Wealth – Page 32 – Wilder, Wealthy, and Wise

Your Business Passion Sucks.

“I can’t afford to sell a west side home for that! But what a fantastical year for pizza by the slice!” – The Simpsons

It’s always a good idea to start a business to take money from people who say, “milady” because they often cannot defend themselves in hand-to-hand combat. Take their money and buy yourself something nice.

The Mrs. and I have had a bunch of business ideas – our Internet pizza by the slice company (we don’t deliver, you have to come pick it up) wasn’t exactly a great hit, but we sold it for $50,000,000 in Alta Vista™ stock that we couldn’t sell for three years. Easy come, easy go.

I kid. This didn’t happen to me, but it did happen to a friend of mine. Don’t worry – he’s been the CEO of multiple companies and has vacation houses in three states.

But one time The Mrs. and I actually came up with a real business plan. We’d read an article on a website back in the day (I actually don’t remember which one – it was a site I used to go to back when Google® was new) about a PC Bang in San Francisco. The concept was that the business rented computers by the hour and sold snacks to gamers who were all connected by LAN (local area networks) to play against each other or as an organized team against other gamers. The name may sound dirty, but it really was a South Korean name that just never wore off. (South Koreans are big gamers.)

The Mrs. liked to play games, and she and I reckoned that a great way to make money would be to take it from chain-smoking gamers – we had e-mailed the author of the article and he told us the concept worked well in San Francisco, but the gamers were amazing at smoking – even teenagers. Since even back then smoking was a thing only demons without souls did inside, the smokers would take a break from killing virtual people to smoke outside.

Thinking this would be a good idea (the PC stuff, not the smoking), The Mrs. and I priced local strip mall rents. We had a place in mind that we wouldn’t even need to retrofit. We put together a business plan. We got quotes on computers, counters, and computer furniture. We got pricing on cash registers and contacted candy, snack and frozen foods retailers. We put together a business plan. Front to back, thirty pages. Included demographics. Everything. The place in the strip mall was awesome – it was right next to a movie theater. Catch the nerds after the Star Wars, right?

I had to work the day of our appointment, but The Mrs. took our business plan and went to her bank (Bank of America) and asked for a small business loan. Hey, the government guarantees that stuff, right? They give them to everybody, right?

No.

They didn’t throw her out because she was a lady. They threw her out because our idea was stupid.

She fumed when she got home.

“I’m going to close my checking account there.”

I’m sure they were upset, because she had exactly $17.43 in her account, plus a box of lint. They even paid extra lint each month on her lint deposit. “Oh, Mrs. Wilder, we would have to shut our doors if you took your $17.43 elsewhere. And here’s your lint.”

I mean, we had cash reserves of $5,000 at that time. Why wouldn’t they loan us a measly $55,000 for an unproven idea?

Well, when I put it that way . . . it sounds stupid. And it was stupid.

See, our problem was that we talked about businesses we thought we would like (I’m not a gamer, but I like candy).

Occasionally, we see some fool with passion and money start a business we had talked about. And then the business would close within about six months.

After careful observation, every business we could be passionate about closed. The successful businesses were ones we wondered “how is that place still in business”?

I decided to observe businesses. Which ones were successful? Which ones lasted five years or more?

The biggest place to occupy was the middle. Stuff everyone needed. Milk. Eggs. Bacon. Quality footwear. Panty hose. PEZ®.

But the competition has scale here. Wal-Mart®, Target©, and the large regional/national grocery stores occupy this niche. And competing against them on price will destroy you. Everyone needs what they sell, but they have relentlessly focused on cost reduction for decades, optimizing supply chains. The result? Cheese has never been cheaper. I can get sushi at midnight in any small Midwestern town. Not great sushi, but Wal-Mart® sushi. And it doesn’t cost all that much. And I can get decent wild salmon anytime of the year.

What about the rest? I know that people sell all sorts of niche products – how do they manage to do that?

Mainly by not making much money. Do people make millions on their YouTube© channel? Yes. If their name is Pewdepie. But if you are in the top 3% of YouTube® channels? You make less than $16,000 a year. Again, not bad posting goofy videos to the Internet, but it shows that the vast majority of people make no money on YouTube™.

And it’s the same thing with the people that sold me a T-Shirt that vaguely references a movie from 1983. (No, you shouldn’t send your kids to Camp Crystal Lake.) They would never make money off of just that one t-shirt. They have to find lots of different shirts like that to sell.

I have no idea where this came from – I found it floating on the Internet. This is a t-shirt I need.

Another example was a local business near where we live. They sold bicycle stuff from 9am to 5pm to the locals (I bought three bikes from them), but their real business for the last 20 years was selling stuff online. They would import cases of, say, bicycling jackets manufactured in China. Then they’d sell them online. Ironically? I talked to the owner and they sold lots of products back to China – the stuff they sent to the United States apparently was only available in the United States, and they had to have it shipped back to them.

But now the bigger bike shops on the Internet have taken most of the market share – the local bike shop is closed. The long thin part of the market they operated on disappeared.

So where do you aim?

With a business you need a broad base of consumers.

You need a lot of people interested in your product. Our PC Bang obviously didn’t meet that.
The product should be a low cost product. Ours would have been low cost, but still would have needed hundreds of dollars in business a night.
The market (ideally) should be an unserved need or a cheap fun thing.

Good examples of this? Fidget spinners. Somebody made a zillion dollars off of those.

When the Japanese first sent cars to the United States? They didn’t send Acuras®. They sent cheap sheet metal things that had great gas mileage because the engines were nearly wind up. And they sold like fidget spinners.

What ideas suck?

I was in a business dinner with a really rich guy – it was our company and his. We were at the nicest restaurant I’ve ever been to – before or since. It makes sense, because the contract we were signing was $270 million. And that was $270 million American dollars, not that wrapping paper they use in Canada. The owner of the firm talked about how the food was wonderful in Houston – and he had tried to create a world-class restaurant in the (smaller) Midwestern city where he lived. He said he had lost a million dollars trying to create an awesome restaurant. So, super high quality is probably not the best way to go when starting out. Think cheap hamburgers. But for a million dollars he had great food for a year!

Who can get away with ludicrously high prices? Apple™. Celebrities.

Think:

Beats® headphones. $45 worth of components for $34,500 a pair (I couldn’t tell you – I buy $12 ear buds).
Whatever stupid crap the Kardashians are selling this week.

So if I were opening a business? I’ve learned a lot. I’d avoid borrowing money early on. I’d avoid everything that I love –passion clouds judgement. I’d look for good deals. My passion would be focused on creating great values for other people – and I’d maybe figure out that Internet pizza by the slice . . . . Maybe I just need an app for that? People buy anything off their cellphones, right?

Employee Retention

“A job’s come up and I thought about you, Clarice. Not a job, really. More of an interesting errand. Sit down.” – Silence of the Lambs

The Boy and friend enjoy cocoa in the break room before heading back to conduct a PowerPoint® presentation on marketing to five year olds. Sadly, The Boy would soon be let go due to age discrimination.

After you’ve been at a job for a while, you begin to count people in the room. Not just on who you could push out of the way to get to the door for a quick escape if you needed to, or who to blame when you took the last cup of coffee in the breakroom without making more. No, after a while, you begin to feel like a survivor, mainly because the faces around you keep changing.

How many people in the room were there five years ago? How many were there 10 years ago? I mean, not that they’ve been in the room the whole time, but that worked for the same company? (I’m assuming your company is like mine, and they have kinda strict rules about not wanting you to living in the conference rooms – it’s horrible when you find that out the hard way.)

I looked at my emails from February 19 five years ago and counted the number of people who emailed me. Then I counted those that were still with the company. There were 10 out of 25 still with the company. I did the math, and that calculated to a greater than 20% attrition, each year. A better survival rate than a doughnut in Oprah’s dining room? Sure. But still pretty grim.

