Transcript 0:00 Welcome back to episode two of my private podcast, Money Notes from Building a Micro Business, where I'm just sharing my unpublished ideas about 0:16 money, business finances, trying to stay intentionally small or building a business that I actually like running instead of the one I feel like I'm supposed to run. Today's thought is about how nothing is actually free, 0:33 and this is inspired by a YouTube video I watched. 0:37 So the YouTube video, it was about the US interstate highway system, and it was talking about the history basically of the US building out its interstate highway system for all the cars to drive on, and how they were successful in getting it built. 0:54 But now the problem is repairs weren't built into that plan. And so while they've got... They got it built up, that worked. Now it needs repair, but that's not happening like it needs to happen. 1:10 And so in the video they talked about different ideas they had for implementing repairs, and when they asked people, "Do you want a bridge where you have to pay a certain amount every time you drive over it?" 1:24 People would answer, "No, I don't want that. I don't want to have to pay for it." But then if you ask them, "Do you want a bridge and you don't have to pay anything when you drive on it?" 1:31 People will say, "Yeah, I want a bridge." To them they're like, "I don't want it if I have to pay for it, but if it's free, yeah, sure, let's do the bridge." And when I heard that I, I was just thinking nothing's free. 1:42 Even, even though in the second example you're not paying for it outright when you drive over it, there is still a cost to that supposedly free bridge. 1:52 And so that's why I wanna talk about this because this is something I see in business too where people don't think about the explicit cost of a thing or like the overall cost of it. Like they're just thinking of... 2:07 They're... Hmm. I see this with, uh, when people are I would say newer in business or maybe... Because this isn't only for people who are new, like they just started their business. 2:18 I see people who have been in business a while who think this way too. But like they're all about the free stuff, free options, free software, free resources. 2:28 But nothing's really free, and this is something I've come to realize within the last couple of years. 2:34 It's been a slow realization, but that's why now sometimes I will say no to quote, unquote "free things" because there's always a cost. You wanna think about... 2:45 I'm gonna think about a free summit or a free bundle of resources just because this is, was a recent question in a community I'm in. 2:53 And also I saw a bundle out in the wild advertised, and my first, my initial reaction was just like, ugh. Like just no. Like an energy drain. 3:03 And it's because even though it's free, like you're not handing over money in exchange for this resource, you are handing over something or you're still spending something. So you're still spending your 3:16 time like watching or consuming the free bundle of resources. You're spending your effort, like mental effort, your brain space to take it in and actually use it to turn into something useful or to understand it. 3:32 Hopefully it's well put together and well done so that it's not even more effort just to make sense of something that's not understandable. And then you're... 3:41 And then again, like implementing what you learn or that resource, more time and effort, brain space, mental energy just to actually make it useful and do it, to do the thing. 3:52 And then more time and effort, brain space, mental energy to maintain whatever it is or keep up with it if, if it's something that probably changes over time and needs updates or, or maybe you do eventually need to get some help. 4:07 And it's not really free. From the business side though as the business 4:11 like putting out the free re- resources, for them it's worth it to make it free because it pulls in new clients, so it will pay for itself over time. It builds awareness or thought leadership. 4:22 So they're, even though it's free for them, they're still getting something. It's just not money dir- at least not right away or not directly, but they're getting something that can eventually turn into money. 4:34 So for them it's worth it. It's, so it's not really like free as in like, "I am providing this thing with nothing in return." That's not true. Or usually it's not true, like that's why they're doing it. 4:45 And so for, for me when I'm thinking about free things or, or just thing, getting something in general, if you pay for it up front it's like you're paying the cost up front. And so 5:02 that's why do it yourself things are typically less expensive than paying someone else to just do it for you or to do it with you because you're getting that extra support. 5:11 And so in exchange for more money you're having to spend less in your time and effort and brain space and mental energy. And so that's why when... 5:24 Or I, I actually just thought of something else like software companies, because this is a very common ta- like tactic or social media company just in the startup space where it's like grow fast, grow your audience really fast. 5:38 Some, some usually by providing like free tiers, free s- product, free software, and then once you build your people then you like raise the price and try to be profitable. 5:49 And so for them it's free because they're getting in exchange your data, your attention, your time, your enthusiasm, or you're building their network which makes the thing they have more valuable because there's more people in it. 6:02 So they're, again, giving something in exchange while you're thinking, "Oh, this is great. It's free." Like, we as the customers are like, "Yay, it's free." Um, 6:11 and I'm not saying all free things are like it's negative that it's free. 6:15 It's just being aware of the cost, and if you wanna expand this to, again, like keeping up with the highway interstate system or roads or cars, um, or... Yeah, like just thinking about even like, 6:33 like obviously I'm thinking of like cars and the environment, and how certain products like gas, um, can... Or, um, 6:43 I'm trying to think of specific products, but I don't wanna go like down into like a climate conversation, 'cause I actually don't have as many concrete examples for that, 'cause that's not my area of expertise. 