Always think in absolute dollars and not in rates. $1000 is $1000 whether the cost per use is pennies or tens of dollars. Thinking in terms of rates is how people would fall for predatory installment purchases in the old days (you can have a new computer for just $2.5 a day!)
The other obvious problem is looking at cost absent of a market. It's not just how much it is worth it to you, but what the competition is offering it for. I personally pay less than $400 a phone and keep it for over three years. Paying $1000 for a phone just two years is not an improvement.
Edit: I spoke very dogmatically above. Using rates can be OK in certain situations where the analysis becomes equivalent to using absolutes, but it's not at all rare for rate analysis and absolute analysis to differ, and people make the mistake of using rates there. You will never, ever, go wrong by looking at absolute amounts, though - and it's usually the easier way to analyze.
In my engineering undergrad, Engineering Economics was a required course. I remember a fellow student said "I often return other engineering textbooks to get some cash, but this book is more useful than most of my engineering ones." Decades later, I can say he was definitely right. All too often I see engineers making poor financial decisions based on heuristics when they're quite capable in doing the (simple) math. But a lifetime of being exposed to flawed ways of thinking of money provides a convenient shortcut.
I don't think you're necessarily disagreeing. There's a factor that neither you nor the author are considering: value/$. Author is implicitly assuming that the higher cost equates to a higher value (clearly this is never a linear relationship).
So my friends call me the cheapest person they know, but I also think like the author. If there is something I am going to use a lot and the added value helps me, then I'll shell out more for it. Really we're talking about Boots Theory[0]. If you buy cheap rubbish then you'll buy frequently. If you buy quality you may only have to buy once a lifetime, even if it is 3-5x. With your phone, if all you care about is texting and making calls, yeah, you're not getting any added value paying more. If you're a person that takes a lot of pictures and values the camera, you will get added value (don't come at me with the "buy a dedicated camera" because you're not carrying that in your pocket everywhere and thus can't capture the same moments).
So if you wear boots every day, it's better to shell out for the boots that will last you a lifetime rather than ones that will last you a season.
> Always think in absolute dollars and not in rates.
Technically, you should think in probability weighted log-dollars to maximise your economy over the long term. (The Kelly criterion.)
In some cases this is equivalent to thinking in terms of fractions of your total wealth -- this is how the Kelly criterion is popularly presented.
For small ("everyday", as Bernoulli put it) amounts, this is equivalent to absolute dollars. So you're right, but it's a special case of a more general principle.
* $/use isn’t really a rate in the way you’re describing with predatory financing. It’s not a cost hiding measure but one of many ways of estimating utility. Optimizing for price alone and not $/utility will bite you for lots of goods.
* A $400 phone used 100 times is $4/use and a $1000 phone used 100 times is $10/use so markets still have plenty of an effect.
> Thinking in terms of rates is how people would fall for predatory installment purchases in the old days (you can have a new computer for just $2.5 a day!)
I think he's phrasing it poorly and you're not too far from where he is.
It's essentially a reworking of the "Boots" theory or poverty. Cheap things will typically wear out faster and need to replaced often.
Like in your phone example. You actually based and compared them on rate. $1000/2yrs is worse than $400/3yrs. Hell, even $1000/3yrs is worse than $400/2yrs.
That $2.50/day computer is going to wind up being $2.50 * number of days owned when it is finally replaced. It will take 800 days to match the value if the computer costs $2000 initially. If you keep that computer longer than 2 years, 2 months, and 9 days, you're now paying more than the value of the computer.
I think the author's suggestion would be to just pay the $2000 up front. It's a lot of money right now, but if you keep the machine for 3 years, that's like $1.83 per day you paid for the computer.
It's not backwards, but nothing is black and white.
An example of where looking at the cost per use makes sense is a gym membership. --If I consider the gym is worth, say, $5/visit and it costs $50/month, then I know I have to go at least 10 times a month to feel like I'm getting what I'm paying for.
On the other hand, yeah, my phone is not something that I'm going to try and figure out a cost per use, not the least because each use has a different intrinsic value to me (contacting someone is more valuable than checking the news, at least for me).
> Always think in absolute dollars and not in rates. $1000 is $1000 whether the cost per use is pennies or tens of dollars. Thinking in terms of rates is how people would fall for predatory installment purchases in the old days (you can have a new computer for just $2.5 a day!)
It depends on the opportunity cost. If you can get a house for 3600 a month, and the house appreciates in value in excess of the discount rate, then it's worth it to purchase that house.
Cost per use absolutely makes sense when the items being compared have different lifespans. Although that's more estimating depreciation than what the article is talking about.
>I personally pay less than $400 a phone and keep it for over three years. Paying $1000 for a phone just two years is not an improvement.
Either you aren't using your phone much or you are needlessly suffering with inferior product. Wearing cheap shoes for years when you could afford comfortable high quality shoes is not a virtue. Same goes with tools we use.
