the study (ahem), Overcoming Bias provides the full list of controls.

Update: Jonah Lehrer discusses this study in an article titled Why Alcohol Is Good for You, emphasising the social side of drinking as the key to longevity.

Narratives for Selling Premium Goods: The Grey Goose Story

People want to pay more in order to own luxury goods, but you need to give them a reason to do so. That excuse? A compelling story.

One man that subscribed to this idea was Sydney Frank, as is evident from the strategy he developed for Grey Goose: the ‘superpremium’ vodka that Barcardi bought for $2 billion in cash in what became the largest ever single brand sale.

In a 2005 New York article published shortly before his death, you can read all about Sydney Frank’s marketing/branding strategy and the compeling story of Grey Goose vodka. This excerpt follows Frank’s decision to have Grey Goose distilled in France:

But why France? Doesn’t vodka come from Russia, or perhaps, in a pinch, Scandinavia? “People are always looking for something new,” says Frank. It’s all about brand differentiation. If you’re going to charge twice as much for a vodka, you need to give people a reason.

“Nietzsche explains that human beings are looking for the ‘why’ in their lives, […] we refer to this ‘why’ as ‘the Great Story.’ The Great Story must be enticing, memorable, easily repeatable, and about what you want your brand to be about.”

For Grey Goose, the brand was about unrivaled quality. Grey Goose’s Great Story hinged on the following key points: It comes from France, where all the best luxury products come from. It’s not another rough-hewn Russian vodka—it’s a masterpiece crafted by French vodka artisans.

It uses water from pristine French springs, filtered through Champagne limestone.

It’s got a distinctive, carefully designed bottle, with smoked glass and a silhouette of flying geese. It looks fantastic up behind the bar, the way it catches the light […] It sure looks expensive.

It was shipped in wood crates, like a fine wine, not in cardboard boxes like Joe Schmo’s vodka. This catches the bartender’s eye and reinforces the aura of quality. Never forget the influence of the bartender. […]

And now the most important piece of the story—the twist that brings it all together: Grey Goose costs way more than other vodkas. Waaaaaaay more. So it must be the best.

This description of Grey Goose’s Great Story perfectly captures the essence of the article.

Health and Alcohol Intake (Men, Women, Wine)

A longitudinal study of almost 20,000 U.S. women is showing signs that moderate alcohol consumption (“one or two alcohol beverages a day”) can lower the risk for obesity and inhibit weight gain:

Over the course of the study, 41 percent of the women became overweight or obese. Although alcohol is packed with calories (about 150 in a six-ounce glass of wine), the nondrinkers in the study actually gained more weight over time: nine pounds, on average, compared with an average gain of about three pounds among regular moderate drinkers. The risk of becoming overweight was almost 30 percent lower for women who consumed one or two alcohol beverages a day, compared with nondrinkers. […]

The link between consumption of red wine and less weight gain was particularly pronounced. […] Some studies have suggested that resveratrol, a compound present in grapes and red wine, appears to inhibit the development of fat cells and to have other antiobesity properties.

The article also notes that while moderate alcohol consumption has been associated with “better heart health”, it has also been associated with an increase in breast cancer risk.

None of this is good news for men:

Studies suggest that drinking alcohol has different effects on eating habits among men and women. Men typically add alcohol to their daily caloric intake, whereas women are more likely to substitute alcohol for food. […]

In addition, there may be differences in how men and women metabolize alcohol. Metabolic studies show that after men drink alcohol, they experience little if any metabolic change. But alcohol appears to slightly speed up a woman’s metabolism.

As before: this is still correlatory, but interesting nonetheless.

Scarcity Marketing

Neuromarketing has recently been looking at The Scarcity Effect:

WORCHEL, LEE, AND ADEWOLE (1975) asked people to rate chocolate chip cookies. They put 10 cookies in one jar and two of the same cookies in another jar. The cookies from the two-cookie jar received higher ratings—even though the cookies were exactly the same! Not only that, but if there were a lot of cookies in the jar, and then a short time later most of the cookies were gone, the cookies that were left received an even higher rating than cookies that were in a jar where the number of cookies didn’t change.

In a follow-up post they look at the case of Knob Creek whiskey using scarcity in their latest marketing campaign (after they announced that there’s a chance they “might run out of their signature bourbon”):

If supply is indeed short, why not cut back on advertising, save a few bucks, and still sell 100% of your inventory?

The answer is branding. Should Knob Creek be known simply as a premium bourbon, or the bourbon that was so good it became unavailable? Should the standards used in the creation of Knob Creek be high, or so high that its makers wouldn’t compromise their manufacturing and aging process to make more available?