October 19th, 2011
The Free Monkey Problem: The High Cost of Free Things
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For economists, the free rider problem, which arises whenever people use a service without paying full price, is a dilemma worth tackling. Today, I want to alert you to a much bigger issue: the free monkey problem.
Free Monkeys for All
Imagine someone was giving away free monkeys on the street. They’re adorable and the price is right (free). You’d have to be crazy not to take one, right?
A handshake later, you’re the proud owner of a monkey named Timbo… for free! Online, a marmoset like Timbo would cost $2,600! What a steal!
But was the monkey really free?
Hidden Monkey Costs
An indoor monkey cage is at least $650.
Monkeys also need medical treatment and immunization shots from expensive vets. Additionally, what about the cost of a monkey sitter when you want to go to a no-monkey establishment?
Diapers are another expense—as much as $3,500 over fifteen years.
Plus, monkeys have to eat. Your marmoset Timbo will eat at least $3 of food a day. Over the average 15 year lifespan of a marmoset, food alone could cost over $15,000.
But it’s very hard to consider and calculate these costs while you’re overloaded with excitement at the chance to take Timbo home.
So the real calculation for buying and caring for a monkey is at least $21,000, and that only includes the costs we mentioned. Since you got your monkey for free, you’ll end up paying at least $18,500 over its life. That’s just a 12% discount. Whoopee.
But free makes our eyes all googly, much like a baby marmoset’s. Before we know it, we’re taking care of a monkey for the next decade and a half at a huge cost to ourselves.
The free monkey problem comes up whenever we consume more than we want because we miscalculate the real cost of something.
If, for example, I apply for a credit card that has a free $100 bonus, it might seem like a great deal. But if research the card in Credit Karma’s review section, I’ll discover that the card has a $50 annual fee, a $1000 spending requirement before I get my $100 bonus (which I’ll blow on a few months of monkey diapers), and a high APR. After all that, my free $100 becomes awfully expensive.
Ever eaten too much popcorn at a movie theater? The refill might’ve been free, but you forgot to value your well-being, and how annoying it is when a kernel gets stuck in your teeth.
As Dan Ariely points out in his insightful book, “Predictably Irrational,” when Amazon introduced free shipping for purchases over $25, sales increased substantially. People spent more than they expected because they incorrectly valued the worth of free shipping. Ariely writes:
“Most transactions have an upside and a downside, but when something is FREE! we forget the downside. FREE! gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is.”
Overcoming Free Monkeys
The easiest way to avoid the free monkey trap is to artificially inflate the price to match its actually cost. If the free refill of popcorn was just $1, how many people would still get it? For a credit card offer, what’s your net gain after all the hidden costs come into play? If your hourly wage for completing the offer is less than minimum wage, you might want to pass.
Thinking through the real cost of things saves us from buying monkey diapers for the next 15 years. So the next time you’re faced with something free, ask if you would pay $1 for it. If the answer’s no, you’d probably be better off without it.
There’s no such thing as a free lunch, unless your monkey steals it for you.
Now, if you’ll excuse me, it’s time for Timbo’s daily walk.
Ezra Fox, Credit Karma Contributor, Free Monkey Owner