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April 23, 2014

The Success of Others and My Motivation

As human beings, we all tend to compare ourselves to others. It’s a natural part of life; whether you want to do so or not, as you learn about how other people live their lives, you make comparisons to how you are living, and even judgments on how those other people live. It’s hard to stop; as long as you want to know how other people are living, the comparisons will occur.

Especially when it comes to money, and the financial success (or lack thereof) had by other people, the comparisons and even judgments tend to flow readily. With money, you can break the current standing of yourself and any others down into a precise figure, exact to the last cent, and compare where you stand. It doesn’t hurt (or help, if you consider this a bad thing) that you can easy find lists of the top billionaires currently living, if you want to see how far you have to go before you are the richest human on the planet. (Heck, if this planet isn’t enough, you can check out the richest fictional characters, and see where you stand next to likes of Richie Rich, Jed Clampett, and Tony Stark.)
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What’s Luck Got to Do With It?

Let’s talk about luck. Many people prefer to pretend that luck (or if you prefer, random chance working in your favor) doesn’t exist, that everything in life is determined by the amount of time and effort you put into your work, and that your success in life is determined entirely by the amount of skill and effort you bring to the table.

This is far from the truth, though. Even putting aside the obvious cases where luck influences your success (the gambling and lottery winners of the world, for example), your progress in life is determined by plenty of factors outside your control. The skill and ability of your competitors, the success of the company, even the current economic climate; these are all factors that can determine whether or not you get a particular job, for just one example, all of which are outside your control.

We could argue for hours, if not days, about the type of good luck charms to choose, but let’s just go on beyond that.

Before we go any further, though: while this article is going to stress the impact that luck has on our lives (and point out just how much luck influences things, regardless of how much we may disagree), it’s easy to take things too far in the other direction. Yes, luck has a big influence on our level of success, but things like hard work, knowledge, and our personal effort have a major impact (arguably, even more of an impact) as well. Do not take what I’m about to say as an excuse to just sit in your home and expect that ‘luck’ will eventually bring you a good job, or worse, gamble away all your earnings from your job to give ‘luck’ a chance to make you a millionaire. Life (and luck) just doesn’t work like that.

How Luck Affects You

You might be thinking at this point that luck doesn’t influence you at all. But remember our earlier example; there’s lots of ways that luck can impact your life with major bouts of good (back to our lottery winners) or bad luck (natural disasters being a prime example). For less extreme levels of luck, think about everything from how easy your commute to work is everyday, to what mood your boss is in the next time you have a performance review, to yes, even whether you have a job in the first place; there are lots of factors in your life that are determined by sheer luck, whether you like it or not. (Including, if I may be a bit morbid for a moment, how and when your life will end.)

It goes beyond that, though. Your luck began even before you can remember, with how you were born. Whether you were born to a rich family, a middle-class family, or a poor family will have a major impact on how well you do throughout life. From the level of education you will get to the job opportunities you will have to social connections you will be able to call upon when you enter the job market, your birth will influence them all, and whether your father is a US Senator or an absentee fast-food worker will determine your situation at birth.

Now, there are probably some of you who argue that in America (or most other Western countries, for my Canadian, British, and Australian friends (among others)), it’s possible for anyone, ANYONE to achieve (financial) success in life, regardless of how poor they begin. While I’ll admit that’s technically true, I hope you’ll agree that expecting someone with no connections, no experience and a poor education (if they have much of an education at all) to wind up a millionaire is a bit like expecting someone with a horrible flu, no running experience, and a twisted ankle to win the Boston Marathon. It’s definitely possible, but not that likely.

More to the point, America (and the Western world in general) is just part of the world (and a shrinking part, if the demographic information is to be believed). There are many parts of the world where unless you are born into power (usually by being the child of one of the guys in charge, or his trusted advisers), you’ll find yourself facing a lifetime of struggle, ranging from working long hours for little more than subsistence pay, to finding yourself forced to fight battles at an age when most American children are still enjoying the lack of responsibility that comes with youth. I’ll be the first to admit that ‘bad luck’ doesn’t come close to describing the true nature of such a situation, but it’s worth remembering that for those who are in such a situation, they really didn’t do anything to cause it, other than, well, being born in the wrong place.

