Acquire More Stuff

March 15, 2013
You know what America needs? A good assistant manager.

You know what America needs? A good assistant manager.

Believe us, we’d rather not cite all these rotten examples. We’re sincere: we’d much prefer it if we could show you more people to emulate than to deride. But not only do the latter outnumber the former, it seems to be an inescapable rule of the universe that they always must.

There’s a regrettable phenomenon among the financially semi-aware that’s worse than hyperfrugality, and almost as bad as whining about self-inflicted and pointless debt. It’s rationalizing away reduction (and diminished fortune.)

Last week the New York Times ran a first-person opinion piece by Graham Hill, founder of both LifeEdited.com (“Design your life to include more money, health and happiness with less stuff, space and energy”) and TreeHugger.com, which is what it sounds like. (Recent headlines include “‘Don’t frack my mother,’ sing Artists Against Fracking” and “Test-drive: Ford C-MAX Hybrid vs. Toyota Prius V”.)

Hill lives in a 420-ft² Manhattan apartment, and feels so righteous about doing so that it’s the opening line of his piece. He wasn’t always so virtuously minimalistic:

in the late ‘90s…flush with cash from an Internet start-up sale, I had a giant house crammed with stuff — electronics and cars and appliances and gadgets.

Did he willingly jettison all that “stuff”, or did circumstances do it for him? Hill doesn’t say, but he does see advancement and accumulation as inherently negative:

My life was unnecessarily complicated. There were lawns to mow, gutters to clear, floors to vacuum, roommates to manage (it seemed nuts to have such a big, empty house), a car to insure, wash, refuel, repair and register

We here at CYC aren’t big fans of lawns ourselves – xeriscaping is less work and better suited to our regional climate – but millions of people love them and accept their upkeep as necessary. As Hank Hill (no relation) would tell Graham, the light yard work is its own reward. For those who’d rather not bother, well, that’s what Manhattan is for. Same deal with regard to the car.

And “floors to vacuum”? That lament is ludicrous for 2 reasons: first, as ascetic as Graham Hill is today, presumably he still has floors. Second, talk about your 1st World problems. Hey, Cambodian villagers: the rich American white man is complaining about the hassle of having to plug in his magic machine that effortlessly makes debris disappear.

Also, we’d love to know how his roommates feel in retrospect about being under Graham Hill’s “management”. Furthermore, look at the cause and effect. He takes on the unwanted responsibility of too big a house (for him), then complains about the subsequent problems of his own creation that follow the purchase of the house.

A message for Graham Hill, and more importantly, for all y’all:

POSSESSIONS ARE AWESOME. Looking around the room right now, we see a coffeemaker. If you’re not familiar, you spend a few seconds filling it with water and coffee grounds, press a button, and coffee shortly appears. No picking, roasting, shipping, grinding, nor distilling required on our part. We just spend a few pennies per serving and enjoy.

There’s also a TV, modestly sized as these new ones go. At barely an inch thick it’s as unobtrusive as possible, and it entertains us for hours on end. Yes, that’s a lousy deal.

Furniture to sit on. Appliances to keep food cool or hot as required. Drawers to prevent us from having silverware and dishes, which together eliminate much of the mess of eating, strewn about haphazardly. Forgive us for considering this shameless mass consumption to be better than the alternative. But from our perspective, there isn’t a single possession we can see that doesn’t make life markedly better.

However, possessions can also be wastes of money. You’re not going to believe this, but it depends on the possessions. The CYC principals have enough money to live comfortably, and do, but part of living comfortably is not having a dysfunctional relationship – or any “relationship” – with what one owns.

There isn’t any indication that (products for sale make) anyone any happier; in fact it seems the reverse may be true.

His lemma is provably false. Anyone reading this who has ever driven a new car, or moved into a new house, or even bought a new article of clothing, felt at least temporarily happier than he or she did a minute earlier. Graham Hill was an early internet millionaire, cashed out in 1998, but before getting racked with guilt did what impetuous nouveaux riches do:

To celebrate, I bought a four-story, 3,600-square-foot, turn-of-the-century house in Seattle’s happening Capitol Hill neighborhood and, in a frenzy of consumption, bought a brand-new sectional couch (my first ever), a pair of $300 sunglasses, a ton of gadgets, like an Audible.com MobilePlayer (one of the first portable digital music players) and an audiophile-worthy five-disc CD player. And, of course, a black turbocharged Volvo. With a remote starter!

