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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

#81

Post by brailsafe »

lelanthran wrote: post #72
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…

> With your phone, if all you care about is texting and making calls, yeah, you're not getting any added value paying more. If all you care about is texting, making calls, playing the occasional game[1], browsing the web, doing mobile banking, listening to music, watching videos, using social media, responding to work emails, viewing the occasional PDF, word processed document or spreadsheet sent over email, screenca…

Agreed. I'm using a pixel 4a that I bought in 2020 probably, after someone stole the Oneplus 3 that I bought used on Craigslist. The screen is cracker down the middle, but otherwise I literally haven't thought about what I'd pay more for. In fact, by paying more for an ostensibly better phone within the same lineup, it would be bigger and more annoying to use, have no headphone jack, have potentially worse battery life, and cost me a couple hundred more. I knew when I purchased it that there was a high likelihood of the screen getting cracked within the first 2 years, or stolen, and therefore my risk is lower by buying the cheapest viable current variant.

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

#82

Post by nextlevelwizard »

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 personally pay less than $400 a phone and keep it for over three years. Paying $1000 for a phone just two years is not an improvement.

Either you aren't using your phone much or you are needlessly suffering with inferior product. Wearing cheap shoes for years when you could afford comfortable high quality shoes is not a virtue. Same goes with tools we use.

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

#83

Post by brailsafe »

This is how I think about a lot of things, also with consideration of the absolute price, but I try not to take it too far, because you do need to just enjoy your purchases some times. I try not to view my purchases now within the broader context of my entire life of what-ifs, and accept a certain amount of risk that I'll just need to sell some stuff or take a loss if major circumstances change. When I did do this, I ended up living in a 1 Bedroom + Den, except the den was empty because I couldn't rationalize buying any mid-tier furniture, since it was likely that it would either take forever to sell, or I'd need to just toss it, but either way it would be irritating. I do consider them in the context of the year or a few years, and the depreciation on whatever it is. When you break down the cost of a car for example, with an eye for both of these extremes, it becomes very challenging to rationalize the purchase, because it almost never works out.

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

#84

Post by kqr »

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…

> Always think in absolute dollars and not in rates.

Technically, you should think in probability weighted log-dollars to maximise your economy over the long term. (The Kelly criterion.)

In some cases this is equivalent to thinking in terms of fractions of your total wealth -- this is how the Kelly criterion is popularly presented.

For small ("everyday", as Bernoulli put it) amounts, this is equivalent to absolute dollars. So you're right, but it's a special case of a more general principle.

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

#85

Post by fer »

robocat wrote: post #55
nayuki wrote: post #10

Along these lines, I find that not many people correctly calculate the cost-per-use of their car. They only think of the cost of gasoline burned, and maybe tolls and parking. They don't think about the cost of insurance divided by the number of trips, or the capital cost of the car amortized over the years of ownership. If people thought hard about the cost-per-use of driving, then other transportation options start…

> not many people correctly calculate the cost-per-use of their car Cost-per-use by itself is fairly meaningless, costs needs to be compared against value-per-use. What is the worth of: a visit to my friends; taking a surfboard to the beach; taking a load of firewood to my parents; an emergency 2AM visit to a suicidal acquaintance; taking my nephew and his friends to the skatepark; helping a friend move; picking up a…

> What is the worth of: a visit to my friends; taking a surfboard to the beach; taking a load of firewood to my parents; an emergency 2AM visit to a suicidal acquaintance; taking my nephew and his friends to the skatepark; helping a friend move; picking up a Craigslist chair.

In urban Europe (the one I'm familiar with, at least), I find public transit, then renting cars/vans and straight up calling cabs/Uber when needed is still absurdly cheaper, particularly with European gas, insurance and maintenance prices, and somewhat limited parking space. Sure, the odd 100€ cab fare to urgently go somewhere far hurts in one shot, but according to my own numbers for where I live, just having a used car lying around "just in case" without any mileage is 304€/mo.

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

#86

Post by [deleted] »

OJFord wrote: post #60
Void_ wrote: post #37

Earlier quoted context omitted.

Actually the installments are a great way to think about purchases. I have a budget of 500€ for sports per year. I use this on gyms, running shoes and what not. I wanted to get into skiing so I bought some skis this year. It was about 700€. Normally this doesn’t fit my budget. But I’m gonna keep these skis for at least 4 years. Now the price is 175€/year. And I still have a bigger portion of my budget left for other…

Amortising the cost over n years isn't the same as calculating a 'per use' rate though. (For many things it makes more sense, don't get me wrong, just pointing out the difference.)

[deleted]

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

#87

Post by kqr »

A related idea is depreciation.

You haven't lost $700 by buying a pair of skis. You have exchanged $700 in cash for at least $500 in a pair of skis that is now previously owned.

So you might lose, say, $200 immediately for the privilege of buying something brand new. And then another $100 if we include up-front the effort to sell them to someone else.

But the rest of the money is still there, in the shape of skis.

As you use the skis they will depreciate in their second hand value -- this is when the money is actually lost, bit by bit. You can estimate how much the second-hand value of the skis are with 10 uses, 100 uses, 1000 uses, and so on. This is the real cost per use.

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

#88

Post by jay_kyburz »

Here is another take, when I compare two things on price, I take the price difference and apply 5% compound interest on it for 30 years. That about how much I would save if I put the money on my mortgage instead. Or when the mortgage was paid off how much it would earn in my retirement savings.

Also, now I have two kids, I always think how much its going to cost my kids. Sure I could buy a $1000 phone now, or I could leave my kids $10,000 extra in the Will. :)

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

#90

Post by ehnto »

I often consider it as cost per hour tempered by some notion of utility. Some things become trivial costs when considered like this.

A computer, per hour of utility, becomes fractions of cents, coupled with the notion that it is practically indispensable to me then it is a no brainer.

My car on the other hand is incredibly expensive per hour, and with increasing public transit and cycling near me, its utility is also in question.

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