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Genius without education is like silver in the mine. – Benjamin Franklin

Like Silver in the Mine is a personal finance blog with a twist. There are mainly 2 types of posts here:

  1. Public Domain Book Responses: In many of my posts, I discuss financial advice from the public domain writings since 1700, from personalities like Adam Smith, Benjamin Franklin, and P.T. Barnum. You’ll be surprised at how sound and applicable this advice still is hundreds of years later!
  2. Consumer Research Reports: I also post my research into consumer decisions and provide practical financial tips.

If this is your first visit to the blog, start with the links at the top, like the declaration of purpose, and then you can find out more about the books I quote. If you like what you read here, consider checking out my own book. Feel free to browse the posts, and please share with your friends!

Top 10 kitchen items to put on your wedding registry

What should I register for?

Registering is a lot of fun. The feeling is similar to what you’d feel on a shopping spree — when you finish, you almost feel as if you had just bought all that stuff. What a great feeling! That brings up another point about shopping and its effect on your brain. But that’s a topic for another day.

I regularly receive wedding announcements from friends and relatives. It’s always interesting to go through a wedding registry. I’d like to say something pithy like “you can tell a lot about a person from the things on his or her registry,” but I don’t really know if that’s true…it seems more like people all register for the same stuff, probably because many of the people getting married (at least the ones I know) fit into a relatively restricted demographic. Anyway, as I peruse said registries, I recall going to Bed Bath and Beyond and going crazy with the little scanner, registering for this and that. We thought we knew what we needed. In hindsight, there are a few things we didn’t quite understand at that point in our lives…

Now that I’m several years further down the road, I thought I’d look back and write some advice for those just embarking on the wedding-registry trip. In this first post, I’ll include 10 suggestions for what you should register for. I’ll follow it up with a post on 10 things NOT to register for. I’m restricting this list to kitchen items because that’s what I’ve been thinking about lately. Kitchen stuff seems to be the most common stuff on wedding registries anyway.

You’ll find a theme below: get stuff that will last a long time. This means it won’t break or wear out. Generally I want to avoid plastic stuff if I can find metal, and I want nice things even if they cost more money up front, because I believe they will be less expensive in the long run. If you’d like more such general advice, check out my philosophy of consumerism. But the topic for today is specific items for your registry. So, without further ado…(drum roll please)…

