The annual Gift Card debate

So the war is now raging, Violent Acres has weighed in:
Fuck the Cheerleader; Buy a Gift Card, Save the World - Violent Acres

And so has Liz Pulliam Weston, already the reason I don't read MSN money, she now claims to know that Gifts cards are not gifts. Now I don't think she's totally off-base, here's a great quote:
A gift, ideally, says, "I thought about you. I considered your likes and dislikes, your needs and wants, your dreams and desires, and found you this token of my esteem that I hope will delight you."

But she really takes the whole thing one too far with some other notable quotes:

Would a lover, in the flush of romance, lean close to the object of his affection and present . . . a gift card?...

Heaven forbid that givers use their own judgment and spend a little time picking out small items that might give the recipients pleasure. Just give us the cash and get out of the way.

Followed-up by some interesting advice:
1. Make certain events off limits.
2. Combine a card with a real gift.
3. Think twice before giving one to someone you love.
4. Don't add to the recipient's burdens.

V of course has some strong views the other way:
Every year for my birthday, I always get a gift or two in the mail from someone I haven’t spoken to in months. I find it incredibly insulting. All year long, these people couldn’t be bothered to call me on the telephone, shoot me an email, or meet me for dinner. Yet, they feel as long as they mail me a fucking candle on my birthday, our friendship status will remain.
...
And yes, I’m giving out gift cards this holiday season. Merely because I know most people aren’t yet at a place in their life where they can look into a box and simply say, “This is just an object. It doesn’t mean anything.”

Idea #4 is actually pretty key to giving a gift card, giving a $50 gift card to Banana Republic is like saying: here have a pair of expensive socks. But it's really no better or worse than just buying a bad pair of socks from BR and giving them as a gift.

Idea #1 is tainted by the adding that weddings should always receive gifts, which is exactly the opposite of what couples want. Most modern couples are paying for their own weddings and they're already living together long before they wed. So why do they need another toaster? Weddings are expensive gatherings, so basically every couple that I've known that married in the last 5 years (and that's like 10 of them) would have preferred cash or a good gift card over anything else.

Heck the fiancé and I were saving up about 10k to pay for our wedding expenses, the best gift (other than something hand-made and personal) would've been straight cash to help pay for the catering and the rental. Of course, this isn't true for everyone, some couples really are moving out right after marriage and for these guys, I'll buy a gift off the registry.

As to the rest of the advice and the raging debates, I figure that Liz has some useful advice it's just mixed in with being a little extreme. V of course, is practical as always (if a little evil), but doesn't always think highly of people.

I'll draw a line in the middle and say that gift cards are a fine gift as long as they're as thoughtful as the gift you would've purchased. Buying a GC is like buying a night out for friends or buying a week of morning Starbucks or a freebie nail job or a couple of reams of fabric for your next quilt. Buying a $50 GC to a $50 / plate restaurant is just as bad as buying diamond studded earrings for a girl who doesn't have pierced ears or giving a crisp, red $50 to your independently wealthy friend.

The nature of the GC is not inherently that it's a bad gift, it's that it's gift that requires thought just as much as any other gift. Bad gifts are bad gifts, cash, cash-equivalent or wrapped in a big box. So just buy gifts that are appreciated (and take the time to wrap them, it shows that you care)

Of course, YMMV

Bill Gates on Innovation

So a few days back, I wrote a post attacking a piece that talked about stifled innovation.

And I stood up and defended a lot of MS work. Well, lo and behold, here's Mr. Gates himself singing some of the same tunes: Bill Gates on Innovation | WebProNews (Printable Version):

Anyway, tablet computers, is there somebody else out there doing tablet computers? IPTV, is there somebody else out there doing — by definition what we do is the baseline. Everything Microsoft does is the baseline, and what we don’t do, that’s what’s innovative I guess. (Laughter.) And by that definition the other guys do all the innovative things.

It's obviously a slightly different take, but he's really got his finger on something: MS generally doesn't get credit when it does new stuff. So for the most part we look at MS and just see all of the common, everyday old crufty stuff that we figure is there.

Look, I'm not a Vista nut, but I also haven't counted MS out of the software world.

Just a blatant plug

MDJ’s First Birthday! | Million Dollar Journey

So one of my favorite reads is celebrating their first birthday. And what can I say but "free stuff"!

Plus he's worth a read, not just for his own experience but for the great guest posts he has going on.

Blog link: The 10 Key Actions That Finally Got Me Out of Debt; or, Why Living Frugally is Only Part of the Solution | Zen Habits

OK, here's a great one from Leo @ Zen Habits:

The 10 Key Actions That Finally Got Me Out of Debt; or, Why Living Frugally is Only Part of the Solution Zen Habits

In particular, here's a great quote:
"And one of the most important steps, as mentioned above, was increasing my income in multiple ways, in a series of steps designed to get my finances in better shape and to pay off debt faster."

When you're overweight and trying to fix your problems you can't just eat to get level, you have to eat less. You can't just fix the "overeating habit", you actually have to starve yourself to counteract the overeating. It's like creating a bad habit to fix the other habit. Usually a good weight loss plan involves exercise too though... it's not just "eating less".

And I think this is what Leo's really talking about and it's not something that many people mention. The journey out of debt/weight problems (same thing BTW) is fraught with perils and setbacks, but it's also something that needs to be fixed from two directions.

