Teach Skepticism

The Tacoma News Tribune has a lengthy, sordid story on a 41 year old con artist named Ryan Rhodes. The story’s utter ordinariness makes it noteworthy. At the center were well-to-do parents who took on faith that Rhodes would build a “high end” competitive baseball league for their 10-14 year old sons. Little did they know that Rhodes ripped $100k off of his grandparents when he was 24 years old and had a history of writing bad checks.

The final sentences of the article:

The list of parents and families dismayed by the Pioneer debacle includes Ed Troyer, Pierce County sheriff’s spokesman, who had a grandson in the Tacoma-based league and coached in his spare time. No stranger to scammers, Troyer said the real cost falls on young people who just wanted to play baseball. “Tacoma really needed a league like that, and now it’s gone,” he said. “It’s pretty sad that all those kids don’t have a league.”

ET, please tell me you’re kidding! That’s the take-away?! The most important take-aways from this case study have nothing to do with baseball. The real cost falls on young people who will never cultivate a healthy skepticism if their parents and grandparents don’t detail for them all of the mistakes they made from the very beginning of the sad saga.

If the boys learn these life lessons all is not lost:

• Learn from your mistakes.

• Never trust anyone automatically. Especially people asking you for money. Know that some people will lie to you, steal your money, and run.

• Be doubly wary of solicitors that are more personable and charismatic than normal.

• If you’ve never done business with a person or group asking you for money, never give it to them in advance of whatever their promising.

• Before giving money to any unfamiliar individual or group, find independent references who can vouch for the veracity of whatever they’re claiming about themselves.

 

 

 

 

What People Get Wrong About Financial Literacy

Every spring a friend in North Carolina and I have a NCAA college basketball tournament bet. He takes the teams representing the Atlantic Coast Conference and I get those representing the Pacific-12. If his teams win more games, I send him a t-shirt, if mine win more, I anxiously await my cotton trophy. This year, neither conference did well, but I barely won a stylish long sleeve Guilford College tee*.

We met teaching and playing noon basketball at Guilford College in Greensboro, North Carolina, in the 90s. This year, along with the shirt(s—one for the Good Wife too, and a coffee mug, Christmas in April), he included four copies of recent Guilfordians, the liberal, liberal arts school’s student paper.

Reading them made it seem like time had stood still. Faculty salaries were still the lowest among a large comparison group of peers. Enrollment was down. Faculty morale was flagging. Some well-liked faculty were leaving to the disappointment of students. Students were protesting the administration’s salaries, which had increased markedly, and were at least average among the same comparison group. Tucked in one of the articles was a devastating detail that will make the new president’s job especially difficult. The small Quaker school has $16m in deferred maintenance. They budget $1.8m a year for continuing maintenance, meaning they’re eight years behind. Some students complained about mold in the dorms.

Colleges on the financial edge routinely defer maintenance. “Let’s delay the roof on the science lab another year.” Eventually, the quality of life for students and faculty suffers, and as with mounting credit card debt, the financial challenges multiply and trustees fret they’ll never catch up. Public schools, churches, and city council’s everywhere face the exact same challenge. Can we manage our finite revenue—whether bonds or levees, charitable contributions, or taxes—well enough to maintain our existing buildings, roadways, and parks? If you want to assess the health of a school district, church, or city, find out how much maintenance they have deferred.

We’re fortunate that our Washington State home backs up to beautiful woods that we’ve enjoyed for sixteen years. In the woods there are hiking and running trails, deer, owls, and a path to a nice city park. Now the woods are for sale and three different developers are interested. Many in our community who have organized to save the woods from being turned into another housing development attended the City Council meeting last week to implore the Council to follow through on their own five-year plan for creating more park space.

