BC Business
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Penny wise or pound foolish? Pondering the question of false savings and financial symbolism.
As travel season approaches, fond memories of past vacations come flooding back – such as the time I visited the wide-open countryside near Ernfold, Saskatchewan. This was an unexpected addition to my itinerary, resulting from the sudden failure of a water pump while rocketing down the Trans-Canada. My brief idyllic time in Ernfold ended with a 100-kilometre tow into Moose Jaw, during which I had lots of time to think that perhaps my decision to save $75 by neglecting to purchase a BCAA membership had been unwise. I’m just sayin’.
Lots of us are re-evaluating spending decisions these days. So what do you cut? Milk baths for your Mexican hairless can probably go without creating any sort of domino effect. Whereas savings on antiperspirant or transmission fluid could have consequences. Financial decisions ought to be about cold, hard figures, but it’s not always so. Emotion, misconception and circumstance often trump logic.
Nothing distorts like a good media furor. Last spring’s uproar over AIG bonuses is one example. When we learned the insurance and financial services giant had paid out large bonuses after accepting U.S. government bailout money, the response provided a rare example of unity. The media howled; the public howled; the Republican and Democratic parties behaved as though the kingdom of heaven had been established on earth and all manner of former antagonists could now live in harmony. All agreed the AIG bonuses were an outrage.
Some of the bonuses surely did stink. But others reportedly were delayed payment for work that had been done essentially without wages – work done not by conniving villains but by AIG employees working in good faith, quite probably unaware of the disaster that was about to strike. More to the point, the $165-million sum, while certainly big enough to make us peons salivate, was not a significant percentage of the massive $30-billion bailout. The outrage was about venting, and it felt good, like cursing the ref at a hockey game – and it accomplished just about as much.
Of course cutting a few of those bonuses wouldn’t have hurt either. Tough times require tough measures. But there’s a danger that we will pursue false economies, reacting to obvious expenditures while ignoring more significant costs – like compulsive gamblers who cut back on trips to the dentist. And there are some cost savings that come, in time, to be seen as short-sighted.
The original Vancouver Public Library plan, for instance, featured a majestic public rooftop garden, which was dramatically scaled back for budgetary reasons. This spring the Vancouver Convention Centre came in at $882 million, including greenery and even beehives on the roof. A $400-million overrun is nothing to brag about – people might assume the green roof was spread with 20-dollar-bill mulch. It would have been easy to cut it, but I’m glad that in this case they didn’t scrimp on the bees and flowers.
Sometimes too we pay more attention to perception than reality. Last summer gas prices went crazy. I was planning a trip back home to Brandon, Manitoba, and once again I decided to drive. People were appalled. News reports were full of tales of vacations cancelled over fuel price woes – wasn’t I paying attention?
Naturally, I was unhappy about paying Merlot prices for petroleum. But cost-wise it was no contest. An airline ticket would run me at least $600, plus several hundred more for a rental car. Even with two nights in a Calgary motel, my ancient four-cylinder BMW could beat that price. The challenge was to ignore all the people on TV telling me that a cross-country car trip would leave me stranded in Manitoba, weaving toques for stray coins.
It worked out fine. Even though this time I bought the BCAA membership and the car never broke down. Seventy-five bucks, wasted.