Defenestrating Thoughts from the Bivouac

About a year ago I borrowed Debt is Slavery, by Michael Mihalik, from the library. It’s a very short book (about 100 pages long) that discusses consumer debt.

Since it’s aimed at beginners, it doesn’t contain much in-depth knowledge. While it may be useful for people without any financial knowledge, it doesn’t have much original material.

As you might expect, the book explains how debt can be good: to buy income-producing property or to pay for an education. And it also covers when debt can be bad: to let you live outside your means.

The book contains warnings about the “Great Marketing Machine”, so you can understand where shopping impulses come from and fight them. It also presents a simple plan to paying off those credit cards.

There was one part of the introduction that I did like. Mihalik mentions that when you seek advice you should ask yourself two questions:

1. Has the person practiced what they preach?
2. Do they have your best interests at heart?

Nothing earth-shattering, but you’d be surprised how many people don’t do this.

In summary, Debt is Slavery is quick read for people with very little financial acumen. The only original thing in the book is the attention grabbing title. I would venture a guess that without the title, the book wouldn’t have ever been published.

The best advice I’ve found on this topic is Saturday Night Live’s sketch entitled, “Don’t buy stuff you cannot afford.” Enjoy!

A quick update on my post from earlier today, CNBC reports that the bailout spending is roughly $4.28 trillion dollars:

[The total is] $4,284,500,000,000, [which is] more than what was spent on WW II (adjusted for inflation, source).

That’s over $30,000 per taxpayer. So our leaders in Washington have spent $60,000 on Crissy and my behalf to bailout the rich. That’s significantly more than our entire household budget for the year!

To put this number in perspective, CNBC even provides a nice slideshow. Here are the highlights (all numbers are inflation adjusted):

• Bailout – $4,284 billion
• Hoover Dam – $0.8 billion
• Panama Canal – $7.9 billion
• Gulf War I – $98 billion
• Marshall Plan – $115.3 billion
• Louisana Purchase – $217 billion
• Race to the Moon – $237 billion
• Savings and Loan Crisis – $256 billion
• Korean War – $454 billion
• New Deal – $500 billion
• Gulf War II / War on Terror – $597 billion
• Vietnam War – $698 billion
• NASA (cumulative) – $851.2 billion
• World War II – $3,600 billion

With the money spent so far, we could rebuild Western Europe 37 times!

And keep in mind this is money that the American Government doesn’t have. It’s deficit spending. Somehow Washington is convinced that adding debt in order to throw borrowed money at a problem caused by too much debt is a good idea.

Exactly how much have we spent on bailouts so far? Over $2 trillion so far (from the article):

• $29 billion for Bear Stearns
• $143.8 billion for AIG
• $100 billion for Fannie Mae
• $100 billion for Freddie Mac
• $700 billion for Wall Street, including Bank of America (Merrill Lynch), Citigroup, JP Morgan (WaMu), Wells Fargo (Wachovia), Morgan Stanley, Goldman Sachs, and a lot more
• $25 billion for The Big Three in Detroit
• $8 billion for IndyMac
• $150 billion stimulus package (from January)
• $50 billion for money market funds
• $138 billion for Lehman Bros. (post bankruptcy) through JP Morgan
• $620 billion for general currency swaps from the Fed

$2,000,000,000,000 is not a number I can wrap my head around. That’s about $7,000 for every American. Or even more stunning it’s about $15,000 per taxpayer.

And it’s not the full story:

[It] doesn’t include the hundreds of billions the fed has and will buy up in commercial paper and lend out to other financial firms. The deficit is nearly $440 billion this year, and the national debt is $10.5 trillion.

And with Washington planning more handouts to the Big 3 and more “stimulus packages” in the works, it will only get worse.

I really don’t understand the logic of the stimulus package. Basically, the government borrows money and gives it to us who spend it on junk and get to repay it later. Isn’t borrowing money to buy junk what got us in problem in the first place?

You don’t give an alcoholic even more alcohol, you don’t given a drug addict even more drugs. Why does Washington think more debt is the solution to too much debt?

I love The Onion; it’s some of the best satire:

(Source)

A while ago I finished reading John Nance’s new book Orbit and was disappointed. I think I need to stop reading anything “thriller”.

The plot is about a average guy named Kip Dawson who hates his life (including his wife) and wins a trip on a private space tourism flight. After a freak accident leaves the only other person aboard (the pilot) dead, Kip realizes that he will die in a few days. With nothing else to do, he flips on the onboard laptop and starts writing his thoughts about this life, his regrets, and the words of a man resigned to his fate.

And unknown to him, his words get broadcast to the entire world. Somehow his writing captures the attention of billions of people and the incredible public support starts a race between the space capable nations to go rescue him.

This plot is definitely clever, but the execution is poor. Much of the book concentrates on the people back on Earth trying to rescue him. So we hear endless bickering between bureaucrats and politic rants on ineffectiveness of government.

And instead of being rescued, Kip turns into a modern-day Macgyver. He manages to repair, fly, and land the space ship to get home. Pretty unbelievable.