When you talk about overcoming challenges there are always two things that you can do:
1. Remove obstacles
2. Increase forward momentum

Living frugally is equivalent to doing #1. But finding a way to make more money is equivalent to #2. What I really like is the way he talks about making more money:
The key is to find something you’re passionate about, and pursue that with all of your heart. That might mean educating yourself, and learning new skills. That might mean finding mentors, and starting at the bottom. But when you’re passionate about something, you’re more motivated to learn and to succeed. Really pour yourself into it, and you’ll find a way.

And here's where he's nailed it, this is where you do #2. Work both sides of the problem. This is what I tell everybody b/c we just don't hear it enough. Don't just lose weight, work out too, it makes the problem much easier to resolve.

Of course, as always, YMMV.

Musings: Ten things holding back tech

So this little ditty has made the rounds, but really, there doesn't seem to be much there. It's a lot of personal philosophy mixed with big picture problems and insufficient or inadequate solutions.

Ten things holding back tech - ZDNet UK

I guess the easiest way to start is to work our way from the top.

1. Microsoft's stranglehold on the desktop
Windows unified the personal-computer market, and led it into the enterprise. A good thing, surely? Yes — if unity is more important than innovation, flexibility and a free market.

This is dutifully followed by multiple European Commission references and the whole "monopolies are bad" thing. This is both an over-simplification and a philosophical imposition. Of course he segues this right into #2

2. Operator lock-in
But I want to stop it right there.

Microsoft's stranglehold on the desktop has enabled the very advances in technology that we're seeing. Having one platform has made the software process less costly and therefore more open. So in many ways this drives innovation, flexibility and the free market.

If I can make software for one or two platforms and only have to test/maintain it on those one or two platforms, then the cost to produce my software and make it competitive is significantly lower. With MS dominating the desktop market, it's easy to make new software that reaches 90%+ of the audience by just making for Windows.

If we started the whole thing again and made a world where 5 different OS vendors each had 20% of the desktop market, we'd eventually end up with 2 OS vendors again and they would either have a split market (Coke, Pepsi) or one leader and one little guy (MS, Apple) with a smattering of small budget competitors. This isn't "right or wrong", it's just the way things are, especially in the realm of "platforms" (OSes, web browsers, etc.)

Supporting multiple platforms is very expensive, it always has been: scroll back to the 80s, look at wars between Unix variants, it hasn't changed. So I fail to see why "unseating" Microsoft as the crown jewel is going to "fix" problems. If MS lost 30% of the desktop share to Apple and Linux variants, the world wouldn't magically become a "better place", if anything, small tech companies would be griping at the difficulty of making new software and reaching a big enough market to support any growth.

And I'm not saying that MS is the "good guy" here, they're not. They've cleared played very dirty for many years (but hey, that's what publicly held companies are basically required by law to do). What I am saying is that MS is not holding back the innovation front. Do a quick run of the MS research site and you'll see that they're not sitting on their laurels. If anything, they have too much going on and nobody can really keep up.

He quotes the required Vista failure lines: As Vista so readily proves, rehashing the same idea again and again does not make for progress. And unless you're a Dev, Vista was really a bust. As a dev though, I can tell you that changes are afoot for Windows desktop apps in the coming years and whether Singularity becomes the new OS of choice or everyone just skips to Windows 7, there's a lot going on under the hood that we won't see for a few years to come. But if you haven't played with WPF, then you won't know any of this, so give it some time.

3. Input methods
We haven't come far. Qwerty is 130 years old, and windows, icons, mice and pointers are 35. Both come from before the age of portable computing. So why are we reliant on these tired old methods for all our new form factors?

Hey buddy, the same Windows Vista that you're mocking in the previous point has voice recognition built in to the OS level. One of the popular Dot Net bloggers Scott Hanselman has a post about it here. He uses a microphone for much of his work. MS has also had a Tablet PC edition available for years, and again the features are built-in with all versions of Vista.

If you want a new input method, go out and buy yourself a tablet, you can get them under a $100 dollars and having used a few, they're definitely a new way of inputting. If that's not enough for you, check out Microsoft's Surface.

Point being, we're not reliant on the Keyboard and Mouse for all inputs, they're just the cheapest implementable methods available. Yes, there are tons of other things that we could be doing, but I think that it's pretty obvious that we're working on them. Supporting a "touch-based" or a "voice-driven" user interface is not an easy problem. It's a really hard problem and we're not "being held back", we're "evolving better solutions".

4. Battery Life
Yeah, you got me here, if we could triple the amount of energy stored in a Li-Ion battery, we would definitely have a different computing environment. But for anyone who knows the basic chemistry here, this is not an easy problem.

Short of a completely new battery technology, we're don't really have any more doubling room left. However, we do have the ability to get more mileage from our batteries: OLED screens promise better usage than TFT LCD we typically use and portable music players have been shown to be able to drastically extend battery life when using certain compression algorithms. And of course, we've made huge leaps in the last few years with making more efficient computer processors to help extend battery life.

5. The mania for speed
Faster processors are great. However, there is more to computing than processor speed — a point which can be easily proven by comparing a two-year-old PC running Linux with a new PC buckling under the weight of Vista. Shrinking the manufacturing process to enable greater speed has proven essential, but it's running out of magic.

...smarter, not faster, will lead to both smarter and faster.

Yes we're well aware of the size limitations on the processor, but if you haven't noticed, the "mania for speed" stopped a few years ago when Intel abandoned the P4 architecture and moved towards the Core and the Core 2. At that point they joined AMD in making multi-core, more power efficient processors in an attempt to address points #4 & 5.