How to Increase Your Luck

Alright, hopefully I’ve been able to convince you now that luck (or again, the random chance of the universe working out in your favor) can influence your success in life, and it is something you should be concerned about. The question then becomes: How do you increase your luck? There’s no magic way to ensure that you will have nothing but good luck, unfortunately (as anyone who bought a hundred lottery tickets while wearing their lucky socks will tell you), but there are some things you can do to help nudge luck in your favor, and take advantage of the good luck you DO get, including:

1. Work Hard and Build Up Your Knowledge: Good luck is only as good as your ability to take advantage of it. Being able to see, for example, that a place online where people could share their personal information and talk to friends would be immensely popular a decade or so ago, and being able to build such a site, could have earned you millions, if not billions, in the following years (as things like MySpace and Facebook can attest). As I mentioned before, expecting millions of dollars and world-wide fame to just fall into your lap is very foolish, but seeing what you can learn to take advantage of the new opportunities each day is a great method to improve your success.  To share a quote I particularly like, ‘Luck is what happens when preparation meets opportunity‘.

2. Build Solid Relationships: You’ll likely already guessed from my discussion of how the family to which you were born determines your level of luck in life, but the relationships you have and build during your life will have a major impact on your level of luck (and success) throughout your life. If you hope to be really lucky, you’ll need to plenty of good relationships with those around you, presenting you with lots of connections that can end up helping you in numerous ways in the future.

Don’t just limit yourself to trying to connect to those who are better off than you; besides looking to many other people like ‘brown-nosing’ and turning them off to you, you never know when someone who is not doing that well now can now end up being in a position of power and influence in the future. (Even our horribly handicapped Marathon runner can end up doing surprisingly well, after all.) Help someone when they need it most, and they’ll be all the more inclined to help you in the future. Speaking of which…

3. Give to Those Less Fortunate: Alright, this might be more in the category of karma (or perhaps the grace of God) than luck, per se, but it still bears mentioning. From giving money to those in dire need to giving your time to help in any way you can, there’s much you can do that will have a large impact on those in need. You might not be able to fix everything that’s wrong with the world (as noted above, there are still some pretty serious problems in our world today, many of which are a bit beyond our ability as individuals to do much about), but everything you can do to help will be appreciated, and if there is any sense of justice to the universe, rewarded in turn.

There you have it, some thoughts on luck, how it exists, and how to improve it. Any methods you have to improve your level of luck? Is your level of luck completely unable to be influenced? Do you think that the ‘luck’ being discussed is really that at all? Please let me know what you think!

Just How Many People Really Need to Work?

Sometimes, the oddest questions pop into my mind. I’m not entirely sure where they come from, much of the time; you spend enough time with your mind roaming randomly, and it’s amazing what comes to mind. Given that I run a personal finance blog, and it’s also not terribly surprising that more than a few such questions involve personal finance. Questions such as

What’s the smallest number of people who need to keep working in the United States to keep society functioning?

This question came to mind when I was thinking about early retirement, and how the goal of many personal finance books, from The 4-Hour Workweek to Laughing at Wall Street, is to give you the opportunity to retire early and spend most of your adult life relaxing and partying throughout the world. Yes, that’s definitely good for you, but it’s possible to go too far: if EVERYONE in the country retired, there would be nobody left to do all the needed work.

Including bulldozer related work, of course

My question is, how many people need to keep working in order to keep the country running, if the rest of us were to, say, develop passive income sources sufficient to allow us to spend all our time relaxing and traveling the world? There’s currently about 196,303,000 adults of working age in the United States (those between the ages of 18 and 65); how many of them really need to work to keep the economy working more or less as it currently? Currently, there’s only 128,279,000 adults listed as working by Bureau of Labor Statistics, or about 65%, so more than a third of the working age (18-65 years old) population can be unemployed or imprisoned (or sipping mimosas on the beach, let’s say) without collapsing the economy; how much further can we go?

(Note before we begin: There’s obviously likely to be some disagreement on what is, and what isn’t, an essential job to keep the economy running. These are my opinions; please feel free to share your own opinions on what needs to be included to keep things running in this country. Maybe you think I’m underestimating how important a particular class of job is, maybe you feel we could cut far more before the country as a whole starts to suffer; either way, let me know and we can debate the issue.)

Let’s go through the Bureau of Labor Statistics National Occupational Employment data, to see what sectors (or parts of sectors) we can do without, starting with:

Management Occupations: Well, here’s a good place to start making some cuts, and not just because this is the category that includes Legislators (all 62,180 of them). I think there’s not too many people, at least not too many non-managers, who’d argue that we can’t trim some of the the fat here at least a bit. If we cut a quarter of the 6,184,000 management occupations, we’d give 1,546,000 people a chance to join passive income earners of the world.

