How To Turn Your Lunch Into $1,000,000

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My Dad taught me there's no such thing as free lunch.

Turns out he was right. Lunch costs a cool million. 

Don't believe me? Read on to find out how you're probably spending a million on lunch. 

You could be reading this from anywhere of course, so it might be $1,000,000, £1,000,000 or €1,000,000. Pick your own base currency.

Before we get onto the how's and why's, let's remind ourselves about the savings crisis in the developed world. 

The Saving Crisis

The pension at the company you work for is most likely broken. The government's pension is broken. If, like me, you're not in your 60s or older, it's very unlikely that your home country will be able to afford to help you in your old age.

Companies are desperately trying everything they can to manoeuvre their way out of funding, or paying, for their company pensions.

Of course your company and the country you live in aren't making much of a fuss about this. 

Why would they? It would topple governments and boards, so you'll have to take my word for it (feel free to do your own research).

So... to ensure you can enjoy a long and happy retirement, have you been saving since you started work? Have you been stashing cash away since you were 16, 18 or 21?

Probably not.

It's a crisis. 

The psychology underpinning why we don't save more, from younger, features a few lovely biasses. The main one is Immediacy Bias.

Smokers know what they're doing is going to kill them young, but they can't stop. Why? The near-inevitable cancer, pain, suffering and loss are so far in the future that "Meh!". Who cares? 

They can't. We can't. You can't. It's just unimaginable. We can't relate to it. It's tomorrow. Mañana. Pffft.

We just can't care about stuff that's not immediate. Millions of years of evolution haven't selected for pension-saving genes. Or "give up the booze and ciggies, they'll kill you" genes.

We're evolved to focus on immediate dangers... even in today's anodyne, extinct-sabre-tooth-tiger world, our lizard brains haven't quite caught up, and saving for a distant tomorrow is something we find almost impossible to do.

Getting young professionals to change their behaviour is big business. Apps, challenger banks, governments all want to change it. I'm not sure I've solved the problem for them, but what I've found is pretty astounding and it might help.

The Lunch That Cost A Million

In my 20s, freshly graduated, I headed for a career in the City of London, working for investment banks in trading risk, P&L, trading and sales. I bought lunch every day, at least a coffee a day and of course I headed out every Friday on the beers, having fun, making new friends and networking my way upstairs.

In my 30s I wised up a bit. A steady girlfriend had me thinking ahead that one day I might settle down, though of course mostly we just partied together. By my 40s, married with kids, I doubled down on saving more, avoiding the drip-drip-drip of daily lunches and coffees out and about. 

I had my own espresso machine at home too, so I could save on the price of a daily commuter coffee and I became a mean sandwich maker.

So no takeaway coffees for me any more. No lunches either, except for Fridays, and days of partying in pubs and bars every Friday are long gone.

On a whim one day I modelled how much this lifetime of tiny daily spending had cost me.

Not a lot, really, spread across my life. All those lunches, coffees and partying, including the substitute 'made at home' lunches, come to about £70k in a working lifetime. By the time you're in your 40s as a professional something-or-other, you should be earning that every year. It's not really all that much spread over a 45 year career, is it?

But it starts to get horrifying, frankly, shortly after that simple calculation. 

Instead of just spending the money on takeaway lunches, coffees and bars, what would happen if you invested it, returning the average of 4% a year?

You'd have a LOT of money at retirement. 

And what if you invested to return 4% and in investments that paid a pretty normal 3.5% dividend? 

Making your lunch and coffees at home you'll have a cool million in your pension when you hit 70.

Yes. You read that right. By making your lunch and coffee at home and investing what you save, you'll retire with $1,000,000.

Don't believe me? Check my sums*.

Laying it out like this isn't going to suddenly make a ton of partying young professionals start saving hard, but every time I've shown this to friends, their jaws always hit the floor.

I thought you'd like to see it for yourself, too.

Time to tuck into lunch**!

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Tags: #finance #investment #saving #pension #bias #immediacybias #compounding

* The spreadsheet, if you want a copy to play with, is here. It's pretty basic. Have a play adding columns to make it more accurate (how much do 4g of coffee beans cost a day?) or play around with the returns and dividends.

** You do need to make a damn good lunch at home or this all feels joyless... gherkins and mayo are my secret ingredients.

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Pigeons, Bombs and Buying More

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I was about to go skiing. As someone who loves cool gadgets, gear and tech, I looked across at my awesome set of touring skis, custom made ski poles and top-of-the-line Italian skiboots. And I felt cold. Dead inside.

I wondered why.

The thought struck me... if I was watching a Faction Skis Youtube video featuring my skis, or reading a review of my Scarpa Maestrale RS ski boots, I'd be salivating over them. Desperate to own them. Saving hard for them. Dreaming of one day looking across a room and seeing my very own, sitting there. 

Such a contrast to reality. I wondered why.

Is it unimportant that carnal, primitive, addictive desire ends when your gear arrives? I can think of only two brands who believe it so important, they've built it into their gear, their gadgets. More on them later. 

Everyone else? Nope. Not even a glimmer. But the truth is, I don't think they know what they're missing.