The organizing committee has done great work thinking creatively about grants and related funding that makes the purchase seem feasible. imgres But the city has been deferring maintenance on our existing parks. One includes a nice boardwalk along the Puget Sound, a walkway so neglected, parts of it will be closed to the public this summer. While sympathetic to our arguments, the city manager and council both regretted that the city can’t afford to purchase and preserve the woods because they’ve deferred far too much maintenance.

It’s human nature to put off saving for future expenses. Just like colleges, school districts, and churches, I do it all the time too. I replace my nicked up bicycle tires after flatting a few times. I get my lawn mower tuned up when it won’t start. I go to the doctor when I’m near death.

I talked to the college senior recently about car ownership. Most twenty-one year olds think exclusively about the purchase price, “If I can just save $5k for that $5k car.” I impressed on her the need for a “cushion” for additional costs like insurance, gas, and regular maintenance including oil changes, the battery, and tires. In an ideal world, she’d also factor in replacement costs, but that’s pie in the sky. Once I broadened her thinking about car ownership, she realized it’s not financially feasible yet.**

Most financial literacy talk is seriously flawed. Everyone overemphasizes technical knowledge. Do you know the “rule of 72”? Do you understand the power of compounding interest? Do you understand asset allocation, mutual funds, investing costs, dollar cost averaging, and taxes impact on your returns?

People think if schools just taught that knowledge all would be well, but it’s not that people don’t know enough about personal finance, it’s that they lack the self-discipline to spend less than they earn. Including legions of college educated people who would pass a personal finance multiple-choice test.

Schools can’t teach young people to defer purchases, to set aside money to adequately maintain and eventually replace possessions, to live within one’s means. The only way to teach anyone the limits of consumerism, to delay gratification, the importance of savings, and how to live within one’s means, is to model it for them over time.

Fortunately, my parents, especially my dad, taught me those habits without ever sitting me down for any sort of money talk. For colleges, churches, cities, and families, “deferred maintenance” means “We’re in the habit of spending more than we have.” Like mounting interest charges, it ties the hands of college administrators, church councils, city councils, and families.

We are extremely fortunate to be able to meet our family’s basic needs each month with some money left over. We can do one of three things with our surplus. 1) Succumb to status anxiety and buy unnecessary luxury items; 2) Keep existential questions about life’s larger purposes at bay through mindless consumerism; or 3) Set some of the surplus aside for anticipated future expenses.

* During graduate school, my friend was a UC Santa Cruz hippie. The UC Santa Cruz mascot is the banana slug. Second Born and I had lunch in downtown Santa Cruz in late January. After lunch we found a must have t-shirt that featured a large banana slug with the caption “SLUG LIFE”. The perfect gift for my next loss. So good in fact we decided I had to send it this year win or lose. He was very grateful and assured us he’ll get a lot of grief for it from his Geezer basketball pals. That, of course, was our hope.

** Odd to me that she’s not more motivated to make it financially feasible. At eighteen, I couldn’t wait to own my own car. So I parked golf carts and picked up range balls for a few years and bought a VW Bug for $1,500. Most gratifying purchase of all time. For the time being at least, in keeping with her peers, she’s perfectly content to bicycle, use public transportation, or, and maybe this is the problem, use her parents spare car.

How to Live—Patrick, Jess, Alyssa

• Patrick and Jess married in August, 2012. Eight months later they were watching people finish the Boston Marathon when a bomb exploded next to them. Both lost left legs. Patrick, “We’ll figure this out.” Jess, “As equally overwhelming as the evil that day, was how incredibly good these people were.” A touching story about love and resilience nicely told by Eric Moscowitz. For anyone wanting inspiration on how to live. And listen to Patrick speaking last week. “Sewing the threads of community.”

• Last week, Alyssa Mastromonaco, President Obama’s Deputy Chief of Staff for Operations for the last eight years, gave her first interview. Hagiographic, but lots of excellent insights, especially on the importance of selflessness, teamwork, and kindness. A must watch for my daughters.