It should really be "cost per meaningful use" or "cost per productive use". Being able to check your news feed on your phone 60 times a day probably doesn't confer as much utility as being able to check your friends' messages 10 times a day.
The overall idea is better expressed as – value stuff based on how important it is to you vs just the dollar amount associated with it, which is pretty generic and obvious advice. Trying to simplify it down to "cost per use" or some other similar metric is pointless. Is the $3000 flight ticket that you use once worth more or less than a $1000 phone you use thousands of times or a $5 coffee you drink in one gulp? No one other than you can answer this for yourself.
of course it's not possible to come up with an ironclad set of rules on how best to spend money, especially not in the space of a single blog post. but that doesn't mean it isn't worth trying. if nothing else, it helps to become more intentional about how you spend your money, which most people would probably benefit from.
I personally don't find the concept described in this blog post very useful. I prefer to think in terms of annualized/amortized costs, especially within the perspective of money-stress-time tradeoffs. I could see others finding it helpful though.
Along these lines, I find that not many people correctly calculate the cost-per-use of their car. They only think of the cost of gasoline burned, and maybe tolls and parking. They don't think about the cost of insurance divided by the number of trips, or the capital cost of the car amortized over the years of ownership. If people thought hard about the cost-per-use of driving, then other transportation options start to look more attractive.
Some of us have calculated it... and it is frightening! I have an Excel sheet of all the cars I've ever purchased or leased, and the cost per mile of them, and it is staggering. Thankful to have enjoyed some fun cars, I cannot imagine just how much of this economy is powered solely by this car dependency we have in the US.
I've also estimated my cost to commute to my tech job in the suburbs (thankfully full-time remote now), and it was staggering how much that was including insurance, maintenance, tolls, electricity, etc., compared to free options/transit/corporate bus/remote work/my daily mortgage cost.
> not many people correctly calculate the cost-per-use of their car
Cost-per-use by itself is fairly meaningless, costs needs to be compared against value-per-use.
What is the worth of: a visit to my friends; taking a surfboard to the beach; taking a load of firewood to my parents; an emergency 2AM visit to a suicidal acquaintance; taking my nephew and his friends to the skatepark; helping a friend move; picking up a Craigslist chair.
Other transport options usually have severe limitations on availability, flexibility, cost, destination, load, etcetera. Optionality and peace-of-mind has huge value too (i.e. availability if urgently required, even if it happens that nothing urgent comes up).
Last time I mentioned on HN how useful a car is, someone suggested hiring a car instead, which is ridiculously more expensive and extremely inconvenient (at least where I live).
Disclaimer: I am carless at present. The non-financial costs are extremely high.
And then if you have the 'nice car' and the 'old car', you may end up favoring the old car for a bunch of activities, reducing the total use you get out of the nice car.
Also vehicles aren't lumps of gold. They rot while sitting still, even in a garage - which fewer and fewer of us do.
> Along these lines, I find that not many people correctly calculate the cost-per-use of their car. They only think of the cost of gasoline burned, and maybe tolls and parking. They don't think about the cost of insurance divided by the number of trips, or the capital cost of the car amortized over the years of ownership. If people thought hard about the cost-per-use of driving, then other transportation options start to look more attractive.
They do think about this, which is why the second-hand market for cars is so healthy.
To be accurate, you should restrict your assertion to those people who only buy brand new cars, which is necessarily a far small population of people who buy second-hand.
There are more people who think about this (they buy second-hand) than people who don't.
I find people making the opposite mistake: They take the total cost of ownership, and say that paying an extra $8K for the car is a small fraction of the total cost, and over 10 years that's just paying an additional $2.20 a day, so it's no big deal.
$8K is $8K - it doesn't matter if it's all paid in one day, or spread over 10 years.[1]
I always notice how they like to look at the cost per day and not, say, the cost per year. I suppose if the daily cost still looks high they'll calculate the cost per hour. Or as in this case, the cost per use just because it makes the number even smaller.
[1] If you exclude opportunity cost. If you include it, investing $8K up front will likely give you better returns than investing $2.20 a day.
In most of the US, not having a car at all places you in a severe hardship. Public transit is usually underfunded or scarce. Daily life needs extra planning, effort, and time.
So a car may be purchased based on pure utility, or for uncommon but plausible capabilities, or for luxury or status.
But people are well aware of the cost of carrying insurance and of buying a car in the first place. Those costs aren't incurred per-use; accounting for them per-use can only make car ownership look more attractive than otherwise, not less.
I'm thinking of negative costs of alternatives too. Cars are expensive, but on other hand how would the alternatives make me feel in both time and use... How much would I actually pay for not doing something...
I consider maintenance, insurance etc. But I weigh that against it takes twice as long to get to work by bus. I work 13 hour shifts so travel time is important to me.
> this means you spent about $0.02 per use, 2 cents every single time you use your phone. That seems like a way better deal than the $14.05 McDonalds meal that you just bought last week
What? Why would you compare a "use" of your cellphone to a really big McDonalds meal? I mean, I should stop eating because there's no way I can eat a meal for less than the cost of using a cellphone one time?
