Category: Wealth

Hot Tubs, Money and Health

“Oh, okay. So I guess you came here in a Hot Tub Time Machine, too.” – Hot Tub Time Machine 2

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A homemade cocoon for our first hot tub.  Notice the used insulation – true Alaska!

It was twenty years ago today . . . oh, wait, that’s Sergeant Pepper . . . in my case it was closer to nineteen years ago . . .

I had just been paid the biggest bonus that I’d ever gotten.  It had been a good year, and I managed a high profile project well – I’d saved the company several million dollars while bringing it in on time.  I had a great, supportive, guru boss (this is both good and bad) who had solid numbers to take to the higher-ups to support his case.  Awesome!

Also awesome was that, after taxes, the bonus could pay down approximately 1/3 of the credit card debt I had at that time.  I had been at the point in my life where I was trying to keep my head above water after a divorce, and credit cards had been a stop gap.  The Mrs. and I sat on the couch in the upstairs living room, as the Sun shined its last golden rays of the day into the room, providing a soft, mellow glow.  We argued about the merits of choosing to pay down the debt, versus other options.  We spent several hours discussing it.

So, The Mrs. and I sat, and made the momentous decision that . . . forget the debt, we’re getting a hot tub.

I know that this is probably not what your financial advisor would suggest you do, unless your financial planner was a twenty-eight year old with a short attention span who lived in his parent’s basement so he could save his money to buy even more weed.  It was a horrible, frivolous decision.  And it was one that I have never regretted.

Not only did we get a hot tub, we got the full-blown Sundance™ party hot tub – seats eight.  We even custom ordered it to match the same colors as our house.  When it arrived several weeks later we moved out of the house and into the tub.  I exaggerate.  We still went into the house for showers.

When we moved to Alaska, we took the hot tub with us.  I eventually encased it in an outer cocoon of plywood and insulation, so even when it was -55˚F outside, the tub didn’t freeze, and didn’t cause the meters at the power plant to spin at light speed.

Our house in Central Midwestia was a great place to hot tub, but if there’s a truly awesome place to hot tub, it’s Alaska.  The Mrs. and I would sit out in the tub for hours watching the aurora borealis write physics equations in the sky in particle, ions, and color.  The aurora would move and undulate, lasting (on a good night) hours as the rivers of light threaded through the sky.  We’ve had a hot tub at every house we’ve lived at, although we never used the one we had in Houston, since . . . it was Houston.

I think that buying that first hot tub was a good decision for two reasons:  we got out of debt, but we did it slowly, and with discipline.  That was good to teach us to live within our means and be frugal, unless I really, really needed those night-vision goggles.

But this isn’t a post about finance, that’s Wednesday’s topic.  Today’s is health . . . and, like apple cider vinegar, hot tubs appear to also be amazingly good for you under most circumstances:

Hot tubs appear to make the following things better:

  • Arthritis
  • Asthma
  • Aurora Viewing* (Offer Void Outside Alaska)
  • Stress (lowers it)
  • Sleep (makes it better)
  • Blood Pressure (lowers it)
  • Migraine Frequency and Intensity (lowers it – I’ve never had one – it’s working!)

I think the other nice thing is that nobody has a laptop or an iPad™ or a Palm Pilot© in the tub – we’re forced to spend time with . . . us.  And that’s good for overall family life.

On the flip side, people mentioned these negative health consequences:

  • Infections from unsanitary hot tubs (In my experience this would be hard to do.)
  • Birth defects (I’ll abstain when pregnant.)
  • Lower sperm count (No comments here.)
  • Heart issues (But, isn’t that every darn thing??)
  • Chlorine over-exposure (see below)

I have had personal experiences with the chlorine, especially early on nineteen years ago when learning how to chemically treat the tub.  At one point, my hot tub had nearly the same chlorine gas content as last seen during trench warfare in France.

Most recently The Mrs. bought a swimming-pool sized chlorinator for the hot tub because there might be 50 hot tubs within 20 miles, Wal-Mart doesn’t stock any hot-tub sized chlorinators.

This aircraft carrier sized chlorine-berg treats approximately 100 times the volume of water as the hot tub on its lowest setting.  The deceptive danger from this chlorinator is that as it sits and bobs in the tub, it’s releasing chlorine into the water, and not a whole lot comes out as gas, so the water doesn’t smell like chlorine.

I got into the tub for a bit after the chlorinator had been sitting in there for about 48 hours.  Pretty soon I felt like I was getting prickly heat (if you’ve never had it, it’s the feeling of pins and needles from when you go from cold to hot).  The way that you solve prickly heat is to . . . wait it out.  Seventeen minutes later, I determined it wasn’t prickly heat, but an actual chemical burn from the chlorine in the tub forming hydrochloric acid and eating my skin.  On the plus side?  I got a rad chemical peel of the type that New York women pay the big bucks for.

One website went as far as recommending no more than five minutes in a hot tub.  I regularly spend several hours in one, but not several hours at 104˚F.  More like 102˚F.  Meh.

So, a bad financial decision is sometimes a great life decision.  Maybe some Beatles in the tub tonight?

 

PLEASE FOR THE LOVE OF EVERYTHING YOU HOLD DEAR TALK TO SOMEONE SANE BEFORE FOLLOWING ANY ADVICE HERE.  Can’t you tell by the stories that I’m not to be trusted on certain topics?

Umbrella Insurance, Teenagers, Driving, and No More Houston

“Lawyers. We’re like health insurance. Hope you never need it. But man-o-man, not havin’ it?” – Better Call Saul

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Artist Conception of my wreck in Houston. Man, I want to drive a Monster Truck in traffic, just once!

It was a wet, hot, humid day in Houston.

But every day in Houston is like that.  One thing we noticed after we’d lived there, oh, two hours is that it’s always hot and humid out, like being forced to live in Rosie O’Donnell’s armpit, except Houston smells less like Cheetos™.

True story:  one spring day after we’d lived there for over a year I got up to mow the yard.  I was shocked to find that a northern dry wind had blown in during the night and the humidity was about 30%.  It was about 60˚F out at 8AM (that’s 7.431 PM in metric).  I was shocked because I had never seen a better day in Houston.  It was the perfect day to go to the park, or go do something outside.  The Mrs. especially hated Houston’s climate, probably exacerbated by her love of Alaska’s climate and the icewater that flows through her veins instead of blood.

I went inside, full of enthusiasm, and exclaimed to The Mrs., “Honey, we’ve got to go do something today, it’s beautiful outside!”

The Mrs., voice dripping with cynicism:  “I have only your word for that.”

But this wasn’t that day, it was six months later.  It was a hot, humid day, like almost every day.  And it was raining for the first time in about a month, a slow drizzle that started about an hour before I left the 35th floor of the shining office tower for the day.

Driving home meant Houston traffic.  And on this day, it was fairly light.  To get to the highway, I first had to merge onto the frontage road, which generally meant getting some speed up so that you didn’t commit the traffic foul of slowing everyone up, which I think condemns you to traffic hell, which is kinda like regular hell, but with more sitting and listening to Bob Segar, forever.

I looked in front of me, and there was only a Volvo getting ready to merge into traffic, but there was a gap larger than a Texan Prom Queen’s hair, meaning he just had to get going and he’d be merged without an issue.

I looked to the left to see if I’d have a similar gap.  I saw that I would have a great gap, if I was going just a little bit faster.

I hit the accelerator to get to merging speed.

The Volvo® was still there, so instead of merging speed, it was now ramming speed.

I hit the brakes, since surely there was enough road to stop.

There was on any other day but this one.  As I mentioned, it hadn’t rained in about a month.  I have no idea what builds up on the concrete roadway during that time – it might be snail snot? –  but when you add the right amount of water like on this misty, hot, drizzly day?  It was slicker than a Yankee banker covered in Teflon©.

Impact.

My airbag deployed, but I was fine, I have massive, bulging arms, so it was more likely the steering wheel would break than my sternum.

I jumped out of the car and went to the person in the Volvo, a guy of about 28.  Houston loves people who are 28, since they can work 14 hour days for months without end.  “I’m sorry! That was my fault! Are you okay?”

I know that my insurance company would rather beg to differ that it was my fault, but, really, if you’re rear ended?  It’s the idiot behind you who is at fault.

And this was my day to be that idiot.

“Are you okay?”

He was still a little stunned, the way everyone is after a wreck, which is exactly the way that Johnny Manziel must always feel.

“Yeah, I am.”

“I’m just glad you’re not hurt.”

After a wreck in Houston, unless one of you has been decapitated, you drive to a police substation and fill out an accident report.  We exchanged insurance information, and drove to fill out the report.

After filling out our information, I said, “I’m just glad no one was hurt.”

“Now that you mention it,” he said, “my neck is sore . . . .”  I’m not sure how much my face gave away, but he quickly stopped there, “No man, it’s fine.  I was just joking.”

Whew.  Fortunately for me, he really was fine, because I wasn’t insured well enough for him to be injured, and in that moment I knew it.

