Michael Eriksson
A Swede in Germany
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Small savings (follow-up)


In an earlier text I discussed the “small savings count” fallacy fallacy, i.e. that it is a fallacy to consider it a fallacy that small savings count, exemplified by a professor of business psychology (or whatnot).

Below follows some additional thoughts.

Categorization problems

I have observed a common issue in my own approach that to some degree has a similar effect to the one that the professor from the original text complained about (and which would have been a much worthier target for his discussion): A failure to make proper comparisons over categories of costs/products/whatnot.

For instance, I am often put off by a price of, say, 10 Euro for some utility item, because it seems like, say, 5 Euro would be a more reasonable price—but the utility item might amortize over many years, while all of the food just bought for a similar price might be gone within two days. The problem is that I do not, unless I consciously compensate, compare prices sufficiently over categories of products.


However, this failure to compare over categories is not always a bad thing, as I tend to err on the side of economizing. One positive effect, then, is that I likely spend less on average than I otherwise would. Another that, if sufficiently many follow my example, there is a downward pressure on prices. (A text on incautious spending and the resulting upwards pressure on prices might follow at a later time: many products and/or product categories are much more expensive than they need be, because too many customers unreflectingly buy at unnecessarily high prices.)

Moreover, this is not limited to what-costs-what but can also include what-food-is-how-energy-laden and other non-monetary criteria. For instance, I have gone through some periods of attempting to lose weight, and seen a natural tendency to cut down on the “food foods” and leave the “reward foods” (“snack foods”, whatnot) untouched, while the opposite gives better results. The categorization is not inherently a bad thing, but here it can be a problem. (I am sufficiently aware that I usually deliberately counteract this, but the natural tendency remains.)

An important special case is when I have already tried to optimize costs in a certain area, and might unconsciously measure future costs only against the current costs in that area—and not costs in general. Ditto, when a certain product has a certain price and now rises in price (as has been very common in the wake of the politician-created inflation in the early 2020s). Consider e.g. “Dolce Gusto” capsules, which have risen from, maybe, 3.50 Euro to 5.30 Euro per 16 capsules. The relative price increase is massive, but the absolute price is still low relative a comparable beverage bought in e.g. a café—the more so as café prices are also very likely to have risen. (In the wake of the COVID-countermeasure era, my visits to various “eateries” and “drinkeries” have dropped to almost nothing, and I cannot go further than “very likely”.)


Dolce Gusto provides a very interesting example for price comparisons more generally. For instance, what is the proper frame of reference for prices? (Home-made drip-brew coffee? Café prices? Something else? Note sub-complications like that a café might offer an opportunity to sit down during a long walk when any machines back home are not available, or that drip-brew does not, or only with considerable additional effort, allow for cappuccinos and whatnots.) For instance, how should the work needed when preparing a cup be measured?

A paradox is that the alleged time savings through Dolce Gusto and similar products are often anything but. With a drip-brew, I simply put coffee and water in the machine, push a button, and come back when (a) the coffee is done and (b) the time is right (e.g., when reading, at a chapter break). Even for a single-capsule beverage for Dolce Gusto, I need to start the machine, wait until the machine is ready, replace the capsule and press a button before it turns off again, and then wait while the beverage is prepared. As the time intervals are too short to do much of anything productive (wipe a counter, yes; read a chapter, no) there is more time wasted than with a drip-brew. This, especially, as a drip-brew is kept hot after preparation, while (at least my) Dolce-Gusto machine has no such functionality—and issues like degenerating foam might apply, even should such a functionality be present on another device. Two-capsule beverages are correspondingly worse, even the doubling in price aside. Ditto, if beverages for more than one person are to be prepared.

Different priorities

An interesting example of a similar type of fallacious thinking was given by some type of consumer show that I encountered in Sweden in, maybe, the late 1980s. The female presenter kept giving tips on how to save money—with the ever-repeated motivation that with the money now saved, the viewer could afford “that little extra”. The problem? Her tips usually centered on exactly what many or most viewers considered “that little extra”—and her tips then amounted to “If you spend less money on ‘that little extra’, you will have more money left that you could spend on ‘that little extra’!”—something both tautological and unhelpful.

The likely problem? She had some specific opinion about what “that little extra” was and failed to consider that many others would have very different priorities. She might have had a priority of spending a week a year on a foreign beach and, yes, cutting out a daily beer after work and the take-out pizza on Fridays would make that week more affordable. However, who is to say that a week on the beach outweighs the loss in beer and take-out pizza? Not everyone would have that priority—and those who did share her priorities were already likely to act accordingly.


Because of the time passed, I can only give very approximate examples. Beer, certainly, is just one of many examples of what might be the highpoint of the day, or “that little extra” of the day, to someone. It is, however, a very common working-class preference and her advice, to my vague recollections, often seemed geared at exactly the working class. Feel free to replace the beer with a glass of fine wine and the take-out pizza with a theater visit—or any number of other combinations of “little extras”.

Generally, as best as I can recall (!), her advice was trite and mostly things that everyone already knew, e.g. repeated occurrences of “Stop smoking and save money!”. It can be safely assumed, however, that smokers were well aware of the monetary costs of their habit, and that what held them back from stopping was not something that her trite advice would alter.

The best that could be said is that there was an aspect of small costs that accumulated, in that shaving off a small amount every day, or every visit to the grocery store, accumulated to a considerable amount over time. (In opposition to the professor, who failed to consider this aspect.) If a sufficiently mathematically weak viewership was assumed, this might have some value; however, it should then have been phrased in more objective terms than that constant harping about “that little extra”. (Who viewed the show is another question—as is whether those who might have benefited from what little value she brought actually were among them.)

Another potential complication, depending on what I might fail to remember, is the focus on affording “that little extra” and a save-to-spend mentality. I have no recollection of advice like putting money in the bank as a buffer to cover some larger future costs, e.g. a major car repair, without using credit cards, loans, or similar—a potentially considerable savings. Neither do I have a recollection of advice to invest the money in a suitable manner. (Presumably, the money saved for the trip to a foreign beach would reside in the bank, but neither as a buffer nor as any type of investment.)