FT116: “Free stuff is rarely good stuff.” -Old Pithy

Posted by PITHOCRATES - May 4th, 2012

Fundamental Truth

Free is Nice but Sometimes it’s just worth Paying for Something Nicer

Often times when someone offers us something for free some of us say, “If it’s free it’s for me.”  Because we like free stuff.  Who doesn’t smile when they see the free samples in a grocery store?  Who doesn’t like getting the free swag from a visiting salesperson?  Sure they have a corporate emblem on them but free flashlights, pens, coffee mugs, baseball hats, etc., are nice.  Because they’re free.  But not everything free is nice.  Those free samples in the grocery store are.  Because they want to get you to buy some of that stuff they’re giving away free.  And if it doesn’t taste delicious that isn’t going to happen.  But the swag is often not high quality stuff.  Or something you would not necessarily buy yourself.  Sure, you’ll use a coffee mug at work with a corporate emblem on it.  But if you have to pay for that mug chances are you’re going to get something you like.  And when you do chances are it’s not going to have a corporate emblem on it.

While traveling in Tennessee once I stayed at one of those hotels that is just a little more than a motel.  One of those multi-floor things that’s longer than it is tall.  One of the hotel amenities was a free continental breakfast.  Consisting of coffee, tea, orange juice, rolls and jam.  Mmm.  Good.  But I passed.  Because within walking distance from this hotel sat a Waffle House.  And if you’ve ever eaten at a Waffle House you’ll know why.  The All Star Special breakfast.  With Pecan Waffles.  And, of course, hash browns scattered ‘all the way’.  Enough to put you into a food coma.  A comfortable food coma.  And I chose to pay for this delicious breakfast instead of eating the free one.  Why?  Because on a scale of 1 to 10 the free continental breakfast is about a ‘3’.  While Waffle House is a consistent ’11’.

I owned a full-size sedan that was pretty loaded.  It wasn’t a luxury car but it pretty much had everything a luxury car had in the way of comforts.  One day I had to take it back to the dealer for some warranty work.  Being a new car under warranty they gave me a free loaner to use while my car was in for service.  Talk about service.  The car they gave me, though, was a subcompact with no amenities.  Unless you call a roof and a couple of doors amenities.  This car didn’t have power locks or windows.  Or air conditioning.  And it only had an AM radio.  Which made for an unpleasant 45 minute commute one way during the dog days of summer.  I returned the free loaner the next day.  And rented a car with air conditioning.  It cost more.  But for me it was worth it.  Because I didn’t like getting drenched in sweat on the drive in to work.  Free is nice but sometimes it’s just worth paying for something nicer.

For-Profit Utilities pay Premium Wages for Electricians to Go Out in Storms to Start Repair Work for Profits

They say you get what you pay for.  They say that because you do.  Things you pay for will always be better than the things you get for free.  As noted above.  But in other ways as well.  Take your electric utility, for example.  Some people would like to get free electricity.  To have the government nationalize our utilities.  Then tax the rich to pay for both the installation and the maintenance of the electrical infrastructure.  So we the people can get free electricity.  But let’s take a closer look at this idea.  And see how free electricity can be worse than the kind we pay for.  By looking at something that happens all too often.  The electric power outage.

Consider two electric utilities.  One owned and operated by the government.  And one by a for-profit utility.  Which one do you think would have a greater incentive in getting that power restored?  The one that pays for that utility with taxes whether you use it or not?  Or the one that will lose money when those electric meters stop turning?  The one charging by the meter, of course.  Because they lose money during an outage.  Unlike the government.  Where the electric utility is just one of the many things they pay for with the taxes they collect.  And if they roll those taxes into your property tax bill you will pay those taxes at most twice a year.  Well, most of us.  Which means there will be no correlation between paying your taxes and using your free electricity.  Unlike with the for-profit utility. 

If the power goes out for a large section of the for-profit utility’s customers there will be an immediate interruption to their revenue stream.  So much so that they will pay premium wages for electricians to go out in storms to start the repair work.  To get those meters turning as soon as possible again.  Because time is money.  And the more time that passes with those meters NOT turning the greater the lost money.  Money that they can never get back.  Because people don’t have to buy extra electricity to make up for the electricity they didn’t use while sitting in the dark.  So people are much better off with a for-profit utility.  Because the for-profit utility and the people both want the same thing.  To restore that power as quickly as possible.  Albeit for different reasons.

The People Paying for Free Stuff have no Incentive to Pay for High Quality

Beggars can’t be choosy.  If you’re getting something for free the people giving it to you expect you to be grateful.  And they don’t want to hear you complain.  For however bad the quality is that they’re giving you it sure is a lot better than what you had before.  Nothing.  Worse, you’re now in their debt.  If they ask you for a favor it’s hard to say no after they’ve given you something for free. 

If you’re buying something for your family you’re going to make sure you get the best quality your money can buy.  If you’re barbecuing for your family it may be steaks and Italian sausage.  If your nieces and nephews are coming over it may just be hot dogs and hamburger.  If you’re buying for the kids in little league you may just buy the hotdogs.  Or volunteer to bring snacks.  And show up with one large bag of potato chips.

When it’s free you get what you pay for.  Not great quality.  Which is why free stuff is rarely good stuff.  Whether it’s swag, breakfast, a rental car, electricity or food at a picnic.  The people paying for your free stuff have no incentive to pay for high quality.  Which is why we should never expect high quality for anything we don’t pay for.  Including public education.  Public housing.  And, of course, public health care.  To name a few.  Each of which has a higher quality private counterpart.  For when we pay we have choice.  And because we have choice the private sector competes for us by offering higher quality.  Why?  For the same reason a for-profit utility provides better quality than a nationalized utility.  Because profits make things better.  And making a profit is the only thing that will get an electrician to climb a pole during a thunderstorm to restore our electric power.  Something we’re all grateful for.  Especially if you’re taking care of a sick child in bed.  Or a parent.

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