Lots of people are aware of the phrase, "To make money, you have to have money". This is a pretty simple idea: starting capital. However, it is also true that "To save money, you have to have money." This is, to many, known as the Samuel Vimes Boot Theory of Inequality... developed by Terry Pratchett in Men At Arms.
“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.”Basically, you can generalise from this. Vimes was unable to buy the better quality product and had to make do with a poorer quality product, which meant, in the long run, that he ended up spending more money. Pay more in the moment, spend less over time. Problem, if you're poor you can't pay more in the moment, and because you're spending more to just be somewhere, you can't save up either. This is, in short, a poverty trap. Sounds pretty compelling, no? Well, apparently not to all...
I'm not crazy about that quote. I've heard it before, and think I was relevant a long time ago but no longer is. The reality is, in this day and age the basics are so cheap and of reasonable quality that it doesn't matter whether you cheap out on most things.
I buy shoes every year, but it's a tiny fraction of my (average) income. I buy lower cost furniture, also for a tiny fraction of my income, and I have yet to have a chair collapse under me. Buying a purse for $20 every two or three years does not put me in the poor house.
People in this day and age are not broke because they buy basic goods for cheap and have to replace them more frequently, they're broke because they blow all their money on junk (barring medical conditions, disabilities, life choices, etc).
~ Zikoris.There are all sorts of problems with this post.: the last paragraph is just plain untrue after that comma, for instance. That's not what we're here to think about though. What I'd like to demonstrate is two things. Firstly, this post is factually wrong. There are still plenty of situations where quality, or something akin to it, and the associated greater price, traps people. Secondly, and I can't really (in practice) separate these out, is that this is actually the wrong generalisation to draw from that quote. The real generality, to my mind, is that being able to spend more, generally means you are able to save more in the long run.
Let's begin by analysing the quality of Zikoris' argument. Firstly, the example: shoes. Shoes are a bit of a sore point for me because my feet are too big for me to be able to find shoes, consistently, in general sorts of shops like the Warehouse or, indeed, anywhere close by. As such, I have on a number of occasions really been reduced to a small selection of footwear... gumboots included. Do you know what happens in those situations? Well, the simple reality is that everything wears faster if you wear it more. That sounds pretty trivial but it's just something you are not going to notice if you have options. We could dress this up in terms of privilege if we wanted to.
Now, if we consider shoes we also know that there are better quality and poorer quality shoes out there. We also know, instinctively, that you often do get what you pay for when it comes to footwear. I am constrained in my ability to purchase enough footwear not so much by my financial situation but rather the impracticalities that come with being taller than most people on the planet. I am also constrained by the economics of things. If Auckland had more people, there'd be more people in my situation and we'd be a more profitable niche (or, perhaps, a profitable niche). Yet, even if this was the case, such a shop could quite well be located outside my normal patterns so that introduces costs to just get there. Already we should be seeing a complex picture. There's really no reason why we should expect that the only difficulty facing someone is that they're not well off. Indeed, not having much money tends to mean that you live on fringes and have worse access to transportation... i.e. you are less able to deviate from your normal patterns. The sort of idea I am trying to get across here is that a person who is poor is a person. They are an individual with a number characteristics beyond their control and quite possibly related to their wealth status that mean Zikoris' characterisation of "it's their own choices" as seen by the discussion of junk is just far too simple an analysis.
