One of the arguments against the FIRE community and seemingly radical savings is that if everyone stopped spending money, the economy would collapse. It’s an interesting argument, but it’s not showing the whole picture, and while it’s not wrong for this reason alone, it’s an argument often presented by people who are terrible with money and are looking for an excuse.
First of all, I think there is value in supporting businesses. On an individual level, I don’t think this is necessary, but I do see goodness in spending money on things you get value from. But this doesn’t mean you have some obligation to spend money, especially not on things you DON’T get value from, and this is the key to the issue.
There are three general ways a company can get money from you:
- They can sell you something that you get value from
- They can sell you something that you don’t get value from after they lie to you about its value
- They can coerce you into buying something that you don’t get value from
Companies that do the last two should not exist. You are not truly getting value from them, and when you buy from them, your money is propping up businesses that don’t add nearly the value to the world that they look like they do. Your money is, essentially, wasted.
And there is a lot of wasted money in this world.
Here’s an example to look at. Facebook adds a certain amount of value to the world. It allows me to stay in touch with my friends through a convenient online interface. Great. They get some of my data and sell it for a profit. Whatever. They can’t provide the service for free. I get it. But that wasn’t enough for them. They wanted more money. So they habitually redesigned their interface to be more and more addicting. I’ve already gotten my value out of it. I’m in touch with my friends. But now, [in theory, not reality] I’m checking it all the time. It’s beginning to have negative effects on my life. I’m not actually benefiting more, but they are earning more and more money off of me [though in this example I’m not technically spending the money]. Is the world a better place because Facebook is continuing to be “supported”?
I would argue that it’s not. It has surpassed its usefulness and has now moved on to claiming it provides more value than it does, and is screwing people in the process.
This is just one example, but it can be applied very easily to other large corporations. They often add a lot of value, they really do. But they don’t stop there, and that’s the problem. They hire whole teams of psychologists to find ways to squeeze more money out of you when you already paid a price and received a benefit. Now they just want to increase the price and not give you any more benefit, at least not proportional to the price. From their perspective, they don’t really care about adding value proportional to the money they are getting from you, they just want as much money as possible.
In high school the Gillette company sent me and my male classmates a free razor and one pack of blades when we turned 18, all the better to make it easy for us to keep buying their razors from then on. It looked like they were giving value, only to screw us on overpriced blades later. Yeah, screw that company.
And it is hard, too, because individual employees often only see a fraction of the earnings. This is a big topic. Marx talked a lot about this, and while his ideas are kind of interesting, they’re also very flawed, in my opinion. I just don’t know how to cram all my thoughts in here at this moment.
My double-edge safety razor is made by Merkur, and it’s a great razor, with incredibly cheap replacement blades. The shave is way smoother, too. I think I paid about $40 or $50 for it like 7 or 8 years ago. I haven’t bought a thing from them since, but I would totally recommend them. I’m glad my dollars went to that company because I love that razor. Businesses should exist for the value they create, not for their ability to extort people into continuous spending.
So this idea that you should be spending money just to keep those coffers flowing? Bullshit. I only want to fill the coffers of the companies I truly get value from. And I think that I do! The more you pay attention to what you are actually getting value from, the more money you can save not supporting (sometimes often seedy) businesses that aren’t actually adding value to your life.
But there’s another aspect this too:
Complexity.
I keep coming back to this, and I think it’s the number one reason that causes people who are otherwise earning decent money to spend every dollar they earn. The more financially complex your life is, the more exponentially expensive your life becomes.
As we are encouraged through life to continue upgrading our possessions and even our expenditures on our families, we forget to upgrade our peace or our simplicity instead. Really large houses are just exponentially more expensive than small houses, and every person who wins the lottery tends to rush out and buy a gigantic house and fancy cars, just to find that before long, all their money is gone. No shit. That’s why you shouldn’t buy those things. Do you think replacing the roof on a 5,000 square foot house is cheap? No. It’s not. You have to be insane to not realize that a really large house is going to cost tremendously more to maintain. But people miss this because they aren’t looking at the bigger picture. They don’t realize how complex life becomes as they build more and more systems into it, more and more dependencies, more and more hassle.