So, five years go by? The company’s changed out most of the employees in my random-ish sample. But what did the attrition look like for mid-level managers? When I did the math, it was greater than 45%. I was surprised – it was a huge number. These were the people who were responsible for company results – and, generally, the employees had been pretty good, and the company had been really profitable during that time period. Almost half of them would leave yearly.

But that 45% attrition wasn’t the highest number I have run into – I looked at another company that I used to work at. Over a five year period, they’d had an 80% attrition rate. 80%! There was only one guy out of sixteen left. It probably won’t surprise you when I tell you that company closed down two years after I visited.

And some positions are even worse. One particularly key leadership position that I’ve observed (since I have worked closely with this position on and off) has seen seven people in ten years. If I add in interim leaders? That number goes up to NINE people in TEN years. For one job. One key job.

I did some research online – what’s a decent attrition rate? Some HR personnel said that less than 15% was a good, healthy number. But the smarter HR people said . . . hey, 15% is high. We want zero attrition in our high performers.

But can you keep the good ones, like the key leeader revolving door listed above?

No.

The world is changing at a pretty rapid pace:

Professor Richard Foster (which sounds like a made-up name) from some so-called college called “Yale” was reported by BBC to have done a study that looked at company lifespans. Turns out the average life of a company on the S&P 500 in the 1920’s was 67 years. In 2011-ish when he did his study? 15 years.

Companies don’t last as long now – your career may last longer than the life span of many S&P 500 companies. High performers? Those that want to make a large contribution will be quitting and going to those companies that are growing – that’s where the opportunity is. You can’t stop them from doing this, unless you have incriminating photos, or are paying them more than you really should. The second isn’t something that a company that’s not growing can (generally) do, so, they leave.

For good or bad, the Bureau of Labor Statistics estimates that workers under forty today will hold 12 to 15 jobs in their lifetime. In a forty five year career? That’s a new job every three years.

So, low retention rates, short lifespan companies, and a job market that is driven by high employee turnover – it doesn’t really sound fun.

Good news! There is a way to stay longer at a company you love: I hear one way to stay at a company longer is to hide in the air ducts and only come out after the security guard makes the 10pm walk through. Might even be some leftover doughnuts in the breakroom.

Nope. Oprah was here. Sigh. Guess it’s ketchup and mustard packets for dinner again . . . .

Facebook, Why People Quit, and Why You’re Not Important

BRETT: What’s the matter?

LAMBERT: I can’t see a goddamn thing.

KANE: Quit griping.

LAMBERT: I Iike griping.

– Alien

The Cub Scouts had a lousy record of shooting down incoming enemy plains, even though they designed their jobs.

This month on Google news, I saw a link for an article called, “Why People Really Quit Their Jobs,” at the Harvard® Business Review™ (HBR). I clicked on it. I don’t suggest that you do, but if you want to it’s here (LINK). Since it was before I had enough coffee to engage the higher reasoning centers of my brain, I nodded, zombie-like, as I read it. I probably drooled a bit, too. I wrote down on a sticky note that this might be a good topic to blog about. See, I think about you, dear reader, all of the time-even in my sub-human decaffeinated state.

Now, I’ve visited this topic before (LINK) in a definitive post about one of the most definitive books on the subject ever written – First Break All the Rules. I heartily recommend this book, and get no money if you buy it at this link (as of this writing). Read my post first – it’s the Wilder’s® Notes (Cliff’s Notes™ was taken, and neither of us wanted to be sued by Cliff Bars®).

If you don’t read the HBR article (again, I don’t recommend it, it rambles and is as poorly edited for flow as a copier fixed by a Chihuahua – and that comes from a one-man-show blogger who does these posts start to finish in three to six hours, admittedly in a flash/flourish of brilliance) the TL;DR version is:

OMG, I totally cannot believe that people quit Facebook®!!!
OMG, why???
Stock options are awesome!!
OMG here’s why:
- “They left when their job wasn’t enjoyable,”
- “their strengths weren’t being used,”
- “and they weren’t growing in their careers.”
OMG, fix that by:
- Designing meaningful jobs (for stars) that people enjoy. Let them design their own!
- Use their strengths, silly!
- Allow people flexibility when they don’t like travel or want to make babies.
- Babies? So 1990. So toxic!

Yeah. It’s that shallow. Here’s an example sentence embedded in the squalid mess of pretentiousness if you don’t believe me:

“At Facebook, our head of diversity is a former lawyer, journalist, and talk show host; one of our communications leaders used to sing in a rock band; and one of our product managers is a former teacher.”

Yeah. I’m pretty sure that they have no idea how stupid that sounds. And I’m also pretty sure that the head of diversity . . . does absolutely nothing of value for Facebook®. Nothing. A communications leader? Not sure what that is, but I’d bet they’re just another leach on the profits the company produces. And a product manager sounds good. At least it involves capitalism in some fashion, maybe?

Whenever you think of a position and its value – ask yourself this: does the NFL® have that position?

No. There is no VP of Football Diversity at New England. Belichick would give birth to living kittens if they hired one, and I would pay $1,000,000 for the rights to broadcast that on YouTube®, and an extra $1500 per Belichick-cat hybrid. Football teams have a mission – winning (except you, Cleveland). And a business should have a mission – creating mutual value for customers, but also creating profit for shareholders. You know, because they own the place.

What they’re missing is that it’s not just these jobs that don’t produce value, it’s that most of the things they do at Facebook® produce little to no value. Price’s Law (discussed in my Jordan Peterson post here (LINK)) shows that of the 20,000 employees at Facebook™, 141 (the square root of 20,000) produce half of the value. It is a certainty that the “head of diversity” is not one of those 141. Nor anyone in HR. Or probably anyone who wrote this article.

I assure you, those 141 people are enjoying work, using their strengths, and get whatever they want from the boss if there’s an issue. They’re probably getting paid a king’s ransom, too, if the culture allows it. And they deserve it. Those 141 people account for $20 billion in revenue.

I had a chance to manage an amazing performer – Willie. I’ve mentioned him before (LINK). Although the company wouldn’t allow me to pay him more even though he’d routinely save them a million a year, in a bad year, and would have saved them from a billion dollar investment based on bad physics (really) if they would have listened to him. But what’s physics when you’re trying to do a business deal, right? Oh, yeah.

A billion dollars (and I’m not making this number up).

Me? I have Willie the maximum amount of flexibility that I could. I couldn’t give him a raise, but I could let him buy almost unlimited computer goodies. It seemed like he had a new laptop every month. Plus the cutting edge in peripherals. As his boss, I generally got the best of his cast-off equipment.

Another employee (not a high revenue employee, but still nice and pleasant) decided to order a new computer.

John Wilder: “Send it back.”

Other Employee: “But you let Willie have one.”

John Wilder: “You’re not Willie.” And they knew that, too. I didn’t treat everyone in the group the same, but I did try to treat them fairly. I think they knew that, too. At least they all nodded when I asked them that during employee review time.

The 141 are the most important people at Facebook™. Honestly, most of the remaining 19,850 or so people at Facebook® are interchangeable and simply lucky to be working at Facebook© rather than being a barista or hauling garbage or working at a cement kiln. And that’s not bad. You need people who just go to work, put in their time, get their job done, enjoy it, and go home. Not every part in the engine is a spark plug. I’ve been a spark plug, and I’ve been a broken wiper switch, sometimes at the same company (though rarely in the same year). The company needs both.

And that’s not to say that you don’t have the ability to make everyone feel awesome, too. I’m willing to bet that Facebook® probably has baristas and jesters and blacksmiths working for them. You can allow and encourage everyone to have fun – there’s no reason not to. And I firmly believe that managers should support their employees – and not be dictators.

I’ve always viewed the position of manager as having a moral dimension – it was important that every employee that ever reported to me was touched positively by the experience – they may not have liked me, but they were a better employee, more productive, more moral person because of the experience. I figured if I could do that, the company had to win, too, even if the employee wasn’t a spark plug.

