What’s a real bargain? Below are some of my musings on how we think about price.
The restaurant I probably go to most often in Seattle is a local taco joint. Their menu is simple and they execute their food well. I’ve been going pretty much since they opened. It’s a little more expensive than taco trucks but in a city that’s becoming increasingly expensive, paying around $8 or $9 for a meal is pretty good. When I leave I feel satisfied and feel as if I earned some well-earned frugality points. My wife and I also eat a good deal of seafood. Sometimes we will indulge in something nice like Black Cod, which our local Asian market had on sale for $18/lb. Typically around .5-.6 lbs is enough to feed us for a meal (with rice and veggie sides). This puts our the cost for two people around $9-11, quite a lot for a home meal. These meals feel like a splurge and sometimes induce a tinge of guilt. But the cost of the fancy-feeling Black Cod meal per person is actually less than the cost of my tacos. So why do I feel like Mr. Fancy Pants for the Black Cod and frugal for the other?
A few members of my family really enjoy bargain hunting. My wife likes to look at the local ads for and pick and choose. The thing she always checks on her receipts is the % savings from a grocery store. On a typical day, it’ll be 25-35% and sometimes if there’s particularly good deals or some free stuff we may even get 50%. My mom is also a big hunter and goes to a Goodwill warehouse that sells by the pound. On a good day, she’ll spend a few bucks and be able to consign $50 or more of goods. Smart, practical consumers, right?
Saving 50% sounds like a lot and but will this make a huge difference in our overall financial picture? I don’t think so. Saving 50% amounts to around $20 which can get you quite a lot of produce but frankly it’s just not that much money in the scheme of things. We are in a city where a minimum wage of $15. Is it easier to work an extra hour or to be a hawk for grocery deals?
Similarly, my mom’s hunting gets some excellent bargains when you look at the amount items cost at retail, but it’s also not necessarily going to put the kids through college.. Sure these things adds up over time and saving money is a good thing but it is a relatively smallish amount of money compared to rent. You can probably scour and dig deep for all sorts of coupons, freebies and discounts on inexpensive goods. Save a dollar or two here and there. In a city like Seattle where the total cost of living is much higher for other reasons (property prices, rent), I think it’s important to acknowledge that these sorts of bargain hunting and frugality are good, but are relatively limited in their overall impact. You can work hard and save $50 on groceries for the month, but you’ll still have to write a check for $2,000 each month for your rent.
One of my local grocery store (a bourgeois organic food co-op) started sourcing supposedly higher-end organic chicken that sells for $3.50 per pound. The relative price compared with your regular grocery store chicken is quite high, where you can typically find chicken for $1 to $2 per pound. You can even find rotisserie chickens for less than these organic chickens, so these new chickens end up looking quite expensive.. That is if you are comparing it relatively vs. an anchor price for whole chickens.
But in a vacuum, $14.00 for 4 pounds of meat is hardly highway robbery. Of course if you don’t think there’s a difference in quality or sourcing, buy the cheaper one.. But if you think the chicken is indeed substantially better quality, I’d argue that it’s easy to make a reasonable and rational case to purchase the higher quality product.
Relative Price Depends What it is Relative Too
In the previous analogy with chicken, let’s think about another protein that’s inherently more expensive, say prawns. The standard, lower-end prawns I find usually come from southeast Asia and sell for ~$6-7 per pound. It’s also possible to find higher-quality products from Alaska or elsewhere, many of which sell for $20 per pound. This amounts to a similar % price difference as our chicken. But because it’s an inherently more expensive product than chicken the cost per pound ends up being much higher. Buying $6-7 may feel like you’re making the cost-effective choice, but it can also obscure the fact that cheap prawns are actually more expensive than the fancy chicken!
We could also try taking this a bit further to the price of a meal going out. Even a cheap eats sort of place in Seattle like the taco place will run you up around $8 or $9. The chicken is $14 for 10-16 servings, and people call it expensive, a qualification rarely applied to the taco place. What people who call the chicken expensive really mean is that it is expensive compared to other chicken.