Total Jobs Cut: 1,546,000

Business and Financial Operations Occupations: Another area where we can probably cut a few positions without drawing too much ire, as this includes everything from HR personnel to auditors. If we can’t cut, say, at least a fifth of them (1,236,000) from various positions without the rest of the economy collapsing, I don’t know where we can look to make these cuts.

Total Jobs Cut: 2,782,000

Computer and Mathematical Occupations: Ah, now we’re getting to the good stuff. Given that most of us have reached the point where we all but need our computers in order to survive, I’d say that this is an area where we can make limited cuts. Given that ‘mathematical’ jobs make up just over one hundred thousand of the three point four million jobs listed, there’s probably not too many we can cut if we want to be able to keep surfing the web and raking in our passive income. So, no jobs cut from here.

Total Jobs Cut: 2,782,000

Architecture and Engineering Occupations: Another kind of tricky one. It’s hard to see too many places in this category where we could make cuts, as long as we want to keep growing as a country. Still, we could probably cut ten percent of these positions from various fields (231,000) and not adversely affect the economy too much.

Total Jobs Cut: 3,013,000

Life, Physical, and Social Science Occupations: Speaking of areas where we should keep up employment levels to grow the country, the sciences probably should be one where we try to keep most of the people still working (and since it is my field, I am a little biased). On the other hand, it does include some fields of questionable value (like economists; just kidding, economists!), and we can probably trim ten percent (108,000) from here, as well.

Total Jobs Cut: 3,121,000

Community and Social Service Occupations: A pretty broad mix of occupations here, from counselors to clergy (alright, I suppose there is a common theme of, well, counseling). I’m sure this is an area where someone who doesn’t have much faith in the ability of counseling to help people could make a huge number of cuts, but I’ll stick with a relatively modest twenty percent (378,000) to make sure there’s counseling services still available to those who need it.

Total Jobs Cut: 3,499,000

Legal Occupations: I realize the first instinct you might have is to get rid of the entire field, or most of the more than half a million lawyers, at least. But they do serve some useful purposes. Let’s say that we can cut about 300,000 from the legal ranks, before we see too much of a downside.

Total Jobs Cut: 3,799,000

Education, Training, and Library Occupations: It’s hard to argue that we shouldn’t have teachers, and I’ll be far from the one to try to do that. Still, as with most of our groups so far, we can probably trim at least ten percent (841,000) without causing too much trouble, particularly if more people have the time to learn for themselves following high school/college.

Total Jobs Cut: 4,640,000

Arts, Design, Entertainment, Sports, and Media Occupations: Another area where many people would say we could cut out the entire group and still have a pretty decent life. Of course, as this group covers everything from actors to athletes, musicians to media workers, it could be a pretty boring life. Still, we can probably cut out a third of this group (575,000) before our lives get too boring.

Total Jobs Cut: 5,215,000  (We’ve managed to cut over five million, and we still have plenty of job classes to go.)

Healthcare Practitioners and Technical Occupations: Another area that’s pretty hard to argue could be easily dropped; nobody wants to find themselves in a world where there are no doctors, pharmacists, or vets around. On the other hand, it’s hard to argue that there’s no room for cuts at all when the first profession listed is ‘chiropractor’. (Sorry, chiropractors; I had a jerk of an uncle who was a chiropractor). So, let’s say that we can probably cut our usual 10% (751,000) without too many worries.

Total Jobs Cut: 5,966,000

Healthcare Support Occupations: Much as with the healthcare practitioners themselves, we don’t want to cut too many jobs here, at least until we find a way to transfer our consciousness into indestructible machines. Still, also as with the healthcare practitioners, we should be able to trim some fat, say 10% (395,000), without too much trouble.

Total Jobs Cut: 6,361,000

Protective Service Occupations: This includes everything from firefighters to lifeguards to police, so it’s a tough one to cut. Still, if we can decrease the number of people we need to imprison (say, by loosening rules related to drug use and other non-violent crimes), we should be able to cut at least 10% (320,000) from here.

Total Jobs Cut: 6,681,000

Food Preparation and Serving Related Occupations: On one hand, with most of the country enjoying a life of rest and leisure funded by passive income, you’d think we need more, not less, people working in restaurants and bars. On the other hand, if you think that waiters, waitresses, and fast food workers aren’t going to be amongst the first to try to get out of their jobs if given the slightest opportunity, you’ve never had one of those types of positions. I’d expect at LEAST 2,000,000 (of the eleven million current workers) would take the first opportunity to call it a career and take advantage of passive income, if they had the chance.

