Capitalism

298 Miles

That how far I drove this week between filling my car with gasoline Monday morning and dropping my son at school Wednesday morning. Why is that significant? For many reasons: cost, time, and luxury to name a few.

First, the cost. My car achieves approximately 16 miles per gallon and gasoline is currently selling at $1.99/gallon. For arguments sake we can agree I used about 20 gallons of gasoline or spent just $40 to go 298 miles. In that 298 miles I took kids to school in the morning, picked up kids in the afternoon and drove myself to Orlando two nights. Looking at a map, 298 miles would take me south to Key Largo or North to Macon Georgia. By comparison, Greyhound would charge $65 for the trip to Key Largo and the scheduled time is 11 hours 50 minutes. With passengers in my car there is no way another alternative competes with my personal vehicle regarding cost.

Right now we are enjoying cheap oil again, prices are less than $50/barrel and gasoline has fallen to its lowest price in since President Obama took office in 2009. However, there is no way this low oil price can continue. Most people do not understand Peak Oil, or laugh it off as a doom and gloom theory. However, the “Peak” in the U.S. occurred in 1972. Peak oil theory is not about there being no oil as there will always be oil Instead, Peak is about the marginal cost to extract each subsequent barrel of oil costing more than the prior barrel. Think of this like working out and having to do pull ups. The first one is easy and takes no effort, the second is harder, followed by the third, fourth, etc. Some people can do ten or twelve pull-ups but the amount of effort to do so is immense. Getting oil out of the ground is the same.

The movie, “There Will be Blood” illustrates this well. Over 130 years ago oil pooled upon the top soil in Pennsylvania. It was easy to retrieve, take a bucket and scoop it up. By the 1920s it was necessary to dig a well, more expensive (harder like the 2^nd and 3^rd pullups) than the first barrel. In the 1980s discoveries of oil on the North Sea helped the U.K. recover economically but at great expense. Whereas in the late 19^th century a farmer with no materials could fill a barrel of oil in a day with a shovel and a bucket by the end of the 20^th century it took nearly a billion dollars to successfully drill a hole in the ground under thousands of feet of water.

My 298 miles was traveled quickly, far faster than in other locales or in days gone by. I estimate I spent about nine hours traveling 298 miles this week. If I lived in Manhattan the same 298 miles could have taken nearly 30 hours. Sixty years ago to travel 298 miles would have taken twelve to fifteen hours. Of course, by car just 100 years ago such a journey as unheard of. Currently I am reading James Howard Kunstler, “A History of the Future,” an excellent prose depicting a post economic collapse in the future. Twentieth century Americans find themselves living again like frontiersmen without electricity or automobiles. Thus, all channels of trade have collapsed and the horse and mule have again become the key method of transportation. In some instances river boats are used to transport goods on the Great Lakes.

We are spoiled to know we can jump in a car and be 298 miles down range in just six hours. The same trip, Daytona Beach to Key Largo or Macon, Georgia in the late 19^th century would have taken two or three days, if not longer. I often contemplate a trip to my cabin, in North Georgia, via bicycle. I figure four to five days to travel the 500 miles, weather permitting of course. In my car, even the weather does not slow me down.

And of course, luxury comes into play. I drive a nice, air conditioned car with power windows, leather seats and connected to the world via an incredible stereo. Why would I choose to use public transportation and subject myself to uncomfortable influences from others? Of course, this personal luxury only works when fuel is inexpensive. But again, even as a child, our 1969 Ford Galaxy had vinyl seats, no air conditioning and a leaf-spring system unchanged from the days of the wagon that took men west in the 19^th century. One hundred years ago my car would have been more luxurious than any coach manufacturer built at the time, and yet it is mass made.

Next week I may drive farther. 298 miles was nothing unique other than an observation and a moment to gain perspective that our lives are amazing in 2015 I thought I would have a flying car by now, but there is nothing wrong with cost effectively quickly, and luxuriously traveling 298 miles.

Success is NOT Debt

How do you measure success? I believe Americans judge one’s success by the size of their mortgage or house. I want us to break the paradigms of societal norms and judge success by freedom. Imagine being debt free. If not debt free then without being a slave to debt by having a minimal amount that allows control over spending and the ability to go anywhere.