You haven't lost $700 by buying a pair of skis. You have exchanged $700 in cash for at least $500 in a pair of skis that is now previously owned.
So you might lose, say, $200 immediately for the privilege of buying something brand new. And then another $100 if we include up-front the effort to sell them to someone else.
But the rest of the money is still there, in the shape of skis.
As you use the skis they will depreciate in their second hand value -- this is when the money is actually lost, bit by bit. You can estimate how much the second-hand value of the skis are with 10 uses, 100 uses, 1000 uses, and so on. This is the real cost per use.
I like that thinking. It also became clear to me when moving. You can actually sell good furniture that you don't want anymore, and get quite some money back. And if you are considerate in which furniture you buy, you can assume you'll also get money for it, should you not need it anymore.
Thus for example, a purchase of a $2000 designer table might not be that huge, if you use it 5 years and get $1500 for it afterwards, you only paid $100 per year to have the table you wanted.
Meh, second hand ski market is very patchy, the selection isn't great and different boot sizes might require binding remounting. Skis only last 100 or so days so cost/day is tiny compared to other ski expenses. You could save a few hundred dollars by buying second hand but then you have a big risk of injury from bindings not working properly. The time and effort looking second hand is a big factor too.
By this logic, paying $10k for a day of "enhanced air" (whatever that might be) is a great deal. After all, you breathe something like 20,000 times a day.
Trying to quantify the psychological value of our experiences to do some kind of double entry booking that justifies our expenses seems like kind of a fools errand to me but that's pretty much what you'd have to do if you wanted to optimize your personal expenses. Time of use doesn't necessarily translate to value or make sense to amortize by. If I do something that makes me just slightly happier or even worse off many times, or I do something for a short time only once creating a memory I look back on for the rest of my life with satisfaction then obviously the single use expense was superior.
> what you'd have to do if you wanted to optimize your personal expenses.
Yeah, it's called budgeting and being poor. Some of us try to maximize this satisfaction and lifelong memories while avoiding incurring significant personal debt on a low salary. Tradeoffs and opportunity costs abound. Of course not everyone should or would be better off being cognizant of these costs and quantities, but some of us have to be by necessity.
The article falls short on the comparison part. Why is the author comparing the cost of using a phone for a couple of minute to the cost of eating out that you usually do maybe once or twice a month? The duration should be similar. Following the author's example of buying a $1000 phone every 2 years, that would cost about $9.2 every week or about two McDonalds meals every month. If I'm given the choice between the two, I'd take the McDonalds.
Here is another take, when I compare two things on price, I take the price difference and apply 5% compound interest on it for 30 years. That about how much I would save if I put the money on my mortgage instead. Or when the mortgage was paid off how much it would earn in my retirement savings.
Also, now I have two kids, I always think how much its going to cost my kids. Sure I could buy a $1000 phone now, or I could leave my kids $10,000 extra in the Will. :)
From what I recall, Warren Buffet thinks about things in the same way, which is one reason he’s famously stingy.
It’s a blessing and a curse, because it leads to wealth but can end up in some weird end states. Like having an uncomfortable lifestyle that the money-controller can tolerate, but other members of the family chafe at.
Be careful to value the compounding interest in your own happiness and the compounding value of the happiness of those around you. Through that lens, a marginal $10k (on top of an already secure retirement fund) might be worth far less than a marginal $1k investment in the happiness of yourself or your friends and family.
Money is not a goal in itself after all, it exists to further our true goals in life. In this day and age it’s all to easy to get distracted by the money game, and forget what our true goals are.
This is a good point raised also by Deming early on in one of his books. The cost of any investment is not just the money spent, but also the risk-free rate compounded on that money over the time the investment is in use.
In periods when the risk-free rate is 2 %, that is what any investment costs you in addition to the principal, as Deming put it poetically, "every day, rain or shine, even on Sundays."
I would have hated for my parents to not buy something so that they could leave me money. I mean not that they had that problem, they died pretty much broke, but still. They taught me how to make my own money.
There's some wisdom in the overall point, but the example of a mobile phone is completely upside down. I for one don't want to think of pulling a device out of my pocket in terms of some kind of microtransaction. Rather I want it to be a natural extension of my own mind, including running software that serves my interests rather than corporate spyware.
Of course one is always able to do a post-facto "price per use" calculation, it's just an extremely myopic paradigm to be thinking in. Even $/month is too small minded - that's how salesmen push you into paying way too much and financing things. But thinking $/year starts to make sense, letting you take into account things like how long upstream software is going to be supported etc.
Also yes, most everybody knows the tabs for eating/drinking out add up to a considerable amount of discretionary income. Those too are better brought into the $/mo and $/year paradigm.
I got the gist of the article with a quick speed-read. I have kinda used this unknowingly for a very long time. I have also helped a lot of people make buying decisions, especially when they find the upfront cost high.
