Price Tag Analysis

White Adidas Samba: The best sneakers I’ve ever owned

2018-06-10T00:00:00+00:00

Introduction

More than a year ago, I bought a pair of Adidas Sambas in white to replace my aging and holey Stefan Janoski sneakers from Nike. The Janoskis had only lasted me 6 months before the soles began to wear out to the point where my socks would protrude through the bottom, and the sides of the canvas material started to split open. I needed a new commuter shoe, one that could endure a daily 1 mile walk from the train station to my office job, and back- while still maintaing a casually stylish look.

Where to buy Adidas Samba and colors

One of the great things about Sambas are that they’re practically timeless and fit in well with most outfits, both on men and women. I’ve worn them with jeans, along with khakis and slim fitting chinos of various colors. Although in my opinion the white ones are the most versatile and best looking, there are variety of colors to choose from. If you’re looking to buy a new pair of commuter showes, I highly recommend these for the price! Here are all of the official colors from Adidas for the Samba line, with the white ones being my favorite!

Color	Link
Footwear White/Collegiate Navy/Gold Metallic	See it
Footwear White/Core Black/Gum 5	See it
Core Black/Footwear White/Bluebird	See it
Collegiate Navy/Collegiate Burgundy/Footwear White	See it
Cbbrown/Trasca/Ftwwht	See it
Core Blue/White	See it
Black/White/Gum	See it
Green	See it
Collegiate Burgundy/White/Bluebird	See it
Core Blue/Footwear White/Bluebird	See it
Black	See it
Cblack/Ftwwht/Blubir	See it

The best sneaker ever?

I had heard great things about the Samba, which seemed to be inspired by German military trainers. I bought a pair in white thinking that they’d last me about as long as every other sneaker that I’ve worn- around 6 months. 1 year and 2 months later, they’ve held up quite well and completely taken me by surprise in doing so. I’ve worn them nearly daily, although most people probably don’t do that and so I’m sure they must last even longer for others. Since I chose to buy them in white, I thought that keeping them clean would be problematic, though thankfully that turned out to not be the case.

Easy to clean, even in white!

Maybe it’s because a large part of them are leather, but anytime they got scuffed or splattered on, a simple wipe down with a wet paper towel nearly always did the trick. Whenever they’ve gotten too dirty from playing soccer or walking on dirt paths (I took them on a few backroads), throwing them in the washer worked incredibly well. Everytime I’ve done this they’ve come out looking radiantly white, to the point where I almost wanted to brush a little dirt on them again to make them look like I’ve actually worn them and that they’re not fresh out of the box. Even after a year, the only signs of wear that are visible on them after a good wash are a few creases.

Buying a mulberry silk pillowcase and the origin of silk

2018-02-03T00:00:00+00:00

Introduction

Hot on the heels of last week’s expensive pillow post, I thought I’d talk about a not nearly as expensive mulberry silk pillowcase that I purchased at the start of last summer, pictured above. I bought it because I had heard that silk will stay cool all night relative to the ambient temperature, and that it doesn’t suck the moisture out of your skin and hair unlike cotton pillowcases. Thankfully both of these things turned out to be true and I slept pretty well throughout the summer. While I was searching for the right case to buy, I came across all different types of silk materials, but ultimately ended up choosing mulberry when I learned that it was the highest quality silk out there.

I briefly went on a reading binge and I’d like to share with you all what I learned about the history of silk, how silk is produced, and why mulberry silk is the best of all silks. As far as the pillow goes, I’m definitely happy with my purchase. I chose the reddish/burgandy like color pictured above, and with its look and feel I like to imagine that I’m ancient royalty everytime I rest my head on it. Given the great experience I’ve had this past summer, come next season I might take the plunge and go the full silk bedding route.

What is silk?

Silk is a type of natural fiber known for its smooth texture and hypoallergenic properties. It’s produced from the cocoons formed by silkworms, but not just any. While there are many types of wild silkworms, one in particular has been bred and domesticated for the purpose of silk production throughout the years. This species is known as the Bombyx Mori, and has been pampered and domesticated so much that it would not be able to survive on its own if released in the wild, and cannot even fly as it once could.

If you didn’t already know that silk came from silkworms, don’t let the fact that it comes from their cocoons disgust you. There are a lot of processing steps between the cocoon and the final silk product that you wear or sleep on. It’s a bit sad, but the silkworm is killed by steaming the cocoon and placing it in hot water, which unravels the silk strands and melts off the glue secreted by the silkworm that binds the cocoon together. This process results in easily spooled silk filaments.

Who discovered silk, and when?

The truth is that the exact origins of the production of silk are unknown. We know that silk was first produced in China, but when exactly this began is a mystery. When history is poorly documented or unknown, cultures always come up with their own origin stories to fill in the blanks, which I always find interesting. In this case, as Chinese folklore goes silk was discovered by Xi Lingshi, wife of the legendary Yellow Emperor. The story goes that a silkworm cocoon fell into her tea, at which point she noticed that the strands on the cocoon could be unraveled for a great distance and reeled into a thread.

Although the timing of this folkloric story would have been about 2,640 B.C., it’s been unearthed fairly recently that silk may have been in production in China since at least 8,500 B.C., as an archaeologist just discovered silk proteins in an ancient tomb. Based on that evidence it seems that the legendary origin story is 6,000 years too late to be historically accurate, although nonetheless interesting!

What is mulberry silk, and how is it different from other types of silk?