As little as 100 years ago, when my grandfathers were children it was not expected to own a house. Homes were required for farmers, but many people were transient laborers. For them a bed roll and a horse had more practicality than “bricks and sticks” planted in a single locale. Prior to World War II Americans were far more agrarian and lived on larger lots to homestead. Cities were dense in population and apartments ruled the day. My great grandmother ran a boarding house for coal miners. Boarding houses are now lost to another time.

Immediately following World War II came the invention of “suburbia”. Starting in Levittown, New York anyone could buy the new American dream – a house. I refer to these early, 1,000 square foot structures as apartment with thick walls: grass. Denser than rural areas, but more spacious, a new living arrangement was sold to the American people. Fueled by a rapid shift in post war production to automobiles the time required to travel distances were shortened significantly. Families could escape urban lifestyle and commuter to work.

It was in the 1950 we began training future generations to believe happiness was measured by their subdivision, brick facade, and picket fence. Along the way our parents stole freedom from us. We could only be judged successful when we had a job, married, and bought a house. Not buying a house, and quietly enslaving ourselves to 30 years of payments three times the amount of the original principal, meant we were failures. Once purchased a cycle of accumulation was required; consumerism built through the fifties and sixties by a never ending flow of cheap, meaningless merchandise from countries never heard of.

The 1990s brought us “McMansions” – homes of epic proportion. With 4 and 5 bedrooms, game rooms, media rooms and excessively large bathrooms accelerated by easy money financing anyone could look like a Vanderbilt. Again, judgment of failure fell upon those failing to keep up with the Jones’. Furthermore, Americans found need for storage units to keep all of their stuff: the trinkets bought at stores like Garden Ridge and Pier 1. My personal opinion, two stores that supply absolutely nothing anyone needs, but distribute trinkets made through near forced labor.

In 2008 financial mayhem fell across our country and housing sales stopped. To this day the National Association of Realtors reports we have bottomed out and housing is recovering. Fortunately, data exposes lies and their story has yet to come true. In February 2013, five years into the Great Recession, housing sales totaled 131,000 for the entire month when backing out investor and foreclosure sales. It is again now I ask again, “does debt or a mortgage determine one’s success?” Of course, success is personal. Judged by others though it continues as an expectation; we must own homes to meet society’s norms. My wife and I are pushing back.

We recently moved to Florida to be near my kids after being forced away in 2009. We had planned to buy a house until we started looking. It was appalling what our money would buy: shoddy construction for $300k, homes ten feet from the neighbor’s for $275k, and a piece of dirt for $70k, or an effective $280k per acre. Why, because the Fed’s $85billion per month quantitative easing feeds a desire for cheap money. Lastly, what if something changes? In other words job opportunities, job loss, society degradation, illness, or any other reason. Why would we want to be anchored to 5,000 square feet of Volusia County Florida?

So how do we gain freedom? Break the mortgage race: if debt is required don’t commit to dirt. I’ve seen too many people pass opportunities during the Great Recession because they were connected to a house, not a “home” with their family. A house is just the container, a home is the programming delivered inside. Thus, a compromise to take our home where we want to go can bring the best situation. For now LeeAnn and I are foregoing bricks and sticks containers for one with mobility. We will see in six months how it feels and whether we moved far. Regardless, knowing we can brings peace.

March 24, 2013 by admin Capitalism Depression Great Recession sheep

A Recipe for Success

A Recipe for Success (2/1/2012)

At dinner last week my friend Scott shared comments from a seminar he delivered to MBA students about entrepreneurship. His observation from spending time with these millennials was their questions focused on how to be successful; not in generalities but seeking a specific checklist void of risk. Mutually we agreed there is no checklist to succeed, but commonalities exist which create a method to achieve success. Personally I have formulated a recipe, based on experience and believe three essential elements are required: S-E-P, Evolution, and no Plan B.

S-E-P

is Skills, Education, and Passion. First,Skills are the know-how we develop over time that contribute to our expertise. For example, we all can pound a nail, but a carpenter knows how to build a house. In his book, Outliers, Malcolm Gladwell describes a 10,000 hour requirement for our skills to develop to an expert level. Second, Education is required to differentiate ourselves, but may come from military, college, or teachings of others. Most important, communication, whether written or verbal, is the critical learning requirement. Third, Passion is the ultimate differentiator between success and failure, but is the hardest to explain. Passion will drive one to succeed no matter what obstacles are confronted and passion is what engages us to continue when our energies are exhausted.