My view is -- start from the cost of your use and buy it even if it is on the costlier side upfront. This is also akin to buying smaller number but of high quality item so they last longer and thus the life-time cost to usage is way beneficial than buying cheap that you need to repeat frequently.
Breaking down the cost down to the number of hours use per day, and thus if a Laptop lasts 3+ years, how much is the actual cost for each hour. Now, will it "spark joy" buying a better but costlier Laptop that will last years.
Same for me: cost per use is helpful to get you thinking about total cost of ownership and product lifetimes.
It's a really good way to evaluate how much you should pay for the second purchase of a tool - also whether the price is worth the warranty.
My Bosch laser Level for example cost $150 more then the alternative, but came with a 6 year as opposed to 1 year warranty. At a total price of $600, I was buying it at $100 a year guaranteed availability. Whereas the cheaper option actually cost me $450 for only 1 guaranteed year of service.
My spending habits changed considerably when I started to include the cost of real estate required in my calculations.
I encountered this first in a forum discussion about boilers - someone pointed out that the largest cost component isn't even the unit itself, but all the space it takes.
Anyway whenever I think of buying a treadmill, I remind myself that the actual cost is an additional €4500 just for the real estate and perhaps a gym membership would have been cheaper, but since I still haven't gotten one, perhaps it's less important to me than I think.
The extremely sad fact is that doing this calculation for storage costs in a major city means you are often better off simply throwing out or giving away the item instead of storing it, and buying a replacement when you need one.
If you don’t buy the treadmill, you don’t save money on the real estate you already own. It either goes unused or is used for a different purpose. Is this really the right way to think about the trade offs?
If that’s worth it for me to upgrade then it’s simple to make the call. We spend a third of our life sleeping so having a good bed is a worthwhile investment.
That assumes the $2k bed is any better than the $1k bed. There is a lot of info proposing it’s not even better than the $500 bed but the marketing teams can easily sell it at a massive markup because people split the cost over years and use.
This is incorrect for many sane reasons. You don't get any value out of your phone for every use, so paying that 0.02USD is not cheap. It's like a pay-per-use subscription. Everyone who deals with investing knows that absolute money means everything - every 1000USD you spend is much costlier because it never has a chance to collect compound interest of inflation-adjusted ~5% annually for the next 30 years. That works out to 4481USD that you are never going to have.
That only happens if you don't compare cost of use in both cases. If the upfront is $100 for the other option, you should calculate what the cost per use is at 10k/100k/1m/10m/whatever uses, and estimate which of those you think you'll hit and make the decision based on that .
This is how I think about a lot of things, also with consideration of the absolute price, but I try not to take it too far, because you do need to just enjoy your purchases some times. I try not to view my purchases now within the broader context of my entire life of what-ifs, and accept a certain amount of risk that I'll just need to sell some stuff or take a loss if major circumstances change. When I did do this, I ended up living in a 1 Bedroom + Den, except the den was empty because I couldn't rationalize buying any mid-tier furniture, since it was likely that it would either take forever to sell, or I'd need to just toss it, but either way it would be irritating. I do consider them in the context of the year or a few years, and the depreciation on whatever it is. When you break down the cost of a car for example, with an eye for both of these extremes, it becomes very challenging to rationalize the purchase, because it almost never works out.
There is a subtlety missing from this article. The absolute cost is relaxant as well as the cost per use.
The absolute cost is very important because it relates to budgeting and total resources.
The cost per use is interesting for making decisions between exclusive alternatives.
Should you buy a hot tub (no)? It’s not just the initial cost but also the maintenance cost (chemicals). When you divide total cost by actual use in hours it’s clear it’s a bad deal.
I often think of entertainment cost in terms of cost-per-entertainment-hour. AAA video games, for example, provide a much lower cost per entertainment hour than movies or amusement parks, for example.
I often think of cost in non monetary terms as well.
When you think about the hours required to maintain something per hour of enjoyment, a lot of things that you can afford all of a sudden seem like bad ideas (many kinds of pets, hot tubs, etc.)
So thinking about usage in a buying decision is a very helpful tool in making good decisions, although it’s in addition to looking at whether you can afford the total cost.
Don't think of price, think of return of investment (ROI).
The decision if I should buy a phone for $400 or $1000 should come after answering the question "Are the extra features for $600 worth something to me?" - for some people they'll be worth - e.g. having better quality photos of their family, or having better FPS on the high-end MMORPG. Others don't need that, they don't have a ROI on the extra $600, so should skip the more expensive one.
Now, going out with an old friend and spending $100 on a night out - it's a huge ROI for some, for others not, although I think the latter wouldn't have gone out at first place. The same is valid for holidays and any kind of experiences - people will have huge ROI and will go.
The one McD menu - that's where I personally will never find ROI, so can't speak about it. Even if I am starving, buying a loaf of bread, butter and some potatoes for less than $14 will give me much more ROI.
As a deal hunter, I also think of "reminder you got a good deal per use". Nice dopamine hit using an item and being reminded "what a steal". I'm a cheap date.