Mulberry silk comes from silkworms who have been exclusively fed the leaves of a mulberry tree. Silkworms love mulberry leaves because they find them easy to chew and consume. Silk produced by worms who have been raised eating mulberry is the smoothest and whitest that is known of, and is therefore more expensive than other types of silk.

For comparison, silk produced from wild silkworms who feast on whatever plants are available to them produce a silk called tussar. Tussar is often more brittle and rougher in texture as compared to the smoothness of mulberry silk.

Wrap Up

I realize that I’ve had back to back posts on pillows. Don’t worry, I don’t intend to turn this blog into PillowWorld, your one stop shop for pillow facts. If you like history, you’ll probably also enjoy the in depth piece I did on the history of U.S. quarter prices and metal composition. Stick around for next week’s post which will be a little more diversified in topic and interesting with respect to statistics provided. Have a great week!

A pillow valued at thousands of dollars: Why buying eiderdown is so expensive

2018-01-21T00:00:00+00:00

Introduction

My current pillow was starting to feel flat and worn out, so like most people nowadays I started my search on Amazon for a new pillow. While browsing around, I stumbled upon a ridiculoulsy expensive pillow. The first thought that came to my mind was that this had to be a mistake. I decided to set aside some time to dig into this and tell you about my findings.

What’s in the price?

What could make a pillow worth thousands of dollars, short of being stuffed with cash or a work of modern art- neither of which this pillow is? I see that the pillow is made with silk on the outside, which I’ve always known to be slightly more expensive than cotton, but this much more expensive? It doesn’t add up to me. Directing my eyes to the product description, I’m now seeing something of interest that I have never heard of, and may just be the lead I’m looking for. The first bullet point says

Grade A Iceland Eiderdown

What’s eiderdown?

Given the context, I’m thinking it’s a special type of down, the comforting and warm inner layer of feathers typically plucked from ducks & geese that I do know usually fetches a higher premium than something like cotton. The first result on Google takes me to Eiderdown.com, which looks to be a private business in Iceland selling none other than….eiderdown! I’m first greeted by this hook on their homepage:

What has been the treasure of kings for centuries and is even today rarer than a new Ferrari?

The answer is an eiderdown comforter.

Now I’m wondering what makes it so rare and…of course I’d still like to know what eiderdown actually is. The site doesn’t disappoint, as the next line reads

The eider is a large, arctic duck , somateria mollissima in Latin, which has been protected by law in Iceland for over a century.

OK, that makes sense. Eiderdown is down that specifically is pulled off of an Eider duck. Speaking of which, I wonder what they look like?

That’s a male one. Cute little guy. The feather colors remind me of a skunk. That’s not an insult as I like the colors- it’s just an observation.

How rare is eiderdown?

The opening line from the website that I linked above about it being rarer than a Ferrari was fun and all, but it sounds like marketing speak. Thankfully, the owner of the site goes into more detail in a separately linked PDF that answers everything I’ve ever wanted to know about eiderdown, including the circumstances behind its rarity.

The total worldwide annual harvest of eiderdown could be carried by one small truck, - while the total annual worldwide goose down production is counted in tens of thousands of tons or ship loads

That certainly sounds rare, but this fact alone doesn’t make it valuable. Ultimately, I’m trying to understand what makes this eiderdown pillow I found worth thousands of dollars. There must be some properties about the down that comes from an eider duck that makes it miles ahead in superiority as compared to down from all other kinds of birds.

Why is eiderdown expensive?

The aforementioned PDF, which I’m now beginning to understand is aptly titled, is called Eiderdown - why is it so outrageously expensive. Early on it was established that eiderdown is extremely rare, and now I’m finding out why. According to this document, it’s the only type of down that is harvested from the wild. This makes sense, since the eider duck is a protected species. In addition to this, the down is humanely harvested as it naturally falls from the female eider’s underbelly- as opposed to being plucked. All of this sounds very labor intensive, and this article from Iceland Review confirms that.

There is no industrial production of eiderdown in Iceland, that is, the down is hand-picked from the birds’ nests, cleaned and washed before it is put into duvets or exported for further production in other countries.

- Iceland Review

As I suspected, there are also characterstics that set eiderdown apart from other types of down. The write up continues with establishing that eiderdown is among the lightest of downs, therefore less of it is required to fill up your comforter or pillow. The eider is an arctic bird, so as the document lays out, it sensibly follows that its down is also exceptionally warm. Beyond being warm and light, I think the largest selling point for myself would be the fact that eiderdown has properties that cause it to clump together to resemble a single larger material. I remember having once gone on a camping trip just outside of Yosemite and using a down sleeping bag. I had to keep fluffing and adjusting it as the down had a tendency to separate causing flat spots. Having a down pillow or comforter where I wouldn’t have to do that all of the time sounds like a luxury, and there’s no question that the price reflects that. That being said if I were to spend this much on a pillow, you can rest assured that it would stay within the confines of my bedroom and not be exposed to the great outdoors. That’s amusing to me, seeing as that’s where the internals of this pillow originate from.

Wrap Up

I can only hope that one day I’ll be able to afford all eiderdown bedding and that I’ll be writing a post here telling you about my experience with it. As of today though, I’m not yet Mr. Money Bags and can’t tell you firsthand whether or not this pillow is worth it. I figure I’ll have to start small and first aim for a comparatively more modest priced pillow made by the same manufacturer, before I move up to the big leagues. Maybe I’ll be able to afford it if I stop using Uber.

