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Scroogenomics: Powerful economic incentives to use Wishzilla

Read our take on the book Scroogenomics by Joel Waldfogel

By Rob Watts, Wishzilla Co-Founder

Last week Chris (my fellow co-founder of Wishzilla, and the originator of the Gift Box Server) forwarded me a review by Orson Scott Card of the book Scroogenomics by Joel Waldfogel. Chris was completely baffled by the review, and kept saying how he just didn't understand it. "This just shows that everyone needs to use Wishzilla," he said.

So I picked up a copy of the book (or at least downloaded the Kindle version on my iPhone). While reading it, I realized that Chris would be confused by the whole Scroogenomics concept, because he and his family have been using the Wishzilla system for fourteen years. They've forgotten what it's like to get lousy gifts! I remember, and I have to tell you Wishzilla does no less than completely revolutionize gift giving. And Scroogenomics proves why.

Let me explain.

Lost Value

Woldfogel claims that a massive amount of value is lost when we as a society collectively buy unwanted gifts. According to his research, people value gifts from others at about 85% of the value paid, meaning that 15% of the value simply evaporates into thin air. You see, normally when you pay for something you value it more than the cash you pay for it; you wouldn't part with the money otherwise.

That means that, on average, if you spend $1000 shopping for gifts for your family over the holidays, it's like burning $150 of it. So from a purely economic standpoint, it's better to just give away the cash.

"Worldwide, " Waldfogel writes, "we're spending a few hundred billion dollars per year on the holidays. in the process, we're destroying $25 billion annually."

In other words, sign up your friends and family on Wishzilla and together we can put that $25 billion to better use!

I highly recommend picking up a copy of Scroogenomics ( $9.95). In the mean time, here are a few more thoughts to ponder.

Sentimental Value

Waldfogel's analysis does not account for sentimental value, which is something of an intangible. I think trying to value sentiment in dollar figures is pointless anyway. If you are just giving away sentiment there is certainly no need to pay a lot of money for something. And I don't think your Aunt May gave you that hideous sweater because she expected you to like it for sentimental reasons. She actually thought you would like to wear it, even though the only reason you keep it is so you have it just in case she happens to ask.

So if you calculate the economic value of receiving a gift you actually wanted (which you value more than the price tag, just like something you would buy), and then tack on the added sentimental value of receiving that perfect gift from the perfect giver, you have a winning proposition. You are creating value rather than destroying it, which makes economists very happy.

The Element of Surprise

So you decide to use a wish list or registry like Wishzilla because you are sick of struggling to find decent gifts, and really hate cluttering up your house with unwanted brick-a-brack. Woldfogel actually suggests using registries to help maintain the value of gifts.

"If surprising your recipient is not absolutely necessary," Waldfogel writes, "then there are some easy solutions, such as gift registries or wish lists."

This is indeed the case with the vast majority of registries out there. First of all, you know what's on your list, and secondly you know what has been purchased by just looking at the list. You may not know who purchased it, but you know of a certainty that it has been purchased just by looking at your registry.

This is why here at Wishzilla we work so hard to maintain the surprise. With every new feature we add, keeping gifts a surprise is always paramount, a requirement that often adds layers of complexity to an otherwise simple piece of functionality.

So, Professor Joel, we would like to respectfully disagree that using a wish list ruins the surprise. You just aren't using the right wish list.

Giving Well

Oh, I didn't already have one of these.
Oh, I didn't already have one of these.

Gift giving is a nuanced art. It's not always easy to anticipate what someone wants and needs, yet the pleasure of giving a beautiful gift, and receiving something truly memorable from a treasured friend or loved one is undeniable. But gifting is comprised of both the giver and the givee, and fostering good communication between the two parties is essential to a meaningful exchange.

In ideal relationships, we would know each other so well that there would be no need to communicate specific desires. In reality, families are spread far and wide, kids leave for college, trends in fashion and technology advance much too quickly to keep track of, and life is full of complications that make good gift giving decisions extraordinarily difficult.

That's why Wishzilla goes out of its way to provide easy means of gauging the needs of your friends and family. Our long-time users will tell you that a wishlist often just provides a springboard for ideas about the right gift. They make sure that their profile is populated with their sizes and color preferences, and add a variety of items to their wishlist to fit every budget.

Some users have told us that the best thing about Wishzilla is that it provides a snapshot of someone's life at a particular moment. It gets the creative juices flowing, so to speak, and makes it much easier to choose an appropriate gift. It might be the exact wish, an upgraded version of it, or something not on the list but of the right size to fit.

Let's talk about teenagers for a second. If you think you know what your teen wants, just wait five minutes. It's bound to change. And there's the problem that you might know what they want, but it just might not be appropriate or necessary to indulge them. But knowing what they want is a great starting point, and helps avoid the seemingly inevitable gifting faux pas. "Oh, thank you! I've always wanted one of these," to the family, accompanied by an acerbic smile, and, "I already have like three of these, and besides, it's so yesterday morning," to the friends.

Communicating what you want and need is critical. But communicating what you got for someone? That's where gift registries get it wrong. The system shouldn't give away the fact that someone, anyone, will be giving you a particular gift.