Really interesting way of looking at things. I use my phone about 6 hours every day. That’s 2,190 hours a year. That’s a lot of time yikes, but anyways, that’s about $0.50/hour of use or about $3/day. I pickup my phone about 110 times per day. That’s $0.027 per pickup. Pretty cheap and worth it when you look at it in those terms. Streaming services, not so much. That’s the magic of marketing. I love pay as you go pricing, but when it’s realistic.
This is going to absolute lead to price gouging because today you can only items in one segment. For example price of bread to other bread. But if you start using cost per use all of a sudden you will be forced to justify 50 bucks for a loaf of bread or 100 bucks for a peanut butter bottle, after all a jar of peanut butter lasts a long time. Yes supply and demand and competition will still exist but they will all learn and adapt.
I liked the general idea but found the examples counterproductive. I personally prefer cooking whole foods at home. However, paying $14 for one meal would provide calories needed to live. I do not "need" to touch my phone 32,000 times at 2 cents a piece.
30 years from now I will hopefully retain some my experiential (expensive) travel memories but may not remember/care if I used a value or flagship phone for a given 24 month period.
I often consider it as cost per hour tempered by some notion of utility. Some things become trivial costs when considered like this.
A computer, per hour of utility, becomes fractions of cents, coupled with the notion that it is practically indispensable to me then it is a no brainer.
My car on the other hand is incredibly expensive per hour, and with increasing public transit and cycling near me, its utility is also in question.
You could make the argument that the phone, combined with all the extremely addictive "services" it provides, is just a piece of hardware that allows the advertisers to use you (via these services, like social media).
In that case it's you, paying thousands for the hardware, to enable others to use you and the limited time you have on this earth.
There's some parallels to traditional animal husbandry.
On the one hand, we domesticated some cows to get milk, in another sense the cows have enslaved the farmers and gotten them work all day to pamper them like royalty, the farmers ensure there is always food in all seasons, they're made to build the cattle shelter from the weather, they go out and hunt predators, they shovel manure, they get up at ungodly hours to milk the cows, and so forth.
I mostly use this for after-purchase evaluation. If I spend $80 on a pair of shoes and at the end of their life they’ve cost $10 per use, I’m not happy. If I spend $500 on a couch and by the end of its life it’s cost $0.25 per day, I’m pleased. I don’t decide beforehand exactly what value I expect to get out of it, but I know it when I see it.
Don't we already have enough propaganda.? I get it, vendors have their wet dreams of endless money stream. Has nothing to do with what I want. So far I am managing pretty good with perpetual licenses except where it makes sense (like Netflix).
Back in the bad old days, when I had an ink jet in college, cost per printed page was easily in the dollars possibly even as high as fives of dollars per page.
Later in college, I bought a used laserjet from the university surplus sale for $20. That little printer got me through several reams of paper before the toner went out. By that point I was in the pages per penny range.
BeetleB|3 years ago
Always think in absolute dollars and not in rates. $1000 is $1000 whether the cost per use is pennies or tens of dollars. Thinking in terms of rates is how people would fall for predatory installment purchases in the old days (you can have a new computer for just $2.5 a day!)
The other obvious problem is looking at cost absent of a market. It's not just how much it is worth it to you, but what the competition is offering it for. I personally pay less than $400 a phone and keep it for over three years. Paying $1000 for a phone just two years is not an improvement.
Edit: I spoke very dogmatically above. Using rates can be OK in certain situations where the analysis becomes equivalent to using absolutes, but it's not at all rare for rate analysis and absolute analysis to differ, and people make the mistake of using rates there. You will never, ever, go wrong by looking at absolute amounts, though - and it's usually the easier way to analyze.
In my engineering undergrad, Engineering Economics was a required course. I remember a fellow student said "I often return other engineering textbooks to get some cash, but this book is more useful than most of my engineering ones." Decades later, I can say he was definitely right. All too often I see engineers making poor financial decisions based on heuristics when they're quite capable in doing the (simple) math. But a lifetime of being exposed to flawed ways of thinking of money provides a convenient shortcut.
godelski|3 years ago
So my friends call me the cheapest person they know, but I also think like the author. If there is something I am going to use a lot and the added value helps me, then I'll shell out more for it. Really we're talking about Boots Theory[0]. If you buy cheap rubbish then you'll buy frequently. If you buy quality you may only have to buy once a lifetime, even if it is 3-5x. With your phone, if all you care about is texting and making calls, yeah, you're not getting any added value paying more. If you're a person that takes a lot of pictures and values the camera, you will get added value (don't come at me with the "buy a dedicated camera" because you're not carrying that in your pocket everywhere and thus can't capture the same moments).
So if you wear boots every day, it's better to shell out for the boots that will last you a lifetime rather than ones that will last you a season.
[0] https://en.wikipedia.org/wiki/Boots_theory
kqr|3 years ago
Technically, you should think in probability weighted log-dollars to maximise your economy over the long term. (The Kelly criterion.)