I had a blast discovering eiderdown and learning about the reason behind its rarity and price due to the way its produced, so I hope you did as well. Did any of you already know about eiderdown? Or are you hearing of it for the first time like myself? Also if you own any products made with eiderdown, please let me know- are they worth it? Let everyone know in the comments below!

How I spent $4,560 commuting with Uber

2018-01-15T00:00:00+00:00

Introduction

If by now you’re not familiar with Uber it’s a ridesharing service in the form of a convenient mobile app. In 2017 I quit taking the bus. Let me paint you a picture of what used to be my commute, which wasn’t even too bad to begin with. I live in the San Francisco bay area, about 40 miles south east of SF proper. If you’re not from the bay area, I should tell you that most of it is large swaths of suburbs as is common in California. Don’t get me wrong, there are downtown and metro like areas in the likes of Oakland, Berkeley, Alameda, Palo Alto, and San Jose- but the bay area is no New York City or similarly booming metropolis.

When you live in the suburbs, which I do- it’s pretty much expected that you have a car. The bus lines sparsely come because no one really takes them. The one that I dependend on ran once every 45 minutes to an hour. I had sold my car when I moved to San Francisco for college because thankfully, SF is one of the few places in the bay area where you really don’t need a car (and probably don’t want to drive it if you have one). When I moved back home, I thought I might be able to go without a car for a while.

Taking the bus was costing me ~2 bucks a trip, or $4 daily. I was using it to get to BART, the bay area’s subway train system, which is 3.5 miles from where I live. The problem was that assuming I was on time and caught the bus, those 3.5 miles took 25 minutes, sometimes longer. Then I’d hop on the train for 50 minutes. The bus ride to the train was taking half of the time I spent on the train itself, which was already a bit long.

Uber to the rescue?

You might’ve been able to gather from the language I used above that I wasn’t very good at catching the bus on time. Whenever I missed it I’d call an Uber, since I couldn’t afford to wait another hour for the next bus and be late to work. That’s how it started, at least. The next thing I knew I was sleeping in for an extra 30 minutes, knowing that I could call an Uber to get me to BART and still be on time. I went through multiple phases of using Uber for my commute. My thought process went something like this:

Phase 1: I’m just taking it to the train station
Phase 2: It’s after work, I’m tired, and just want to be home. *pulls out phone*
Phase 3: Wow, this might get expensive. I’ll use Uber Pool instead.
Phase 4: Uber Pool takes forever, maye I’ll do X in the morning and pool on the way home.
Phase 5: Screw it, Uber X both ways

$$$ Assessing the costs of Uber

On average, Uber X was costing me $9.50 per trip, or $19 a day. Since I work 5 days a week, each month I was spending $380. Uber Pool was a few dollars cheaper per trip, so while I was doing that (which didn’t last long) I was spending a little less, at $260 a month. I remember being conscious of the costs early on and thinking, that’s not too bad. How could I think that? I justified it because I didn’t own a car and figured I was saving money. I told myself that the cost of Uber was predictable and reliable, whereas owning a car came with the responsibility of sudden maintenance requirements, insurance, and fuel costs. Besides, I’d only be going 7 miles a day to catch the train (you don’t want to drive to SF in rush hour traffic). When I thought of it like that, it seemed like a car was overkill.

This was an especially tough decision for me to make because I’m actually really into cars, and wanted to justify owning one. The problem is that I had just assumed that the cost of car ownership would be more expensive, and didn’t actually take the time to breakdown the costs- mostly because I was afraid of finding out that I might be wrong about the cost effectiveness of Uber and that I had been wasting my money the whole time. Well, I finally sat down to crunch the numbers, which is why I’m writing this post. I looked at the annualized cost (time & money!) of Uber, owning a car, taking the bus, riding a bike, and of course walking.

Is car ownership worth it?

To give a car the best chance of coming out on top, I only considered cheap econoboxes- of which the Honda Fit is my favorite. I’m not particular to owning a brand new one, so I only looked at ones at least 4 years old. My normal, more car enthusiast self would have considered picking up a more interesting beater off of Craigslist, but the rational and adult side of me who is seeking reliability is writing this post at the moment. Looking at local listings, I’m seeing $10,000 for a 2013 with 27,000 miles. Sounds good to me, so I’ll use that as the hypothetical car for my calculations.

Gas

The fuel economy of these things is great, 28mpg city, which is where the majority of my driving would be. Gas prices in the bay area generally hover between $2.80 and $3.50 so I’ll take the average of that and assume a $3.15/gal gas price. The Fit has about a 10 gallon gas tank, so that means I should be able to go 280 miles per tank, which would cost me $31.50 per tank. Since I only travel about 7 miles a day, one tank of gas should last me (280 miles / 7 miles/day) = 40 days. That’s pretty great, I’d have to fill up less than once a month. If I only used this car to get to the train station, I’d be filling up 6 times a year!

Maintenance

The cost of maintenance, including general engine repairs and tire & oil replacements according to AAA is $0.0628/mile. Given that I won’t be driving frequently, that seems pretty low. If I commuted for 240 days a year going 7 miles each day, that would be 1,680 miles driven a year. That only puts me at about $105.50 in annual maintenance costs.

Insurance

I wouldn’t expect insurance for this car to cost me too much. Albeit, I’m 24 years old and I’m male- so I can probably expect a higher rate than other demographics. Since the car is slow and I have a clean driving record, I’ll go with a conservative $80/month for liability insurance, which is all I’d buy for a $10k car.

