The Economy of the Mundane

A bakery is a small business. Several thousand bakeries are still discussed as small businesses. At what point do we add them up?

I started wondering about this while looking at the valuations attached to technology companies. The numbers are enormous, and the attention follows them. But an ordinary apartment can cost several hundred thousand euros. An ordinary city has tens or hundreds of thousands of them. Its residents buy groceries, pay bills, replace clothes, repair cars, go out for dinner. None of those decisions is especially grand. Taken together, they might be.

I wanted to know how much money a city moves simply by being lived in. Not what its palace is worth, or what price someone might assign to its museums and history. The museum tickets, yes. The collection, no. What people actually spend on the lives taking place there.

My suspicion was that this ordinary economy was much larger than the way we talk about it suggests.

The addition is already done

A corporation arrives with its activity assembled. Its revenue has a name, a report, and someone paid to explain its significance. Thousands of purchases, contracts, offices, and employees become one figure.

A city’s purchases remain scattered across receipts.

We know that NVIDIA is enormous. We are less likely to have a number in mind for the groceries bought in Tokyo, or the restaurants, clothes, rent, and repairs paid for across Madrid. Each purchase is familiar enough to seem unimportant. Something can happen millions of times and attract very little attention precisely because it happens all the time.

Consider Alcalá de Henares. It is not a city that features prominently in conversations about the global economy. But walk through its residential neighborhoods and consider what is there. Apartment after apartment, each representing a substantial purchase, a mortgage, years of work. Then the things inside them. Then what it takes to keep those households going.

The amount is not obvious from the street. Neither is the amount represented by a company’s offices. In one case, however, we are accustomed to receiving the total.

What I was counting

My first attempt bundled together things that needed separating.

The estimated value of all the homes in a city is an asset valuation. It is not money changing hands today. A flat someone bought twenty years ago can be worth half a million euros without anyone having paid half a million euros for it since.

The value of the homes sold this year is a different number. So is the rent paid this year. So is the money spent building or renovating them.

A company’s market capitalization and its annual revenue are different too. The valuation reflects what investors are prepared to pay for ownership, with expectations about the future built into the price. Revenue records sales over a period. Comparing annual grocery spending with a company’s valuation mixes two measures. Adding ten years of groceries does not fix it.

I was interested in both the accumulated wealth and the continuing activity, but they could not share a total.

For the activity, I wanted to know how much people spend living in a place, what they spend it on, and how often that spending returns. Homes might change hands after decades. Cars and appliances after years. Bills arrive monthly. Food keeps passing through the household.

A city runs on all of those rhythms at once. An annual figure can establish the scale. The breakdown would show what produces it.

What returns tomorrow

The repetition interests me.

A café does not need every customer to make an extraordinary decision. It needs enough people to come back. A supermarket sells things that will be used up. The purchases are modest partly because they recur, and their scale becomes apparent when you count them across a population and over time.

An occasional transaction of great magnitude and a small transaction repeated millions of times can both produce large annual totals. The second is easier to overlook because no individual purchase gives much indication of the whole.

I initially thought of this economy as more stable too. People will still need food tomorrow. They will still need somewhere to sleep.

The need persists, but that does not make every business serving it secure. People trade down, stop eating out, postpone repairs, share housing, or go without things they need. A property market can collapse while the need for housing remains acute. A restaurant can fail on a street where people continue having dinner.

People still have to find ways to feed, house, transport, and care for themselves. Businesses, prices, and spending can change considerably around those needs.

That is why I am interested in their continuity. A business can stop serving a need because it is no longer profitable. The person still has to find somewhere else to meet it.

The same purchases

There was another problem with my comparison. Corporate revenue and ordinary spending are not separate piles of money.

Buy groceries at a large supermarket chain and the purchase belongs to both. It is part of your household spending and part of the company’s revenue. Buy a phone, fill the car, pay for an internet connection: the same overlap appears.

Some of the world’s largest companies are large precisely because they collect ordinary purchases. Their size is evidence of the scale I was trying to see.

But we tend to discuss the activity differently once it has been consolidated. Thousands of independent shops are a collection of small businesses. Put comparable activity under one owner and it becomes a major corporation, with the apparent economic importance that comes with the name.

Ownership changes things. A large company can coordinate investment, negotiate with suppliers, and exercise power in ways dispersed businesses cannot. Those differences matter. What does not follow is that the purchases become more substantial when one organization receives them.

The revenue was there before we gave it a single heading.

A city and a corporation gather activity differently. One groups it by place; the other by ownership. A global retailer collects purchases made across many cities. A city contains purchases from many global retailers, alongside its independent shops and services. Adding the two together would count some of the same purchases twice.

But their overlap makes my point from another angle. The mundane layer is substantial not only because of its scale, but because so much of the corporate economy is made of it. The groceries do not cease to be ordinary purchases when they appear in a multinational’s accounts. We simply become more attentive to their total.

Even companies further from the consumer depend on this activity through their customers and suppliers. The connections are less immediate, but they are still there. The technology company and the neighborhood shop do not inhabit unrelated economies.

Why the detail matters

I suspect my interest in this begins somewhere less numerical.

In The Hobbit: An Unexpected Journey, Galadriel asks Gandalf, “Why the halfling?” His answer contrasts Saruman’s faith in great power with what he has found in “everyday deeds of ordinary folk.” He means ordinary kindness and love, the small things that keep darkness at bay. When he returns to the question of Bilbo, he admits that he is afraid, and that Bilbo gives him courage.

What I like is that the answer becomes personal. Gandalf is not merely defending the usefulness of small people in a grand undertaking. He needs something Bilbo offers him.

I have a similar feeling about ordinary life. A repair completed, a meal served, a shop that reliably has what its neighborhood needs. Each is easy to describe without sounding particularly impressed. But try living somewhere they are missing.

A neighborhood can have expensive homes and be an inconvenient place to live. The shops, services, and routines around them help determine what those homes actually offer. You live in the apartment, but you also live within reach of things. Someone has to provide them, and doing it well can make a considerable difference to your day.

Their revenue measures part of that activity. It does not capture everything useful about it. A reliable repair service can save you hours; a nearby shop can make an ordinary errand manageable. Neither has to become a large company for the improvement to be real.

I love technology. Engineering is my profession because it interests me. I like the ambition, the science fiction, the possibility of making something work better than it did before. I also like being able to get good bread near my house. There is nothing inconsistent about those interests, and no reason the second should seem economically negligible because it is familiar.

I still want to know how much Madrid spends on groceries, cafés, clothes, repairs, and the rest. I want to distinguish the city from the region, residents from visitors, money actually spent from estimated values. Those details determine what the number means. I want to see the proportions, not simply produce another enormous figure.

Apartment prices tell us what it costs to buy a place in a city. The businesses around those apartments tell us something about what it is like to live there. We are very attentive to the first figure. I would like a clearer picture of the second.