I am making my why through Richard Thaler’s new book and want to share a little story from the book. Thaler tells a story of a guy who wouldn’t pay $10 to have someone mow his lawn. Ok, no big deal. The guy is frugal or maybe he likes mowing lawns. But, the guy also said he wouldn't mow his neighbors lawn for $20. Stop and read these lines again.
I think this is an example of the wrong way a lot of people look at financial decision making.
Earlier this Spring I receive a note in my mailbox from a teenager in the neighborhood. He was offering his grass cutting services. I had not used a lawn mowing service in the past. I never liked the way the large mowing services would just show up and knock out your yard in 20 minutes and seemingly not take much pride in it. I even remarked to Natalie how there were no kids cutting lawns anymore. I had to hire this kid. But, I first needed to justify the $40/week to myself and the way I did it was the way an economist would approach it. Not suprising since I majored in Econ.
I asked myself the simple question of whether $40 was a good value. I thougt so. I then thought about mowing my lawn last year and how I did actually enjoy it. But, I recalled a couple of occassions where I flat out did not feel like doing it even though it needed cutting desperately. How bad did I not want to cut the grass on those occasions? How much would I have paid to have it cut on those days only? I settled on $500. That's how bad I didn't feel like doing it on those days.
It made my decision to hire the high school kid easy. If I were to have only one instance where I would pay $500 to have someone else do it then it made $40 seem like a bargain.