by Gary North
Old habits die hard. Sometimes good old habits become bad old habits. We still can't break them easily.
I don't go shopping very often. I use amazingly few items. Two eggs, half a banana, and a shot of molasses: breakfast drink. Maybe a piece of toast. Some meat and vegetables for lunch. Maybe the same for dinner. Not much to it. Clothes: a pair of cheap pants (Sam's Club), a shirt (same for a week), and a daily change of underwear. I walk 200 yards to my office. I'm alone. Who cares what I wear? Not my two dogs, one of whom swims in the pond, then lies in the mud, and then wipes his paw on my pants to get his ears scratched. (He has me well trained.)
So, shopping is not my bag. But when I shop, I usually shop at Wal-Mart. I shouldn't.
No, not because Wal-Mart dropped its "We Buy American" banner three years ago. Not because it's a rapacious company that is putting mom-and-pop businesses (e.g., K-Mart) out of business. It's because I can't afford to shop there.
Aren't prices low, every day? Yes. Isn't there a wide range of goods? Enormous. Then what's wrong with shopping at Wal-Mart?
It's too big.
First, there is the parking lot. Have you ever been in a near-empty parking lot at Wal-Mart? I never have. So, I have to walk a long way to get inside. It eats up my time. My time is valuable.
Once inside, I'm in a small town. Where is everything? I don't know. I don't shop there that often. But it probably won't be close to the door that was close to the area of the parking lot where I found a space.
Sometimes, I know where to go. Milk is way, way in the back. I drink a special kind. A local company sells skim milk that doesn't have the skim milk taste we all hate. It's called "extra." It costs an extra 25 cents per gallon, I think. But they also sell it at our local market, too — when they haven't run out, which happens too often. They never run out at Wal-Mart.
Fruits and vegetables? They sell those locally. Bread? This I can get only at Wal-Mart: Oroweat 12-grain. That's what gets me into the place once every month or so. I usually buy every loaf, bring them home, and freeze them.
People with substantial incomes really can't afford to shop there. Going to Wal-Mart takes too much time. Time is valuable. Standing in line takes time. You stand in line at Wal-Mart, unless you know the "get out fast" secret. This works especially well in the Super Center behemoths. If I walk into a local market, I can get in and out fast. I pay a few percentage points more, but my time is worth something to me — more than the extra cost of the food. Yet I still shop at Wal-Mart.
For tires, however, I never shop at Wal-Mart. It takes too much time to get the work done. The Good Old Boys' Tire Store and Assorted Grease-Covered Spare Parts Company in my town (population: 1600) is just about as cheap, a lot faster, and they sometimes fix stuff for free.
OLD HABITS DIE HARD
Most people in the United States with a lot of money earned it themselves — about 80% of them. They started small businesses that got big. That's the message of The Millionaire Next Door, and it's true.
I was a starving graduate student for years. Well, not starving, but I had to hustle. I wrote articles for The Freeman. I worked part time as a teaching assistant. Things were tight. So, like most people who finally make a lot of money, I developed habits of thrift that I can't break.
The poor man doesn't place high value on his time. He prefers to stand in line rather than pay extra money. Scarce resources are allocated either by time or money. People who get rich developed the habit of trading off time against money. Then, when their income changes, their habits don't. These habits don't depart when the money starts rolling in. "A penny saved is a penny earned," said Ben Franklin. He did not face the graduated income tax. "A penny saved is 1.3 cents earned, depending on your marginal tax bracket." So, I don't spend extra money.
In a way, I guess shopping at Wal-Mart can be considered economical for a rich man, if this is a part of his life style that carries over into his business. He refuses to write larger checks even though he can afford to.
For a man with a lot of money, it is a mistake to pay a low price whenever there is either training involved in using the item, or the dreaded phrase, "some assembly required."
There is another risk: the thing won't work out of the box. Sam Walton understood this, as a rich man who never abandoned his poor boy's roots. That's why he adopted a 100% exchange plan. His cost-cutting marketing strategy depends on the absence of on-site repair facilities. So, when you buy anything at Wal-Mart that doesn't work, take it back and get a new replacement. This happens so rarely that it pays for the policy of not having on-site repair facilities.
Wal-Mart makes at least one exception to its "no service" rule for commodities (as distinguished from its pharmacy): a Wal-Mart Super Center's watch department, which will change the battery in your watch, cheap. If this service were not available, some of us would not buy watches from Wal-Mart.
I don't understand the conservatives' hostility to Wal-Mart. The company offers the option of paying low prices to people who favor the trade-off between time for money. That's millions of people. Wal-Mart makes their lives better. In those areas of shopping in which we favor saving time over saving money, we can go to our local mom-and-pop market, or its economic equivalent in our day, the 24-hour convenience store.
And yet, and yet . . . you don't see many new Cadillacs or old Rolls-Royces in front of convenience stores. You see used cars owned by folks who probably should pay more attention to higher prices than they pay to fast shopping time. Old habits die hard, good and bad. As powerful as the logic of rational economic choice is in economic theory, any theory of self-interested decision-making that ignores the effects of habit is not much of a theory. It is long on equations and short on common sense.
July 16, 2002
Copyright © 2002 LewRockwell.com