Remember, those 19850 remaining employees still produce half the revenue – though the formula is recursive – 140 of those 19850 make $10 billion for the company. Oops. But, really, if everyone designed their own job, nobody would do the dishes and the toilet would never be clean. And that would describe my basement . . . sigh.

Warning Signs, The Economy, Didier Sornette, and You

â€œWe have no Great War.Â No Great Depression.Â Our Great War is a spiritual war.Â Our Great Depression is our lives.Â We’ve all been raised on television to believe that one day we’d all be millionaires . . .â€

â€“ Fight Club

This is the corpse of FDR, brought back to life every 75 years to fight Robot Hitler.Â Notice we added a laser eye for this year.

Iâ€™ve talked about both the causes (LINK) and effects (LINK) of economic bubbles and economic depressions in two articles that won the Coveted 2017 Wilder Prize for Excellence in Journalism Related to Things John Writes AboutÂ®.Â You should read these articles.Â Theyâ€™re fun and may save your life, if you require expensive medicine from fresh squeezed bats each day and need the cash to pay for bat juice.

But what happens before everything goes straight to hell?Â What are the precursor signs before a recession or depression takes hold?Â Where are the danger signs that say . . . beware of dragons beyond this point?

Game of Thrones would not be as popular if this was the casting choice for Daenerys.

Letâ€™s start with definitions.Â A recession (and a depression is just a bigger recession) is when the economy starts to contract, and the definition is that this contraction lasts at least two financial quarters.Â A depression is the same thing, but there are great dust storms and everyone moves to California and no one bathes for a decade.

Why does the business contract?

Letâ€™s take the last recession.Â Everyone wanted houses.Â Lots of houses.Â In 2007 people were buying houses on speculation that theyâ€™d go up in price.Â Because houses always went up in price.Â And for a few years?Â Yeah.Â But when houses stopped going up in price?

People stopped building houses, six was enough for the average family.Â But if you have no new houses to roof, and youâ€™re a roofing company?Â You fire your roofing crew and stop buying shingles.Â The people you fire stop making truck payments.Â The shingle company stops making shingles, and lays off the factory workers at the shingle factory.

Prices collapse.Â Everywhere.Â And in 2008-2009 this cascaded throughout the economy.Â And the first thing that happened is that EVERYTHING got cheaper.

Perhaps the first sign that things will be going south is that . . . things are going well.Â Too well.Â Itâ€™s like the frat party at midnight before the heaving begins â€“ laughter and joy everywhere.Â And everyone believes that this party is different â€“ theyâ€™ll escape the hangover gods in the morning.

So what is a gauge of the measure of market intoxication?

The VIX.

VIX stands for . . . Volatility IndeX.Â VIX.Â Like PEZÂ®, only with money instead of those small bricks of candy that build a wall of love around my heart (my doctor calls that arteriosclerosis), the VIX was created in 1990 and attempts to predict the market volatility for the next 30 days.Â Hereâ€™s the graph of the VIX for the last 27+ years, thanks to Yahoo FinanceÂ©:

If you look closely, you can see that when the VIX spikes, people are running and screaming in the streets because the economy is collapsing.Â But what happens before the spikes?Â Everyone is calm.

And, historically thatâ€™s been the case.Â Everybody is an expert when the stock market keeps going up.

“Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day’s financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me tips and, I suppose, spent the money I and others gave him in the market. My cook had a brokerage account and followed the ticker closely. Her paper profits were quickly blown away in the gale of 1929.” – Bernard Baruch, famous dead trader dude (from Fortune Magazine, April, 1996)

And thatâ€™s what that low VIX number tells you.Â Everything is great!Â Sunny sky and the wind is in your sales.Â Not a cloud in the sky.

So, one big signal is that everything is going great.Â Not sure how useful that is, but the current VIX is very near an all-time low.Â This is why in my (very brave) 2018 prediction (LINK) I said it wasnâ€™t going to blow up in 2018.Â Obviously I could be wrong, but as low as the VIX is, Iâ€™d expect some upturn prior to things falling apart.Â In 2007 the VIX turned up before everything blew up.Â So?

My expectation of an economic recession/depression/crack-up number one?Â The VIX will turn up prior to the fall, probably at least six months in advance.Â So hereâ€™s one indicator of future economic downturn, and itâ€™s been shown to work.Â Perfect?Â Certainly not.Â Sudden dislocations (think 9/11) could throw it right out of the window.

Currency and Trade

What else might indicate a coming crack up?Â One that was pretty popular was high interest rates.Â Back before the FED so tightly controlled the currency and interest rates by buying all of the United Statesâ€™ debt thatâ€™s unsold (yes, this is somehow legal), this was a sign that the party was going to end.Â Failing businesses led to banks only lending to the best projects â€“ the ones that could afford high interest rates.Â Interest rates were (kinda) set by the market.

Iâ€™m pretty sure this one is long gone . . . and not sure that thereâ€™s a replacement.Â The economy of the United States is such that, if we experience difficulty, other countries experience collapse.Â Think the riots in Egypt, Syria, and Libya were spontaneous â€“ no â€“ they were the result of economic trouble in the US.

Another major indicator would be if another currency became as well accepted in the world as the dollar â€“ and imports rose significantly in price.Â Sadly, if this happens, the entire economic system is near collapse.Â As Iâ€™ve pointed out before â€“ the only thing that keeps our currency going is belief.Â I can trade two pieces of paper with $100 printed on them to a liquor store owner and have a nice bottle of Johnny Walker BlueÂ© handed to me.Â Oh.Â It has to be the government that prints the $100.Â Not me.

Why?Â People (silly people!) believe in the government more than me.Â They believe the government wonâ€™t print too many.Â Just like Bitcoin () is limited in the total number that will ever exist.Â Except governments everywhere print money whenever they can.Â Except the Swiss.Â I blame it on the cocoa.

Energy

Other signs of big trouble?Â Oil above $100.Â Oil above $140 is screaming collapse.

Modern economies run on energy.Â What would we do without it?

This is from Kentucky Fried Movie.Â Good times.

Oil is consumed by every product you buy, generally in the production, packaging and transport.Â Because of that, it acts as a general tax on the economy when prices go up.Â And because oil extraction infrastructure takes years to get going â€“ high oil prices can distort the economy for years.

Cash Ban

Horrible sign. Â Venezuela will look awesome in comparison if this happens.

Math

Iâ€™ve mentioned Dr. Didier Sornette before.Â Heâ€™s a French geophysicist that applied advance math previously used to predict earthquakes to predict whether or not a bubble exists in stocks, and, if so (at least in prior work) how long the bubble had until it popped.Â He pegged that we were going to enter a singularity around 2045 or so where all bets are off, based solely on the math.Â Donâ€™t know if he still stands by that, but he produces a monthly report at the Economic Crisis Observatory (LINK).

In the latest report, of the sixty stocks in the US he studied, 35% were in a bubble.Â Thatâ€™s up from the previous month.Â From this, weâ€™d deduce the bubble is (potentially) inflating.

And Dr. Sornette absolutely called the big Bitcoin bubble a month before it topped.Â Pretty amazing.

Iâ€™d keep an eye on this work.Â It shows that thereâ€™s plenty of bubble a brewing in the record setting stock markets around the world.

And be careful.Â There may be dragons here . . . .

NOTE:Â I AM AN INTERNET HUMOR-DUDE, NOT A FINANCIAL PROFESSIONAL.Â Consult someone sane prior to making investment decisions.Â Like your Mom.Â Or a lawyer.Â Or a carnie.

Scams, Your Momma, and Cheap Speakers

“You were right about that computer scam. That was a bad idea. I’m going to take the blame for it, I decided.” – Office Space

I’d like to report this sign for false advertising. The town was not made of Cuervo® nor did they make Cuervo™ there.

Back a few decades ago . . . .

I was in a college classroom, after class. A bunch of us were sitting around talking and Joe jumped in.

“So, guys, the most incredible thing happened to me,” said Joe. “I was at a Burger King® and I had just finished eating. I was walking back out to my car, and this guy in a van stopped me.”

