Category: Opinion

I’m on holiday this week, so I thought it would be oh so much fun to republish an ancient post (Sept 2008), which most readers haven’t seen before.  Enjoy!

Online opinions and reviews are everywhere.  If you are doing some online shopping, it’s almost impossible to go to a site offering merchandise that doesn’t allow people to write reviews on the products.  You can comment on blog posts, newspaper articles – the “people” definitely have a voice where they didn’t before the internet came about.

In theory, allowing the public to comment on your product description sounds like a big win for the consumer since they can gain from the experience of others who have already bought that particular product.  In reality, I’m not so sure.

Either you are with us or against us

A couple of years ago I wanted to buy a DVR – digital recording device.  As it turns out it was a complete waste of money, but that is another story altogether.  🙂  Since I didn’t know much about DVRs, I did quite a bit of research online.  I looked at basic models, intermediate models and high end models and read as much as I could on places like epinions.

I figured that I could learn enough from the consumer reviews that they would help me determine what brand and model of DVR to buy.  The problem was that for every single brand and model, there were really negative reviews and really positive reviews and nothing in between.  These results were pretty useless for my purposes since they told me absolutely nothing about if the product was right for me or not.

The reality is that people who are motivated to sign up and leave a comment/review somewhere feel very strongly about the product and probably represent a small percentage of the owners of that product.  The end result of course is that most online opinions will be strongly for or against that particular product or service.  What I really want to know is how the other 95% of the owners feel.  Are most of them happy/unhappy (even if only slightly) with the product?  I’ll never know because very few of them will ever leave their opinion anywhere for me to read it.

Another example which I’ve seen first hand is on various posts about discount broker Questrade on this blog and others – some of the commenters (as is their right) have spent a large amount of time locating every single Questrade post on the internet and leaving lengthy negative and duplicate comments.  I have no problem with people doing this which is why I leave the comments as is, but the downside to this situation is that people who are looking for a discount brokerage might get swayed by all the negative comments, even thought they might not be reflective of the majority of customers.

Product/service suitability for requirements

Another issue I’ve found with online reviews is that sometimes people will complain because the product didn’t meet their requirements.  The problem is that my requirements for a product might not be the same as that person.

For example, I might want a new computer to do word processing and email.  I’m looking for something cheap that has enough power to do those basic tasks.  I don’t need a super-duper high powered computer that can run the latest video games.

If I read a computer review written by a disappointed gamer who isn’t happy with a computer because it doesn’t run his games properly, I might end up influenced by a review that isn’t relevant for my needs.
What do you think about  online opinions?  Do you base any buying decisions on them?  Have you ever reviewed a product online?

JD from Get Rich Slowly recently talked about a decision he made to cancel a trip to England.  He had a $900 plane ticket which was non-refundable, non-transferable, non-everything.  The $900 was gone.

In his post, he makes the argument that the $900 he spent on the ticket was a sunk cost since he couldn’t get it back. 

With respect to Jd’s argument, I don’t think the $900 was really a sunk cost.  Yes, the money was gone and he couldn’t get it back, but he could still use the service that the $900 paid for. By deciding not to go, he was giving up a plane flight worth $900. 

Whether you give up $900 cash or give up an item worth $900, in my mind it’s the same thing.  Since he could have still taken the $900 flight at the time he made his decision, it wasn’t a sunk cost.

I think of a “sunk cost” in the context of money that was spent on something and now you have a decision about a course of action which will ensure that you can’t get the original money back.

For example, let’s say you have a business that you have invested $50,000 in and it loses $1,000 per month.  You’ve given it lots of time and work very hard, but it’s clear that you have to close the business. 

It would be very tempting to say “but I put $50k into it, I can’t close it down since I’ll never get that back”.  However, you have to turn it around and ask yourself – would I buy this business for $1 which requires 50 hour weeks and loses $1,000 per month?  If the answer is no, then the business should be shut down.  Note that the original $50,000 was not part of that analysis because it is a sunk cost and is irrelevant to the decision.

