Cheap conveniences build wealth
If you really want a high end electric car, and you have the money, then you can buy a Tesla. You’ll end up paying through the nose though. It is super expensive, and that is not just because it takes a lot of work and resources to make. It is expensive, because Tesla wants the profit, in order to reinvest it into energy projects.
No way you can get a similar car cheaper. Unique products like Tesla cars have no alternatives, so the people who really want their functionality will end up paying up, even if the price is much higher than the fair price.
Rice and potatoes are commodities, because they are easy to find everywhere for about the same price. If I am trying to sell you rice for a hundred dollars per kilo, you will not buy it. I cannot make much profit from any commodity, unless I sell a lot of it.
Tourist attractions and museum tickets are not commodities as each
attraction is unique by definition. Some people really care about that
specific attraction, so the owners increase the
seller profit as
much as possible. It traps the stupid tourists the way a sticky band
traps flies in the summer. Attracted by the shine, the tourists get
stuck there and part with a sliver of their wealth and their
spine. When the time comes to make a big decision, their softness
makes them vulnerable to the hardened tourist trappers.
Tourist traps are almost always wealth traps, rice and beans are
almost never wealth traps, and Tesla cars are often wealth traps. When
we fall for wealth traps, total cost of our decisions can be as much as
useful need because we give a lot of profit to the seller. Or
even more! When the two sides are equal, we are just spinning our
wheels to build wealth for the trappers.
Why the fuck do we ever do that? Are we that stupid? No. We aren’t
that stupid, but we see things the wrong way and make errors. We are
happy to fall for wealth traps and oblivious to the exploitation,
because we are perceiving our need as very high, and think that paying
up will fix it. We don’t immediately realize that the money we are
spending were worth our hard working time. Yes, we aren’t that stupid,
we know that we can spend
time and work to get
money. But we don’t
fully get that it is a two way street and that we can spend
back to get
time. Instead we spend our money on bullshit.
Ugh, this sounds horrible. Are such trappy products and experiences
bad for society as a whole? Not necessarily. They just shuffle wealth
around but do not immediately destroy it. A tourist trapper might be
better at managing money than the trapped tourist. Tesla invests in
research which could potentially pay off a lot. Sometimes the
need for the buyer is even higher than the price. If a very
productive and highly paid person buys a Tesla, the time and energy
saved when the car runs on autopilot might be worth more than the cost
of the car. It is a win-win, but it might be more like
win-WIN. Free-markets encourages producers to seek advancements in
technology in order to get an edge on other sellers and get more
All-right, this doesn’t sound so horrible any more. Individual persons
can lose a bunch of their wealth in order to improve overall society
well-being and the entrepreneurs who invent new awesome products and
seller profit. Yet, the small person still seems
fucked. Rich get richer as they get equity in the new enterprises, and
consumers are constantly getting fleeced from any wealth they
accumulate. Seems like a vicious cycle which promotes wealth
inequality and slow rise of the standard of living for the
poor. Capitalism, yo.
Can the small guy escape? Yes. Is it easy? I don’t think so. But it is
probably not too complicated. To better dissect the topic I’m actually
going to go back and revise my wealth equation. I’ve been talking
useful need, but really, what I’ve been meaning is
productivity. And the productivity can be split as
convenience. Needs are hard and non-negotiable. Shelter and
food. Clothes and water and health. Conveniences are things we prefer
to have, but will survive without them just fine. Lets look back at
the revised wealth equation:
wealth increase = + need + convenience - natural resources fair prices - total seller profit - hidden environment cost
When we are in a tight situation, against the wall, and we’ve made
commitments, we increase our
need becomes higher. This comes at the
convenience by the same amount. Smart sellers know that we
cannot back out of our commitments and our need has increased and can
ask for the higher price, knowing that we will pay. If another seller
tries to compete with them and offer a cheaper, less convenient
product, that product would not satisfy the new
The way out for the poor guy is to gradually gather up wealth, which
means to make decisions, to buy products and experiences, to engage in
activities which increase wealth. If we are in the position of the
poor guy, there are multiple viable ways to do escape. We can work or
be entrepreneurial, which directly adds to our wealth. We can purchase
commodities, where a seller cannot increase the price, so we satisfy
our needs without parting away with wealth. And we can sacrifice some
convenience, when it comes too expensive, in order to get the better
deal, the one which adds to our wealth.
The first two are pretty obvious. Earn more and spend less. But the
convenience trick sounds counterintuitive. Inconvenience invokes the
image of austerity measures. When I was growing up, I often heard the
phrase “the economizing is the mother of the misery”. Scary… Do we
need to live in misery and in order to save up? No. We should feel
free to spend a reasonable price for shelter, decent food, warmth and
health care. And we should get convenience when we can get it cheaply.
Convenience is almost always overrated. Inconvenience sounds like a loss of time and effort, and we are very loss averse, so we try to avoid it. But the truth is that once we’ve experienced the inconvenience, our mind starts thinking about how to overcome it. While there is the obvious way - pay up to the trapper - there are alternative creative solutions as well. The more we need to deal with the inconvenience, the more economies of scale kick in and we become more efficient. Which makes the inconvenience lower. We also adjust our baseline perception of convenience through hedonic adaptation. More power to us, as we get to save more of our wealth.
We have a choice. Whether to get expensive convenience now, or wealth later. We will always pick at least some convenience in the present tense.
Internet is an example of something that is very convenient and cheap. It is cheap because it is a commodity at a price similar to the fair price to build the infrastructure for it. And it can provide a lot of free information, services and connections. A cheap convenience like the Internet makes the society more wealthy and prosperous. Other cheap conveniences are bicycles, home cooked meals and to some degree - airplane transportation.
My current opinion is that learning to recognize the cheap conveniences will make us wealthy and won’t hurt the economy and prosperity of the society.