Most of the fun of gift giving is striking the right balance between finding out what someone wants and keeping the fact that you know what they want a secret. At Wishzilla, we understand that balance.

You went out of your way to make sure that your mom has absolutely no clue that you actually got her that fabulous day spa trip she's wishing for. We won't tell if you don't.

Sometimes just volunteering together<br> is the best gift you can give
Sometimes just volunteering together
is the best gift you can give

Gift Cards and Charitable Giving

Times are tough, and we're all having to tighten our belts and make some hard decisions when it comes to our purchases. But chances are if you are reading this, you're better off than more than 99% of the world's population. In Scroogenomics, Joel Waldfogel suggests giving charity gift cards, and outlines a lot of other great ideas to deal with the roughly 10% of the value of regular gift cards that is never redeemed.

But the fact remains that gift cards are almost as wasteful as unwanted gifts. If 10% is wasted anyway, that's not much different than wasting 15% of value on unwanted gifts. It's better to just make sure you're getting what people want.

Frankly, I think gift cards are almost as much of a cop-out as cash. You still have to take the time and resources to go back out there and go shopping with the gift card (okay, I know some people love shopping, so maybe it's not so bad).

But I think Waldfogel is on to something with the charity gift cards, so I propose to go to the next logical step.

If you really have everything you need, consider making a wish of a charitable donation. The next time you're listening to the fund drive on your local NPR station, make a donation if you can, and add the wish of a donation to your wishlist no matter what. Or, make a wish for a volunteer day at a local soup kitchen. That tells your friends and family that giving back to the community is important to you, and that giving a specific donation in your name is the best possible gift to you.

Once a gift to your favorite charity is on your wishlist, your friends and family can show their support by both fulfilling the wish and hitting that little "me too" button to add the wish to their wishlists as well.

To Wishzilla or Not to Wishzilla

We think Wishzilla is a great way to do gifts. We've been working on making it that way for over fourteen years (in Internet time, that's like... going back to the stone age), and our long-time users will tell you that it works.

"It’s just what our family uses every Christmas," says Judy from North Carolina. "It made our shopping so easy this year, knowing that we were getting folks exactly what they wanted!" from Tami in Ohio.

Scroogenomics proves that bad gift giving ain't funny. It costs. We think it's time for a gifting revolution. Now, there are lots of wish list services out there that can help you hone in on the right gifts. Find one that works for you and use it. But however it happens, we really need to stop this nonsense of just giving willy-nilly.

It just so happens that we've built Wishzilla to be the best way to do gifts, period. Give it a try and you won't be disappointed.

Last year we declared war on regifting, a wasteful practice easily avoided by just giving a great gift in the first place. Well, this year we're taking it to a whole new level, and we're asking you to help us put our economy back on track by giving gifts that will truly be valued.

Scroogenomics? Bah, humbug! Hello to Zillanomics!


ekimdrofla show [+]hide [-]
2010-01-21 02:43:45

Well, I really don't understand the economic objection, but that's probably because I've never felt like I really have a grip on economics. I mean, I don't understand how money is ever "wasted." All money does is go around in circles anyway (I think...). I do think the secret registry idea (a la Wishzilla) is a good one, since I do understand the problem of unwanted/undervalued gifts--for both the giver and the receiver. My only real problem, I guess, is my personal reluctance to post my wants. Somehow (and pretty much subconsciously) that seems to smack of selfishness, egoism, whatever. Just assuming that someone wants to give me a gift, and then somehow trying to manipulate them into giving me a particular item. But then the article even addresses that (although obliquely), with the idea of the registry being a springboard for ideas. And then there is the problem, especially with kids at a distance (grandkids, nieces and nephews, etc.) of knowing what the recipient already has, not to mention what they are really interested in this week. So I guess overall I like the secret registry idea. I just need to get over my reluctance to make my wishes known. Which, after all, is perhaps a kind of egoism itself.

vzavor show [+]hide [-]
2010-01-21 03:48:37

I don't think wishing on wishzilla is about making other people buy you what you want. For me, this is more about telling people who you are through what you want. I'm not asking my friends to give gifts to me, it's more when they want to give, they know exactly what I want. I think this is great.

rw show [+]hide [-]
2010-01-21 06:50:21

@ekimdrofla, that's part of the irony of gift giving. You want to be surprised with something that you want, but it's not exactly polite to just tell them. If you know someone is interested in giving you something, doesn't it behoove you to give them a little guidance? Making an online wishlist is actually more anonymous than just coming out and telling (or asking) someone, and can avoid those awkward little moments when people are struggling to figure out what you want. As for the egoism, just make sure that the stuff on your wishlist reflects who you are. Make non-monetary wishes, for example. Or wishes for charity, as I mentioned.

