Monday, June 10, 2013

Capital investments, home-tool version

When my husband and I got married, I had a sewing machine and he didn't.
An eleven-year-old N-son uses
my thirty-year-old sewing machine

That's not a particularly telling fact, given our genders.  But it's possibly more telling that I had an electric drill, and he didn't.  I also owned a well-organized tool kit, including hammer, screwdrivers, wrenches, tape measure, and pliers, whereas he had  a box of miscellaneous tools.

Want to guess who owned the jig saw and the circular saw?  The plumbers' snake?  The pitchfork?  That would be me again.

We still both think it's funny that  I thought I was marrying a rich man.  Why did I think he was rich?  It was the way he spent money on things like clothes, food, and books, areas of the budget where I definitely scrimped.  Plus, I knew that he earned more money than I did.  What I hadn't quite realized at the time is that the way somebody spends (or invests) money is actually a much bigger insight into wealth than the amount that person earns.

In order to turn income into wealth, we have to make capital investments.  I've always thought of "capital" as "money".  If you'd looked at our money investments sixteen years ago, you'd have seen that my husband had a retirement account only half the size of mine, despite his having been in the workforce twenty years to my five.  He also had a small rolling amount of credit card debt but no emergency fund.  So on the "capital = money" side of things, he really wasn't a particularly wealthy guy after all.  (It's a good thing that his money wasn't the reason I married him!  And really, he's a terrific guy.  I feel more than a little yucky for sounding like I'm picking on him so much here).

A couple of books I've been reading lately have made me realize that money is only part of the building-wealth story, though.  "Capital" also means equipment and materials that can be put to productive use.  Indeed, the whole reason that Capitalism has been so influential (according to Heilbroner and Thurow) is that "the market system becomes an immense force for the accumulation of capital, mostly in the form of machinery and equipment."  A cloth manufacturer who gets investors to float some money for a new loom is going to be able to produce more cloth -- and therefore earn more money for everybody involved.   (Little plug here for lending money through Kiva -- you get to be part of "an immense force for the accumulation of capital").

And a person just starting out in life will build more long-term wealth by purchasing a good sewing machine than by buying a lot of clothes.  The former is a capital investment; the latter is just what Thorstein Veblen would call "conspicuous consumption" (a.k.a., showing off).  In the case of my husband, it wasn't even that --- it was entertainment.  Moving money out of his own pocket and into someone else's cash register --- well, that was a game that got rewarded with prizes of fun clothes, ready-made food, immediate gratification.

I'm fortunate that, for me, these tools are just as much fun as nice clothes are for my husband.  Actually, maybe they're even MORE  fun, because a sewing machine and a drill are so versatile, I can keep playing new games with them.  (Check out how I repaired some of my son's wooden train tracks with wooden beads and chopsticks!  Whoop!)

Train pieces with the knobs chewed off.  (Blame the dog?)

My drill, wooden beads, chopsticks, a bit of glue
fix everything right up.

I was thinking about the home-tool-variety of capital investments this past weekend as I purchased a $7 mower-blade sharpener for my drill.  I bought it new; I bought it full price -- not my standard op procedure.  But over the past few years I'd tried unsuccessfully to find a place that will sharpen blades cheaply, and a new blade runs $20 or more.   And so I decided that this recent purchase is like the $20 thermos that pays for itself in half a year -- buying a sharpener  that will save me $20 every couple of years is a darned good way to invest $7 of my money.

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