The second essential element is Evolution. Our lives are about learning from mistakes and this is the evolution I refer to, understanding how to move forward after a perceived failure and use failure as way to unlock opportunities. I argue each failure makes us stronger because they are events, not who we are. For example, when I owned my company many people assumed my most successful software program was the first I developed. To the contrary, I counted there were nearly 14 different programs I had tried to develop and sell. Most business owners evolve to create opportunities and rarely is success found the first time.

Lastly, to succeed there must be no “Plan B” because failure cannot be an option. I assert if an easier option exists affording failure then our effort will stop when the most difficult challenges loom. When failure is not an option, our creativity is ignited to try new methods and search for alternatives supporting our passion, in other words evolution occurs. For example, today’s college graduates can choose to move home because finding a job or supporting themselves is deemed impossible. If moving home was not an option these struggling graduates would share cheaper homes, work three jobs, and live on their own. Success cannot be had when one can turn his back on hard work and fear of bankruptcy.

There is no checklist for success, but I can assure you without elements of the above achieving success is impossible. Our current economy is tough and it saddens me when I hear about friends and neighbors losing jobs and homes, but at the same time I can identify friends finding success because they will not be victimized by systemic factors and have demonstrated the above elements. No guarantee for success exists, but I assure you practicing and understanding the above will bring reward.

January 30, 2012 by admin Capitalism Economic Development John - Personal Sharing

Zombieland (11/30/2011)

Watching the news last week was absolutely predictable as there was much speculation about zombies appearing on Black Friday to consume meaningless merchandise from China. I am guessing most of the zombies have garages full of past Black Friday festivals, plastic junk hidden away under children’s beds and some may have storage units holding booties from years past. For several weeks the zombies have been fed hype regarding deals on computers, tablets, televisions, clothes, and a myriad of other unneeded items. Last week’s newspapers prepared the zombies so they could map their plans with war like precision.

Over the last several years the retailers who feed the zombies have become more sophisticated by using the internet. This allows some zombies to continue feeding on traditional foods at home, Thanksgiving leftovers, and use their computer to kill merchandise with their credit cards and a few online clicks. These zombies feel they have an edge against everyone since they maintain the protection of their homes and can start shopping and killing deals in the digital fantasy world; oblivious to social interaction and breathing fresh air.

Not only was the news an accomplice to the zombies, but the media was being fed by our own government. There were reports if the zombies did not consume enough merchandise then the great beast, “The Economy,” would not survive. It appears the annual ritual of zombies appearing on the day after Thanksgiving has become the signal for the life of the beast over the following year. The President himself helped by ensuring merchandise for his campaign was marked down 10% on Friday, giving zombies a new purchasing outlet

As stores opened the zombies took to hurting each other: A 55-year-old Marston, N.C., woman zombie who had just finished Black Friday shopping for Christmas presents with her sister zombie and son at Wal-Mart in Myrtle Beach was shot in the foot during a robbery in a nearby parking lot; in Phoenix, AZ a brawl broke out in the video game aisle as zombies madly tore open packages like they contained the cure for cancer; at a Pittsburgh area mall where a hot deal on yoga pants had some women zombies fuming. “Literally, girls zombies were punching each other,” said shopper Liz Wentling, and “girls were literally shoving each other, moms were getting into it.” In Rome, NY zombies at a Wal-Mart injured two female zombies and a male zombie was arrested after fighting in the electronics department. In another incident, a woman zombie trying to improve her chance to buy cheap electronics at a Wal-Mart in a wealthy Los Angeles suburb spewed pepper spray on a crowd of zombies and 20 zombies suffered minor injuries, police said Friday.

Black Friday’s ritual has become more prevalent over the last several years, especially as the Beast has been dying. Roosevelt was the first to try to control the zombies during the Great Depression by moving thanksgiving a week earlier to stretch the holiday shopping season in 1939. But it was not until Philadelphia newspapers used the phrase in 1966 did the zombies have a festival day called Black Friday. The mid-1990’s propelled the frenzy to headlines and in 2002 Black Friday officially became the biggest shopping day of the year. Last week approximately 134 million zombies left their caves to kill deals nationwide on Black Friday. As the zombies face the hangover of debt from consuming too much meaningless merchandise retailers were quick to celebrate “the best Black Friday in years.”

