In the book Freakonomics, the author experimented with scenarios where items were priced for a few pennies, and then when they were offered for free. When he lowered the "price" of an item from two cents to one cent, in his student experiments, behavior of consumers was fairly predictable. But the effect was radically different when he lowered the price from one cent to zero cents (free). His conclusion was that "free" was not just a price of zero, but something else entirely - and our behavior changed accordingly - and in a bizarre manner.
It is as simple as that. While the "best things in life are free" everything else costs money. And when someone offers you a "free upgrade" or "free flight" or a "free gift" you should always bear in mind that you are paying for it, one way or another.
Free simply does not exist. No one, in their right mind, gives away things for free. Maybe someone throws out junk, and you find value in it. But even then, you have to expend labor to obtain that junk and re-sell it to a scrap dealer. It ain't free - you worked for it.
And yea, maybe your dear old Mom will make you a lunch of hot soup and that's free. Although you will have to listen to her complain about "Why you don't visit more? You're always busy with that blogging nonsense!"
But from a retailer? A car dealer? A credit card company? Free? Forgetaboutit!
For retailers, "Free" is just a gimmick to obscure the real price of an item. "Buy one, get one Free!" doesn't mean free at all, but that the price is 50% of that marked. And since that price may be inflated, it may not even be a discount. But it ain't free, that's for sure. But since it is such a perceived bargain you might actually buy two - or even four! Free Isn't.
How do you know something isn't free? Well, first of all, if you have to take out your wallet in order to get the "free" item, then by definition, it ain't free. This seems simple and axiomatic, but people regularly fail to see this. They give up on real financial matters and go after FREE instead.
What about give-away items? I have a friend who always snaps these up. You know, the free tote bags they give away at conventions. Merchandise with logos on it to promote a product or seller. Or the free shampoos they give you at the hotel. Or the free napkins at the fast-food place.
Well, you know the drill. If you pulled out your wallet even once during the transaction, it ain't free. Those free napkins and "pinks" (artificial sweeteners that old people steal from restaurants) are not free at all, but folded into the cost of your meal. You steal $1 worth of artificial sweeteners and, well, the cost of your meal is higher as a result (One restaurateur tells me that when old-people bus tours show up, he has the waitresses scramble to remove the little ceramic dishes with the sugars and sweeteners on them. If he doesn't, well by the time the bus tour leaves, he will be out $20 in artificial sweeteners for a group of 20 oldsters who all want toast and "Senior Coffee"). Free Isn't.
Logo items, even if you don't pay to get them by attending a convention (where you pay to get in) or other event involving you removing your wallet from your pants, are not really free, either. The item may not cost you cash directly, but as a walking advertisement for a company, you are basically selling yourself to them, in exchange for a tote bag. Free isn't.
Indeed, if you are willing to be a whore for some company, you theoretically could get a free car out of the deal. But like anything else, there is a catch - Free isn't. You have to drive around in a car wrapped with an advertisement on it. And you have to drive a LOT in order to get the vaunted free car - or even partial compensation. Perhaps a delivery company that drives lots of miles might get something out of this. For you and me who commute to work every day - no one is giving us free cars. Free Isn't.
But that doesn't stop people from seeking out deals like this. In fact, FREE becomes an obsession with many folks. And in fact, hoarding disorder is often linked to the obsession over FREE. Dad cruises the block on trash day, picking up those valuable broken lawn mowers, which he stacks outside his garage. Hey, they were FREE! They didn't cost me anything!
Mother similarly fills up the house with crap and garbage that she finds God-knows-where. "Don't throw that out!" she says, "It's still good - and it didn't cost anything!"
But hoarding disorder has a real cost - not only in depreciated property values, a degraded lifestyle, and the cost of dumpster rental - but in terms of how it affects your finances and thinking. People obsessed with FREE things often overlook more important things in their life. By obsessing over a box of discarded buttons, they fail to realize that the hole in the roof of their house is causing major water damage to their home. Free Isn't.
Hoarding disorder - the "end game" of FREE. Is that where you want to head?
FREE is just a trap. It is a well-worn path that they send the cattle up, in the stockyard, to be slaughtered. "Hey, everybody, let's go here! They are giving away free grain!" And you walk up the chute and there is a captured-bolt gun shot into your head, and as you hang from your heels, bleeding out from a knife wound to your femoral artery, you wonder, with your last breath, "What happened to FREE? Why did they lie to me?"
The lure of FREE is powerful and strong. It has hooks that sink deep into our emotional guts. That is exactly why every advertiser and retailer uses it. "Free Cheesy Sticks!" they scream - and you fail to realize that selling you scrap dough and toppings is not really some special treat. Free Isn't.