Similarily, maybe someone buys a stock at $100 and it drops to $50.  Some people won’t be able to sell that stock at $50 or anything less than $100, because that decision will ensure they won’t get their original money back. Again, the proper analysis is to decide if that stock would be worth buying at $50 – if yes, then keep it, otherwise sell it. The difference in value between the current stock price and the original stock price is a sunk cost and is irrelevant.

In JD’s case, he paid $900 for a plane ride.  When he decided to give up the trip, he can argue that the $900 was gone and is a sunk cost, but I would argue that he still had the option of getting on the plane (a $900 value) and therefore it is not a sunk cost.  Or at least not a very good example of it.

What do you think?  Was JD on the money when he used the “sunk cost” argument?  Is my argument “sunk”?

 

 

One of the best things about blogging is the comments readers leave. Far more than other publishing mediums, blogs allow the writers to get closer to having a dialogue with their readers.

On a number of occasions I’ve talked to people about comments, why readers comment and how to get them to do so more. I’m unwilling to follow a number of the approaches myself, but here they are for other bloggers to consider.

Get More Readers

There’s a certain proportion of readers who will comment on blog posts (I’ve heard the estimate of 1% from multiple sources), so the easiest way to get more comments is to get more readers. I’ve written before on some general ideas about this, but most bloggers are probably already doing everything they can to get as many readers as possible.

Write “Accessible” Posts

A friend’s father was talking about how the hardest decisions for an organization are often made the quickest. If a board of directors is considering building a new power plant, there’s probably one person who really understands what this entails and they’ll do what she thinks is best. If they’re deciding whether or not to buy new mops for the custodial staff, everyone has an opinion and the discussion may take a long time.

Similarly, complex posts will get fewer comments. I think Thicken My Wallet writes some of the most detailed and insightful posts in the personal finance blogosphere (I think 98% of his stuff is gold). A ton of his posts get 1 or 2 comments, and some don’t get any.

If a blogger writes nothing but rehashes on the themes of “avoid debt”, “investment X is AMAZING!”, “investment Y SUCKS!”, “latte factors”, or “spend less than you earn”, it will often be a blog that will get tons of commenters (as everyone can put together a comment on many of these topics).

I think Garth Turner at greaterfool.ca is pretty funny, but basically every one of his posts boils down to “real estate is over priced and the market is going to crash”. Each of his posts gets hundreds of comments.

This is something that I think has limited the comments I get, but I’m just not willing to write posts that keep going over the same territory repeatedly (it seems boring to me).

Write Inflammatory Posts

Casey Serin is the master of this, but bloggers learn when a post hits certain buttons among their readership. Writing a post on the subject is a good way to get passionate members of both sides posting comments. Our posts on real estate agents do this, although Mike and I have only written these posts when we have something to say, not to get people fired up.

A high traffic blog could easily be created around the idea of a daily post criticizing real estate agents. You’d get the agent rebuttals, people agreeing, people leaving anecdotes of bad experiences, and so forth. Each day, just write 400 words and get everyone going again. Other ideas would be daily posts on: why the government needs to give poor people money, why poor people are the cause of all of society’s ills, how you just need to *believe* in success to achieve it, how taxation is evil, how real estate is the easy path to riches, how Forex trading is the easy path to riches, how gold is the easy path to riches, or how some particular stock trading systems is the easy path to riches. Don’t do anything substantive on any of these topics, just keep saying the same vacuous things in different ways each day.

Respond to Comments

When I first dabbled with blogging I thought that it might make sense to not respond to comments at all. My thinking way that I have my say in the posts, so perhaps I should let readers talk it out between themselves in the comments. If your goal is to get more comments, DEFINITELY respond to as many comments as you can. People will be far more likely to leave comments in the future if they get a response. It also leads into discussions in the comments section, which will tend to draw more people in and get more commenting happening.

Encourage Commenters

I think we’ve had some AMAZING people commenting on this blog over the years, but there have been a couple of crazies that stuck around for quite a while. They’re often good at writing inflammatory comments and getting people going, and they leave LOTS of comments, so encouraging them may be a good idea if lots of comments is your goal. I always wanted to maintain a high value of commenting as well as raw number, so I’d ignore them and eventually the nuts would move on (probably related to my last point: if you ignore the good commenters they’ll move on too).