I think I jumped in with something to the effect that very few good things happen when a guy from a van approaches you in a Burger King™ parking lot.

Joe ignored me and continued, “He had these speakers in the back of his van. He had dropped them off at a rental, and he had mistakenly signed two extra out. If he took them back to the shop, they would have fired him for checking the extras out. These are $1000 speakers! Each!

“I got them for $300 for the pair! They sound totally awesome with my stereo! I had to run to the bank to get the cash, but I got them!”

I smiled.

I had just read in the local newspaper that there was a scammer group operating around the metropolitan area of Moderatelylargecity, East Westeria near where we lived. They were selling speakers worth about $50 a pair out of the back of trucks at fast food restaurants. Cash only.

I thought to myself – “Hey, Joe likes the speakers. He really likes them. And if you tell him it was all a scam, he’ll hate the speakers and feel stupid. Is it hurting anyone to let him think he got a deal?”

Joe was a nice guy, and I successfully held back my inner jerk (on that far distant morning). I’m betting Joe has no idea to this day. Maybe I should call him and tell him?

And of the bunch of us talking, Joe was by far the nicest guy. Probably the most moral. If you read this blog you KNOW it’s not me. (Yes, I know John Wilder’s halo is firmly askew – but it’s in a roguish Captain Mal Reynolds way.)

The world is full of scammers. Many of the scams are legal, just like the one your mom pulled on your dad.

And how do I know so much? Yeah. I got scammed. More than once. The first big scam occurred when I signed a contract when I was pretty young (20??) that wasn’t a good one (for me) but it only cost me $1000. For a membership in a buying club. To buy things at factory cost. When I had no money to buy things at factory cost.

Thankfully, it was financed with monthly payments of like $50, which was a lot back then. But looking in the rear view mirror? That $1000 was cheap, and the payments made it better. I got to feel stupid not one time, but EVERY SINGLE MONTH when I wrote out that check. Now? I try to look through my lens of past stupidity to evaluate every single deal.

Recently I responded to an email from a “group” that appeared to be tied to a professional association that I am a part of. Mistake. Set up an appointment and it turned out I could join this “group” for only $200 per month. This would be awesome! This would help me advance some professional goals that I was interested in. Well, $200 per month plus a $250 startup fee. I was discussing the opportunity with them on the phone:

Me: “Well, how often does this actually work?” (I was expecting 95% or something.)

Jim Q. Salesdude: “You can understand that we don’t keep statistics on our success rate. But most members are active for more than a year . . . .”

And I’m sure he’s telling the truth.

The average person that would be wanting this kind of opportunity could afford $200 a month. And the process would likely take months. So, yeah, I’m sure he’s telling the truth, because he has people who can afford it buying . . . hope. I looked up the company online, and saw very few positive reviews – most indicated it provided them no help whatsoever. Heck, I can just go the bank and get $200 in ones and at least be able to make a fire out of it. Why should I give them $2650?

But what are the signs of a scam?

Hard sell/won’t leave you alone. – This is often the number one sign. The salesman has money on the line – you money. If you sign up? They get money, and it’s likely that they’re morally flexible in the first place. With this opportunity listed above, the salesguy is getting sort of clingy. He’s very insistent – like a psycho ex-girlfriend level insistent. As long as he doesn’t come to my house in the middle of the night and shave my dog completely bald and then take a magic marker to him, I think I’m okay – nobody wants that to happen to them twice. He called me today even after I told him I wasn’t interested. Even sent me an email to reschedule on my calendar after I ditched his call. When in full hard sell mode, they make high school sophomore girls who just got dumped in public look stable.
Implication that this is special, or maybe kinda illegal. – In my case, this was supposed to be a backdoor link for “special access.” I was approved after describing my experience in a single sentence, and then told how special I was. Alarm bells! This is also an incentive for you to be quiet after the scam is over – not everyone gets special access! I’ll give you a heads up: there is no Secret Nigerian Prince and no one has picked you to get a special offer because of what you’ve done. You’re not that special. And your kindergarten teacher doesn’t even remember your name. Mine does. But that’s because of the knives.
Payment for things that aren’t usual. – Back (farther) in the past The Mrs. and I attempted to get an agent for a book we’d written. We found one who loved us and loved our book! This agent also wanted to . . . charge us. We believed in our book. A bit too much. Thankfully, we were only out several hundred dollars on that one. There’s no way you should pay an agent, and no way that you should pay people for “super special professional opportunities.”
Too good to be true (threats and promises). – One salesmen talked about how people who bought “Brand X” (his competitor) often got fired. I liked the guy, but made sure that I’d never buy that particular product. I respond poorly to threats. I respond much better to treats, which is nearly spelled the same way. Treats are better: Like sausage. Wine. Beer. Some mixture of wine, bacon, sausage and beer. In a smoothie?
Quick response required. – If you don’t act today, you can’t get this deal! If someone tells me that? I walk. No deal is that good. Have to act tonight? Hmmm, I’ll pass. If it’s a good deal where both parties will benefit, it will be available tomorrow, like your mom.

Nigerians and internet scammers look for stupid people. Why? You can keep them going forever. That’s why the emails from the “Nigerian Prince” have spelling and factual errors. If the person reading the email has enough brain cells momentarily clear the fog and do a Google® search for “Nigerian Prince” – well, that’s way too bright for the scammer. They want them stupid (certainly) and rich (would be nice). Since most things in the third world can be bought for about six dollars and handfuls of the wrapping paper the locals call money (sometimes including the local parliament) – you are rich if you live in America. Even if you make minimum wage.

Scammers sell empty hope, which makes them equivalent with your state’s lottery board. Last night I dreamed I was talking with my brother. And mentioning how Steve Martin (yes, that Steve Martin) and I were friends. Heck, I even had Steve’s phone number in my phone.

And I woke up, and was briefly sad that I really wasn’t friends with Steve Martin. See how sad that was? I bet you’re crying and sobbing that I was so disappointed. That’s what selling empty hope is. That and assuming that your parents really loved you.

I’ll leave you with this: You can’t scam an honest man. If you stick to honest reward for honest work and honest value? You’ll never be CEO.

But you’ll never be scammed, either, if you also remember never to trust a five year old or a dude selling speakers out of the back of a van at Burger King®.

Obamacare, Health Insurance, Ear Hair, and Looking at Breast Implants

â€œNo, Steve, the guard, accidentally looked at Medusa’s head.Â Turned to stone.Â Who covers that? Is that health insurance or Workman’s Comp?â€ â€“ The Librarian: Return to King Solomonâ€™s Mines

A picture of Fairbanks Memorial the day Pugsley was hatched born.Â I had good insurance then.Â Too bad itâ€™s gotta go . . .

Almost everything in the world (almost!) has gotten better since I was a kid.Â Well, the music isnâ€™t as good.Â And the movies are gloomier.Â And my hair has migrated from my scalp to . . . everywhere else.Â For heavenâ€™s sake, why did it have to go INTO the ears???

As I look to things that have gotten much worse in my lifetime, the number one is . . . health care costs, which is even worse than ear hair.Â Obamacare (or the Affordable Care Act for those of my readers that regularly appear on CNNÂ®) was supposed to fix that.Â In my case, my premiums nearly doubled while my deductible went up by a factor of eight.Â If my math is right, that means my health insurance is worth, on a dollar basis, one sixteenth what it was before Obamacare.

When Pugsley attempted to self-amputate a finger on a camping trip, The Mrs. took him to the emergency room.Â He came back with two stitches.Â My bill?Â Over $1000.Â And I had to pay it, in cash.Â Did he really need all of his fingers?Â Nine is a good number, right?

Iâ€™d love to blame Obamacare â€“ but itâ€™s really just part of the system thatâ€™s vaulted health care costs upwards.Â Weâ€™ve all experienced it â€“ weâ€™re paying unconscionable rates for care thatâ€™s not (in some cases) as good as it was in the past.Â I know we have fancy equipment and machines that go â€œping,â€ but the idea of a family doctor that knew you family from your birth until his death is over.

