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The Cost/Value of "Free"
Old 07-14-2012, 02:28 PM   #1
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The Cost/Value of "Free"

We all like free stuff. We all hate it when free stuff is taken away from us. I still resent gas stations charging for air and water. It was always free when I was a kid then, all of a sudden,I needed to pay them for the code to the air/water so that I could top off my tires! Not fair!!!

I started listening to this NPR Planet Money show today and had to agree with just about everything that they spoke about. I had never heard the story of the Red Cross charging GIs in WWII for doughnuts before,but it sounds a bit like me and my problem with gas stations.
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Chana Joffe-Walt/NPR Navy veteran Howard Dunn and Army veteran Tom Kaine remember when the Red Cross briefly charged servicemen for doughnuts during World War II. Many veterans still resent it.




If you think about every other price in the world — a dollar, $12.99 — free stands out.

Free has the power to make us do completely irrational things. It can drive us to break rules, and take risks we never thought possible. It can make us feel savvy and smug and exhilarated.
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Everybody likes free. But free can be dangerous, too. Today's show is sort of the flip side of Ben's airline deal. It is what happens when you take something that was free — and you give it a price, a decision many Internet companies face today. That is a highly risky move, it turns out. And the damage can be enormous.
This week, free of charge, Chana Joffe-Walt and Alex Blumberg tell the story of the Red Cross and free doughnuts — that suddenly weren't free any more. It happened 70 years ago, and the Red Cross is still feeling the consequences.
Episode 386: The Cost Of Free Doughnuts : Planet Money : NPR
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Old 07-14-2012, 02:39 PM   #2
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"Free" has its problems, as does the consumer's appetite for "cheaper is better". The old saying goes, "when you subsidize something, you get more of it." But more stuff provided for free, unless you hit on a brilliant business model, is not sustainable.

Same with "cheap". We as consumers wanted cheaper. The cheaper, the better. In a competitive marketplace manufacturers had to find ways to provide stuff cheaper. But they hit a point where they could no longer do that using facilities where workers had minimum wages, labor laws and health/safety regulations. So to satisfy the insatiable demand for "cheaper", businesses packed up and moved their manufacturing to places like China. And their IT shops to places like India. Collectively as a society it feels good to bash industry for doing this, but it was our own demand for the lowest price that largely fueled this. So we bash the US Olympic Committee for commissioning uniforms for the athletes that were made in China even as we're driving to Walmart -- because it's the cheapest -- to buy a lot of stuff made in China.

For what it's worth, until about a year ago we actually had a gas station in town that provided free air. I actually made it a point to buy gas there as long as they weren't a lot more expensive. But when they removed their "free" air and replaced it with a machine that charged a dollar for air that you usually had to "feed" twice, I ended that loyalty.
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Old 07-14-2012, 03:31 PM   #3
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Great piece, thanks for pointing it out. I really enjoy how the Planet Money team takes complicated economics and makes it interesting and thought-provoking.
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Old 07-14-2012, 03:59 PM   #4
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My dad was an infantryman in WW II, fighting through North Africa and Italy until he got wounded and sent back to the US. I don't know exactly where he encountered those costly doughnuts, but it made a huge impression on him.

For the rest of his life, he never forgave the Red Cross for charging for doughnuts, while the Salvation Army handed them out nearby for free. He kept that chip on his shoulder any time the Red Cross was mentioned (and conversely had nothing but warm fuzzies about the Salvation Army).
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Old 07-14-2012, 04:41 PM   #5
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My dad was an infantryman in WW II, fighting through North Africa and Italy until he got wounded and sent back to the US. I don't know exactly where he encountered those costly doughnuts, but it made a huge impression on him.

For the rest of his life, he never forgave the Red Cross for charging for doughnuts, while the Salvation Army handed them out nearby for free. He kept that chip on his shoulder any time the Red Cross was mentioned (and conversely had nothing but warm fuzzies about the Salvation Army).
The Red Cross charged my brother for a cup of coffee when he was coming back from the front lines in Vietnam. He doesn't think much of them either.

The Salvation Army did some wonderful work in New Orleans after Katrina.
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Old 07-14-2012, 04:53 PM   #6
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The Salvation Army does a lot of impressive work for such a small church. I am a Catholic but I think the Salvation Army feeds as many people in our town with I am guessing 1/20th of the money.
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Old 07-15-2012, 01:49 AM   #7
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Same with "cheap". We as consumers wanted cheaper. The cheaper, the better. In a competitive marketplace manufacturers had to find ways to provide stuff cheaper.
This book details the high cost of 'cheap' stuff:
Cheap: The High Cost of Discount Culture by Ellen Ruppel Shell
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Old 07-15-2012, 07:36 AM   #8
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Few if any products or services are free, but it's amazing how consumers will modify their behavior when they think (or hear) something is free. That said, I sometimes fall for it myself.

