It is Not the Drill That You Want, it is the Hole

Hole not Drill

I have to start off by giving credit to Harvard Professor Theodore Levitt as the title of this post is a derivative of something he said.

Did you know that when someone buys a drill in the U.S. the average use of the drill is a total of 12 minutes over the total time of ownership?  12 minutes.  I just did a quick search for Dewalt Drill.  I came up with a cost range of between $99-$439 for a new drill.  At the low end of the range ($99), based on using the drill for 12 minutes, the per second cost for the drill is $.14, the per minute cost is $8.25.  This is a great example of a product that typifies our hyper consumptive behavior.  We feel like we need products to make life more convenient.  But, as mentioned in the title, we don’t really need a drill, we need the hole.  So what if your neighbor down the street has a drill?  Two blocks from my home there is an octogenarian that is retired and works a lot with wood.  He has lots of tools and depending on the project we may run down the street to borrow a tool or seek guidance.  This is convenient for our family.  If it were not convenient, or if our friend did not have the options (tools) that we needed, we may go out and purchase these tools.

If I hang a picture in the home, I need a hammer.  If I replace a battery in a child’s toy, I need a screwdriver.  If my kid puts a hole in the wall, I need a putty knife, sandpaper, and a paintbrush.  If these items are not convenient for me to access it is likely that I will feel the “need” to purchase these items while their use over their lifetime may only be 10-20 minutes.  Does it make sense to own these products?  Dewalt thinks so, as do myriad home improvement product brands.  But when you look at ownership for an average person more analytically, it is hard to justify owning a drill when your per minute cost is $8.25.  Alternatively, could tools be shared amongst neighbors?  What if there was a company that subsidized tool cost for a neighborhood member and shared revenue with them to rent tools to other neighborhood members?  Doing yet another quick search I found “ShareMy Toolbox” an app that looks to facilitate this type of tool sharing.  There is that is a web portal designed to allow communities to organize there own sharing networks.

Somewhere in the last 40 years we were convinced that we needed to personally own lots of stuff.  In the 90s I became a fan of a quote from a movie by @chuckpalahniuk, “You are not your job, you’re not how much money you have in the bank. You are not the car you drive. You’re not the contents of your wallet. You are not your f*&%ing khakis.”  Even though we may like the idea of not feeling a need to consume, to buy wantonly, to accumulate things, we are products of a marketing machine.  We are constantly barraged with marketing messages telling us to buy.  It is hard not to think, “I need a new phone,” simply because of new features when your current phone is very much functional.

The reason I’m talking about hyper consumption on a financial education blog is that many of our financial problems stem from a “need” to consume.  See the below chart from the Bureau of Labor Statistics:


The average income BEFORE taxes in 2014 was $66,877, and the average expenditures were $53,495 in the same year.  What happens when we look at the post tax numbers?  See the chart below from the Peter G Peterson Foundation:

Tax rates

If we take a blended average of all five quintiles (notice the top quintile is divided into five parts) we get 11.448% of income is taxed.  This means that the take home pay of the average American is $59,221 and we are spending $53,495.  We are saving about 10% of our income annually on average.  Some say that this is the rule of thumb for saving.  Let’s look at saving from a different perspective, how much do we need to save, and for how long, in order to reach financial freedom?  This requires goal setting and can be complimented by taking advantage of collaborative consumption behaviors.  We touched on this earlier, but “collaborative consumption is an economic model based on sharing, swapping, trading, or renting products and services, enabling access over ownership.” @rachelbotsman

If we simply saved $5,726 per year and earned a modest return of say 5% annually, with annually compounded interest after 10 years we would have a balance of $84,949.  Two years of retirement would deplete the balance.  After 30 years at that same savings rate, and rate of return, we would have $424,198, this stretches our retirement to 8 years.  Push it all the way to 50 years and the balance would be $1,324,325, now we can comfortably retire (at age 70 with roughly 25 years of retirement).  But what if we employ collaborative consumption?  What if instead of owning a car we can reduce this annual expense through ride sharing platforms?  What if our food expenditures are reduced because we participate in a land sharing platform where communities share in the cultivation of fresh foods? What if we spend less on clothing and accessories because of collaborative consumption? To our earlier point, other expenditures can be reduced if we collaboratively consume household items that get very little use as individual consumers.  Can we push the average savings rate to 20%?  At 20% after 10 years we would save $169,898 (and because our spending rate decreases from $53,495 to $47,769, we stretch the non working time further to 3.5 years).  At 20% after 30 years we would save $848,395 (17.8 years of retirement).  At 20% after 50 years we would save $2,648,650 (55 years of retirement if we lived that long).

The point here is that participating in collaborative consumption can create significant quality of life changes simply by having access to things rather than having to own them. Many of these types of services for collaborative consumption exist today.  Feel free to view this list of the collaborative consumption opportunities near you.

Think creatively about saving money.  If we can’t save more through limiting traditional expenditures, maybe the key is leveraging collaborative consumption models.




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