Coffee Anyone?

black coffeeWhat do you add to your coffee? And I don’t mean cream or sugar.

Although not a coffee connoisseur, I do enjoy a cup of good coffee. Have you noticed that when you buy coffee, and many consumer staples, they often come with “extras?” By this I mean customer loyalty promotions. At McDonald’s you get one sticker for every hot drink, and when you have collected seven you get one free drink. At Tim Horton’s you get to play Rollup the Rim for a chance to win. So what? I know the different tactics seem insignificant, but the underlying principles are highly important. These two loyalty promos radically reflect different strategies for improving your financial well-being. Here's the point: It’s not how much money you have; it’s how you manage it. One strategy fosters an attitude of steady plodding, and the other a spirit of speculation. One works for gain and the other plays for gain. Which is better? In my opinion, McDonald’s has the better plan based on Proverbs 13:11: “Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.” (ESV)

The Rollup the Rim method might win you a car, but it does nothing to strengthen your savings muscle. Typically, Canadians are terrible savers. Canada has the highest personal debt ratio of all the G7 countries. Again, I know that coffee cup incentives are trivial, but let me make two points: 1. Size is not as important as strategy. Jesus said, “He who is faithful in little is also faithful in much.” 2. We have become a society that likes to play for money rather than work for it. Have you ever noticed the expression playing the stock market? Of course it’s more fun to play for a quick win rather than patiently collecting stickers. The lottery (something for nothing) mindset erodes our work ethic. Low-interest, easy money has further addicted us to spending and discouraged saving.

I have won a few free coffees at Timmy’s, but never a car. On the other hand, I have also seen the words “Please Try Again” too often. In contrast, the McDonald’s sticker always holds its value. The “get rich quick” versus “get rich slow” methodologies are as old as Aesop’s fable about the tortoise and the hare. The harder I work, the luckier I get. Easy come; easy go. When I was in grade school my parents shopped at Loblaws, where they received green and red customer loyalty stamps. One red stamp was worth ten green stamps. When mom or dad came home with the groceries, I had to fold and store the brown shopping bags, and then collect the stamps into an official Loblaws booklet. My parents were training me to save.

The spirit of speculation has become the norm and infected all segments of our culture. It might surprise you to know that in the financial markets hedge funds are in the multi-trillions—almost ten times the size of the underlying “real” markets. It’s like the majority is merely speculating and the minority is actually working. The spirit of speculation in the stock market is not new. We are all born greedy. (It’s why we need to be “born again,” but that's another story.) In his book, The History of Greed, David E.Y. Sarna traces the development of derivatives such as short-selling (selling shares, borrowed for a fee, with the expectation that the price will drop) back to the Dutch stock exchange in the 1630s. Uncontrolled speculating blows big bubbles.

tulip frenzyAt the height of the market, the rarest tulip bulbs in Holland traded for as much as six times the average person’s annual salary. By 1636, tulip bulbs were traded on the stock exchanges of numerous Dutch towns and cities, encouraging all members of society to speculate in the markets. The fever kept on getting wilder and wilder until suddenly, at the beginning of 1637, the bubble burst and many investors were left with nothing. Over the centuries human nature has not changed. We still want something for nothing. The spirit of speculation lives on and is fed in innocent, innocuous ways, perhaps even over a coffee.

Many financially-savvy individuals see the lottery as a tax on the poor. I don’t know for sure. When it comes to coffee sales I’m sure that both techniques—the slow sticker and the quick rim—improve coffee sales. In my wallet, I just need two more for a free latte. If you’re buying, may I have your sticker?

Why Work?
Money: Now You See Me; Now You Don’t


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Thursday, 19 October 2017
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