When I was just out of college, I kept all of my car insurance at the minimum required by law.  My theory was that if they sued me, they couldn’t take anything from me unless they wanted part of my debt.  The only time you’re really immune to lawsuits is when you have nothing worth taking.  But now I had actual cash in my bank account, and my only debt was part of my mortgage.

Not good.  If Mr. Volvo had really been injured?  Ouch.  I was lucky!

The next week I realized just how big my luck was.  My brother, John Wilder (don’t ask), has a son who was injured in a motorcycle accident where he wasn’t at fault.  He wasn’t hurt especially badly, but his medical bills had already surpassed $78,000 and they were suing the driver.

I called my insurance company and upped my coverage.  A lot.  So I was a little safer, right?

I moved out of Texas and into Upper Southeast Midwestia.  One night while drinking beer and burning a brush bonfire in my backyard, my next door neighbor (for whom my family must be a nightmare) and I were talking about our youthful misadventures.  He told a rather delightful story of how he and his friends were throwing dirt clods at one another.  No, it wasn’t last week, it was when he was nine.

(For the benefit of those who have never left the concrete of our big cities, a dirt clod is dried mud, much softer than a rock, but much harder than your life has ever been.)

Everyone was throwing clods at everyone, in what was a fairly common experience back before the Safety Moms clamped down.

One boy, my neighbor’s best friend, got hit.  He had to go to the hospital.  Guess who got sued?  My neighbor’s parents, because they owned a bank.  My neighbor confided in me that he had an umbrella policy that covered him for $1,000,000, mainly to cover him against the future misdeeds of his son.

The Boy probably won’t cause that kind of havoc, but I have to worry about Pugsley, who, in a good natured goof that no one would hold against him, might cause Canada to fall into a black hole.  Oops!

Okay, I called my insurance company and the next day I had a $2,000,000 umbrella policy.  It costs about $200 a year.  I did have to upgrade my homeowner’s insurance and my car insurance, but that’s fine.  I actually never calculated the percentage increase, because the peace of mind was so great.

Lessons I’ve learned:

  1. Minimum insurance is awesome, as long as you don’t own anything. Once you have a nest egg?  Insurance is cheap.
  2. The amount of coverage can be as much as, or more than your net worth. They have to go through State Farm® to get to you.
  3. I like oxygen. No real relationship to the topic, but I thought a third point would be more visually appealing.

It’s my personal opinion, for me (as my lawyer, Lazlo made me write, because he was assigned to me by my insurance company) that insurance makes sense if you have assets, drive, or have teenage sons and don’t want to be bankrupt because Laura-Lou and Cletus have a great lawyer.

On the bright side?  We don’t live in Houston anymore.

Rome, Britain, and Money: Why You Can’t Find Fine China after the Apocalypse

“For over a thousand years, Roman conquerors returning from the wars enjoyed the honor of a triumph – a tumultuous parade. . . The conqueror rode in a triumphal chariot, the dazed prisoners walking in chains before him. . . A slave stood behind the conqueror, holding a golden crown, and whispering in his ear a warning: that all glory is fleeting.”- Patton

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Is it just me, or is that Tom Cruise’s profile on that coin?

In the spring of 407, a Roman citizen stood on the dock and watched as the last Roman Legionnaire placed his sandaled foot on the deck of a boat, preparing to cross the English Channel.

That last Roman soldier turned and looked back at the island as the sea winds blew on the fair spring day and powered his ship to Gaul (now France).  He had voted for his new Emperor – Constantine III, a usurper and common soldier in Britain.  Constantine III had decided to take his Legion across to set up power in Europe, and eventually march on Rome to solidify his claim to the throne.  Constantine died in 411, beheaded after abdicating his power.  Legend says that Constantine III was the great grandfather of Arthur, but those days are lost to history, and anything said about them would be nothing but speculation.

But the Roman on the dock, waving goodbye to the Legion, he is the one that has always fascinated me.  What were his thoughts as he watched the ships containing virtually the entire organized military of Britain sail off?

“They’ll be back soon.”  That’s always been my bet.  He expected that the Legion would return after Constantine III took Rome.  Or, worst case, another Emperor would send a Legion in – for the last 360 years the Romans had at least some presence in Britain.

The man, we’ll call him Marcus, walked back to his villa that overlooked the sea.  He had central heating, and a personal bath that was likewise heated.  He was fairly well off, as he made significant money importing plates from southern France and selling them to almost everybody.  They were cheap, and everyone dropped plates, so he had a guarantee of repeat business.

The winter came, and the Legion didn’t return.

The spring came again, and with it came the Saxons, raiding in force.  Again in 409 the Saxons raided.

And in 408 no plates came.  The stone masons that Marcus had hired to build an addition to his villa didn’t show up.  Marcus took his treasure of coins from his business, and buried them so that he wouldn’t lose them in the raids.  He never told his son, Lucius where the coins were buried, so when Lucius buried his father five years later in the shadow of the burnt and wrecked villa, he was within two feet of hitting the pottery the coins were buried in.  It wouldn’t have mattered much, since by that time coins were used less frequently, and most deals were built around bartering one thing for another.  Without the army there, most people didn’t care all that much about the copper coins.

Lucius lived through 450, and heard of the last request for the return of the Legions to the Emperor in Rome as the Saxons decided to stay.  The Emperor’s surviving Legions were busy elsewhere.

Rome never returned, even though on Rome’s version of Facebook®, FaceusLibrium™ some scribe wrote that under the “Relationship with Britain” box that “It’s Complicated.”

Wow, that was dark, am I right?

I’ve been thinking about Marcus for about 20 years.  This is the first time I gave him a name, but I do know that there was a Roman citizen who watched as the last soldiers marched on to the boat, and I do know he expected them to be back – sooner rather than later.  Rome was forever, right?

Some of the Roman roads in Britain are still in use today – the Romans were excellent engineers, and built to last, which shows that they never built dishwashers.  Roman place names still echo down the centuries, not the least of which is Londinium, the Roman name for Scotland.  Okay, I’m kidding, the Romans called Scotland “Jim,” because, well, why not.

But after the dark days started, things changed.  Let’s take the plates that Marcus imported.  That was a real thing.  In the south of what is now France, an entire industry was created that made china plates and bowls, and these were shipped throughout the Roman Empire.  Fortunately Pugsley didn’t work there, as he would have accidently broken scores of plates each day, but each time in a humorous way so that they would still love him, because after all, Jerry Lewis is considered a genius in France.

When Empire ended, so did the trade in plates and bowls.  And archeologists love ceramic plates, because every family has their own little Pugsley that drops crockery day and night. (Truth be told, The Mrs. and I were out on the deck last night when we heard the tell-tale crash of plate under influence of gravity and a tile floor turning it into a future archaeologist’s Ph.D. dissertation, “Plate Fragments Dating from the Time of Emperor Pugsley Wilder the First.”) Trade itself also dropped off, since people are notoriously bad at sending their ships and cargo to places that have no money and no law.

Where I get too close to today.

One of the symptoms of the failing Roman Empire was its currency.  The Romans had a currency known as the Denarius.  This is not the same as Daenerys Targaryen, Mother of Dragons, and is not planning to invade Westeros.  The denarius got its name because, (I swear I’m not making this up) it was originally worth 10 asses.  Not just any asses, but the Roman bronze coin called the asses.  Why, what did you think I meant when I said asses?

Anyhow, the Roman denarius was quite popular – it was silver, and was the more common coin used in Rome.  It was so common that its name is still in use today – the Spanish word “dinero,” meaning “burrito with sour cream” is derived from the denarius.  And as it was the common currency, it was how soldiers were paid and how most people bought wine and proto-Pez®.  Rich people used gold to buy bigger things.  (An aside:  One coin name that amused me was the “solidus,” which gives me the thought that one Roman said to another, “Pray, Cassius, do me a solidus.”)

Back when the denarius was just getting started, it was really silver, 95%-98%, and was stable at that weight and purity for around 250 years.  As you can see in the graph below?  At the later stages of Empire the coin was worth nearly nothing, being smaller and having only 5% silver.  The denarius is the ancestor to . . . the penny.

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Would you buy this stock?

The Roman Empire was really strong – it had great Legions, and even better roads.  For the Romans, the road was military technology, and the roads allowed their Legions to move farther, faster to the borders of Empire than the barbarians that they had to constantly fight possibly could.  This consistently terrifying military allowed the Romans to rule an Empire for a long time, because it allowed them to also stipulate that Roman currency would have to be used.  You might say he who has the gold, makes the rules?  I’ll counter that with he who has the best military in the world says what gold is.

In that manner, a Roman Emperor finally decided that he’d stop using silver (except for a whiff) in the denarius.  He could make the currency worth less, because he had Legions that were expensive, but could also be counted on to enforce the currency laws of the Empire.  Essentially the Empire was so strong that it could use the military to enforce use of the currency.  And this system worked for quite a while, (like everything) until it didn’t.

And what happened to all of the currency when the Romans issued the crappy, near worthless denarius?  People took the good stuff and kept it.  “Bad money drives out good,” is known as Gresham’s Law, which he sent in a letter to Queen Elizabeth I.  Others had stated the law before he did, including Copernicus who wrote a whole book about it the year Gresham was born.

