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Dont think of price, think of cost per use

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Re: Dont think of price, think of cost per use

#131

Post by gompertz »

sacred_numbers wrote: post #61
godelski wrote: post #54

Earlier quoted context omitted.

I don't think you're necessarily disagreeing. There's a factor that neither you nor the author are considering: value/$. Author is implicitly assuming that the higher cost equates to a higher value (clearly this is never a linear relationship). So my friends call me the cheapest person they know, but I also think like the author. If there is something I am going to use a lot and the added value helps me, then I'll sh…

I see so many people talk about the Boots theory, and while I don't disagree, there's another side to the story. What if you buy a really nice pair of boots that will last a lifetime and then a couple years later you move to a beach town where you wear sandals all day? Or what if you get paralyzed and have no need for durable shoes? The point is that life is unpredictable and both your circumstances and preferences c…

The boots theory also falls flat in regards to style. I've never seen a single person wear boots older than maybe 10 years. Paying 3x-5x on anything with the "once a lifetime" ideology only works for timeless stuff like wrenches, measuring cups, or anything that hasn't remotely changed since 1945. Which is a very small list.

Re: Dont think of price, think of cost per use

#132

Post by OJFord »

robocat wrote: post #94
OJFord wrote: post #63

Earlier quoted context omitted.

> Cost-per-use by itself is fairly meaningless, costs needs to be compared against value-per-use. That implies the only alternative is not doing things? You can just order a taxi? I think for many car users the total 'cost per use' of their car exceeds the average taxi fare they'd pay for those journeys. Nevermind considering public transportation.

> You can just order a taxi? A trip to my parents and back is ~$180 by Uber - I go more than once a week so that would be way more than $10k per year. And an Uber doesn’t come with a tow ball: I often use a trailer out there or back (I mentioned firewood, but also dump runs and moving stuff from/to storage). The Uber has a variable wait-time, and is not useful if I have to go anywhere urgently, and an Uber often valu…

> A trip to my parents and back is ~$180 by Uber - I go more than once a week so that would be way more than $10k per year.

So you do the 'cost per use' calculation, and probably you find that car ownership is a better deal than a taxi? Nobody's saying it's a way of showing a purchase is always wrong!

> And an Uber doesn’t come with a tow ball: I often use a trailer out there or back (I mentioned firewood, but also dump runs and moving stuff from/to storage).

Obviously you compare like for like. Probably no taxi tows, but you could hire a car for the weekend.

If you're doing this every week and with other uses I expect owning a car is still the best option, I just don't know why you're trying so hard to miss the point.

Re: Dont think of price, think of cost per use

#133

Post by OJFord »

BeetleB wrote: post #68
OJFord wrote: post #62

Earlier quoted context omitted.

> My point, though, is that cost per use is not usually a helpful metric. I think it can be: say you're comparing two cars with the same fuel efficiency, one's more expensive and more luxurious (or to make the same efficiency less contrived, you're considering the 'luxury interior package' upgrade) - roughly how many times (or hours) will you use the car over your ownership; it might be helpful to consider the per us…

> I think it can be: say you're comparing two cars with the same fuel efficiency, one's more expensive and more luxurious (or to make the same efficiency less contrived, you're considering the 'luxury interior package' upgrade) - roughly how many times (or hours) will you use the car over your ownership; it might be helpful to consider the per use (or hour) cost of that extra comfort. You can get away with this becau…

Yes, I don't think it's helpful for comparing apples and oranges, just for considering whether you want one thing at all, or which among a single class of thing.

An example I've often used before is a Netflix subscription - I wouldn't pay much more for it, but a lot of things look like a bad deal/much lower utility in comparison to it. Pint of beer = half a month's Netflix, for example. It's not helpful, it's a recipe for overpaying for some things and unnecessarily depriving yourself of others.

Re: Dont think of price, think of cost per use

#134

Post by bena »

BeetleB wrote: post #24

This is completely backwards. Always think in absolute dollars and not in rates. $1000 is $1000 whether the cost per use is pennies or tens of dollars. Thinking in terms of rates is how people would fall for predatory installment purchases in the old days (you can have a new computer for just $2.5 a day!) The other obvious problem is looking at cost absent of a market. It's not just how much it is worth it to you, bu…

I think he's phrasing it poorly and you're not too far from where he is.

It's essentially a reworking of the "Boots" theory or poverty. Cheap things will typically wear out faster and need to replaced often.

Like in your phone example. You actually based and compared them on rate. $1000/2yrs is worse than $400/3yrs. Hell, even $1000/3yrs is worse than $400/2yrs.

That $2.50/day computer is going to wind up being $2.50 * number of days owned when it is finally replaced. It will take 800 days to match the value if the computer costs $2000 initially. If you keep that computer longer than 2 years, 2 months, and 9 days, you're now paying more than the value of the computer.

I think the author's suggestion would be to just pay the $2000 up front. It's a lot of money right now, but if you keep the machine for 3 years, that's like $1.83 per day you paid for the computer.

