Frugal and Plain Cheap
October 10th, 2008[ Software Development ]
I really like this personal finance advice from Ramit. He attempts to explain the difference between being cheap and frugal, and yes there is a difference.
“Instead of being guided by the invisible hand of stupidity, take some conscious control of your spending. Are you just spending on eating out? When was the last time you spent money strategically to try to gain something useful? Yes, it’s actually good to spend money on things you value. Yes, it’s important to spend money on things that will benefit you financially, intellectually, whatever. Yes, I’m encouraging you to spend money on certain things!”
I love this advice because saving money sometimes requires spending money. It’s about creating value, not cutting costs. A somewhat meaningless example from my personal life. I play hockey 4 or 5 times a week. Years ago I used wood sticks because I clearly could not afford those fancy overpriced 1 piece composite sticks and the quality of my game certainly didn’t require high end gear. I would go through a $30 wood stick about once every 2 weeks which cost me a lot of coin. Finally I tried a low end composite stick which cost about $60. That stick lasted me well over a season. I have over a season and a half of use on my current stick. I would have gone through several dozen wood sticks in that time. So yes, for me a $200 composite stick is massively cheaper than a $10 wood stick. Try explaining that one to your wife.
Switching over to the current market and software, the smart companies that are going to weather any storm will make smart value based decisions. Hopefully your customers will be frugal not cheap. If you’re building software, or any product or service, then the burden is even greater that you create real value for your customers. That isn’t the same as ‘selling’ value, it has to actually exist. Someone could easily have sold me a composite stick but that wasn’t the value. The value came after using it for months and not having the blade soften and turn to mush from water seeping into wood. It was the value that came through usage that turned me into a life long customer not the initial sale.