Mention Comments / Commenters in Posts

On occasion I’ve based a post around a good comment or highlight a commenter in a post. This is like the last two ideas on steroids (and is worth doing).

Link to, and Comment on, Other Blogs

It may only lead to a single comment, but most readers have probably seen the comments bloggers leave one another thanking them for links. Linking to other blogs and other blogs’ posts is worthwhile. When I get a good comment from a blogger I haven’t seen before, I’m VERY likely to go and check out their blog (and usually leave at least a couple of comments on interesting posts). Theoretically, bloggers should leave good comments since they got enough interesting ideas to write posts on their own blogs (and can toss a couple interesting ideas into the comment section of other blogs).

Keep Posts Short

My posts are too long, I realize many people just won’t get all the way through a 1,000 word post. Some commenters will leave comments without reading the entire post, but they’re jackasses for the most part. Keeping posts short and digestible will increase the number of people who finish reading it, and therefore may consider leaving a comment.

Ask Your Readers Questions

I suspect some people are willing to comment but just can’t think of anything to write. One technique is to try to encourage discussion with a few questions at the end of a post that you hope people will comment on.

What have you found to be the posts most likely to get you to leave a comment? For bloggers out there, what have you found to be the best ways to get readers to comment?

In this post I’m trying to get my arms around some VERY BIG concepts. Feel free to comment and disagree, but please realize that with 1,000 words to work with I can’t cover every perspective to the depth I might otherwise wish to. I’ll also acknowledge my bias towards formal education:  I have 9 years of post secondary and am in the middle of a PhD program.

Most people believe that education, or at least knowledge, is a good thing. Even those who seem to embrace ignorance believe they have a commitment to knowledge, just of a different nature.

Gradations of Knowledge

In my opinion there is massive differences in the value of various pieces of knowledge. How to make penicillin is far more valuable than knowing who won the 1957 World Series. Bad knowledge is also possible:

• Magic crystals are a better treatment for breast cancer than modern medicine
• Killing people by suicide will get me 72 perpetual virgins in the afterlife
• There are such things as high yielding and safe investments.

are all examples of dangerous nonsense. Believing this sort of thing can get you killed or ruin your life. An education that results in the belief of dangerous nonsense is harmful. Even those who peddle dangerous nonsense will argue that there are gradations of knowledge (and that the information they’re selling is of higher quality than what you’d get elsewhere).

How to select an education that will result in the greatest increase in the VALUE of knowledge is therefore key, rather than just blindly pursuing “education”. The paradox of this is that when you’re seeking the education, you inherently don’t possess the knowledge to evaluate it, which is how people get sucked into dangerous nonsense.

Experience

Luckily, we’re all constantly self-educating (learning) simply by surviving another day on the planet. I have an uncle who can look at a couple interacting and read if they’re romantically interested in one another or not. This really impressed me when I was in my early 20’s. Now I realize that if you date enough and live long enough people can read this sort of interpersonal interaction easier than reading a book. I’m amazed at how clueless high school students are about this (a girl will almost be drooling over a guy and he won’t realize it).

While I was writing this post, Firefox crashed on me and I lost 700 words. I’ve learned to save more often in the future when I’m working on posts.

Experience is a dear teacher, but fools will learn at no other.
Benjamin Franklin

The problem with learning by experience is that it takes a long time. The value of an education is to learn the lessons of other people’s experiences faster than it would be take to go through those experiences yourself. I can learn the results and importance of Mendel’s pea pod work without actually breeding 29,000 pea plants.

Limits to Formal Education

The economic value of formal education has been shown. This doesn’t mean all education is a good investment. Scam trade schools are a particularly odious way to waste people’s time and money. While established university and colleges are businesses more than they acknowledge (how many businesses solicit donations from previous customers?), they also have to provide value to continue getting students in the future.

In my opinion, there are two valid reasons for paying for an education: to increase earning power or because you’re passionately interested in the subject. A minimum amount of passion is needed to get through an education (and to work in that field). People who can find an education that accomplishes both for them are particularly fortunate.