Re: Dont think of price, think of cost per use

#135

Post by Folcon »

BeetleB wrote: post #24

This is completely backwards. Always think in absolute dollars and not in rates. $1000 is $1000 whether the cost per use is pennies or tens of dollars. Thinking in terms of rates is how people would fall for predatory installment purchases in the old days (you can have a new computer for just $2.5 a day!) The other obvious problem is looking at cost absent of a market. It's not just how much it is worth it to you, bu…

I've not heard of Engineering Economics before, can you recommend any great textbooks that are preferably standalone and have good examples?

Re: Dont think of price, think of cost per use

#136

Post by bombcar »

lvturner wrote: post #42
bombcar wrote: post #29

Earlier quoted context omitted.

For non-necessary payments I think of it in cheeseburgers. Would I rather have this five hundred dollar phone or eat a cheeseburger a hundred times?

Cheeseburger all day every day... but then I need to think about the quality of life degradation that 100 additional cheeseburgers would bring... sigh The rabbit hole never ends.

Sure, a hundred cheeseburgers in a day would be too much, but if the phone will last three years, that's about three burgers a month ... could be worth it!

Re: Dont think of price, think of cost per use

#137

Post by bumby »

sacred_numbers wrote: post #61
godelski wrote: post #54

Earlier quoted context omitted.

I don't think you're necessarily disagreeing. There's a factor that neither you nor the author are considering: value/$. Author is implicitly assuming that the higher cost equates to a higher value (clearly this is never a linear relationship). So my friends call me the cheapest person they know, but I also think like the author. If there is something I am going to use a lot and the added value helps me, then I'll sh…

I see so many people talk about the Boots theory, and while I don't disagree, there's another side to the story. What if you buy a really nice pair of boots that will last a lifetime and then a couple years later you move to a beach town where you wear sandals all day? Or what if you get paralyzed and have no need for durable shoes? The point is that life is unpredictable and both your circumstances and preferences c…

This is a risk perspective (and a correct one). But the risk is quantifiable. It's generally probability x severity.

So what's my probability of moving to a beach town and never needing boots again? Probably very low, since I will be unlikely to move and even if I did I would still use my boots for things like hiking, working around the house, etc. The risk is therefore very small as well. The same can be applied to your other scenarios. Uncertainty makes us uncomfortable, but it can often be reasonably quantified.

Re: Dont think of price, think of cost per use

#138

Post by bumby »

gompertz wrote: post #131
sacred_numbers wrote: post #61

Earlier quoted context omitted.

I see so many people talk about the Boots theory, and while I don't disagree, there's another side to the story. What if you buy a really nice pair of boots that will last a lifetime and then a couple years later you move to a beach town where you wear sandals all day? Or what if you get paralyzed and have no need for durable shoes? The point is that life is unpredictable and both your circumstances and preferences c…

The boots theory also falls flat in regards to style. I've never seen a single person wear boots older than maybe 10 years. Paying 3x-5x on anything with the "once a lifetime" ideology only works for timeless stuff like wrenches, measuring cups, or anything that hasn't remotely changed since 1945. Which is a very small list.

Style only matters if part of your value proposition is the status an item confers. Using the earlier example, a $400 phone won't get you any cool kid points, but I'm assuming the OP is basing their decision on functionality more than form/status.

Re: Dont think of price, think of cost per use

#139

Post by birdman3131 »

lelanthran wrote: post #127
Tenoke wrote: post #110

Earlier quoted context omitted.

I read on my phone that has 525 dpi and it seems to make a difference (I only found myself comfortable reading all books on my phone on my previous one which had similar dpi without noticing). Your $400 phone likely has half the dpi, worse screen in general and worse camera for a start. Just because you don't benefit from a better phone it doesn't mean nobody does. And if you are bringing up games, wordle is an odd c…

I've played Diablo Immortal on my phone. As far as I can tell, it worked fine. I used Wordle as an example of a game played by the masses. There are orders of magnitude more people who play things like Wordle than things like Diablo Immortal, hence my reason for using it as an example. But still, gaming was poorly specified on my part; I should've mentioned that a $400 phone can play AAA titles, not that a $400 phone…

I usually buy a generation older phone. Currently on a oneplus 8 pro I bought for $300 that has essentially that DPI (513) and 120hz screen. I would never want to go back to a lower quality screen.

Re: Dont think of price, think of cost per use

#140

Post by demopathos »

BeetleB wrote: post #24

This is completely backwards. Always think in absolute dollars and not in rates. $1000 is $1000 whether the cost per use is pennies or tens of dollars. Thinking in terms of rates is how people would fall for predatory installment purchases in the old days (you can have a new computer for just $2.5 a day!) The other obvious problem is looking at cost absent of a market. It's not just how much it is worth it to you, bu…

I'm not sure why absolute values are inherently easier to analyze than rates.

My income is a rate so I find normalizing on time to be pretty useful. I think $/use is pretty similar to normalizing on time

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