In late 2001, the U.S. economy was wobbling. The dot-com bubble had burst, 9/11 had just happened, and people were bracing for a recession. Most discretionary spending was sliding.

Leonard Lauder, then chairman of Estée Lauder, noticed something strange in his company's numbers. As nearly everything else softened, sales of lipstick were going up. Not down. Up.

He had a theory about why, and he called it The Lipstick Index.

The logic is pretty straightforward. When money gets tight, people don't actually abandon the urge to treat themselves. They just have to buy cheaper things.

The new handbag is out of reach, so it gets postponed. But a tube of lipstick is only a few dollars. It's a small, visible, instant pick-me-up that delivers a hit of "I bought myself something nice" without denting the bank account. So instead of cutting the treat entirely, people swap the expensive indulgence for a cheap one. Lauder's claim was that when times get hard enough, lipstick sales actually rise.

Here's the part most versions of the story leave out. As a serious economic indicator, the lipstick index doesn't really hold up.

It looked great in 2001. Then the 2008 financial crisis hit, a far deeper recession, and lipstick sales fell right along with everything else. Economists who've dug into the numbers since have found the signal is shaky at best. People do trade down to small comforts in tough times, but whether that comfort is lipstick specifically depends on the era, the trend, and what else is competing for those few discretionary dollars.

So the literal index is mostly a fun piece of folklore. The instinct underneath it, though, is very real.

The reason the idea refuses to die is that the core observation keeps showing up under new names.

Lipstick in 2001. Coffee more recently. When people feel financially squeezed, they reach for small, affordable dopamine hits that hand back a little sense of control. The product changes, but the behavior doesn't.

If you ever sell anything, it’s an interesting takeaway. In a downturn, the businesses that get crushed aren't always the cheapest ones. Sometimes the small, affordable luxury is exactly the thing people refuse to give up.

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PS—There’s a reason the Estee Lauder company has been around for 80 years.