Secrets of a Low Cost Life

In the summer of 1920, Ralph Borsodi stumbled on a life-changing insight – and one that we can apply today. It all began when his wife canned tomatoes for winter use. Ralph, having “an incurable bent for economics,” wondered if it paid – or if they were better off just buying canned tomatoes from the store. He sought to find out.

The Borsodis spent many evenings carefully factoring in all the costs of canning tomatoes. It was more difficult than it sounded, as Borsodi relates in his book Flight From the City (1933). Eventually, they had an answer. “When we finally made the comparison,” he wrote, “the cost of the homemade product was between 20% and 30% lower than the price of the factory-made merchandise. The result astonished me.”

How could little Mrs. Borsodi, working alone, produce canned goods at a price lower than the great Campbell Soup Co.? The latter had labor-saving machines. It had massive economies of scale. It had smart management. After much study, Ralph began to put the pieces together. “Slowly, I evolved an explanation of the paradox,” as he puts it:

Transportation, warehousing, advertising, salesmanship, wholesaling, retailing – all these aspects of distribution cost more than the whole cost of fabricating the goods themselves. Less than one-third of what the consumer pays when actually buying goods at retail is paid for the raw materials and costs of manufacturing finished commodities.

From that simple insight, a whole new way of life opened up for Ralph. And it is something to think about today.

To back up for a minute, I should tell you a bit about Ralph Borsodi (1888-1977). He was a great libertarian in the American tradition of Thomas Jefferson. He was an economic theorist and important figure in the back-to-the-land movement. Borsodi believed – and set out to prove – that the household could be a productive and creative institution.

In Flight From the City, Borsodi writes about how his wife and two young sons were renters in New York City. They bought their food and other goods from retail stores. Borsodi had a white-collar job in the advertising industry.

But the insecurity of it all gnawed at him. Borsodi knew he was dependent on that income from his job. Then in 1920, his fears became reality. There was a housing shortage in NYC. The landlord sold the house the Borsodis rented. Finding another place to rent was expensive. As later gubernatorial candidate Jimmy McMillan would put it, the rent was too damn high.

So they moved out in the country, about three hours from the city. They bought a place with a small frame house, an old barn, and a chicken coop. It also had seven acres of land – hence, they named it “Sevenacres.”

Ralph wanted a degree of economic freedom he didn’t have before. He would still work for a “modest salary.” But if it went away, he wanted the freedom to continue almost indefinitely without it.

To do this, Borsodi aimed to make more at home. Much of the rest of the book is an account of the Borsodis’ efforts at raising chickens and goats and growing vegetables and keeping bees. The Borsodi homestead produced its own eggs, milk, butter, and honey. They also would weave blankets, carpets, and draperies; make some of their own clothing; and grind flour, corn meal, and breakfast cereals.

Borsodi shares detailed records of the expenses to show how cheap it was for his family to do these things for themselves compared with buying them from the Campbell Soups of the world. His goal was not autarky. He wanted not to have to rely so heavily on an uncertain salary or the whim of a landlord or the great machinery of modern industry. Nor did he want to rely on the government.

In This Ugly Civilization (1929), Borsodi makes his views on this point clear: “History, which is one long record of the imbecilities and the injustices of governments, furnishes us good grounds for seeking some alternative solution for them.”

Borsodi’s do-it-yourself manifesto came out when the country was “most deliriously celebrating the great boom of which Henry Ford was the prophet and mass production the gospel. Virtually no one wanted to be told that the whole industrialized world was mistaken; that there was another way and a better way of making a living and of providing ourselves with our hearts’ desires than through organized, integrated, centralized labor.” When the Great Depression hit, though, it was a whole other story.

And this, really, is the nut of the investment insight I wanted to share with you. No, I’m not recommending you head off to create your own homestead to prepare for a depression. However, I do have a soft spot for the Jeffersonian ideals Borsodi personified.

I recently picked up a copy of Kevin Carson’s The Homebrew Industrial Revolution: A Low-Overhead Manifesto. There is a lot of good stuff in this book. It focuses on how the modern statist world raises the cost of living. And it shows an emerging alternative economy that reduces the need for a continuing (and high) income stream to live well.

Reading Carson, who quotes Borsodi extensively, made me want to read Borsodi in the original. (You can find Flight From the City and This Ugly Civilization free online. Both are easy reads.) Anyway, Carson’s distilled wisdom from Borsodi is worth sharing:
Contra conventional finance gurus like Suze Orman, who recommend investments like lifetime cost averaging of stock purchases, contributing to a 401(k) up to the employer’s maximum matching contribution, etc., the most sensible genuine investment for the average person is capital investment in reducing his need for outside income.