Top 10 kitchen items for your wedding registry

  1. High-quality stainless steel cookware. There are lots of options to choose from here. I like the Farberware Classic line for value, but if you really want the best, I really like All-clad. All-clad does it right! These pots are expensive, but they will last you the rest of your life (and then some!) They use 18/10 steel on the inside (where quality matters the most), 18/0 steel on the outside (so you can use the pot with an induction stovetop), and aluminum in the center (for conductivity). There are some other brands that do a similar thing — the most important thing is to avoid non-stick coatings that wear out.
  2. Corelle-ware dishware. These are inexpensive, thin, light, and classy. If you break one, it’s easy to find replacements or expand as you gain space. No need to start out with service for 12. For a new couple, shouldn’t 2 dishes be enough? Ok, maybe 4.
  3. Metal measuring cups and spoons. I finally found the perfect set on Amazon (it’s made by Amco). Get this set and I believe you will never again need to replace a broken set of measuring cups. The key here isn’t just that they’re metal, it’s that they are a single piece of metal. There is no welding to come loose. There is a similar set in the Martha Stewart collection at Macy’s (I think It’s made by the same manufacturer). The same goes for a nice, high-quality measuring spoon set.
  4. Nice knives. Do yourself a favor and skip the cheapo knives. You don’t need a lot of knives, but get good ones. How do you choose a good knife? Look for heft! Is the blade just a flat piece of metal attached to the handle, or is there a solid hilt? Look at the difference between this knife with substantial steel hilt vs. this knife which is just a flat blade. Both nice brands, both get rave reviews — but to me, one is higher quality than the other. The most useful knife is the 6″ chefs knife. I wouldn’t mind having a couple of those.
  5. Pyrex storage, and glass mixing bowls. I’ve had lots of glass and plastic storage containers, and from now on I think I’ll only be buying Pyrex. First of all, I don’t like to put plastic in the microwave or dishwasher for two reasons: 1) health concerns with high-temperatures, and 2) they melt. Plastic also gets discolored and old quickly (I’m speaking from experience here). Glass solves all these problems. The downside to glass is that it can break, but I’m willing to accept that. I try to be careful with it, and acknowledge that I’ll have to replace it if I drop it. This is where the Pyrex comes in — other glass storage bowls seem to break so much more easily. Pyrex isn’t unbreakable (we have broken it before), but it’s clearly more durable than most of the other cheapo brands we’ve owned. Finally, glass just seems more natural to me.
  6. High-quality silverware. Personally I’ve been impressed with our Oneida flatware, but just look for is something that won’t bend. Also, you don’t need to start with service for 12…
  7. Stainless steel prep/condiment bowls I cannot find a set that has these two important qualities: 1) it must nest perfectly (to save storage space); 2) it must include plastic lids. If you can find this, let me know. So, I suppose you can’t really register for this, since it doesn’t exist…but this fills the spot so that if I ever find this, it can go on the list.
  8. All-metal cheese grater. So many graters, so much plastic! And so many broken graters. I had to go through a few graters before I realized if I just spent a little more to buy one that wouldn’t break, I’d never have to buy another! Get a solid cheese grater. Your descendants will thank you.
  9. Knife magnet. So much better than the ubiquitous knife-block, which not only takes up space on your counter, but doubles to dull your knives as well! If you do go with the knife block, do yourself a favor and get one that won’t dull your knives (like a Kapoosh). If you rent, you may not have the option of installing a knife magnet.
  10. Braun multimix handheld mixer/processor/blender combo. Wow, an appliance! No other appliance has made my list because I think they depend on the person — you should restrict yourself to the ones you actually use frequently. But I think this appliance is more universal. Most multi-use items are bad at everything they do, but this is an exception! It’s actually great at all 3 of its functions. An item that actually excels at multiple uses! Even more impressive, this multimix is a kitchen item, where counter and cabinet space are always in demand. Kitchen appliances don’t last forever, and that’s OK — you’ll get several great years of 3 different functions out of this single appliance.
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The 4 ways to employ capital

What should you do with your savings? When you finally have something in the bank, it’s important to think about the best way to make your money work for you. Today’s public-domain excerpt is from Adam Smith’s Wealth of Nations. Here he discusses the 3 basic ways you can employ capital:

In all countries where there is a tolerable security, every man of common understanding will endeavour to employ whatever stock he can command, in procuring either present enjoyment or future profit. If it is employed in procuring present enjoyment, it is a stock reserved for immediate consumption. If it is employed in procuring future profit, it must procure this profit either by staying with him, or by going from him. In the one case it is a fixed, in the other it is a circulating capital. A man must be perfectly crazy, who, where there is a tolerable security, does not employ all the stock which he commands, whether it be his own, or borrowed of other people, in some one or other of those three ways.

Smith spends a good section of the book talking about fixed and circulating capital. This paragraph is a good summary that just breaks it down simply. There’s a lot of good stuff here. Capital can be employed in 3 ways:

1. You can spend it (immediate consumption).
2. You can invest it with others, such as buying stocks or bonds (employed in procuring future profit that “goes from you”, a circulating capital).
3. You can invest with yourself; for example, you can buy goods with the hopes of reselling at a profit (a fixed capital)

The fourth thing to do with your money is to not employ it at all. That is, sit on it. This is what the “perfectly crazy” do, in the words of Adam Smith. I think the world today is full of such “crazy” people who employ their stock in the fourth way. They may not realize they’re crazy — most likely they just don’t know any better. The “doing nothing” way is money that you put under your mattress, in a checking account (that bears no interest), or in a savings account at a big-box bank (that bears basically no interest).