In some cases this is equivalent to thinking in terms of fractions of your total wealth -- this is how the Kelly criterion is popularly presented.
For small ("everyday", as Bernoulli put it) amounts, this is equivalent to absolute dollars. So you're right, but it's a special case of a more general principle.
Spivak|3 years ago
* $/use isn’t really a rate in the way you’re describing with predatory financing. It’s not a cost hiding measure but one of many ways of estimating utility. Optimizing for price alone and not $/utility will bite you for lots of goods.
* A $400 phone used 100 times is $4/use and a $1000 phone used 100 times is $10/use so markets still have plenty of an effect.
Void_|3 years ago
I have a budget of 500€ for sports per year. I use this on gyms, running shoes and what not.
I wanted to get into skiing so I bought some skis this year. It was about 700€.
Normally this doesn’t fit my budget. But I’m gonna keep these skis for at least 4 years.
Now the price is 175€/year. And I still have a bigger portion of my budget left for other sports.
bombcar|3 years ago
golemotron|3 years ago
Or SaaS.
bena|3 years ago
It's essentially a reworking of the "Boots" theory or poverty. Cheap things will typically wear out faster and need to replaced often.
Like in your phone example. You actually based and compared them on rate. $1000/2yrs is worse than $400/3yrs. Hell, even $1000/3yrs is worse than $400/2yrs.
That $2.50/day computer is going to wind up being $2.50 * number of days owned when it is finally replaced. It will take 800 days to match the value if the computer costs $2000 initially. If you keep that computer longer than 2 years, 2 months, and 9 days, you're now paying more than the value of the computer.
I think the author's suggestion would be to just pay the $2000 up front. It's a lot of money right now, but if you keep the machine for 3 years, that's like $1.83 per day you paid for the computer.
tallanvor|3 years ago
An example of where looking at the cost per use makes sense is a gym membership. --If I consider the gym is worth, say, $5/visit and it costs $50/month, then I know I have to go at least 10 times a month to feel like I'm getting what I'm paying for.
On the other hand, yeah, my phone is not something that I'm going to try and figure out a cost per use, not the least because each use has a different intrinsic value to me (contacting someone is more valuable than checking the news, at least for me).
mise_en_place|3 years ago
It depends on the opportunity cost. If you can get a house for 3600 a month, and the house appreciates in value in excess of the discount rate, then it's worth it to purchase that house.
Folcon|3 years ago
unknown|3 years ago
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demopathos|3 years ago
My income is a rate so I find normalizing on time to be pretty useful. I think $/use is pretty similar to normalizing on time
HWR_14|3 years ago
vasco|3 years ago
nextlevelwizard|3 years ago
Either you aren't using your phone much or you are needlessly suffering with inferior product. Wearing cheap shoes for years when you could afford comfortable high quality shoes is not a virtue. Same goes with tools we use.
hitovst|3 years ago
l33t2328|3 years ago
RyEgswuCsn|3 years ago
JetAlone|3 years ago
paxys|3 years ago
leetcrew|3 years ago
I personally don't find the concept described in this blog post very useful. I prefer to think in terms of annualized/amortized costs, especially within the perspective of money-stress-time tradeoffs. I could see others finding it helpful though.
nayuki|3 years ago
jeffwilcox|3 years ago
I've also estimated my cost to commute to my tech job in the suburbs (thankfully full-time remote now), and it was staggering how much that was including insurance, maintenance, tolls, electricity, etc., compared to free options/transit/corporate bus/remote work/my daily mortgage cost.
robocat|3 years ago
Cost-per-use by itself is fairly meaningless, costs needs to be compared against value-per-use.
What is the worth of: a visit to my friends; taking a surfboard to the beach; taking a load of firewood to my parents; an emergency 2AM visit to a suicidal acquaintance; taking my nephew and his friends to the skatepark; helping a friend move; picking up a Craigslist chair.
Other transport options usually have severe limitations on availability, flexibility, cost, destination, load, etcetera. Optionality and peace-of-mind has huge value too (i.e. availability if urgently required, even if it happens that nothing urgent comes up).
Last time I mentioned on HN how useful a car is, someone suggested hiring a car instead, which is ridiculously more expensive and extremely inconvenient (at least where I live).
Disclaimer: I am carless at present. The non-financial costs are extremely high.
dataflow|3 years ago
How many years will I own my car? How do you know?
Maybe some folks buy a new car on a regular basis, but others will keep a car as long as they can. The denominator isn't known for everyone here.
And then there's inflation, recession, etc. which can make the numerator unclear too.
hinkley|3 years ago
Also vehicles aren't lumps of gold. They rot while sitting still, even in a garage - which fewer and fewer of us do.
lelanthran|3 years ago
They do think about this, which is why the second-hand market for cars is so healthy.
To be accurate, you should restrict your assertion to those people who only buy brand new cars, which is necessarily a far small population of people who buy second-hand.
There are more people who think about this (they buy second-hand) than people who don't.