Summing up all of the costs, owning a car for a year probably looks like this for me:

Expense Type	1st Year Cost
Initial purchase	$10,000
Gas	$189
Maintenance	$105.50
Insurance	$960
Sales Tax	~$1,000
Total	$12,254.50

At least if I only consider the first year’s costs, owning a car is obviously more expensive than Uber. The other thing I’m purposefully not accounting for is that I would likely use this car on the weekends, further increasing my gas and maintenance costs, but perhaps lowering my insurance cost on a per mile basis. Based on these calculations though, it seems like it would take almost 3 years for the cost of car ownership to pay for itself over not riding Uber. Again, while there’s always the odd $3,000-$6,000 beater that I could (and likely would) purchase in practice, I wanted to optimize for reliability here by getting a relatively newer car.

Leasing?

Finally, in terms of cars my other option is leasing. Looking online I see that I can lease a Honda Fit for $169/month if I sign a 3 year contract and pay $2,299 at signing. My costs with that option would look like so:

Expense Type	1st Year Cost
Down Payment	$2,299
Monthly Payment	$2,028
Gas	$189
Maintenance	$105.50
Insurance	$960
Sales Tax	~$229.90
Total	$5,811.40

Hey, that’s not too bad! Leasing would be a little more expensive the first year because of the money due at signing, but after that I’d only pay $3,282.50 a year- which is over $1k cheaper than Uber.

Comparing my options

Now that I know how much a car would run me on a yearly basis, let’s look at the rest of my options.

Ride type	$/trip	Daily Cost	1st Year Cost	Roundtrip Time Taken
Uber X	$9.50	$19	$4,560	20 min
Uber Pool	$6.50	$13	$3,120	40 min
Uber X + Pool	~$8	$16	$3,840	30 min
Car	$11.73	$23.45	$12,254.50	20 min
Leased Car	$12.11	$24.22	$5,811.40	20 min
Bus	$2	$4	$960	50 min
Bike	$0.625	$1.25	*$300	40 min
Walking	$0	$0	$0	140 min

* Assumes a bike purchased for $300

Let’s be honest, I threw walking onto that table just for kicks, but I’m not going to walk 7 miles a day. Can I do it? Thankfully, yes. But in terms of time taken I just don’t think it’s very practical. Anyway this table is unfairly biased against cars, since they require a hefty initial investment. Let’s use a line graph to stretch the timeline to 3 years. I’ll consider the gas, maintenance, and insurance costs fixed across each year, but I’ll divide the initial purchase price and sales tax by the amount of years the car has been owned for. For example, the 3 year cost of car ownership will be calculated by Gas + Maintenance + Insurance + (Purchase Price + Tax) / 3. Ok, here’s what I got:

Are time and money the only factors?

If I was optimizing for speed and cost, I’d clearly go with leasing a car. By the middle of the 2nd year, leasing becomes cheaper than all 3 types of Uber rides- and is obviously much cheaper than owning a car outright over a 3 year period. The thing is, I don’t just care about time and money. My life has been getting increasingly sedentary, so I’m also optimizing for calories burned. When that’s considered, riding my bike is the clear winner. It’s the cheapest and healthiest option that’s also reasonable with respect to travel time. It also helps that I live in California, where I can ride my bike year round.

Wrap Up

Wow, there’s just something about stretching out costs to a longer timeline that really puts things into perspective. When I see these numbers I’m not really proud of how much I spent on Uber over the past year. I don’t regret it and I certainly got my money’s worth, but I just feel like I could have spent all of that on something else if I was just a little less lazy and more prudent. Things I could have spent that money on:

an eiderdown pillow
a down payment on a car or a car lease
a mostly funded Roth IRA
2 months of rent
a new laptop
crypto investments
charity
burying it in the ground for a treasure hunt

I traded my money for convenience, and while I certainly feel that it was a fair trade, when I think of the health benefits I’m missing out on and the opportunity cost of the money I spent, it’s clear to me that I should have bought a bicycle. Does anyone have any suggesions for a road bike in the $200-$350 range and a good bike shop in the bay area?

If no one has any suggestions, I found a relatively cheap 21 speed aluminum Vilano commuter bike on Amazon that I really like and intend to buy in a few days. Hopefully it’s cheap enough that people won’t want to steal it at BART. Or maybe I’m just being naive?

As always, thanks for reading! In this post I primarily broke down my own personal finances. If you enjoyed that, you’ll probably also like my post from a couple weeks ago where I tried to guess the cost of making a Bellroy leather wallet.

See you next week!

How much does it cost to make a U.S. Quarter?

2018-01-07T00:00:00+00:00

Introduction

I’ve always been somewhat of a casual numismatist. Not fanatical or anything, but I suppose coins have always been kind of interesting to me because each one carries its own guarded piece of history made up of the countless interactions that others have had with it. It’s fun to imagine who’s hands some particular coin has passed through, what they may have bought with it, and what their lives were like. Going through that thought process always made it all the more exciting that the coin was passed on to me and that my life was now a part of its story. Another aspect that made coin collecting fun for me was hunting for U.S. coins made with 90% silver in my spare change, which are increasingly seldom found in circulation.

Buuuut, I don’t want to get all sentimenal and philosophical here. Today I want to look at the relatively recent history of the production costs of U.S. mintage, specifically U.S. quarters. I’ll be looking at quarters from 2 different time periods: 2000-2016 and 1932-1964. You might be wondering about the significance of those timespans. Excellent question! 1932 was the first year when the quarter as we know it today in and art (though not necessarily composition, more on that soon) was minted, with George Washington’s bust on the obverse and the bald eagle on the reverse side of the coin. It’s worth noting that the quarters minted from 1932-1964 were composed of 90% silver and 10% copper, weighing in at a total of 6.25 grams- while the quarters from onwards weigh only 5.67 grams and are made of cupronickel (copper-nickel), with 8.33% of it being nickel.