I think it’s valid to go into debt for an education that increases your earning power, but that studying something you’re passionate about should be done with money you’ve already earned. I’d happily use money I’d saved to pay for a child’s liberal arts education if they understood the limited impact it would have on their earning (and the massive impact it would probably have on their life). I’d be reluctant to go into debt for this and would discourage any young people from doing so.

Just because something increases your earning power doesn’t mean paying any price is worthwhile. If it’s possible to get a comparable education at a local school while living at home instead of a far more expensive education living away from home, the local school would obviously have the higher return on investment. Contrasting the cost and expected return needs to be done carefully by the potential student.

Like any investment, it’s important to investigate what you’re buying (the school and program). One heuristic would be an inverse correlation between the quality of education and the amount of advertising (when have you seen an ad for Harvard Law or MIT Engineering?). Another would be an inverse correlation between the cost and the value.

Autodidacticism

I love autodidacts and, like many bloggers, am myself one in terms of personal finance (I’ve never taken a business course and have only taken one economics course). Certainly autodidacts can learn much faster than from experience as they read books on the subject and teach themselves. It’s a great hobby and very occasionally makes a massive contribution to a field of knowledge (sometimes a change that only an outsider would be capable of making). There are a number of problems with this form of self-education.

It’s possible to spend massive amounts of time on incorrect or irrelevant information. Cranks can construct an elaborate, impenetrable field with their own vocabulary and with sufficient persistence ignore advice that what they’re doing is a nonsensical waste of time. During the dot-com boom a number of startup were created around ideas that anyone with a computer science background could have shown to be NP-complete (and therefore there is no known way to efficiently determine a solution).

On the flip side, it’s also often the case that autodidacts move from one thing that’s interesting to the next, and avoid learning a complicated, but fundamental, part of the field that’s important to progress to higher level understanding. This is a more enjoyable form of learning, but naturally tends towards a broad, shallow understanding of the field (think Cliff Clavin). It would be a VERY rare person who would be capable to teaching themselves advanced mathematics without someone providing a curriculum to ensure they had mastered all prerequisites.

I continually get annoyed when I read a writer making the blanket statement that education is good. I would agree with the statement generally, but I think it is more nuanced than it is typically presented.

We recently got an e-mail (summarized below) from a reader asking for advice about a situation with her parents.

“My parents have worked hard their entire life but never saved a dime.  As they approached retirement, they worked as the resident managers for an apartment building.  They have very minimal savings, and the small amount they have (X-mas bonuses or RRSPs) they cash in for consumer purchases such as a La-Z-Boy chair, new Jeep or a string of campers.  They’ve recently bought into an expensive timeshare style campground membership.

My brother and I had a meeting with them, talked about our concerns and offered to help set them up with a small building they could manage for us.  They said they’d be happy to live there, but didn’t want to be involved in operating a business (because of bad experiences in the past) and wouldn’t take any action to help set up something to take care of their own retirement.

They joke about living in my driveway in a camper as their retirement plan.  Both seem concerned about retirement at times, but won’t change their behaviour or do anything to plan for it.  They didn’t help us with out schooling and have lived the good life, so it doesn’t seem fair that my brother and I will have to support them in their golden years (they’ve had far more, nicer trips than I have over recent years).  We both have kids we’re planning to send to school and our own financial obligations.

What is the best response in this situation?  My brother has given up on them and I want to confront them!

Since the e-mail wasn’t addressed to Mike or I specifically, our lucky reader gets a two-for-the-price-of-one response!

Mike’s Response

“Your parents are stupid, selfish and screwed. You are screwed as well unless you can disown them (which is unlikely)”. 🙂

Mr. Cheap’s Response

There are a number of perspectives on this.  I think the first two can safely be dismissed, and the later two are worth your consideration.

1.  Legal

Except for a small number of very isolated cases, there usually isn’t any legal obligation to financially support your parents.  I am not a lawyer, but my understanding of whether you support them or not in their old age isn’t a legal obligation.  You don’t mention this, but one of my friends once worried about inheriting her father’s bad debts.  This sort of Dickensian thing doesn’t happen anymore (as long as you don’t co-sign on the loans, lenders won’t be able to make you responsible for your parents financial mistakes).