The least you should do with long-term capital (of any substantial value) is put it in a high-yield online savings account or CD; these have no risk to you, and provide a greater reward than nothing…but somehow large banks still attract substantial deposits with savings accounts that pay nothing. Why do people settle for a savings account yielding 0.003% at a brick-and-mortar bank, when there are online accounts yielding at least something? Even in 2012, when interest rates are at the lowest point in decades (and the Fed will be keeping them that way for the foreseeable future), there are still online accounts yielding 1%. You’re not going to retire on that, but it beats 0%.

Of course, the online savings account should really be the basic, worst-case scenario, since there are better ways to invest both circulating and fixed capital.

In my investments it’s turned out I invest in circulating capital far more than in fixed capital. It’s tough to come up with many examples of things I could invest in that would “stay with me.” One common example could be a house. If you view your house as an investment (a debatable viewpoint), it’s a fixed capital. The house is a “good” you hope to resell with a profit. Maybe you’ll invest more into it, in time or money, for improvements that will increase its value.

Formal education could also be seen as a fixed capital of sorts. It’s not really capital in the same sense, because it’s not trade-able, but it’s an investment in yourself you hope will be valuable later.

Finally, businesses are probably the third of the most common ways to employ a fixed capital. It’s less work to invest in circulating capital, but I think the rewards can be greater in fixed capital — if you do it right.

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Formal vs informal education (part II)

This is part II in a part series on education. [1 | 2 ]

From Adam Smith’s Wealth of Nations:

Fourthly, of the acquired and useful abilities of all the inhabitants and members of the society. The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realized, as it were, in his person. Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour, and which, though it costs a certain expense, repays that expense with a profit.

The value of informal education

Abilities acquired either formally or informally will probably cost something, usually in a combination of both time and money. This cost can be seen as an investment in yourself. It makes sense to seek a good deal on such an investment.

I think informal education can provide greater utility per dollar than formal education. It is therefore interesting that people tend to overconsume formal education and underconsume informal education. They overconsume formal education when they seek degrees or certifications without the intention of monetizing those certifications. I concede that money spent on education, even if it will never be monetized, may be better than that spent than idle diversions like movies, but it doesn’t quite make sense to go into a hundred thousand dollars of debt for a degree that will not be useful in paying off that debt.

Education in general, whether formal or informal, is valuable because it improves your person. The primary financial way it’s manifest is that the market will be willing to pay more for your time. This is the point Smith presents in the except above. Education expenses, when made for economic reasons, really should be thought of as investments in your own personal intellectual capital. The market values formal education considerably, but it also values informal education. If you can teach yourself to program, you’ll be able to find a job programming even if you lack the formal education. However, the market will value you even more if you can get a certification, regardless of your actual programming ability.

Education is also valuable for other reasons besides monetary. It can make you more able to help others. It can make you more independent. It can make you a better member of society by helping you make more educated votes. It can contribute to other members of society as you teach them, and make them more valuable. Most importantly, it can make you more valuable to your family members, particularly children, as you teach them important lessons.

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Formal vs informal education (part I)

From Thoreau’s Walden:

Which would have advanced the most at the end of a month — the boy who had made his own jackknife from the ore which he had dug and smelted, reading as much as would be necessary for this — or the boy who had attended the lectures on metallurgy at the Institute in the meanwhile, and had received a Rodgers’ penknife from his father? Which would be most likely to cut his fingers?… To my astonishment I was informed on leaving college that I had studied navigation! — why, if I had taken one turn down the harbor I should have known more about it.

Part I: Formal education and certification

I usually divide education into two categories: formal and informal. Formal education is courses with teachers, textbooks, homework, exams, etc. You usually pay for formal education. Informal education is self-learning. This includes reading books or web pages, visiting museums, watching informational movies, and, like Thoreau says, actually doing stuff. Informal education is sometimes free, and usually cheaper than formal education. Sometimes, you get paid.

Thoreau makes formal education sound completely useless. From a strictly knowledge-centric point of view, I have a feeling he’s right…you probably learn more by getting out in the real world than you learn in the classroom.

So why is the world so focused on formal education?

