Are You Paying Too Much? 9-26-10

Anderson, South Carolina

The first thing I’m usually asked by people new to me is, “What do you do.” I generally answer, “About what?” The response this draws is sometimes amazing, ranging from queries about my work to a more blatant, ‘how do you make money?’ It has been as extreme as being queried pointedly about my net worth. My interpretation of the question is that people are generally far more interested in making a very fast efficient assay of my social standing, educational status, and capacity to generate cash flow than about my world view or ethical/moral bearings. The vagueness of my responses sometimes produces an amazing level of dissonance – intentionally. It only escalates when I reveal I have not worked in ten years, for money that is. Difficulty arises for many when a different life accounting system is presented to them.

In Western secular consumer cultures score is kept financially. One’s ability to obtain funding for a vast house, a high performance car, and $850 seats at the Super Bowl is held in high esteem. An obnoxious man here in town, who has amazingly deep pockets, is being actively courted by local non-profits for the possible magnitude of largesse this man can generate on their behalf. This ill-mannered individual would not get the time of day from most people, if he did not have multiple millions of zeros and ones stashed on bank binary data storage devices; money being little more than patterns of ones and zeroes on magnetic platters, no longer backed by anything of substance.

There has been a long-standing cultural value in post-WWII Japan that embraces the idea of paying too much for something, as evidence of one’s financial wherewithal. Many Japanese pride themselves on the cost paid for sushi bites. Many sushi restaurants advertise select sushi on the internet at $174 for a dozen bites. Some establishments in Tokyo have been reported to serve bites wrapped in gold leaf at $40 a bite. For the uninitiated, sushi is little more than seaweed wrapped around a spoonful of sticky rice with assorted fish and vegetables placed in the center. Rice, seaweed, and vegetables, even most fish, cost little of nothing in the microgram quantities found in small sushi bites – constituting pure profit.

In May of 2010 six bottles of wine were bought by a buyer in Asia for $98,591 - $608 per ounce, more than half the price of gold bullion. The highest price paid to date for a single bottle of wine was $265,000. A bottle of 1789 Chateau Margaux surviving from the private collection of Thomas Jefferson was auctioned at Christie's in London in 1989; at $10,351 per ounce. Applying a bit of crass thinking to this one realizes these ‘investments’ will result in little more than extraordinarily expensive journeys down the hall to the smallest room in the house. Eventually someone with an inflated ego is going to open the stuff and drink it.

Perhaps this irrational speculation is little different than the incredible tulip mania that nearly ruined several national economies in the early 17th century; an era when single tulip bulbs were selling for the equivalent of two years’ income for well-endowed merchants. Individuals traded off their family farms for a single bulb. More recently someone traded the value of a couple of very good houses for a single bottle of red wine. Eventually, we might realize we are just talking about very old grape juice that fermented in a damp cellar someplace in Virginia. Tulip bulbs were never worth millions. Wine is not worth $10,351 an ounce. Most of our houses are not worth what we think they are. Our national economy has been torpedoed by our own suburban version of tulip mania. One wonders how rational behavior and common sense can be restored to our collective thinking without the exquisite pain that comes from massive economic adjustments.

A friend of mine recently bought some of my photos in an exhibition. I was selling these for the mundane sum of $35, framed and matted. She could not get my price tags off quickly enough. We too embrace a cultural value that places value on a gift by virtue of how much cash flow the transaction created between buyer and seller. Blind studies have convincingly demonstrated that consumers believe a product to be of better value and durability if they are told it costs more than a competitor’s far cheaper product, despite the reality of identical product being put in two bottles, one with a high price and the other labeled as generic. I wonder what would happen to that bottle of 1789 Chateau Margaux if a Winkling Owl label was put on it and then placed for sale in the grocery store at $2.79. I speculate it would be returned for having turned to acid and being undrinkable.

We do the exact thing with the product that has the ability to ruin most of us financially – cars. Americans buy about 16 million new ones every year, despite long standing knowledge that new cars are perhaps the worst possible ‘investment’ short of the tables in ‘Vegas. Even in the depths of the Great Recession, almost eleven million people made the worst investment of their lives, buying new cars. Federal policy was re-engineered to entice, even actively coerce, millions into cashing out perfectly good cars in order to jump start the collapsed automotive industry. Automobiles are the most powerful monikers of success. No one need ever know that we have draconian lease agreements that enable us to drive $85,000 sedans known to have poor crash and reliability histories. Many of the most prestigious cars available in the world are notorious for being full of vinegar when it comes to reliability and cost-effective ownership. They too can result in very expensive journeys down the hall – to a bankruptcy court.

We seem to derive a lot of our self esteem from our capacity to spend too much for something. Reckless cash flow appears to be part of our validation from others. What would happen if instead we derived some of our esteem from the ability to shop powerfully instead, deriving a sense of empowerment from being a victor rather than a victim of cultural mantras about consumer spending?

Receive my instruction, and not silver; and knowledge rather than choice gold. For wisdom is better than rubies; and all the things that may be desired are not to be compared to it. I wisdom dwell with prudence, and find out knowledge of witty inventions.