Since a lot of the data we’d normally use to reverse engineer costs is already provided for us and thus so are the what and how components, this post will be more of a history lesson with explantions for why things turned out the way they did. Enjoy the ride!

2000-2016

Okay, let’s start with 2000-2016. Time to dig around the U.S. Mint site. Looking at the production reports section, I see that the earliest report that they have available is from 2001. That’s great, but what about all of the years before that? Did they not start keeping records until 2001? Reading through the 2001 report, I see this

The following supplemental schedules were prepared in compliance with the new reporting requirement per Public Law 106-445 Section 5134(e)(2) of title 31, United States Code that was amended in FY 2000, which required the United States Mint to include in its annual report specific information regarding the costs and expenses for producing, marketing, and distributing circulating coinage — both in gross and on a per-unit basis — as well as gross revenue from the sales of each denomination.

Well that explains it! Excuse me one moment as I take the time to scour through 17 years of reports to aggregate and distill the important stuff.

…

I’m back, and here’s what I gleaned:

Year	# Produced (MM)	Unit Cost	General & Administrative	Distribution Cost	Total Costs	Revenue (MM)	Profit (MM)
2000	6167.6	$0.0429	not provided	$0.0009	$0.0438	$1541.9	$1266.5
2001	5528.8	$0.0517	not provided	$0.0007	$0.0524	$1382.2	$1080.4
2002	3616.0	$0.04	$0.0229	$0.0008	$0.0637	$904	$669.9
2003	2471.6	$0.0452	$0.0229	$0.0008	$0.0689	$617.9	$427.4
2004	2241.6	$0.0466	$0.0257	$0.001	$0.0733	$560.4	$395.9
2005	2655.6	$0.0491	$0.0212	$0.0014	$0.0717	$663.9	$467.2
2006	3004.4	$0.0681	$0.0211	$0.0015	$0.0907	$751.1	$478.4
2007	2711.2	$0.0841	$0.0125	$0.0012	$0.0978	$677.8	$412.5
2008	2510.4	$0.0925	$0.0153	$0.0012	$0.109	$627.6	$354.1
2009	965.2	$0.0816	$0.0298	$0.0017	$0.1131	$241.3	$132.2
2010	252.8	$0.0956	$0.0302	$0.002	$0.1278	$63.2	$31
2011	324.0	$0.0923	$0.0176	$0.0015	$0.1114	$81	$45
2012	486.8	$0.0943	$0.0171	$0.0016	$0.113	$121.7	$66.8
2013	1062.4	$0.0903	$0.0135	$0.0012	$0.105	$265.6	$154.1
2014	1684.0	$0.0775	$0.0109	$0.0011	$0.0895	$421	$270.5
2015	2645.2	$0.0755	$0.0076	$0.0013	$0.0844	$661.3	$438.1
2016	2483.2	$0.0672	$0.008	$0.0011	$0.0763	$620.8	$431.4

I have some observations…maybe questions too.

General and Administrative costs have been dropping

Looking at the table, over the past 16 years the overhead associated with manufacturing a quarter has gone down by quite a bit, from $0.0229 in 2002 to $0.0008 in 2016. That’s a 96.5% reduction in costs! Props to the Mint for being able to accomplish that. Now I’m wondering how they were able to do that. Starting in 2003, in the introduction to the manufacturing report, the 37th Director of the U.S. Mint, Henrietta Holsman Fore opens with this:

Dear Customers and Colleagues,

…

To meet the challenges that lie ahead, we have set priorities for the organization to help us capitalize on opportunities, reduce expenses, and measure our progress both internally and against world-class organizations in an effort to continuously improve business operations.

We have defined a clear vision and outlined strong, focused priorities to become more efficient and add more value to the work we do while meeting or exceeding the expectations of those who work with us.

Source: U.S. Mint Annual Report, 2003

So we can see that there was a clear focus on cutting costs and becoming more efficient early on. It seems like whatever initiatives she implemented to do this were working, up until 2008. By 2007 the general and administrative costs had dropped to $0.0125/coin, before sharply climbing to $0.0302 between 2008 and 2010. Perhaps this excerpt from 2008 can explain the increase in cost?

Unfortunately, lower volumes means that we must allocate our fixed costs over fewer units, offsetting the benefit of lower metal prices.

Source: U.S. Mint Annual Report, 2008

That checks out because production numbers did decrease from previous years in 2008, a trend that continued to get worse up until about 2012.

In any case by 2016 general and administrative costs had dropped to $0.0008. From this line in the 2015 report, I guess the Mint just got really good at controlling costs. The increased production figures over time probably contributed too.

The Mint controlled indirect costs, allowing the increased shipments to generate more seigniorage.

Source: U.S. Mint Annual Report, 2015

Regarding low production numbers from 2009-2012

While other years (including those after 2012) had at least 1.5 billion quarters minted, this time period only saw ~2 billion quarters minted between all 4 years! I’m reminded of a line I saw in the 2002 report.

The demand for circulating coins is directly related to the economy. Since mid-2000, when the U.S. economy began to slow, demand for coins decreased.