The cheap shots comparing Linux and Vista are just that: cheap shots. Linux and Vista are not competitive desktop OSes, Vista and Mac OS X are competitive desktop OSes, I guess he's counting on the Slashdot crowd to back him up on the Apples-to-Oranges comparison.

Point is, between various SSE and the move to 64-bit and the move to multi-core and the creation of things like physics processors, we're clearly making a lot of movement in the "not faster" category.

Ok let's skip ahead:
9. National interests
10. The current lack of global wars and/or disasters
Yeah, again, you got me... technology is being impeded by political interests. This isn't new or novel, this has gone on for as long as we've known. Galileo's pretty famous for his sacrifice, but these are pretty disingeneous arguments to make when we live in an era of relatively high freedom and access to information.

And now for more of the opinions:
8. Web 2.0
I think that I can let most of this just speak for itself:
Speaking of daft innovations that do little to better the lives of humanity, Web 2.0 has a lot to answer for...But the extremes of enthusiasm shown by financiers and business people are verging on counterproductive...It's nice to see the vanguard cashing in. But they're not really worth their valuations or the mountains of cash they have received from venture capitalists, whose money could probably find better use in other areas of technological innovation.

Yes, b/c making the web into the new target platform isn't really that significant? Oh no, you're just saying that it's a waste of money. I thought that you wanted innovation, flexibility and a free market, but I thought that it took money and competition to make these things happen. Are lots of companies going to fail, are lots of investors going to lose lots of money? Sure, but that's just par for the course, being angry at "Web 2.0" is like being angry at every major technological boom: radio, the railway, cars, they all had their big booms and their big losers.

This will be no different, of course, I can assure you that people throwing billions of dollars at technology is not "holding back tech" as the title of the article would seem to imply.

7. Skills inequalities
Applications and technology might become more intuitive and creative if more women were involved in the industry. Diversity breeds innovation...
The more IT listens to and gives power to those it has traditionally excluded, the better it will be suited to solve real problems for us all.

Yeah, yeah, if more men were involved in the nursing industry the world would be a better place, right? Just more cheap shots and more of the same "classic" problems. Take that last sentence and replace IT with any major industry: healthcare, education, engineering, public services. It's basically a straw man sentence with no supporting arguments.

The author cannot even be bothered to find a single link in this section that supports his statements, espeically the whole "if more women were involved" sentence. I just can't argue with "logic" like that.

And lastly, we'll end on a good note:
6. Intellectual property law
Here he's correct.

Laws regarding IP are not currently capable of correctly handling modern technology. This is not just for technology, this is for all of the arts. Consider that the laws regarding copyright and patents were developed before the advent of the microchip, before scanners and photocopiers and digital cameras and even affordable home cameras.

If you, faithful reader, were writing Intellectual Property laws in the 1850s, how would you have accounted for all of these things?.... yeah, I wouldn't have been able to either... so it's probably time to re-write most of this stuff, but many of the politicians responsible for making these changes are just not technically capable enough to institute the changes... kind of a shitty deal.

Of course, we'll need this intervention sooner rather than later, b/c not only was IP law not written for the current tech, it was written before the advent of computer code. So that means that all of the computer code powering all of the highly capable computers is all hovering in a giant legal gray area b/c no one's really legislated a good answer for the whole thing (again, not like the people drafting the laws have the required technical know-how).

So there we go... the "Gates on Stuff" Top 3 List of Things Holding Back Technology:
1. Battery life
2. Politics
3. IP law (read politics...)

OK, new list:
1. Battery life
2. Politics
3. Really shitty tech writers

Of course, YMMV.

What is Your Tipping Policy?

This one is in reply to a post on Million Dollar Journey:

Ask the Readers: What is Your Tipping Policy? Million Dollar Journey

Wow man, didn't you read the MyMoneyBlog post on this thing? It was a S***storm, you've just opened a giant can of worms :)

Cabs
As a guy who's never owned a car, I've taken a few cab rides in my life. I talk to all of them, most of them don't own their cab (in Winnipeg or Edmonton). It's typically closer to one guy who owns 5-10 cabs and all of the cab drivers are on for 12 hours b/c they can't make a living wage on 8 hours shifts. This may be different in TO or Montreal, but I always give a good 10-15% (sometimes more for short rides). You're trusting your life to these guys and they don't get paid very much.

Fast-food
The standard McPolicy is that tips go in the charity bin. The only exception is when the patron insists, then you can take the tip just to get rid of them.

Me I don't tip my Starbucks baristas, but when I go to the Gourmet Cup across the street, the one that charges me a buck less for my latte and always has top-notch fresh-baked goodies and is clearly run by the guy who serves me... well he and his staff will get a tip. Often I'll just give them the buck they saved me :)

Delivery Drivers
Are intentionally underpaid, so I throw them a couple of bucks. Around here, the pizza place tacks on like $2 for delivery which is clearly not paying the driver very well, so I throw him a few extra. If the delivery charge were $5, then he'd get nothing.

Waitresses
Waitresses are like the annoying black hole of tipping. My sister's a waitress and she makes great money (her best gigs made more per hour than I did as a computer consultant!), of course, I've watched her work and she's amazing... most waitresses don't meet that quality bar. But I'm still iffy on the tipping thing.

What annoys me at a deep level, is that I don't really go to a restaurant just to be waited on, I go there to talk and to eat great food. For my night to be good, I don't really need a good waitress, I just need one that isn't inept. Heck, if I could replace the waitress with a computer ordering system and just have someone drop off drinks, that would be just fine.