One reason is that formal education is much more structured, which attracts some people. If you lack the internal discipline to learn on your own, it is helpful to have a professor to set deadlines and learning objectives. Formal education also requires less personal involvement. You don’t have to decide what to learn, you just have to learn what you are given. Informal education requires you to both decide what to learn, and then learn it. That’s more work.

The biggest difference (besides cost) between formal and informal education is that formal education provides certification. You get to put letters after your name, like B.S., or M.A., or D.D.S, or you get a certificate. Informal education provides no such certification (at least not automatically). This ends up being a huge economic incentive for formal education, which is what basically keeps the wheels of academia turning and growing.

The letters after your name are important because they tell other people that you are willing and able to jump through academic hoops. This is a very valued skill in the marketplace, which makes sense because a lot of business is about satisfying government regulations. Some of the letters also tell you a bit more; a PhD indicates that you are a world expert in some very specialized subject. An MD indicates you’ve studied medicine. These are important letters to have if you want to work in a job that requires these types of skills. If you don’t want the kind of job that needs these letters, the letters are basically meaningless to you (except for bragging rights, which is also very important).

If you are lucky enough to be in the situation where certification is irrelevant to you, then what is the point of formal education? If you are self-motivated, you can teach yourself for free (or at least much less) anything you could learn in a formal setting. The only difference is the letters after your name. Because of this, from a financial point of view, it only makes sense to participate in formal education if you plan to monetize that education. And if this is your plan, then Thoreau’s argument fizzles. You go to college to get a B.S more than to gain understanding, which is a side effect.

If this is the case, then why would you go to college to get a degree that is not valuable to the market?

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Smith’s 4 Tax Maxims

4 principles on what taxes should and shouldn’t be, what From Adam Smith’s Wealth of Nations:

Before I enter upon the examination of particular taxes, it is necessary to premise the four following maxims with regard to taxes in general.

I. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation. Every tax, it must be observed once for all, which falls finally upon one only of the three sorts of revenue above mentioned, is necessarily unequal in so far as it does not affect the other two. In the following examination of different taxes I shall seldom take much further notice of this sort of inequality, but shall, in most cases, confine my observations to that inequality which is occasioned by a particular tax falling unequally even upon that particular sort of private revenue which is affected by it.

II. The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gathered, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence and favours the corruption of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty.

III. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. A tax upon the rent of land or of houses, payable at the same term at which such rents are usually paid, is levied at the time when it is most likely to be convenient for the contributor to pay; or, when he is most likely to have wherewithal to pay. Taxes upon such consumable goods as are articles of luxury are all finally paid by the consumer, and generally in a manner that is very convenient for him. He pays them by little and little, as he has occasion to buy the goods. As he is at liberty, too, either to buy, or not to buy, as he pleases, it must be his own fault if he ever suffers any considerable inconveniency from such taxes.

IV. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state. A tax may either take out or keep out of the pockets of the people a great deal more than it brings into the public treasury, in the four following ways. First, the levying of it may require a great number of officers, whose salaries may eat up the greater part of the produce of the tax, and whose perquisites may impose another additional tax upon the people. Secondly, it may obstruct the industry the people, and discourage them from applying to certain branches of business which might give maintenance and unemployment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy, some of the funds which might enable them more easily to do so. Thirdly, by the forfeitures and other penalties which those unfortunate individuals incur who attempt unsuccessfully to evade the tax, it may frequently ruin them, and thereby put an end to the benefit which the community might have received from the employment of their capitals. An injudicious tax offers a great temptation to smuggling. But the penalties of smuggling must rise in proportion to the temptation. The law, contrary to all the ordinary principles of justice, first creates the temptation, and then punishes those who yield to it; and it commonly enhances the punishment, too, in proportion to the very circumstance which ought certainly to alleviate it, the temptation to commit the crime. Fourthly, by subjecting the people to the frequent visits and the odious examination of the tax-gatherers, it may expose them to much unnecessary trouble, vexation, and oppression; and though vexation is not, strictly speaking, expense, it is certainly equivalent to the expense at which every man would be willing to redeem himself from it. It is in some one or other of these four different ways that taxes are frequently so much more burdensome to the people than they are beneficial to the sovereign.