 

 

I Just Bought a Drone

Tuesday night, while the Good Wife and I slept, our checking account was ransacked by the Internal Revenue Service. This is where our (personal) record amount of federal taxes will eventually end up.

BF-AH180_12taxr_G_20140411180904

The Internal Revenue Service needs reinventing. Could there be a worse name? It sounds like something from an Eastern Bloc dystopian novel. How about the Public Commons or the Public Commons Service? Now the most dreaded sentence in the English language will be, “Hi, I’m from the Public Commons Service.”

Granted, that’s barely scratching the surface of what’s wrong with the PCS. The main problem with our tax system is once our checking account is raided, we have next to no say over where our federal tax dollars go (apart from voting for two senators and a congressional representative). For example, despite being anti-war educators, 27.7% of our federal taxes go to the military (defense and military benefits + veteran benefits) while 1.32% goes to education. We’re forced to help purchase drones, when we’d much rather help purchase improved teacher salaries.

At the same time, our hawkish neighbors might compensate for our military stinginess by designating far more than their 27.7% for the Pentagon. And of course, our other neighbor, Dan, Dan, The Transportation Man, would significantly increase his 2.65% transportation contribution.

A few significant improvements would result from this experiment in direct financial democracy. 1) Complaining about tax rates would decline. 2A) Government departments and programs would have to explain to the public why they’re deserving of a greater percentage of the total revenue available. And 2B) The more they could demonstrate fiscal responsibility, the more support they’d gain.

Admittedly, these ideas won’t slow the accelerating gap between the Haves and Have Nots. On April 15th, I listened to a panel of tax experts discuss tax reform on the Diane Rehm Show. I was much more intrigued by the tone of the discussion than the details of their ideas. The tone was, “Our tax system is so complex that improving it by simplifying it is impossible, but I’m happy to play along with your national audience anyways.”

As anyone who has tried to improve K-12 schooling, reduce global warming, reduce money’s influence in politics, or eradicate drugs and crime from their community will tell you, those who have a vested interest in the status quo benefit greatly from a sense of overwhelming complexity. Reformers, whether tax or otherwise, can’t wrap their arms around the whole problem, and therefore, don’t know where to begin making changes. Eventually they try piecemeal reforms. Before those reforms take hold, people’s patience runs out. Gradually, everyone and everything reverts back to “normal”. With each passing year or decade, what’s viewed as “normal” becomes more deeply entrenched, making significant change even more difficult.

Tax reformers have lots of good ideas including deductions they’d tweak or eliminate altogether. But they can’t see the forest because of the trees. Their ultimate challenge is to convince the public that simplifying and improving our tax system is possible.

 

 

 

 

Sports are Not a Metaphor for Life

First a note to international readers. In the U.S. the first two weeks in April is many sports-minded people’s favorite time of the year because of a confluence of great events highlighted by the college basketball national tournaments and the tradition-rich Masters golf tournament. There’s also the start of the professional baseball season and the beginning of the professional hockey and basketball playoffs. And this year there’s going to be a pretty special footrace in Boston next Monday, the 21st.

Few, if any, expected to see the Universities of Connecticut and Kentucky play for the national basketball championship. Combined, both teams lost nineteen games during the regular season. Similarly, Bubba Watson looked completely lost on Augusta National’s greens during Saturday’s third round. Most people thought it was Louisville’s, Arizona’s, or Florida’s tournament to lose and Matt Kuchar’s turn to break through in a major championship. Few were shocked when Bubba fell behind by two strokes early during Sunday’s final round.

But Bubba, following Connecticut’s and Kentucky’s lead, rallied to play his best golf at the most important time, and won by three strokes. My takeaway is this. Next week in Boston, pay no attention to who is in the lead at the halfway mark. In fact, don’t place too much importance on who is ahead at the 20 mile mark. In keeping with this sports season, someone unexpected will assert their will on the field over the last few miles. Call me crazy, but maybe even someone not from East Africa.