The most important word in that curious passage is the first important one: “celebrate”. If you’re possessed of a truly wealthy mentality, you don’t buy a house that requires 4 descriptors because you want to “celebrate”. You do it because you:

  • Need a place to live.
  • Can afford it and make it cash flow. Obviously most primary residences don’t generate income in and of themselves, but the idea is to live somewhere that doesn’t make you poorer month-to-month. If you do, you’re buying too much house.
  • Want to set yourself up for appreciation. (Or, you’re so rich that you don’t care. Laurene Jobs’s ostentatious and impractical residence isn’t ever going to be easy to sell, but she doesn’t worry about it. Her house could be annihilated by antimatter, which insurance doesn’t cover, and it’ll barely affect her net worth.)

Remember what we said about possessions being awesome? This post is being written on a $1500 computer that’s thin, portable, fast, aesthetically gorgeous and largely free of bugs. That sounds expensive, but no other laptop can do what it does as efficiently and sleekly. And cheaply.

Meanwhile, Graham Hill paid 20 times what he should have for an item whose sole purpose is to shield your eyes from the sun. As we tweeted last month:

Foster Grants

Graham Hill didn’t just buy stuff: he bought liabilities. Things that serve only to make someone else rich (the local Volvo dealer, for instance) and that erode Graham Hill’s own wealth. Which he can’t see, because he’s too busy wasting money:

I hired a…personal shopper. He went to furniture, appliance and electronics stores and took Polaroids of things he thought I might like to fill the house; I’d shuffle through the pictures and proceed on a virtual shopping spree.

The CYC principals could probably afford a personal shopper (we’re not sure how much they go for, whether they take a portion of the proceeds or a salary, etc.), but don’t.

(My) life (was) cluttered with excess belongings.

Then why’d you buy them? And once you realized that, couldn’t you just sell them? Of course not. Why, when you can be didactic and tell the people without internet windfalls how they can live as austerely as you. Ultimately the crux of his complaint is ecological, but he throws in some Americacentric criticism of elbow room, too:

Our fondness for stuff affects almost every aspect of our lives… The average size of a new American home in 1950 was 983 square feet; by 2011, the average new home was 2,480 square feet… In 1950, an average of 3.37 people lived in each American home; in 2011, that number had shrunk to 2.6 people. This means that we take up more than three times the amount of space per capita than we did 60 years ago

Yes. IN THE 178th MOST DENSELY POPULATED SOVEREIGN NATION OR DEPENDENT TERRITORY (out of 243) ON EARTH. We’re not exactly Macanese here.

Look, Ace. Just because you and 1.6 million other misguided souls decided to cram yourselves onto a 23-square-mile island, that doesn’t mean the rest of us in the remaining 3,541,245 have to or want to apologize for our love of space. Then there’s the obligatory quote from an academic to give Graham Hill’s piece that patina of respectability:

In a recent study, the Northwestern University psychologist Galen V. Bodenhausen linked consumption with aberrant, antisocial behavior.

Let’s peek at Control Your Cash’s most recent credit card statement. (Business account, thank you. But they’re all business accounts.) We’ll try to compare our profligate spending habits to those of Graham Hill, and see where and if we can cut back. These are all the purchases from the past month, with the qualification that they were:

  • for non-food items.
  • for goods, not services, which means they could theoretically fall into Hill’s “excess belongings” category.
  • over $20.

Let’s see…$179.48 for pet medications. But that’s an essential, unless we want feline blood on our hands.

$696.77 for a mattress. But that’s a business expense, because it’s going in a rental property. Renters like latex foam and a single-stage coil design. A threadbare mattress leads to an unoccupied unit.

$131.44 for a windshield wiper reservoir. The old one was leaking and beyond repair. Regardless of Professor Bodenhausen’s stern assessment, we fail to see a link between buying car parts and “aberrant, antisocial behavior.” Then again, we’re not that educated and have trouble operating on so advanced a level.

$25 for a blender.

Graham Hill can go die. Guilt is bad enough, misplaced guilt worse still. Misplaced guilt that’s supposed to inspire commiserative guilt in others is worst of all.

Today, Graham Hill operates on a higher plane. Here’s his variant on the platitude about “experiences” being better than “stuff”:

Aside from my travel habit — which I try to keep in check by minimizing trips, combining trips and purchasing carbon offsets

With the possible exception of “combining trips”, 3 of the 3 actions he undertakes to mitigate the harm he inflicts on Mother Gaia are moronic. Read the first one. He likes to travel, but tries not to travel. And now, instead of spending money on expensive sunglasses, Graham Hill takes that same money and flushes it down a (solar-powered, composting) toilet.

Does this really need explaining? Buy stuff that gets you ahead: or as we call it, “assets”. Buy lots of them. Buy nothing else. Even a $15 toaster might not meet our strictest definition of an asset in that it’s probably not going to appreciate for future resale, but owning one beats holding your bread over a fire pit every morning.

The flip side of the equation is to sell liabilities, or at least not buy them. Graham Hill bought nothing but liabilities, then complained about how they impoverished him (definitely financially, and also spiritually, he seems to say.) There’s no more efficient way to get poor.