But if we were to look at a more general case, the so called "average" person who doesn't live far away from shops, who doesn't have strict dietary needs or some costly medical condition and for whom not finding clothes or shoes that fit is nought but a nightmare, we will still see that Zikoris is wrong. Imagine, for instance, that you manage to save $10 a week after covering your necessary food and living costs (including bills etc. etc.). That's not much. And when you consider that poor people are, in fact, people and need to make sanity purchases as much as anyone else for their own psychological well-being, the amount saved after seven weeks is probably some amount less than $70. (This, by the way, is assuming that you're able to save anything in the first place: that's not necessarily a reasonable assumption to make!) Now, ask yourself: are you buying shoes every week? No, you are not. Shoes, therefore, aren't in your weekly budget. At best, shoes fall in a general budget category: emergency purchases/the rainy day. Now, if you have to replace shoes suddenly this could well be an issue. You've possibly got to spend some money to get to the shoes (or, if shopping online, bring the shoes to you; although free shipping may be an option... but this is often a "Spend $200 and get free shipping!" sort of deal anyway... hang on a minute) and then you've got to spend money to buy the shoes too. Quite possibly you are going to have to settle for something that you can afford... or turn to a credit option (which will cost you more over time). Our baseline person doesn't face those extra costs on top of the stated price-tag but they do still need to get to the price-tag. And funnily enough, I don't see too many $10 shoes out there.
Yet, that wasn't a strictly reasonable scenario, was it? After all, you're probably going to notice that your shoes are on their last legs sometime before you're reaching the point where you're throwing them away. Still, when you think about it, you see that the world is dynamic. On any given day, after all, things happen that break the standard, predictable pattern. Maybe, for instance, you get caught in a rainstorm and have to dry off somehow. That's not a free action, unless it subsequently becomes quite sunny and hot (ah, islands). Whether you towel off, change into something dry or sit in front of a heater you don't normally have on so high, these all introduce extra costs somewhere along the line (or maybe you risk it and end up getting ill, though you could win that lottery and not become ill). Maybe you wash more towels or clothes that week so your water and electricity bills are just that little higher (although, again, this won't be much higher, unless you, your partner and your two kids all get caught and it's a whole new load: and what if you have to use a laundromat? Even just having to wash two towels a week could affect your prices). What happens when things pile up? When you just have that really bad week where the car gets dinged, the train breaks down and you lose an hour off your shift and the associated pay because your contract sucks? Do you just hit some reset button over the weekend? Don't be ridiculous. That's a moron's way of thinking. What happened in one bad week a year ago can still be screwing you over today. Makes that one bad week scenario look all the more probable, doesn't it?
However, in general, you've still got to think about what having less money means. Well, sure, you can't buy as much expensive stuff, but you also can't buy as much cheap stuff either. Less money means you can't spend as much. Sounds trivial but it's actually really meaningful because none of this stuff can be treated in isolation (like Zikoris tried to do). Think about it. Basically anything that you wear functions like how shoes do: the more you wear it, the faster it wears out. And, likewise, the worse the quality, generally the cheaper the price, and the less time you have before it looks worn out. And because you're on a limited income your wardrobe consists mostly of these sorts of things. And as we established, you're not saving much and these aren't weekly purchases. So, wardrobe growth is slow. Basically, you're where someone with two pairs of shoes are: everything gets worn out more simply by the fact you're wearing things more. And although it's all over time, it still takes you maybe a whole week's worth of managing your budget, or maybe more, before you can actually replace anything (or, indeed, repair it... if this is economical: biggest difference between Sherlock and Sherlock Holmes? How many times Doyle has Holmes pay attention to repairs vs Moffat and co.).
Okay, okay, but didn't Zikoris say that quality is basically good enough these days that it lasts long enough that you won't get trapped? Well yes, but hopefully you see that this was "proved" by treating things in isolation. When you deal with cumulative effects and dynamic systems, this is going to steer you wrong. We've seen this. Your ability to buy new things is related to what happened in the past, expectations about the future and, of course, your income (we're still dealing with someone whose Marginal Propensity to Save isn't 0). And these things are all related to your initial endowment/entitlement in the first place. If you're starting with less stuff, even if the quality is only slightly worse it's still not as good. This implies that on some metric, in this case durability, what you've got is inferior to what they've got. Connect to this what a shirt's lifetime is (lifetime usage is based on estimated amount wear: wear things more than those estimates and a product's lifetime decreases) and you realise just how simplified Zikoris' view is. Here's a quote (in its original context its discussing simplification and history rather than economics as we are):
This desire for simplification is justified, but the same does not always apply to simplification itself, which is a working hypothesis, useful as long as it is recognised as such and not mistaken for reality.
