3 Ways to Cure the Inefficiencies of Gift Giving

By Boyd Arnold

The holiday season is upon us and if you’re like me, you couldn’t be more excited. Family, friends, food, time off from work, presents, football...what else could you ask for?

It turns out we could ask for less. The holiday season is the most wasteful time of the year. Americans throw away 25 percent more trash during the Thanksgiving to New Year’s holiday period than any other time of the year. The 2.65 billion Christmas cards that are sold each holiday season could fill a football field ten stories high. While we try hard to give great gifts, gift giving is inherently wasteful and inefficient in ways we might not know.

Why gift giving is inefficient

When you have money you know how to use that money to maximize your satisfaction better than anyone else can. If you’re hungry, you’ll buy food. If you’re bored, you’ll go to a movie. If you’re content, you’ll put that money under your mattress for a rainy day.

What happens when you need to buy a gift for someone else and try to maximize their satisfaction from the gift?

If you’re like most people you struggle finding gifts for others. You struggle because there is no guarantee that any gift you select for someone else will even come close to maximizing their satisfaction. There are so many gifts to choose from and most of the time you have far less than perfect information to maximize the recipient’s satisfaction.

This predicament has been quantified. Research shows that when we receive gifts from other people we value them 20 percent less than items we buy for ourselves. So for every $100 you spend giving gifts, the people receiving the gifts only value them at $80. That is a $20 deadweight loss.

20 bucks, big deal you say. Well, it is a big deal when we consider how much money is spent on gift giving in aggregate over the holidays. The month of December has 8 percent of the year’s shopping days but makes up 23 percent of sales at jewelry stores, 16 percent at department stores, and 15 percent at electronics stores. Total U.S. retail sales in December are expected to total $65 billion this holiday season. That means we buy $13 billion worth of wasteful gifts that don’t satisfy anyone (except for big box retailers).

Gifts that give choice to recipients and make the world a better place

The following three gifts provide recipients with choice, are not wasteful, and make the world a better place. Best of all, these gifts keep on giving and growing. The Kiva Card The Kiva Card is a great way to give someone an opportunity to provide a micro-loan to an entrepreneur in a developing country. The card recipient will be able to choose the entrepreneur they want to lend money to and will receive updates on the progress of the entrepreneur throughout the life of the loan. When the loan is repaid, the card recipient will be able to choose a new entrepreneur to make another loan to.

TisBest Charity Gift Cards
The TisBest Charity Gift Card is a gift card that recipients spend on a charity of their choice instead of buying more stuff. Recipients can choose from over 300 charitable organizations on the TisBest website. TisBest selects charities that cover a broad array of interests so that nearly everyone will be able to find an organization they believe in for their donation.

Mosaic’s The Gift of Solar
This holiday season Mosaic is giving The Gift of Solar. Anyone who signs up for a free investment account and invests in a solar project of their choice will receive $25 from Mosaic. This gift will keep on giving and growing over the years as the solar projects pay back interest. Returns to date on the Mosaic platform have been 4.5-7 percent (APY). As the principal and interest of the gift is paid back, investors can reinvest in other solar projects to create more clean energy and more wealth.

Boyd Arnold is a member of Mosaic’s business development team.  Prior to working at Mosaic, Boyd worked in investment consulting and has experience starting businesses.  He graduated from the University of Colorado and has completed all three levels of the CFA.  Boyd enjoys cycling, brewing beer, and baseball. Follow him on twitter @boydarnold. 

[Image credit: Sparkieblues, Flickr]