Wednesday, November 26, 2008


Today is Thanksgiving, which is always something I look forward to; but more importantly, at least in my little world, Maggie and I are finally moving into our new flat tomorrow. And yes, I did say flat. Contrary to popular belief, the word "flat" is used occasionally in the US, but it usually refers to an apartment that occupies an entire story of a building. Our new flat fits that bill, plus the listing was posted by a British expat, so either way it's a flat.

Just for fun, let's compare the two flats, our London flat vs. our new one:

UK: ~700 sq. ft. in a 40 unit building
US: ~1700 sq. ft. in a 3 unit building with a garden

Now take a guess which one costs more per month.

No matter how you tweak the exchange rate, out London flat was much more expensive even without considering the council tax. We don't have council tax in the US, instead we have potholes, bad schools, minimal public transportation, and lots of homeless people, which is apparently a fair trade-off.

Living in London is crazy expensive, a well known fact, but then again London also has by far the highest average salaries in the UK. The interesting bit to me is the comparison of average household incomes in London and San Francisco: ~£40,000/year in London vs. ~$70,000 in San Francisco (1,2,3). Now some might say, "Sure, but the pound is worth more than the dollar," and this is true. In fact, when we moved to the UK the exchange rate was 2:1 dollars:pounds, and when we left it was around 1.5:1 (which means we got royally screwed in both directions, but that's a story for another time while sobbing into a glass of wine). But exchange rate means nothing when you're living in a country using the currency, what really matters is purchasing power, i.e. how much the money in my hand buys me in terms of goods and services. What we found overall was that most things cost about the same in dollars that they do in pounds. If a sandwich costs you about $5 in New York, it will probably cost about £5 in London. This is all a very long-winded way of saying that (a) cost of living is much higher in London, but (b) London salaries don't adequately compensate for this. Which brings me to the inevitable question, one of the questions we were most frequently asked by our American friends: how and why does anyone afford to live in London? As to why, there numerous factors such as culture, trendiness, alcoholism, and curry. As to how, the question can be answered by what I like to think of as Andy's Special Theory of Economic Relativity (ASTER for short).

Most people don't spend a lot of time thinking about relativity — I know I don't. I freely admit that I spend inordinate amounts of time thinking about lots of pointless things: What movies would I pick for a special Dan Hedaya movie night? (Initial thoughts: The Adventures of Buckaroo Bonzai Across the 8th Dimension, Blood Simple, and Running Scared - maybe Clueless or The Usual Suspects); What would be my audition song for American Idol/The X-Factor (current favorite: Sister Christian by Night Ranger); If I opened a restaurant that served only fresh baked chocolate chip cookies and ice cold milk, would people come? Anyhow, I'm rummaging through my various pointless lines of thought, and relativity doesn't seem to factor heavily in hardly any of them. But ever since I visited Einstein's house in Bern, relativity has been creeping into my mind, and I think ASTER helps explain some of the economic situations people live in around the world.

Night Ranger is relatively cool in Japan

The classic way that the basic premise of relativity is explained always seems to involve a person on a train and a person on a platform while the train moves by. I'm going to consciously buck this trend and use a new set of images that I think will be more vivid: a clown on a jet-powered tricycle, and a hitchhiking mime on the side of the road. While the clown zooms by the mime, completely ignoring the mime's exaggerated hitchhiking gestures, the clown is expertly juggling three bowling pins. In the mime's frame of reference (the roadside), the clown is moving very fast as he roars by on his festively decorated jet-powered tricycle and the bowling pins are moving forward with the clown. In the clown's frame of reference (on the jet-powered tricycle), apart from the slight vibration caused by the jet engines, the clown isn't moving at all relative to the tricycle and the bowling pins are going straight up and straight down with no forward motion. The point (I think) is that both are accurate depictions of what is going on, but the observations are only accurate relative to the frame of reference. In other words, words that would probably make a physicist wince, a particular reality only makes sense if you are the one occupying that reality.

ASTER is the economic extension of this concept. When we first moved to London, we couldn't do the math. We looked at our salaries, we looked at what things cost, we looked at the weekly rents that were scarily like our monthly rents in the US, and we looked at how we liked to live, and life in London just didn't seem to add up to something we could realistically afford. 8 million people couldn't possibly afford to live in London, yet they did somehow. After several months of adjusting to the way of life in London, all of a sudden the math worked and we could start to accurately get a picture of our budget. I imagine someone from London moving to the US would probably look at the math and think, "Blimey, I can afford a 6 bedroom mansion and a Lamborghini," then they'd get to the US and wonder where all the money went.

Perhaps ASTER isn't that groundbreaking of a concept, and it is probably not even worthy of such a cool acronym. Yes, London is expensive, but people that want to live there make it work by adjusting the way they live (e.g., not owning a car, eating in a lot, etc.) or by going into massive credit card debt. From the outside looking in, it's easy for one to wonder why people don't just move somewhere more affordable; in fact, people elsewhere in the US ask this same question about the San Francisco Bay Area, which is much more expensive than most parts of the US. The point (I think) is that you live where you want to live and you make it work. We couldn't be happier to be back home in the Bay Area, enjoying a real Thanksgiving with circular pies, and moving into our new flat. I just can't wait for the Lamborghini to arrive.

Happy Thanksgiving.

1 comment:

American in London said...

Happy (belated) Thanksgiving, Andy. And hope the new flat is wonderful (an entire floor - wow!).

Even when the exchange rate was $2 to £1, I would tell my shell-shocked American visitors that if they divided their annual salary in half, it'd still be more than my annual salary in London. But it didn't matter - they still thought they couldn't afford anything here, whereas (as you say), once you choose to live here, you just do what you have to do and stop thinking about "how much better" your purchasing power was in the US.

Americans have it pretty good when it comes to purchasing power. It's hard to avoid feeling deprived (in terms of material goods) wherever an American decides to move, I think.