Personally, what makes my night is great food, and if anyone deserves the tip for great food, it's the cooks. At least around here, the people I know working the kitchens don't make great money. Unless they're independent or "high end", they're pushing just above 30k and they're working weekends and holidays and all kinds of crappy shifts. If anything, these are the people that make my night, why don't they get the tip?

And (400 words in) this is where things get really complicated. Different restaurants and chains have different procedures for tips and tip distribution. Now to start, if it were up to me, everyone involved in the services industry would make a fair working wage and the managers would simply be responsible for paying more money to good waitresses (just like everyone else does in every other industry). But barring legislation, that's pretty much just a pipe dream, so here are the details.

Waitresses at most places are required to "tip-out" based on their total receipts. Cooks will get 2% and the bar will get 2% and hostesses will get 1% at like a typical Earl's, Montana's, Boston Pizza, etc. This may or may not be after total receipts after taxes based on who's calling the shots (of course including the taxes just dilutes the tip even more and it's pretty shady). So the passive-aggressive 1-cent tip is not just insulting, it's financially damaging (yet somehow legal).

And that's where things get funny: financially damaging. Where I live in Edmonton, there is no minimum wage (or at least nobody works for it) as we have a massive boom and a big people shortage. So even with a 10% tip, the waitress can still take home $2.50 on my $50 order and she makes $11/hr (base) + $2.50 * number of tables which can easily push her into $25 range for handling like 6 tables (of which $14 is marginally taxed). Now that's just an average joint, even in Winnipeg, renowned for its cheapness (not frugality, just outright cheapness), a quality waitress can make $23+ / hour even with a base wage of $7.

Of course, once you factor in that $16+ of those hourly dollars are cash tips and are mostly untaxed, then your waitresses end up making the equivalent salary in the $30+ range. That's $30+ dollars / hour for an entry-level job with a small amount of responsibility. A lot of waitresses are making more than the guys who prep and cook the food.

So we come back to my previous thought, don't the guys cooking the food deserve most of the money? I mean, isn't their job just a little bit harder? So here's the math:

• Your meal cost: $100
• Waitress salary: $7
• Cook salary: $15

If you tip 15%, the waitress keeps 10% and ends up with $17, the cook gets 2% and ends up with the same number. As you add money to the cost of the meal, the waitress makes more and more relative to the cook. In fact, the only salvo here is that the cook should be able to cook more tables than the waitress is waiting and will therefore catch up (a little). But you're still throwing a lot of money at the person who didn't really do much that you couldn't have done yourself...

If you're like one of the crazy MSN writers and you figure that 20% is the new 15%, then the waitress ends up with $22 and the cook is still stuck at $17. (Of course, she's writing from the US where the minimum wage for wait staff is typically 50% of the regular minimum wage)

*sigh*

After this whole bit, I basically don't want to starve anybody, so when I'm tipping for a night out, I tip 12-15% and that's it. If I get really good food (better than expected for the price), then I'll add tip money specifically for the cooking staff (as written on the receipt), but this seems to happen pretty rarely.

It's not a perfect system and I have to vary slightly for specific places (i.e.: family-owned joints), or for when I'm sucking up a table for a long time (i.e.: watching a football game at the Boston Pizza). However, I think that it correctly accounts for the way services staff are paid and the amount that I feel they should be paid.

Of course, YMMV.

A reply: Why Isn’t There Universal Personal Financial Education?

Why Isn’t There Universal Personal Financial Education?

I think that there's something else here to consider Tim. And I think that it's the fact that we can't all save 10% or 20% of our income.

Picture a world where everyone saved just 10% of what they made and lived completely within their means. And I mean everyone. What happens?

Nothing... in a literal sense. If everyone has money and nobody needs it (b/c they don't borrow, they live within their means), then who pays out the interest? I mean, maybe a mortgage or an education might be funded in the first generation, but after that, everyone would just be able to gift their money down, so who's paying interest in a world where nobody is borrowing money...

So have I got you thinking here?

So what do you do to get ahead in this world? Well you run out and borrow tons of money, then you start building businesses and paying it back. Of course, so do other people, so the interest rates move up, but only to some equilibrium point.

Of course, now these high-rollers either go broke or make it big and at some point they stop, b/c they need to do something with their money. So the wealth gets shifted down or around and everyone but the businessmen are saving their pennies and living "risk-free". Well at some point, people in the middle (not broke or rich) are bound to say "Heck, I want a bigger car, so I'm just going to save 5% instead of 10% what do I need all of this money for."

And this is where we get "keeping up with the Joneses". Eventually the people in the middle all fight to be like the rich guys and the other people in the middle and then everything just churns at a higher rate.

Is it good or bad? Well short-term we produce more (don't know that this holds longer term), but people living check to check are definitely the lifeblood of the economy. These are the grunts who need to show up each day or they won't make the rent, these are the producers. For the rich to be "independently" wealthy, they need to leverage all of these grunts. Our stock dividends are built on the back of these people.

If the grunts all had enough money that they didn't need to go back to work, then they probably wouldn't. And of course, stuff would stop. The economy, to some extent, is driven by consumables. Now admitedly, we've created a lot of consumables in our "disposable society", but even under the cruft, we still need food and new shelters and medecines and condoms and tools and replacement parts, etc.

We PF bloggers are wrecking the curve, we're trying to to break the paycheque to paycheque lifestyle. But what we do simply does not scale infinitely.

