Friday, January 28, 2011

Information Overload

I am convinced that as a culture and as individuals we suffer from information overload. In fact this blog is part of the problem. The cell phones that are so convenient, allowing us to connect to anyone in our world, at any time, are also electronic leashes that enslave us. Business email is the ultimate in dump and run management. Once I have sent you an email, my problem is solved. I even have a record of when and what order was given. That you misunderstood my request or did not have the resources to implement the order is not my problem.

Over the last year, I have only been adding to my existing investment positions through dividend reinvestment programs for individual stocks or payroll contributions to my retirement account. In part, I have not been purchasing stock in other companies because I have read too many conflicting reports on too many opportunities.

The problem is so acute that high priced resorts are offering “unplugged” vacation packages. No wi-fi, no cell phones, no TV. The Quincy Hotel in Washington, DC includes a $25.00 Barnes and Noble gift certificate in such a package. Read a book? Do they still make those things?

This week I turned a three night business trip into a somewhat unplugged experience. When at the hotel, I never turned on the television. I limited my use of the cell phone to conversations with my wife. My use of the Internet was minimal, mostly an attempt to determine how to minimize the effect of the snow storm on my trip home. Instead I read Karen Armstrong’s latest, “Twelve Steps to a Compassionate Life.” I was even blessed with the opportunity to meet a close friend who lives in that area for dinner. A couple of hours of fellowship, time spent in a hot tub, and reflecting on ways to become a better human being definitely improved the quality of my life. When I found myself drifting, I just went to sleep. Wonderful.

From time to time, just turn it off, if only for a few hours. The world will still be there when you return.

Saturday, January 22, 2011

A Country Boy Can Survive

Because you can’t starve us out
And you can’t makes us run
Cuz we're them old boys raised on shotgun
And we say grace and we say Ma’am
And if you ain’t into that we don’t give a damn
Hank Williams Jr.

I am not a fan of Hank Williams Jr. However, he does perform two songs I really enjoy, The Monday Night Football Song and A Country Boy Can Survive. The second touches on a growing problem with no simple answer. I was raised and trained to become a cog in a complex system, to find and keep a job in a structured corporate or governmental bureaucracy. To some degree, I have succeeded in this role. Now that system is in the midst of a serious crisis. When a failure occurs in a system consisting of simple components, the results tend not too be too significant. As systems and their components become more complex, they become more efficient. However, when a complex component in system fails the results tend to be catastrophic. It is the nature of systems. Fifty years ago, the phone system was based on individual electromechanical switches connected to a single phone. If one of these switches failed, only one phone was affected. Today, switches are embedded in computer software. In the early 1990s one of these switches failed, leaving the entire East Coast without long distance service for a number of hours.

A number of major components in our complex economic system have failed. Today there are approximately 25 million Americans who are unemployed or employed less than full time. Over 43 million Americans are receiving food stamps. That is about 14% of the population. Long term unemployment is at the highest levels since the Great Depression. It has been shown that the longer people are out of the job force, the harder it is for them to return. They are experiencing what psychologists term, “Learned Helplessness.”

“Learned helplessness, as a technical term in animal psychology and related human psychology, means a condition of a human being or an animal in which it has learned to behave helplessly, even when the opportunity is restored for it to help itself by avoiding an unpleasant or harmful circumstance to which it has been subjected. Learned helplessness theory is the view that clinical depression and related mental illnesses result from a perceived absence of control over the outcome of a situation.”
M. E. P. Seligman

The preacher man says it’s the end of time
And the Mississippi River she’s a goin’ dry
The interest is up and the Stock Markets down
And you only get mugged
If you go down town

The whole world is telling you that you just can’t do it. I have listened to too many stories for which there are just no easy answers. Today, an unemployed person with skills and experience for which there is no longer any demand is in serious trouble. We have not been trained or conditioned to be self reliant. We have been trained to become a part of and to depend upon a major corporation or the Government. If we look to such frail institutions for salvation in times of trouble, we will be disappointed every time. It is time to turn back to the simple ideas that work. The system components that will support us in times such as these are friends, family, and faith.