Among these investments is the purchase of a home – and paying it off as quickly as possible. I know that with low interest rates, this may seem foolish. But interest costs are interest costs. Use a mortgage to buy a rental (or two). The rental also provides an alternative income stream. You own your own place free and clear.

I think Borsodi’s story also touches on something timeless. It destroys the notion that bigness leads to efficiency. People often assume giant corporations are efficient and hard to beat. They often are not. Borsodi exposes the hidden costs of large-scale production. He shows the wisdom in locally sourced goods.

As Borsodi found out, his wife could can tomatoes cheaper than Campbell Soup – a counterintuitive but handy insight. It also speaks to our commitment to small, owner-operated firms against the absentee owners of the giants of industry. Our smaller, agile, and more resilient firms are the egg-snatchers in the dinosaurs’ nests.

I know Borsodi’s story may be one of the stranger ones I’ve written about to you. But I think the message is important. (Besides, the Borsodi tale struck me as immensely fascinating in its own right.)

Do you have any memories or tips to share about similar experiences? If so, I’d love for you to share them here.

[Ed. Note: Chris Mayer’s monthly Capital & Crisis newsletter – published by our corporate affiliate Agora Financial – is among our favorite value-oriented advisories. Chris consistently provides contrarian investment ideas you won’t find anywhere else.]
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  • Johnf

    I too grew up on a farm in Arkansas. My parents raised 4 kids while dad drove a school bus we made ends meet by having our own cows, chickens and pigs. We always had plenty of fresh milk and eggs and we grew most everything we ate. Mom would make some of our clothes with feed sacks. We canned and froze the things we grew. i would imagine we would have been considered poor because we didn’t have a lot of things other folks did but we always had plenty to eat. I know i couldn’t wait to leave the farm but now I wish i could go back. Things then were much less complicated.

    • Craig Ballantyne

      Sounds wonderful, John!

  • mike

    Craig & Chris,
    You point is well taken…but you forgot one very important point. The home canned tomatoes are infinitely better. When harvested, they are actually red all the way thru the tomato…when you cut into the tomato, the juice spills out onto the counter. This is a real tomato. The store bought tomatoes are not even close to the taste & goodness of a homegrown tomato.
    Mike Colson

    • Craig Ballantyne

      Mike, yes! Especially considering most store bought tomatoes are purchased out of natural season. That’s the big issue, right?

  • Dr. Em Crosby

    My mother had 3 sisters. My uncle would go to the farmer’s market in the summers in Anniston, AL and bring back bushels of corn, field peas, pecans. etc. So my aunts would get busy. They would cut the corn off the cob, cook it a little and then freeze it. The same with field peas cooked slightly and then frozen. They usually sent the pecans to someone who cracked them, then they spent untold hours shelling and putting the pecans in plastic bags and freezing.
    It was a lot of work. But the corn and the field peas were fantastic. Unfortunately, I don’t know how they did it and it is lost today. It was a very arduous job. But the rewards were wonderful tasting food.
    Today we have agribusiness. These are not farms. They are businesses and they work for the bottom line. It doesn’t mater if they pollute the earth with the waste of these poor animals who live in horrible conditions. And they want to alter the genetics of the vegetables. We have already seen the results and it is not pretty.
    I can tell you that I have become a vegetarian. And I am not thrilled with what I buy at the store. I hope it is not too late to stop these agribusinesses and the disaster of our food. Congress is voting right now and I have written to them to vote “No”. I have hope still

  • Dave

    The way of thinking, reducing expenses through use of non-working time, is only appropriate if there are no means of making money outside of the home or any place within a reasonable, cost-effective commute. People on farms with no means of transportation to jobs and retirees seem to fit this description.

    WIth a decent job, bills can be paid and leisure time is available. How a person chooses to use the non-working, leisure-time is up to them. A person could use their time to save 20% of their tomatoe preparation costs. Or they could put their time into studying to become more valuable in the market place or to further a business endeavor.
    For me, I chose to continue to learn to achieve higher, more valuable workplace skills and I chose to spend a few hours a week building a part-time business. The skills and business have developed enough ongoing income in my life and dwarf any savings (by at least one-hundred fold) that would have been made from tomatoe-preparation, production-costs.

    Relating to the paying off of a house early — a valuable strategy, but again, not omnipotent. If no other form of leverage is possible outside of the value of paying off the mortgage, then early mortgage pay-off is extremely valuable. I have two friends and parents who have paid off houses and they lead a low-stress life; indeed great.

    For me, I chose to build a aprt-time business which requires only a couple of hours a week to develop the income to pay the mortgage payment. Again, proper leverage. Further, the returned investment of value-added workplace skills and part-time business income have greatly outperformed any savings from paying off my house earlier.
    $1000 per month can be put towards paying off my mortgage early or re-invested in my business. My business returns 21% on average; after taxes, 13% net with some time expenditure. I’ll take the 13% net income increase over a 3% to even 6% mortgage buy-down strategy.