Now doctors have to see as many patients as possible to pay for their rent, BMWÂ® and the loans they took out for college, their divorces, their small airplanes, and their portion of the partnership.Â And they practice defensive medicine.Â They run tests that you have to pay for to protect their medical license.Â And if your insurance doesnâ€™t pay for the test because itâ€™s unnecessary?Â You pay for the test.

I love capitalism.Â Itâ€™s awesome.Â But our health care system doesnâ€™t even remotely resemble capitalism.

Letâ€™s start with theft.

Our current health care system was changed in the 1980â€™s.Â If you showed up to an emergency room in 1979 and had no ability to pay for care . . . they had no obligation to provide care.Â None.Â As a matter of principle theyâ€™d stabilize you, but a life changing surgery involving 20 heroic doctors?Â Not so much.

I heard a story about a woman who lost her health insurance.Â And then got cancer.Â She couldnâ€™t afford the $80,000 or so in costs for chemotherapy and treatment.

She died rather than bankrupt her family.

And, sadly, thatâ€™s the right outcome.

The economist Thomas Sowell said (more or less), â€œIf an economist was designing a car, instead of an airbag in the steering wheel, there would be a knife pointed at the driver.Â Good economists believe in in consequences for actions.â€

There needs to be an incentive for people to pony up and get insurance.Â And in the 1980â€™s they removed that.Â Now, regardless of my ability to pay, if I show up at the hospital, they have to treat me.Â Canâ€™t turn me away.

Now Iâ€™m all for compassion.Â But in this system, the person who is compassionate (the politician) forces the provider (doctor/hospital) to treat someone for â€œfreeâ€ â€“ but in reality passes on the costs to the responsible idiot with insurance and money (me and you).

Why does a TylenolÂ® cost $11 each in a hospital?

Yeah.Â Youâ€™re paying for the freeloaders.Â For the lawsuits.Â For the administration costs.

One hospital (Duke) had 900 beds.Â It had 1500 billing administrators.Â Why?Â They have to navigate through Medicare rules, as well as rules and correspondence from hundreds of different insurance companies.Â You spend a night in the hospital?Â You have 1.7 people there with you just counting the costs.

Yikes!

Of the things that determine a capitalist system, itâ€™s all missing.

You donâ€™t see those until weeks or months after the event.Â How can you make a decision?
They donâ€™t have the choice to refuse to serve you.
You donâ€™t have one if youâ€™re bleeding out.Â You go where the ambulance is taking you.Â You donâ€™t haggle when youâ€™re unconscious.
The system is so regulated that the American Medical Association determines the number of doctors in the country.Â Think that theyâ€™ll increase competition?Â Hospital regulations (mainly Federal) are extensive.
LipitorÂ®, which treats something or other, was making Pfizer $5billion a year.Â After it went generic?Â Less than a $1million a year.Â Protections for drugs are routinely extended and live longer than the original patent period.Â Apparently Viagraâ„¢ also keeps the patent system going for a long time, too.
LOL, whut?

What does a free market look like for medicine?

We actually have great examples.Â Laser eye surgery costs have plummeted over time.Â And, itâ€™s never been cheaper for ladies to become . . . ahem . . . enhanced.

Why?

People have choices.Â They donâ€™t need the surgery.Â They want it.Â So they shop around, and will only get it if the price meets expectations.Â $10,000 to not need $200 glasses?Â Not on this planet.Â And even the girl who wants bigger boobs is budget conscious, even though her boyfriend now has had laser eye surgery and can see them.

Recently several doctors have cut the cord.Â No insurance.Â None.Â Come see the doc?Â Cash.Â But the prices . . . are much lower.Â Much.Â Many are less than the copay for your insurance.Â Hereâ€™s a link (LINK).

The Mrs. and I were discussing this problem last year.Â I outlined the issues.Â The Mrs. leaned back and contemplated.Â She swirled the Johnny Walker Blue Labelâ„¢ in her glass and said . . .

â€œMake it illegal.â€

John Wilder:Â â€œMake what illegal.â€

The Mrs.:Â â€œInsurance.â€

When she said that, I immediately pushed back in my mind.Â The costs were so high . . . how could anyone ever consider that?

But then I realized that she was right.

Health insurance as a concept really took off during World War II.Â The government had frozen the wages of the workers so we didnâ€™t have runaway inflation as the tank factory tried to steal workers from the bomber factory.Â But . . . you could add benefits.Â Life insurance.Â Pensions.Â And?Â Health insurance.

This began an 80 year distortion of the health market.Â The person taking the action (you) was not paying the bills (insurance company) or writing the prescriptions (doctor).Â How could costs NOT explode under such a twisted system?

So, The Mrs. is right.Â We have to burn this village to save it.Â And we will â€“ because otherwise it will torch the whole country as Iâ€™ve previously predicted (LINK).

Until then?Â We can stare with perfect vision at augmented . . . attributes.

If only there was a cure for ear hair.

The Iron Triangle of Retirement . . .

â€œWell, itâ€™s not really fine, but itâ€™s not why Iâ€™m here.Â Hell, man, you know me.Â Moneyâ€™s not my issue.Â I couldâ€™ve retired straight out of MIT, off to some island, let the business run itself.Â Nobody told me to try and save the planet.Â I wanted to.â€ â€“ Kingsman, The Secret Service

Downtown Houston, reflected off a building at dawn.Â No, I wasnâ€™t there at dawn to catch the picture â€“ I was working as hard as Jean-Claude Van Damme at a splits contest.

At some point, Iâ€™m going to retire.

No, not change the low-tread tires on the Wildermobile â€“ I generally like to wait until the tires are completely showing steel before I change them out.

Silly, Iâ€™m talking about working all the time.Â For money.Â So this blog is safe.

Some people suck at retiring.Â I work with one guy who retired six years ago, Ted.Â About six months after Ted retired, he came back and asked, â€œHey, have need for me to consult?â€

Although Ted decided he wanted to retire (and got the cake, party, and everything), Ted wasnâ€™t really ready.Â He keeps coming in to work even now after six years.Â Thankfully Ted has a unique perspective and awesome experience on technical systems that can help train some younger workers, so itâ€™s a win-win.Â But heâ€™s not ready to retire.Â That switch that says, â€œhey, Iâ€™m done,â€ or â€œhey, if I have to go to hell itâ€™s worth it to never see you people again,â€ or, â€œI never, ever, ever want to live in this soul-sucking environment again,â€ never flipped for him.Â And I donâ€™t think it ever will.

Work for him is still a big part of who Ted is, the definition of himself when he gets up in the morning.

For a long time I was with Ted.Â I could no more see retiring than I could see Kim Jong Un and President Trump forming a â€œGuys Onlyâ€ fort in the Oval Office and sending the secretaries out for chocolate milk while they watched Loony TunesÂ® cartoons on a Saturday morning before Mom picked them up to take them to the skating rink and the movies after.

But recently?Â Yeah.Â Iâ€™ve started to think that Iâ€™ll retire one day, and thatâ€™s what this is about.Â (The decision to decide to retire is a different post.)

Iâ€™ve discussed retirement before in the best and most comprehensive article ever written on early retirement strategies (LINK).Â But that article was focused on people who retire young.Â Which would be less than 1%.

Letâ€™s see when people really retire, based on 2015 Census data, as analyzed by LIMRA SRI and as I found on Financial Samurai (LINK).

This excludes people like Abraham Lincoln who exit the labor force for other reasons, of course.

Most (68%) of people retire at age 65 or earlier.Â This makes sense, but first Iâ€™ll have to introduce a self-serving concept and graphic.

Letâ€™s talk about John Wilderâ€™s Iron Triangle of Retirement Fate (JWITORF).

I made this graphic at great expense, after paying Freddyâ€™s Advertising, Kites, Etc. $2,300 and waiting six weeks for delivery as it came on a container from Shanghai.Â Oh, wait, I threw it together in 5 minutes.

