

Financial secrets of the world's poorest people. - robg
http://www.boston.com/bostonglobe/ideas/articles/2009/05/17/q_and_a_with_daryl_collins?mode=PF

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pj
When I was traveling in Krakow, Poland, I was living on 10USD a day, including
lodging, food (really awesome food), transportation and entertainment. I still
don't understand how a train ride away the same lifestyle would cost 50USD a
day. Why?

A lot of the numbers people use to describe how people live are misleading. In
poorer countries, organizational structures are flatter. You pay the owner of
the chicken for the eggs. This leaves out the money for the factory workers,
the truckers, the marketing, the grocery store (and all its hierarchies), and
profits for the shareholders who perform no labor at all. This is monetary
waste. This waste increases prices for the consumer.

This is true in a lot of countries outside the u.s. The food in the restaurant
is cooked by the owner of the restaurant, not a wage earner. The efficiencies
found by automation and commoditization of labor are lost in the waste of
trickle down economics.

Another aspect of life in poorer areas of the world - including many areas of
the united states - is the barter that occurs between many individuals. I'll
mow your lawn if you paint my house. I have the mower, you have the ladder and
the brushes.

This type of cooperation is lost in an individualistic society like the united
states where everyone performs a role. The cashier, the delivery person, the
accountant. In "poorer" societies, these roles are performed by a single
person in many cases.

This division of labor has, rather than increased productivity and decreased
cost, in fact increased cost due to monetary waste at each exchange. Listen to
Noam Chomsky describe the "real Adam Smith" and how he believes the division
of labor will destroy the individual through wage slavery.
<http://www.youtube.com/watch?v=ugq86q9KyPE> I have not read "wealth of
nations" myself, to verify Chomsky's opinion of Smith's work, but I have it on
hold at the library and will soon.

Think of it like physics. Just as energy is lost when it changes form, money
is lost when it changes hands. The more hands through which that money passes
between the producer and the consumer, the more money is lost to waste.

~~~
ivankirigin

      The efficiencies found by automation and commoditization of labor are lost in the waste of trickle down economics.
    

Just because less money changes hands doesn't make the system more efficient.
Poor people buy a lot less with a lot less.

~~~
old-gregg
I lived on a $300/month salary (eastern europe) and it didn't feel like
getting 20x less of what I'm getting now in US for $6k/month. I simply didn't
have to pay $80 for a pack of 6 pills of fairly generic antibiotic which I had
to pay another $70 for a 15-minute visit to a doctor just to get the
prescription for. That's what... about $25 per pill?

There, I simply walked into a pharmacy and paid about $2 for a jar that felt
like a lifetime supply of _exactly the same pills_.

Food was also dirt cheap at local farmers markets, and I also didn't have to
pay $60/hour to car mechanic and the _same big mac_ at local McDonalds was
only about $0.5

So... no, _"a lot less with a lot less"_ isn't even close to an accurate
description. Moreover, middlemen __do __introduce inefficiency, especially in
tightly regulated "markets" like the healthcare: I know a fair bit of how the
medical equipment market in US works, and I can tell you that you'll get
exactly the same pacemaker installed for about 60% less in Germany as compared
to US: that's because your friendly regional salesman of Boston Scientific
really likes to fly his own plane, and the doctor who put it in you really
enjoys legalized kickbacks for "research purposes".

The same applies to law and finance: bribing police or settling disputes by
negotiating was _a lot_ cheaper than going to court in US armed with a
$400/hour lawyer, and without 30 year mortgages real estate market actually
represented real market prices as opposed to being just a trading commodity
[overpriced many times over] with a side effect of providing actual housing.

Instead of paying $200K for a summer house, me and my dad built our own, small
but cute 800s.f. cabin. Took us about one summer of weekends and less than $2K
in raw materials.

I'm not saying that life was fun in a 3rd world country, but measuring the
cost of living is a very, very nontrivial matter, that's all.

~~~
jmillikin
If you think standard medical care is bad, wait until you see the state of
dentistry int he US.

A two-barrel caulk gun costs $3 at a home-improvement warehouse, but $250 if
ordered through a medical supply catalog (with the _same part number_ stamped
on it). A dental handpiece costs $2500 to buy and $80 to repair in the US, but
one can be bought new for _$70_ from China. And the Chinese ones work just as
well, if not better.

For some reason, American dentists are remarkably risk-adverse; while they'll
moan and complain about how high their bills are, they'll also refuse to
consider any solution unless they've personally used it for 30 years. Just
getting them to use computerized practice management is Sisyphean struggle.

~~~
Retric
Services cost more in the US, but most stuff costs about the same or a little
less. However, you get paid at the inflated services rate.

Go to the correct US store and buy a 100LB bag of cheep rice and it will be
cheaper than a lot of developing nations. But go to the dentist, doctor, or a
restaurant and it's cheap in the developing world. Granted most things tend to
be cheap where they are produced but as long as you avoid having other people
do stuff for you living in the US can be extremely cheep.

PS: A friend of mine who was making 46k/year in Fairfax VA, one of the more
expensive areas to live in the United States, and saved 20,000$ in one year.
He was living the life of an Indian college student in the US and that's
cheep. He said the only downside was washing his own clothes, but he just
dumped it in the machine so it was a trivial change.

------
ovi256
Nice analogy with startups : focus on cashflow, not assets.

------
maw
The "savings club" mentioned is known in Mexico (and possibly elsewhere in
Latin America and among Latin American immigrants in the states) as a "tanda".
The one I participated in (against my better judgement -- my wife signed us up
as a favor to someone we know who was organizing it) was run with eleven
participants, and lasted one cycle. I paid MXN$200 every week and expected to
get MXN$2000 towards the end of the cycle. I think this arrangement was fairly
typical.

Of course, the further back in the queue you are, the bigger the risk that
others will drop out before it's your turn for your payout. From the outset,
that seemed like a likely outcome to me, and it is indeed what happened.

As a reasonably well off expat, MXN$2000 wasn't a big deal to me (what is a
big deal is the lack of trust experiences like mine breed). However, since it
is a lot of money to many people, there's probably money to be made offering
what tandas do, and even paying a small amount of interest, without such risk
being borne by the participants.