So this:
in the end we need stupid people to make money off of so you and I are the reason there is no universal financial education
is basically correct, but it ignores two "big-picture" issues.

#1. More knowledgeable citizens are capable of making more fiscally responsible decisions. If the populace in general had a better understanding of monetary issues, our government would be held to a much higher standard. As it stands right now, I can't trust most people to understand an RRSP let alone understand the vast implications of inflation, the central banking system and just government spending in general.

#2. Productivity Lost to Overhead
If you consider many banks, insurance cos and mutual fund salesmen as useless overhead, then increased financial knowledge would lead to overall increases in productivity. Instead of selling unnecessary contract, these people could build more roads or research new products.

End of the day, I figure that Canadian Dream would agree with me that it would be nice to provide more people with the personal finance knowledge that they need. Of course, the very people suffering from this lack of knowledge are the people that don't know what they're missing. And of course, it will never become part of the public school system, b/c the voters don't know that it should be there.

Of course, as always, YMMV.

Save big on a tiny income ???

So maybe I'm just an eternal critic, but I caught this one off the wire and I had a good laugh, though there are few gems here too:

Save big on a tiny income - Savings & Debt Insight - Sympatico / MSN Finance

FTA: When I wrote an article describing how some of us could save more, I got an earful from frustrated readers, many of whom don't earn as much as the rest of us.

"If I had that kind of income I could save easily. Try (saving) on the incomes of most of us working, single moms, which is more like $2,500 a month! Cut our expenses? How???"
Carrie Bowers, 29, of Colorado, added: "How would the average service worker go about saving for retirement, a child's education (or even (her) own in hopes of moving up in the world) on less than $18,000 a year? Some financial advice for the public-transit set would be appreciated more than you know."

Now I read the original Dunleavy article for which she received the "earful" and it was pretty prissy. Of course, now she tackles a far more complex issue and basically fails to satisfy needs. I mean, imagine that you are making $18,000 / year. That's less than $9.40 / hour, that's $1500 / month to feed you and a kid (and pay taxes).

Now here's the advice that you're given:
- Stash a dollar in a jar every time you do the laundry
- Save all your $5 bills in a coffee can.
- Create bank errors in your favour. "If I spend $2.16 on a coffee, I deduct $3 (in my check register),"
-Switch from paper to plastic

Because you somehow have these "extra" dollars sitting around with 18k / year, right. And I doubt that the plastic will be necessary (if the 29-year old making 18k actually qualifies), the truth is, she probably makes like 8 purchases / month: 4 grocery runs, 1 rent cheque, 1 "bills run", 1 bus pass, 1 misc shop. She doesn't need a credit card to control spending, she doesn't have any money to spend! ($3*20 on coffee = 4% of pre-tax income!)

This one sounds like a great idea:
-"Don't forget gardening as a money-saving venture,"
Until you realize that single Moms making 25k/year don't exactly have houses with gardens. At the least she could suggest some public programs that offer free "gardening space" for families in need (and yes these do exist).

And spoken like a true "rich kid":
-"Look at the Pottery Barn catalogue, shop at Goodwill,"
-Buy generic instead of brand-name products.
-Buy non-perishables in bulk

Like anyone living on less that $400/week hasn't figured this out already. I'm pretty sure this strategy is part and parcel with keeping our two commenters off the street. Of course, when you can't afford a car (and on 18k, you can't), buying bulk goods is really a pain unless you're really lucky and the bus happens to go to your local Costco (which doesn't tend to happen b/c buses and warehouse districts don't tend to cross paths). The only saver here is this:
-Share the savings. ... buy toiletries and such at a warehouse store and divvy the spoils up with friends.

Which can at least mitigate the transportation and storage issues ('cause you don't have a lot of square footage when your monthly rent budget is under $600).

Am I being overly critical? Well OK, I'll throw out a couple of bouquets: "Make your savings automatic". is a good, if standard piece of advice. I guess if you pretend that you only have $1400 instead of $1500 each month that you may be able to parlay that $1200/ year into both a retirement fund and a university education (but good luck). She also suggests making "trades" (i.e.: bartering your time: cleaning for daycare time), which actually has useful applications but obviously doesn't scale.

Ok, so I can hear the readers now bored with my criticism: What would you do, oh GatesVP the smarty-pants???

Simple answer? Find a way to make more money.

What? What kind of answer is that?

It's a realistic answer, if you're 29 & single, with a kid and you haven't cracked $10/hour then the only way you're going to get ahead is to find a better paying job or move up in the job you're working. You can try all of Dunleavy's silly tricks, but all you're going to be doing is cutting more corners. You're not putting your kid through expensive American college, you're not "quitting work at 65".

At some point you have to figure that you're not going to make ends meet, and I think that 18k has hit that point. I mean really, even a 30k single mom with multiple kids has probably hit that point.

I know a guy who started managing his own McDonald's at 23, making 30k+. In fact corporate McDonald's stores have good family health coverage, good training, good benefits plans and managers even get a car after a few years. Now 23 is young, but I have met tons of McManagers under 30 (even some with kids) and I've even met a district manager under 30 (50k+ bigger car).

These are not prestigious positions, these are entry-level, show-up-to-work-and-we'll-train-you positions. These aren't kids with university degrees (those ones are working elsewhere), these are the ones who put in their 40 hours, go to paid McSchool and work their way up the chain is 5 years or less.

So at some point you have to ask yourself when are you going to start running your own McDonald's (insert career here) and build yourself a future?