Let me try to simplify these ideas into 4 short bullet points:

  1. People should be taxed proportionate to their earnings. This is not supporting a progressive tax, but a flat tax — this means “20% of your income”, as opposed to “$3000 per year regardless of income”.
  2. Taxes should be applied fairly to everyone. The IRS shouldn’t be able to tax certain people differently than others, simply because it likes someone more than someone else.
  3. It should be convenient to pay taxes.
  4. Taxes should have low administration costs.

Where does the US stand today

I think in our current system we accomplish #1 admirably (in fact going beyond Smith’s suggestion with progressive rates). I also think we accomplish #2 quite well — the tax law may be complex, and loopholes may make it unfair overall, but at least it’s applied in the same way to everyone.

I think we fail miserably at #3 and #4, though. As far as convenience goes — sales taxes are convenient. We pay them when we buy stuff (Smith even mentions this type of tax specifically), they’re easy to pay, we just add on the amount and the computers take care of it. Income taxes, however, are a huge nightmare for everyone. They take hours of filling out forms. Most people are so inconvenienced, they are willing to hire someone else to do it for them. This is a clear violation of Smith’s maxim #3.

I also think we’re completely off the mark with maxim #4. The IRS employs in the neighborhood of 100k people. Even bigger than that is the number of people required to prepare income tax reports, and tax planning. There is clearly a huge cost requirement just in collecting taxes. These are costs that the public pays, but sees no benefit from.

There are a few ideas out there for how to fix some of these things; for example, eliminating income taxes completely would ameliorate problem #2 (income taxes have got to be the largest general tax pain for the typical American), and would also greatly benefit #4 as well. Not sayin’ it would be fair or work for other reasons, just sayin’ it helps on Smith’s Maxims.

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Complain with actions vs. words

From the autobiography of Benjamin Franklin, regarding a visit Franklin made to London:

[I] observ’d there was not one shop open, tho’ it had been daylight and the sun up above three hours; the inhabitants of London chusing voluntarily to live much by candle-light, and sleep by sunshine, and yet often complain, a little absurdly, of the duty on candles and the high price of tallow.

How much more of a problem this is today, enabled by electric lights (ironically greatly facilitated by Benjamin Franklin himself)!

But rather than talk about the merits of waking and retiring with the sun (which Franklin clearly believed: “early to bed, early to rise…”), I find the second part of this quote interesting, how people choose voluntarily to live by candle-light, then complain about the cost of candles. This is very prevalent today.

I’ll give you some examples.

Mary Landrieu (senator of Louisiana), recently proposed a bill to require airlines to eliminate fees on one checked bag (and other things like water). This strikes me as a modern example of choosing to live by candlelight, then complaining about the cost of candles. If you don’t like the baggage fee, don’t fly with the airline that charges baggage fees. If all the airlines charge fees (which they don’t), take the train (it’s better for the environment anyway). Why do people refuse to enforce their values with their consumer decisions, choosing instead to try to enforce them by complaining or regulating?

Another example: Bank of America recently enacted (and subsequently redacted) a $5/month “usage fee” for debit cards. This had the American public and its leadership up in arms. President Obama expressed the sentiment of the nation when he said this is “exactly why we need somebody whose sole job it is to prevent this kind of stuff from happening.” Another example of choosing the live by candle-light and complaining about the cost of candles.

People choose their lifestyle, and by so doing, control their costs. It’s absurd to complain about (or try regulate!) a business offering a service you think they shouldn’t charge for! People need to learn to talk with their actions. When you decide if it’s worth the convenience to fly, you have to include the cost of the baggage fee. As long as the fee is transparent (which it is in both of these cases), what grounds is there for complaint?

