BlueSky Thinking Summary

In a challenge to traditional investment wisdom, a paper by Scott Baker, along with Stephanie Johnson and Lorenz Kueng, explores how many households manage inventory as an alternate form of investment.

Specifically, evidence reveals that many households, particularly low-income households, can realize enormous cost savings—up to 50%—through the simple expedient of stockpiling everyday goods like canned food and toiletries.

Using Nielsen data, this unconventional approach finds that structuring how a household manages inventory can produce returns on par with some of the better-performing hedge funds.

"Household working capital" is what Baker terms it—a category that should include not just liquid assets but consumer goods inventory as a key driver of household wealth.

While perhaps not traditional, within finite economic resources of households, it is just a sophisticated and pragmatic approach to their optimization.