Vail Daily column: Bah, humbug | VailDaily.com

Vail Daily column: Bah, humbug

Benjamin A. Gochberg
Valley Voices

I make sure the heat is turned down in the office so that I can clearly see my breath gently billowing over the stacks of gold coins and my giant ledger as I scribble away the latest line item:

“Olsen, Brandt — For set of skis purchased — ($1,123).”

My assistant repeatedly asks if she could put more coal into the stove as I step out for lunch. I insist that there is sufficient heat to keep the water in her glass from freezing. She dons a comforter instead and makes do with a candle.

I mutter something about prisons and workhouses as I pass the bell-ringer into the grocery store … and make sure I avoid eating anything for lunch that might later come back to haunt me (bit of beef, blot of mustard, crumb of cheese, etc.).

I’m no scrooge, but it’s hard not to be accused of it during this time of year. I mean, I love Christmas. … There’s so much we can rejoice about. Although a spirit of giving and service often pervades the season, there is also a great deal of economic inefficiency with how we handle one of the most important spiritual holidays of the year.

Think about it. We venture out and swarm retailers in hopes of an additional 10 to something percent off a regular price, but in the end, the regularity of the sales themselves render the pricing economically irrelevant. Some of us buy at any price, out of generosity of course, but also to assuage the guilt of not giving something. That’s a good reason to spend money. … You wouldn’t want to get a gift and not give one. How preemptively considerate of you.

Black Friday shopping … does that conjure up positive imagery for anyone? Let’s go wait in line in the wee hours of the morning in order to participate in a stampede of frustration and rampant consumerism. Great idea.

Holidays weren’t always like this. They weren’t truly seized by retailers until the 19th century. What was to be a limited attempt to romanticize St. Valentine’s Day in the early 1800s turned into a full-fledged spending frenzy in just a few decades. Christmas followed suit shortly thereafter, and by the 1920s, the concept of Black Friday and the spending season between Thanksgiving and the end of the year was born. In 1939, President Eisenhower actually moved Thanksgiving earlier a full week, providing an additional week of consumerism to the public. It wasn’t until a few years later that Congress officially declared a consistent date for the holiday.

Spending around the holiday season usually centers, of course, around gift-giving. Although the emotions behind giving a gift can be uplifting, it is, unfortunately, one of the most economically inefficient practices in modern culture. One potential positive of gift giving is the opportunity for redistribution among family and friends. Those better off have an excuse to appropriately rebalance relationships, and individuals with significant or easily identifiable needs within the group benefit. Unfortunately, the presence of an expectation of reciprocity often negates a portion of this possible benefit. Further contributing to inefficiency is an economic principle called deadweight loss.

Deadweight loss occurs when the perceived utility of a gift differs between the giver and the receiver. I’ll provide a clear example. Let’s say I have a friend who happens to be an avid biker. Maybe he spent more on his bike than my car is worth. (You know who you are). He doesn’t know me that well, but wants to get me a gift. He decides that he would like to give me a highly technical bike helmet for Christmas. The helmet makes you faster, actually improves brain function and cures cancer. He goes to a fantastic local bike shop, where he pays a premium price for the helmet. On receiving the helmet, I graciously accept the gift and make sure not to tell my friend I have no intention of wearing a $150 helmet. I return the gift for store credit, and purchase more retail merchandise at a probable premium. The loss occurs in the margins paid multiple times, and the difference in utility between us. It’s estimated that as much as 30 percent of money spent on gifts results in deadweight loss to the purchaser and receiver of the gift.

Of course, most of the above loss can be avoided with simple agreement on the gift. It’s efficient, but not exciting or romantic. Rather than going this route, to appropriately balance economic inefficiency and all those emotions, I recommend analyzing your gift giving based on risk. On one end of the risk spectrum, you agree on a gift. There is no risk at all for loss, but the potential for high excitement is also zero. On the other end, you do not consult with the receiver of the gift at all, and might even consider a gift outside of the receiver’s general interests. If you choose wisely, you might be a hero, but your possible loss exposure also increases. You might easily balance your risk of loss by asking about gift types rather than specifics. If you decide you want to buy me a gift, go the no-risk route.

Now, the holiday season, of course, has value. There are intangibles that can’t be measured. There is love that can only be felt. Pleasures that can only be experienced, not numbered. Happiness, oft times, that can be but shown and not necessarily accounted for in some cynical banker’s ledger. We can’t simply look at the holiday season under the magnifying glass of gain. Those who choose to do so risk more than some of the intangibles which we all feel. As with the younger Ebenezer, an aspiring professional, we must remember the words offered by the love of his life shortly before he lost her:

“You fear the world too much. … All your other hopes have merged into the hope of being beyond the chance of its sordid reproach. I have seen your nobler aspirations fall off, one by one, until the master passion, Gain, engrosses you.”

The average American spent more than $400 during Black Friday weekend, and although retailers expect to book around 40 percent of their profits before the end of the year, the money spent can often represent a significant burden for families. The average individual is expected to spend over $800 on gifts this season. I would advocate communication and an abundance of caution. Though this may be good reason to not let my admin put another chunk of coal in the stove, let’s not forget the words of another banker:

“Business!” cried the Ghost, wringing its hands again. “Mankind was my business; charity, mercy, forbearance, and benevolence, were all my business. The deals of my trade were but a drop of water in the comprehensive ocean of my business!”

A happy holiday season to you all, and may you spend your time, resources and energy wisely.

Ben Gochberg is a commercial lender and business finance consultant. He plays, lives, works and is trying to do a little good in Eagle County. He can be reached for business inquiries or free consultation at 970-471-3546.

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