    And paying off a house in a decling market is a bad idea as it causes a loss of money. Leveraging a house in a growing-value market place by minimizing payments is a great idea to make more money.

    If you don’t have a leverage point outside of your house and there is no way for you to become more valuable in the marketplace and there is no way to make money by building a business, then yes, pay down your house. Retirement plans should include a no-mortgage home because retirees aren’t working (by definition) and there is no leverage of increased value or business.

    I’m a bit confused as to why this topic was brought up on Early to Rise. Shouldn’t we be learning better market-value skills and business-income-increasing skills?

    Again, there is not a right or wrong strategy, only the correct applicaiton of it. Until I retire, my focus is on building skills for an increased market value and growing my business.

    • Craig Ballantyne

      Hi Dave!

      Thanks for your comments and great question.

      As you can see, we’ve had a wide range of responses to the article.

      I published this, because while we mostly publish how-to advice, we also like to publish philosophical content on living well.

      In fact, I have a weekly schedule that goes like this:

      Monday – Mindset and Motivation
      Tuesday – “How to” (do something valuable)
      Wednesday – Wealth or Success
      Thursday – Wealth or Health
      Friday – Philosophical to make people reflect

      As you concluded, there is no right or wrong strategy, and I hope that applies to our content as well.

      Many thanks, Dave!

      Craig

  • Phishman327

    I retired to the Lancaster area of PA and although I’m not farming myself, I am surrounded by Mennonites who live by the principles you stress (and strong Christian values). They also own All the local businesses with their extended families. They figured it all out decades ago!
    If Obama would put these hard working Mennonites in charge of the economy, the U.S. would come roaring back!

    • Craig Ballantyne

      Love it Phishman, thank you!

    • Markangelo

      They have no individual freedom !!!!!!!!!!!!!!!!!!!!

  • Pam

    I always enjoy the “bait” you write Craig in moving me into the following article (plus the quote), but I don’t always read the article because they are too long.

    However, today I couldn’t resist! I always relate to your rural life and your busy mother, Craig, that is how I was raised. To work hard and enjoy doing it!

    What I got out of the article? Simplicity is one of life’s most satisfying choices!

    • Craig Ballantyne

      Thanks Pam!

  • MarJM

    I’m curious what value Borsodi put on wife’s time, when calculating the cost of canning and freezing? Did he keep track of how many hours she spent and attach an hourly rate to that?

  • CathyJoLo

    Interesting article! It
    seems we Americans have become more accustomed to dependence on others’
    goods/services and in many arenas of life, have lost the knowledge, skill and will of “creating” to meet our own needs.
    In addition, many of us have also bought into the belief that the only
    way to survive in today’s economy is for both spouses to be employed outside
    the home. Yet, those are simply beliefs, but not necessarily truth for everyone. Years ago, my
    husband and I uncovered our true “cost” (both tangible and intangible) of both
    spouses being indentured to companies in demanding careers. A series of experiences led us to examine our
    beliefs about security and what was necessary for our desired quality of
    life. After considering my
    entrepreneurial tendencies, talents, and potential, we decided I would leave my
    demanding job to manage our household “enterprise” and produce supplemental income
    in entrepreneurial ways. My husband remained in his career path but with more
    confidence about our future. We were amazed to discover there were many
    strategies for living on almost ½ of our previous income once we sold our home,
    moved to a less expensive (but nice home) in a lower real estate tax district, and gave more attention to managing our various resources. There’s more to the story,
    but in summary, we learned to live on much less and enjoy life more while
    continuing to build our financial stability and a more compelling future! There are many possibilities!

    • Craig Ballantyne

      Thanks for the feedback, Cathy. Great work!

  • MarionLynn

    Both my grandmothers used to ccan foods. 1taught me how to make Orange Marmalade. Because watermelon rind pickles were my favorite, after years of begging (after I had gotten married) my Aunt finallly gave me the recipe.Unfortunately I have yet to make any, but I’ve held on to that recipe despite my moving all over the country. One grandmother had a vegetble garden in her back yard. Nothing real big but enough to feed the family and put away some for the winter. My other grandmother would wait for sales on the various vegetables she liked to use or get some one to take her to the country to an open air farm market on a road side. She would do this at harvest times and can/preserve them for the winter.Although I don’t can much,I did learn how.I do cook my own food and often make more thani I can eat in 1 meal. I then put the extra i n the freezer i 1 sserving containers so I can put together a quick meal when I don’t have time to cook, heat and serve.

    • Craig Ballantyne

      Thank you!

  • Markangelo

    This article promotes landlords not homesteaders ?