This has happened even in the United States, and recently.  Back when we used to pretend our money had value, we used actual silver in the coins.  Congress decided that was silly – if we had to spend money to make money, then we cut out the profit margin of government, so in 1960’s they passed an act that removed silver from US coinage.  If you wonder why you never find a 1962 quarter in your change, it’s Gresham’s Law:  everybody took all the coins that had actual value (the good) and replaced them with base metal coins (the bad).  Bad money drives out Good.  And that’s what happened with the Romans, too.

The Roman denarius was worth less than 1/2000th of its original value when it was discontinued, but all of the cool silver ones were melted down pretty early, because they were worth more than their face value, like a 1962 quarter is worth $3.36 of our current bad money, which is backed by . . . nothing, except the Army, Navy and Air Force.  And the missiles.

But, back to Britain!

In Britain the archeologists looked at the plate parts.  They found that 100 years after the Romans left, the king ate on plates that were . . . crappy.  These plates, in fact, were worse in every respect to the plates that a common citizen of Roman Britain could buy quite cheaply 100 years earlier.  The British had forgotten how to make plates, and had to figure that technology out all over again.

Literacy took a hit, too.  If the Romans had a Department of Counting People Who Can Read, that information is lost to us, but when you look at excavated Roman cities, there was sufficient Roman literacy that graffiti artists would leave nasty “Your Momma” jokes almost everywhere.  “Epaphra glaber es.”  That translates to, “Epaphra, you are bald.”

Yikes, Epaphra isn’t very popular, but somebody also wrote that “Epaphra is not good at ball games.”   But if we have enough people who would write on walls about the food, the barmaid, or their girlfriend, we had way more people who could read and write in Britain 100 years after the Romans left – it’s likely that Marcus could, and probably his son, Lucius could read as well.  But reading became less important of a life skill than “not getting murdered by the Saxons” as time went on without Roman rule.  If Lucius had a son, he’d not ever learn to read much at all.

It’s because of this that we end up not having much of a written record of Britain during this time frame – whereas we know Epaphra sucked at football and probably needed to wear a hat, we don’t even know when the Battle of Badon took place.

What happened there?  Oh, just that maybe King Arthur defeated the Saxons in a comeback victory straight out of a Hollywood boxing movie.  So we don’t know when.  We at least know where, right?  No.  There are guesses, but the Battle of Badon details are lost to history, though some accounts (written hundreds of years later) said that Arthur mowed through the Saxons like a Doberman pinscher through a pot roast.  I hope I get someone like that writing about me in 200 years . . .

One of the great things about civilization and a rule of law (besides this blog) is that it allows for us to have cool things, and not have the Saxons up in our face all of the time.  But for forty years after the Roman Legions left, the people of Britain were hoping and expecting that they would come back.  Our world is an interconnected web of commerce and information that allows our life to happen in amazing comfort.

And it’ll always be this way, right?

Careers, Industry, Location, AI, and College

“Well, Newsweek says it’s good to change careers, right after they laid off all their editors.” – The Simpsons

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Is it just me or do JFK and GHWB have tiny heads? Are all presidents made of concrete?

There are numerous aspects of your life that you can’t change – height, eye color, favorite flavor of fruit Gushers®, or the amount of backhair that you want to grow long so you can feel the wind blowing on it, wild and free.  Some of these even have a significant impact on your career – taller people make more money (that’s true), and people who like grape Gushers© best are more likely to want to have their career revolve around astrology.  And those with hairy backs should probably avoid employment in a Velcro™ factory.

But there are factors that are entirely within your control, and math provides some pretty good guidance on how to maximize your pay through career selection or a career change if you’ve still got some time between now and when you’re disappointed by your Social Security check and those stupid kids and their fancy Zima® wine coolers.

  1. Characteristics of the Industry

The choice of industry that you work in will have an amazing impact on your net worth during your career.  Ideally, you’ll chose an industry.  Since you’re reading this, I assume you’re smarter and better looking than 98% of the population and have, instead of an odor coming from your armpits when you sweat, a faint piney smell naturally graces the noses of those around you.  But, like I said, you’re smart – even if you don’t first love what you do, you will certainly learn to like it a lot if it gives you great results.

All industries are not alike, since some of them throw off a lot more money than others.  There’s a reason Apple® has a $500,000,000,000 in cash along with a collection of spleens and spare kidneys – it’s insanely profitable.  Your local Mom and Pop café and pest control store?  Not so much, they can’t afford any internal organs.

To be clear, there are great jobs in every field – there are people in retail sales who do wonderfully – there just aren’t a lot of them.  So, first suggestion, if you want to go fishing, don’t start in a puddle.

I went off to Wikipedia (LINK) and found a great summary of industries in the United States.  It dates to 2002, and no one has updated it for a while because all of the Wikipedia Admins are off updating the Justin Bieber page.

 

I took the percentage of people working in the sectors, and then divided it by the percentage of payroll they got, and the results were pretty amazing.  At the bottom, getting only 37% of the average income, were hotels and restaurants.  If you want to make bank instead of beds?  Not the industry for you.  If you want to make beds instead of bank?  Head on over to the Hilton®.

  • The best, earning more than twice (!) the average national payroll, was “Management of Companies.” Over 2.6 million people worked in this category, and it is a Tertiary Sector (last post) part of the economy.  Keep in mind, people that work in, say, the hotel as mangers are called out in that category.  These people are employed as managers as an industry.  Amazing! And also not a surprise – the bosses are pretty good at negotiating their salary up as well as yours down.

 

  • The next best was Utilities, earning 187% of the average income, but there are only a few jobs (660,000) in this industry, so it’s a bit harder to get in. This is a Secondary Sector job, so tends to be much more stable than the Tertiary Sector work.

 

  • Finance and Insurance, are third on the list, with 168% of the average income. This didn’t surprise me at all, since, like the managers, the golden rule of “He who has the gold, makes the rules,” applies, and these folks are the gatekeepers to the gold.  Over 6.5 million people were employed in this sector, living off of your insurance and interest payments.  These are Tertiary Sector jobs.

 

  • The next was a nerd tie: Scientific/Technical/Information, making 152% of the average wage. It is a revenge of the nerds, since they make more money than most of the football linemen that gave them wedgies, but less than the preppy tennis players who dated Buffy.  These are also Tertiary Sector jobs.  Notice the pattern, here?

What’s missing from this list?  Doctors!  The medical field is less than average as far as pay goes.  The four bullet points above account for 19% of the workers in the country, but make 38% of the US payroll.  So, if you’re hunting for a job that pays well, it’s hiding up there.

  1. Location, Location, Location

Cost of living has a huge impact on our ability have spare money to invest and save for our future, or to spend on something nice, like mosquito repellent or Chiclets®.  Living in a high cost area, like LA or New York City?  Yikes!  Sam over at Financial Samurai got a huge number of hits (and me for a reader) when his post about Scraping By On $500,000 A Year (LINK) exploded all over the internet.  In it he created a hypothetical family that was just squeaking by on $500,000 a year.  It was controversial because so many people failed to feel a lot of sympathy for the family and yelled at their computer screens to the fictitious family on how stupid they were.  Not the brightest bunch, right?  Anyhow, I responded with how to Live Large on $50,000 A Year (LINK).

Location matters, and most of the time you don’t get paid city wages to live in the country where you can buy a house (not a great house, but a house) for $10,000 straight up (this is true).  Generally, though, the wages don’t go down as much as the house prices do here in the sticks so you’re net ahead.

There are some great upsides to small town living – there’s less to spend your money on, commutes are generally better, and if you forget to close the garage door ALL NIGHT LONG (thanks, Pugsley) you find that everything is still there in the morning.  (In truth, one night Pugsley forgot to close The Mrs.’ hatchback on the Wildermobile II, and left it open all night.  We found a cat inside, and some spiders, but that’s it – not a thing missing.

The downside of low cost (and high trust!) living is that it is much harder to meet and make connection with high-powered folks who could help your career.  For instance, when I lived in Houston, I knew a guy who is friends with a former President.  He gave me his baseball tickets for one game.  The view is below.  And no, I didn’t bother them.  Generally, you won’t make/meet that kind of people in a small town (though there are exceptions, like Batman – LINK).

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The guy directly in front is a Secret Service guy.  When Pugsley dropped a cup of ice, his head whipped around like Justin Bieber on a merry-go-round as pushed by The Rock.  He assessed the three year old as “not a threat.”  He doesn’t know Pugsley!

  1. How likely is the job to be outsourced/done by Artificial Intelligence?

Much more likely than you think.  The BBC has a website (LINK) that calculates the likelihood that your job will be automated within the next 20 years.  The internet has already killed formerly lucrative and widely held jobs, like travel agents – used to be one in every little town – now? Gone.  Newspapers are on the way out.  As I mentioned before, truck drivers are “soon,” and then we’ll have a surplus of people who like biscuits and gravy without a job.

