March 31, 2015

I’m Stumped on a Real Life Opportunity Cost Calculation: We’ve Hit a Snag Choosing the Wall to Wall Carpeting

The economists among you will enjoy this.  I’ve run into an opportunity cost trade-off that has me stumped.  The fact it has me stumped has me frustrated.  That is distracting me from more important things.  What is my problem?  Carpet.  Carpet is my problem.

I’ve mentioned before that I’m a big fan of nicer carpet, mostly because I spent a good portion of my day sprawled out on the floor reading, even if a perfectly good chair is nearby.  Nice carpet feels great, and allows me to focus on my work; bad carpet hurts and causes me to spend most of the time adjusting or jostling for a less painful position.

Now that the sitting room is nearing completion (though there is still work to be done), I am turning my attention to the master bedroom suite and the music room.  I’m trying to decide upon the carpet to put in both and I’ve hit a bit of a snag.  I’m looking at two competing wall-to-wall carpeting options, both made by the same parent company under two different subsidiary brands.  One is Masland, the other Fabrica.  One is nylon, the other is wool.

The first, the Masland Seurat, retails for $130 per square yard, not including installation or padding, and is made of a high quality nylon fiber.  It has a Berber-like look to it, but it is actually a deep, plush-feeling carpeting. I took the large sample and laid down against it to test whether it was suitable for reading annual reports all times of day and night.  It passed with flying colors.   

Masland Nylon Carpet in Seurat Style

The Masland carpet in Seurat is made of high quality nylon fibers ...

The next alternative is the Fabrica Corvo, which retails for $210 per square yard, not including installation or padding, and is made of genuine New Zealand wool.  The sitting room now has a wool rug and I’m thrilled with the properties, to the point that I am looking for the perfect wool rug to go in the dining room, as well.  Given how satisfied I am with it, I imagine that the same would hold true for wall-to-wall wool carpeting.  Fabrica is supposedly a fantastic brand; the same people who carpet the White House.

The question: On a retail basis, is the wool carpet fiber construction worth an additional 61.5% premium over the equally-as-nice nylon fiber?  Do I get 61.5% more utility out of it than I do the Masland carpet?  I don’t know.  Therein lies the problem.  Most of these economic trade-off decisions are easy for me.  This one has me stumped.

To put it in economic terms, the premium of wool carpeting over nylon carpeting would cost an additional $20,000 or so.  I am 29 years old.  If I were to be perfectly average and earn the same return on long-term asset classes as most investors in the 20th century (10% pre-tax and pre-inflation), going with wool over nylon would cost me $2,840,868 by the time I am Warren Buffett’s age.  This is not a $20,000 decision.  It is a $2,840,868 decision.  That is real money that would have gone to the Kennon & Green Foundation or been given away to my heirs.  

But the thing is, life is uncertain.  God willing, I’ll live that long but the Earth could be destroyed by astronaut dinosaurs from a planet made of diamonds tomorrow afternoon.  Who knows?  That changes the hyperbolic discounting variables.  This is the economist in me.  Trade-off decisions are normally very easy.  If I were 45, I’d buy the wool carpeting.  If I were 55, I’d buy the wool carpeting.  If I were 65, I’d buy the wool carpeting.  But I’m not.  I’m 29 years old.  The opportunity cost is very high.  I don’t know what I want to do.  Like I said: Stumped.  It’s the only word.

Fabrica Wool Carpet Corvo Trinity

Fabrica Wool Carpet in Corvo Style and Trinity Color is made of genuine New Zealand wool ...

In the next few days, I have an appointment with a carpet specialist to help me go through all of the options.  I feel like I’m taking a crash course in carpeting.  My trepidation comes from my ever-present desire to have an escape hatch and, unlike an expensive area rug, wall-to-wall carpeting has almost no utility if you make a mistake and need to have it removed.  It would just be lost money.  

I need to get a lot of work done before Friday and all I can think about is style, cut, and material for residential carpeting.  This is ridiculous.  I need to snap out of it and focus on my job.  I’m supposed to be reviewing budgets for a special print job we require and signing off on the final accounting before sending it to the firm that handles our tax filings.

