The Cost of "Free Coffee"

Stephen Dubner over at the Freakonomics blog has an interesting post about the value of free coffee. And it made me think about costs.

In Etan Bednarsh's example, the iced coffee from Dunkin' Donuts was free, but it wasn't free. We should remember, in spite of what groups like the Free Software Foundation would have us believe, that there are costs other than just financial when acquiring items. In Etan's case, the cost for "free iced coffee" was the time he would have spent in line waiting for the coffee. How long? Let's say ten minutes, as an example. I've certainly waited in lines longer than that before, but let's just use that for the sake of this argument.

Ten minutes is one-sixth of an hour. How much is an hour of my time worth? When I do consulting work, an hour of my time is worth anywhere from $50 (if I really like you) to $150 (if I think you can afford it). But let's stay at the low end of the scale, and say $50. So ten minutes of my time would then be worth about $8.33. Compared to getting an iced coffee for $3.50 almost immediately, that "free iced coffee" is a pretty expensive cup of joe.

Why is it that so many people never think of time as a cost? I know people who will drive around a city and its suburbs looking for the cheapest gas so they can save maybe ten cents a gallon when filling up. They spend an hour of their time (again, worth at least $50, in my case) to save a buck or two filling up. Is there time really worth only a dollar or two an hour? Maybe it is, but not for me.

The lesson here is about the value of convenience. We live in a society of convenience, where some items we pay more for simply because they're convenient. This convenience comes in the form of time savings, and since time is money, there is (or at least, can be) a cost savings by paying more for an item. We spend more money, but have more of our time available to us.

What we do with that time is, of course, up to us. Most of us seem to use it these days to sit on our couches and watch television (and I'm as guilty of that as the next person). If that's what you're using your free time for, then by all means spend six hours driving around to every furniture store in the city to find the cheapest price on a new couch so you can save a hundred bucks.

For me, though, I'd prefer to spend a little more cash to gain some more of my time that I can put to some productive use.