 

Trends in information will drive careers, too.  How long until competition from people like hurts traditional publishers?  Already there.  Pewdepie has more reach than the Wall Street Journal (this is true!), and that’s good – this flourishing of media outlets will effectively kill the gatekeeper, allowing us ever greater freedom of information sources.  But the people at CNN won’t like it a bit as they compete against . . . everyone.  Anderson Cooper might have to find a job cleaning pools, or delivering cotton candy to orphanages.

  1. What credentials are required?

Lastly (for this post) when contemplating a career, what credentials are required?  As I’ve mentioned before, only a few college degrees make any sense nowadays.  Anthropology?  French literature?  You’d be better off in a coma for four years – at least you wouldn’t spend $100,000 plus on a degree best suited for working as a barista.

Additionally, the costs for college are heading up much faster than inflation – and have been for years.  The reasons for this are really simple – a goldfish will grow to match the size of his tank, and my butt will grow to the size of my jeans, and a college will grow to consume every possible dollar of federal student aid and student loans that a student/parent combination can take out.  And buy climbing walls, and safe spaces, and pay for new girl’s luge/rifle team uniforms.  Ohhh, and have you seen the latte machine?

For many in the future, I’d suggest you skip college, unless your career demands it.  There are a few jobs that require the credentials you get in college:

  • Doctor – includes all types. Some of them, however, have salaries that don’t justify the cost of medical school.  That’s right – medical school used to be a slam dunk win, let’s buy the Mercedes.  Recently I read of a doctor that had student loans high enough that she would never be able to pay them off.  And student loans cannot be discharged in bankruptcy.  Only release?  Death or moving to Canada, which is like death, but with better food.
  • Lawyer – Used to be a great ticket to the upper middle class. Still is, for some, but the median income of lawyers keeps dropping over time.  A good corporate lawyer will always be needed, but paralegals in Bangladesh can do the work more cheaply than a new associate.    And when Lawbot2000® hits the court room?  Look out!
  • Professor – Overdone – unless you’re politically connected, you’ll die a pauper. But one with leather patches on your tweed jacket.
  • Engineer – Still pays out, but losing its ability to pay out as costs increase. Lots of managers come from here, but automation will pull even more jobs.  Plus, how many trains are there, anyway??
  • Accountant – Required, and a lower tier school will do just fine, if you can avoid the AI rollout that will eliminate most of the jobs.
  • Teacher – Will eventually be replaced by “coaches” who help students after they watch the Led Zepplin of tutors on the web.
  • Veterinarian – Still costs a lot, and probably is dicey as far as payout right now, and soon kittens will be self-repairing.
  • Optometrist – I can see this being automated out of business. See this, get it?
  • Dentist – This profession is eliminating itself through technical advances – fewer dentists are needed now than in the past because they’re so darn good.
  • Psychologist/Psychiatrist – Talking about this field just depresses me.

So, keep in mind it’s all changing, and maybe with stem cell therapy, in ten years you can be taller, too.  Just think the salary that 6’10” tall you (that’s 8 meters tall) will command!

Economic Sectors and Where the Wealth Is

Do you know why all the world hates a Lannister? You think your gold and your lions and your gold lions make you better than everyone. May I tell you a secret? You’re not a golden lion. You’re just a pink little man who is far too slow on the draw. – Game of Thrones

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If only we had Master of the Card back during the conquest of the Americas – they could have gotten rich shipping credit cards back to Spain!

What is wealth?

In our world, wealth is the accumulation of tangible or intangible stuff that makes us better off.

Vague enough for you?  If a nation has of any of the following, that nation has wealth:

  1. Forests – they can make toilet paper. Or toothpicks.  Or Justin Bieber posters.
  2. People – they can make things or do stuff. Like accounting. Or making novelty t-shirts.
  3. Oil – they can make precious carbon dioxide – it’s what plants crave™.
  4. Pez© – they can mine the precious, precious Pez® ore.
  5. Cows – they can make ice cream or jerky (but not at the same time).
  6. Pez™ – Worthy of double inclusion because it’s Pez©. Plus, just say “Pez™ ore” out loud. I dare you.

At some point in history, an unnamed (because I’m too lazy to look it up) economist started thinking.  This is unusual, since economists are not normally prone to actual thought, as they tend to cluster in economist flocks and just repeat the same thing the other economists are saying in a herd behavior learned to prevent any one of them from being proven wrong.  It might be that this economist was being particularly unherdish that day?  Anyway, it was his thought to divide the economy of a nation into sectors.  He chose the term sectors so that he could pretend to be a starship captain and say things like “Chart a course for Sector Three, Mr. Sulu”, because that’s a lot more interesting than being stuck as part of an economist herd for the rest of your life.

Being crazily creative, he named the first sector the “Primary Sector.”

The primary sector is all about raw materials and extracting them – pumping oil, logging trees, growing quinoa, conjuring pigs from the underworld, and basset hound harvesting.  And you don’t have to extract it for it to count, unextracted resources are part of the base wealth of a nation, but you don’t get any money (most of the time) until you extract the resource.  It’s like picking your nose . . . but I’ll stop there.

Really, the primary economy is the basement of wealth creation.

It’s also trouble.

Nations that depend wholly on raw material production are associated with all sorts of negative outcomes, from being less developed (overall) and being less productive . . . for an example, let’s pick on the Spanish, because, after all, who hasn’t picked on the Spanish?

Spain managed to find tons of gold (more than 150 tons) and silver (more than 7,000 tons) in one century alone.  By find, I mean “take”, but that’s a longer story, and not the one I’m telling now.  The Spanish Conquistadores shipped the loot back to Spain, and the Spanish used the money to . . . be the lazy 16 year old trust fund kid who lived in Daddy’s other mansion.  The vast wealth allowed the Spanish to hire servants for their servants, and, hire people like the Dutch and French to come on over and do work the Spanish wouldn’t do.  (Sound familiar?)  The only things missing from this picture are Facebook®, Twinkies©, and PS4™.

And I don’t blame the Spanish one bit.  If I’m sitting on a billion or so dollars, I’d probably hire the Dutch and French to paint my house instead of making Pugsley and The Boy do it.

Anyway, this vast wealth took a productive, hungry, strong people who had a lot of gold into a people who hadn’t invested in an economy or infrastructure and had spent all of the gold within 200 years.

During the Spanish-American war, new steel American warships took on (by took on I mean “sank”) the Spanish Navy.  The state of the art US Navy with rifled cannon that could strike miles away with accuracy went up against ships that had cannon that were smooth bore and were older than the French Revolution (really).  I was the equivalent of The Rock going up against a six year old with a stick.

The war lasted 10 weeks, and that was because Spain couldn’t Tweet a surrender.

Spain had been weakened by her Primary Sector wealth.

The Secondary Sector

The secondary sector of the economy takes the stuff produced by the Primary Sector and turns it into something of actual use.

Sure, we all love crude oil, but besides bathing our birds in it, what can you do with it besides sell it to someone who will turn it into something useful?  Oh, you could eat it, but, it gets old after a while.

So, we take the Pez© ore we mined in the Primary Sector and smelt it into the Pez® bullion that we all covet so.  We turn cows into steaks and sell them.  We turn wood into boxes for the fidget spinners we have delivered from France.  We turn people into Soylent Green.

To best picture the Secondary Sector, imagine sprawling factories producing steel plate, dishwashers, tanks, computer chips, and canned soup.  To create this industrial giant requires massive construction, investment in roads, bridges, seaports, airports, building of factories and manufacturing equipment.  Beyond that, it requires investment in the people who will run the factories, from the labor on the factory floor to the engineers who design the equipment, to maintenance personnel who fix the equipment, to the manufacturers of the spare parts.

An industrial economy is a learning economy – there is a new problem to be solved every day to make the Pez® ore smelters produce 1% more Pez© per day.  Sure, everyone knows the basic principles of x-ray lithography for producing semiconductors, but how many could produce a single functioning computer chip, even given a week and the ultimate set of repair tools from the 1950s?

I thought so, only 75% or so of you raised your hands.

The secondary sector produces tremendous numbers of jobs for the economy, and those jobs are generally the gateway jobs to the middle class and a means for social mobility upwards.  Solving problems in the Secondary Economy generally often led to great wealth for the inventor involved, unless you were Tesla.  Then you died broke in a hotel room with a pigeon you loved (Wilder True Fact®).

The Secondary Sector took the wealth produced by the Primary Sector and multiplied it.  It took $1 worth of paper and turned it into $100 worth of books.  It took $300 worth of steel and turned it into an engine worth $2000.  That increased wealth flowed to people all up and down the line, including the people making the purchases.  A car made in 1998 is categorically better in almost every respect than one made in 1968.  A Camaro from 1968 has about the same horsepower as a 2018 Ford Taurus SHO, so the wealth increases to both the manufacturer as well as the consumer as competition and constant innovation improved the quality of the product and the efficiency of production.

