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STOCK INVESTORS TALK about taking advantage of market inefficiencies. That sounds nice, but I don’t have any confidence I can spot mispriced stocks, which is why I stick with mutual funds, especially index funds.
But there’s a market inefficiency where I’ve done pretty well—train tickets. In my late 60s, when I was in my final job, I commuted from central New Jersey to Philadelphia by train. This meant parking my car at the station, taking New Jersey Transit (NJT) two stops, and then switching to the Southeastern Pennsylvania Transit Authority (SEPTA) train into Philadelphia.
Door to door, this took two hours. For those readers who walk to work or drive 15 minutes, this might sound like a lot. But in the New York area, two-hour commutes are fairly common.
I had the option of either buying a monthly ticket or purchasing single-ride tickets. A monthly ticket is convenient. All you need is the one piece of paper for as many trips as you take within that month. As a senior—defined as age 65 or older—I was entitled to a fare discount. This discount applied to both monthly and single-ride tickets.
SEPTA is especially generous to seniors. You could travel anywhere within the SEPTA system for free—as long as you stay in Pennsylvania. But if you travel on SEPTA to Delaware or New Jersey, you have to pay. I only traveled one stop into New Jersey but, because of this, I needed to buy a ticket. I didn’t like this.
Meanwhile, I also discovered that NJT conductors weren’t that efficient. Sometimes, they decided—for reasons unknown to me—not to collect tickets. Had I bought a monthly ticket, this wouldn’t matter, since I’d have paid for the whole month, whether I took the train or not.
The upshot: I decided to buy individual tickets at the senior discount—and tried to take advantage of “train market” inefficiencies.
When I got on the train, I’d always have NJT and SEPTA tickets. If the conductor asked for my ticket, I’d hand it over. If the conductor didn’t, I’d keep the ticket for my next trip.
Riding the train every day, you tend to see the same conductors. Once they recognized me and they knew I didn’t have a monthly pass, they’d always ask for my ticket, which I would give them. There were no inefficiencies in this case. But when there was a new conductor working, I often got to keep my ticket.
This situation played out best on SEPTA coming out of Philadelphia at the end of the day. When new conductors worked the train, they didn’t know where I was going, nor would they ask. I’d show my SEPTA senior ID and get a free ride.
For those readers who feel I cheated these transit companies out of revenue, keep in mind that I always bought tickets and never got on the train without one. I simply used them as required. No, I didn’t go out of my way to give my ticket to the train conductor. But I would have done so—if the conductors were doing their job.
An added twist: To pay for both parking and train tickets, I would fund a pretax flexible spending account through my employer. But I needed to spend the full monthly amount or it would be lost. And sometimes there was indeed money left over.
What to do? The leftover money could only be used to buy train tickets, which meant buying yet more SEPTA or NJT tickets.
NJT senior tickets can be used by riders age 65 and over and by the disabled. My wife, son and I all fall into these categories, so I used the extra dollars to buy NJT tickets. We’d then use the tickets to travel into New York City or go to Newark airport. And there was no rush to use the tickets—because they don’t have an expiration date.
To add more fuel to this fire, besides “gaming” the two train systems, isn’t it also wrong to use a pretax flexible spending account from an employer, meant to subsidize commute costs, for personal tickets for one’s family?
The best part about this element of the scam is that if his family members don’t want or need the excess tickets, he could sell them on e-bay, thereby taking advantage of yet another “market inefficiency.”
One of the perpetual HD topics is gaming the IRMAA penalty (tax?) which ultimately results in less income for our barely solvent Medicare system. Is this so much more noble than gaming the transit companies?
“Ask not what your country can do for you, ask what you can do for your country”. JFK