Yeah I know you can't save for your own education, but if haven't noticed, we have tons of government programs and funding for single mothers in just this situation. Maybe it's just a Canadian thing, but you certainly don't have to starve to get an education, you just have to put in the time and pass your courses. And we also have nearly draconian laws when it comes to child support, so hearing about mothers not getting child support, while others are receiving money they're not supposed to (yes I've heard both), just burns my bacon.

Now I want to be clear here... I make 54k/year (18k * 3) and I don't own a car and I don't own a place (I rent an apartment with my fiancé) and that's how I (we) get ahead. I live close to work and do all of my grocery shopping on foot. We bus to the mall on weekends for "stuff" runs, but we've mostly cut that out now that we're done furnishing the apartment.

I'm cutting a bunch of big corners to help me get ahead, but at 18k / year, you're just not cutting it. There's simply not enough money there to live a healthy lifestyle and save.

It's cute that Dunleavy tries to help, but I think she missed the point of what it means to feed multiple mouths on 30k/year. It has nothing to do with cutting corners b/c you're already cutting tons of corners. It has everything to do with making enough money to support your needs and then making a little bit more.

Why I don't read MSN Money

Make builders, lenders fix the housing mess - MSN Money

Wow, so I just read this Jim Jubak guy and reminded myself about why I read the PF blogs instead of the MSN Trash. FTA:

Remember Enron? The company claimed revenues of $111 billion in 2000 only to file for bankruptcy in 2001 when it turned out that revenues, profits and asset holdings were either wildly overinflated or didn't exist at all.

Losses to shareholders were variously estimated at $60 billion to $80 billion. Those are huge numbers. But when you add up all the fines and settlements paid by the parties the courts decided were responsible for at least part of the fraud, it comes to less than $10 billion.

Right good, the SEC has no teeth, it can't prevent you from losing money if the company lies. No shit, welcome to 2007. Enron, Worldcom, Nortel... all names to make you wince, except, oh yeah, this crap has been happening for decades.

He basically uses this opening paragraph to run off into a segue about Beazer and other home builders and he actually brings up the fact that Beazer employers violated federal law and that shareholder are out billions in the drop:

Whether the fines Beazer eventually pays are $15 million or $150 million, however, they won't do anything to help investors recoup the $1.5 billion they've lost in the stock as it plunged to $8.38 on Oct. 17 from $47 a share at the end of 2006. The best those folks can expect from an Enron-style settlement is pennies on the dollar.

Again, no shit! Welcome to the shark tank, this isn't new, the company cheated both the consumers and stock holders, surprise, surprise! If you thought the SEC was going to be your magical shining knight on a white horse and save you b/c the company "cheated", then you were sadly mistaken. I'd feel for you and deliver my sympathies, but it doesn't really take a genius to know that this stuff has happened dozens of times since the SEC was instituted in the 30's.

The SEC has no teeth, they cannot recover the money you will lose when a non-solvent company reveals the level of their "cheating". The SEC is not a risk management tool. You've been told.

So now, Jubak wants the greedy lenders to made responsible for fixing up new deals for the people to whom they gave all of these bad mortgage loans. Of course, he's not actually giving specific ideas on how to do this, let's put the onus on the cheats, right? This whole "good ideas" thing is pretty hard.

How the heck are lenders supposed to help? These are people who signed up for mortgages without taking a credit check? You bought a house worth several years of your salary without a credit check!?! Clearly these are people who missed the whole Caveat Emptor life lesson and no lender in their right mind actually wants to help these people out, that's why they had to cheat to get the loans in the first place, duh!

Obviously, the lenders took advantage of people with a poor grasp of financial concepts or people who were too greedy and wanted a place they couldn't really afford. In either case, malice or ignorance, there is only so much that you can do to protect people from themselves. It would be great to catch all of these dirty business people, but it's really a loser's game, there's just too much money in housing (and cars) to keep the sharks out of the tank. Plus, if you're going to take a mortgage without running a credit check, let's face it, you deserve to be broke and homeless for a while.

Sofware IS a Service

Here's a quickie reply to Jeff Atwood's blog posts on the decay of software:
Why does software spoil?
Are Features the Enemy?

Of course, what he's talking about in these last two posts is basically endemic to the way in which packaged software is sold. It's not the very nature of software, packaged software is sold as a physical good, but it's not.

All of this feature bloat is an attempt to justify future sales, but sometimes problems arise from below as well. For all the "stableness" of packaged product it's all running on shaky ground. Hardware and software are evolving so quickly that even stable software will die. But that's the fundamental problem!

Building and then packaging software is analogous to building a house on top of a sand-dune and then selling the house. When the house inevitably crumbles we run out and sell a new house. Of course, the crumbling may have nothing to do with the quality of the house itself, it's just that you built it on a fricken sand dune!

This is why we need to move to subscription-based software services. I can't buy software for $100 today and simply expect it to function correctly on my new computer 10 years from now. Software isn't like a shovel or a bed or a fridge. Software is organic, it grows, it evolves, it lives within an eco-system of other related software.

For software to grow correctly, we need to move to a subscription model so that we can afford to keep programmers as tenders of the garden as well as tillers of the new land. Right now, we're not tending our gardens. The packaged software guys are being constantly forced to till new soil with no one left behind to tend gardens. But again, this is because we're pretending that selling software is like selling a shovel.

Good software doesn't need to spoil, instead it needs to be sold in a way that will allow it grow and to be tended. Maybe I'm just a dreamer, but imagine a world where Quicken charged an annual software fee? Then instead of "sun-setting" features, they'd just extract cash for keeping their software up to date and ensuring that it satisfies current/future customer needs.