Filed Under: Bad Examples, Capitalism, Making Smart Choices Tagged With: , , , ,

Marissa Mayer Is Wrong. So Are Her Employees.

February 27, 2013
Marissa Meyer, 3 years ago.

Marissa Mayer before she was pregnant.

 

Marissa Meyer today. The lesson? Even 2 months of motherhood will wear you down.

Marissa Mayer today. Even 2 months of motherhood will beat you senseless.

 

If you missed it, Yahoo!’s* new CEO decided this week that her employees can no longer work from home. At the very least, her move started a national if not international debate: Employees Will Abuse The Freedom vs. The Flexibility Cat Chewed Through The Bag Years Ago. Who’s right?

Neither, but Ms. Mayer is less right than her newly disgruntled employees.

Regardless of how many readily quotable experts insist that productivity increases through the synergistic collaboration of having employees physically present together, we assure you that it is a treacherous lie.

Speaking from experience, your former wage-slave blogger used to work at an advertising agency; that most “collaborative” and “”creative”” of environments. (Yes, there are two sets of quotation marks around that word. Advertising is about as creative a profession as shepherding is.) To the insurance broker or paralegal, whose every step at work is regimented, an advertising agency sounds and looks like Zion. Relaxed dress codes, open floor plans, accommodation for unorthodox personalities, etc. The kind of accoutrements that ought to make people look forward to going to work in the morning. If any environment should benefit from having employees in physical proximity, that’d have to be it, right?

Hell and no. The life-saving transition from employee to contractor to self-employed required doing the same work from home. It tripled productivity.

How? Because there’s an element of randomness to most things, and the notion that everyone on the planet is forever at their most productive from Monday to Friday between 9 a.m. and 5 p.m. (or 8 p.m or 9 p.m., if you want to impress the Marissa Mayer in your life) is ridiculous. Also, the weather is usually nice during the day – at the very least, it’s sunnier than it is during traditional non-working hours – which means there are streets to walk on, golf courses to play, and literal mountains to climb.

After a refreshing day of the leisure activity of your choice, and the psychological high that you get from the feeling that you’re putting one over both on societal norms and the suckers who have to punch a clock, it might (or might not) be time to get down to business. In the toil of choice – in this particular case, writing advertising copy and commercial scripts – there was no practical reason for having to sit in an office with people of somewhat similar job descriptions. In fact, not being in that milieu was itself a positive jolt to productivity. In a dedicated home workplace, there are no distractions. Or at least the distractions are easier to control. No co-workers taking advantage of the open floor plan by invading one’s poorly delineated personal space and capitalizing on one’s time. No racial sensitivity workshops. No pressure to have lunch with people whom you wouldn’t want to spend 30 seconds in an elevator with, let alone an hour at Applebee’s. And no burning 45 minutes or so in traffic, each way.

Obviously some jobs can’t be done at home, but lifeguards and coal miners aren’t part of this discussion. A job that, at its most elemental level, involves transporting electrons to select places is a job that can be done anywhere.

Ms. Mayer might have a secondary agenda. Perhaps she’s doing this to assert her authority. Maybe it’s a test of her employees’ commitment to the cause that is the almighty Yahoo! Either way, the onus is on the inconvenienced employees to get in a position of self-determination.

Come on. If Yahoo!’s most productive telecommuting employee doesn’t want to go in the office and says as much, she won’t have to. Mayer isn’t going to walk away from the spread (said employee’s contribution to the bottom line minus said employee’s salary) if it’s big enough. That’s just bad business.

Mayer isn’t being unfair. It’s her company, her rules. She can require employees to work in offices with tepid coffee and cumbersome parking, and it’s up to those employees to decide if they’re going to stand for it. But if you’re not an employee, and if you derive your income from lots of sources rather than a solitary one, you’re not at anyone’s capricious whim. Mandated hindrance is something you can take or leave.

Assuming that you’re an employee, as most people are, the road to independence is obscured. You’ve probably heard 3rd-hand stories about how difficult it is to navigate and how many potholes there are. Resisting the temptation to take this road analogy any further, just spend a few bucks on our book and stop being trod upon.

 

*Ms. Mayer, if you really want to do something simultaneously revolutionary and atavistic, how about reverting to standard naming conventions for your company and thus getting rid of that stupid exclamation point? If you put “Yahoo!” at the end of a statement, does it require a period? If you put “Yahoo!” in the middle of a sentence, it looks like the end of a sentence. If you make a possessive out of Yahoo!, as we did above, then you have to immediately follow one punctuation mark with another. In fact, we just had to do so again. See? Thanks for nothing.

