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I want to follow-up on Newsletter #46 about financial life in the negative world.
In that newsletter I talked about the "financial independence, retire early" movement and others that promote less consumption and higher levels of savings.
But when trying to save money, it's easy to be penny wise, pound foolish.
What I've observed that you are often better off either buying the highest quality (and thus often more expensive) products or the lowest quality, but that the middle can be a bad deal.
Esquire magazine used to promote the idea that, "It's better to own one good suit than five cheap suits."
But maybe a better rule would be "better one good suit or five cheap suits than three medium priced ones."
This goes along with Nassim Taleb's idea of "barbell strategies," which he says tend to produce good outcomes. He wrote in Antifragile, “A barbell can be any dual strategy composed of extremes, without the corruption of the middle—somehow they all result in favorable asymmetries.”
When I worked in consulting, I made a lot more money than I do now. I got into classic men's tailored clothing. I ended up buying a lot of high end dress shoes, hand made Italian shirts, etc.
What I discovered is that when I bought truly high quality products (not just fancy branded expensive ones), they lasted so long that they actually turned out to be cheaper on a per wear basis than anything else I ever bought.
In fact, some of the things I bought more than a decade are still in great shape and I still wear them. I have only had to throw away one pair of dress shoes I bought since 2000 - that's more than two decades. Some of my shoes should last the rest of my life if I take care of them. I have a couple of shirts that are 15 years old that I still wear.
As my income declined, I obviously had to start buying cheaper things. But I feel like I actually made some bad deals. For example, I started buying shirts at Brooks Brothers. But Brooks Brothers shirts still aren't cheap, and they don't last all that long either. Some of them are shot within a year.
If I had invested in more high quality shirts that might last 5-10 (or more) years with proper care, I might have ended up spending less money in the long run.
Today I try to take the approach of buying either the best rated cheap option I can find, or look to buy something I can be assured is very high quality.
That means mostly I buy cheap stuff today, honestly. But I feel like that offers better price performance in most cases than pseudo-quality, medium priced goods.
The best option, and one I try to do when I can, is find the best quality goods on deep discount. I have a place where I can sometimes buy the best wool socks in the world at half price. (No, I'm not telling you what and where!)
This barbell approach isn't a hard and fast rule. But it's one I try to keep in mind. The key is to think about cost per use metrics or the long term total cost of ownership.
I hope this is useful as a tool you can use in thinking about your own purchasing decisions.
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