One of the most frustrating things to see is the blind pursuit of points, miles, rebates and free stuff at the cost of time. In just the past week I’ve seen a number of such deals where people sell their time in exchange for something trivial, thus preventing the achievement of bigger and better things.
Here’s a couple of examples:
Get a free Chipotle
- (perhaps lie) that you were going there anyway and the store was closed.
- Sign up to receive your free Chipotle
- Profit
The way I look at that is from the vendor’s perspective:
- Give away $9 burrito, cost price of $1.5
- Get people into your store (perhaps upselling some on the Guac/Soda)
- Get mailing list for them, spam them with news/coupons
- Profit
If both of you profit, is it a win/win? Or does someone always lose? In a similar example (for banks) discussed on twitter recently with Noah from the Money Metagame, he thinks you can have winners like this because the inferior competition loses:
https://twitter.com/Money_Metagame/status/697185467620552709
But the reality is that it is never a zero sum win/loss. There is always friction or attrition at play, and this is most commonly overlooked in the pursuit of happiness, or a free Burrito. A section of the win for Chipotle is to gain your attention and get you on their list, once you have visited the store for your freebie, should they have performed correctly, you will return. Perhaps you’ll return as soon as they snap their fingers (offer a coupon) and you get hooked. The CAC (customer acquisition cost) is the price paid to those customers who do get a free Burrito. Note that not everyone will claim that freebie in time, but everyone will get themselves on ‘the list’.
I hear the same when it comes to opting out of SPAM. Many people tell me they regret opting out of mailed spam letters now because they saw someone with a 100K Membership Rewards offer. But we really must keep an eye on the broader picture:
Points and Miles (and free Burritos) are supposed to provide us with leverage beyond cash, or simply allowing us to save cash otherwise allocated for these expenses. They are supposed to enhance our lives. It is very easy to lose sight of the goal, and instead create a life where everything is a coupon, and you spend so much time complicating things in the hope that you’ll strike it lucky with some high quality SPAM that overall, everything degrades.
Remember, everything has a price. There’s never really a win/win, and it is the little things that will slowly add up that will reduce your quality of life, making you the game, not the player.
Sort of on a related note, this is why I disagree with Freequent Flyer’s post on the CSP. He argues that the CSP is an unhatched Freedom. The Freedom has restaurant bonuses for a quarter each year, but oddly never when I spend the most on restaurants. I’ve almost fooled myself into allowing myself to go out to eat more because of the Freedom 5x, but in the end you will literally poop out the $95 annual fee you think you saved the next morning/afternoon. So for convenience sake and travelers protections I chose to not downgrade the CSP.
In regards to solicitations from companies/banks, I think it’s all a matter of self control in a game of intelligence. They will always try to one up you, you just have to decide whether it’s worth it to try to play their game to your advantage or quit while you’re ahead.
Also, anyone wanna hit up Chipotle for a free burrito anytime soon?
Yeah it’s self control, but you also open yourself to a barrage of spam and information in the hope of a nugget. The barrage has a price in my opinion, and it’s a profit to the company, and a loss to
most customers- kinda like a lottery.
Are you trying to condemn the entire concept of economics? 😉
Example: I get a free burrito that I value at $5 which cost Chipotle $2. (The burrito is worth $5 to me because I would otherwise have to spend $5 in groceries to cook an equally-satisfying meal at home). I also get some spam text messages which are worth -$1 to me. Chipotle gets something(?) out of it, customer data or something, which it values at $4. We’ve both gained here (me at $5-$1=$4, Chipotle at $4-$2=$2) which is the literal definition of win-win.
If there was no win-win, we’d have no trade and everyone would do everything themselves.
What people often fail to do is adequately account for opportunity costs and downside risks that should reduce their expected payoffs. Like the likelihood that I’ll forget about the free burrito coupon and let it expire unused and only incur the -$1 value from annoying text messages.
When I say it isn’t a win/win I mean it isn’t a 100:100 it is a ratio. In your example the ratio might be 5:1 ($5 positive, $1 negative) but what I’m suggesting is that the negative one is actually more than you think, and what’s more, it is a recurring negative charge that you pay without realizing.
Similar to a subscription based business, you are now an acquired customer, and you not only will be more likely to buy in the future, but you also are selling a recurring stream of inconvenience that can be so powerful that it prevents you from achieving things that offer real value.
The goal should be that we invest something now for a recurring stream of income, but instead, we buy something now (the bad list) for a recurring stream of costs to us.
Ah, then I think we are in agreement. I know I often underestimate the more obscure costs associated with these “deals.” I let that citigold account drain $30 a couple of unnecessary months because I was lazy and forgetful. Certainly cut into the “profits” of that deal.
I think the phrasing no win/win threw me off as I interpreted that as a statement of “there can be no mutual gains from trade.” Instead, if you mean, there is no free lunch, then sure. Except maybe diversifying investments?
I think you’ve got it fundamentally wrong. While you’re correct to point out the sometimes “hidden” cost in time that comes with obsessively searching for free deals, you are incorrect to somehow attribute this (or confuse this issue with) the win/win transaction that occurs between an individual and a business.
You should keep the two concepts separate. Each person engages in an economic transaction because they believe it to be beneficial; that in fact is the entire basis of capitalism and is a very good thing. It’s a self-regulating mechanism that leads to all sorts of increased wealth and happiness for everyone.
On the other hand, individuals should be aware that time and attention are resources just like money, and they shouldn’t be so frivolous with theirs. But where you’ve gone wrong is somehow implying that the receiver of the wasted time or attention somehow had anything to do with the loss, when it was the giver who freely gave it up, all the while thinking (incorrectly, it seems) that they were coming out ahead.
The distinction of who is responsible is pretty key here, because when you realize that the person “wasting” their time seeking small deals is at fault for their own bad decision, then you can no longer draw your greater conclusion that there’s some sort of ratio in the win/win scenario…..or if you can, it is an entirely unrelated point that wasn’t made in this article.
The receiver is responsible if they are the ones presenting the masked opportunity for their benefit, which is lost on the giver. Knowing that the receiver is intentionally building something beyond what you see in the transaction allows you to build in your filters.
Another well written post Matt. This one is even pithy.
I’m working on it 🙂