Filed Under: Capitalism, Making Smart Choices Tagged With: , ,

How Do You Guys Do It? Part III

February 13, 2013
Whatever. At least they're not carrying student loans.

Whatever. At least they’re not carrying student loans.

You know what the problem with most personal finance advice is?

An obsession with scarcity.

Buy off-brand groceries. Shop at thrift stores and garage sales.* Never eat a meal that you didn’t prepare yourself. Wear clothes until they’re threadbare. Do all this and you’ll have slightly more money than you otherwise would, which you can then use to…

To what?

Pay off a portion of student loans that you were foolish to have incurred in the first place? Build an “emergency fund”, an account whose very purpose is to stay inert?

Unlearn everything. If you heed the standard and repeated advice, all you can hope for is to one day have a net worth of 0. Paying off debt becomes an end unto itself, as opposed to just one step in a lifelong goal of building as much wealth (which is to say, giving yourself as many options) as possible.

Maybe you think debt is uniformly bad, perhaps because of how ominous the word sounds (“Our national debt”, “I’m in your debt”, “How do you plan to pay this debt?”) If that describes you, join us as we journey back to your elementary school math class.

Question 1: Is 5.93% debt bad?

Let’s ask both a) a simpleton and b) someone who understands money.

Simpleton: “Of course. What a stupid question. If I borrow $1000 today, and owe $1059.30 a year from now, how can that be good?

Discerning Human: “Well, what kind of return can I get?”

Other acceptable answers include “What’s my alternative?” and “What would I forgo by not borrowing that money?”

According to Bankrate.com, the average $75,000 home equity loan goes for 5.93%. That’s up a staggering 75 basis points over last week.

What if you were to borrow that $50,000 and use it to…buy an interest in a commercial property? A million-dollar building with 19 partners? A building which you and your partners now own free and clear, and can begin renting out to tenants whose rent payments can cover the price of your home equity loan and then some?

You’d be turning a profit, setting up a system by which you’d receive monthly checks. A lot of work up front, for all-but-effortless money in the 2nd and subsequent months.

Question 2: Is 19% debt bad? Like, say, what you’d pay on a credit card balance?

Simpleton: (see above)

Discerning Human: Not unequivocally, but almost certainly. Unless I can find an investment that’ll pay me more than 19% – and the less I borrow at 19%, the greater the return on that hypothetical investment would have to be – borrowing money at that high a rate is only going to bury me.

Yet tens of millions of people do this every day. They don’t think of the shopping excursions and restaurant bills that comprise their MasterCard balances as “borrowing money”, even though that’s exactly what they are. And if you aren’t resetting your balance to 0 at the end of every month, you’ll never be anything but poor.

But cheap money, like the kind a responsible homeowner has access to, is one of the prerequisites for building wealth.

Everyone, no matter how successful, borrows money. Microsoft is not what you’d call a struggling company, given that it made $17 billion on revenues of $74 billion last year. Yet Microsoft has $12 billion in debt on its books. Almost all of it is long-term debt, and Microsoft gets to borrow at lower rates than you do, but the principle is the same: it takes (other people’s) money to make money.

But I can’t do that. I don’t have that kind of equity in my home. I don’t even have a home. I live with my parents, make very little money, and still have a bachelor’s degree I’m paying off.

Well, what do you want from us? Rousing applause for having made awful decisions? If you’re 80 pounds overweight and you smoke, you probably shouldn’t heed the fitness advice in Shape or Men’s Fitness, either. What’s your point?

This is why people, not all of them dumb, hold mortgages. Sure, you could wait until you’ve saved up enough money to pay cash for a house, holding yourself up as a paragon of debtlessness, but whatever for? It’ll take you decades to save that much money, and what would you be doing in the meantime? Renting. And renting pays -100%, every time.

Even the people who dispense narrow-minded personal finance advice hold mortgages, knowing that borrowing money at 3.6% for 30 years is better than paying cash for a house. Not only because it takes so long for most people to get their hands on the kind of equity that would enable them to pay cash for a house, but because of the other opportunities they’d be unable to put any cash toward while saving up for said house.

You want a tangible goal? One more beneficial than the goal of spending as little money as possible? Get the rate at which you can borrow as low as possible. When your credit rating enables you to borrow at lower rates than other people do, your potential spread increases. To the person who can borrow $1 million at 3%, a 4½% investment can be worthwhile. To the person who can’t borrow $1 million at less than 8%, the roster of possible worthwhile investments shrinks to almost none.

*Shopping at garage sales is a stupid idea anyway. You’re going out of your way to shop, i.e., spend money, despite not knowing what’s for sale. “Ooh, a lightly used bassinet! And only $15! This’ll be the impetus my husband needs to finally agree to having a child!”

Filed Under: Capitalism Tagged With:
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