Business Discipline Meets Historical Records. An MBA’s Review of Policy and Facts.
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Why Being a Miser Isn't the Right Way to Do Business or to Live Life
Sometimes, people can confuse frugality with being a miser. I think about a couple of times when I watched Spongebob Squarepants back some time ago and getting irritated at Mr. Krabs. Unfortunately, there are some people who are so obsessed with money (or money comes first) that they end up becoming misers. As I was watching Spongebob while studying to get my bachelor's degree in business administration--I felt that the Krusty Krab model won't work well in real life. I mean, I tend to eat at Jollibee almost daily since I was studying in the University of San Carlos-Main Campus (USC-Main). As I was eating there--I thought would have Tony Tancaktiong build Jollibee as an empire if he was a miser? Mr. Krabs ran his Krusty Krab on a miserly mindset--just one cook and one cashier. Mr. Krabs would even artificially inflate prices just to get more money. In real life, Mr. Krabs should go to jail.
Drawing the line between being thrifty and stingy
It's often easy to confuse both of them. So, we need to draw the difference between them. I was thinking about how it would be to have a stingy parent vs. a thrifty parent. For a stingy spouse, his or her thrifty spouse is extravagant. However, that's very far from it because there's a difference between a thrifty person from an extravagant person. Along the way, I felt going on the middle read of thriftiness though I tend to spend more than others.
Being thrifty means one spends money wisely. For a thrifty person, it would mean being willing to spend more if it will save more money in the long run. A thrifty person would buy a more expensive appliance if it gives good convenience, and service, and is power-efficient. A thrifty person may shun luxury brands because they're overpriced. However, a thrifty person may spend a little more for quality. It's like a person won't buy a luxury car but will spend more on a brand new Toyota car. A thrifty person may buy a brand new nice smartphone but will reject any overpriced smartphone. It's because the person seeks long-term savings even if it means spending more for the moment.
Meanwhile, being stingy is absolutely compromising on need and quality. You can think of a person who has so much money but like in some exaggerated stories--even deprive themselves of their needs. It's like in the children's story of The Miser and His Gold who hid his gold in his backyard than invest it in the bank. Another story has a miser who even doesn't buy new clothes. That would a very sad state because the person only thinks of raking in as much money as possible. It would also go as far as that such a person wants to always sell at a higher price while haggling with others for a lower price. In short, the person puts money above everything else.
The opportunity costs of the miserly lifestyle in contrast to being thrifty
I was thinking of certain fewer episodes of Spongebob that show the opportunity costs of being a miser. True, the cartoon may just be there to give you a laugh (though it's already worn out by now) but you might meet such people who can make some of the mistakes of Mr. Krabs. It had me thinking about how a miserly lifestyle can accumulate opportunity costs. In economics, an opportunity cost is something that you lost when you could've gotten it.
It reminds me of an incident when I decided to invest in AXA. For a miser, insurance is "worthless". For some, they don't even trust the banks so they might be hiding their money under the mattress. During my MBA days, one of the speakers in the financial symposium mentioned that her grandfather kept the money in a safe in the house. It was a truly sad thing since the value of money changes over time. Something considered of high value during the 1970s may no longer be of high value today. I had some toys that cost around PHP 200.00--PHP 300.00 during the 1990s were considered costly. Now, those values are considerably low.
Instead, one can think about a diversified portfolio is the thrifty way to go. The miser may scoff at it as a scam. However, a thrifty person carefully investigates financial companies. For example, a thrifty person dismisses all "too good to be true" promises. Meanwhile, a miser may either buy them in (because of greed) or shun them along with the good financial companies. A thrifty person may decide to put some money in stocks or a managed fund, get some insurance (such as health insurance), and insure as much stuff as possible. A thrifty person may think that stocks can be of higher risk so managed funds can be a good alternative. A thrifty person decides to put some money in this and that bank investment to let it grow.
What would be the big disadvantage of keeping all your money under the mattress or a private safe? Depositing your money in a legitimate bank means there's some form of insurance if ever the bank gets bankrupt. There's also the option to pull out of a bank you know is misusing clients' money for a trustworthy bank like Metrobank or Banco De Oro. Meanwhile, keeping all your money under the mattress or a private safe will mean it rots in there. Not to mention, new currency is printed every now and then. That means the coins and bills need to be changed for them and older currency becomes obsolete. Not to mention, there's no chance to grow at all since banks pay their clients interest since they're practically borrowing money from depositors. That's why banks need to be very wary about who gets loans or does mortgages--it's also to protect clients!
How being thrifty vs. being stingy affects businesses too
I was thinking about how some of the biggest businessmen are philanthropists. Maybe, it's because some of them know what it's like to be poor. For example, the late Henry Sy dealt with shoes before opening SM or how Tony Tancaktiong started small before establishing Jollibee. Some businessmen believe in the power of giving to charity. Some of them even give generous tips and founded their companies hoping to create a future for their employees. These people can easily build a good brand image which will have you coming back for more.
How would being thrifty be good for business? It would be good to live a life built on quality over luxury goods. What's wrong, really, if a wealthy man doesn't wear branded goods or uses an expensive mobile phone? What's wrong if a wealthy businessman chooses to celebrate his parties in private? It's wise to avoid lavish living as that could soon compromise the income. Some businessmen fall down because of lavish living. Living within one's means is advantageous as it generates wealth for the next generation. Teaching the children to do the same might create a future emergency fund for the next generations in contrast to raising spoiled children.
However, why is being a miser a bad way to do business? When a businessman only cares about money--he forgets about that raking in the profits is not a one-man job. Do you think Jollibee will be Jollibee without its entry-level service crew and restaurant managers? Do you think that a factory is a factory without factory workers? A miser would only care about how much money he can save even if the quality is compromised. It's like not spending even on necessities which, in turn, will eventually slow down work processes. It's like refusing to buy newer and better equipment and then complaining why work quality has been bad. It's like refusing to carry out repairs, waiting for the damage to become worse, then stupidly complaining about why the expenses suddenly piled up. In short, being a miser is all about compromising quality so one can save money. However, it means one ends up having opportunity losses out of being a miser. Besides, safety may also be compromised resulting in heavy lawsuits or even jail time in the long run.
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