6:54 But there's things we buy or use every day that for us feel cheaper. Oh, I'll think of... 7:01 This is a better example, but in business, but it's the same concept, where big companies like Walmart or Amazon, because they're so big, they can get their product for better prices, which means they can sell it for lower prices compared to like a smaller business. 7:15 Like, they don't have the same kind of resources or connections, and so they have to buy their product at a higher price, and then sell it at a higher price to just to stay in business. 7:26 And so it's sort of like that, like you go into Walmart and think like, "Oh, it's cheaper." Or it's not free, but it- there's less. 7:33 But you don't see all of the system behind it that makes it cost less than like another smaller business. And so it's like that with a lot of things in the world today, 7:46 and I, I guess that's just something just to keep in mind, like to think about it. Especially with tech, like... 7:57 A- and I think I already mentioned this, but when I do see like a new free software, sort of like how people have been upset with Wave for not being free anymore, but it, I... 8:07 Yeah, it couldn't stay free forever, um, unless they were just selling everyone's data to stay in business. Um, 8:14 but so yeah, when I see new free s- free things, free software especially, I'm always a little suspicious, 'cause I'm wondering how they're making money. Like, where, eh, how is this business staying in business? 8:26 'Cause it's not a nonprofit, so they're probably not running on grants. And yes, they, there could be like startup funding, but eventually are they gonna stay in business? Are they gonna stay profitable? 8:38 Are they selling our data? Or what else are they doing that we don't know about? So yeah, that's, that's what I wanted to share about. And let me check my idea notes to see, make sure I didn't miss anything. Okay. 8:55 So in, 'cause in my notes I had written down this concept of externalities, and I think this is good to share. So in economics, there is the concept of like action that people, 9:10 like people's actions that indirectly affect other people, so like who are not even involved in the original person and what they're doing. 9:19 So like a third party, an innocent third party is affected, and so that's called externalities in economics. 9:26 And there can be a negative externalities like pollution, so a business is polluting the environment, and people living nearby who are not involved in that business at all are affected. So that is a negative externality. 9:41 Now, the, and the cost of that, like that negative consequence is not priced into prices, and that's what I meant when I said the v- environment gets affected because of these things we're using, and their negative consequences are not actually reflected in the prices of things. 10:01 The climate, environment is not my area of expertise, so this is just what I've heard, like heard and read through, but haven't deep dived into myself. Look this up to be sure. 10:12 But dairy and meat, like there's the prices are subsidized, so we keep buying it, but the negative consequences of like the dairy industry and the meat industry aren't reflected in the prices. 10:22 'Cause otherwise the prices would be higher, which means we'd probably buy less. Ideally, if you're thinking about economics, then the extra cost would go to like running the industry better. 10:34 Obviously economics likes to look at things in a more perfect world, in the ideal case. Um, but that's that concept. So externalities. 10:44 And there can also be positive externalities where like it benefits people, like uh, other people around, so it's like a positive consequence. 10:53 That is a thing, and then economics says if there are positive externalities, we would want to lower the cost of whatever that is to, to basically encourage it to happen more. 11:04 Um, so like economics is basically saying we wanna incentivize things to have positive consequences, and then de-incentivize things with negative consequences through cost. 11:17 I try to keep this to money, but really it, it, this whole, this concept, 11:22 uh, applies outside of just like money and business finances or personal finances, because money is this tool, and it c- it can be used as a tool, like I mentioned in the, as a tool to either encourage positive behavior or d- discourage negative behavior. 11:39 Uh, but yeah, money is this tool. It affects so many things, like how our activity affects the planet. 11:45 And I guess it's why I wanted to share this concept, just so we can think about it on, um, like a smaller level, just as like a, someone who's trying to build their business, like thinking about what is free? 11:56 Like, what is the real cost behind free? Are we paying the cost up front in money right now? Or are we paying it later in our time, energy, and effort? 12:06 Or even longer term, like the planet, the people, our society around us? And so I would say that ha- cost isn't always a bad thing. It could be beneficial. 12:18 Instead of money, you give your time for a free resource to benefit from it, or you could give your time to help someone. 12:25 Like, if I give my time to hold a friend's baby while they can take a break, then that would be worth it. So I would say that cost is worth it. So cost is not always bad. Free is not always good. 12:38 I- just think more holistically about, about your actions and what you're getting. That ex- that sh- exchange, again, the v- exchange of value, that is a big part of money. 12:53 That's it for today's thought, for this episode's thought. Ho- hopefully this, you got something out of this. Um, if you did, you can let me know. 13:03 I put a link in the description where you can share any thoughts you have or questions. Thanks for listening to this, and until next time.