The Tertiary Sector

The Tertiary Sector are the services that the nation produces.  So, we went from the base wealth in extractable resources to extracting them to turning them into something useful.  Services are . . . everything else.  Technically, trash companies and nurses and teachers and bloggers and hotels and restaurants are tossed into this branch of the economy.  And they do valuable things, especially the bloggers, but they’re not where the money is.  The real money is in FIRE.

What is FIRE?  Finance, Insurance, and Real Estate.

The miner mined Pez®.  The smelter produced precious Pez™ bullion.  FIRE makes more money off of Pez© than anyone:

  1. They make money by selling stock in the Pez© Company.
  2. They make money by selling futures in Pezâ„¢, betting on what the price will be a day or week or year in advance.
  3. They make money by selling bonds so the Pez® miner can expand his operations.
  4. They insure the Pez© ore smelter against the all too common Pez™ smelter explosion.
  5. They sell the Pez® miner a house. And loan him the money.  And insure the house and . . .

You can see that the main profits of the economy are pretty well sucked up by FIRE.

In general, it’s also sucked up by a fairly small number of people.  I mean, sure there are millions of people engaged in the above, but when you look at where the money flows, it gets pretty concentrated up top, and no, I’m not a member of Occupy Wall Avenue or whatever it’s called.

The amount of payroll that goes to folks in Finance alone is 1.5 times the amount that goes to manufacturing, on a per person basis.  So where do our best and brightest (who want money) go?  Finance.

The financial sector creates (in some cases) wealth out of nothing – so when people buying stock get spooked, the stock market can drop in value an amazing amount in a short period of time (remember 2008-2009?) and cause the wealth to just vanish.  The farm is still there, producing basset hounds, the trees are still there, converting sweet carbon dioxide into oxygen and wood, yet the markets collapse.

As we move up the economic ladder we move progressively from the tangible (a hunk of coal) to the intangible (computer storage that says you have a million dollars, not even a real million Susan B. Anthony coins to back it up).  And the intangible multiplies the profits.  When you turned $1 of paper into $100 of books?  You had physical assets.  In stock, the price is based on how many books the investing public thinks you can make and sell over the next few years, and what sort of profit that might generate.  Tertiary wealth, in many instances, exists only because we all agree it does, and we stop believing?  It disappears as fast as George R. R. Martin’s ability to write a coherent sentence (that man is NEVER going to finish).

The economy in the United States continues to move from a Secondary Sector economy to a Tertiary Sector, which has broad individual implications, which I’ll discuss in the next post.

Making Less Than You’re Worth and Value Creation

“And so then Skeletor told Terminator he wanted a divorce, and apparently it’s all going to be finalized soon!” – South Park

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As it’s a short post, here’s a link to the story about the vole above.

“No, John Wilder, I said I want to make less thank I’m worth,” said my friend, who I will call Spock.

I was surprised.  I took it as an axiom, a truthticle (John Wilder Definition:  A quantum truth particle), that the old adage was right – you want to get paid what you’re worth.

Spock continued, “Yeah, if I’m worth what I’m paid, I’m not a bargain.  If I’m worth more than I’m paid?  That’s the guy you keep around – he makes you money.”

And Spock was right, his argument as logical as his Vulcan blood is green.

If I go to work and don’t create more value than the amount I’m paid, unless I work at the Department of Motor Vehicles in the Customer Hostility Division, I’m going to get fired.  This isn’t a moral judgement, it’s just that companies can’t survive hauling around with comatose employees that don’t make it money.

To put it simply:  If I don’t make (much) more money for the company than they pay me?  They’ll find a way to make sure I work for the competition.  And if someone (or a cool robot) can do the job for less than they’re paying me?  I’m probably going to be doing a lot more blogging in all the free time that I’ll have.  I will have been Terminated.

Not killed, though at one company I worked at:

HR told the story of a gentleman that worked there who was fired.  The HR Personbot2000™ told them that they were going to be terminated.  Having been a recent transplant (with correspondingly iffy English skills) from a country where the voters regularly re-elected the dictator with a 99.9% majority, the employee panicked, and barricaded himself in his office.  The standoff lasted until the Personbot2000® got another employee to translate to the fired employee that he wasn’t going to be killed, he just didn’t have a job there anymore.

No one in the world has been happier to find out he was “only” fired.

I digress.

One way to make sure that you’re creating value is to be where the value is created.  I know that sounds circular, but understand that more than just working hard is required to create value.  Another example:

I was living in Alaska, and loving it.  I had a great job, loved the weather, friends, and the family loved the place.  One day the phone at work rang.  It was an old boss.  Come to Houston, he said.  He wanted me to work on a project that would impact the lives of (literally) millions of consumers, and be the biggest project of my life so far.  We didn’t want to move, really, but the opportunity to work in the hottest (at the time) sector of the economy on a huge project was too much to turn down.  Plus it was hard to breathe with all the money they were forcing down my throat.  So we went.

In this instance, a small team was working on an investment of billions of dollars.  The revenue per employee was massive.  The team worked unconscionably long hours for years to put the project together and bring it to completion.  I can count multiple days where my savings to the company was over a million dollars.  And multiple days where I had to ignore huge problems to go work on even bigger problems.

Creating value was easy in such a target-rich environment, as was working 14 hour days and not exercising.  But the food was awesome and the houses were cheap because Houston is as hot as the surface of the Sun.

In the end?  The projects were finished.  And me, too.  I moved on to another economic sector, but my big lesson was:  If you want to find an easy way create value, go to where the big money is changing hands.

Makes logical sense, as Spock might have said . . .

Another short post – the notes for the second half of this post will show up in Monday’s post, since they are broader in nature, and provide a better understanding of the workings of the world economy and didn’t really fit well with the above stuff. But enough shop talk . . .

AI and Future of Work

“Since when did AI Stand for artificial insanity?” – Andromeda

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A machine for making Pez!  Or the back side of an Airline Departure board.  I forget.

The Middle Class Apocalypse is Coming!  The Middle Class Apocalypse is Coming!

Today is Wealthy Wednesday, so this post is about Wealth, and the future patterns associated with wealth and work based on the trends we can all see today.  On Monday, the Weekly Wisdom post talked about significance and the importance of work, and that post is here.

I’ll give you the TL;DR version – Work is important for health and well-being.  A great job has certain attributes that tie to the significance of the work, which lead directly to health and well-being.  Humans were made to work.  We actually like working when it makes a difference, when we make a difference to the world.

But what about that Apocalypse thing you mentioned up above?  It seems like that just might be important?

The economy is changing now at the most rapid pace, well, ever.  What we’ve seen over the past few years has been an economic recovery that’s been rough, especially for the middle class.  Most jobs that have been created appear to not be as good, not pay as much as the ones that have disappeared.

This trend is not over.  It’s actually just starting.

And, like Star Wars: The Force Awakens®, it has all happened before, though Han Solo didn’t die the first time they blew up the Death Star.  Or the second time.  Third time was the charm.

Four hundred years ago on the planet Earth, workers who felt their livelihood threatened by automation flung their wooden shoes called sabots into the machines to stop them.
Hence the word sabotage. – Star Trek, The Undiscovered Country

Not the last use of Sabotage in Star Trek

The Last Time We Were Here

The industrial revolution was an extraordinary dislocation among the working class in the Western world.  Extraordinary advances in power (steam engines) and mechanical devices (looms, tools) made standardized manufacturing of a consistent product on a grand scale possible.  Spoiler alert!  In the long run, this led to much greater prosperity and a constantly rising standard of living that created the greatest wealth machine in the history of mankind – Europe and the USA.

But along the way?  Lots of people were displaced.  If you were a knitter, you now no longer need knit knickers neatly, because a machine was massively manufacturing many muumuus.  To put it gently, you no longer had a knitting job.  Take your needles and shove off.  And the machine is better at knitting than you.  And you suck at running knitting machines because you have ADHD.

Being faced with this type of situation, the average person in at the time reacted calmly and happily watched as the trade or craft that they had engaged in their entire lives was extinguished like M&Ms® at a Weight Watcher® relapse?  No.  Inspired by (potentially fictional) leader Ned Ludd (the origin of the term “Luddite”) they rioted.  They raided the countryside, molested the cattle, and inspired really bad art:

Ned Ludd

Via Wikipedia – This image is in the public domain in the United States. 

Oh, my!  When I go down in history, I’d like to have a much better picture of me, not one where I’m wearing a polka-dotted Muumuu while my gigantic form looms over my tiny minions as the Alamo burns in the background.  And what AM I wearing on my head.  Is that a beaver??

I guess it’s an understatement to say that the change was difficult, but it did lead to mass producing important things, like nails, sewing machines, scarves, and, eventually, Pez®.

