Transcription
What, what's undoubtedly true is we perceive money differently. The whole assumption of economics is that money is completely fungible. But one of the insights of behavioral economics, people like Richard Thaler, was what they called cookie jar economics, where people would, people mentally, for example, have a budget for essentials, and they have a budget for fun. And, you know, so discretionary money is spent in a different way fundamentally to the way in which you might pay your gas bill or something of that kind.
And so, you know, one of the interesting things that a lot of these fintech companies are doing is they literally allow you to create savings pots so that you can, you can, sometimes it's by rounding up on any credit card payment. So you round up to the nearest pound, for example, and that goes into a savings pot. But, um, although logically humans should look at money as being, uh, effectively, you know, a pound is a pound is a pound, we don't do that in all kinds of weird ways. I mean, you may have seen the series on YouTube called, rather incorrectly, "Girl Maths." Oh, yes. Which is, you know, in other words, you know, someone who saved £50 at a sale actually feels they've almost earned £50, and that we can reframe money in all kinds of very perverse ways.
You also say price is a feeling. Yeah. No, no. To economists, price is a number. To, uh, consumers, price is a feeling. Something can feel expensive or feel cheap, uh, entirely depending on what you compare it to, how you frame it. A friend of a, um, uh, actually, the, uh, uh, friend of my brother's joined the RAC club, which is, it's like two and a half thousand pounds to join, and it's £1,500-£2,000 a year, okay, to join. And he said a very interesting thing. He said, weirdly, he said, most people go, "Ooh, that's expensive." He says, "It is the single check I'm happiest to write all year. There's not a single payment that I make more happily." Why is that? He said, "Because my alternative to doing that is to rent or buy a flat in London." And compared to the cost of buying or renting a flat in London, that RAC club membership is absolutely trivial.
RAC club. So, it's a club on Pall Mall. You can stay there overnight. Uh, they even have dormitories so you can stay there overnight inexpensively, and you're staying on Pall Mall. I mean, that's five-star hotel territory. Okay. Um, it has a post office, squash courts, Turkish baths, a swimming pool, effectively. It has all the facilities. You have to share them, but it has all the facilities of an Edwardian aristocrat of spectacular wealth. You know, servants, restaurants, uh, you know, everything you want to do can be done for you there, which, you know, you don't, you don't enjoy any of those services if you, you know, rent a small flat in Clerkenwell or whatever. Okay. And he argues, it's because it's collective expenditure. You know, it's funded by its thousands of members, and so it can afford to provide that level of kind of service and utility. And so because he frames his RAC membership as the alternative to buying a flat, um, he regards it as a complete bargain.
And now, if you think about it, the other advantage is no one rings you up at 3:00 in the morning from, uh, the RAC club and says, "The immersion tank's sprung a leak. You need to come over and fix it."