BeetleB|3 years ago
$8K is $8K - it doesn't matter if it's all paid in one day, or spread over 10 years.[1]
I always notice how they like to look at the cost per day and not, say, the cost per year. I suppose if the daily cost still looks high they'll calculate the cost per hour. Or as in this case, the cost per use just because it makes the number even smaller.
[1] If you exclude opportunity cost. If you include it, investing $8K up front will likely give you better returns than investing $2.20 a day.
dsr_|3 years ago
So a car may be purchased based on pure utility, or for uncommon but plausible capabilities, or for luxury or status.
thaumasiotes|3 years ago
Ekaros|3 years ago
incone123|3 years ago
GJR|3 years ago
bachmeier|3 years ago
What? Why would you compare a "use" of your cellphone to a really big McDonalds meal? I mean, I should stop eating because there's no way I can eat a meal for less than the cost of using a cellphone one time?
kqr|3 years ago
You haven't lost $700 by buying a pair of skis. You have exchanged $700 in cash for at least $500 in a pair of skis that is now previously owned.
So you might lose, say, $200 immediately for the privilege of buying something brand new. And then another $100 if we include up-front the effort to sell them to someone else.
But the rest of the money is still there, in the shape of skis.
As you use the skis they will depreciate in their second hand value -- this is when the money is actually lost, bit by bit. You can estimate how much the second-hand value of the skis are with 10 uses, 100 uses, 1000 uses, and so on. This is the real cost per use.
webjunkie|3 years ago
rr888|3 years ago
cozzyd|3 years ago
j7ake|3 years ago
unknown|3 years ago
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tracerbulletx|3 years ago
formerkrogemp|3 years ago
Yeah, it's called budgeting and being poor. Some of us try to maximize this satisfaction and lifelong memories while avoiding incurring significant personal debt on a low salary. Tradeoffs and opportunity costs abound. Of course not everyone should or would be better off being cognizant of these costs and quantities, but some of us have to be by necessity.
slategruen|3 years ago
jay_kyburz|3 years ago
Also, now I have two kids, I always think how much its going to cost my kids. Sure I could buy a $1000 phone now, or I could leave my kids $10,000 extra in the Will. :)
gen220|3 years ago
It’s a blessing and a curse, because it leads to wealth but can end up in some weird end states. Like having an uncomfortable lifestyle that the money-controller can tolerate, but other members of the family chafe at.
Be careful to value the compounding interest in your own happiness and the compounding value of the happiness of those around you. Through that lens, a marginal $10k (on top of an already secure retirement fund) might be worth far less than a marginal $1k investment in the happiness of yourself or your friends and family.
Money is not a goal in itself after all, it exists to further our true goals in life. In this day and age it’s all to easy to get distracted by the money game, and forget what our true goals are.
kqr|3 years ago
In periods when the risk-free rate is 2 %, that is what any investment costs you in addition to the principal, as Deming put it poetically, "every day, rain or shine, even on Sundays."
rufus_foreman|3 years ago
mindslight|3 years ago
Of course one is always able to do a post-facto "price per use" calculation, it's just an extremely myopic paradigm to be thinking in. Even $/month is too small minded - that's how salesmen push you into paying way too much and financing things. But thinking $/year starts to make sense, letting you take into account things like how long upstream software is going to be supported etc.
Also yes, most everybody knows the tabs for eating/drinking out add up to a considerable amount of discretionary income. Those too are better brought into the $/mo and $/year paradigm.
Brajeshwar|3 years ago
My view is -- start from the cost of your use and buy it even if it is on the costlier side upfront. This is also akin to buying smaller number but of high quality item so they last longer and thus the life-time cost to usage is way beneficial than buying cheap that you need to repeat frequently.
Breaking down the cost down to the number of hours use per day, and thus if a Laptop lasts 3+ years, how much is the actual cost for each hour. Now, will it "spark joy" buying a better but costlier Laptop that will last years.
XorNot|3 years ago
It's a really good way to evaluate how much you should pay for the second purchase of a tool - also whether the price is worth the warranty.
My Bosch laser Level for example cost $150 more then the alternative, but came with a 6 year as opposed to 1 year warranty. At a total price of $600, I was buying it at $100 a year guaranteed availability. Whereas the cheaper option actually cost me $450 for only 1 guaranteed year of service.
Tade0|3 years ago
I encountered this first in a forum discussion about boilers - someone pointed out that the largest cost component isn't even the unit itself, but all the space it takes.
Anyway whenever I think of buying a treadmill, I remind myself that the actual cost is an additional €4500 just for the real estate and perhaps a gym membership would have been cheaper, but since I still haven't gotten one, perhaps it's less important to me than I think.
The-Bus|3 years ago
clircle|3 years ago
r00fus|3 years ago
$2k bed / 10y = $200/y.
If that’s worth it for me to upgrade then it’s simple to make the call. We spend a third of our life sleeping so having a good bed is a worthwhile investment.