Regardless of the cheese factor of the graphic, John Wilderâ€™s Iron Triangle of Retirement Fate does explain pretty neatly how retirement works, and why people wait so long to do it.Â So, why 65?Â Statistically speaking, youâ€™re at or near your maximum wealth as you near age 65.Â Additionally, you have a reasonably long life ahead of you (statistically speaking) but not an unreasonably long life.Â Presumably, youâ€™ve also reached the age of wisdom where youâ€™re smart enough not to blow through your retirement cash on cruises, vacations, PEZÂ®, pantyhose, and chocolates.

But letâ€™s look closer at the Quantum Entangled Boxes at the Vertices of John Wilderâ€™s Iron Triangle of Retirement Fate (QEBATVOJWITORF).Â Or, just the boxes with words.

The first one weâ€™ll tackle is:

Lifestyle

You can upsize lifestyle to spend virtually any amount of money including a fortune the size of Johnny Deppâ€™s $650,000,000.Â The world entrusted $650,000,000 to Johnny Depp over the course of 31 years.Â .Â Heâ€™s kinda broke now, since he buys mansions at the drop of a hat, and his personal expenses run to about $2,000,000 a month.Â His security alone costs $300,000/ a month.Â And hair gel?Â Thankfully he saves on soap and shampoo.

My needs are a bit more modest.Â Most planners say you should expect to spend between 70% to 80% of your take home pay when you retire.Â But others say you only need to plan for 50%.Â Or 100%.Â Or . . . more!

Part of the problem is that their guidelines assume you spend everything you make.Â If you have the ability to save (like in the earlier retirement article LINK) a very large proportion of what you earn, these metrics donâ€™t make sense â€“ you might only need to replace much less than half of your present income, since youâ€™ve radically reduced your lifestyle and eliminated many items . . . like security for $300,000 a month.

Lifestyle is a retirement variable that you mainly control.Â Get a budget and live by it.

Biggest risk?Â Healthcare.Â Who knows what thatâ€™s going to cost â€“ might be $60,000 per aspirin by 2019.Â You donâ€™t want to guess what calf implants will cost . . . .

Longevity

If youâ€™re dying tomorrow, like Abe Lincoln, you already saved too much for retirement.Â If youâ€™re going to live another 80 years, you donâ€™t have nearly enough.

When I first started looking at retirement with a spreadsheet and projected assets and lifespans, one fact popped out at me:Â the earlier you retire, the less you earn, so your retirement savings will be less.Â And you will pull money out sooner since you donâ€™t have a salary anymore.Â Sure, it sounds like a â€œduhâ€ conclusion, but once I put my numbers in and played with it, it began to make perfect sense.

So, if you retire early, it helps if you die early, too.Â And donâ€™t forget your spouse!Â If theyâ€™re much younger than you, you might want to try to convince them to pick up smoking, skydiving, BASE jumping, and prison boxing so they donâ€™t outlive you by too much.Â Youâ€™ll thank me for it later.

Outside of shortening life, you donâ€™t control tons about your longevity, either.Â Biggest risk?Â You outlive your money and so does your spouse and you get a never ending stream of â€œI told you soâ€ when youâ€™re 90 but she just uses a crutch and can beat you and your walker.Â Thankfully you can be a burden to the state and your children at that age.

Amount of Money You Have

This is (mostly/kinda) in your control, too.Â Bill Gates has billions of dollars saved for his retirement, and I know some people who work a whole year and donâ€™t make a billion dollars.Â Okay, I kid.Â But I am certain that you could save more money than you are saving right now.Â Part of the value is adding additional money to your savings, but the other value is in reducing your lifestyle and knowing what you really need.

A second portion of your money will come from your 401K.Â Most of these are a really good deal, since you company will give you free money to add to your savings.Â They do this to encourage you to contribute, since a portion of their bonus is based on how much you contribute.

Pensions are awesome if youâ€™re part of the 0.0001% of private sector jobs that still have them.Â If youâ€™re working for the government?Â Yeah, I guess you can count on* that.

Social Security is a real thing â€“ and one that you probably can count on*.

*Bigger risks?

Inflation (hereâ€™s a LINK to my commentary on how thatâ€™s inevitable in our current monetary system).
Budget deficits (hereâ€™s a LINK to my commentary on what the likely impact of our deficits is).
Economic dislocation (hereâ€™s a to a discussion on Bitcoin and how it can disrupt economic systems).

Best idea now?Â Max out your 401K and savings.Â Understand what lifestyle is really necessary and what you have to do to pay for it, both in dollars today, and in years of your life in the future.

John Wilderâ€™s Iron Triangle of Retirement FateÂ© . . . ignore it at your own risk.Â Assuming youâ€™re not going to be like Ted (and 10% of Americans) and work past 75 . . . heck, I might have new tires on my car by then . . . .

John Wilder is not a professional financial dude.Â Consult your attorney, financial planner, or shamen for real advice.Â Â

Depression, Debt, and Saving Tinfoil for Fun and Profit

“We have no Great War. No Great Depression. Our Great War’s a spiritual war . . . our Great Depression is our lives. We’ve all been raised on television to believe that one day we’d all be millionaires, and movie gods, and rock stars. But we won’t. And we’re slowly learning that fact.” – Fight Club

Depression related to debt? Unpossible!

My Mom went through the Great Depression (she was pretty old when Ma and Pa Wilder adopted me, nearly fifty) as a child, so she told us kids ALL about it. To hear her tell about it, the Depression wasn’t all that Great from her perspective, but no one wants to talk about the Mediocre Depression. One of the ways that she was impacted by the Depression was her relationship to physical objects that might be of use someday. Tinfoil that you used to cover last night’s casserole? Hey, you might be able to use that again. Aluminum pie tins? They could be cut to make a great decorative lantern (no, they couldn’t, but Ma kept them anyway). They call this “hoarding” now. Pa even built a building to hold Ma’s stuff.

The reason for her obsession was understandable. During the Depression, many times her family had to do without basic necessities. Our family was well off by comparison, but Ma Wilder never got over the times when she had so little. We wrapped our Christmas presents one year in the comics section of the Sunday paper to economize. Food? Never thrown away. It fed us, then the leftovers went to the dog. During my life as a kid, we never spent a cent on dog food. Pa Wilder eventually got her to throw away old TV Guides® (kids – it’s a tiny part of the Internet that describes “what’s on TV” that they used to print out and send to us every week).

Perspective: Pa Wilder was the president of a bank at that time. We were NOT hurting for cash.

And I recall that Grandpa McWilder plucked a fiberboard suitcase for me out of the closet so I could pack my things to come and visit him and Grandma McWilder every weekend (LINK). The suitcase was missing its original handle. Grandpa took an old leather belt and cut it and wrapped it as a handle on the suitcase. It was (probably) better than the original suitcase handle. Whenever he needed something, his first trip was not to the store, but to his shop, where he would craft whatever he needed out of wood, leather or metal.

And Ma Wilder followed her dad’s example. Her crafts were legendary, making a passable statue of Ben Franklin out of a wine bottle, some sand, a sock, some blue felt and grey yarn and some copper wire. Our family was not in need of Ben Franklin statues, but Ma Wilder liked to keep in practice, since at that time the US was also tied up in a great period of inflation – it looked like the wheels were coming off of the great capitalist experience called the United States. Interest rates to buy a house were all in double digits. Even the Treasury notes were yielding 18%+.

What this did (looking backwards) was trim all of the non-productive investments from the economy, and I do mean all. If you could stick your money in a bank account and make 12%, you’d do it. Why risk your money in a business venture, unless that business venture was really, really good?

So what business ideas got money at that point in time? Only the best. And those great ideas had to have great teams behind them. The crappy ideas were laughed out of the bank. These high interest rates also depressed the stock market. Why buy stocks when you could buy government bonds at 15%?

This high-interest rate environment led to a recession, but what followed the recession was the greatest peacetime economic expansion in history – the stage had been set by winnowing away the crappy companies.

