Omnivore’s Dilemma: Economics of Farming and Why Food Marketing Is Everywhere

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I’d like to make a habit of reading a book every other week in 2014. My first book is The Omnivore’s Dilemma: A Natural History of Four Meals by Michael Pollan. This 2006 NYT bestseller has already been well-discussed, but I saw it at my library’s donated book sale and wanted to read it for myself.

Instead of a regular review, I just wanted to share one financial concept inside about the special economics of food. We all learned in school that as prices go down, demand should go up. As demand goes up, the price tends to rebound until an equilibrium is found. But this doesn’t work for food producers:

The growth of the American food industry will always bump up against this troublesome biological fact: Try as we might, each of us can only eat about fifteen hundred pounds of food a year. Unlike many other products – CDs, say, or shoes – there’s a natural limit to how much food we each can consume without exploding. What this means for the food industry is that its natural rate of growth is somewhere around 1 percent per year – 1 percent being the annual growth rate of American population. The problem is that Wall Street won’t tolerate such an anemic rate of growth.

This leaves companies like General Mills and McDonald’s with two options if they hope to grow faster than the population: figure out how to get people to spend more money for the same three-quarters of a ton of food, or entice them to actually eat more than that. The two strategies are not mutually exclusive, of course, and the food industry energetically pursues them both at the same time.”

If farmers have a great year, they can actually make less money as prices plummet after product floods the market (due to our finite stomachs). Let’s look deeper into those two alternatives:

Convince people to spend more for the same amount of food. This is behind why everything is processed to the point of ultimate convenience with sleek packaging. Any cooking beyond using the microwave has been removed. Everything is in single-serving packages. Every new diet comes with its own line of ready-to-eat stuff in a box. Surprise, everything also gets more expensive! I just noticed that gluten-free pasta costs roughly 3 times as much as traditional pasta. Even terms like “organic” and “free-range” are twisted by marketing and may not mean what you think.

Convince people to eat more food. What we consider an acceptable portion size has increased over the years. From 1982 to 2002, the average pizza slice grew 70 percent in calories. Even the surface area of the average dinner plate expanded by 36 percent between 1960 and 2007 (source). Think of the “Upgrade” or “Combo” feature of many fast food menus. Why just order a sandwich and drink water, when for a little more you can get fries and a soda? Once you order the combo, why not “upgrade” to even larger fries and larger soda for just 50 cents?

This is why we are surrounded by food branding and food marketing. To fight back, we should buy food as close to their whole “raw material” state as possible in order to avoid the middleman (processing). Even though it does take more time, this makes the food we eat both healthier and cheaper overall.

IKEA Small Space Floor Plans: 240, 380, 590 sq ft

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While walking through an IKEA home furnishings store last week I saw a bunch of neat “model homes” that took up very little space. Supposedly every IKEA store has their own sampling of small space floor plans – only a few are profiled on their website – so here are some pictures and videos that I took with my smartphone. (Apologies in advance for the poor film quality.) Some of the tight designs require specific wall positioning, but many of the concepts could be used to maximize the space in any home.

590 sf Floor Plan – 1.5 Bedroom, 1 Bath
This home is designed for a young couple with a young child. The kitchen island doubles as the family dinner table. The main bedroom is a pretty decent size, and floor-to-ceiling closets and shelving maximizes storage. I call this a 1.5 bedroom floor plan because the “kid’s room” is fine for a crib but would be really tight for a twin bed. If you could move walls you could take some space from the kitchen.

 

 
380 sf Floor Plan – Studio w/ Separate Bedroom
This studio layout means there are no walls between the bedroom and the living room, but at least they are separate spaces. The kitchen is actually a pretty good size, but there is no room for a dining table. I think the kitchen counter is meant to be the eating space. Designed for one or two people.

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Save Money: Bring Your Own Cable Modem & Stop Paying Rental Fees

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Many cable internet providers have been initiating or increasing cable modem rental fees recently. In many cases, the fees are now so high that it is almost a “no-brainer” decision to buy your own modem. Unfortunately, many people either won’t notice the fee or don’t even know that bringing your own equipment is an option.