2.  Cultural

I briefly dated a woman of Kenyan descent and she talked about how her parents would hit up her and her siblings for things like building a new deck on their house (hardly a necessity of life).  Even though she was working a low-paying job, the expectation was that the children would kick in to help the parents live a more comfortable life.

While your parents clearly aren’t good with money, did your dad teach you to ride a bike?  Did your mother read to you when she tucked you in at night?  Did your dad take you out to a bar for your 19th birthday and tell you why men were no good and you should steer clear of them?  Did your mom watch “The Bachelor” with you and make catty comments about the contestants?  Parenthood is about more than just paying university bills.

The obligations in Western cultures are almost entirely FROM the parent TO the child.  Some might argue that by virtue of giving birth to you and your siblings there is a debt that isn’t absolved by your parents making bad choices.

3.  Ethical

Friends and family make bad decisions for themselves.  It’s torturous when you see the problem coming from a mile away, you warn them and they tell you to mind your own business, then you’re expected to pick up the pieces when your prediction comes true.  Since you’re a mother, I’d bet you’ll have many opportunities to go through this again with your children as they get older! 🙂

Your parents are adults and should have planned for their own retirement.  It isn’t fair that they’ve dumped this responsibility on you, their children.  Instead of having a comfortable apartment, treating the family to the odd meal out and taking the grandkids on a memorable trip to Disneyland they’ve set up a situation that is going to be unpleasant for everyone involved.

Setting aside whether it is “right” to help your parents out or leave them to sink or swim on their own, imagine your OWN future.  Say it’s 20 years from now and you’re thinking back on your parents (who have since passed away).  Would you prefer to have the memory of them being a financial burden on you in their golden years or of them living an impoverished life isolated from their family? Rather than determining what’s “right” it might be worthwhile to consider the situation from the perspective of what will lead to the least personal regret in the future.

One other thought is that having your parents live with you might not be the burden you expect.  Contrary to public perception, people don’t become instantly and completely useless the instant they turn 65.  If they’ve been resident managers, your parents have a set of skills that might make them very welcome guests in your house (cleaning, light repairs, contacts with tradespeople, etc).  Even having two trustworthy, loving people to help take care of the kids might be a welcome addition to the household.

I suspect that, of these two evils, having your parents be a financial burden for a few years would be the lesser evil (which, hopefully, your siblings would share with you).  I’ve never regretted kindnesses I’ve performed in the past, even those that have cost me significant (at the time) amounts of money.

4.  Pragmatic

The entire situation may be a moot point, as Canada has a pretty nice social support system.  For an elderly person with no money, they won’t be living a lavish lifestyle but the necessities of life will probably be covered by old age security and whatnot.  While they are in good health, this should cover rent and groceries.  Once they are in worse health it should cover a retirement / nursing home.  If having your parents live with you is too great a burden for you and your siblings, government programs will cover their lifestyle (and you shouldn’t feel guilty about letting your parents use these).

For your (and your parents’) peace of mind it may be worth researching this and letting them (and your siblings) know what a realistic future looks like for them:  it won’t be sipping drinks on a golf course in a tropical destination, but it won’t be living in your driveway and eating cat food either.

If, in this situation, you had a little extra money to treat your parents to cable TV in their room or to take them out to a restaurant occassionally it would be generous to do so, but not an obligation.

What are your feelings about the situation?  Any advice for the writer?

Some time ago Preet, Mike (& Mrs Pillars) and I got together for some yummy Thai food and adult beverages.  At one point I was expressing skeptism about something, and Preet wryly responded “Skeptical?  You?  No, never!”  While I’ll leave my own personal skepticism as an issue between myself and the team of psychologists in Vienna focused on my therapy, I’ve since been developing a model of the spectrum of credulity and skepticism.