Total Jobs Cut: 8,681,000

Building and Grounds Cleaning and Maintenance Occupations: Another area where we need people, if we want the country to stay tidy, but the workers themselves are likely more than willing to take their leave. Let’s say about 20% (838,000) can do so before the country gets too messy for us to stand.

Total Jobs Cut: 9,519,000

Personal Care and Service Occupations: This sounds, from the category name, like it should be people like nurses and other personal care workers, but it’s actually a mix of things like gambling supervisors, funeral directors, and bellhops. We can probably cut 20% (724,000) before we see much of a difference in our daily lives (or even in our funerals).

Total Jobs Cut: 10,243,000 (Look, we’ve cut more than ten million jobs, and we’re not done yet!)

Sales and Related Occupations: As with the lawyers, I’d expect many people would probably argue that we could cut a lot of sales people without too much damage. It’s hard to argue against that point; from online sales sites replacing many of the four million retail salesmen to automatic checkout lines cutting the need for the three million cashiers, we probably don’t need to do much cutting ourselves before it happens for us. Still, let’s say we can slice off an additional 5,000,000 (out of thirteen million) sales workers right now before we see too much of an ill effect.

Total Jobs Cut: 15,243,000

Office and Administrative Support Occupations: The category where most of our stereotypical white-collar workers fall. As with food service workers, we probably need more than we think; also as with food service workers, I’m sure more than a few would jump at the chance to no longer have to work a white-collar day job. Let’s say about a third (7,128,000) could be cut from the payroll without too much ill effect.

Total Jobs Cut: 22,371,000 (Now we’re really making some progress!)

Farming, Fishing, and Forestry Occupations: This seems like an area where not many people would still be working, and we’d be right. Even our typical 10% cut (41,000) doesn’t make much of a difference in our overall employment numbers, but let’s assume that even here, there’s fat to trim.

Total Jobs Cut: 22,412,000

Construction and Extraction Occupations: There’s probably more than a few environmentalists who think we should cut the entire ‘extraction’ part of this set of occupations, but I think we should have some domestic energy production. Still, we should be able to safely cut 10% (496,000) of these jobs and still have more than enough people to build our houses and drill our oil.

Total Jobs Cut: 22,908,000

Installation, Maintenance, and Repair Occupations: Another set of occupations that are, if anything, going to be even more necessary when everyone is enjoying an early retirement fueled by passive income. Still, there’s probably some fat to trim here, as everywhere, so let’s say we can cut another 10% (499,000).

Total Jobs Cut: 23,407,000

Production Occupations: Here’s where all those butchers and bakers and (probably) candlestick-makers  find themselves. As per usual, we can probably trim about 10% (837,000) without seeing much of an impact on the businesses themselves. (And probably will see that much of a decline as automated systems are able to replace many of these jobs.)

Total Jobs Cut: 24,244,000

Transportation and Material Moving Occupations: Once things have been produced, they need to be moved, and this is the group that moves them (and us!) around. It’s hard to argue that we no longer need to move things around, but between increases in efficiency, new types of transportation, and our general belief that we can trim a sizable portion of any job sector, I’d say we can drop at least 20% (1,728,000) without too much trouble.

Total Jobs Cut (Overall): 25,972,000

Remaining Job Total, Nationwide: 102,307,000

Percentage of Adults Employed: 52%

There you have it, we as a country could conceivably get by with just over half of the adult population employed. (Plus, I’m sure more aggressive job-cutters could probably double or even triple the number of jobs I think could be dropped, cutting that percentage down to 25% or less.) I hope you enjoyed this bit of speculation as much as I enjoyed writing it.

What do you think of my hypothetical job cuts? Was there anywhere I was too aggressive? Not aggressive enough? Any sectors that should have been cut completely, or any more that shouldn’t be touched?

Deep Thoughts: Per-Capita Taxes, Fines, and Flat Fees

I’ve been thinking lately about money, justice, and the tendency in our society to assign flat rates to goods and services.   Although we don’t normally think about it, it’s pretty much par for the course; it’s too difficult (and in some circumstances, illegal) for, say, a store to charge each customer a different price.  If you and I shop at the same store and buy the same thing, we will pay the same amount.  (Well, that’s not necessarily true; there are any number of reasons why we might pay different amounts, from coupons to sales to membership in store organizations.  Still, if you and I are charged different amounts, there’s usually a clear reason why.)

This is generally considered a good thing.  If you want something that costs $X, you need to provide $X in order to fund it.  In some cases, this means that you need to rearrange your financial situation so you can spend that money.  Nobody will make the argument that you DESERVE to buy whatever you want at a low enough price for you to afford.  For retail purchases, this just doesn’t make sense.