November 26, 2011 by admin Capitalism Great Recession

I love Corporate Jet Owners

I love Corporate Jet Owners (10/12/2011)

Our president loves to talk about “fat-cats”, “the rich”, and “millionaires and billionaires” as he makes a case for the malaise in which we find ourselves. The parallelisms to Carter’s same pleas with America in 1979 are eerily similar, especially knowing such criticisms and populist arguments drove the economy further away from recovery. One of President Obama’s specific criticisms targets corporate jet owners and it is with this I must take exception. If driven by jealousy and envy it might seem appropriate to target those rich guys flying around in their jets, but personally my family and I depend on corporate jet owners to pay our bills.

Where the president misses the mark is he believes the government through Keynesian economics is best suited to transfer wealth and create economic growth, whereas I feel corporate jet owners are better suited. For instance, a jet must first be built and this is accomplished at plants like Gulfstream in Savannah, GA where 5,500 at all skill levels are employed. Additionally the supply chain, maintenance or even the multiplier effect of employees spending money locally all come from the purchase of corporate jets.

Once in the air the jets must be fueled, maintained, and managed. A hangar with a staff of three to five is typical and two pilots are needed. Thus, the “evil” corporate jet owner directly employs people to take care of his aircraft paying at least $350,000 in total salaries and the appropriate taxes. Further economic stimulus results from the hangar rent and property taxes. Operating the aircraft requires fuel; a truck driver delivers the fuel and companies sell the fuel to the corporate jet owner. Additionally, every gallon typically collects $0.244 in Federal Excise Tax, $0.05-$0.20 in state and local taxes, and another $0.10 in miscellaneous taxes. A corporate jet owner will consume 50k-200k gallons of fuel annually, generating tens of thousands of dollars in tax revenues. Each time the aircraft lands at an airport’s FBO (Fixed Base Operator) employees keep their job by servicing and fueling the aircraft, like an old-fashioned service station.

It is easy to be envious and jealous of those who have more, especially when you have never held a job or worked to start a company like our president, but under examination a different view comes to light; like a car a corporate jet is a tool to do business, to travel faster and more conveniently. In 2005 General Aviation contributed $150 billion to the economy, employed 1,250,000 million people and generated $53 billion in wages. As America’s single biggest corporate jet user, via the taxpayer’s pocketbook of Air Force One, I wish President Obama would rethink his populist arguments against corporate jet owners.

October 21, 2011 by admin Big Government Capitalism Great Recession

All Lots $79,900

All Lots $79,900 (10/5/2011)

Driving to Gainesville (GA) one morning last week I passed a partially developed neighborhood with an enormous sign advertising, “All Lots $79,900 – Financing Available.” I laughed as I looked at the subdivision: empty lots next to “McMansions” displaying overgrown weeds, and electrical boxes and sewer pipes growing out of the ground like trees. The eyesore of the undeveloped properties is obvious and a developer’s dream is awash in a failed economy.

During the boom I was always troubled by such subdivisions; worthless land with infrastructure added and lots sold like South Florida swampland. Exorbitant prices were supported by the banking Ponzi scheme. How come no one every asked why a piece of dirt was nearly $350,000 per acre I wondered? Farmland returns value and is the reason people homesteaded. However since the first post-WWII subdivisions in Levitown Americans have succumbed to a delusion of home ownership as a measure of success.

Imagery fuels this desire as Hollywood’s settings range from Beverly Hills and Orange County to Chicago’s North Lakeside Drive or beachfront on any shoreline. The middle class believes homes should be large and spacious when the affordable reality is quite opposite. Maybe the “Real Housewives…” should be set in a Toll Brothers or KB Homes three bedroom house in Orange County, Florida to generate a realistic picture of middle class life. In that show Mom and Dad would both work 50 hours per week and good times are replaced with conversations of budgets and staying afloat.