And it led, finally, to the creation of the middle class.  The factories had to have managers.  Engineers.  Equipment manufacturers.  HR.  Accountants.  Payroll clerks . . . and these factories finally allowed the concentrated application of experience and knowledge to the problems of industry.  Some owners of factories became extraordinarily wealthy.  Some geniuses, like Lord Kelvin?  He basically invented thermodynamics and spent his summers on his massive yacht wandering around the Mediterranean with the Kardashians.  Not the ancestors of the Kardashians, but the same ones we see on magazines all of the time.  I am convinced that the Kardashians are:

  1. Evil, and
  2. Immortal.

But I digress.  The middle class is stunningly important to economic and governmental stability.  It’s a place for middling to high IQ people to go and strive, to go and find meaning in their work and in creating civic organizations and clubs and golf.  All that brainpower tends to go toward helping people in all of society get wealthier over time, and makes society better as they get wealthier – a truly virtuous cycle.

If they weren’t doing this?

Well, if smart, capable people aren’t doing great stuff to make society better?  They get all Emo and Occupy.

Imagine if Rage Against The Machine actually had a job down at Dad’s hardware store? Would they be singing barbershop quartet instead?

Michael Lewis has written several books, like Liar’s Poker and Moneyball.  He’s talented.  But his first degree was in Art History.  Admittedly it was from Princeton, but it was . . . ART . . . HISTORY.  He ended up being a bond trader after getting a degree in economics from the London School of Economics before landing the bond trading gig, but, really, these sorts of opportunities don’t exist for current liberal arts grads.  And, like Ned Ludd, current liberal arts majors all dress up in polka-dotted muumuus and put a beaver in their dreadlocks and protest.

They’re protesting against a global labor market.  They might have the best degree that you can get, but legal aides are now competing against actual lawyers (and smart ones, too) in India who’ll do 250 hours of legal and case research for some pita bread and half of a Coke®.  The first part of this wave of globalization was the outsourcing of labor that went into manufacturing.  For the last 15-20 years mid-level engineering and legal research has joined the globalization push.  It’s had the effect of making the world more average, and if you’re talking pay, I assure you that you don’t want to work for the world’s average wage, which for some types of work is a cot and a promise not to play any music by Bob Segar®.  If you’re bad?  You have to listen to “Turn the Page.” Again and again.

A significant trend in jobs is to make them so anyone can do them.  If you’re reading this blog, I’m certain that your IQ is much higher than the average, and you’ve probably got bones made out of titanium, and might be able to bend steel bars with your mind.  Many jobs that remain are standardized by procedures to the point that very little IQ is needed.  The job is made to suit the lowest common denominator that might show up to be hired.  And these jobs will actively discriminate against your middle class employee template – they don’t want smart people in these jobs.  Smart people think, and if you think?  You might be wrong.  And in this world of hyper litigation?  They might have to settle a lawsuit because you started thinking that cooking oil was a lot like floor wax, and fifty old people slipped and fell on Crisco© oil in the produce section.  Many employers don’t want thinking.  Bad for business.

New forms of work are showing up as well – the “Gig” economy, where people get paid for doing things like hanging your pictures or walking your dog or by driving you around in their own car for Uber©.  The job market is fundamentally changing now, and we all can’t support ourselves by just Ubering® each other around.  Nor will we be able to – Artificialish Intelligence will eventually replace all the Uber™ drivers.

And that’s the big kahuna.  The large enchilada.  The massive Pez®.  Global low wages, procedural jobs that kill the soul?  Those are nothing compared to Artificialish Intelligence.

(According to Google, I, John Wilder, am the one who has coined this term!  Huzzah, me!)

What is Artificialish Intelligence?  My definition is that, really you don’t need a full-blown sentient intelligence for the vast majority of tasks you’ll automate, you just need the bare minimum of subroutines, rules, and algorithms to get the job done.  For most things, that isn’t really all that much.  We’ve had cars that can drive themselves for a while.  And soon, they’ll be everywhere.  Who needs truck drivers when the trucks drive themselves?  Who needs Uber© drivers when Uber™ has a fleet of cars that don’t complain, and, more importantly, don’t get paid?  As soon as competent Artificialish Intelligence appears in a field, there’s no point in a human ever doing that task again, unless they like doing it.  Unfortunately, if you’re one of the 1,500,000 to 3,000,000 people who drive for a living?  Yeah, 90% of them will lose their jobs.  Not an if.  A “will.”

If you count the sheer number of accountants and tax preparers that have lost work due to TurboTax®?  Yeah, lots, and TurboTax™ probably does a better job than many tax preparers, with a lower error rate.  This trend of Artificialish Intelligence destroying jobs is not new.

Ever feel like your job is to pass the butter?  And it’s actually not at all required to add too much intelligence to most of our devices.  Who needs an automatic vacuum or smart cell phone that has a mood?

I’m not sure of the new jobs that will be created due to the changes I’ve noted above, but I do have suggestions if you’re starting out in your career that might help . . .

  1. Be born rich.
  2. Be a friend to billionaires.

Really, the jobs that are very hard to automate or turn global are things that have a barrier, like the following categories:

  1. Government Jobs. The barrier is pretty obvious to this one – Congressmen don’t have to go home to their constituents and explain that they’ve outsourced the Department of Commerce to Uzbekistan.
  2. Distance Barriers. Some things have to be done locally – most construction, plumbing, tree services, and these are jobs that will be a bit harder to automate, though they will change significantly.
  3. Regulatory Barriers. Plumber, Electrician, Pharmacist, Doctor, Lawyer . . . each of these have barriers that are require credentials and licensing.  I would add Teacher to this list, but distance learning won’t be kind to that profession after a decade or so.
  4. Extreme Knowledge. It can be done, being a specialist in a very narrow field.
  5. Be a Creator. You can’t outsource a Steve Jobs from Sebastopol, nor a Bill Gates from Bratislava.  Nor a Scott Adams from Albania.  These are unique talents due to their ability to create.  Can everyone be a Creator?    But the good news is that there are still Government Jobs!

I have only a limited understanding of what the world of work will look like in twenty years, but the changes will be very drastic, and I’ll be posting more about this in the future.  In the past, if you were making copper pots by hand, when the machine took your job and started pressing them out of sheet copper, you had no real way to see that a world of thermodynamics, engineering, and advanced wealthy complex society could form out that stupid job-stealing machine.

But you could see the beaver clearly.  That’s why you kept it in your hair.

The Shape of Your Money

“I’m quite good at spending money, but a lifetime of outrageous wealth hasn’t taught me much about managing it.” – Game of Thrones

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I need a better picture for this, but I give up.  Here’s a dolphin.

I was talking with a friend the other day about personal finances, and we were discussing how we were both in pretty good financial shape, but we were (yet) in very different places.

Most of my money is ludicrously liquid, in fact, when I grab a quarter, it turns into a wet, squishy mess.  But by liquid, I really mean that have the ability to use it, right now, right here for anything from purchasing a prodigious plethora of Pez® and pantyhose to just letting it sit and rot.  Mainly my money has just been sitting and rotting slowly due to inflation.

As I’ve discussed before, most of my time (day and night, sometimes) had been spent out of the house actually earning the money, and I’d given very little thought to actively managing it and the best way to do that.  I’ve missed some great deals, but I’ve also missed plenty of bad ones, like that Shetland pony farm.  Never could get those seeds to sprout.

My friend, however, has a great financial structure going forward, but he’s fairly illiquid – he can’t really touch vast chunks of that money, in some cases he can’t touch it for 20 years into the future, or it would require severe penalties (like losing a kidney, or paying massive taxes – but I repeat myself) in order to get at it.  I think his setup has him set up far better than me, 20 years from now.

In the conversation we were having, I came up with the epiphany – our money has different shape.  Shape, like a fine pair of pantyhose, has two sides.  Money shape has at least two – liquidity and risk.

Liquidity

Liquidity is when your money is available.  The greater the liquidity, the more available your asset is.  So, if I have $10 in my hand, I can use it immediately if I so chose.  Or I can do like government and just light fire to it and watch the pretty flames.  But let’s look at liquidity from liquid to solid of assets we own.

Money

  • Cash – As above. You can do anything you want with it.  Well, most things.  It can’t help you go faster than the speed of light.
  • Checking Accounts/(Debit Cards) – Either way, the money is immediately and totally available, as long as you have money in your account or have recently paid your credit card bill. Many places still checks, which are becoming an obscure throwback to another age when men could actually sign their name.  I pay bills with checks.  I have never owned a debit card, but I hear they go great with fish.
  • (Credit Card would go here if Credit Cards were an asset – they’re not, they’re a loan)
  • Things – Some things are almost as good as cash, but they’re not cash. Silver coins, gold bars, Pez®.  This could go nearly anywhere, depending upon the thing, the time of the day, and the tide.  Beanie Babies® probably are about as liquid as land near a former Soviet nuclear/biological warfare testing site.  Sorry if you thought those would pay for college.
  • Stocks/Bonds – These are pretty liquid, it will still take a day or two to get a check and get paid.
  • Savings Account – Different than checking – they can hold your deposit for a period of time if they want to after you ask for it, generally no more than 30 days. It’s actually a loan to the bank.  Do you really trust those guys?
  • 401k/IRA – The money is yours, but you get hit with a huge penalty for breaking that piggy bank, takes weeks to get a check. I think it’s just a plan for you to save your money and put it all in the same place so the government can find it easily and use it to buy Carmex™.
  • Home – Generally takes more than a month to sell/close. Might take a year.  Might take longer.
  • Land – See above, but . . . location, location, location.
  • 401K/IRA (no penalty) – Become 59 and ½ years old. So, if you’re 59.49999, pretty liquid.  But easy to calculate how much time until you are liquid.
  • Pension – Get it at a predetermined age, generally 65.
  • Social Security – Can start drawing early, but you get less over time. If you die early, that’s a good deal.  Wait, did I just really type that?