As much as I’m probably closer to one end of the scale than the other, I don’t want to claim any correlation between intelligence or the “proper” perspective.  It’s just different ways to view the world, the right blend of which is different for every person and situation.  I’m not suggesting that this model is of any inherent utility, it’s more something I’ve been thinking about and find interesting (and hoped some readers will as well).  A number of people I’ve discussed this with agree that there’s a spectrum between credulity and skepticism, but had never thought of it in terms of discrete levels.

Getting the right level of credulity / skepticism is VITAL for personal finance.  We’re constantly bombarded by more information then we can process, all of which may (or may not) impact investments.  Paying attention to the right information (and ignoring the wrong information) can be the determining factor in many investments.

There was an interesting psychological experiment (some details, and a video, were posted to boingboing) that contrasted human willingness to blindly emulate one another to chimps.  The original paper this is based on is available here for anyone who has access through a university (or is willing to pay).

Credulity Level 1

At credulity level 1 the general assumption is that all people always tell the truth and aren’t motivated by bias.  If someone asserts something, they’re taken at face value.  The Invention of Lying explores the idea of an entire world (except for one man) which operates on this principle.

One of the big advantages of this level is you don’t have to evaluate information:  you just believe it all.  This is probably reasonable when you’re in a totally foreign environment and are trying to figure out how to function.  I personally went through this when I’ve lived abroad in the past, if someone told me I should do something (or not do something), I’d just believe them and change my behaviour.  Sure, maybe they were tricking me but it was easier to just follow what natives suggested (since, hey, it’s their country, right?).

The big disadvantage of this is that you’re very easily deceived and exploited.  Sadly, there’s a whole class of scams that exploit recent immigrants (since they are more likely to be at this levels as detailed above).

Credulity Level 2

This includes the belief that something is true because it’s in a book or newspaper (implicit faith in the editorial control of the publisher) or because a trusted source (such as a friend or family member) said so.  On the face of it this might be a reasonable and effective filtering mechanism.

This level is required for education, where someone is designated the teacher and the other the student.  Yes, it’s possible to learn if you challenge every assertion made by a teacher, but there are precious few environments that would allow this sort of behaviour from a student.  For things like learning which foods are safe to eat or which are poisonous, children would starve (or die from poisoning) if they couldn’t accept this level with their parents.

The problem occurs when someone in the trusted group is tricked, the idea can then spread quickly through their social network as each contact unquestioningly believes what was told to them.

Credulity Level 3

At this level you trust your own experiences.  Once something has happened to you and you’ve learned about it, you make predictions about the future based on those experiences and trust them.

This can be much more powerful than blindly following a teacher once you gain a deeper understanding of a domain of knowledge, as you experiences can correct misunderstandings your teacher had (“It’s a poor student who doesn’t surpass his master”).  If your real estate mentor told you to always avoid properties with foundation problems, but you come up with a strategy, based on your own experiences, which allows you to lucratively flip properties with foundation problems you might be the only one operating in a lucrative sub-market.

Things change and it can be dangerous to trust what happened in the past.  Bubbles form because an investment keeps paying off, so more money keeps pouring into it (as everyone keeps expecting the future to be like the past), which causes it to keep increasing in value, until suddenly everyone in Holland looks around and asks why they’re all so crazy for tulip bulbs.

Credulity Level 4

At this level you trust what you can sense (or reason about).

This can be worthwhile when you incorporate your personal experiences with an understanding of different environment and determine when you’re in a familiar situation and when things have changed.  Andrew Lahde understood the credit crisis before most people in the financial industry saw where it was heading, and by understanding the financial principles at play (instead of just counting on “it’s been making money up until now, I guess it’ll keep making money!”) he achieved an astronomical return for his hedge fund.

Sometimes your senses (or the data) deceive you.  A friend of mine’s father (an engineer), wholeheartedly believes in ghosts because he remembers seeing one as a child.  Beyond just the vivid imaginations of children, sometimes we see things that simply aren’t there.  Richard Dawkins relates the anecdote in one of his books of seeing a demonic visage superimposed on a neighbour’s house, which, as he approached, broke down to be just light shining out from windows.

