Dreadnought Economics

In 1906, the British Royal Navy launched the HMS Dreadnought.

Before Dreadnought

Until that morning, naval power was a gradient. You had older battleships, newer battleships, some with more guns, some with fewer. It was a linear progression of utility.

But the Dreadnought was different:

• First all-big-gun battleship
• Powered by steam turbines
• Faster, deadlier, and tougher than anything else on the water

The Discontinuous Jump

The moment she launched, she didn’t just become the “best” ship. She effectively deleted the value of every other ship in existence. Every battleship built before 1906—even ones launched just a month prior—instantly became “pre-Dreadnoughts.” They were obsolete scrap metal.

I tell you this because I recently realized I have inadvertently recreated the Anglo-German Naval Arms Race in my bedroom closet. And, much like the German Empire in 1910, I am losing.

The Dataset of Ruin

I spend a lot of time optimizing trading strategies and game theory models. Theoretically, I should be good at resource allocation. In practice, my personal inventory is a disaster.

I conducted a forensic audit of my last 24 months of clothing consumption.

The Data

• Sample Size ($N$): $\approx 45$ items acquired
• CapEx: $\approx$ $2,250 (mean price $\mu_p \approx$ $50)
• The Hypothesis: Usage would follow a Uniform Distribution ($U(a,b)$). I paid for them, so I should wear them.
• The Reality: Usage followed a severe Power Law. Roughly 5-7 items accounted for $>60\%$ of total utility.

Result: About $1,000 of dead capital hanging on hangers.

Why? I didn’t understand that clothing follows the same rules as naval warfare.

The Dreadnought Effect in Utility Theory

Standard Economic Theory

Goods are substitutable with diminishing marginal utility. If I have a “Perfect” shirt ($U=1.0$) and a “Good” shirt ($U=0.8$), I should theoretically wear the Good shirt $40\%$ of the time.

False.

Reality: Discontinuous Utility

The moment I acquire a “Dreadnought”—a perfect item—the probability of me choosing an inferior substitute drops to near zero.

Exhibit A: The Zara Failure

I bought a pair of white oversized Zara jeans.

• The Intent: High fashion.
• The Reality: They didn’t pair well with my core items. My “Confidence Multiplier” ($\alpha$) was $\approx 0.4$.
• The Dreadnought: I already owned tailored chinos that fit perfectly ($\alpha = 1.0$).
• Result: The Zara jeans were rendered obsolete immediately. $N_{wears} = 2$. This is dead capital.

Exhibit B: The Patagonia Arbitrage

I bought a Patagonia technical climbing tee (discounted to $30).

• The Reality: It fits perfectly. It doesn’t smell. It never wrinkles.
• Result: It is a Dreadnought. It murdered every other t-shirt in my drawer.
• CPW: Approaches $0.

The New Protocol: Quantifying the Closet

To stop bleeding money, I’m treating my wardrobe as a bounded system governed by specific variables.

1. The Decay Constant ($\lambda$)

Clothing is a depreciating asset. Its structural integrity over time ($t$) follows exponential decay:

Decay Rates

• Patagonia/Arc’teryx: $\lambda \to 0$ (the “Forever Coefficient”)
• Cheap Fast Fashion Wool: $\lambda \approx 0.5$ per wash (loses shape faster than a radioactive isotope)

2. The Optimization Strategy

I am pivoting to a High-CPW Uniform strategy (Zone 1).

Three Rules

1. The “Dreadnought” Filter — If a new item does not completely obsolete a previous item in its category, do not buy it. “Good enough” is a trap.
2. The Functional Exception — For high-entropy environments (The Gym), Aesthetic Value is irrelevant. My $15 Decathlon tee with CPW = $0.50 is an efficiency masterpiece. It stays.
3. The Constraint — 5 Tops, 4 Bottoms, 4 Shoes

Why 4 pairs of shoes?

Material fatigue requires rotation. By introducing a rest period ($t_{rest} > 24h$), we reduce the Decay Constant ($\lambda$) and extend the asset lifespan.

Conclusion

I spent $2,250 to learn that in a closed system like a closet, the “Second Best” option isn’t an alternative,it’s waste.

The British Navy learned this in 1906. I learned it in 2024. From now on, I only invest in Dreadnoughts.