I’ll probably end up bowing to Kathryn Hepburn’s philosophy on buying furniture (watch short clip for explanation):

  • Anevergreen

    Have you considered installing wood instead of carpet?  A soft wood like bamboo should still feel good to lie on and won’t be a storehouse for dirt and allergens the way carpet is.  Plus it would be a lot cheaper than either of these options, and then you could buy some more wool throw rugs to put on top if you really want; and the advantage of using throw rugs instead is that they are easier to clean and can be easily replaced when needed.  Bamboo is also an environmentally friendly resource.  Admittedly, it is hard for me to even imagine someone wanting a wool carpet, between the scratchiness of the material and the smell (especially if it gets wet at all).

    • Joshua Kennon

      Thank you for your thoughts =) A big percentage of the house now is hardwood, oak stained floors and I love them. I like being able to switch out the area rugs to completely change how a space looks and feels. I’ve never seen Bamboo flooring, though. I’ll have to keep my eye out for that.

  • Spingus

    Quality wool carpet is an absolute delight, it’s in a completely different league from old army blankets.  Of course you know that which is why this is even a point of discussion!

    So, this isn’t going to be anything new, but here is how I would approach it:  Which carpet will give you and your family the most enjoyment over its service life?  Weigh that against the cost and see if the money you save on the less expensive one would have been put to better use; is that $2,840,868 going to realize a bigger benefit to you and yours by ending up in the foundation or on your floor?

    I’m a big fan of Ms. Hepburn’s attitude, though I hadn’t known it was hers until I saw the clip. I strive to buy the better experience of two choices.  The sale price is just one metric as you know, the hard part is valuing the experience appropriately.

    I bought a Bengal Cat a few years ago.  The purchase price was about  two week’s net pay on top of a nine month wait.  I could have gone to the pound and had a cat virtually free of charge instantly –this is what I have typically done for my entire life.  I laid out what I wanted from my new pet versus what pound kitties and fancy cats can reasonably contribute.  I chose the fancy cat (I still have my long time companion kitty –she is going on 16 years old so this is a long term commitment)

    After three years of living with my Bengal I can say that the quality is a reward unto itself –the affection, intelligence and athletic ability are impressive but it’s the personality that has given me the most joy.  I really don’t think about how much she cost originally because every day she adds value to my life that goes well beyond the predicted emotional return on my investment.

    Not that I have a vote, but I say go for the carpet that you like best.  If it’s the more expensive version, you should like it more than the other by a wider margin.  If knowing that the White House has the same carpet makes you enjoy it more add that in.  If picturing yourself on the more expensive one with your child, spouse or pet in front of the fireplace makes you smile more than the cheaper one then go for it.

    • Joshua Kennon

      Thank you for your thoughts. I appreciated that you took the time to share them =) The Bengal cats are gorgeous! I’ve never interacted with one personally but I hear their temperaments are great. My family has a Himalayan (a purebred half Siamese and half Persian) that has the sweetest temperament I’ve ever known in an animal. She’s going on 11 years old now but I never knew it was possible to love a pet so much.

  • Tricia Drake

    My family installed a high quality wool carpet and it survived and looked good for over 3 generations.  I have no idea how high quality nylon compares to high quality wool these days, but if the wool is going to look nice 10 or 20 years longer than the other, that could make an economical difference.  This only makes a difference if you plan to keep the carpet (and the house) until after it wears out.  On the other hand, it might be NICE to buy a new carpet in 20 years just because you’d like a new color, and the $20,000 invested at 10% might earn enough to buy a second high quality nylon carpet 20 years from now.  
    Another consideration is cleaning ability – if the nylon carpet is of the type that spills can’t absorb into the fibers, so spilling a glass of red wine = dabbing with a cloth vs. a professional cleaning . . . 
    Good luck with your decision.

