List, Repent, Repeat

At the end of each calendar year, we are bombarded by year end lists.  The Best Dressed, The Worst Investments, The Shortest Marriages (sigh, yes, I'm afraid it's true about Russell Brand and Katy Perry), the top ten baby names (shockingly, Sophia is #1 again).  Some of the more interesting lists I read included  ZDNet's Top Ten Sex and Tech Headlines, Arizona State University's List of Top Ten New Species for 2011 (who knew?), and Geek.com's Top 10 searches that show that people still don’t know how to use a browser"".  On Friday, Lake Superior State University in Michigan gave top honors to "Amazing” on it's 37th annual List of Words Banished from the Queen's English for Misuse, Overuse and General Uselessness, but I think my favorite has to be the Top Ten Pantone Colors for Women's Fashions, which included the colors "Russet" and "Beeswax".

Then comes New Years Eve, when we are publicly pressured into making lists of New Years resolutions.  We list virtuous goals like losing weight and getting fit, cultural goals like reading more books and seeing more art exhibits, charitable goals like volunteering at homeless shelters and reading to other people's children, financial goals like eating all that fancy organic produce before it goes bad and maybe starting a college fund, social goals like making a point of actually dining with people with whom we Facebook every day, and family goals like not calling the kids by the dog's name, and showing more appreciation for our husband's attempts at housekeeping.  

Oh, and world peace.

We're just obsessed with list making.  

And when we finish making our list of resolutions, we feel like we've accomplished something!  We fulfilled our civic duty to admit our imperfections and promise to improve ourselves by the end of the following fiscal year.  The New Years Resolution list is like confession and penance.  But there's no real incentive to follow through.  At the end of next year you can just look at the list, admit you failed, say some Hail Mary's and do the same thing all over again (I hope the Catholics forgive me for appropriating heavily, and hopefully I haven't misrepresented the whole mechanism, but I thought it would be ok since the Gregorian Calendar change marked by this "new years" thing is a Catholic invention, after all).

So how about trying something new this year:  Instead of making a list of things you plan to do, make a list of things you've FINISHED.  Start with a blank piece of paper and only add to it things you've actually DONE.  Then at the end of the year you can publish your own personal list of The Top Ten Most AMAZING Things You've Actually Accomplished This Year, rather than just being another one of those drunk people who spend the next New Years Eve talking about what you're going to do. 

Personally, I'd be honored if my future accomplishment list included the entry:  Named a New Pantone Color. 

The Benefits of Jedi Mind Control

If you live in the developed part of planet earth, you probably use credit cards.  Shopping with a credit card feels so easy and painless.  As behavioral economist Dan Ariely said in an interview I heard yesterday, you go into a store, you hand them a piece of plastic, and they give you that thing you want.  Want the Williams Sonoma Star Wars Cupcake Decorating Set? It's all yours.   Electric Garlic Roaster?   Yours.  Ariely says buying things makes you feel powerful.  And buying them with plastic, makes you feel like you're getting them without  really paying for them.  Intellectually, you know you'll actually have to pay for them eventually, but you're not that intellectual. 

My 21 month old daughter has only one time frame: NOW.  Later, after and soon mean nothing to her, only NOW.  This gives her great power.  You will comply with her demand for your jewelry NOW or she will scream loudly NOW, and don't even think you can buy her off with promises of other things later.  Adults, on the other hand, spend a tremendous amount of energy learning to live in the moment, but I'm pretty sure that the primitive part of the adult brain is still like my daughter's  --- living in the eternal now, and when we hand over that credit card, I'm pretty sure we are thinking, "I don't have to pay for this (now)."  

Give it to me or I'll scream.

But then inevitably, we get the bill, and we don't feel so good anymore.  We judge ourselves for having bought that garlic roaster.  Did we really need  that Amish fireplace?  We all know we should pay the credit card bills off in full every month, but sometimes we don't.   Then we feel like our credit card is unhappy with us.  We're letting the card down.  If we were better people, we'd pay our credit card bills off in full (now) and avoid paying interest charges (later).  But that would leave us with little or no money for other stuff right now.  And what if the payment is due now, but arrives late?  Then we're really in trouble!  The card will punish us with a late fee, and possibly higher interest rates, further reinforcing our sense of shame and failure.  The card can be so hard to please, and soon all the power that came from compelling a store clerk to hand something over to you is replaced by sinking feelings of weakness.