Despite Kip apparently baring his soul during the course of the book, his character still isn’t very developed. Many key people in his life, like his wife and kids, are never introduced to the reader. Instead, Kip’s wife is a one dimensional character that is stereotypical “mean, nagging wife”. He says that he loves his kids, but we only briefly meet one of them.

Skipping over this leaves us with an incomplete picture of Kip. We see how he sees the world, but we never see how the world sees him.

Lastly, Kip’s narrative is not at all gripping. If it couldn’t keep my attention, how are we to believe that he captures the hearts and minds of billions of people?

This may be a good book for killing time at the airport, but not much else; great idea, but poor execution.

Remember those elaborate political conventions (i.e. the four-day-long campaign ads)? Well, guess who paid for them…

Just look in the mirror.

That’s right, you the American taxpayer contributed $34 million to the conventions.

This money is allocated from the budget through the Presidential Election Campaign Fund. The fund’s original goal was to limit private donations and replace the money with federal funds. The intention is that people couldn’t buy political favors through donations, as the campaigns would be publicly funded.

And like most government programs it completely missed its goal:

Ellis also points out that paying the cost of the conventions, now exceeding $100 million each, still relies heavily on soft-money contributions, corporate sponsors and political donations. The taxpayer funds, he says, amount to nothing more than an added gift for the political parties’ parties.

“If you look at the conventions, they are still heavily financed by corporate contributions and then also get a big chunk of change from Uncle Sam,” he said.

I guess this should be filed under more “bailouts for the rich”.

(via Jon)

Just the other day I said the same thing to a ruler. :-)

About a year ago I finished reading The Blind Side by Michael Lewis and felt it was one of the best non-fiction books I’ve ever read. It has several topics intertwined into a very entertaining and gripping narrative.

One set of topics is about football. Specifically how the game evolved from a running game to a West Coast offense (lots of passing, but the quarterback is insignificant) into today’s game where the “big pass” is more important and thus the quarterback position is valued.

And now with teams making big investments in their quarterbacks, they need to protect that investment. This led to a run up demand, and pay, for offensive linemen and specifically the left tackle who protects the quarterback’s “Blind Side”.

But the more interesting part of the story is that of Michael Oher. This a kid with no education and a horrible family background and ends up in a upper class white school and adopted by a wealthy white family.

From there he discovers football and quickly becomes one of the top college football prospects by virtue of his size and incredible athleticism.

And his story is one that forces you to take a deep look at our society. It is the true value of the book, it’s not a football book; it’s a book that shows you the parts of our society that are hidden and the kids that are completely left behind.

Which forces you to think about one of the greatest challenges of humanity today: how do we close the gap between the haves and have-nots?

How is it even possible that such poverty exists alongside such wealth? How can a child be without housing, education, health care, or any measure of security for their entire childhood?

“He left a neighborhood in which he could drive all day without laying eyes on a white person for one where a black person was a bit of a curiosity.”

I feel that the world would function best as a meritocracy, but this necessitates that we have equality of opportunity.

As we learn about Michael, we see that the problem isn’t intelligence, it’s access to the system. Even something like sports, which should be a meritocracy, over 80% of kids that are good enough to play college sports are not academically qualified.

And for many of these kids, this is their only way out.

Blind Side is really the story of how much academic and emotional support is needed to allow for “equal access”. And the amount of that support which is needed to help kids avoid the plethora of hurdles and challenges in their way, including everything from illiteracy to crooks to even car crashes.

Anyone that reads this book will be deeply rewarded by the experience. It’s a very thought-provoking story and it will challenge how you look at the world.

One last thing, I was once told that those of us born with opportunities will ultimately be judged based on how we used those opportunities to better the world. I think the many people who help Michael on his journey will be judged very favorably.

One of my favorite quotes is from Mark Twain:

“Whenever you find yourself on the side of the majority, it’s time to pause and reflect.”

I’ve started applying this to various facets of my life and I feel that it’s a great mechanism to keep yourself intellectually honest. Self-reflection and questioning could lead to two outcomes: (1) you realize that your beliefs were invalid and you fix them or (2) you realize that your beliefs are correct and the exercise of examination reinforce it.

And if you’re intellectually thorough in your self-evaluation, either outcome is good.

There’s another way to think about this.

In my pre-Google days on WinFS, one of the senior managers said one of the smartest things I’ve ever heard. He said that basically once you reach a certain level (in the scope of an organization), everyone is at roughly the same level of intelligence. The difference the amount of data they have to work with.

If you have two people with the same intelligence, the one with more data will on average make the smarter decision. That’s why a Senior VP’s opinions are often more valuable then, say, a line level Product Manager.

Ignoring The Peter Principle and all that, the insight about amount of data is brilliant. The guy that runs a big venture capital fund will see thousands of business plans and the reasons for success or failure of hundreds of business in the course of a year. Of course, he’s in a good position to give advice on the subject.

And to tie it all together, at some level the act of pausing and reflecting is gathering new information. And with that new information you can use your intelligence to make a better decision.

Remember the Weimar Republic and how hyperinflation led to people using wheelbarrows full of money to buy a loaf of bread? Well, the same thing is happening in Zimbabwe right now.

Though I read the news coming out of there, it just seemed weird and not real. And then I came across this blog post with pictures that clearly illustrate what’s happening there.

You should check it out.