When I first sketched this post in my head, I was playing around with what, if anything, these athletic contests have to do with how you and I should live. But I was forcing it because athletic competition is not a meaningful metaphor for life. Because only one team hoists the national championship trophy and only one golfer puts on the green jacket each April.

In life, the more our family members, close friends, and co-workers flourish, the better our lives. The key to that is cooperation in the form of mutual support. In contrast, family, friendship, and co-worker competition inevitably results in petty jealousies, anger, and dissension.

And yet, sometimes there are sublime moments of cooperation in the heat of athletic competition. For example, at one of last year’s major marathons, the two men leading the race passed one water bottle back and forth. Maybe they were Stoics even more focused on giving their best effort than finishing first. And often the most awe-inspiring moments are compliments of young athletes, like high schooler Megan Vogel, who flat out reject win at all costs thinking.

 

 

 

 

 

How to Get Unstuck

Daily routines give our lives needed structure. My day typically starts with an early morning swim or run followed by a green tea latte. And newspapers. I use the same locker at the Y and shower in the first stall. Sometimes when I’m showering, dudes still half asleep mindlessly do a U-turn towards “my” stall necessitating my “take a hike” glance. I cycle Tuesday and Thursday evenings. I wrap up most days like Winston Churchill, reading in the tub (well, more accurately, he dictated speeches). Maybe I should add in cigars.

The problem with daily routines is that we reach a point of diminishing returns, a tipping point where our lives become too predictable. Absent spontaneity and serendipity, life is uninteresting. Especially as we age, we’re prone to getting stuck in over routinized ruts. The question is how do we get unstuck?

Reagan Underland, an Olympia High School senior, knows how to get unstuck. Read her story here. Even though Reagan most enjoys the humanities and has no family ties to the military, she’s attending the Air Force Academy in Colorado Springs next fall. Why the Academy? Reagan said, “. . . I wanted to do something that scared me and that had purpose.

That’s a wonderful formula for getting unstuck. Find something that scares you and has purpose. I did the same thing as Reagan when I was eighteen. I chose a college that I wasn’t really prepared for. Because I was scared of failing, I ended up flourishing.

The last thing I did that scared me was two years ago when I raced an iron distance triathlon. But truth be told though, I’m not sure if that experience was sufficiently purposeful. In my interpretation of the word, purpose implies something that’s socially redeeming. Maybe it’s time for you and me to follow Reagan’s lead and do something scary and socially redeeming.

 

 

Spring Reading

For when you’re done with your spring cleaning.

1) Teaching Tolerance—How white parents should talk to their kids about race. A must read if your goal is to be “color blind” and raise “color blind” children. I started out skeptical thinking adult behavior easily trumps parent “talk”. But Wenner Moyer makes a convincing case for both.

My “kids and race” story from my junior year of college. I was a teaching assistant in a culturally diverse 3rd grade magnet school classroom in West Los Angeles. One day I was sitting at a round table helping five or six students write stories. One light skinned African-American girl began to rub my pinkish, freckled forearm with her hand. Thinking deeply, she finally blurted out, “You have salami skin!” Feeling a need to return serve, I replied, “Well, you have chocolate skin.” To which another darker skinned girl said, “Huh uh, she has carmel skin, I have chocolate skin!”

2. The Oracle of Omaha, Lately Looking a Bit Ordinary. Can we finally wrap up the active versus passive investing debate and move on to more pressing issues like who will replace David Letterman next year? Even Warren Buffet says Vanguard Index funds are the single best way to invest one’s money.

3. Her First, and Last, Book. Graduation season is around the corner. This is a grad story to remember. “I cry because everything is so beautiful and so short.” Paragraph to ponder:

After the crash, Marina’s parents immediately forgave and comforted her boyfriend, who faced criminal charges in her death. They asked that he not be prosecuted for vehicular homicide — for that, they said, would have broken their daughter’s heart. Charges were dropped, and the boyfriend sat by her parents at the memorial service.