My issue is that I’ve been living too far up the liquidity tree.  I’ve been serially under-invested, and have been for years. As I mentioned above, another dimension to money is risk of loss:

  • Cash – 100% risk of loss. Inflation, over time will destroy cash purchasing power.  It’s the way that government keeps promises – it taxes those who save and are responsible!
  • Gold/Silver/Pez® – Only lost if you don’t know where you buried it, but values may vary greatly even during a year.
  • Stock Market – Inflation adjusted, it’s probably one of the best defenses against the tide of inflation. Individual stocks are much more risky than index funds, but have the potential for much greater gain.  Probably the best long term choice, but I hate to buy now, when the market is at an all-time high.
  • House – Even if it blows up, you still own the crater. If only there were a market for craters.
  • Pension – Generally, these are horribly underfunded. Good luck, especially if you’re a California government employee!
  • Social Security – I’ve always felt that I’d never get any money back on this scheme. Still betting that.

The impacts of the shape of your money are significant.  I have more choices now than my friend, and unless I do a good job managing those choices, I’ll have many fewer as I get older.  The nice part of this, however, is the choices are mine, and I’ll live with the outcomes.

Now, to invest in an S&P index fund?  Or maybe horde Pez® for the apocalypse?

Choices, choices.

Homes: Affordability versus Income

“Well, you know, I’ve been lying about my income for a few years; I figured I could afford a fake house in the Hamptons.”-Seinfeld

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Our old Alaska home.  Photo by The Boy.

Houses are both an economic and emotional topic.  As a half-human cyborg travelling back in time from the year 2000, I tend to focus on the economic side of the equation, however I realize fully that there are a huge number of emotions (like happy, or sleepy, or caffeine) tied up in a house.

A house can also be a home.  And a home is for living in, for entertaining, for loving in, for building memories, for first steps, for raising children.  It’s also where I keep my pants, and that is fairly emotional for me, too.

The process of home-buying is built entirely around emotions.  The agent taking you around to view properties will have the emotional antennae of a cocker-spaniel with daddy issues, attempting to understand what you like, and, if they’re good, they’ll swap around the listings to show you the one that they think you’ll like the most as the last one on a long day.  It’s happened to me.  It’s effective.  For the most part, you’re tired at the end of the day, and you don’t even blink when the realtor tells you about the repeated haunting of the house by the soul-stealing-infant-snatching ghost.  Honestly, you can always get another infant, right?

When selling, though, the realtor puts on an entirely different hat.  It looks a lot like the Pope’s, but it’s orange.

A list of things we’ve been told:

  • No odd objects. Where did you even get a Battlestar Galactica helmet?  Do the lights work and everything?    (Apparently the buyer can’t imagine their things in the house if yours are too striking or unusual, like that coffin we keep in the corner with Uncle Drago’s skeleton.)
  • The smell of freshly baked cookies should permeate your house. If you grill a burger?  It should smell like a cookie.
  • Move your, um, things out. We can then stage it with things that normal people might own.

There’s also a huge amount of emotion based on the selling price of a house.  I’ve seen (and when I was younger, I was guilty of) being emotionally tied to the value of the house.  The value of the house was a reflection of my value!  How dare you say you don’t like the color?  I painted that!

Also guilty of?  Emotion in negotiation.  True story, I once negotiated back and forth so often that the realtors (both of them!) pitched in to close the difference.  At the end we were arguing back and forth over 0.25% of the price.

Also guilty of?  Mixing emotion in with the inspection report.  The Home Inspection is the rite of passage for a home whereby an inspector tries to make the current homeowner’s head explode by picking out every tiny possible thing wrong with a house and then whining about it.  I mean, what’s wrong with exposed copper wiring in the children’s playroom?  They love the way it makes their arms vibrate when they grab it.

I know that emotion is important to those of you who had that chip implanted at the factory.  But, really, in the longer term economics is more important.

In my opinion, the most important aspects of home ownership are:

  1. Affordability/Tax Deduction – When I moved to Houston, I was talking on the phone to the nice lady at the mortgage company, and she said I qualified for a loan that was eight times my salary. The payment alone would have been enough to keep President Trump in hair product for a month.  Me:  “Why would you even offer me that, there’s no way I could ever repay you?”  Her: “I have to tell you that you qualify for it.  They make me.”  More about this topic follows.
  2. Insurability – Let’s pretend you buy a house. Can you even get insurance?  Check with your company – they have a list of houses that they won’t insure based on previous experience and claims at the house.  It’s a downside of the data-driven world, but your mortgage company (unless you’re buying outright) will demand you have insurance, lest they unleash a cauldron of lawyers to play Justin Bieber songs outside your window all night long until you are insured.
  3. Cost of Upgrades/Code Compliance/Upkeep – Over time, these items add a lot to the cost of home ownership, not to mention the amount of personal time you have to spend polishing the Great Orb in the back room, and making sure that the bare wires in the children’s playroom are where they can reach them.
  4. Cost of Commute/Time – If you have a job, where your house is determines how long it takes you to get to work, unless you’re a witch and can teleport. Commuting costs time and money, and detracts from your ability to spend time with your family though, with some families, that might be a plus.  A little more on this follows.
  5. Resale/Future Value – I know I put this kind of low, but this is my list – yours will likely vary. My actual results are below.
  6. Cost of Private Schools/Time – We’ve always bought homes where we didn’t have to worry about this – the public schools have been adequate, and in small-town America, most are pretty good. Our worst schools? Houston area.
  7. Storage Costs – If you buy too small of a place, this might be a thing. Hard not to buy an adequately sized place where we live.

Item 1. In the list above is where it is because, for me, it’s been the most important.  You can have an awesome place that you can’t afford, and that wrecks your life, since the insurance and taxes are consuming so much of your income.

Home Number 1 2 2A 3 4 5
Home Cost as a % of Gross Income 22% 17% 20% 17% 14% 5%
Return (Annual) on Sale 16% 3.4%   11% 0% N/A

Home 2A was a refinance, home 5 is our current home.

Affordability

My experience on home price to income:

  • Home 1: Too expensive, very little money left over.  The cheapest home on the list, but also my lowest income.  Bought at just the right time, but wasted the equity on Pez®
  • Home 2: Next house. Even at 17%, the house was too expensive, but primarily because other debt loads were too high.
  • Home 2A: Same house, just refinanced to buy more Pez®.  Got rid of car payments, so very livable.
  • Home 3: Great house, made a killing, no car or Pez© debt, so that worked for us.
  • Home 4: Debt level okay.  Also a help? We still had no car payments.
  • Home 5:   Next to no income spent on the house.  Plenty of money for Pez™!

Cost of Commute/Time

Home Number 1 2 3 4 5
Commute Time Minutes 20 20 10 30 20
Commute Cost (at $0.35/mile) $14 $12 $6 $14 $14

 

Meh.  Not a lot of difference there, though I will say the 10 mile commute was awesome, and sometimes I biked to work.  In Alaska.  Yeah, it was awesome.

Resale

As you can see, I’ve never lost money on a house transaction.  House 4 was our most expensive house to date, and I had to sell it in the middle of the real estate crisis.  It’s at a zero instead of a negative (it should be about a 20% loss) but when I took a job with that company, one of the conditions on the job offer was that, if they moved me, I would, at minimum, be kept whole on the house.  Nice work, and it was an easy negotiation that took the form of one question, followed by a “sure, we can do that.”

It’s likely that whenever we sell our current house, it’ll be at a loss.  We bought it at a time when the market was (locally) pretty hot, but those days are likely gone.  It’s okay, because at my current equity and payment, it’s really not a strain.

What would have been a killer for me would have been living in a house that was too expensive and unaffordable.  Based on the above, I’d peg that as a total home payment (including taxes and insurance) of less than 1.4% of your annual income.  Above that, and I think (depending on your debt structure and payments) that is enough that ever purchase has to come under extreme scrutiny.  And it gets tough, and life is much less fun.  So, I’d go for a less expensive house, even if it means living with the soul-stealing-infant-snatching ghost.  At least it does dishes more frequently than Pugsley or The Boy.

John Wilder may be a Nobel©®™ Prize winner, but he is not a financial advisor.  So, talk to someone who isn’t the Internet equivalent of Bluto Blutarsky.

Identity Theft, Dormant Bank Accounts, Check Your Statements

I”Identity theft. Apparently he used to sit on his couch, hack high net worth accounts all over the world. Turned it into a collection of Hummers, helicopters, and, apparently, Freddie Mercury’s ashes.” – Prison Break

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Conquer the Crash of 2004?  You bet!  Rode it out with Mad Max.  You remember that, right?