I live back in the woods, you see
A woman and the kids, and the dogs and me
I got a shotgun, rifle, and a 4-wheel drive
And a country boy can survive
Country folks can survive

It doesn’t end there. We do have a responsibility to keep developing our own skills and support network. The first thing we must do is ask the right questions. Asking, “Why are these things so?” while natural and understandable is not productive. Asking, “What shall I then do?” is the harder but correct question. Whether or not our situation is the result of wickedness in high places or our own mistakes, focusing on anything other than our own responsibility in the present moment is a waste of time.

The answer to the intelligent question usually involves learning (not necessarily book learning), change, and hard work. If what you are doing isn’t working, try something else. Albert Einstein defined insanity: “doing the same thing over and over again and expecting different results.” He also observed, “It's not that I'm so smart, it's just that I stay with problems longer.” Find and develop the right skill set and you will survive.

“Learned helplessness can also be a motivational problem. Individuals who have failed at tasks in the past conclude erroneously that they are incapable of improving their performance.”
Ramirez, Maldonado, & Martos

In experiments in which dogs were trained to become helpless, it was shown that even when their condition was changed to one in which they were able to escape the electric shocks, they didn’t try. They had learned how to become helpless. However, not all of these animals became helpless. Roughly 1/3 learned how to avoid the electric shocks when given the opportunity. Wikipedia observes, “The corresponding characteristic in humans has been found to correlate highly with optimism: an explanatory style that views the situation as other than personal, pervasive, or permanent.”

You are better than a dog. You can learn to survive!

I can plow a field all day long
I can catch catfish from dusk till dawn
We make our own whiskey and our own smoke too
Ain’t too many things these ole boys can’t do
We grow good ole tomatoes and homemade wine
And a country boy can survive
Country folks can survive

Monday, January 17, 2011

Just Because You’re Paranoid, Doesn’t Mean They Aren’t Out to Get You

Sorry about getting this one out late. Before the holidays one of my facebook friends shared this rather scary bit from the news. A number of my coworkers have purchased the latest generation of smart phones. I-Phones, Droids, and the like are essentially little portable computers that put the power of the Internet, things like GPS, as well as phone and text service in the palm of your hand. They are pretty amazing. The user can add applications (apps) for little or no cost greatly expanding the power and flexibility of these devices. However the Wall Street Journal reports, “An examination of 101 popular smartphone "apps"—games and other software applications for iPhone and Android phones—showed that 56 transmitted the phone's unique device ID to other companies without users' awareness or consent. Forty-seven apps transmitted the phone's location in some way. Five sent age, gender and other personal details to outsiders.” Since then this misuse of personal day has passed into the courts. A number of lawsuits are pending.

These phones are equipped with a unique device identifier (UDID). Think of this as a “super cookie” that can not be erased or disguised. Every time you use the device, they are watching you, collecting data on your preferences, whether you like or not. Again the Wall Street Journal Reports, "The great thing about mobile is you can't clear a UDID like you can a cookie," says Meghan O'Holleran of Traffic Marketplace, an Internet ad network that is expanding into mobile apps. "That's how we track everything."

Apple and Google both let advertisers use the information collected from smart phone to target customers. While Apple claims that apps for their phones “cannot transmit data about a user without obtaining the user's prior permission and providing the user with access to information about how and where the data will be used,” experiments performed by the Wall Street Journal indicate that this claim is not true. The companies like Motorola and Samsung that manufacture these devices view them as platforms. Since they neither create the apps nor load them onto the phone, the manufactures contend that they bear no responsibility for the misuse of personal information.

Companies that buy and sell this information, such as Mobclix, can even locate the home of an individual user. Although these companies contend they categorize users rather than maintaining individual records, the Wall Street Journal reports, “In roughly a quarter-second, Mobclix can place a user in one of 150 "segments" it offers to advertisers, from "green enthusiasts" to "soccer moms." For example, "die hard gamers" are 15-to-25-year-old males with more than 20 apps on their phones who use an app for more than 20 minutes at a time.” Fox News reports, “Both the Android and iPhone versions of Pandora, a popular music app, sent age, gender, location and phone identifiers to various ad networks.”

Technology is not standing still Apple has filed a patent application for a system that uses data collected from web history, web search patterns, downloads to a personal medial library and even correlates such data with the preferences and histories of friends on social networking sites. This is pretty scary stuff. It is bad enough that marketers are violating the personal privacy of their targets at every turn, however it is certain that once such technology is developed it will be used by governments to locate their “enemies” even if they are quiet, law abiding citizens.