Source: U.S. Mint Annual Report, 2002

Well we did have a pretty bad financial meltdown that turned into the Great Recession in 2008, now that I think about it. Let’s crack open the 2009 report to find out more, since these reports have a fiscal year ending on September 30th and the 2008 financial crisis didn’t occur until October.

Mint Director Edmund C. Moy drops this on us:

The big story in Fiscal Year (FY) 2009 was the recession. The United States Mint is no stranger to recessions, as we’ve survived and thrived through 33 of them since 1854. But the severity and rapidity of this recession challenged us and affected all three lines of our coining operations.

Source: U.S. Mint Annual Report, 2009

Makes sense. I wonder exactly how that directly affected coin production?

Our circulating coin production was at a 45-year low with fewer cash transactions because of the slow economy and Americans cashing in coins they’d been saving.

If money isn’t exchanging hands, I suppose it doesn’t make sense to mint more.

Do unit costs track the spot price of metals the coin is composed of?

Remember how I mentioned earlier that modern quarters are composed of cupronickel (copper + nickel)? I compiled the market prices for nickel and copper going back to 2005 and averaged the closing prices for both per month- then I took those numbers and averaged them per year. The following graph shows the percentage change on a yearly basis in the prices of both metals, overlayed with the percentage change in the cost of making a quarter. For those on mobile the blue line is nickel, the brown line is copper, and the black line is the change in cost of making a quarter. I scraped the copper and nickel prices from these tables kindly publicly provided by Business Insider.

Interestingly enough, changes in the cost of making a quarter seem to track the changes in price for copper and nickel. After 2012, the price changes in the cost of these metals seem to decrease less, but ultimately are still negative.

The cost of making a quarter appears to be most influenced by the swings in the price of copper. This makes sense, since quarters are 92.67% copper, with only 8.33% being nickel. It’s a good thing too- just look at that 150% price swing between 2005 and 2006 in the price of nickel. That peak is huge!

The unit cost of making a quarter in 2016 was the lowest it’s been since 2005. Why?

From 2012-2016 prices for both metals saw relative consecutive decreases ranging from -9% to -30%. I’d guess that that has a lot to do with it.

Look at that seigniorage!

Something that makes sense but never really ocurred to me is that if the government can produce currency for cheaper than it sells that currency (at face value), then they’ve made a profit. As it turns out there’s a word for that, and it’s called seigniorage. Did you know that? I didn’t know that. Good for you if you did. In fact, I’m kind of curious as to how many people have that word in their lexicon. Do me a favor and post in the comments whether or not you already knew that word.

Anyway looking at the profit column in the table, the Mint earns hundreds of millions of dollars each year in seigniorage.

/u/born_lever_puller, a moderator at /r/Coins on Reddit reached out to me and had more insights to provide on seigniorage:

Before the days of income tax, seigniorage - the difference between the total cost to produce a coin and its face value, was a way for governments to replenish their treasuries.

So people would bring their silver to the mint to have it assayed and made into government-issued and certified legal tender - which was important for commerce, but the government kept some of it for themselves. In the early days the US Government didn’t have access to silver or gold bullion in adequate quantities and relied on miners or traders to sell it to them. There is good evidence that some of the first coins struck by the US government used Martha Washington’s own household silverware - fancy tea pots, urns, pitchers, serving dishes, platters, utensils, and that kind of stuff.

1932-1964

Here’s the fun part. The U.S. Mint didn’t start releasing cost and production data until 2002, when a law passed requiring it to do so as we learned above. That means that we’ll have to reverse engineer the data.

How much did it cost to produce quarters from 1932 - 1964?

Since quarters made during this era were 90% silver and 10% copper, I’ll start by looking at silver and copper prices for the same period. We’re looking at a timespan of 32 years, so to save time and simplify the presentation (we’re only estimating after all!) I’ll sample 2 years from the start and end of each decade like so:

1932 & 1939
1940 & 1949
1950 & 1959
1960 & 1964

To get the cost of each metal in the quarter, I’ll be using this formula: [% of metal in quarter] * [metal price/gram] * 6.25g.

Looks like by the time the U.S. Mint was ready to end production of quarters with silver in them, the cost of silver in a quarter had already risen to $0.23!

Year	Silver Cost*	Copper Cost*	Total Quarter Cost
1932	$0.051	$8.0e-05	$0.05108
1939	$0.071	$0.00015	$0.07115
1940	$0.063	$0.00016	$0.06316
1949	$0.13	$0.00027	$0.13027
1950	$0.13	$0.0003	$0.1303
1959	$0.16	$0.00043	$0.16043
1960	$0.16	$0.00045	$0.16045
1964	$0.23	$0.00045	$0.23045

*Historical prices for silver and copper obtained from the U.S. Geological Survey.

Obviously with silver prices rising, continuing production was going to be unsustainable- and that’s just the cost of the materials. If we added general, administrative and distribution costs, it would certainly cost more to make a quarter than a quarter is actually worth.

Why were quarters initially only 90% silver?

I mean, why not just go 100%, ya know? Alexander Hamilton may be able to tell us. In his addressal to the 1st congress of the United States on January 28, 1791 he says

It is sometimes mentioned, as an expedient, which, consistently with a free coinage, may serve to prevent the evils desired to be avoided, to incorporate in the coins a greater proportion of alloy than is usual; regulating their value, nevertheless, according to the quantity of pure metal they contain. This, it is supposed, by adding to the difficulty of refining them, would cause bullion to be preferred, both for manufacture and exportation.

from On the Establishment of a Mint

Initially I thought the answer was to prevent people from melting the coins down for bullion and manufacturing purposes, therefore taking the coins out of circulation. As it turns out, I misunderstood Hamilton. /u/born_lever_puller who I quoted earlier enlightened me on the 2 primary reasons why the U.S. minted coins using a silver alloy instead of pure silver.