Free sucks, too. Nearly every retailer offers FREE things these days, and that makes it harder and harder to understand the real cost of things. For example, one grocery store offers "Buy one, get one FREE!" on soup. The other offers "$10 Free Gas!" if you buy $500 worth of groceries. Yet another offers a complex "Cash Back Bonus!" if you sign up and follow a Byzantine set of rules.
Which is the best bargain? Which is the best place to shop? Beats the heck out of me! With all these complicated "deals" they offer, you can't compare the price of apples to the price of apples - quite literally.
And that was the point.
Supermarkets don't want to end up like gas stations - competing on price alone. Out by the Interstate, there is a Mobil and an Exxon, right next to each other. Which is weird, as ExxonMobil is one company, and here they have two competing gas stations side-by-side.
Weirder still, one station is always 20-50 cents higher in price than the other - a significant jump in price. So, as you might expect, one station is busy and the other is not. People can see the prices posted clearly and understand "This bargain is better than that bargain".
If grocery stores had to compete like that, well, it would not be nearly as profitable an enterprise. Direct price comparisons are death to grocery stores. And most people, not having a photographic memory, don't understand what is a good price and what is not - at least on a wide array of items.
You may have grasp of prices for certain things - beer for example (if you are a young man). And not surprisingly, in grocery stores, beer prices are very, very competitive. The man who buys a case of Miller Lite every Friday night knows what it should cost, and is not distracted by BoGos or coupons or whatever.
But with the wide array of food prices in a store, it is hard to think, "Gee, is this price on sandwich bags good or not?" unless you could instantly compare it to others in the area (a great application for a cell phone app, by the way!). Moreover, since most folks don't want to shop in three grocery stores to find the best prices on individual items, they tend to pick one store - thus getting a "free" item that is paid-for by their purchases of other things. Free Isn't.
So, how do you avoid being snookered by these scams? Short answer: You Can't.
Most of us simply do not have the time and energy to go out and cross-shop every single damn thing in our lives and get the best possible price on a can of beans. Saving 5 cents on something simply isn't worth the labor involved. And yet many of us go after deals like that.
In the Freakonomics website, the author noted in "Free Cheeseburgers" people will often wait in line a long time to get "Free" promotional things - valuing their "Free" time far less than what they would make as wages (about 30% by his estimate).
Here on the island, we see the same thing. A local restaurant offers a happy hour with "Free" hors d'oeuvres. Some Canadians flock to the place, order a glass of water, and then stand in line waiting to get their "Free" food which might have a retail price of $5 and a wholesale cost of maybe $2.50. Needless to say, that restaurateur discontinued that practice (I am not sure why, Canadians, who pay through the nose for everything in Canada, seek out FREE in America. One would think our low prices would be nearly as attractive!).
I do not go to these sort of events (The club holds one, twice a month as well, with $1.25 drinks and free food). Why? Because I don't feel the "price" of going - wading through a crowd of anxious people, waiting in lines, and behaving like pigs at a trough - is worth the bargain. I would rather to and pay $30, sit out at the Courtyard at Crane, have a cheap bottle of champagne, and share a luncheon entree and be waited on. Peaceful, quiet, relaxing, enjoyable - well worth $30.
The free food, on the other hand, isn't worth anything, as the overall experience of dining is actually a negative. Eating like cattle has a zero value to me, even if the caloric intake is not zero.
And this desire to rush the buffet and put food in to ziploc bags and carry it home in your purse (yes, they do it!) is another example of faux financial acumen at work. People thinking they are "beating the system" by getting a free lunch, before they go back to their home and spend the afternoon day-trading stocks.
Free can be distracting and a time-waster - and hoarding disorder is the end game on that, taking up ALL of your time. Many old people justify their obsession with getting "FREE" on the premise that "Well, I ain't got nothing else to do!" But the hour or so spent scarfing up $5 of free food at a buffet could be better spent in other ways. And the vaunted reward - some free deep-fried puff-pasty thingy or whatever - is really not some special treat, any more than a "free airline flight" is. Free Isn't.
And yet, the temptation is to go after FREE - to tout the great advantage of getting some trivial item "free" if we spend hours of our time or hundreds of our dollars consuming. It is in our human nature and they know it. They shout out "FREE" and they have us from the get-go. All you can do is use your strongest willpower to resist it - to walk away from it whenever possible. To walk away and IGNORE than little voice in the back of your head that says, "Gee, maybe they are giving away free ponies today!" And to resist even the urges of your friends, acquaintances, and associates, who will all regale you with how great FREE is (they even comment here!).
In the long run, running away from these deals is the best. For every one deal where you might make a buck, chances are, you will spend $10 on some other one. Forget about the pennies - concentrate on the dollars.
Free is distracting. Free makes you do weird things you would not ordinarily do. Free is a waste of time and energy. Free is dangerous and can bankrupt you. Free is evil. Free is bad.