In a previous post, we discussed the true cost of cheap (view it here) and the dangers of being a ‘bargain demon’. In this post, we consider again Law 40 of the ‘48 Laws of Power’ by Robert Greene which tells us to ‘despise the free lunch.’
This law, among other things, discourages persons from carelessly and witlessly accepting unrealistic promises or things of value for seemingly no cost. While the offer/gift may be appealing in the moment, the recipient will likely pay in the future. Also, it is important to recognize that the free lunch can present itself in many different ways. While this is a financial literacy post, it doubles as a post about life as well in discussing the true cost of the free lunch.
A FREE LUNCH OFTEN EQUALS SOMETHING THAT‘S TOO GOOD TO BE TRUE
Imagine you’ve been offered an opportunity where you just ‘can’t lose!’; an opportunity where you’re promised plenty in return for giving proportionately little on your end (you give a little and get a lot in return). The truth is that while it is intended for somebody to win; that somebody isn’t intended to be you.
This is particularly true for get rich quick schemes. If an “investment opportunity” seems too good to be true, it probably is. And it is at this point where a person should question the legitimacy of the opportunity. Persons should look for red flags, research and ask questions like “How is this possible? “How does the other side benefit in this deal?” and “What don’t I know?”
AN EXAMPLE OF A FREE LUNCH – BERNIE MADOFF’S UNDERTAKING TO HIS CLIENTS
A great example of something too good to be true was Bernie Madoff and his infamous Ponzi scheme. Prior to being uncovered, Madoff had for years provided his investors with higher than usual returns that were inexplicably consistent, regardless of market conditions. In reality, nobody could replicate his performance, even with the best strategies; and this gave rise to suspicion and his eventual downfall.
This example shows that a free lunch will often be used with the intent to defraud people. Here, persons who had engaged Madoff believing him to be legitimately outperforming the market even when it was improbable, learned the hard way that it was too good to be true. They did not ask the questions above and on the back end of their free lunch which contained promises of consistent investment returns was the loss of jobs, life savings, homes, reputations and much more.
DESPISE THE FREE LUNCH IN LIFE GENERALLY
Beyond investing, people should also recognize when the free lunch appears in their lives generally. There will be, for example, instances where seemingly selfless persons will give gifts and perform favors; but with strings attached – whether you know it or not at the time. Any benefit to them for their generosity will likely be at your expense. The giver may, for example, be quick to constantly remind you and/or announce to others how they’ve helped you. This person may also insist that you are perpetually indebted to them for this deed. Maybe there is some future compromising obligation tied to this gift that you are not yet aware of. This person may be seeking to win your loyalty or love, in which case, emotional manipulation is likely to follow the gift.
And what may be lost here, is not necessarily money, like the Madoff example, but one’s dignity, peace of mind and respect.
A FINAL THOUGHT
This is not to say that one should live their life in a state of constant cynicism or that persons shouldn’t take advantage of meaningful opportunities when they arise. Also, even in the best circumstances, risks will have to be taken; whether on an investment opportunity or in life generally – and even then, things may not work out. That’s life!
The point here, however, is that the free lunch is not free. Thinking otherwise will lead one down a path of financial and/or emotional disappointment. Despise the free lunch, but if not, do what is necessary to understand what the true cost of that lunch may be.
WILFRED BAIN 