It'd probably be a better software world, it's just a long ways off.

The DSM sucks

Here's a neat read from ShrinkTalk.Net

http://www.shrinktalk.net/archives/the_dsmivtr_is_stupid.phtml#comments

There are two sides here:

1. You're angry that you didn't get published. I'm sorry that it didn't work out for, I understand, but bringing up the bird journal just gives fuel to the opposition. That anger kind of "dequalified" point #2

2. The DSM is basically a piece of crap.

And it is, that book is the reason that I went into computing instead of psychology. 10 minutes and a little searching and all you're left with is "Man this is screwed up and useless, I can have two depressed people with totally different depressions"

The DSM is basically crap, but it's really just a small piece of the puzzle. B/c let's face it, most of North American medicine is crap. To follow up Amber's comment, I'm living in Canada (Edmonton) and I think that Canadian doctors over-prescribe (the American system is just a giant mess I don't want to touch).

But ironically, I think that the problem doesn't stem from the doctors, it stems from human nature (the pool from which we select doctors). Human nature is to desire the quick fix and the nature of the world is to favor the "gradual change": people want to wake up 20 lbs lighter, they don't want to lose weight; they want to "become" happy rather than "discover" happy. Like all classic dual-edged swords the "quick-fix" is both a source of success and failure.

So when it comes to medicine and health, people think the same way: "quick fix". We have pill for this a procedure for that and everything is fine. Human nature has reduced the concept of human health to a giant book of problems with an associated "lookup" for solutions. And it's done this under the very concept that such a "solution-lookup system" could feasibly exist and could feasibly be managed / maintained by doctors.

I can't be done. Sure it could theoretically be done, but it can't actually be done. At some point (as with all things) you have to cut your losses and work on your strengths.

Now sure, I'd love to yell at the doctors for believing that they could index all of humanity's problems, but hell We The People are basically yelling for it. We, the human race are just a bunch of "quick-fixers", that's our nature, heck that's our strength. Of course, at some point, we too have to cut our losses.

And this is where "modern medecine" has failed us, b/c our current medical scheme is highly focused on quick fixes. People (doctors) feel important when they are solving problems. "Processing" patients makes you feel good, it makes you feel like you're saving lives and making a difference. Of course, the problem with that logic is pretty clear: isn't the best news usually just no news at all? Wouldn't it be better to just have less people needing to visit the hospital?

Of course it would, but we (typical north americans) haven't built our system or our lives this way. We don't build for longevity, we don't "grow", we leap damnit! And that's why we're in trouble, we build bad foundations and then band-aid them up.

Think foundations:

1. Diet
2. Sleep
3. Activity
4. Mood

These things affect basically everything. Heck, these are the fundamental cycles of life, we eat, sleep, move around a bunch and act happy/sad about the whole deal.

So when you come in complaining about a headache, what does the doc ask you? He asks for descriptions or prior history, he's mostly trying to figure out what strength of pill to prescribe. But what he should be asking you is the above 4 questions. What he's fundamentally trying to do is return all of these to healthy norms.

Yeah, it doesn't always work, yeah some things are bigger, but unless we're trying to "normalize" these 4 factors, then how do we know what's causing the problem? How do we know what we're actually fixing? If your jaw hurts and you have a headache what's the problem? Unless I can ascertain that you've been sleeping well, eating well, treated your body well and were mentally positive, then how can I possibly evaluate the cause of your situation? Both of these issues could be caused by any of the above problems, face it, you could be having a headache b/c you aren't sleeping quite enough, but the doc probably just assumes that it's b/c of the jaw pain.

Yes to argue semantics I can't actually evaluate the exact cause of every ailment that you may have. But the least that the medical profession could enforce would be to throw out the most salient factors of variability. Anyone with a long-term ailment should be keeping diet/sleep/activity journals with a daily thought blurb. The goal, front and centre, should be normalizing these behaviours so that we can actually pick out the abnormality.

But we don't do this b/c it isn't quick. People, let alone doctors, don't want to keep these complicated journals and track their own progress, they don't want to get better, they want to be made better. So that's what the doctors deliver.

Deep-down, it angers me to no end that some of the smartest people around (doctors) can't actually behave like the smart people they are and learn to correctly guide the populace instead of buying into their weakness. But that's the fundamental problem, we don't just need doctors to pull out rotting teeth or replace broken hips or prescribe one-step solutions, we need doctors that can guide the patient on all levels but that's not what's happening.

Getting Defensive About Spending Habits » My Money Blog

Jonathan at My Money Blog, just posted up a little piece about the flack that "frugal financial bloggers" have received lately.

Here's the link: Getting Defensive About Spending Habits » My Money Blog

And of course, the reply:

OK two points:

1. As an aside, the culture of people who save tons of money are benefiting from those who don't. Don't get me wrong, we could probably double the number of Jonathans in the world and still not notice. But when you buy stock or bonds, or rent real estate, you are benefiting from someone else's sweat. I'm OK with that.

2. We hit this vein when we talked about "frugal tips" and "lifestyle" a while back. At some point you have have to "do something" with the money that you're earning, and there are two sides to this.

Some people don't "get" that people do all of this saving b/c they don't have their own savings goals. But by the same measure, many people in the PF blogosphere are absolute horrible role models for showing off their savings achievements. They save all kinds of "retirement money" but then never talk about what they actually want to do in retirement.