But guess what?  You've got it all wrong!  your creditors don't want your guilt.  They don't need your apologies.  Your creditors LOVE you!  And they especially love you for your sins.  If you can't resist buying stuff you might not need --- great!  If you don't pay off your balance, even better!  Remember? That's how they make money!  What if you pay late? They make more money!  And if you really screw up your credit score?  They charge you a higher interest rate and make even MORE money!  So relax, you are your creditor's BFF, and just like in any relationship, once you realize how important you are, you can start making demands.

I made a payment that hit one day late last month, so I called and told my credit card company they should waive the fee they had just charged me.  I felt like a Jedi knight practicing mind control when the rep on the phone said, "Okay, no problem.  And what ELSE can we do for you today?"   Well, feeling emboldened by my first triumph,  I decided to push my luck, and I told the customer service rep that I was a really great customer and that they should give me a lower interest rate.  And ya know what they told me? They said they now AUTOMATICALLY review all accounts quarterly and if you've been paying your bills and behaving yourself, they will AUTOMATICALLY give you a better interest rate.  Just like that!  You don't even have to call them and tell them what a nice person you are.  

Why are the creditors being so nice?  Well, unless you enjoy reading about credit default swaps or suffer from insomnia, you probably haven't read the 2,319 page Dodd–Frank Wall Street Reform and Consumer Protection Act signed into law in 2010, but it turns out it contained some lovely little nuggets that benefit credit card customers by forcing the creditors to play nicer than they had in the past.  And if they don't, you can always leave them, like jilted lovers with no future possibility of receiving your interest payments and late fees.  

So even if you struggle with the concept of time, doesn't it feel good to know you hold enough power to be a demanding prima donna in the relationship with your creditors?  

Of course, no matter how powerful you are, you'll still have to pay your bills.   Unless you really think the world is going to end in 2012, in which case, don't worry about it.

Don't Hate the Giant Bow

Every year around Christmas time they start running those ads on TV where someone surprises their spouse with a new car with a very large red bow on it.  Right afterwards they tell you that you can lease one of these cars for about $600/month, so I guess the implication is that you should lease one. "Merry Christmas, Honey!  Look, I got you a Lexus!  Ok, actually, I leased it, and now we have to make the payments.  Yeah, aren't you excited??  

Honey?"  

And if he didn't lease it for you and just paid cash?  How many of us would be really happy to hear that our spouse just spent $30-$100k of OUR money without even discussing it?  Who are these people?   

These ads are pretty obnoxious.  Is it my imagination, or is it always the man getting a Lexus for his wife? The message is either (a) If you really loved her, you'd buy her a Lexus for Christmas, or (b) If you were a good wife, he'd have bought you a Lexus for Christmas, or c) Discussing the purchase of an expensive car with your spouse is something only poor people do.

The Lexus "December to Remember Sales Event" ads have been running every year for over a decade now, and during that time, the economy and has tanked, and the ads have started to seem more and more bizarre.  Besides the whole "we are the 1%" vibe, which seems somewhat unfashionable right now, I have a feeling that not everyone feels more loved when their spouse commits them to an extra $600 monthly payment.

The other night I Googled the ad, and you can't believe how many blogs and forums are dedicated to hating it.  Some of them are actually pretty funny.  (If you're not too delicate, try this one, for example: http://www.somethingawful.com/d/news/lexus-commercial-rant.php)  It seems people's hatred of this ad has reached a new pitch along with public anger over the wealth disparity in this country.  This ad just seems to rub salt in many open wounds, and lot of people feel those ridiculous giant red bows are somehow the ultimate insult.

This was Honda's response to the Lexus ad: http://www.youtube.com/watch?v=3OThgvHPQkc

It starts with their pitchman saying, "Are you a millionaire? No?  Well, then you probably don't give cars to people as presents," as he knocks a big red bow off a Honda Civic.

Should Lexus perhaps try another approach?  Maybe one based less on making the wealthy appear smug to the non? This is apparently considered to be a very effective ad campaign.  The demand for the oversized red bows is so strong that Lexus keeps a warehouse full of them in Torrance, CA.  The bows cost dealers almost $300 each and apparently must be returned post-surprise (which I found surprising in itself).

The company that makes the bows is King Size Bows in Newport Beach, CA.  http://www.kingsizebows.com/bow-uses/lexus-december-to-remember-car-bow, and by the way, they encourage you to contact them to discuss your oversized bow needs (for all those other enormous gifts you weren't quite sure how to wrap).

I keep wondering how I would feel if my husband surprised me with a Lexus under a giant bow, and I just can't imagine it because that would be about as likely as him buying me shoes.  He knows better than to get me something that says, "in all our years of marriage, I've learned nothing." 