Gigachad|3 years ago
kuratkull|3 years ago
traceroute66|3 years ago
Its not the favourite unit of measurement of the cloud salesmen for nothing.
"Come to my cloud" harks the salesman .... "look, X is only $0.000000001 a go, Y is only $0.00095 a go .... its so CHEAP".
I think we know how it all pans out. You / your company ends up with an eye-watering cloud burn rate.
Beware the double-edged sword as they say, "cost per use" is not the panacea ... apart from for the seller, perhaps.
maccard|3 years ago
dubswithus|3 years ago
fshbbdssbbgdd|3 years ago
brailsafe|3 years ago
efitz|3 years ago
The absolute cost is very important because it relates to budgeting and total resources.
The cost per use is interesting for making decisions between exclusive alternatives.
Should you buy a hot tub (no)? It’s not just the initial cost but also the maintenance cost (chemicals). When you divide total cost by actual use in hours it’s clear it’s a bad deal.
I often think of entertainment cost in terms of cost-per-entertainment-hour. AAA video games, for example, provide a much lower cost per entertainment hour than movies or amusement parks, for example.
I often think of cost in non monetary terms as well.
When you think about the hours required to maintain something per hour of enjoyment, a lot of things that you can afford all of a sudden seem like bad ideas (many kinds of pets, hot tubs, etc.)
So thinking about usage in a buying decision is a very helpful tool in making good decisions, although it’s in addition to looking at whether you can afford the total cost.
pnut|3 years ago
jeffwilcox|3 years ago
Today, I look at the math, on a cost-per-day or cost-per-use angle, and I'm so happy that I went for something nice that I enjoy.
I do feel like cost-per-day amortized is probably more interesting for a lot of decision making.
We probably over-estimate how often we'll use a product or service.
nGaR5zKE|3 years ago
The decision if I should buy a phone for $400 or $1000 should come after answering the question "Are the extra features for $600 worth something to me?" - for some people they'll be worth - e.g. having better quality photos of their family, or having better FPS on the high-end MMORPG. Others don't need that, they don't have a ROI on the extra $600, so should skip the more expensive one.
Now, going out with an old friend and spending $100 on a night out - it's a huge ROI for some, for others not, although I think the latter wouldn't have gone out at first place. The same is valid for holidays and any kind of experiences - people will have huge ROI and will go.
The one McD menu - that's where I personally will never find ROI, so can't speak about it. Even if I am starving, buying a loaf of bread, butter and some potatoes for less than $14 will give me much more ROI.
unknown|3 years ago
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pxeboot|3 years ago
As a hiker, I have spent a lot of time calculating the cost and weight per calorie of food, and the fuel to cook it.
cvccvroomvroom|3 years ago
TCO and ROI are far more important.
For example, inkjet printers are insanely expensive per use.
Generally, the larger and more expensive the laser printer, the cheaper it is per page.
dirtyid|3 years ago
nikolqy|3 years ago
yalogin|3 years ago
x43b|3 years ago
30 years from now I will hopefully retain some my experiential (expensive) travel memories but may not remember/care if I used a value or flagship phone for a given 24 month period.
unknown|3 years ago
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ehnto|3 years ago
A computer, per hour of utility, becomes fractions of cents, coupled with the notion that it is practically indispensable to me then it is a no brainer.
My car on the other hand is incredibly expensive per hour, and with increasing public transit and cycling near me, its utility is also in question.
btbuildem|3 years ago
In that case it's you, paying thousands for the hardware, to enable others to use you and the limited time you have on this earth.
marginalia_nu|3 years ago
On the one hand, we domesticated some cows to get milk, in another sense the cows have enslaved the farmers and gotten them work all day to pamper them like royalty, the farmers ensure there is always food in all seasons, they're made to build the cattle shelter from the weather, they go out and hunt predators, they shovel manure, they get up at ungodly hours to milk the cows, and so forth.
So who actually domesticated whom?
pneumatic1|3 years ago
lopis|3 years ago
RileyJames|3 years ago
I’m not sure if it was usable life, or how long the user kept it.
Somethings don’t break, they’re just not very good, and it makes sense to replace them with a more useful version. Most things just break tho.
chiefalchemist|3 years ago
A McDonald's meal is an expense.
A mobile device, you can argue, is an investment.
The device can return daily joy*. A meal is, special events with friends aside, a soon forgotten one-off.
* The device can also be a distraction and a time-suck. That needs to be factored in.
FpUser|3 years ago
uhuruity|3 years ago
j7ake|3 years ago
The two are so different that it makes no sense to put them in the same comparison.
One should compare phones within the category of other phones. Compare food with other foods.
unknown|3 years ago
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Danborg|3 years ago
hitovst|3 years ago
asciimov|3 years ago
Later in college, I bought a used laserjet from the university surplus sale for $20. That little printer got me through several reams of paper before the toner went out. By that point I was in the pages per penny range.
The-Bus|3 years ago
threefour|3 years ago
k__|3 years ago
France_is_bacon|3 years ago
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