This post is the second in a series intended to get you (and me!) thinking about some ideas related to frugality and minimalism, and looking at them in light of whether or not the ideas are spreadable and/or sustainable. Today’s topic is “net loss frugality”.
A net loss is the idea that when you’re done with something, you have less than you started. If I sell you a bag of groceries that cost me $10, and you pay me $8, I have a net loss of $2.
There are two ways this can show up when it comes to frugality:
Personal “Net-Loss” Frugality
Personal “net loss” frugality is when you do something to save money, and it winds up costing you more in the long run.
My favorite example here is Internet access. I know people that still have dial-up, because they’re unwilling (not unable – that’s a different story entirely) to spend an extra $10 per month (over dial-up) to get high-speed Internet access.
If the customer uses the computer for much of anything at all, and values their time at much of anything at all, the value of the extra time spent waiting for downloads, waiting for web sites, etc. typically more than compensates for the additional high-speed access fee.
Add to that that a virus hitting a computer because a customer can’t install Windows Updates properly (and therefore doesn’t have the proper security patches) eats up all of the savings from a year or two almost instantly.
As an ironic twist, I’ve seen in-home computer repairs that should take 15 minutes take an hour and a half or more because there was no expedient way to get the necessary software onto the computer over a dial-up connection. More hours = more cost, typically at a rather high rate.
External “Net-Loss” Frugality
External “net loss” frugality is when you do something that saves you some money or time, but only because it costs somebody else in the long run.
A money-based example would be the questionable practice of buying a replacement for a broken item, and returning the old item with the new item’s box and receipt. You may get your money back, but everybody else loses out.
The manufacturer gets a broken product back that they shouldn’t (at least not according to the return policy and/or warranty) be replacing. It also has to be handled by people at the manufacturer, people at your retail store, and people in the distribution channel.
If the store is lucky, they get reimbursed for their item cost – but they don’t recoup the value of their labor processing your exchange.
What Do These Have In Common?
What they have in common is that neither, in reality, is frugal. In the first scenario, you waste both time and money. It may not be directly attributable to your decision, because you may not realize the connection – but that doesn’t make it any more frugal.
In the second scenario, you cost other people time and money. Since companies tend to defray these extra costs via things like price increases or pay freezes, society as a whole winds up paying for your savings.
The key question here, as before, is, “if everybody else did this, what would happen?” In scarcity frugality, the worst result is that some people wouldn’t get a benefit. In net-loss frugality, somebody would actually suffer a loss each time.
Net-loss frugality fails the spreadability and sustainability tests. If these types of so-called frugality were to become the norm, society as a whole would be much worse off – not better.
Needless to say, I avoid this type of frugality whenever possible. Saving a buck or two at the expense of others (or at the expense of myself, longer-term) just isn’t worth it.
Next time we’ll be talking about my favorite type of frugality – one that we should encourage as much as possible!
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