Of course it's important. If the things I own instil a strange obsession in me that transcends the enjoyment of using them, the next time I need to replace or upgrade, I'm going to return to the same brand. We talk of 'churn' in software marketing all the time, but why so rarely, if ever, with gear, is brand churn measured and minimised?

How can we create primitive, base, addictive, contemporaneous desire for the gear ('consumer durables' as they're called) that we own?

 

Therein lies the epiphany that I'm here to share with you today.

 

'Epiphany' is a big word, but I haven't found anyone else who's connected the known influences of addiction and marketing consumer durables. It works for software too, of course.

What is the one thing that most of us are irrationally addicted to? Social media. The Facebook feed. The news. The Twitter timeline. The Pinterest roll. The inbox. The Flipboard edition... Browsing Amazon for the nextest, bestest sports watch. And so on. We look, we look more, we can't stop... 5, 10, 15 minutes or more later we look away, confused that our lives haven't improved. An hour later we do it again. Why?

It's called Operant Conditioning and it was discovered by behavioural psychologist B F Skinner.

Skinner found that pigeons would get bored, when pressing a button got them no reward.

Unexpectedly they'd also get bored when they pressed a button that rewarded them with food every time.

What drove them totally crazy was when Skinner modified the experiment, so when the pigeons pressed the button they were rewarded with food randomly. It drove the pigeons crazy. They couldn't get enough of pressing the button.

Nir Eyal wrote eloquently on how operant conditioning explains how social media, email, et al, all have a strange hold over us. In a nutshell, we never know if we're going to be rewarded for scrolling, for argument's sake, through our Twitter feed. The rewards are random. So unlike a sure thing, which is boring, and a thing that never appears - also boring - sporadic rewards trigger things in our lizard-pigeon-brains that make us continually seek them out. And keep going back for more, whether we're rewarded or not.

Addicted. To a terrifying degree.

This is relatively easy to design into software, even though most software companies don't.

Why has no one designed sporadic rewards into consumer durables? Into gadgets and gear?

As I looked across at my lovely ski gear, I realised it held no surprises for me. A ski is a ski is a ski. It might be one of the best skis in the world, but a sure thing is boring, right? And yes, I get unexpected rewards from using the ski, but that's processed in my mind independently of the ski; it's the action that's rewarding, not the gear. Not the brand.

And there's the Big Idea. How can we imbue gear, gadgets; consumer durables, with agents that will engender the sporadic rewards that we know will addict us to the brand?

"HOLD UP!" says my wife, in her empathetic way. "Why is this important? With the world so full of landfill, pollution, plastic bag-filled oceans, isn't engendering obsessive desire for brands, for stuff, evil?"

I don't think so.... who doesn't want to love the things they own more? It might actually make us keep them for longer.

Here are some thoughts and ideas that no one is doing;

  • A member's club for the owner of your product, that applies to any owner, not just the first, offering sporadic rewards. Some big, many small, most tiny. People who buy second hand often move on to buying new, later. Give them a reason to buy your brand new.
  • A landing page where anyone who owns your product can go to start a real relationship with your brand. With the promise of more than just an extended warranty and newsletter. With the promise of surprise and delight. Of sporadic rewards.
  • A place to go to find out if you've got the reward, easily and often. Make it public, so everyone else wants in on the act by buying something you sell.
  • Tie rewards into the events you run, the tradeshows you attend... the Youtube videos you make. You probably already have current marketing campaigns that can support your Operant Conditioning campaign.
  • Change the product itself, during the ownership cycle, if there are elements of software to it.

I could go on. The key is in creating the sense of randomness. The will-I, won't-I? Make your customers peck repeatedly, like the pigeons, without knowing if and when they'll get a reward.

Very different from the regular, predictable owner's club.

Who is already doing this? Apple, with the iPhone: I get sporadic rewards from iOS updates that transform my phone into something better. Sometimes they don't, and that's the key. It's no surprise that most people replace their iPhone with another iPhone.

Tesla does it too, with their car firmware updates. Most of the time, they're mundane. But sometimes they unlock Easter Eggs and other hidden new features for the car you already own. You won't know until you unlock it in the morning, if you've just been air-dropped a sporadic reward. No surprise that Tesla owners are crazy-obsessed with their cars, so much so it's like all the quality and recall scandals never happened.

Canon nearly does it with their "Canon Professional Services", the only problem being you have to have bought so much of their gear that you're already invested in their brand. Bloomberg too, nearly do it, with the Bloomberg Arts Club... but again, the barrier to entry is too high for it to be really functioning operant conditioning.

BMW, Ford, Nike, Salomon, Faction, Petzl, Fox, could all be doing this, and should be, to name a few. None are. It works for software too. Most software companies don't do it either.

 

I can help.

 

PS. So what's with the pigeons and bombs in the title? BF Skinner used pigeons and mice to research conditioning. Along the way he devised an ingenious method for organic bomb guidance in the early 1940s, using pigeons in the nose of a bomb who'd been trained to peck at a target on a screen in front of them. As the bomb drifted off target, where the pigeons pecked would move, correcting the bomb's trajectory.

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