The Power of Scarcity

The fast food world gave us an interesting case study in supply and demand last week. By now you’ve no doubt heard about The Chicken Sandwich, the surprise superstar menu item from Popeyes Louisiana Kitchen that’s launched 1,000 blog posts, op-eds and thought pieces.

According to reports, the Cajun restaurant sold out of its entire seven-week inventory in just over two weeks. All of this despite no marketing campaign to speak of.

As what often happens when demand outpaces supply this dramatically, the value of the Popeyes sandwich has exploded on the secondary market. One Maryland man managed to sell his for $100, an incredible 2,400 percent markup over the retail price of $3.99. In a viral Instagram video, rapper Quavo flashes a bag full of the chicken sandwiches and (jokingly) offers to let them go for “a thousand a chicken.”

There are a few lessons investors can learn here—one of them being that people put a premium on scarcity.

Gold and Munis Look Attractive With Limited Supply

Gold is an obvious example. The precious metal is both rare and finite, making it an ideal global currency. Although output continues to grow, the number of large, high-grade gold discoveries has been declining for decades now. Some experts, myself included, believe peak gold is already here.

Copper could soon be in the same boat. The red metal isn’t nearly as rare as gold is, but because of surging global demand, mostly for use in electric vehicles and renewable energy, it’s expected to go into deficit in 2021.

“A single wind turbine can have up to a ton of copper wiring in the massive generators at the top of the tower,” the Oxford Club’s David Fessler told me in an interview last month.