    • Joshua Kennon

      I loved the economic rationalization in this! It sounds like you were typing out the different thought patterns in my head. :D

  • James

    This statement makes the decision easy to me:

    I took the large sample and laid down against it to test whether it was
    suitable for reading annual reports all times of day and night.  It
    passed with flying colors.

  • Anonymous

    The ancient Stoics felt it was only ok to own something if you did not become attached to it. If you lost the carpet, and it was lost money would you, ultimately, be ok with this? 

    • Joshua Kennon

      Ah … tricky question.  I only get attached to items that have emotional significance for me because they somehow relate to memories in my life.  So the carpet?  Yeah, I’d be okay if it were lost money.  But a total win for bringing up the ancient Stoics.  I haven’t heard them discussed since philosophy class in college.

      • Arthur Stordahl

        Funny how things work. A curiosity of wool carpet vs synthetic and my mind is revitalized to look into a refresher for the Ancient Stoics. A win here as well. A lean toward natural fiber is a difficult call in carpet, preliminary look, yet to feel samples. Much luck, oh 8 months maybe sprawled on the best choice now.

  • Ok

    Get the more expensive one.

  • Gilvus

    I think you should go into the woods naked, bludgeon a bear to death with a pillowcase full of frozen chicken, skin it with a plastic spoon, and use the pelt as your “sprawl-on-ground-reading-BRK-reports” rug.

    I won’t tell PETA.

    • Joshua Kennon

      I have … issues … with PETA.  I respect what they are doing, and one of the five charitable causes to which I donate money is animal conservation to prevent species from going extinct, but I sometimes feel like their tactics are counter-productive and result in worse treatment of animals in the long-run.  You can’t ignore mental models, like reciprocity and Kantian fairness, and expect to win people’s hearts and minds.  As stupid as it sounds, a single Sarah McLachlan commercial with a wounded animal probably does more good than throwing red paint of fur coats. Compassions works better than violence. That’s why Gandhi and Martin Luther King won but terrorism generally fails.

      • Gilvus

        By wounded, you mean a baby red fox with a brightly-colored cast on its leg, right? Cute overloads tend to work well for whatever you’re trying to do.

        Animal conservation is a sticky topic because it pits rationality versus our soft spot. I’d be incredibly sad if pandas went extinct, but the rational part of me thinks that pandas should be weeded out by natural selection, and the millions of dollars they put into conservation efforts for the adorable critters could be better spent elsewhere.

        For funsies, look up “panda porn” and “panda viagra.” They’ve done some crazy stuff to get them to mate.

  • Teeka T.

    If you are going to have children anytime soon then I would strongly recommend that you avoid wall to wall carpeting. Despite your best efforts they will destroy it :-)


  • Wools of New Zealand

    Wool will look better for longer but this is not purely an economic choice. Wool is also renewable, not made from crude oil. Go with the ethical choice and splash out on the lovely New Zealand wool. Dont stick with wood unless you enjoy braething in air-born dust particles.

  • Jason

    Check out, Great prices on high quality wool carpet. No trade off necessary. They didnt have the brand on their website I was looking for but still were able to help me buy the non toxic wool carpet i desired. They have a ton of other “green” flooring options as well and not to mention great customer service.

  • bpollen8

    Both of your choices are pricey. Comparing the additional $20k cost of one over the other is the wrong way to look at it, IMO. That’s because one is an apple and one is an orange. You could go on comparing one carpet with another forever, if that were the basis for your choice. Instead of the nylon you are considering, for example, is that carpet worth that high price over the next lower cost level of nylon, which would still be a high quality nylon? I think you should also take longevity out of the equation. Both carpets (and in fact most carpets) will last in good shape (if yu take care of them) for as long as you will want to keep that carpet. Your taste will change in 20 years at most, or you’ll sell your house and the new owners will change it. Carpet is not like an oriental area rug that is passed down for generations. I’m considering nylon vs wool, myself. I’m comparing which one would stain less or be easier & cheaper to clean (I will ALWAYS have pets), which one won’t pill, which one feels better under bare feet (a minor consideration), and which is better for people and pets environmentally (wool has an allergy component, while nylon has more chemicals).