In my case, a family member who had Time Warner cable was now being charged $5.99 a month for basic cable modem rental. $6 a month is $72 a year. A quick look on the TWC compatible modem list showed several models that can be found online at retailers like Amazon.com for under $100. (The model with a built-in WiFi router costs $12 a month while a separate router can be bought for $20!)

I stuck with a familiar name brand and picked the Motorola Surfboard SB6121 for $65.99. (The SB6141 at $80 is the next model up and compatible with the fastest speeds available, though you’ll have to subscribe to one of the most expensive monthly plans.) Both are DOCSIS 3.0 which ensures future compatibility.

The installation process was quite simple:

  1. Buy the modem. Wait for it to arrive. Remove old modem (unscrew cable cord and unplug power). Install new modem (screw in cable line and plug it power).
  2. Call your provider or start a Live Chat session online. Time Warner is 1-800-TWC-HELP (1-800-892-4357), or pick the “Buy or Lease your Modem” option when chatting.
  3. Provide them with the Cable Modem ID (MAC address) found on the back or bottom of your new modem. Wait 30 minutes or less and your high speed internet should be working again.
  4. Remember to return old modem (this is really the hardest part).

Unless you plan on moving really soon, at $66 for the modem with free shipping you’d break even in less than 11 months. Alternatively, consider it a $66 investment that distributes $6 of tax-free income every month. That’s a 111% annual yield. Good luck finding any stock that will give you that!

Tomales Bay Oysters – An Unforgettable Meal at Everyday Prices

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Not to turn this into a food blog, but talking about The French Laundry reminded me of another awesome Northern Californian meal you could have at a mere fraction of the cost.

Both the Tomales Bay Oyster Company and the Hog Island Oyster Company have farms located by the ocean about an hour north of San Francisco. Anyone can drive up and shuck live oysters that were harvested hours ago just a few feet away. Sit on wooden picnic tables and save money by bringing everything else yourself for a gourmet picnic – shucking knives, lemon, wine, crusty bread, cheese, and so on. Eat them raw or cook them on provided grills. A dozen oysters costs $10-$20 depending on size and type. A comparable meal at a restaurant would cost more than twice as much and wouldn’t be as fresh.

These were the best oysters that I’ve ever had at any price!

I’m trying to think of similar opportunities where you can get the highest-quality ingredients without the white tablecloth, do some of the work yourself, and enjoy an unbeatable meal for the cost of a chain restaurant. When I was younger, we used to catch crabs using chicken necks and a net. Hunting your own meat and fishing also come to mind, although those require a bit more equipment and skill.

Here’s a quote from Ernest Hemingway’s “A Moveable Feast” found in a recent Yelp review that will make oyster-lovers salivate.

As I ate the oysters with their strong taste of the sea and their faint metallic taste that the cold white wine washed away, leaving only the sea taste and the succulent texture, and as I drank their cold liquid from each shell and washed it down with the crisp taste of the wine, I lost the empty feeling and began to be happy and to make plans.

Amazon Mom and Subscribe & Save Tips

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There is a minor kerfuffle going on with Matthew Yglesias and his post How to Save Money on Amazon With a Fake Baby vs. internet ethicists including Gawker.

Short version: If you sign up for Amazon’s Subscribe & Save program and add at least 5 items in that month’s delivery, then you’ll get 15% off every item in that delivery instead of just 5%. However, if you are a member of Amazon Mom (free with Amazon Prime trial) and do the exact same things (add at least 5 items to that month’s delivery), then you’ll get 20% off every item in that delivery. There goes Amazon… contributing to overpopulation and fake babies.

I didn’t even notice this difference because we signed up for Amazon Mom a while ago as we had a real baby, but I do like the 20% off on wipes, diapers, baby food pouches, and addictive indian curry packets. (Oh, I really don’t care about the kerfuffle. People can decide for themselves.)

Buy more, pay less? I usually sign up for everything recurring every month, and then cancel whatever I don’t need when I get their warning e-mail that things will ship soon. Sometimes I don’t reach five items, although if you sort by price*, there are several cheap S&S-eligible things that you can actually save money by buying them. For example, if you have 4 items totaling $80, then adding an additional item will save you 15% extra, or $12. So adding anything that costs less than $12 will actually reduce your final bill.

* Try this link for Grocery items and in the top-right corner click “Sort by Price: Low to High”. Try this link for Baby foods. The prices don’t always seem to sort correctly, but if you scan the first few pages it helps.