As time went on and as the economy expanded it also changed as small companies grew to enormous size and replaced large ones that didn’t serve a purpose in the economy anymore (MicroSoft® grew, Montgomery Ward™ exploded).

The interest rate was then lowered.

And lowered. And lowered.

The idea behind this (from the standpoint of a politician) is that cheap money encourages business. Which encourages hiring. Which is one way of using the people’s money to buy their votes.

And, it’s a great idea. Companies borrow money. That makes the banker happy. People get jobs when the companies use that money to invest in stuff, like buildings, stores, employee PEZ® dispensers, Johnny Depp’s ego, factories (once upon a time we made stuff here) and oil wells.

In a functional economy, some of these businesses flourish, and some fail. The flourishing businesses more than compensate for the lost incomes (and bad loans!) of the failures. This is healthy in an economy – bad ideas, like my Internet pizza by the slice company (no, we don’t deliver, you have to pick it up) fail. Good ideas, like Amazon.com, flourish.

But as you can see above, we got to a point where the graph went . . . flat, like Johnny Depp’s career. And flat as in zero. Also like Johnny Depp’s career.

So, if high interest rates force businesses out in a Darwinian competition that only the strong survive? What happens when interest rates are low?

Well, we live here in Smallville. Smallville is . . . small. It had some hotels built during the 1950’s and 60’s. And one obviously from the 1970’s. One might have been the late 1980’s. And one last hotel built around the late 1990’s. Most nights nobody is in any of these hotels. I’d bet it’s generally a 10% occupancy rate or so. Low. In a nearby town, you can buy one of the 1970’s vintage motels with 50+ rooms for $200,000 or so. Yes, you read that right. Annual income for the thing is about $120,000, and it probably nets out at $40,000 a year or so after costs. Sort of expensive for a $40,000 a year job.

But right now in our very lightly visited (and way off the beaten track of any busy highway) town they just built a brand new hotel. That might be 15% full on a good night.

Why?

Because money is historically cheap. Like 5,000 years of history cheap. Save it? Never! The investment only has to yield more than the interest rate of the loan to be profitable.

Cheap money is like gasoline to the bonfire that is our economy. To start the fire, a little is needed. But to really get the party going? Toss on more gasoline.

When there’s a competing economic system or discipline from organized investors, this won’t work. The confidence of the economic system would be lost, and interest rates would go up as people fled the money system.

If there’s an alternative. But today? There really isn’t a credible alternative to the dollar (the euro is too new, the yuan and yen are too closely held, and every other currency on the planet (except the Swiss and British) is generally more valuable as holiday wrapping paper than as actual money.

Without this constraint of an outside competitor, politicians did what politicians do. They opened the spout to the money supply. Yay! We can borrow and spend ourselves into infinite economic prosperity, right?

Not exactly.

A little debt adds a lot of GDP. It funds great ideas like desktop computers to massively increase business productivity. It funds control valves and robots and data systems that automate pipelines and car factories.

The big ideas get funded first. They change the world.

Eventually you get to funding ideas like “bigger cupholder” in a Camero®. You get less return, less profit with each dollar invested.

That’s shown pretty well on the following graph – it relates debt to GDP (GDP is like the country’s salary – it’s all the money the country makes). The first bits of debt (earlier on) produce the greatest growth in productivity. The last bits of debt? It shows that they aren’t horrible, but in reality this graph reflects consumers getting out of debt as fast as they can during the Great Recession – individuals don’t take on more debt when they’re not sure they’ll even have a job at the PEZ® factory next month. Unless you’re Johnny Depp, in which case you just buy $30,000,000 in castles and some albino bears.

This is called diminishing returns – the latest debt doesn’t add as much to the economy, unless you really need a castle filled with albino bears and can sell tickets. The later investments are worth so much less than the previous investment. Eventually? You get debt without GDP growth, so you pay interest on the PEZ® that you ate last night. Forever. Your bonfire? The wood has burned all away, and the only thing that keeps the fire going is the gasoline. And it makes a much smaller and more dangerous fire.

Yes, eventually the added borrowed money swings your income downward, as you pay interest on investments that produce nothing.

This was like another time in history. Just wish I could remember what it was.

Maybe I should save my tinfoil now?

Bitcoin, Satoshi, and Belief

â€œViolent ground acquisition games such as football are in fact crypto-fascist metaphors for nuclear war.â€ â€“ Back to School

Does this look like the Bond villain Satoshi Nakamoto who put together the ~~million~~ 7 bitcoin fortune???

As a family we often go out together for Friday night dinner.Â Itâ€™s a nice way to close the work week prior and get together as a family and talk.Â We (generally) have a strict policy of leaving the phones at home (LINK).Â A corollary rule is â€œno talking about computersâ€ at dinner, mainly to keep The Boy and Pugsley from entering a nerd mind meld where they talk to each other in binary:

The Boy:Â 0101 1001 110010 10011 0111?

Pugsley:Â 10010!

Both:Â Laughter.

On this particular Friday, The Boy would not shut up about bitcoin.Â (à¸¿ is one suggested Internet symbol for Bitcoin.)Â Â He told me how bitcoin was a cryptocurrency â€“ a currency that uses cryptography to verify transactions and make sure that some people donâ€™t just counterfeit a bunch more of them.

You prove that you have a bitcoin via mathematical checks that only work if you have the â€œmagic numberâ€ â€“ your key to your money.Â Again â€“ secret codes â€“ cryptography â€“ is used to access your money.Â Lose the code?Â Not only can you never use your money â€“ no one can ever use it again.

Bitcoin is also unique in that itâ€™s mined.Â Not in a real mine, but by using computer processors to break yet more codes through trial and error.Â Itâ€™s not like all the bitcoins were available on day one â€“ the inventor of bitcoin designed the system so that code breaking the next bitcoin is harder than code breaking the last one, so it gets exponentially more difficult to crack the bitcoin codes.

When people first started mining the coins, they used a computer processor.Â Then someone came up with the idea to use graphics cards, like the ones in your computer that generate the images you see on the screen to do the processing.Â Sounds crazy, but the graphics card is an order of magnitude better at doing the math than the processor.Â Right now, most bitcoin mining is done on purpose-built processors, and a lot of it is done in cold places (Iceland) to make it easy to dump the heat from the processing with cheap electricity (Iceland has cheap electricity from geothermal).

Bitcoin started not only with a set number of bitcoins in the future, it was introduced in tandem with something called â€œblockchain.â€Â Blockchain is an open ledger system where people look at and record transactions.Â If everyone looks and sees the transactions (not the details, mind you) then everyone agrees that a transaction happened.Â There are multiple copies of this ledger, so itâ€™s redundant and decentralized.Â There are some people who think that blockchain might be the real innovation that will long outlive bitcoin.

I looked at The Boy as his tutorial on bitcoin came to an end.

â€œHow many bitcoins do you have?â€

â€œFive.â€

I was astonished.Â The Boy was 12.Â He had, in his bedroom, concocted a scheme where he mined an alternate cryptocurrency (litecoin) and traded it back and forth between different currencies until he (finally, at peak wealth) had seven bitcoin.Â When he had seven bitcoins, his net wealth was several thousand dollars.

â€œOkay.Â The computer comes out of your room.â€Â I had no idea he was a budding day trader.

Eventually his trading losses ate all of his bitcoins, besides a few he used to register a domain name.Â He even gave me 0.5 bitcoins for my birthday in 2012, but, I gave it back to him.

Yeah.Â He gave me something that is worth about $8500 today.Â Biggest birthday present to me, well, ever.

But donâ€™t feel bad, at least I didnâ€™t trade away $123,060 (todayâ€™s value) worth of bitcoin.Â Like he did.

Even stranger is the origin of bitcoin.Â It was created by a shadowy internet figure who used the name Satoshi Nakamoto.Â Since he originated it, he also mined the first million bitcoins â€“ worth $19 billion dollars today.

Yeah.Â And theyâ€™re just sitting there.