The first is that silver is quite soft and would be a poor choice of metal for usage in a coin that’s meant to be tossed around in circulation for decades to come. The other reason is that during the early days of the U.S., the colonies had to rely heavily on imports, as they lacked many of their own resources. Had they minted 100% pure silver or gold coins to pay for these imports, it’s highly probable that the coins would have been kept by the exporting countries and would not have made their way back into circulation in the U.S. This was important because during that period there was a shortage of precious metals in the colonies and the U.S.’ minting facilities were still in their infancy, being unable to keep up with demand.

Wrap Up

I really appreciate you making it this far, and I hope you had as much fun reading through this as I did writing and discovering the information. Next week, there’s something somewhat obscure and overlooked that I want to learn and break down the cost of.

I forgot to mention, quarters were not the only ones to contain actual silver in them at some point. Dimes and half-dollars did as well during the same period. If you’re interested in starting your own silver coin collection, it’s relatively cheap to do so and you can buy coins on Amazon here.

If you enjoyed this, check out my last post where I tried (and mostly failed, but it was fun!) to guess how much it costs to make a leather wallet. Thanks for reading and stay stuned for more!

How much does it cost to make a leather wallet?

2018-01-01T00:00:00+00:00

Introduction

A few months ago I was in the market for a new wallet. My sketchy looking $20 “leather” wallet from JC Penney that I had bought 5 years ago when I was 19 and broke was falling apart on me. This time I wanted to buy what I perceived to be a grown man’s wallet- so I started my search on Amazon. While the Bellroy Hide & Seek immediately caught my eye due to its slim profile, I wondered about the price tag. What goes into making a wallet like this?

Materials

Looking at the product description, Bellroy describes their Hide & Seek wallet as containing “Premium, environmentally certified leather”. Hm, understandably vague since this is only a product summary- but we’re going to have to dig deeper here.

There’s a section titled “Our Leathers & Materials” which seems promising. Expanding it we see this:

The leathers we use are premium hides tanned under gold-rated Leather Working Group environmental protocols, then dyed through so they age gracefully. The woven fabrics we use are sustainably produced and chosen for their durability and lightweight performance

Well this only opens up more questions, not all of them strictly related to materials. Who is the Leather Working Group? What does it take to conform to their gold-rated environmental protocol? How much does it cost to produce leather that abides by this protocol? Are “sustainably produced” fabrics more costly? By how much?

We’ll try to answer all of these eventually, but for now we’ll stick to finding out what kind of leather, fabrics and dyes are used. Scrolling to the site footer there’s a link to “Our Leathers”. I’m getting excited, will they tell us all about their process?

We use only premium grains selected exclusively from gold-rated Leather Working Group tanneries.

More of this Leather Working Group. Let’s look into those guys. According to their site, they seek

to improve the leather manufacturing industry by creating alignment on environmental priorities, bringing visibility to best practices and providing suggested guidelines for continual improvement” presumably by their leather working certification process and protocol.

The Leather Working Group lists tanneries and manufacturers that they’ve certified, but most of the tanneries didn’t have a website- and unsurprsingly when they did prices for their leather were not listed. Luckily, I found a blog post at Satchel & Page written by someone who claims to “talk to tanneries all the time” and has graciously shown us their price list. According to the sheet they provide us with, the full grain vegetable tanned leather that Bellroy supposedly uses costs $8.35 for 10-11oz, or about $0.76/oz. Since the blog post is from 2014, let’s adjust for 3 years of inflation using the BLS’ inflation calculator. Looks like we’d be at $0.80/oz today.

What about leather from a gold rated tannery specifically? Well since we couldn’t find any prices for that, we’ll have to grossly estimate. I imagine that the difference in price for sustainable and environmentally friendly leather would be somewhat akin to the price delta for sustainably farmed free-range chickens, or organic food of some type. Business Insider has already done the research for us, finding that organic chicken costs $2.99/pound whereas a normal chicken runs for $2.49/pound. That’s a 20% difference. Applying that to our $0.80/oz figure, we get $0.96/oz of leather.

The Bellroy Hide & Seek comes in at 1.8oz and is mostly leather, so we’re just going to blindly go with $0.96/oz * 1.8oz, giving us ~$1.73 in leather costs.

For the fabric which Bellroy says is “sustainably produced” and woven, I looked up the first retailer that popped up on Google for “sustainably produced woven fabrics” and landed at Honey Be Good. Their “Cirrus Solids” woven thread goes for $11/yard. I estimate that our little wallet has about 22.5 in. of thread around its perimeter, or 0.625 yards. Based on Honey Be Good’s pricing, we’ll put the fabric cost to be at ~$6.88.

Lastly the dye. Bellroy doesn’t say anything about the dyes that they use, but I gathered from a retailer called the The Cafe Racer that they use “non-toxic vegetable dye”. The first thing that came up on Google when I searched for “buy non toxic vegetable leather dye” was Fiebing’s LeatherColors™ at Michael’s, which goes for 6.99 for 2.2fl oz. So how much dye is needed to cover the wallet? I tested this by pouring 0.25 fl. oz. of water on one side of the wallet (don’t worry, it survived).

I didn’t spread the water out, but if I had’ve I could could’ve easily covered half of one folded side, or a quarter of the wallet.