Stop Wasting Money on Vitamin Supplements

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“Enough Is Enough: Stop Wasting Money on Vitamin and Mineral Supplements” is the title of an editorial in the Annals of Internal Medicine that address three different studies released in the same issue about the role of vitamin and mineral supplements in preventing chronic diseases. The abstract:

In this issue, 3 articles address vitamin and mineral supplements for prevention of chronic diseases. [...] They conclude that most mineral and vitamin supplements have no clear benefit, might even be harmful in well-nourished adults, and should not be used for chronic disease prevention.

Specifically, beta-carotene, vitamin E, and possibly high does of vitamin A were found to “increase mortality” (not good). The three articles and the editorial were found via the NPR article “The Case Against Multivitamins Grows Stronger“.

One review found no benefit in preventing early death, heart disease or cancer. Another found that taking multivitamins did nothing to stave off cognitive decline with aging. A third found that high-dose multivitamins didn’t help people who had had one heart attack avoid another.

Steven Salzberg, a professor of medicine at Johns Hopkins says that “The vast majority of people taking multivitamins and other supplemental vitamins don’t need them. I don’t need them, so I stopped.”

I don’t think multivitamins are going away, and physicians are still recommending them for certain groups like expecting mothers. But perhaps Sheldon Cooper was right and most of us are just buying the ingredients for “very expensive urine“.

Americans Spend 5 Hours a Day Watching TV

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Americans are watching more TV than ever at least according to Nielsen and AllThingsD. Television remains the biggest chunk of the nearly 60 hours of media consumed every week. Here’s how those 60 hours break down across TV, radio, online, and mobile in 2012.

If you did the quick math like I did, yes 35 divided by 7 days is an average of 5 hours of TV per day. Five hours! Even with all the buzz about Netflix, the numbers haven’t changed all that much over the last few years:

I did some quick searching and found the 2012 American Time Use Survey (ATUS) by the U.S. Bureau of Labor Statistics gave some slightly different numbers:

Watching TV was the leisure activity that occupied the most time (2.8 hours per day), accounting for about half of leisure time, on average, for those age 15 and over.

(I’m not sure what the cause of this big difference is, my best guess is that the BLS survey depends on self-reported answers, while Nielsen data includes set-top boxes that quietly track actual usage. People may think or only want to admit they watch less TV than they really do.)

I don’t begrudge anyone the act of decompressing after a day of work. I watch TV to relax too. But sitting for 3-5 hours in front of the TV every single day? I don’t see how someone who does that can also complain about being “too busy” to cook their own food or do other self-improvement projects. Learn a new skill, get a better job, start a side business. Warren Buffett’s investment partner friend Charlie Munger recommends working for yourself an hour every day. I mean, who else is going to do it?

Chart: Gift Card Popularity Still Rising, Returns Dropping

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Here’s a chart from a Businessweek article showing how the percentage of people buying a gift card for the holidays is still increasing, while the percentage of people making a holiday return is dropping.

Does this mean that gift cards are no longer considered tacky or lazy? If so, that’ll save me both some time and mental anguish as I hate shopping. I’m hoping to avoid any mall this entire season (so far so good). The negative correlation shown above would suggest that as a whole we aren’t very good at picking out specific gifts anyway! ;)

My Wisest, Most Frugal, Longest-Lasting Purchases From Amazon

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If you’ve been shopping at Amazon.com for many years like I have, a fun activity is to look at your order history which it appears they keep indefinitely. I have purchases dating as far back as 1999, with many questionable ones sold off long ago on eBay including Palm PDAs, Minidisc players, and those multichannel walkie-talkies that were so popular for a while. However, other items I still have and will hopefully get many more years of use out of them. Again, these aren’t all my best purchases ever, just five examples I bought from Amazon.

KitchenAid Artisan 5-Quart Stand Mixer
This was bought shortly after we got married, and we’ve been using it regularly without any issues for nearly 10 years. We use it to beat eggs and knead dough for pizza, pasta, cookies, and bread. Cooking at home saves us lots of money, so even though it was expensive upfront, the added convenience has definitely been worth it already.