Credulity Level 5

At this level you doubt everything (and reject any avenue the provides concrete information as unreliable).  It’s possible the world is a simulation (think Neo from The Matrix) and that everything is a lie, but how could we ever know?  Even if you see cracks in reality, how can you reason about what is outside?  At this level of extreme skepticism, everything is questioned (and doubted).  You see some people at this level in specific areas of their lives (such as conspiracy theorists, holocaust deniers or tax protesters, who remain skeptical of events that obviously happened no mater what evidence or reasoning is offered to them).

This level of skeptism can sometimes lead to radical breakthroughs, such as Einstein believing there was more to physics than what Newton had outlined.

The downside is obviously when massive amounts of thought and effort are wasted on attempts to debunk something that is, actually, true.

I’m a feminist (of the Cathy Young brand of equality feminism, not the cuckoo-for-coco-puffs Andrea Dworkin or difference feminism brands of feminism).  Sometimes I’ve grappled with the best way to divide expenses within a romantic relationship.  As an ideal, splitting the costs evenly seems to make sense, but I’m certainly aware that often two people will differ in their disposable income or earning potential.  The actual mechanics can sometimes be difficult, with each person thinking they’ve paid more or becoming amateur accountants trying to balance the various expenses.  In the past, I’ve typically taken a generous view and offered more than strictly half (and have never come to regret it), and have had the good fortune of having mostly dated women who insisted on keeping things fairly divided.

One couple who I was friends with ran into a problem with this while dating as undergrads.  He had a fairly “macho” view of masculinity and dating and insisted on paying all the bills whenever they went out.  Eventually it got to a point where dating was costing more than he could afford.  He discussed this with her, and her reaction was that she wanted things to be more fair and was happy to contribute when they went out.

The guy initially thought this was ok, but told me he was humiliated whenever she paid and he would have to slip off to the washroom because he was so uncomfortable with her paying the bill.  I thought this was kind of lame of him (get over it!), but I thought their solution had some merit.

Basically, they opened up a joint bank account, got a debit card for it, and would always add equal amounts of money to it (so when it got low they’d add $150 each to it or whatever).  They’d then use it to buy anything that they wanted to pay for “as a couple”.  Instead of having to keep a mental tally (I paid $39 for dinner two nights ago, then you paid $21 for the movies, but I paid $7 for the popcorn…), by using the account they were guaranteed that they’d split the bills down the middle.

The other “benefit” was somewhat lopsided.  He would always pay with the communal account, giving the appearance that he was treating (when she was stealthily paying half).  If she didn’t protest, why should I?

All sorts of variants are possible on this for all sorts of situations.  Instead of setting up a joint bank account it’d be possible for one person to use a credit card solely for couples activities, then they split the bill every month.  In addition to a romantic couple, this approach for splitting expenses could be used for friends (2 or more) who are traveling together and want to split all expenses.

If one person earns more than the other, they can decide whatever split makes sense, then still use this approach.  If the girlfriend earns double her boyfriend’s salary, she can put double whatever he does into the account and they’ve neatly split all bills 1/3rd to him and 2/3rds to her.

There certainly can be dangers to shared accounts.  We’ve probably all heard stories about one member of a couple being left with bills after the relationship ends (whenever I see one of those court shows on TV it seems these are almost the only cases they get).  You’d also want to limit how much cash and credit was available in such accounts in case someone goes nuts (I recently mentioned in a  post about the brother of a friend who had $10,000 of his money drained from a joint account after his fiancé went on a weekend gambling binge).  There’s also the chance that your partner might make an impulse buy with the joint account (shoes he just has to have, or her buying drinks for men with loose morals in bars).  If your partner is doing this sort of thing (or you’re worried they will), do you really want to build a life together with them in the first place?

I grew up with an older brother and part of that experience was learning how to deal with disagreements. One thing that I think we both discovered fairly early on is that threats are rarely a good way to get what you want. I’m amazed at how often people try to use them within an ongoing relationship and am perplexed that they haven’t clued in to how ineffective they are.

