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There Is No Such Thing as a Free Lunch
Several years ago I decided to make a career change and went to work for a financial advisory firm. In order to be successful, we had to build our client base. One of the ways that we were encouraged to do so was by taking out groups of up to 12 people for a “free lunch” at a nice restaurant. At the lunch, I would schmooze with my guests, give a canned 10 minute speech about the benefits of financial planning, collect everyone’s phone number, pay the bill and leave, allowing my guests to enjoy their “free lunch” .
The name “free lunch” really is a misnomer. The lunch was anything but free. I was paying for it and my guests had to listen to me as I recited a boring speech that I had memorized. Then the next night, I would try to contact them to convince them to become my client. If they politely refused, or I couldn’t contact them. I would call again and again until they had agreed to meet with me or got a restraining order on me (that never really happened, but I am sure people were tempted at times!). I’m sure many of my guests felt as though they had more than paid for the seven dollar burger and fries I purchased for them.
The phrase “there ain’t no such thing as a free lunch” (TANSTAAFL) is a legitimate economic principle. Wikipedia simply describes it as “as person or society cannot get something for nothing” There is always a cost involved, whether it is paid by the recipient or by someone else. Even if it doesn’t appear, at first that there is a cost to any one individual, there is a social cost. Economist Campbell McConnell has written that this idea is “at the core of economics” There is also a scientific concept of TANSTAAFL. Briefly, everything in the universe has come from something else. There is nothing, not matter, energy, or light that did not come from another source , or draw resources from the source.
The term “free lunch” originated in the bars and saloons of the United States, around 1870. The owners of these establishments would offer a free lunch with the purchase of one drink. They were betting, often quite successfully, that the customers would buy more than one drink. They deliberately made lunches, salty, so their patrons would need to quench their thirst with more drinks, Of course, the lunch wasn’t really free, it was paid for by the bar owners who often made up for the cost of the meal with the drinks they sold. Also, a bar owner was likely to raise the cost of his drinks to help defray the cost of the meal.
This term became common in America in the early part of the century. In 1934, newly elected New York Mayor Fiorello LaGuardia announced a campaign against vice and corruption by stating that there would be “no more free lunch”. It was in the 1930s that economists began to use this term. And in 1975, noted free-market economist Milton Friedman used it as a title of a book.
The concept of giving away something for what is advertised as “free” is a common and time tested marketing strategy. A quick examination of your spam email can reveal many “free” offers. Emarketers will give you something for free, but you will pay by giving your pertinent contact information to them. They will use this information to try to sell you something else in the future. A timeshare company may give you a no cost weekend at their resort, but they will try to sell you a vacation home. A fast food restaurant will publish a coupon for a free sandwich knowing that their customers will also buy fries, a drink and dessert. The cost of the “free” burger is built into the costs of the other items. They are also hoping that you will like their food so much, you will go back to the restaurant, and next time pay full price.
The principle of TANSTAAFL can be observed today by looking at the world’s faltering economies. The Socialist governments of Greece and France have built societies where people expect to get benefits for no cost. Both of these economies are teetering on the brink because they simply can no longer pay for their largess. The US will follow if we do not get a handle on this problem soon.
Of course, on the most simple level. People believe that something for “free” just means they don’t pay monetarily for a certain good or service. If your boss buys lunch for the entire department,, a website gives you a free iPad or a cell carrier gives you a free phone, you may not consider the cost the giver is paying, nor will you consider the cost you have already paid or will pay the future. You just enjoy the free item.
In conclusion, there is a cost for everything in society. While we may not pay monetarily for the benefit, it is being paid for by an individual, an institution or society at large. That does not mean I will not accept something without cost. If someone wants to take me out to lunch, I’m free every day!