Saturday, November 21, 2015

Already Affordable

The 'Law of One Price' is the idea that the same thing should sell for the same price wherever it is. The idea that what determines some things price is its value. This forms the basis for the idea of 'Purchase Power Parity' which compares the output of countries adjusting for the strength of the currency. So while South Africa may 'produce less' in dollar terms, the amount of stuff will be higher than suggested by the dollar selling price. The Economist invented the 'Big Mac Index' as a light hearted way of looking at the idea that the same thing (don't get much more same than a Big Mac) should cost the same. 


One reason the Law of One Price doesn't really earn its stripes as a Law is because we don't choose where to be based on where the specific thing we are buying is the cheapest. If you are sitting at a pub in London and want a pint, you are going to have to hand over £5. It doesn't matter that it would be ridiculous to pay R110 for a beer in Johannesburg. A friend tells me craft beer in Vietnam costs 3200 Dong (That is R2). He had to check that he was converting properly.

One of the problems with comparison (which seems to be a way we try to figure out if we are happy) is Big Maccy. When we see a friends house, we may like the idea of living there. When we see another friend at the Rugby World Cup final, we may like the idea of being there. Whatever the point of comparison, financial freedom/ time/ power/ friends/ intelligence/ musical talent/ blah/ blah/ blah, it is impossible to stand back and consider the full combination of things that go into that.

The exercise of stepping back is useful. Even then, you probably won't have all the facts and feelings at hand. A 2 hour chat with someone about the stresses and benefits of their job will only give you a whiff of what it is all about. What we are generally the expert on is what our experience is. We can tweak that. That's why when we give advice, it is autobiographical.

Trying to step back and think of all the things we spend our time, energy, money, love and worry on can help us realise when we could benefit from a change. It is hard to keep all the things that are important to us in mind. It's worth occasionally stepping back to ask what the most important things are. Why are they important? Then perhaps you will realise that something is worth a trip to wherever your own personal Vietnam Craft Beer is. You might find that you can already afford it. Price is a vote. Value is personal.

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