What Bob’s Discount Furniture Can Teach Us About Capitalism

While listening to the radio this evening, I heard an ad for Bob’s Discount Furniture. For those of you unlucky enough to not live near Bob’s sphere of influence, the chain sells, well, discounted furniture. Some of their goods are used and perhaps slightly worn. Their prices are, therefore, naturally lower than those of your big box stores like Bedding Barn and Sears. Lately, though, Bob has been making an excellent point in his advertisements: he sells furniture with no gimmicks.

With Bob, you will not get free installation, free shipping, or discounts on internet orders. About all you might get is some free popcorn if you hike out to one of his fine retail locations. This may seem like a simple matter of straight talk and folksy charm, but the lack of financial trimmings makes Bob’s one of the most ethical retailers in the market today.

If you want to learn Economics 101, the first thing you need to understand is that there is no such thing as a free lunch. Ultimately nothing is free save generosity. Businesses do not provide generosity; they provide goods and services in exchange for a fee. Therefore, they will not give you anything free no matter how much they appreciate you as a customer, hold true to “the true meaning of Christmas,” or want to stimulate the economy. Why not? Because they cannot give you something for free. Nothing is free.

Imagine this fairly plausible scenario. Joe’s Subaru decides that they need something to boost sales in the face of increased gas prices, so they throw in a complementary 2-night, 3-day trip to Lulu’s Resort in Tahiti, worth $700, with the purchase of any vehicle over $22,000. There are two ways Joe can pay for this perk: either he can be a total dirtbag and charge you an extra $650 or so in markup prices, or he can do the “ethical” thing and pay for it using company funds. After all, assuming he is running a decent car import business, he can probably scrounge up a couple hundred thousand bucks from profits to cover the costs, especially after factoring in the new sales. Most of the time when we think about gimmicks, that’s where the money trail in our minds end.

But there is a crucial, simple question missing from this brief overview: what would happen to that $700 in profits if it did not find its way to Tahiti? There are countless possibilities: perhaps it would have gone to charity. Or to the savings accounts. Or to new ad campaigns. Or to employee end-of-the-year bonuses. The first case might be worth looking at further, but not here and now. In the second case, more money in the bank means that another person or company can access $700 to help buy a new home, open a new business, or even take out a new car loan. In the final two cases, the money eventually or directly finds its way into the hands of ordinary folks with ten thousand financial decisions and wishlist items in any given year.

The point is this: the final three cases, which are the only ones we are discussing right now, all lead to money furthering the choices available to investors and consumers. In essence, they mean that money fulfills its primal role, which is to give people the freedom to obtain what goods and services they please. That is the very heart of capitalism. That heart is pierced every time some gimmick comes along like Joe’s trip to Tahiti.

Why? Though it may seem innocent enough, the normal person buying a new car would not ordinarily choose to spend $700 taking off to Tahiti. There are more pressing concerns in life for most of us that we would choose to address first if we had any say in the matter. As consumers, we believe that we are receiving a free gift in the trip. But for the entrepreneur or worker who has however much less money because it is now subsidizing trips to Tahiti for happy customers, that loss is a loss of freedom. If we would not expect an entrepreneur with nothing to gain in the matter or a worker with mouths to feed at home to pay for someone else’s Tahitian getaway, why do we expect them to indirectly? If you want a Tahitian getaway, pay for it yourself!

Gimmicks are a very bizarre form of economic tyranny by businesses. There are some cases where the loss of economic freedom might be justified. For example, including batteries with toys or offering free shipping might be tolerable, given that the products being purchased are unusable without them.

The fact remains that most of the other gimmicks out there are little more than freeloading. Sure, giving away a free iPod with every new microwave might seem harmless, but it is nickel-and-diming investors and workers out of their right to do as they please with money. It is only because that money is not predictable or guaranteed that investors and workers are even willing to part with it in the first place. Since it is not yet their money, there is no direct, accountable loss to them.

When the day’s done and you settle into that hammock at Lulu’s, clutching the keys to your new Tribeca, though, know that it was not free. Know that some poor schmuck got gipped out of that inventory upgrade or that ribeye steak tonight because he did not get loaned or paid what he could have been if you were still bored in Connecticut.

Alternatively, go buy a new bed from Bob’s, pay to ship it in yourself since you are the only person who will actually be sleeping in it and that’s only fair, and sleep soundly in it knowing that the money saved from subsidizing meal gift certificates or giving you free toss pillows is now empowering someone to spend money they earned as they please.

I am sure the same principle applies to government, but at that point things just get scary.