There’s No Such Thing As a Free Lunch

Although Milton Friedman, the legendary professor and Nobel Laureate at the University of Chicago, considered as perhaps the most influential economist of the last half of the 20 th century, generally gets credit for coining the above axiom, it was actually Leonard P. Ayres, who was the originator. Mr. Ayres had a remarkable career as an educator, an economist, and a brigadier general in World War II. The quote was first published in an article in the New York Times shortly before Ayres died in 1946.

The phrase received additional recognition in a 1966 novel, The Moon is a Harsh Mistress by the celebrated science fiction writer, Robert A. Heinlein. He created an acronym, TANSTAAFL, still used today in fields such as Thermodynamics and Mathematical Finance. It translates to the less grammatical, “There Ain’t No Such Thing As A Free Lunch.” Commemorating the fact that Milton Friedman popularized the concept, there is a TANSTAAFL snack bar in the University of Chicago where Friedman is known as the Father of the “Chicago School” of economics.

The aphorism lives again, larger than life, as testament to those of us who are prone to swarm like lemmings to the all too numerous invitations to attend financially oriented lunches, dinners, even cocktail parties, so (seemingly) generously, and of course freely proffered — and this is the point — by unknown, and sometimes unscrupulous hucksters . What? That really nice young man who spoke so eloquently and apparently knowingly at that last seminar you attended might not have been what he (or she) seemed?

I’m shocked! — shocked I say, that anyone would harbor such suspicious and skeptical judgments without evidence to substantiate this scurrilous attack. Okay! How about this opening paragraph from an Associated Press report published on September 10 th?

“An investigation by federal and state regulators of ‘free lunch’ investment seminars aimed at seniors has found high-pressure sales pitches masquerading as educational sessions, pervasive misleading claims for unsuitable financial products and even fraud.”

This examination was conducted by the Securities and Exchange Commission (SEC), state regulators, and the securities industry’s self-policing organization, the Financial Industry Regulatory Authority. Covering seven states with large senior populations, including Florida, it focused on 110 investment firms and branch offices that sponsor sales seminars to seniors with free meals. The investigation found that, “Senior citizens are big targets for investment fraud, and the free lunch seminars are very successful in attracting this sought after demographic.” Among the findings of the regulators who conducted the investigation are the following:

• The popular “free lunch” or dinner seminars, often at upscale hotels, restaurants and golf courses, are advertised as educational sessions or workshops at which no product will be sold. They are actually sales presentations pushing those attending to open new accounts and make investments on the spot or in follow-up meetings with the salespeople . Nearly 60 percent of the 110 investment firms and branch offices examined showed evidence of weak supervision of the employees running the seminars, including failure to review the seminar materials.


• About half of the 110 seminars inspected included false or misleading claims such as ‘Immediately add $100,000 to your net worth,’ and 13 percent included what appeared to be outright fraud such as liquidating accounts without a customer’s knowledge or consent, or even selling bogus investments.


• In 23 percent of the seminars, investments were suggested that were unsuitable.

Some of the popular investment products pitched at these “free lunch” sessions are variable annuities, the newer equity indexed annuities, real estate, reverse mortgages, and oil and gas schemes. So let’s see: If you had attended one of these 110 seminars that were monitored, the odds were, at best, 50 percent that the meeting you attended was legitimate. Would you be willing to travel to Las Vegas and bet your retirement portfolio or your savings at a craps or blackjack table? Compared to one of the above seminars, your chance of success would be much better in the gambling casino.

The next time you’re tempted to take advantage of one of these sessions go and enjoy the meal, but keep in mind that the term “free lunch” is an oxymoron since by definition “there ain’t no such thing.” Just memorize and keep repeating the acronym to yourself: TANSTAAFL, TANSTAAFL, TANSTAAFL.