Archive for the ‘Time Investing’ Category

What’s wrong with this picture?

Tuesday, July 20th, 2010

So, how do we spend our time, collectively, as a nation?  What do we do?

For the ears of babes, we find this nugget of statistical wisdom in a 2009 children’s book:

“If America Were a Village” (by David J. Smith):

(Imagine the United States is a village with a population of 100. What would it look like, based on (carefully sourced) national statistics?)

“More than one quarter of the inhabitants of our village – 27 in all – attend school.”

“47 are employed… 18 are in professions… 12 are in sales… 7 in service occupations… 5 work in construction and repair… 5 work in manufacturing, farming and the transportation of goods.”

“There are 5 people in the village who want to work but can’t find jobs.”

“The remaining 21 people don’t work: 15 are retired, while 6 are not looking for work or are unable to work. Of the 6, 1 person is in prison or jail. (One other, who may be working, is on parole from prison.)”

So…  what is wrong with this picture?

First, I don’t see where the military workers went… but nevermind that, maybe they are in “service occupations”, which lists “1 in firefighting and law enforcement”.

Second, I don’t see where the babies and children not in school went.

But perhaps most shocking to me is that less than half the population is working, and evidently the population (on balance) also spends 27% of its lifetime just on going to school!

It seems to me that standards of living could be improved for the whole population if the workforce were increased (producing more goods and services for all to exchange), and if the educational system were streamlined (less years in school, more years being productive… maybe some years working for experience while also going to school?).  It also seems that the “sales” population (1 in 4 workers? really?) is too high. Imagine if we had half as many sales clerks and twice as many manufacturing workers!  Or if we needed only 4 construction workers (not 5) and put them to work making other things?  Also, some of the “professionals” may not really be needed (see below)… that’s another place where we could actually produce more for each other, instead of most workers just pushing papers and staffing cash registers, while only a few workers actually produce.

One worry is that the number of elderly retirees/nonworkers is likely to increase in proportion to the population. We will have to reduce the proportion of  “workers”, or the number of students, just to make room for the retirees in the “pie chart”.

Also, “One person has more than 30 percent of the wealth.” and with 4 more it’s also true that “5 people have more than half of all the wealth” … “while the 60 poorest people share only about 4 percent of the wealth.”  That just isn’t right. Although, to be fair, some of those 5 saved like mad while they were working and have earned their retirements.

For the detail oriented:

The 27 in schools can be broken down as follows: 3 are in preschool/kindergarten, 12 in elementary school, 6 in high school and 6 in college/other training.  (If 12 are in Elementary, then I believe 9, not 3, should be listed as being in preschool/kindergarten, since children typically enter Kindergarten at age 5, whereas elementary school K-6 is 7 years. 9 is about 5/7 of 12.)

The 18 in professions break down as: 4 in management, 3 in education/training/library, 2 in health care, 2 in finance, 1 in computer tech, 1 in architecture/engineering, 5 in science/law/social service/arts (not that these all have equal social value…)

The 7 in service occupations break down as: 2 in food preparation (cooks), 2 in cleaning/maintenance of buildings and grounds, 1 in health care support, 1 in firefighting/law enforcement, and 1 in personal care & services (hairstylists, etc.).

I suspect that if we had 1 less each in management, finance, health care and law, no one would notice (especially if we simplified our over-complicated legal, financial and health care systems).  That makes room to support more productive workers and/or more retirees…

The Essence of Wealth?

Monday, April 19th, 2010

I spotted this quote over on The Big Picture today, and thought it apropos given the subtitle of this blog (“making the most of time and treasure”):

“Riches do not consist in the possession of treasures but in the use made of them.” —Napoleon Bonaparte

(Whatever one thinks of Napoleon, he certainly knew something about both treasure and many of its uses!)

From this perspective, much of Wall Street, though it has accumulated “treasure”, knows nothing of “riches”. Money not responsibly invested is wasted wealth, as is the labor (“time”) of those involved.

It is also worth pointing out that banks do not own their money.  They merely borrow it from their depositors and other creditors.  If they accumulate riches (i.e. siphoning profits off the spread between their borrowing costs and their lending rates), it is only because they are better at making “use” of your treasure than you are!

About the Author and the Blog

Wednesday, December 30th, 2009

“Wisdom Speaker” is a working physical scientist living on the east side of the San Francisco Bay Area.  Wisdom Speaker is between 30 and 50 years old and has a top-tier Ph.D. in his field.  W.S. also has a spouse, 2 children in school, a house with a mortgage, and occasionally a sharp tongue. Like many his age, W.S. manages a portfolio that is “big enough to worry about, but too small to retire on”.

For years, W.S.’s spouse led the family to develop strong saving habits, and over the years they invested using conventional buy-and-hold, dollar-cost-averaging, asset-allocation methods. But in 2005 realized that conventional financial wisdom was no longer adequate to the times. Unfortunately this occurred after buying a new home near the peak of the 2000-2006 housing bubble. Although the home equity could not be saved (for some years, anyway), the housing experience “woke them up” to the speculative/Ponzi financial environment. Time was invested in a more detailed financial education. Abandoning “buy-and-hold” and taking detailed control of the household finances, W.S. went to cash and avoided the 2008 financial panic.