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The three great, original, and constituent, orders of every civilized society

From Smith’s Wealth of Nations:

The whole annual produce of the land and labour of every country, or, what comes to the same thing, the whole price of that annual produce, naturally divides itself, it has already been observed, into three parts; the rent of land, the wages of labour, and the profits of stock; and constitutes a revenue to three different orders of people; to those who live by rent, to those who live by wages, and to those who live by profit. These are the three great, original, and constituent, orders of every civilized society, from whose revenue that of every other order is ultimately derived.

Spending

Let’s break it down in other terms. Whenever you buy anything, the money you spend can be divided into 3 groups.

First: the rent of the land. Most land is privately held, so, in order to derive some use of it, you must pay for it. A good chunk of what you pay for it will go to property taxes, so in some sense the land is partially owned by the government that controls it. The rest of the rent goes to the person with the title.

Second: the wages of labor. This is pretty self explanatory. You pay someone (or get paid) for work.

Third: The profits of stock. Most things that are produced require initial money, which can take several forms: capital equipment, inventory, education/training expense, personnel recruitment costs, etc. This is called stock. Stock naturally must give off some profit to maintain it; otherwise, the owner of the stock would be better investing elsewhere that does pay. Some of these things are easier to liquidate than others. If you “invested” $100,000 on a degree that doesn’t return profit, how do you reinvest that? Maybe things like that can’t appropriately be called stock.

When you buy something, from a pack of gum to a house, you can divide the amount you spend into parts that are going to each of these areas.

Earnings

Flip this around, and observe that these are the three great, original, and constituent ways to derive an income. Most people derive most of their income from choice #2; that is, they are wage-earners. They trade labor for money. There are two other options; Option #1 is to buy land and derive income from it, by leasing it or cultivating it for example. Option #3 is to invest, today this is often done by buying stocks or bonds — which constitutes owning businesses or lending to them. Actually, even money in an interest-bearing savings account is earning income through option #3 — the bank turns around and invests that money in companies, buying up capital equipment or supply of some sort to derive an income. The bank turns some of this income back to you in the form of interest.

Financial independence means you cover all your expenses with income derived from rent of land or profits of stock, instead of from wages of labor.

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The ultimate price paid for everything

From Smiths’s Wealth of Nations:

Labour, it must be remembered, is the ultimate price which is paid for every thing.

These days we think of everything in terms of money. The mighty dollar is how we’re paid, it’s how we spend. It’s our savings, it’s our investments. It’s easy to think of everything in terms of its value in currency.

But the intrinsic value of currency is really nothing. Back when currency was based on the gold standard, it had some intrinsic value, but since the change to fiat money, money is actually worthless. People only give you something for it because they think others will do the same (and they do).

Like Smith says, the final value of things should really be measured in work (or labor). Something that takes you 3 hours to create is more valuable than something that takes you only 2 hours. Of course, work is more than just time, it’s also effort…but it’s often simplified to time. Really work is made up of both time and energy.

There are a few problem with abstracting all value into currency:

First, currency changes value from day to day. For example, $1 today is not the same as $1 in 10 years.

Second, if you think only in terms of money, it’s easy to forget that it represents time and energy you’ve spent. One of the great things about currency is that it allows you to “save up” time and energy to be used later. If you think of money only as money, you don’t consider the cost of an item in terms of the time and energy you spent to earn that money.

Thinking of value in terms of labor doesn’t have these problems. The value of labor doesn’t really change with time. An general hour of hard physical labor today is the same as an hour of hard physical labor in 10 years. And thinking about the cost of things in terms of how much time+energy it is costing you is a healthy way to ask yourself if you really need all that stuff.

Since I’ve starting evaluating things on the basis of how much they cost me in labor, I’ve found myself more reluctant to sacrifice meaningful “life energy” for useless gadgets.

If you’re interested in this principle, you should definitely check out Your Money or Your Life, which elaborates quite a bit.

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Parade of riches and credit

From Smith’s Wealth of Nations:

With the greater part of rich people, the chief enjoyment of riches consists in the parade of riches; which, in their eye, is never so complete as when they appear to possess those decisive marks of opulence which nobody can possess but themselves.