The media continues to find false hope week after week of real estate market bottoms or economic turnaround. Housing starts are the lowest in recorded history, and loans to purchase a home are unattainable. The biggest criminals have been exonerated by “too big to fail” and continue to profit, and taxpayers now hold one-third of foreclosed properties. Instead of reporting on “Obamavilles” and digital soup lines of 45 million food stamp recipients a National Association of Realtors monthly press release reporting “pricing bottom reached” is promoted as gospel to only be contradicted the following month.

The dreams remain alive for a life now gone; large houses, jet skis, and oversized trucks, but signs for $79,900 lots still fly. As businesses shutter, mayhem by youthful mobs continues, prices rise and wages stagnant I hope reality will set in. Across the country there are families living the dream in brand new, overpriced homes looking at the overgrown remnants of lost subdivisions and lost dreams. Someday soon the sign will promote the real value, “All Lots – Worthless.”

October 21, 2011 by admin Capitalism Depression Economic Development Great Recession

Lawyers

Lawyers (8/31/2011)

The problem in America with health care costs, insurance and even consumer costs is lawyers. I fly airplanes and recently was reading a placard in the aircraft, finding it idiotic because it states the obvious: “…failure to properly latch seat and heed all instructions can result in bodily injury or death.” That placard is there due to a widow successfully suing Cessna when he adjusted his seat while climbing out on take-off. The incident was certainly not Cessna’s fault but a jury ruled otherwise.

Some adventure sports like white water rafting and parachuting require a waiver before participating; again to head off lawsuits. Every amusement park in America has a warning to pregnant women and back pain sufferers at the front of each line to mitigate law suits. Similarly, my wife is pregnant and we were required to sign an 8-page disclaimer releasing the doctor of liability if the baby is harmed during birth due to law suits.

Recently I was in Mexico with my kids and took them to an attraction consisting of natural park area, snorkeling, tubing, and other experiences. Walking through the park there were no hand rails to protect against a fall, there were no cameras watching our every move, and there were no warning signs at each ride In fact, it was probably the nicest, cleanest, most cost-effective, freest park experience I have ever head; it existed without the oversight of lawyers fueling idiocracy.

Three weeks ago I traveled to Gulf Shores, Alabama and saw shocking “ambulance chaser” billboards. The law firms advertising were seeking clients who cleaned up the oil spill and “might” be exhibiting “any” symptoms of illness. Talk about fishing for monies and setting up for a class action lawsuit.

It is nearly impossible to turn on the evening news in Orlando, Florida without the advertising of a particular law firm shopping for clients to call regarding the latest disease, tragedy, or injury. The only justification for the persistent advertising is the successful income stream generated by settlements made just under the radar of large companies. These under $20,000 lawsuits filed frivolously but settled readily by insurance companies cut costs instead of risking larger expenses in court, a steady windfall for law firms.

Examples abound but now I must ask, is this the lawyers’ fault or the juries making it easy to win “life’s lottery” with a lawsuit. I don’t know that caps on lawsuits are the right answer but I would assert less monies to attorneys and more to victims would make lawyers less likely to shop for victims and more likely to pursue justice.

September 6, 2011 by admin Capitalism General Rant

Things you don’t know

It’s easy to watch the news and feel the economy is improving. Comically the performance of the Dow Jones is blasted at us each evening as the key indicator of economic success in America. It becomes more ironic when one thinks of Larry Kudlow shouting accolades of “Green Shoots” across the CNBC airwaves, but our neighbors are losing their jobs and homes. The Obama administration’s economic success is measured by the Dow, unemployment, and inflation. The numbers are reported as better than during the recession of the 1980s and especially better than the Great Depression. However, this is far from the truth.

Every evening the swings in the Dow are blasted across the airwaves as the measure of success of our country. However, the Dow has changed so dramatically no one should pay any attention to these numbers. The Dow is an index of 30 companies, originally started in 1896. In 1896 there were twelve companies in the Dow and only one remains existence today, General Electric. Since 1896 the “components,” or 30 companies composing the index, have changed 48 times. Thus, a more technology weighted or health services weighted Dow can look nothing like the Dow of bygone years. When one adds inflation, as the Dow is unadjusted, the numbers become completely meaningless.

The unemployment numbers are currently 9.1% and considered the holy grail of whether we are better off than the Great Depression. Most people don’t realize the methods of calculating the unemployment rate have changed. The most significant change came in 1994 when those out of work for more than a year were eliminated from the numbers, essentially reducing the count by 5 million and in 2003 the statistical models were changed. Using old methods brings the current U-6 rate to 23%, in line with the numbers of the 1930’s.