I also thought the outrage about the made in China US Olympic team uniforms was nonsense. One of the reports even acknowledged that 98% of apparel sold in the US is not made here. And I'd be willing to bet most of the clothing the athletes wear while competing is not made in the US, yet "they" singled out the opening ceremony uniforms why?
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Old 07-15-2012, 09:33 AM   #9
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And I'd be willing to bet most of the clothing the athletes wear while competing is not made in the US, yet "they" singled out the opening ceremony uniforms why?
Your point is well taken. However, in my mind, the flap is as much about how utterly ugly the uniforms are. Of course, in a world of varying taste, YMMV.

My own personal issue with "free" is that there is no such thing. Everything costs. The only question is "who pays?" I've seen some ads recently (ostensibly making the public aware of the features of Obama care). The word "free" is thrown around in these "non-political" ads. "Free" wellness exams, "free" this, "free" that. It makes me crazy. We could argue all day about the "good" or "bad" of Obama care, but calling any of its features "free" is obscene. Again, the real question is "who pays" for all this "free" stuff? If you have an income or you have an ER "stash", I suggest you look in the mirror for the answer. (Of course, as always, YMMV.)

There was a time that including services (e.g., 2 checked bags for your purchase of an airline ticket) was the norm. Now, businesss are using what used to be considered "just part of the packages" as a profit center. It was never "free" - just "included". What I now resent is that airlines make most of their money this way (and on other non-flying services). Same with banks: When they add fees for what I consider "included" service (use of a teller, etc.), that's when I get angry and lose all loyalty - and move accounts to CUs. I honestly don't mind paying a reasonable fee for a service, but I resent businesses turning their old "included" services into their main profit centers. I suppose it all comes out the same, but it forces me to make a lot more decisions and to despise those business to which I once felt some loyalty. But, YMMV.
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Old 07-15-2012, 09:42 AM   #10
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Funny thing about price. We want the lowest price possible, thinking cheaper is better and free is best. Then it goes away and we realize the real cost of cheap or free, are now willing to pay but there's no one around to make it anymore.
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Old 07-15-2012, 10:14 AM   #11
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I also thought the outrage about the made in China US Olympic team uniforms was nonsense. One of the reports even acknowledged that 98% of apparel sold in the US is not made here. And I'd be willing to bet most of the clothing the athletes wear while competing is not made in the US, yet "they" singled out the opening ceremony uniforms why?
I'm personally not "outraged" by the uniform issue...but I kind of understand their point. When you have an official item representing your country in an event that brings in people from each country, it's kind of the time for "national pride" in a respectable way. When you're draping all of your emissaries in garb that is made in a foreign land, it's kind of 'less' patriotic. Granted, there are other, bigger issues to get upset over, but the Olympics are a source of national pride, a chance for your national identity.

Imagine if each country had items they displayed in the opening ceremony procession that were symbolic and sources of pride for their country - a vehicle, perhaps, or maybe a certain animal or a drink. Now imagine if it turned out that vehicle was bought out by a foreign company and had all production shipped to another country; or if that animal was actually a different breed from another country that vaguely resembled the country's breed; or if the beer brewery was bought out by a foreign brand, all local breweries closed, and all production shipped to another country.

Those items no longer (or perhaps never) had an identity with the country.

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Funny thing about price. We want the lowest price possible, thinking cheaper is better and free is best. Then it goes away and we realize the real cost of cheap or free, are now willing to pay but there's no one around to make it anymore.
If most 401k plans switched to low low cost funds (like 0.30% and under), yet charged participants an annual $30 or $50 account fee, people would revolt. But keep them in their 1.5%-2.00% funds with "no annual fees", and they're happy as a lark.

It's all about the marketing/packaging!

Although, with the issue of airline baggage fees as an example, the majority of members of the forum should actually be happy with things like that...since isn't that similar to the Vanguard business model? Offer everyone low cost products, and make those that 'cost more to service' pay a higher fee for the ancillary services? Doesn't matter whether it's a low mutual fund balance vs someone with a $1MM balance, or someone who checks 3 bags on the plane vs someone who carries on just 1. Consumers paying for the services they consume is more efficient (and fair) to most extents than a flat pricing model.
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Old 07-15-2012, 10:23 AM   #12
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I'm personally not "outraged" by the uniform issue...but I kind of understand their point. When you have an official item representing your country in an event that brings in people from each country, it's kind of the time for "national pride" in a respectable way. When you're draping all of your emissaries in garb that is made in a foreign land, it's kind of 'less' patriotic. Granted, there are other, bigger issues to get upset over, but the Olympics are a source of national pride, a chance for your national identity.
At the risk of