~ Primo Levi, "The Grey Zone"
Never forget that Zikoris is presenting a very simple view of the world as the reality of the world.
I'd also like to note that wealthy people are probably going to spend quite a lot more on furniture than poorer people. Furniture is durable, for the most part, and unless there's misuse going on or it's really, really ancient, you're unlikely to going to replace it for any reason other than your tastes and preferences have changed. Some people don't have the luxury of an income to follow through on those changes. Those that do, often do. This is not actually a critique of the Boot Theory, however, it's more just an opportunity to mention Rake. This principle (re: furniture and its replacement, and inequality too, actually) is an important part of one series three's episodes. Right, now that we've kept the sponsors happy(if you can't tell I'm joking, seek help).
Thus far I've basically tried to show that Zikoris' ideas about quality aren't the smoking gun that they seem to think that they are. In all honesty, I am not convinced that quality differences have narrowed in the way Zikoris thinks. That is, I get general impression older stuff was generally more durable (although, probably, not as comfortable) and our assessments of quality these days tend not to consider durability, which is the important thing in terms of the Boot Theory, so much. But, wait, hang on a moment... is quality really the important thing in the Boot Theory? And thus we arrive at my second point: the Vimes Boot Theory actually avoids Zikoris' formulation.
Right at the start of this post, before I got caught up in just how wrong Zikoris is, I mentioned that I generalise the Boot Theory not in terms of "Rich people can buy better quality stuff and therefore save more" but rather in terms of "Rich people can spend more, this often means they can make savings". We see this with HOP cards (as best as I can tell, like Oyster Cards: they're Auckland's contactless PT fare cards). There is $10 start up cost to using a HOP card. After all, you need to be able spend $5 to buy the card and a further $5 in terms of the minimum start up. As we've pointed out, someone might only manage to save $10 a week after they've paid their living costs (food and board) and they could well be dealing with crap that arose in the past too, meaning their actual savings level could be lower. However, I think most people who use public transport a lot would be able to get the "capital" together to invest in a HOP card. This is good because without a HOP card you actually pay noticeably more (which is, never fear, a fair fare scheme because, in terms of buses, cash payment is not system-friendly, and everyone would be better off in a purely HOP world). Yet, you can still save more by investing in a monthly pass. For adults, a two zone monthly pass allows infinite travelling within and between both zones for a set price of $190 up front. These savings can sound significant or they can not sound significant. The problem is that for people to whom even $10 is a substantial saving with meaningful benefits, spending a large lump sum to get a monthly pass (even the cheaper single zone ones) is very probably not going to be an option. Thus, you miss out not just on the savings but also on the ability to make more trips outside the standard pattern at no extra cost. This is important.
Perhaps, though, the Boot Theory should just be generalised in terms of quality and what I've discussed here with regards to HOP cards is simply "got to have money to make money" it's just that the money "made" is the money saved. I like to see the two ideas as being the different sides of one coin, though: Heads you're saving, Tails you're making money. Which is a different book.
What I hope I've made clear, here, is the relevance of Primo Levi's quote: that ours is a very complex world and we can't expect simplifications to describe it adequately. This is, perhaps ironic as my "coin" consists of two simple maxims, both ironic themselves. But, if what I've said isn't convincing just remember that your $800 washing machine cost you $800, not an $800 loan with punitive interest rates, and that your house is lit with longer-lasting eco-friendly bulbs not incandescents you replace every other week. And remember that although these are small parts of the annual budget, it's the frequency in weekly and day-to-day expenditure that really matters.
Oh, it's also possible that Zikoris and I are speaking from two very different day to day experiences of living costs. New Zealand, you see, is generally thought a fairly expensive place to live. That's going to be important to consider when you look at my assessment of his scenario and what it is that $10 will buy you.