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True Cost of Holiday Shopping Calculator

Time for my annual Black Friday Buzzkill calculator! ;) Can you hear that sound? Sleigh bells a-jingling? Carol singers? No, it’s credit cards a-swiping as part of what is now officially BUY BUY BUY season.

Here’s a mental trick that I use to temper my “self-gifting” urges. We know that every dollar saved now will be worth much more in the future. I made this calculator to help visualize this fact and push me to forgo short-term (temporary) pleasure for long-term gain.

Step 1: Pick Your Purchase:




Name Your Own Impulse Buy Price

Step 2: Pick your estimated annual return (default is 6%):
4%     6%     8%
Step 3: Pick your time horizon (default is 30 years):
10 years    20 years    30 years    40 years
Assuming a 3% inflation rate, the inflation-adjusted TrueCost™ of your impulse buy in years is:   

$600 for a cashmere sweater? $7,000 Flatscreen TV? Ouch. This is not to say the occasional splurge is never worth it. (I do like me a steaming hot Peppermint Latte.) Perhaps it is. But I hope that this calculator can provide a little perspective while you are barraged by retailers to buy stuff you really don’t need. Who cares if you get 30% off when it’s so expensive?

Unexpected and Wise Advice From Financial Advisor Ann Kaplan

I’d never heard of Circle Financial or Ann Kaplan before reading this Businessweek interview, but I found myself bookmarking it for later as she gives a lot of unexpected advice that you usually don’t hear from a financial advisor. For example, let’s take “What’s the biggest financial mistake people make?“. I would say that the majority of advisors would focus on some part of investing as that is how they justify their fees. Something like “they should manage risk better, like I do with my smart-alpha-low-beta asset allocation system”. Instead, Kaplan’s response focuses on spending and priorities (emphasis mine):

The biggest mistake isn’t bad investment choices, it’s overspending. Most people are very surprised when they analyze their spending to discover that a lot of it doesn’t reflect their priorities. Maybe they’re eating out a lot when their priority is travel. Most can cut one-third of their budget by eliminating things they don’t really need, whether that’s buying jewelry or theater tickets. The goal of thinking about this isn’t to encourage you to necessarily cut back but to understand that you can. That helps eliminate fear.

I agree wholeheartedly. From another 2009 Forbes article :

When we study what diminishes wealth, down markets and manager selection are not key figures,” says Kaplan. Instead, it is lack of diversification, overspending and borrowing too much. Build an effective checklist for your road to a healthy portfolio that includes planning, diversifying, monitoring investments, securing tax efficiencies and arranging for appropriate wealth transfer. “All these factors have one thing in common,” says Kaplan. “They are all things we can control.”

Even though she is a former Goldman Sachs partner (which at least to me suggests skill at ruthless profit-seeking), she focuses on the personal/social/behavioral aspect of financial advising and is known for exchanging advice in a group environment:

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Republic Wireless: Moto X Phone On Sale Now, New Plans $5-$40 a Month, Switch Between Plans For Free

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Updated. Republic Wireless is a mobile phone service that uses WiFi internet to place calls and text whenever possible, saving both you and them money. When WiFi is unavailable, you fall back onto Sprint cell towers. No contracts, but you must buy a phone from them as you cannot bring your own. Some new updates:

  • Moto X. As of November 14th, you can buy the new Moto X smartphone for $299 (Engadget, Anandtech reviews). You can still buy the old Defy XT for $99 but it’s pretty old.
  • Switch between plans for free. You can switch between any of the new plan options, up to twice per month, with no penalty. This means you could upgrade to 4G for a week or a month if you need it, and even downgrade to the $5 or $10 plan if you are traveling or don’t plan to use any data that month. Nice flexibility
  • MMS now supported. MMS (multimedia/picture texting) is now officially working with all major carriers and most regional carriers.

Four New Plans

Here’s a new graphic that explains the plans pretty succinctly:

  • $5/month = WiFi only. No WiFi = Nothing works.
  • $10/month = WiFi + Talk + Text. Unlimited talk and text, no cellular data.
  • $25/month = WiFi + Talk + Text + 3G Data. Unlimited talk, text, 3G data.
  • $40/month = WiFi + Talk + Text + 4G Data. Unlimited talk, text, 3G/4G data.

Prices don’t included taxes and surcharges. Below is information quoted about their Acceptable Use Policy:
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