On the Other Hand…

But what’s good for goods and services offered by companies may not be good for money that you HAVE to pay.  There are, for many offenses from traffic violations to littering, set fines that must be rendered to the police if you are caught.  I’m not going to argue that illegal activity should not be punished; sadly, there are more than a few individuals out there who only keep their behavior within acceptable parameters due to such threats of punishment.  Having some sort of punishment for offenses should be a part of our justice system.

Much the same can said about the family swear jar; the more you can afford to swear, the more you are likely to swear.

My concern is this: there are, with many crimes, maximum fine limits set out.  As with the concept of having a fine in the first place, the logic behind this is pretty noble: you don’t want the courts to have free reign to impose any penalty they would like on any crime.  If you did that, all it takes is one corrupt courtroom to take the hard-earned money from numerous people.

My qualm is this: having an upper fine limit and fixed fines for offenses means that the lower your income, the higher a portion of your income you will end up paying for a given offense.  A $500 littering fee could be 5% of a $10,000 a year earner (and the difference between eating decently for a month or going hungry), but only 0.05% of a $1 million a year earner’s income.  Which person is more likely to never litter?

While we’re on the subject of flat fees, there’s also the issue of per capita taxes.  Similar to fines, these are paid as a flat amount per person.  Unlike fines though, they don’t depend on the payer doing something illegal, but are paid every year (or more often, depending on how your tax system is structured).  They suffer from the same issue, though; the less you earn, the higher the portion of your income that goes toward taxes.  While these taxes tend to be rather small (my hometown, for one example, charges $10 per person, or did so the last time that I had to pay for it), they still cost more as a portion of total income the lower that said income is.

My Thoughts

My whole reason for bringing all this up is to note that sometimes, what works in one area of our social interactions (in this case, retail sales) might not be the best in other areas of our lives (like taxes and fines).  While nobody (or at the least, not me) will argue that the amount you pay for goods and services should be tied to the amount you earn, I would argue that taxes and fines should be tied to what you are able to afford.  The difference is the issue of choice; you have no (direct) choice over the taxes or fines you pay (you can, of course, vote for those who promise to cut down on fines and taxes, although how well that will work is an open question), but you can choose how to spend (or, wacky thought, save) your money.  That difference, in my opinion, should be enough to treat those types of expenditures much differently when it comes to allowances for earning levels.

What are your thoughts on fines and per-capita taxes?  Is it better to try to tailor the amounts owed to what people can pay, or simply charge a flat amount?

Remembering 9/11

It’s the anniversary of the September 11th attacks on the United States.  Not only is it the anniversary, but it’s the tenth anniversary, to boot.  There is a lot that comes to mind when a tenth anniversary comes around.  I know that many media sources have been providing stories about what people were doing when they first heard about the attacks, so I guess I will do the same.

Ten years ago, I was a freshman in college.  I had an eight am class, so I had to wake up fairly early to make it to breakfast and get to class on time.  I went to the cafeteria, ate some breakfast, and didn’t particularly notice anything wrong.  There was a TV on, but the sound was turned down and I didn’t really pay attention to it.  I noticed in passing that there seemed to be some sort of special news bulletin, but I was running a bit late so I didn’t pay it much attention.

It wasn’t until I got to the lobby outside of my classroom that I realized something was going on.  I saw the rest of my class, over one hundred people, standing in the lobby, watching the television, largely in silence.  There was some discussion about what was going on, as well as what this would mean for us and our classes, whether classes would canceled or what would happen to us in our positions as students.

It was… frightening.  At that point, there wasn’t much information about what was happening, or any explanation as to why it was happening.  The whole situation was the sort of thing I could have never have pictured happening.  There was talk of it being a possible accident before we went into class; although by the time we were finished, it was pretty clear what had happened.  In our classes, our professors tried to get us to calm down, noting that it was highly unlikely that our classes would be canceled or anything like that; Wilkes-Barre was a long distance from New York or Washington, and it was unlikely anyone would try to attack us.

As time went on, it became more apparent what had happened.  It also, as time went on, became clearer what was going to happen.  Slowly, as the hours turned to days, the days turned to weeks, and the weeks became years, life started to return to a more normal style.  For all the talk of how everything had changed, things seemed to return to normal.

That’s the thing about life: it goes on.  I can’t guarantee that the next ten years will be any better than the last ten have been, but I can promise that only by being willing to face them can we hope to get through them.

Have a deep, thoughtful September 11th, and God Bless.