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No point of market saturation for housing or craft beer bars

As a famous economist once said,”If you book them, they will come.”

Another generic brewery coming soon to a location near you.
Another generic brewery coming soon to a location near you.

Dear Hipster:

I’m no economist, but I think I have learned a thing or two about markets merely by watching the world around me. For instance, I was not surprised to hear housing prices have fallen for the first time in something like a decade. I could have hazarded a guess that was the case based on nothing more than the aggressive selling and house flipping I have watched in my neighborhood in the recent past. A couple of years ago, houses would go up for sale and they would sell the very same day. Everybody was moving out of the neighborhood left and right, “trading up,” if you will, and the house flippers were at it like crazy! Then, all of a sudden, houses started taking a few more days to sell; then a week; then a little longer, and a little longer; then, next thing you know, the news announces a dip in housing prices for the first time since seemingly ever. Nothing lasts forever, after all. Anyways, I have been observing the gradual replacement of conventional small businesses in and around my neighborhood with craft beer bars and breweries. Common sense dictates there must be some outer limit of hipster consumption such that our local market could only sustain so many. Yet, every time I think “Well, surely there isn’t room for another hipster bar,” I hear about how some local storefront will soon be replaced by yet another brewery, or maybe a bar. I realize hipsters are very thirsty, but surely there must be some limit to how much beer they can drink, and to how many different venues could divide up the local market of thirty hipsters before there weren’t enough hipster dollars to go around. Is there no outer limit?

— John, Normal Heights

Perhaps most importantly, the market for hipster hangouts is not bounded by demand for any static good. Sure, hipsters love overproof beers, but they really love being the first person to try a new thing. In reality, the demand for any given hipster joint actually peaks before the place even opens up. At that point, the hype machine is in full force, and local hipsters will be girding their loins for the opportunity to be the first person through the door, thus poised to issue definitive edicts to the unfortunate hipsters who boarded the hype train too late and thus had to settle for a second-hand account.

As a corollary to this first point, the objective imbibing ability of the hipster community is not the primary driver for the perpetually booming market in hipster dives, breweries, and craft cocktail emporia. Rather, the imminent or actual arrival of some new and heavily hyped gathering point for the world’s drunken hipsters creates its own, unstoppable momentum. As a famous economist once said,“If you book them, they will come.” Even if they don’t want a beer, they will be unable to stay away.

Thus, there is no point of market saturation for hipster social anything. For example, the market can effectively support n+1 craft beer breweries, where n is the number of craft breweries currently in existence at the time any given group of hipsters debates where to spend their tax refunds, quarterly bonuses, and the proceeds from selling the third-hand Lexuses their parents grudgingly gifted them as graduation presents.

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Another generic brewery coming soon to a location near you.
Another generic brewery coming soon to a location near you.

Dear Hipster:

I’m no economist, but I think I have learned a thing or two about markets merely by watching the world around me. For instance, I was not surprised to hear housing prices have fallen for the first time in something like a decade. I could have hazarded a guess that was the case based on nothing more than the aggressive selling and house flipping I have watched in my neighborhood in the recent past. A couple of years ago, houses would go up for sale and they would sell the very same day. Everybody was moving out of the neighborhood left and right, “trading up,” if you will, and the house flippers were at it like crazy! Then, all of a sudden, houses started taking a few more days to sell; then a week; then a little longer, and a little longer; then, next thing you know, the news announces a dip in housing prices for the first time since seemingly ever. Nothing lasts forever, after all. Anyways, I have been observing the gradual replacement of conventional small businesses in and around my neighborhood with craft beer bars and breweries. Common sense dictates there must be some outer limit of hipster consumption such that our local market could only sustain so many. Yet, every time I think “Well, surely there isn’t room for another hipster bar,” I hear about how some local storefront will soon be replaced by yet another brewery, or maybe a bar. I realize hipsters are very thirsty, but surely there must be some limit to how much beer they can drink, and to how many different venues could divide up the local market of thirty hipsters before there weren’t enough hipster dollars to go around. Is there no outer limit?

— John, Normal Heights

Perhaps most importantly, the market for hipster hangouts is not bounded by demand for any static good. Sure, hipsters love overproof beers, but they really love being the first person to try a new thing. In reality, the demand for any given hipster joint actually peaks before the place even opens up. At that point, the hype machine is in full force, and local hipsters will be girding their loins for the opportunity to be the first person through the door, thus poised to issue definitive edicts to the unfortunate hipsters who boarded the hype train too late and thus had to settle for a second-hand account.

As a corollary to this first point, the objective imbibing ability of the hipster community is not the primary driver for the perpetually booming market in hipster dives, breweries, and craft cocktail emporia. Rather, the imminent or actual arrival of some new and heavily hyped gathering point for the world’s drunken hipsters creates its own, unstoppable momentum. As a famous economist once said,“If you book them, they will come.” Even if they don’t want a beer, they will be unable to stay away.

Thus, there is no point of market saturation for hipster social anything. For example, the market can effectively support n+1 craft beer breweries, where n is the number of craft breweries currently in existence at the time any given group of hipsters debates where to spend their tax refunds, quarterly bonuses, and the proceeds from selling the third-hand Lexuses their parents grudgingly gifted them as graduation presents.

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Au contraire, Hipster. There is definitely such an upper limit, and it has been reached in many areas. The Reader beer-reporting staff is lamenting the closure of many craft breweries and brew pubs. Saturation has been reached, and there will be more consolidation and weaker operations will be falling by the wayside. John is onto something here, and it isn't going to be good for the local micro-and craft-brewing industry.

July 3, 2019

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