The family finances came out well ahead of their 75/25 allocation benchmark, but now the question arises as to how, exactly, one should invest for sustainable gains going forward.  The classic definition of an “investment operation” is one which, “upon thorough analysis, promises security of principal and a reasonable rate of return” (Benjamin Graham). In short, a sustainable gain!  Now, some of what is often considered speculation is in fact investment (e.g. trading with a high probability of success, but a short time horizon).  On the other hand, the lesson America failed to learn from Enron and the dot-coms is that too often, what is sold as “investment”, is actually speculation – or worse, fraud!  Clearly we cannot trust others to do our “thorough analysis”, guarantee “security of principal”, or deliver a “reasonable rate of return” for us.  How now to invest?  W.S. hopes to share what he has learned about investing for “Sustainable Gains”, and to learn from others with similar interests.

W.S. also believes that Graham missed a critical element of what constitutes an “investment”.  There is an ethical or moral dimension to investing:  one must put one’s time and treasure to good use, and be able to sleep well knowing what the “investees” are doing with one’s treasure.  An “Investment Operation” must be one which “upon thorough analysis, promises security of principal and a reasonable rate of return while putting capital to a use one can agree with.  Wave upon wave of financial scandal shows that this issue is far wider than “socially responsible” index fund sellers would have one believe.  Even the simple act of buying a CD, or a T-bill, has an ethical component. So “Ethical Investing” will be another theme covered here.

Another issue that comes up almost immediately is that the fiat money we use today isn’t wealth, or capital, or anything really.  It’s a bunch of carefully arranged electrons (or paper, or metal disks, but always of minimal intrinsic value) which record the exchange of debts.  But debt is not capital!  Capital is the surplus of production over consumption.  Debt is an agreement to deliver future production in exchange for current production.  True wealth might be better defined as accumulated resources to meet human needs.  W.S. has only dabbled in this area so far, but understanding the “Nature of Wealth” is vital to having “Sustainable Gains” in this area, and will be another theme here.

Finally, there is the eternal issue of time. One can often earn more money, or save it, but one’s time is far more strictly limited. Time spends itself whether one likes it or not, one never knows how much one has left, and it’s darned hard to get more!  But perhaps careful “Time Investing” (not just time management), particularly in conjunction with financial investing, can lead to sustainable gains (measured in terms of any personal goal) as well?  At any rate, between work, family, and personal needs, W.S. feels time-poor, and struggles to fit all the joys and sorrows of life into the 24-hour day, so “Time Investing” will be another theme here.

Hope you enjoy the site!  I look forward to seeing where this goes…

Live Long and Prosper!

Monday, December 28th, 2009

Time investing is more critical to meeting one’s goals than financial investing. Time cannot be “saved”, it’s more easily “wasted” than money (since only inaction is needed), and it’s darned difficult to “earn more” of it. While one can usually work (or, for those with investment income, wait) to get more money, it’s a harsh truth that one’s time on this world – and the quality of that time – is generally much more limited.

So it was interesting to open the print version of Newsweek back on June 22, 2009, and read “Can You Cheat Death?  No, but you can negotiate…”. These are things which increase/decrease one’s life expectancy, in years:

  • +10 Years – if you have a blood relative who has lived to 95 or older.
  • +5 Years – if you regularly play puzzles like Scrabble or Sudoku (keep your mind healthy & young!)
  • +5 Years – if you are a married man (stay married!) or +5.2 years if you are a woman (married or not, women tend to outlive men)
  • +5 Years – if you take 81 mg of aspirin a day
  • +3 years – if you eat 5 servings of fruits/veggies each day
  • +2 years – if you floss daily
  • +2 years – if you eat nuts regularly
  • +1.7 years – if you go to church regularly
  • -0.5 years – if you drink more than 5 cups of coffee each day
  • -1 years – if you get less than 6-8 hours of sleep each night
  • -1 years – if you have a family history of diabetes
  • -2.5 years – if you are outdoors a lot and do not wear sunscreen
  • -5 years – if you are slowly putting on weight
  • -5 years – if you frequently feel stressed out
  • -5 years – if you eat red meat more than twice a week
  • -5 years – if you have less than 12 years of education
  • -7 years – risky sexual behavior
  • -15 years – smoking
  • -15 years – using IV drugs

No doubt some of these will not “add” cumulatively – otherwise married churchgoing, fruit-vegetable-and-nut-eating Sudoko-players with long-lived relatives who floss and take aspirin daily would have life expectancies over 100 years!

Other items above may not be “primary causes” of increased life expectancy in and of themselves, but they get credit because correlate with other things that lead to longer lifespans (higher income, better social support networks…).

The list also highlights some behaviors that are destructive to lifespan; most of these are also financially-destructive behaviors as well!  I suspect that even the humble act of “burning the midnight oil” (and thus not getting at least 6-8 hours sleep) is both financially and time-destructive. Superficially, staying awake longer and sleeping less provides more time (and a chance to earn more money) up front, but the resulting sleep deprivation reduces quality of life (less valuable time), leads to poor decision-making (wasted time), and can impair one’s productivity at work (reduced future income).  And then there’s the year of lost life expectancy cited by Newsweek, to boot!