Before heading back to Nepal, I had this brief discussion with my roommate about how jobs can be created by really large estates, which raised some interesting thoughts. I think there are some good points to be made there, but it leads me back to the example of yacht builders. When billionaires buy yachts, it’s easy for us plebes to roll our eyes, but some argue that this actually creates jobs for the people who build the yachts. And there’s some truth to that. Personally, I’m skeptical that this constitutes a net positive for society, but it’s also not my place to say what people should or should not buy, and the parable of the Broken Window is something of an eternal consideration for which economics seems to have no definitive judgement, despite it often being labeled a fallacy. [I should read up on that again]. But I guess for me, my perspective is that I don’t believe it’s my duty to own a house, just as an example, and it’s insane to me that people are comfortable holding onto mortgage debt for 30 years and would rather continuously upgrade to more and more expensive houses, exposing themselves to greater and greater risks, when they could otherwise buy their freedom so much sooner (notwithstanding actual good reasons for upgrading a house). On the one hand, I guess laborers earn a paycheck from all the maintenance, but on the other hand, homeowners are generally so much poorer when they pay to maintain these monstrously large houses, not fully knowing just how much it is actually costing them in both money and their sanity. If I have a plumbing issue that I can’t fix, sure, I’ll absolutely call a plumber and pay them to fix my problem. Plumbers add value. But that doesn’t mean I should welcome problems that shouldn’t exist or at least don’t have to exist, especially if, say, gaskets and sealants were specifically designed to go bad after 5 years. The trades should only exist for the value they provide, not for value that people are falsely lured to believe in. And I think that in general, the housing market lures a lot of people into a false sense of value. But I am, of course, deeply cynical on this topic.
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That billionaires sometimes pay people to create yachts is also very different from saying that billionaires should buy yachts so that people can earn money from creating them. I’m not convinced that the yacht industry “should” exist at all, just as I’m not convinced the trades “should” exist, either. Dignified work, however you define that, is not inherently virtuous, it’s just a matter of supply and demand. We don’t keep technology from the 1800s going in order to provide “dignified work” to the people performing the labor, because those technologies, while maybe interesting, are largely obsolete. For a wild example, forcing people to spend 50% of their income on goods and services in the name of “causing” industry and jobs would be idiocy, and would fuel a lot of worthless labor that nobody is getting value from. I guess it hurts that sometimes peoples’ skills become obsolete, but that’s why maybe we shouldn’t put specialization on a pedestal. And yet people “need” that specialization so they can pay these ridiculous mortgages they are so comfortable with.
Imagine being a successful lawyer and buying a $2million house. But you hate being a lawyer. You are now locked into being a lawyer because there is no possible way you could switch into another specialization and still pay your mortgage. That house is like a chord around your neck now, and you have to endure a job you hate for it. It sounds like absolute stupidity but people do this on a smaller scale all the time. “I hate my job, but I’m going to buy a $500,000 house, because houses are good financial assets that always go up in value! I’m sure this won’t have any affect on my happiness”. “Boy I’m sure glad that the money I’m throwing out maintaining this place is supporting other people!” I guess it’s different if you love being a lawyer, but how many people do you know who absolutely love their job? Probably not many. How much do you love your own job? Enough to commit to it for 30 years? [I’m of course glossing over several perspectives]
Besides, if the majority of homeowners owned 10 bedroom / 10 bathroom houses, plumbers would obviously be in higher demand, but that doesn’t mean they would be rightfully in demand if you consider that hardly anybody needs a 10 bedroom / 10 bathroom house. This hypothetical demand for plumbers is entirely fabricated by people’s erroneous and perhaps completely crushing and nonsensical desire for such large houses in this example. But I think there are many jobs today that are nonsensical, too, though less obviously so. And if people are going to pursue a specialization (since this likely won’t change anytime soon), they may as well choose a specialization for which the demand exists for valid economic reasons, and not because of some fluke of whim or social pressure or misunderstanding or other deceit.
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So I guess companies can lead you astray, but you can lead you astray, too. Social norms can lead you astray. I know more than a few spouses who have led friends down a wasteful path. It’s about understanding what actually gives you value, and maybe even being willing to pay good money for good value. Cut the rest!
I’ve supported Osprey. I’ve supported OTC. Nintendo. Tech guys who refurbished old Dell business laptops. When I pay $40 at the fancy haircut place because my normal barber is still recovering from rotator cuff surgery, it hurts, man, it really hurts, but I know it means something to the guy cutting my hair when I’m his first customer of the day and it’s already afternoon. The books I bought at Barnes and Noble play a small role in paying the wages of the employees there [turns out Amazon prices aren’t always that much lower].
It’s good to support people. Just…be real about value. Be real about how much you actually have time for. Be real about what is actually a burden to afford and what’s actually necessary. Pushing back on complexity and having a high savings rate has allowed me to direct my funds to some really cool people in Nepal, allowed me to buy awesome decorated furniture and art, buy quality parts for my car, and so much more. I’m not about “spending nothing”, but I do feel that most of what I buy gets me good value, and yet there has still been plenty left over and I’m not at all interested in throwing that away on things I don’t get value from.