The Hide & Seek’s product page says that the area of the wallet is 115mm x 85mm = 9,775 sq mm, so a quarter of that would be 2,443.75 sq mm. To get the coverage rate, we’ll divide 0.25 fl oz. by that number which leaves us with ~0.0001 fl.oz per sq mm.

Now we need to know the surface area of the entire wallet. It has 2 sides, so we’ll say that the surface area is about twice the 9,775 sq mm area, or 19,550 sq. mm. To find out how much dye this wallet needs, we’ll multiply its surface area by our coverage rate (19,550 sq mm. * 0.0001 fl.oz/sq.m). That gives us ~1.96 fl oz, or 89% of that 2.2fl oz bottle from Michael’s. So it looks like they’re using ~$6.22 in dye, 89% of the 6.99 price tag.

We’ll say that there are 3 primary materials, at these price points:

Raw Vegetable Tanned Leather: $1.73
Fabric: $6.88
Dye: $6.22

Research and Development

Hiring designers and engineers to make a wallet probably isn’t cheap. Unfortunately nobody has stated how much they’re being paid by Bellroy on their Glassdoor. We’re going to have to dig deeper and estimate. I’m all about that. Looking at their open job positions, it looks like they’re hiring a “product development engineer”. Since they’re based out of Australia, let’s look up the going rates for that type of role out there. According to Payscale.com, an average product development engineer commands a $72k salary in Australian dollars. For an average product designer, Payscale says we can expect about a $79k salary. Bellroy doesn’t seem like an average type of company though- they’ve gone above and beyond to fetch quality leather and materials for their wallets, and their site looks pretty spiffy. It’s probably safe to assume that they don’t hire average people, so let’s throw a 10% markup on those salary numbers. That leaves us with $79.2k AUD for the engineer and $86.9k AUD for the designer. Now I’m American so I like things in terms of freedom dollars. It looks like as of the time of this posting, 1 US Dollar fetches 1.28 Aussie Dollars. So to sum things up,

1 Designer: $67.8k USD

1 Engineer: $61.8k USD

Now the question is, how many designers & engineers did it take to develop this wallet, how long?

Bellroy doesn’t publically releases numbers like this, but they did have a Medium post on a similar wallet, where they detailed the staff and time resources that went into designing it:

2 design leads, 2 support designers
1 product development manager
1 chief executive
1 chief financial officer
1 creative director
1 project manager
…
5 months of development
101 sold in the first day

We’ll only be looking at the design and engineering aspect of this. We’re going to flatten the roles here a bit, and assume that all 4 designers were paid $67.8k USD. We’ll also assume that the product development manager was paid the same as an engineer, which is $61.8k USD.

In total, we’re looking at (4 * $67.k + $61.8k) * (5 months/12 months) giving us $138,750.

Manufacturing

I tried to find information on how much it might cost to manufacture a leather wallet, but I unfortunately came up short. I did however, find this article on Hypebeast claiming that it costs $1-$2 to manufacture a T-shirt. T-shirts, leather wallets…what’s the difference, am I right? Let’s go with $3 for our factory, since I imagine that dealing with leather is at least 50% more involved than dealing with cotton and fabrics.

Licenses/Certifications

Going back to the Leather Working Group, it looks like to get the opportunity to be certified you need to pay them a membership fee. The fee structure looks like this:

0 - $250MM Net Sales - $2500/year.

We don’t know Bellroy’s net sales, but that same medium post mentioned that they sold 101 units of the “Coin Fold” wallet on the first day of production. This is unrealistic, but we’re going to assume that they sell the same amount on a daily basis, 365 days a year. At a $99.65 price point, that’s $3,673,597/year. Even accross 90 different product offerings at a variety of price points, I doubt that they clear $250MM a year in net sales. This site estimates that they do $2.871MM in revenue, but I’m not sure how much that’s to believed as their information looks outdated.

In any case, let’s go with $2,500/year for the Leather Working Group membership. This cost is spread across multiple products (about 90), so let’s say ~$28.80 per product as a one time cost.

Estimated Profit Margin

Component	Cost
Leather	$1.73
Fabric	$6.88
Dye	$6.22
Manufacturing	$3
Total Cost	$17.83

With the MSRP price on Bellroy’s site being $89.95 and the estimated cost to make each wallet being only $17.83, I’ll guess that Bellroy is pocketing $72.12 per wallet. That’s a 400% profit margin! Assuming these estimates are correct, of course.

With licensing and R&D costs, how many wallets would have to be sold to recoupe their costs? ($28 one time LWG fee + $138,750 R&D staff costs) / $72.12 profit/wallet = ~1,924 wallets. If they sell wallets at a rate of 101/day as we assumed, then it only takes them 20 days to break even. Not bad.

Wrap Up

If my estimates are anywhere close to correct, 400% is more than a healthy profit margin. It’d be great to hear from the Bellroy team to know if I got anywhere near to the actual cost of making this thing.

Hope you enjoyed this first write up! My aim is to post 1 article at the start of each week. I’ll be looking to analyze more obscure or strange products, so if you guys have anything suggestions for things you want to see a write up on email me at pricetaganalysis@gmail.com

Lastly, I’m not at all affiliated with Bellroy, but if you’re in the market for a new wallet, I’m enjoying the Hide & Seek quite a bit and can definitely recommend it. You can get it from Amazon here.

Thanks for reading!

P.S. If you work in the leather working industry and want to tear me up about how terrible my estimations are, feel free to post a better estimation in the comments.