I was also kinda struggling with the economics of it. Isn't money kinda like the water cycle... what goes up must come down? If it is, that doesn't mean you need to give all your water away to someone with a leaky canteen. I'd prefer to think that you could spend less money on a great gift, and keep more money in your pocket while giving something that's actually appreciated. If perceived value is an economic indicator, it's a win-win situation.

md show [+]hide [-]
2010-01-28 23:42:04

I think the money is only "wasted" in the sense of perceived value. I agree with ekimdrofla that the money has done its purpose regardless -- it's out there lubricating the economy. Sure the money is "wasted" in the sense that it didn't have full impact on the person receiving the gift, but tell that to the guy working in the factory that produced the lousy sweater.

I think the biggest problem with any sort of a registry is that it commercializes gift giving so much. As the old saying goes, it's the thought that counts. The most successful (and possibly first?) registry out there was/is the wedding registry. It's efficient and convenient, and avoids the whole problem of getting a porcelain rooster from great-Aunt Melba. But I think the reason that registry is such a hit is 1) it's a rare event that 2) involves more than one person who 3) need everything and 4) are putting a lot of money out on the line to have YOU over as THEIR guest at the event. So, by nature the gifts should be practical and based on need, and are in the spirit of reciprocity rather than emotion. Also, you might know what the bride would like, but not the groom, and the registry helps with that. In short, a wedding is the rare event where sure, the thought still counts, but it's generally acknowledged and felt on both sides that the transaction is more grounded than that. And because the new couple needs pretty much every class of thing, the choices are varied enough that people can still find something in there that they would WANT to give even on their own (so there's still some personal thought there).

In my opinion, this is why many people object to the broadening of registries beyond weddings: for other events, it just seems crass. And people do seem to just give money more in response, like, "If you're going to commercialize this and make it about the material goods, then why bother with the pretense, here's cold hard cash." If not done right, it can take the joy, fun, and good will out of it, and replace it with a feeling of just being imposed upon (hit up) for a gift. Sometimes it's the very convenience of a thing that is its downfall, when the point is really the process.

I think the WishZilla concept is good because it strikes the balance. It's not saying "Buy me this", it's saying "This is the kind of thing I like". And the person doing the buying still gets to shop and choose and surprise, and the person receiving can also be surprised. One of the most memorable gifts I ever got was a watch I asked for, but didn't expect. This was back in the eighties when calculator watches were all the rage, and my grandfather knew that's what I wanted, but boy I didn't expect the super cool full on data storage watch he got me! He put the extra thought in, and surprised me with something I didn't even know existed. I think this is the sort of thing WishZilla is able to mediate.

It's a tough balance to hit though, and WishZilla is about the best out there for striking the best of both worlds in that regard.

rw show [+]hide [-]
2010-01-29 20:37:30

The book talks a bit about how the money is "wasted," and the whole thing is really an extension and refinement of the article Waldfogel wrote in 1993 called "The Deadweight Loss of Christmas," and published in the American Economic Review (just Google it). You need to be an economist to understand it completely, but apparently this is a microeconomic measurement that impacts individuals, rather than a macroeconomic one.

Other causes of deadweight loss (again, Google is your friend) can be enlightening. These include things like taxes, tariffs, and monopolies. From my understanding of it, buying a gift for someone you don't know that well has an inherent "gift tax" of about 15% of its value on average.

You make some good points about the nature of gifts and sentimental value. I'd almost take it a step further. Take Valentine's day, for example. It seems that the gifts that are most highly prized are the ones that manage to have the highest deadweight loss if you discount sentimental value. You are essentially buying sentiment, and the more you spend, the more you get. You could buy the roses for 1/4 the price any other time of year, and they still only last a week and smell just as sweet, but spending $200 on that day buys more value. God forbid you should actually buy something useful for a Valentine's Day gift!

As for wedding registries, I agree that they are a more accepted form of the commercialization of gift giving. But one problem that they have is that they are typically only at one particular store (Macy's comes to mind, of course). For our wedding we found this beautiful silverware at Macy's, but didn't get very many place settings because of the cost. Later, a good friend got us the remaining settings from an online store at a fraction of the price at the department store. So I think Wishzilla has the opportunity to revolutionize wedding registries as well, simply because it is not affiliated with any particular retail vehicle.

Wishzilla exists because Chris's family enjoys gift giving but not the commercialization of it. But I agree that there is a certain cultural taboo about just asking for what you want for your birthday or the holidays (at least if you're older than about 10). Our regular users will tell you, however, that once you overcome that initial barrier the experience is refreshing and rewarding. Waldfogel's original 1993 paper actually helps explain why.

"I find that gifts from friends and 'significant others' are most efficient, while noncash gifts from members of the extended family are least efficient and destroy a third of their value," he writes in the introduction.

This is really what we've found with Wishzilla as well: it works best for extended families. And once you get over that initial taboo, you'll find that it also helps with bringing meaning back into gift giving by communicating the things that are most important to you, even (or especially) if those things have no monetary value.

co show [+]hide [-]
2010-01-29 21:11:06

Wishzilla exists because I got tired of everyone asking "What do you want? What do you want?" around birthdays and Christmas. I'm sure everyone that hasn't signed up for Wishzilla (or has only done so recently) is very familiar with that practice. And how is answering the "What do you want?" question any different than setting up a wishlist or registry?