Saturday, January 15, 2011

A Belated Happy New Year

Just eight ideas for the New Year.

1)Determine your net worth on a monthly basis. Know the approximate value of your home and how much you still owe on the mortgage. Know the totals of your outstanding loans and credit card balances. Add up the value of your cash, stock, bonds, CDs, money market funds, bank accounts, and IRAs. Make sure you are heading in the right direction.

2)Quantify your goals. If you want to buy a house, determine how much that house will cost, the required down payment, all the fees and taxes associated with the purchase of a home in your jurisdiction, and the monthly payments. If you want to retire, run the base calculation for retirement. Guaranteed Annual Pension + Expected Annual Social Security Payout + (Investments) X 0.04 = Your projected retirement annual income -- I want to buy a house or I want to retire are dreams. Quantified they become goals.

3)Constantly work on an evolving strategic plan. This could be as simple as I will save $5,000 a year over the next 4 years in order to place a 10% down payment and cover all charges associated with the purchase of a $100,000 home.

4)Start an emergency fund. If you don’t have six months take home salary in free cash, you still need to work on an emergency fund. If you don’t have any money in such a fund, start with the next paycheck. Put aside whatever is reasonable every time you are paid. Rainy days happen.

5)Know thyself. Take a little time to examine your financial habits. Are they working or do they need a little fine tuning? How much are you saving? How much are you spending? How much are you earning? Where are you investing your money? Any room for improvement?

6)Find your sleeping point. I could have included in know thyself but it is really a bit different. “J.P. Morgan once had a friend who was so worried about his stock holdings that he could not sleep at night. The friend asked, 'What should I do about my stocks?' Morgan replied, 'Sell down to your sleeping point' Every investor must decide the trade-off he or she is willing to make between eating well and sleeping well. High investment rewards can only be achieved at the cost of substantial risk-taking. So what is your sleeping point? Finding the answer to this question is one of the most important investment steps you must take.” -- Burton Malkiel

7)Take free money wherever you find it. Most notably if your employer offers matching funds on a 401K plan. Take the money and run. What a deal, you save a dollar, you are given a dollar, all tax deferred.

8)Do not spend money you don’t have on things you don’t need. This one piece of advice that will save you a great deal of financial pain. You don’t need a new smart phone. You don’t need a big screen HDTV. You don’t need a new BMW. Now, if you have the discretionary cash for any of these wants, go ahead and enjoy your money. But don’t call wants needs and don’t borrow money to buy them.

Friday, January 14, 2011

Who Has Your Back?

After the annual Christmas vacation and a bout with the flu compounded with bronchitis I hope I can get back on a more normal schedule with the blog. Sometimes I am a little surprised at how some subjects keep resurfacing as I attempt to better understand the interplay of money and happiness as we walk through this valley of tears. As I watch and listen to those around me, I am becoming more and more convinced that the most critical component to success in life is who shares our life.

Once, a long time ago, I read an interview of Hollywood Henderson, the flamboyant former linebacker of the Dallas Cowboys. He was asked, “If you found yourself in a ghetto knife fight, which of your former teammates would you want covering your back?” Henderson did not hesitate, his answer was Roger Staubach. Henderson explained his respect for a teammate who was a ferocious competitor, who never quit and never compromised, a man who always had your back no matter how desperate the circumstance. After years of involvement with cocaine that lead to prison time, Henderson understood the psychology of a ghetto knife fight. His praise of Staubach was high praise indeed.

So then, who has your back?

The first people to have a high impact on the shape of our life are our parents. Unfortunately, we are not able to select our parents. If nothing else, my parents taught me to spend less than I make, obviously the first step on the road to wealth. They also taught me, more by demonstration than lecture, the simple virtues of hard work, deferred gratification, and a healthy fear of debt. I have incorporated all of these early lessons into my life to a greater or lesser degree. Other parents have taught their children how to create wealth, a skill at least as important as the ability to manage and conserve wealth. Some parents have taught their children that their happiness is connected to conspicuous consumption setting them up for a lifetime of debt and unhappiness. Some parents even manage to teach their children that some things are more important than money, status, or success.