Did he lose his secret code?Â Is he dead?Â Is he waiting to buy New Zealand?Â Was Satoshi the CIA?Â Was he a time traveler from the future?Â What if it was created by the first sentient AI as a plot to crash the economy?Â No one really knows if he is even a he, or if he is alive or frozen in nitrogen next to Walt Disney.

Yeah.Â Weird.

But bitcoin exists.Â And now itâ€™s recognized as a commodity like pork, oranges, or PEZÂ® and traded in futures markets, which are regulated by the Securities and Exchange Commission.

Whatâ€™s going to happen with bitcoin?

Iâ€™m not sure.Â Predictions are pretty hard, especially about the future.

In the past, every single currency thatâ€™s not based on something like gold which prevented wanton printing (called a â€œfiatâ€ currency, after the Italian car) has eventually failed.Â Bitcoin isnâ€™t based on gold, but it is based on the mathematical certainty of scarcity â€“ once itâ€™s all mined out in a decade or so, there wonâ€™t be anymore.Â Ever.Â In fact, the amount of bitcoin in circulation will end up getting smaller over time as people lose the secret code for their wallets (this happened to The Boy â€“ he has a wallet with about 0.001 bitcoins in it.Â About $180.Â But canâ€™t get the code.Â And if he canâ€™t?Â Those coins are lost forever.Â Theoretically, we could divide bitcoin forever.Â And the losses mean it will go up, not down in scarcity.

Additionally, bitcoin has no government backing, and is outside the control of central banks like the Federal Reserve Bank or the International Monetary Fund.Â They donâ€™t like that, but they can live with it because itâ€™s small.Â If it gets to be of any size, theyâ€™ll kill it.Â China has already made bitcoin trading illegal, and itâ€™s possible that more countries could do the same.Â Could they kill it entirely?Â Bitcoin buffs say â€œno.â€Â But they could make the penalties so high and make exchange into hard currency so difficult that itâ€™s effectively the same.Â Other countries besides China will ban bitcoin.Â Expect â€œterrorismâ€ to play a part in this.

Currently, like a Dutch tulip bulb (LINK), itâ€™s gone too high, too fast.Â Â I have to think that it will come back down.Â And back up again after that?Â Yeah.Â Probably.Â The difficulty is that bitcoin is based entirely on what people will believe about it in the future, which is very hard to predict.Â If people donâ€™t believe in it, it will go to zero . . . but if people see a continually inflating dollar, a deflating currency will look very good.

All the gold in the world is worth somewhere around $1.9 trillion.Â Bitcoin is worth about $300 billion.

Someone estimated â€œall the stuff in the worldâ€ is worth about $400 trillion, which surprised me because there is so very much PEZÂ© in the world.Â So, bitcoin is pretty small compared toÂ . . . everything.Â It still has plenty of room to grow.

Bitcoin is real, and itâ€™s around to stay, especially when governments start printing money like itâ€™s going out of style â€“ bitcoin will provide a non-inflationary alternative â€“ Greshamâ€™s law (LINK) says that bad money will drive out good, and people will get rid of their currency thatâ€™s becoming worthless, and save the currency thatâ€™s becoming more valuable.

So, I wish that The Boy had not frittered away his seven bitcoins.Â And I wish I knew who Satoshi was.Â I could certainly help him look under the couch cushions for his code . . . for a small fee.

But . . . what if . . . The Boy is Satoshi?

I’m not a financial advisor.Â I don’t have bitcoin and won’t buy any this week.Â Disclaimer, disclaimer, disclaimer.

Washington: Musk, Patton, and Jack Daniels all Rolled into . . . the ONE

“I, George Washington, born in 1492, freer of the slaves, and the first president of this, our country, though savagely impeached for the shooting of Abe Lincoln, I will lead us into the demise of all humans!” – Home Movies

General George Washington, 1776, when he was about 44 years old. 44 years old, a billionaire, a war hero from the French and Indian War, and now commanding a rebel group fighting the largest superpower in the world. Hmmm. Maybe that’s why all that stuff is named for him?

There is a time for fighting valiantly and dieting. Then there exists the Thanksgiving/Christmas nexus. I’ve been generally trying to minimize the carb content of what I eat, but Thanksgiving? Yeah, I’m having pumpkin pie. And stuffing. And mashed potatoes. And might drink a bit of gravy. Just a quart or two. Not from the gravy boat – I have standards. I have standards . . . and a mug. A great gravy mug.

Yes, I have willpower, but Thanksgiving and Christmas are more difficult times to stick to diets. So, I don’t. And I don’t spend a lot of time feeling guilty about it, but it’s also a good time to reflect that eating different things changes my mood.

If I’ve had enough potatoes to feed the Soviet Army, I know that I’ll feel differently both physically and mentally. Sugar is similar. Ditto with bread.

So, how do I feel different physically? For me, when I eat carbs I tend to retain a LOT more water. It’s my theory that it’s used to think out my blood so it flows better than maple syrup. When I jump back into the low carb regimen, I know that for the first few days I will dump water faster than the democrats dumped Al Franken.

I’m pretty sure that the extra water does NOT do anything really good for me.

How do I feel different mentally? Again, for me the low carb (very low, like none) zaps me into a state of clarity and stability. Stuff just doesn’t bother me as much. And I seem to get better sleep.

But one thing that’s wonderful about the Holidays is . . . George Washington.

George was really tall for his time and place, and strong enough that he could crush walnuts in his bare hand. British walnuts. And he was known to party (from teachingamericanhistory.org):

First Troop Philadelphia City
Cavalry Archives, 1774

City Tavern
George Washington
Entertainment of

15 Sept., 1787

Light Troop of Horse, September the 14th 1787

	To Edwd Moyston .. Dr.
To 55 Gentlemans Dinners & Fruit
—	Rellishes, Olives etc………………………………………..	20	12	6
—	54 Bottles of Madera……………………………………….	20	5
—	60 of Claret ditto……………………………………………	21
—	8 ditto of Old Stock…………………………………………	3	6	8
—	22 Bottles of Porter ditto………………………………….	2	15
—	8 of Cyder ditto……………………………………………..	16
—	12 ditto Beer…………………………………………………	12
—	7 Large Bowels of Punch………………………………….	4	4
—	Segars Spermacity candles etc………………………….	2	5
To Decantors Wine Glass [e]s & Tumblers Broken etc..		1	2	6
To 16 Servants and Musicians Dinners……………………		2
—	16 Bottles of Claret…………………………………………	5	12
—	5 ditto Madera……………………………………………….	1	17	6
—	7 Bouls of Punch…………………………………………….	2	16
		£89	4	2

If you study the above, you’ll see that George Washington and 54 of his best buddies had 114 bottles of wine, plus cider, beer, and 8 bottles of hard alcohol. I’m thinking our Founding Fathers were knee-walking drunk at this point – you can see that they got well into the “smashing the bottles and glasses” part of the party. And it was the equivalent of something between $15,000 and $20,000 that he spent on the party.

George liked to party.

And he liked to party at Christmas, which brings us to eggnog.

Now, I must tell you that I really, really hate eggnog. Hate it with a passion.

Or I did, until I had George’s eggnog. And it just so happens I’ll share his recipe with you (this will be the 306,001^st place on the Internet that you can get it):

“One quart ye cream, one quart of ye milk, one dozen tablespoons of ye sugar, one pint of ye brandy, ½ pint of ye rye whiskey, ½ pint of ye Jamaica rum, ¼ pint of ye sherry—mix liquor first, then separate yolks and whites of 12 eggs, add sugar to beaten yolks, mix well. Add milk and cream, slowly beating. Beat whites of eggs until stiff and fold slowly into mixture. Let set in cool place for several days. Taste frequently.”

And it’s amazing. It tastes just like Christmas. And George was right – making this stuff and drinking it on day one is NOT advised. It tastes . . . strong. But after three days in the fridge? Amazingly smooth.

So, not only was George a billionaire president general that defeated the world’s largest and best trained armed forces? He knew how to party.

Here’s to you, George!