To start, I’d like to clarify what I mean by a threat (people have commented that it’s odd when I give definitions at the beginning of a post, but commenters regularly misunderstand what I was getting at, sometimes believing I’ve asserted the exact opposite of what I intended, so it’s worthwhile to take the time to be clear). A threat CAN be physical violence (“do this or I’ll hurt you”), but it can also be removing something good (“do this or no desert for you”), changing the relationship (“do this or I’ll break up with you”) or emotional (“do this or I’ll be angry with you”).  Heck, you can even threaten SELF-HARM (“Pay my rent or I’m going to be living on the street”) and use the fact that someone cares about you against them (I personally find this particularly odious).

I think in each case, it sometimes works to get you what you want, but it comes at a cost of damaging the underlying relationship. This can be fine in some situations, such as a one-off transaction with a street vendor while on vacation (“give me a better price or I’m walking away”), but usually the long term hurt isn’t worth any (potential) short term gain.

I love the board game “Risk” (and putting modesty aside I’m fairly good at it). Typically in Risk it’s important to avoid two-front wars, and if you can get the other players to leave you alone while you hammer on one of them (ideally with help from at least one other player), you’re half-way to winning.  Sometimes when I’d hammered away at someone and left them in tatters, I’d tell them I’d let them live if they promised not to attack me (a threat) or to join me in attacking someone else.  This would let me focus on a bigger threat, instead of committing resources to wiping them out completely.  They’d either refuse, and I’d have to wipe them out, or they’d agree and betray me at the earliest possible opportunity (Risk cards allow a weak player to explode later in the game).

The realization I eventually had was, it was a bigger cost to their ego to feel like they’d given in to my bullying them than it was worth for them to stay in the game.  They’d rather reject my demand (and suffer the consequences) than feel like they’d “given in”.  What’s bizarre is even when they stakes are much higher than a board game, people still have the same reaction.  For a world leader to get on the TV and proclaim “We do NOT negotiate with terrorists” makes them look strong and powerful, when in fact, they may be doing a disservice to those they represent.

I contacted some property owners who had units which had been available for rent for an extended period locally (over 4 months).  The owners were eager to talk about selling, but quickly made it clear that they expected me to jump through hoops to buy from them.  They were clearly at a disadvantage in the negotiation (since we both knew their property was sitting empty costing them money each month), but they were so desperate to strengthen their position that I wasn’t able to reach an agreement with any of them (one wouldn’t even let me make an offer – he demand the offer exceed “market rate” but couldn’t tell me what he thought market rate was or how he would calculate it).

Within an employment context, threats to fire or quit are EXTREMELY harmful.  I’ve basically taken the position that I don’t mention quitting until I’m 100% sure I’m leaving.  I’ll try to talk about problems, but I never would mention quitting until I was certain I would leave.  At a number of workplaces they tried to convince me to stay, but at that point I would be a lame duck.  They’re going to remember I was ready to leave, and that will affect any future promotions or assignments.  One retired man I talked to once told me that in all his years of working, he’d found when someone threatened to quit and were convinced by management to stay, they’d usually be fired within 6 months.  Management convinced them to stay so they’d have more time to transition them out of the role they were in, not because they wanted to keep the employee.  Similarly with threats to fire someone, how many times will they need to hear that before they decide it’s better to get another job before it happens?

There’s a clear moral reason against threats (it’s not a particularly honourable way to negotiate), but on top of that they aren’t effective at getting what you want.  On top of that, it makes it harder to negotiate with the person in the future.  If there’s ever a good time to use a threat in a negotiation, it’s very rare (perhaps in life or dead survival situations or one-off interactions like the street vendor mentioned above).

Reacting to threats is also a funny situation.  It’s always tempting (and so very satisfying) to say your own variation of “I don’t negotiate with terrorists” and shut down talks after someone has threatened you.  I think this is less than optimal as well, because you lose any options that might have come out of negotiations with that person.  Giving in to threats is very dangerous (you’ve validated to the other person that threats are a good way to get what they want from you, and they’ll be more likely to threaten in the future).  Setting aside your ego and continuing the interaction can still possibly lead to agreement.  I gave up on the for sale by owners after they’d threatened me, but I should have kept the lines of communication open and told them that I want to buy their property if they decide to sell in the future.