You still need to build wings, seats, landing gear and beverage carts, too. Seriously, it's easier to just visit Southwest.com
Because sometimes it makes sense.
It’s called Ricardo’s Law of Comparative Advantage. It says that things work best when everyone does what they’re best at. Ignore it, and you’ll hurt yourself financially.
Say you work as a salaried salesperson, but you also happen to be a capable amateur gardener, and can trim 50 tree branches an hour.
(sigh) Why does there always have to be math?
There’s very little math. Stop whining.
A mustachioed man wearing a Chivas USA cap knocks on your door, and explains in broken English that he’d like to trim your branches for $9 an hour. You reluctantly agree, even though hiring him means depriving yourself of a relaxing pastime.
So you hire him, and find out he’s half the gardener you are: he takes an hour to trim 25 branches. Should you grab the garden shears out of his hand (points facing downward), say you’ll do it yourself and fire him?
No.
If you earn $40 an hour, forgoing an hour of that to trim your branches makes no economic sense. Better to pay Javier $18 to do it and free up your time.
But if you really enjoy gardening that much, then yeah, go ahead and garden.
Real life example: we have a woman who cleans the house fortnightly. She charges $100, takes her time (usually about 8 hours), and is amazing. Of course we could clean the house ourselves, but it’s easy for us to get distracted. Whereas for our housekeeper, our house is strictly a place of business – not somewhere to walk around naked and listen to loud music in. (As far as we know. We try to stay away on days she visits.)
But she’s good at what she does. It’d take us longer than it takes her, and even though it’s our place, we admit we wouldn’t be as thorough. Also, we hate cleaning. (That being said, we’re still the kind of people who will spiff the place up, at least a little, for the housekeeper’s arrival.) We also don’t have the fancy equipment she has, nor would we be willing to invest in such. Furthermore, we travel frequently enough that it’s sometimes worth it just to have her there to feed and water the cats, which can allow us to extend some trips by a day or two.
If you don’t enjoy doing something, and the professionals don’t charge an exorbitant amount to do it themselves, it’s perfectly fine to hand them the wheel.
Are there exceptions? Well, what do you enjoy doing?
An example: changing motor oil. Again, there’s a capital investment involved. We happen to drive SUVs that require more oil than that effete little subcompact you drive to Whole Foods in. This isn’t a primer on how to change your oil, but here’s the list of ingredients:
6 quarts of synthetic blend $24
Filter $4
Pan $3
Cap wrench $8
Swivel wrench $14
Jack $140
Jackstands $90
That’s about it. Everything else, you can steal.
Go to Jiffy Lube, you pay $35 for a synthetic blend change. We save $7 by doing it at home, but have to buy $255 worth of additional equipment. It’ll take 47 oil changes for the capital investment (most of that involved in getting the truck off the ground) to pay off.
But this is for 2 SUV’s*, so that’s 23 oil changes apiece. Say we average 4000 miles between changes, that’s 92,000 miles each. And we can use the jack and stands for other maintenance, too.
Jiffy Lube techs have an underground station and muscle memory – their least competent employee can change oil far faster than yours truly can jack up the SUV. However, we’re at their mercy as far as getting in, jiffily or otherwise. Meanwhile, there’s zero wait time in our garage.
Also, they’ll test the vehicle’s battery**, recommend an unneeded replacement of an air filter***, maybe find a few other things wrong. Some of those might even be legitimate.
The psychological reward for changing your own oil is substantial, too. Chicks claim that they dig scars, but what really gets them hot is grease-stained hands.
On the flip side, paying someone to do what you can isn’t necessarily bad nor even something to discourage. You can eat every meal at home, but every now and then it’s only natural to want to leave your palate in the hands of a professional cook (and your dirty dishes in the hands of professional bussers.)
*We normally use “trucks” to describe what we drive, simply because they carry lots of cargo and we take them off-road. However, if they were authentic trucks in the F-150 or Tundra or Ridgeline sense, they’d have an extra inch of clearance or so – possibly just enough to allow a normal-sized person to get underneath without spending $230 on hydraulics and accessories. Thus our use of the term “SUVs”.
**A battery tester can cost $80. Seeing as that’s almost the price of a battery, is it worth it if you’re going to change your oil at home instead of getting a free test and readout at a professional oil change place? Well, while batteries die gradually, it’s pretty hard to perceive their imminent death without a tester. You’ll just wake up one day and she’ll be cold and unresponsive. Which she was going to be anyway. Jumper cables get you to the AutoZone, where they’ll test your battery without charge (haw!) and install a new one, also without charge. Well, they’ll charge you to buy it, that is. And you can assume it’ll be charged. Dropping it in place will be on the house. But it’ll still be charged. For no charge.
***If you plan to keep your car for even as little as 25,000 miles, buy a K&N filter. They cost 5 times more than standard air filters, but you can wash and reuse K&Ns. And they come with a million-mile guarantee.
**This article was a #1 pick in the Best of Money Carnival 103rd Edition**
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I don’t think $40/hour is the right comparison. You presumably aren’t foregoing working hours to garden (likely can’t if you want to keep the job, for that matter, suggesting that $40/hour to forego working hours is an underestimate). The opportunity cost is that of the actual hours you sacrificed. If you’d be doing contract work paying $40/hour that’d be one thing. But if the alternative is watching college football games on a lazy Saturday afternoon? I don’t think that value is intrinsically tied to your working wages. It’s based on personal preference and is less objectively quantifiable.
If the choice were gardening at 3am weeknights or paying a gardener, the gardener would have to be awfully expensive for people not to pay him. Likewise, if probably to a lesser extent, for gardening during normal working hours. But if we’d garden at a time when we’re not doing something particularly important, we’d do it ourselves likely more often than guessing from working wages would indicate, because the working wage is the wrong metric in determining comparative advantage at that time.
I wrote and rewrote this post, figuring now was as good a time as any to discuss what P.J. O’Rourke calls the only non-obvious piece of economic theory. I kept changing the occupation of our protagonist. She was everything from an exotic dancer to an attorney before I went with something fairly mainstream (and that pays less than those other positions.)
I get your point, and agree with you in principle. Really, the dollar figures themselves are just a matter of preference. The important thing I’d like folks to take away from this is that you can attach a price to your headaches (and their alleviation.) And that even if you’re better than someone else at both your profession and his, it can still make sense to hire him.
Fair enough as a simplification.
People willing to go slightly deeper in exploring the idea may find this brief economics article informative and useful (not least because of the identity of its author, although you wouldn’t guess it from his recent writings).
Taking a look at your expenses is important! Deciding which ones make sense to do yourself is even more important. Since I am not hand at all, I find the least expensive technician who does good work to perform these services. My expertise is in money matters so I do those things myself!
I changed my own oil on my beater cars, but it’s a job I really don’t miss doing and I don’t have my own garage anyways. Great post on comparative advantage!
It may be worth the money paying someone else to do something if you know how much your time is worth to you.
Here’s my corollary:
If you need to do something repeatedly or regularly, and its a high-value task, it might be worth your time to learn how to do it. (Example: tax basics)
If you only need to do something once, it may not be worth your time to learn how to do it, especially if its a low-value task. (Example: changing your oil)