The consumer price index (CPI) is the measure of inflation and it too has changed. The market basket of goods is to measure pricing averages as this index impacts policy and more importantly government dole like Social Security and Medicaid. Alan Greenspan argued the historic methods were invalid because, for example, if the price of a steak increased then consumers would substitute with hamburger. A somewhat valid argument until one considers rent, heating oil, and gasoline where there are no substitutions. Changes were made by Carter, Reagan, and Clinton to ensure inflation was not “overstated.” Housing is indexed to “rent equivalents” and energy has been eliminated.

In essence, we are not comparing apples and apples to look at today versus yesterday. “There are three kinds of lies: lies, damned lies and statistics.” – Author Unknown

August 20, 2011 by admin Capitalism Depression Economic Development Great Recession

Higher Education Myth

Higher Education Myth (7/6/2011)

My daughter is 15, just finished her freshman year of high school. Like many parents with a high school student I am carefully watching her grades and doing everything I can to ensure she will make it to college. Over the last four decades the number of students going to college has increased, and so have the costs. I was the first in my family to attend college, earning my way on a scholarship and understanding the path in front of me: attend school, work hard, get good grades, and graduate expecting to find a good paying job. Even in the 1980s I was puzzled by the choice of major some would make, possibly liberal arts related and then wonder why they could not find a job. As an Engineer I was showered with job offers and an excellent starting salary (nearly $39,000 in 1990).

Today it appears college has become an entitlement program, fueled by readily available public financing and a willing consumer unqualified to receive a “real education.” In 2011 the average public university cost will be $20,000 per year, and a private school twice that much. Assume your son or daughter is following their passion into liberal arts and a 4-year degree will approach $160,000 with income prospects of $25-30,000 per year; if they are lucky. Sadly, there is an assumption these students are qualified for education, and more so entitled to a job at graduation. I recently heard this anecdote Continue reading…

July 6, 2011 by admin Big Government Capitalism Depression Great Recession

Wealth Disparity

Wealth Disparity (5/11/2011)

A drive through New Smyrna Beach demonstrates the extreme wealth disparity that can be found anywhere in America or the world. From the mega-wealth of beachside to the barely surviving poor west of U.S. Highway 1 radical contrasts in daily life are found. It is impossible to look away in a small town and not acknowledge differences, to ignore them would be unconscionable. Like New Smyrna, America’s numbers are mind-blowing: the top 1% controls nearly 33% of the wealth in America whereas the bottom 50% has just 2.5% of the wealth.

Don’t misunderstand me. I love nice things, eating out, a beautiful home, new cars, and a big bank account. As a country even our poorest live far better than the middle class does overseas, but such argument is not cause for turning our backs on the needy. Similarly, the populist envy driven by our current President does not justify excessively taxing wage earners, or the ultra-wealthy. The current raging debate has disclosed the failures of our progressive tax system: envy that the “rich” pay much of their tax through a 15% dividend, and sadly uncovering through subsidies and support programs a single mother of three earning $14,000 per year has more disposable income than a similar mother earning $60,000.

We need the successful to succeed, creating jobs, opportunities, and capital for driving the economy. Simultaneously an understanding and empathy must exist for those who need help. I do not have solutions, but must argue the debate is lost in political rhetoric and desire to drive pet projects. Taxing the wealthy at 100% will not provide enough revenue to fix the government spending problem and it certainly will not lift those in need. Milton Friedman argues in the movie, “The One Percent” the increasing wealth gap is justified because it has also lifted the poorest of poor. In earlier lectures Friedman, in characteristic fashion, shows at least that government creates a perverse system starting with bad schools, limits opportunity through minimum wage laws, and creates dependency via welfare programs.

The political debate from both sides focuses on our tax system and protecting special interests, Republicans arguing to keep tax rates low on the rich, Democrats seeking more. Sadly, both sides view 67,000 pages of tax code as the holy grail of government purpose and fail to understand simplifying the tax system and cutting spending will allow market forces to work toward solutions benefitting both rich and poor.

May 26, 2011 by admin Capitalism Depression Great Recession