The single most important financial decision you will ever make is your selection of a spouse. At one point during my bout with the flu, my head hurt so badly I did not want to watch TV or read, so instead, I chose to listen to Wayne Dyer lecture on how to get what you really want. I certainly do not agree with everything Dyer has to say, but I find him a thoroughly entertaining lecturer who really does make me think about why I believe what I believe. Near the end of the lecture, he wanted to make certain his audience understood he was not talking about manifesting the miraculous appearance of a BMW in your driveway, after hearing what he had to say about bringing thoughts into the material world. However, he wryly observed his wife seemed rather adapt at materializing her desires in the material world. He laughed at his own joke and added, “You husbands know what I mean.” Indeed, the wife of a famous wealthy writer and lecturer is better positioned to manifest a BMW in her driveway than most of us.

Different kinds of friends enter and leave our life. Two examples from scripture are the four friends who tore the roof off a house in an effort to lower their sick buddy into the Master’s presence. These are friends who are a constant part of our life over many years. We all have friends who have covered our back on many occasions. Usually, there are not many of these friends who meet the definition given in Ecclesiasticus, “A faithful friend is the medicine of life; and they that fear the Lord shall find him,” but thankfully they are there when we need them. A second kind of friend is covered in the parable of the Good Samaritan, someone who enters our life at a critical juncture, steering us in the right direction at the right time or perhaps even saving our life. Yes, sometimes a total stranger will cover your back when you are most in need.

So take a moment and run an inventory of the friends in your life. What do your friendships cost? What have your friends given you? What have they asked for in return? Who has your back? Most of our so called friends hold the same beliefs and opinions we hold. As Doctor Phil says, “Is that working for you?” Or are the friends who do not always agree with us, who don’t always tell us how much we suffer, and aren’t afraid to slap us upside the head, the people who have brought the greatest light into our lives.

If you are honest, I think you will find that the spiritual calculus of friendship has nothing to do with double entry bookkeeping, for sometimes in giving we receive more from a friendship than we could possibly imagine.

Mark 10

[29] And Jesus answered and said, Verily I say unto you, There is no man that hath left house, or brethren, or sisters, or father, or mother, or wife, or children, or lands, for my sake, and the gospel's,
[30] But he shall receive an hundredfold now in this time, houses, and brethren, and sisters, and mothers, and children, and lands, with persecutions; and in the world to come eternal life.
[31] But many that are first shall be last; and the last first.

Sunday, January 2, 2011


Once again I spent a few days of the Christmas season with my parents on Jekyll Island. This thoroughly delightful family tradition happens at the Jekyll Island Days Inn and Suites. This is my father’s idea of an honest value. The motel is simple, clean, and has a really good free breakfast. Truthfully, like this patron, the property showing some signs of age but it is still in pretty good shape. For $45 a night, the off season rate, a customer gets a room with a view of the woods across the road, free parking, free in room coffee, breakfast, a newspaper, free Wi-Fi, and for those of us without a laptop a courtesy computer in the lobby. What you see is what you get, no tricks, no traps, no gotcha.

In the course of my employment, I have stayed in a number of so called luxury hotels. These traps for the unwary are generally located in major metropolitan areas. Nothing is what it seems. The lobbies of these operations, particularly the atrium lobbies popular in the 1980s are spectacular, but in some cases the room is even smaller than the Jekyll Island Days Inn. Nothing is free. A Coke from the mini-bar might cost $4.00. Wi-Fi might cost $15.00 a night. Don’t even think about going to the hotel restaurant for breakfast. Who in their right mind would pay $12.00 for scrambled eggs. Many of these places don’t even provide a little in room coffee machine for those of us who tend to wake up before 6:00. However, after 6:00 coffee can be obtained from a cute little cart in the lobby for $3.50. The Casino Hotels of Las Vegas have raised the gotcha to an art form. In some of these establishments, some of the items for sale in the room are placed on electronic sensors. If you pick the thing up to look at it, you bought it.

Car dealers delight in the gotcha. They intentional make the deal as complex and interwoven as possible, making it impossible for the customer to determine how much he is really getting in trade in, the cost of financing, or the price of the new vehicle itself. Car dealers also delight in finding add on gotchas like rust proofing or extended warranties. Really, if I thought the car was going to breakdown often enough to justify the cost of an extended warranty, I would not buy it in the first place.

Look at things like the legal disclaimers attached to credit card applications or prescription drug descriptions. They are not there for your protection. They are made extremely complex in order to confuse the unwary or protect the company from legal action. Watch out for the gotchas wherever they are hiding. Try to get to the bottom line out of pocket costs for the actual way you use a hotel, or when you buy a car, or when you vote. Any time you are hearing too many words of finding too many hidden fees or excessive charges, don’t bite the hook.