If you only read one post I’ve ever written, read this one.

William Blake said, “Life can only be lived forwards, but understood in reverse.”

Stupid William Blake.

It started last January, but to tell the story I have to start on April 17 of this year.  Every year, tax day is on April 15.  Unless April 15 is on a Saturday, Sunday or Monday.  So, essentially tax day is tied to the calendar like Easter (only PhD’s in Astrophysics and the Cadbury Cream Egg® people can figure out when Easter is, and that was only after the advent of the digital computer).

Anyhow, not wanting to put things off until the last minute, I sat down on my computer 36 hours prior to my taxes being due (that’s at least 40 metric hours).

TurboTax® is like the person who holds your hair when you vomit.  It’s nice of them, but you’re still in horrible agony with a convulsing body with things going entirely the wrong direction.  That’s the way I feel about tax day, even if they send some of my money back to me.  I rationalize that it’s easy, and, heck, procrastinated to the point where I took a day off to do taxes.

I sat down with a hot cup of coffee, my trusty laptop, and proceeded to open all of those letters that showed up in January with “Important: Tax Information Enclosed” emblazoned in blood red on the envelope.  I soon had piles of income, deductions, stocks and toenail clippings arrayed in front of me next to the computer to begin entry into the government’s enabler (TurboTax©) and began entry.

Income was easy.  Had all of that.  Whoops?  Where are the interest statements on two accounts?  Pugsley brings the mail in most days.  On a windy day, Pugsley might have dropped it and those statements might have blown into Canada along with William Shatner’s toupee.

I called up my bank, “Yo, what gives?”  (Okay, I actually said, “Verily, what mayhap be uppith with my interest statements?”)

The response was, “Hmmmm, ohhh, okay, I see.  Those accounts are dormant.  You’ve done no transactions with them for 24 months.”

John Wilder:  “Can you undormant them?”

Nice Lady:  “Sure!”

John Wilder:  “Wow, does this happen often?”

Nice Lady:  “Yeah.  What’s really bad is that in some states if the account is dormant long enough, the state takes the money.  And there’s nothing you can do to get it back.”

John Wilder:  “Wow.”

Nice Lady:  “That’s a rough conversation.”

I completed my taxes, but this conversation stuck in my mind.  It seemed pretty wrong that this could happen to someone who was just, you know, saving their money and being all responsible.

So, on Friday after lunch, I called up my bank and began to request my account balances.

The nice lady (a different one this time) began rattling them off.  A year previously I had put them all in a spreadsheet (minus account numbers) and was comparing them:  “Yup, that’s right.  Yup.  Yup.  Yup.”

Nice Other Lady:  “And that’s it.”

I didn’t need to add them up.  There were the right number of accounts, and most of the amounts were the same.  But the amount on the biggest one wasn’t the same as the spreadsheet.  Not even close.

And it wasn’t more money.  It was smaller.  By a lot.

A lot.

A lot.

Over 10% of my net worth was missing.  More than my home value, plus all the cars I’ve bought in the last ten years.  Just gone.

You know that whole, “blood runs cold” thing?  It wasn’t running cold.  It was cryogenic (cryogenic comes from the Latin word “Cry” because your money is missing and “Genic” meaning this level of stupidity must be genetic).

I pretended calm.  Have you ever tried to pretend to have idle chit-chat with your boss while you think that even this second your bank accounts are draining faster than Amy Schumer chases a cheeseburger?

The next three hours and forty-one minutes at work were the equivalent of sixteen years of my life.  The drive home took another four years.  I now identify as being seventy-one.  I think I will list that on my Social Security application next year and argue that I am “age-fluid.”

As I drove home I prayed.  “Please oh please.”

Further, I deduced that there were three possibilities in the situation:

  1. Russian hackers had pilfered an account and were living high on the hog with their fat Bulgarian mistresses in some country where they use wrapping paper for money and eat dark bread and vodka all night.

(I have no idea if Bulgarians are fat, but I was not thinking good things about the potential hackers).  Now the family fortune isn’t watched over by a series of accountants I keep chained in the basement, it’s been because I’ve worked really hard – in some years nearly 4,000 hours a year (and gotten amazing results for my company lots of times).  As such, I have stacks of unopened bank statements I don’t read; I’m off at work.  I know I have enough money for most things I’d like to do (most of my wishes are small and involve T-shirts with funny sayings on them), and so, I skip opening them.

Sadly for me, most banks will only allow you to fix hanky-panky if you let them know in sixty days.  I’m not sure I’d opened even statement during that time period.

My blood ran colder.  This was the worst possibility.

 

  1. Whatever state my bank was located in had confiscated my money and had bought themselves hot tubs for their tax accountants and a new snow plow.

This was marginally better.  My accounts had just gone dormant, and I could make a good case that they were big poopy heads and give me my money back, meanie.  The legal term for this is Prima Whinius.  And maybe they could take the plow back.

 

This was a better possibility for me.

 

  1. I had made a mistake about how much money I had.

This was a pretty remote possibility.

The amount that was missing was a pretty big one, one I’m sure I hadn’t imagined, and one that the Other Nice Lady had NOT mentioned.  I distinctly remembered going through the statements, account by account, and adding them up a year previously.  And it was the biggest account, by far.  It’s like playing hide and seek with Al Roker’s former pants.  If you can’t see them, you’re just not looking.

In a strange way, I was hoping it was this, because then I could pretend I wasn’t as stupid as in either point one or two above.

I finally got into the driveway.  The Mrs. was (thankfully) gone to drop The Boy and Pugsley off at a Junior Wine Tasting Festival, while I tore into the house like a poodle chasing a pork chop on a stick.

I ran downstairs to the vault where I keep the gold coins I swim in and my financial statements.  (It’s actually a closet filled with tents, sleeping bags, and plastic bins of my cable bills from 1897.

I reached in, and pulled out  . . . the golden ticket – the first statement I found was for the account.  I ripped it open and looked at the balance.

It was the big number I was expecting.  It was from less than six months ago.

I ran upstairs, and dialed the bank.  I read the account number off, and asked for a balance.

Nice Lady Three:  “Well, John Wilder . . . ” and it was the same number from earlier in the day.

“Is there any problem, sir?”

“Yes,” I croaked into the phone, stress filling my voice, “I’m missing more than 10% of my entire net worth out of this account!”

“Sir, are you sure?”

I looked at the statement again.  I looked at the second page.  It showed a different number.

A much smaller number.

One that matched what she said.  And it had the right account number next to it.

Crap.

It turns out the statement aggregated three accounts.  Two of the accounts showed up on other statements that I also got monthly in other, separate envelopes.  Wow.  I’d double counted a house and a Corvette™.

Dangit.

I then recalled that moment a year ago when I’d added up my accounts, and found, happily, that I had a house and a Corvette® more than I’d expected.  Yay!  Strangely, my emotions then hadn’t included panic or hyperventilation.

The Mrs. returned home, and I outlined the situation.  To her?  No big deal.  It’s my job to watch the money and to make sure we have enough money to buy Pez©, pantyhose, and elephant rides.  I watch our net worth, and The Mrs. watches Mystery Science Theater 3000.

My Lessons and Takeaways:

  1. Check your Statements.

Money isn’t actually real, so if the Russians take yours, and you let the bank know about it within sixty days?  They’ll make some more for you, or at least that’s what the Internet thinks.  I don’t online bank or use ATMs, so those aren’t danger points for me.  But the more you expose yourself to those that love Bulgaria, the riskier it is.

  1. Check your Statements.

And actually math them.  Make sure that everything looks good monthly.  I’d call your bank every other month.  Actually, I’m volunteering.  Send me your banking information and Social Security Number.  I’ll check for you for free!  (HINT:  THIS SOUNDS SUSPICIOUS BECAUSE IT IS – I CHARGE A FEE)

  1. Periodically Stir Your Money.

That will prevent the state from thinking it’s dormant and stealing it.  It will also prevent your money from sticking to the sides and bottoms of the pot as you cook it.

I am probably now old enough to adult more, so I probably should adult.  I should probably figure out a way to invest it so it returns money to me, instead of just the bank.  I know, this is a crazy idea.

  1. Outside of How Much You Spend and How Long You Are Retired, Money at the Margin is the Most Important in Retirement

When I re-ran retirement scenarios?  Yeah, I’m gonna need to work longer or adopt Justin Bieber.  Okay, I’ll work longer.

In the end, the biggest take away of the Wilder Financial Catastrophe That Really Wasn’t of 2017®?

I haven’t changed, and I’m the same John Wilder the day before and the day after, and a bank error in my favor won’t hurt me.  And, as I continued to open statements?  I found half a Corvette® to add back to my net worth.  Yay!

I lost something I never had, but now you have an awesome blog post.  Tell six friends or I’ll tell the Russians where you live.  On tax day.

Now you understand what an evil genius Blake was.  Lived it forward, understand it now.

You should watch this, it’s how I felt.  It has four instances of cussing, but it would be PG-13.  Honestly? I cussed a lot, too.