To me the ads also say, "Don't worry, doll face, I'll take care of you and buy you diamonds and furs and cars. Don't worry your pretty little head about the numbers."  I guess none of that is insulting if it's 1940 and you're in a Raymond Chandler book, but I think this creates an opportunity for the wealthy to hate this ad too.  And I haven't even gotten into how much people hate the theme song from the ad (or the fact that you're supposed to recognize it and look out the window, because you know what comes next!), or the people who find it particularly nauseating to watch politically correct lefties giving each other hybrid SUV's.  In fact, I'm pretty sure there's something in here for EVERYONE to hate.

And isn't that really what the holidays are all about?  They're about setting aside our political and socioeconomic differences and coming together in peace and harmony around our mutual hatred for a car ad.  Maybe we should thank Lexus.

Pre Holiday Shopping Econ Refresher

My son is doing an oral report this week explaining the law of supply and demand.  As I'm explaining it to him, It strikes me how easily we forget that this basic idea explains just about everything.  So before you go do your holiday shopping, I thought maybe the adults in the room could use a refresher.  

Let's start at the beginning:

High supply + low demand = low price.

Low supply + high demand = high price.

High and low supply are easy to understand (the thing is either plentiful or scarce) but how about demand?  WHY is there high or low demand?  Why does a little house in LA cost much more than the same house in Michigan?  well, because not that many people like snow AND high unemployment.  Why is Groupon giving you such cheap deals on skydiving lessons?  Because not that many people can justify spending money tempting fate while they are also trying to pay for groceries AND health insurance (and not that many people have spouses who will let them).  

My son says some things cost more because one thing is "way more cool" than the other.   Which brings us to the next point: perceived value.    

Why is a Mac more expensive than any other computer, and Apple almost never has to give people deals to get them lining up at their doors with credit cards drawn?  Because we think a Mac is "way more cool".  We are willing to pay a premium for something we think is better.   Why would you pay $1,000 for a Prada purse?  Because you think it's better than other purses (or that people will think you are "way more cool" when they see you out with your Prada purse). It doesn't matter if it's actually better than a purse that sells for a fraction of it's cost, it's about whether you think it's worth it.  

We are willing to pay a premium for goods and services as long as we believe we're getting a good value.  An $800 an hour lawyer isn't just being a pig, she's getting paid what people are willing to pay a person that they believe is giving them the best service, and there's a limited supply of her time.  Not to say it is the best, but If you hired the $100/hr lawyer, and it didn't go so well, you'd say, "well, I guess I got what I paid for".  

Perceived value changes over time.  My father just reminded me of how electric typewriters cost $500 when they first came out.  So remember that the law of supply and demand really only tells us what anything should cost in this particular moment.   If everyone thinks a certain thing is "way more cool" at a certain moment, the price will be high.  

Now sometimes you get a bargain.  Sometimes, low demand is just a function of limited awareness.  Sometimes the hairdresser at the salon around the corner who only charges $60 a haircut is actually just as good as the one in Beverly Hills who charges $400.  And sometimes you score a really nice, original Eva Ziesel bowl for a buck at a garage sale  (yes I did, thank you very much).  That's what's called "arbitrage".  Taking advantage of the difference in the value assigned to the same item in two different markets.  Milk costs $3 a gallon at market A, and $2.50 a gallon at market B.  Arbitraging is what we think of as getting a good deal.  Every housewife should really be thought of as the Chief Arbitrager for a small family firm.  My husband has been scouring Ebay for years trying to find an arbitraging opportunity on a reissued '59 Les Paul (i. e. buying it for less than he could sell it for.  Not that he would sell it).  Then he could tell all his friends about the deal he got.  And everyone loves to tell the stories of a great deal they got --- it's not a complete experience if you can't flaunt your arbitraging triumph. And a great deal is like money in your pocket, right?  

Well, no, it's not actually.

So the bottom line is:  When you go out and spend money this holiday season, remember that 

a) The person receiving the gift may not want skydiving lessons. 

b) They won't enjoy them more because you got a good deal on them. 

c) A young child perceives the packaging to be of equal value to it's contents, so you can save money by just giving the little ones boxes. 

d) Bigger kids often perceive value differently than their parents.  Mine enjoy obsolete technology, like an old polaroid camera or that typewriter, which you can now get for pretty cheap.

e) Whenever possible, wait until AFTER christmas to buy stuff, so you can take advantage of retailers attempts to right supply demand imbalances (i.e. sell off all that stuff no one bought) because you are now totally savvy about arbitraging.  

and finally, 

f) Forget the whole "money in your pocket" thing, no matter how good of a deal it is, if you're broke, don't shop!