“There Ain’t No Such Thing As A Free Lunch”
People who know me know that I’m not one to miss an opportunity to praise Robert Heinlein, but his recognition and popularization of this basic fact strikes me now as one of the more prescient aspects of his writing.
Our obsessive pursuit of a free lunch is, in my mind, the chief cause of the current problems with the world economy. Yes, many are blaming simple greed, but there’s more to it than that. Greed, simple avarice, while distasteful, is distinct from the more toxic desire for a “free lunch”. Greed in and of itself is simply a desire for more. Left un-checked greed alone can ruin a life, sure, but it’s possible to be greedy without the domino effect that we have observed in the past year. It’s possible to be avaricious without desiring to acquire possessions undeservedly; greed can drive push a person to improve himself and to earn those things which are desired. To be sure, such a life is ultimately unfulfilling and there is no final satisfaction in it, but it won’t necessarily drag everyone else down.
No, the disaster comes when greed is accompanied by sloth and we seek possessions the easy way. When we believe that we can get something for nothing we delude ourselves. Sometimes we merely postpone payment (with interest), sometimes we force that payment on others, and sometimes, worst of all, we do both. It is convenient to blame banks and CEOs and “speculators” (a vague grouping at best), but the fact is that most of us bear at least some of the burden ourselves. When I first started working, during the boom period of 2004/2005, I looked into the possibility of buying a small house as opposed to renting. Fresh out of college, $2,000 in the bank, two months of work experience in a “real” job. The bank told me they could approve me for a $250,000 mortgage. I told them they were insane and that I was looking for, at most, a 75,000 mortgage.
The result of my search was that I remained in an apartment; unlike the area in which I grew up it wasn’t possible to find solid $50,000 to $75,000 houses where I was working. But that’s not the point. The point here is that a lot of people believed their bank when they were told that things would be fine and that they could refinance later when the value of the house had gone up (because it was certain that house prices would continue to climb). To be sure, banks should not have been willing to lend as much as they did; I am by no means absolving the banks which were out after their own free lunch. However, I’m simply astounded that more people didn’t realize that they needed to reign in their spending and stop relying on credit.
We willingly buy into the idea that credit spending is acceptable and then are shocked when the bill comes due. On Sunday, there was a story on the news about a man who had been making over $750,000 a year as a Hedge Fund manager who had lost his job and was now delivering pizzas for $7.50 an hour to make ends meet. The news story took the populist slant and there was a sort of “wink wink, nudge nudge” implication that this was in some sense the deserved comeuppance for one of the “fat cats” who caused the current mess. That angle didn’t work for me. Instead, I came away wondering why no-one questioned how a man earning $750,000 a year lacked any significant savings. I’m simply baffled by the apparent expectation that we’re all living paycheck to paycheck regardless of how much we make. That a person who made $750,000 a year had no significant savings to fall back on is absolutely baffling to me.
When it all comes down to it, we have all made this bed and we all have to lie in it. Maybe good will come out of this yet. Maybe we’ll learn something and start saving again. And maybe I’ll strike oil in my backyard. But hey, I can still hope.