Protein $/lb + $/Serving
|Better Sourced Prawns||$22.00||$7.33|
A Tea Example
Ripe pu’erh is something where the normal price isn’t very high and we are used to not paying very much. The median price for shu pu’erh that is available to westerners comes out to around $0.11/g or about $40/cake. When a higher-end ripe i.e. the 2017 HLH Lao Mane a $405/1000g cake ($0.41/g) everyone’s immediate reaction is to freak out. In my opinion, there are two reasons for that. (a) The sticker shock, $405 is a lot of money (1KG is also a lot of tea). (b) people are comparing the cost to the average ripe pu’erh. The price only sits a little above a median young raw pu’erh production (~$0.30-$0.35/g in 2017), but is almost 4x as high as our average ripe!
Similar to our chicken example when we say the boutique ripe is expensive, we don’t mean that it is expensive in a vacuum but expensive relatively.
One of my theories on tea consumers is that we tend to gravitate towards a certain sort of buying and rarely deviate from it. We might be a medium-end buyer or a high-end one. Most people that are buying $0.30/g young sheng (average $0.30-$0.35/g) aren’t also spending $0.30/g on ripe pu’erh (average $0.11/g). If they did it would make them a fairly typical sheng buyer, but a very high-end ripe one.. The more likely case is that someone buying average priced ($0.30/g) young sheng person spends around average price ($0.10-$0.15/g) on ripe tea. They will probably spend somewhere around average (~$0.20/g) for Dongding Oolong. If this holds true, this implies that your tea buying isn’t always consistent in price (they’re not buying the same $/g for every tea) but follow a different pattern that places you at a similar point for each tea relative to price anchors.
One thought experiment is putting yourself back 12 years to 2006. What would you actually buy?? Would it be the nicest tea available or something else? On first glance, it seems like your time machine really opens up a lot of doors.. Things like 1980s 8582 was being sold for ~$20 for a 20 gram sample? Would you hit that hard and buy multiple tongs? It’s only with the benefits of hindsight and knowing that these teas are now mostly inaccessible and sell for $36/g in some cases that it seems like a fantastic buy. $1/g buys a lot of tea some pretty premium tea now, back in 2006 that was a very high amount to spend on tea. If I’m being honest with myself, I probably would’ve just sampled it once.. It’s only relative to the current price of those teas that we know it would’ve been a good idea to buy.
Breaking the Pattern & Your Own Intuition + Instincts
Breaking this pattern means being a high-end chicken buyer without necessarily becoming a high-end prawns buyer. In the bargain hunting example at the top of the page, even if you can get a huge % off your order of lower priced goods it won’t necessarily make you wealthy in the long-run.
In tea’s case, breaking the pattern might mean buying nicer tea from an inherently cheaper tea category and perhaps less high-end tea from more expensive categories. In more crude terms, you’re mindfucking and rationalizing your tea expenses by looking at metrics like $/g and $/session rather than the price relative to the median of its category. Things like ripe pu’erh, heicha, and some oolongs/black teas are good candidates where the baseline price for tea isn’t expensive and to buy above average examples isn’t necessarily wallet busting. A super fancy ripe is maybe the same cost as an average young raw production..
The reverse might be holding off on something where the baseline price is already very high, like Wuyi oolongs. Sure, buying $0.25/g ripe probably feels like a splurge. But if you feel like the quality is there and you like the tea, it really isn’t any more financially irresponsible than typical sheng buying.
Tea Situation Matters
I’d argue that we should be breaking the mold and comparing prices across tea categories more often. This may involve ignoring our intuition on what is expensive or not. If we identify instinctively as mid-tier buyers and buy around the averages we may end up with a rather large quantity of tea, maybe too much. And if we buy faster than we accumulate (as many of us do) it really doesn’t make sense to continue buying this same tier of tea. In such situations, it makes a lot more sense to slow down, buy less, and maybe aim a little higher.