- if the athlete's wore outfits made in the USA for the opening ceremonies, and then competed in sportswear/dressed in casual clothes 98% of which was made in other countries at all other times during the Olympics (not to mention during years of training), would "they" have said anything? Based on past Olympics, the answer would appear to be "no." Just saying those (politicians) who are now outraged are being more than a little selective, call me cynical. Put the clothes all in a pile, burn them, and start over - give me a break. That horse (pun) left the barn decades ago...
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Old 07-15-2012, 10:45 AM   #13
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if the athlete's wore outfits made in the USA for the opening ceremonies, and then competed in sportswear/dressed in casual clothes 98% of which was made in other countries at all other times during the Olympics (not to mention during years of training), would "they" have said anything?
I don't claim to have perfect knowledge of the behind-the-scenes financing, but I'm thinking that the US Gov't paid for the official uniforms made in China, while the athletes' competition and casual apparel are (primarily?) paid for by sponsors and donors and the athletes themselves. If that is the case, then it's a big difference IMO.
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Old 07-15-2012, 10:47 AM   #14
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The issue of embracing the fact of globalization in our lives and how symbols of our country in a pinnacle, global event are dressed are seperate to me.
Globalization: For. It benefits us and all others. The pie gets bigger.
Olympics wardrobe: Against non-US made. It is a symbol. Have you no pride in your country?
Ralph Lauren as the designer of the Olympic wardrobe: Adequate words escape me but Loathe is not strong enough. Buck Rogers and the return to the 8th dimension come to mind.

I believe that they "must" be made in China because of market for the 40 million knock off uniforms that fans everwhere will want to buy.
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Old 07-15-2012, 10:49 AM   #15
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..... call me cynical.
Well, OK.

You're cynical Midpack, very, very cynical.

There.
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Old 07-15-2012, 10:58 AM   #16
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It doesn't bother me that the US opening ceremony garments are made in China, but I think it would be nice to have at least the ones actually worn in the opening ceremonies to be made in the USA. I can make a jacket or two . Knock offs for the mass market can be made anywhere imho.

Sometimes what the athletes wear in competition is designed according to certain specifications--like the seams on the swimmers' suits, or the women's beach volleyball uniforms that can contain no more than 12 square inches of stretch fabric --so it might make sense that they're all made to those specs in whatever approved factories, and they probably all have multiple uniforms for their events. The opening ceremonies garments are one-time only, one per competitor, custom designed, so it would be easier to have those made in the home country I would think.

Ralph Lauren is the official designer for the opening ceremonies outfits and said those for the 2014 Olympics will be made in the USA. Ralph Lauren to make 2014 Olympic uniforms in the U.S. - Los Angeles Times
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Old 07-15-2012, 11:21 AM   #17
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Your point is well taken. However, in my mind, the flap is as much about how utterly ugly the uniforms are. Of course, in a world of varying taste, YMMV.

My own personal issue with "free" is that there is no such thing. Everything costs. The only question is "who pays?" I've seen some ads recently (ostensibly making the public aware of the features of Obama care). The word "free" is thrown around in these "non-political" ads. "Free" wellness exams, "free" this, "free" that. It makes me crazy. We could argue all day about the "good" or "bad" of Obama care, but calling any of its features "free" is obscene. Again, the real question is "who pays" for all this "free" stuff? If you have an income or you have an ER "stash", I suggest you look in the mirror for the answer. (Of course, as always, YMMV.)

There was a time that including services (e.g., 2 checked bags for your purchase of an airline ticket) was the norm. Now, businesss are using what used to be considered "just part of the packages" as a profit center. It was never "free" - just "included". What I now resent is that airlines make most of their money this way (and on other non-flying services). Same with banks: When they add fees for what I consider "included" service (use of a teller, etc.), that's when I get angry and lose all loyalty - and move accounts to CUs. I honestly don't mind paying a reasonable fee for a service, but I resent businesses turning their old "included" services into their main profit centers. I suppose it all comes out the same, but it forces me to make a lot more decisions and to despise those business to which I once felt some loyalty. But, YMMV.
I agree about the 'included' part.... but the history of companies breaking apart their services and charging ala-carte is that they did not reduce the cost of the original item... they just starting to charge for the included items... this is not limited to banks or airlines....
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Old 07-15-2012, 11:42 AM   #18
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Off topic: This site has photos of the Olympic uniforms of many countries: Olympic Uniforms for the 2012 Opening Ceremonies - Mental Floss

Note the Italian uniforms - classy, elegant and patriotic (with words from their national anthem embroidered in them).
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Old 07-15-2012, 11:46 AM   #19
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Off topic: This site has photos of the Olympic uniforms of many countries: Olympic Uniforms for the 2012 Opening Ceremonies - Mental Floss

Note the Italian uniforms - classy, elegant and patriotic (with words from their national anthem embroidered in them).
I have to admit that I like ours better than any of the others shown. The British uniforms are ghastly, IMO. I don't really care for the Italian uniforms.
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Old 07-15-2012, 11:47 AM   #20
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I don't claim to have perfect knowledge of the behind-the-scenes financing, but I'm thinking that the US Gov't paid for the official uniforms made in China, while the athletes' competition and casual apparel are (primarily?) paid for by sponsors and donors and the athletes themselves. If that is the case, then it's a big difference IMO.
I believe there is no public funding for the US Olympic team or any of its activities, including uniforms.
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