Today in the US, this seems true of not only the rich but the middle class as well. I suppose today’s middle class would be considered “rich” by 1700s standards. How else would you explain the popularity of posh clothing brands like Abercrombie or Hollister? This at least is not a question of quality, especially considering the way these brands advertise themselves. Speaking of which, what a fantastic marketing concept–get your customers to pay to become a walking advertisement. Usually it goes the other way around. But I digress…

The “parade of riches” of the middle class is a bit different from what Smith describes. First, his “richer than others” argument does exist today (we call this “keeping up with the Joneses”), but the primary motivating factor is now luxury or convenience. We still “parade our riches” by buying lots of stuff, expensive toys like iPads, luxury cars, etc — we do this primarily for the luxury/convenience and secondarily for the social “show factor.” The biggest difference is that a lot of this stuff we can’t actually afford…so we use credit. I think todays parade of riches is chiefly manifest in buying conveniences and luxuries without actually being able to afford them. Maybe we should call it a “parade of credit” instead; people aren’t so much parading around what they can actually afford; rather, they parade around how much credit they have. This includes leasing cars, using credit cards, etc. Incidentally, this is one of the main points in The Millionaire Next Door. What about buying a home on a mortgage? Isn’t that another parade of credit?

One way the middle class participates in the parade of riches/credit is through travel. People get together and talk about all the exotic places they’ve been. I think travel is important, but the way many people do it (including me), with 2 days of tourism here and 3 days there, defeats some of the benefit. This type of tourism seems more motivated by social capital payoffs than an actual desire to “broaden one’s horizons.” In this way it really just amounts to a parade of riches, and the more exotic you can get, the more likely your trip will be considered a decisive mark of opulence which nobody else can possess.

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Consumer Research Report: Safety Razors II

This is part 2 of my report on a practical and cheap solution to the problem of shaving. Start with Safety Razors part one.

After deciding that a safety razor seemed like a good idea, I narrowed my options down to these two models:

The $200 Feather all stainless, or the $40 Merkur DE. Both razors get great reviews, although they seem to be in different classes. People who know razors seem to rate the Feather as an amazing piece of precision equipment. The Merkur similarly has great satisfaction ratings, and is often recommended as a good first razor. So, there’s probably a difference in shaving quality, if you know the difference.

The key difference, though, is that the Feather is stainless steel, which means it will never go away. The Merkur is chrome-plated pot metal, which means when the chrome plating wears off, the razor itself will start to deteriorate. I still think the Merkur will have a reasonable lifespan (say, 20 years? 30 years?). But I truly believe that the Feather could last the rest of my life, and then some.

The difference in price is rather severe. My general philosophy is to buy things that will last longer, even if they cost more, but the difference in price here is a factor of 5, which is high. Should I be swayed by the long-term prospects, and better engineering, of the Feather, or should I follow the value in the Merkur?

In the end I decided to buy the Merkur razor for 2 reasons:

  1. The Feather all stainless was out of stock most places I looked. That means I would have to wait for awhile to get it. I may buy it in the future, so I’ll be watching prices.
  2. I yielded to the principle of only spending the big bucks on quality I can appreciate. Because I’ve never even used a safety razor before, I probably wouldn’t appreciate or even notice the quality difference between the Merkur and the Feather. Buying the Feather would be like buying a $1,000 set of golf clubs for my first round of golf. I don’t even know if I’ll be able to put up with the time commitment required to shave with a razor.

Since the Merkur will last for quite awhile anyway, that’s what I went with. I got the razor a week ago or so, so I’ll post a followup in a few months to explain my experience.

Creams and Soaps

Back in the day, there wasn’t aerosol shaving cream, but shaving soap. From what I’ve read, you can use regular soap to shave but there are also soaps that give better lather, and don’t dry out so quickly on your face. People seem to prefer these. I’ve decided that I definitely won’t be buying the common aerosol shaving cream cans. For the moment, though, I am experimenting with a normal shaving cream, regular soap, and a shaving soap. I think what I end up doing is buying a shaving soap sampler to see what different soaps do. More on this in a few months when I have some meaningful results.

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