Competing With Fools

The business that sells the same good or service at a lower price thanks to efficiency gains is doing the world a service. The business that does it without covering costs is going out of business.

While that might seem a tautology, there’s a painful parallel with people: those who scrimp and save and thereby make ends meet are in some very real sense successful. Those who cut corners by ignoring actual costs of life such as healthcare and retirement play a game of liability chicken — eventually a harsh reality will make fools of at least some of them. Depending on your profession / vocation, your field may have more or fewer fools.

Similarly, if you’re considering buying a house in for example the SF Bay Area, you’ll quickly notice that the people around you seem to accept having household income-to-house price ratios that are, shall we say unconventional? With variable interest rate loans and very limited money down (we’re back to lending 90% now last I heard), it’s yet another game of liability chicken.

Of course house prices can only go up. At least until they didn’t.

This means that if you’re in a labor market or house buying market where the other participants act like fools by any reasonable standard, either by accepting “too low” a wage, or by paying “too much” for a house, well, then you’ll soon find yourself a fool too if you’re not willing and able to get out of that market.

And then you either have to out-scrimp, out-save, or out-earn everyone else by a wide margin in order to keep key ratios in check, or reluctantly participate in the “Let’s Hope Uncle Sam Bails Us Out If Shit Happens” sing-along. The more the merrier!

Competition is great. It has built this country. I love competition.

I just hate competing with fools playing liability chicken.