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16 Jun

Being poor is costly.

Influencers on social media usually caricature Indian mothers as the most resourceful members of a family.

The other day, I saw a three-part reel showing all the ways an Indian mother optimizes the use of a T-shirt, plastic containers, newspapers, toothbrushes, and various other knickknacks some of us would see no use for.

The comments section, unsurprisingly, was full of people wondering if all mothers were similar. It made me think the same.

Despite differences in our languages, customs, or education levels, most of our mothers secretly hope that we learn to use resources conservatively. And for a majority of our mothers, this hope stems from the lack of resources they or their parents have experienced at some point while growing up.

In fact, an Indian mother’s obsession with resourcefulness is so well known that I saw a few YouTube videos where the vlogger pranked their mother by sharing how much money they spent to buy something.

Even in this blog that documents how Indians use food delivery, the person confesses to hiding the actual cost of a dish from his mother while ordering food online. Evidently, affluence, or the freedom to access money and all it buys, remains a rare privilege.

Perhaps more than not having access, we are always cautioned against spending too much money. It is all too common for our mothers to ridicule us for not knowing how to bargain while buying anything. Against that backdrop, it could be useful to understand why the need to be resourceful could ironically end up being more costly.

Are you wondering how? Don't worry, I'll explain. But before that, I want you to read this excerpt from the Discworld series of books by comic-fantasy author Terry Pratchett.

“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 at the same time and would still have wet feet.

This was Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.”

Samuel Vimes is a fictional character who bought the ten-dollar shoes because he didn’t have money to buy the better ones. Even though buying those shoes meant he would have to buy another pair later on, he had little choice in the matter, given how much he earned monthly.

Sometimes we also try to save money by buying an inferior quality and masking it as some form of resourcefulness. Not saying resourceful itself isn't a good trait. It is important and, in certain cases, inevitable. Resourcefulness fosters creativity in all that we do. But it is costly when we don’t realize that expending so much effort or resources to conserve a few in the short term has long-term costs associated with it.

For instance, a colleague once bought a second-hand washing machine for six thousand (something he considered a steal deal), which within a month of use, started causing trouble. The clothes came out dirty, and when he tried to get the machine fixed, he discovered that the motor had concrete, so he would have to replace it. Once he got that fixed, he realized that certain functions on the machine didn’t work as expected. He then spent more money to get that fixed. Soon after these two fixes, he realized that some wiring in the machine was faulty. He again spent more money to get that fixed.

All in all, the “steal deal” ended up stealing a lot more money from him. He easily spent about ₹10,000 extra for the washing machine actually to start working. In spite of the great deal he got, he incurred a cumulative loss on the transaction. He could’ve used that money differently if he didn’t get charmed just by the machine’s price.

The Balasore train tragedy was a more recent incident of this type of thinking at play.

Passengers with confirmed berths on trains have the option to purchase insurance coverage for a minimal cost of INR 0.35 per ticket. This facility is provided by the Indian Railway Catering and Tourism Corporation (IRCTC) for passengers who book their tickets through their online portal. However, it is important to note that buying insurance while buying a train ticket is not mandatory.

Unfortunately, on the ill-fated day in question, only 54% of the more than a thousand passengers travelling on the two trains had chosen to avail themselves of the insurance coverage.

In economics, this is called a false economy.

It is an action that saves money at the beginning but, over a longer period, results in more money being spent or wasted.

For example, it may be a false economy if a city government decided to purchase the cheapest automobiles for use by city workers to save money; however, if cheap automobiles have a record of needing more frequent repairs, the additional repair costs would eradicate any initial savings.

Some examples of potential false economies include:

  • Purchasing cheaper products that don't last as long or may require more maintenance than the more expensive alternatives (buying cheap shoes, cheap paint, cheap automobiles)
  • Paying just the minimum amount on a credit card bill each month
  • Purchasing counterfeit consumer goods

And if you are poor, there is a double whammy associated with being jugaadu.

Not only do products and services become all the more expensive for you, but you also get stuck in a negative spiral of spending on just a few baskets of things. And despite being resourceful, you cannot save money or buy better quality things.

The double whammy of being poor and therefore being resourceful keeps you poor, or to put it differently, you realise how being poor actually turns out to be more costly overall.

Think about this:

Poorer neighbourhoods tend to have fewer nearby jobs, requiring longer commutes and higher transportation costs in terms of both time and money. This can decrease employment opportunities, increasing unemployment.

Or, how lower-income consumers are more reliant on alternative financial services that are more expensive, such as money lenders or other local schemes that seem inexpensive at first but prove to be exceptionally taxing when the person tries to repay the money.

But these are the adverse outcomes people face when they are poor and cannot afford to make richer choices.

At times though, even when you are rich, you could be making poor choices.

A colleague shared how her parents didn’t buy medical insurance at the right age and were neglectful about paying the dues leading to an incident where they had to bear the cost of an emergency medical expense out of their own pocket.

This is a one-off anecdote, but I am sure from your life, there will be examples where poorly made choices cost you a lot more later.

As a professional, when you frame your career solely based on monetary fulfilment that comes at the stake of other more desirable (long-term) fulfilment, you are exhibiting a kind of false economy. It isn’t news to hear how candidates offer-bait organizations that they interview at, just to hike up their compensations.

“Oh I am getting a better offer at X, could you match it?”

In the short-term, this trick could even work out in the candidate's favour in the dearth of other applications or the urgent need an organization may have for that role, but the long-term effect of such offer-baiting is the perception it creates for the hiring manager.

The candidate would be immediately labelled flaky or undependable in the long term. This signals scarcity and money-mindedness over mission-mindedness.

Now you might resist this attack of mine for having ideal expectations but do think about if offer-baiting qualifies as any measure of your worth. When you cheap out at first while making decisions optimizing for the immediate need, you forget that the need (product bought, higher compensation) must be maintained.

You forget that the washing machine should work flawlessly to make the return or break even on the price it was bought for. The candidate offer-baiting needs to work diligently enough after being hired to create a perception of trust.

Maintenance costs of decisions are usually hidden, and you are likely to miss them if you just think about immediate outcomes.

Make choices that help you avoid being “penny-wise, pound-foolish.”

Think long-term.

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