When a plague of poverty decimated an ancient land, the king called in his wisest economic advisors and demanded they prepare a short textbook on economics so that he might devise a remedy.

A full year later the king’s advisors returned with 87 volumes. Enraged at having his orders ignored, the king ordered his guards to execute half the advisors. Fearful for their lives, the remaining advisors edited the economics texts down to four volumes. The angry king responded by ordering his guards to execute all but one of the remaining economic experts.

The last royal economist was trembling when he told the king, “Sire, I will reveal to you in five words all the wisdom that I have distilled through these years from all the writings of all the economists who once practiced their science in your kingdom.”

“Quick,” said the impatient king, “what are they?”                                                  

The advisor answered, “There ain’t no free lunch.”

This adage is sometimes called “Crane’s law” and is popular in communicating the idea that it is impossible to get something for nothing. It implies that everything has a cost, whether it’s immediate or hidden, and that someone, somewhere, must pay for it. In business and economics, this concept is often used to remind people that even if something appears to be free, there are usually underlying costs or trade-offs involved.

“Free lunches don’t come cheap,” said Charles Petzold, American programmer and technical author on Microsoft Windows applications.

In economics, the phrase underscores the idea that resources are limited, and every choice involves a trade-off. If you receive a product or service for free, the cost is likely absorbed elsewhere, such as through advertising, data collection or increased prices on other products.

No free lunch demonstrates opportunity cost. Greg Mankiw, American macroeconomist at Harvard University described the concept as follows: “To get one thing that we like, we usually have to give up another thing that we like. Making decisions requires trading off one goal against another.”

In business, “no free lunch” serves as a cautionary reminder to evaluate offers that seem too good to be true. For instance, a company might offer a free trial of a service, but the long-term subscription fees could be substantial.

On a personal level, this adage encourages individuals to be mindful of the value of their time and efforts. If someone offers to do something for you with no apparent cost, consider what they might expect in return, whether it’s a favor, loyalty or future business.

Understanding this principle can help in strategic planning and decision-making. It encourages a thorough analysis of the benefits and costs associated with any decision, ensuring that you are aware of the potential implications and hidden costs.

A couple of real-world examples include the Freemium Model where many apps and online services offer free versions with limited features, enticing users to upgrade to paid versions for full functionality.

Another example is the promotional offer, where retailers might tempt customers with “buy one, get one free” deals, but the cost is often built into the price of the first item or offset by increased sales volume.

The phrase “there is no free lunch” serves as a valuable reminder to approach offers and opportunities with a critical eye. It encourages due diligence and a deeper understanding of the true costs involved in any transaction or decision.

So I caution: always be aware of the hidden costs and trade-offs in any situation, as nothing truly comes without a price. You get what you pay for.

A man walked into a small diner and noticed a sign that read, “Free lunch for anyone who can solve our riddle!” Intrigued, he sat down and asked the waitress about the riddle.

She smiled and said, “Here’s the riddle: What has keys but can’t open locks?”

The man thought for a moment and confidently replied, “A piano!”

The waitress clapped her hands and said, “That’s correct! Congratulations, you’ve won a free lunch!”

Feeling quite pleased with himself, the man enjoyed his meal. As he was about to leave, the waitress handed him a bill. Surprised, he said, “But I thought the lunch was free!”

The waitress winked and replied, “Oh, the lunch was free. But the drinks, dessert and service charge aren’t included!”

Mackay’s Moral: In both business and life, always look beyond the surface to understand the real cost of any offer or opportunity.