Matthew 5: 37 (NIV)

Simply let your 'Yes' be 'Yes,' and your 'No,' 'No'; anything beyond this comes from the evil one.

Proverbs 10:19

When words are many, sin is not absent, but he who holds his tongue is wise.

A tip of the hat to the oftwominds financial blog for inspiring this one.

Saturday, January 1, 2011

Outliers (The Story of Success)

“An outlying observation, or outlier, is one that appears to deviate markedly from other members of the sample in which it occurs.”
F. E. Grubbs

Outliers (The Story of Success) written by Malcolm Gladwell is a light stimulating read. The author examines the elements of success through asking a number of curious questions such as why are almost all professional hockey players born in the first three months of the year. His answers contain some statistical evidence coupled with vignettes and anecdotal evidence. This is not scholarly sociology but it is interesting and probably closer to the truth than most of us would like to believe.

Basically Gladwell contends that success requires three elements talent, hard work, and luck. Examining everything from professional basketball players to computer programmers the author has concluded that success in any field requires a minimum level of talent or physical attributes. There is some threshold for any profession. Above this line success is possible. Below some certain combination of intelligence, gifts, and ability success is very unlikely. However, it seems 6 inches of talent over this bar is as likely to produce winners as 6 feet over the bar. We all intuitively know this to be true. Many stars in the NFL were not talented enough to be taken in the first round. Many college stars, loaded with natural talent, have proven to be complete busts in the pros.

Why is this true? Gladwell notes that as he studied competence in many divergent fields, including writing, science, and music the magic number 10,000 reappeared on numerous occasions. The author concludes even Mozart, the greatest musical genius in Western Civilization, did not really start to produce first class compositions without his father’s review until he had spent about 10,000 hours writing music. Interviews with many successful men and women (more anecdotal evidence) also support this conclusion.

Lastly, the author observes that talent and hard work are not enough. It turns out Horatio Alger was right. Success requires both Luck and Pluck. Luck is not winning the lottery and moving to Hawaii. Luck is an opportunity. Some generations are demographically blessed with better educations, more job opportunities, or some kind of historical convergence. A hugely disproportionate number of the richest men in history were born in America in the 1830s. Why was that? Why were most of the wealthiest Internet moguls born in a single three year span? They had unusual opportunities because they were the right age when they were in the right place at the right time. In 1968, at age 13 Bill Gates had essentially unlimited access to one of the most advanced computer terminals in the world. He seized this opportunity, completing his 10,000 hour apprenticeship in time to become the richest man in the world.

Luck can also come in the form of associations. Joe Montana, the outstanding quarterback of his generation, was not picked until the 3rd round. Unbelievable! He wasn’t that tall. He didn’t have a rifle arm. He was quick enough but not really fast. However, his coach, Bill Walsh, wanted to install a different kind of offense that did not require a tall drop back passer with a rifle arm or a halfback who could throw the ball. The West Coast Offense was uniquely suited to Joe Montana’s talents. He was quick enough to roll out of the pocket and throw short and intermediate passes with deadly accuracy. After 8 trips to probowl, 4 super bowl rings, and 2 times league MFP, Joe Montana is now a member of the Football Hall of Fame. What if his coach tried to use him as a different kind of quarterback, one requiring a different talent set?

Gladwell examines the importance of cultural legacies. He observes that people who produce tend to have three elements in their jobs autonomy, complexity, and a strong correlation between effort and reward. These attributes tend to get passed down to following generations who then use them to find success in other fields. The author contends this why the children and grandchildren of small time Jewish clothing manufacturers have achieved unusual success in the professions. He also believes it is one of two reasons Asians excel in mathematics. He also demonstrates why Asian deference to authority has caused an excessive number of airplane crashes.

Although Gladwell does examine the importance of what is often called “Emotional Intelligence,” the ability to work with or manipulate the actions of others in one chapter. I believe he spends far too little time on this important subject. The concept of the “self made man” is deeply rooted in the American psyche. The modern world is far too complex and interconnected for the “rugged individual” to succeed without the talents, abilities, and cooperation of others. Microsoft was not built by one man.

Now, how many more of these things do I have to write before I have my 10,000 hours?