How the heck can you be sure that you're saving enough for retirement if you haven't even defined what retirement means to you? Why are people saving all of this money when they don't have anything they want to do with the money? Most PF bloggers don't even list their interests anywhere in their Bios, it's like the only thing they do is "work and save money".

The typical PF blogger makes almost zero posts about the things they do buy, they just keep throwing out money savings tips and net worth updates, but they don't give us pics of the new rental property or the x-mas toys they bought the kids or the new car they bought in cash(!).

To the outside world, the average young PF blogger just looks like a freak. Like some money-saving hole with 100k in the bank and no dreams outside of owning a home. They post up these stupid "Net Worth IQ" plug-ins, but they don't actually have top-level links to the posts where they talk about their "dreams for the money".

Now, the two sites that are linked to? Yeah, they're probably taking some undeserved flak. But check out the "About me" pages on both of them. Not a word about what they do with their money, not a word about their financial goals, or their dreams or what they want to during retirement or where they want to be in the next 10 years.

That's horrible! That stuff should be front and center! Many bloggers actually do have them "sitting around", but that's not enough, that's not real, it need to be front and center.

David and Trent (the bloggers being linked to) are evangelists for the Frugal Lifestyle (tm), but they're not doing anything that makes me want to be like them. They've put frugality front and center as if saving money were some type of self-fulfilling cult. Check out Trent's post here. He puts like 1000 words into explaining his investment portfolio but at no point does he mention what he's actually planning to do with the money! He's just templating some "savings plan" and saying "this is good, it works", while completely ignoring the purpose of the money he's saving.

I'm sure that his aims are valiant, but "regular joes" simply can't buy into this concept. These uber-savers simply don't seem human, they don't have any desire connections (material or philosophical). They're not "saving money to buy their XBox 360" or "saving their money to help save the whales", they're just "saving money". And average people don't buy that b/c it's not really rational, you don't save money "just because", you save money "for something".

When you're writing a blog about frugal living you have to put the goals front and center. People have to see that you have something other than just numbers on a ledger. They have to see you saving money AND spending money. Otherwise you just look like some kind of freak.

American economics and the USD

This whole post started with the following post on MyMoneyBlog.
Hedging Against The Dollar: Opening A Foreign Currency Bank Account vs. Buying A Currency ETF » My Money Blog

Look guys, I've mentioned this before and there are some great links already posted. The US economy has some serious issues and barring a massive war to claim vast booty and slaves, the purchasing power of the dollar will decline.

What does this mean? It means that means that more Chinese people will be able to afford the 10th generation iPod and less American people will be able to afford the same iPod. Peter Schiff pretty much nails it: as the value of the USD goes down and goods become relatively more expensive, other buyers with stronger currencies will swoop in and buy those goods.

Why is this happening? That's very complex, but here's a very simple explanation: You are fat and in debt. (same thing) You import more goods than you export and you've been doing it for years. You bring in 10 bananas each worth a dime but you're only bringing 90 cents to the deal. You then give out an IOU for the other 10 cents.

This basically means that you owe people lots of money (40% of the US national debt is foreign-held), but people aren't going to just take cash, b/c the value of that cash keeps dropping. They want stuff. They want oil, gold, food, they want services (skilled american workers), etc.

Cash is just trust. The US handed out a bunch of IOUs for cash, but they're not worth anything if nobody can cash them in for stuff. Of course, the world has been accumulating these IOUs, but they haven't been able to cash in b/c all of the American stuff is so expensive. But that's part and parcel with the whole import/export thing. For USD $100 I can buy 2 Russian programmers for 3 days or I can buy one american programmer for one hour. I can buy one bottle of "American pharmaceutical" or 10 bottles of "Indian Pharmaceutical" (both made from the same stuff).

Nobody wants to buy American stuff b/c it's too expensive; but everyone has these American IOUs that they want to cash in. Of course, everyone's in on the deal now and nobody thinks that these American IOUs are any good. So the solution is simple: the American economy will suffer until they can start paying off the debts and letting people cash in their IOUs. Again, money is just trust. It's pieces of paper or computer bytes with promises attached. The world does not trust the American economy, it does not trust that the American IOUs are worth anything. Until the dollar drops to the point where other countries can "get their money's worth" when they cash in the IOUs, then the dollar will continue to drop.

Jonathan: you said: As long as I can still buy what I need with the dollar, I don’t care if it trade 3:1 with the Euro.

But this is what you're missing, if the Euro goes 3:1 you won't be able to buy what you need with your dollars. Your salary will be the same, but the cost of the iPod will double. Your food will be more expensive as foreign markets start buying your produce with the money you owe them.

Yeah, yeah, this is happening right now on a small scale, we call it inflation. But you've just seen minor inflation, almost a side effect of the reserve banking system. Underneath all of this, the citizens of the US (whose very birth certificates back the money that is printed) are in debt to the world and they continue to live beyond their means. The US consumes more energy and gas than it can produce, while hinging its entire economy on those very resources. US labour is too expensive for all but the western european countries and manufactured goods are likewise too expensive. The only thing the US can "afford" to export is the food, but nobody else really needs the food at American prices.

When the whole thing falls, then you'll see real inflation, gas & food will suddenly cost twice as much and you won't be making any more money. Once it's fallen, you won't be able to "buy what you need with your dollars", your purchasing power will be drastically reduced. This is the cost of globalization, the world is catching up and the US is at the top of the ladder, so the only place left to go is down.

The US is the richest country in the world living a lifestyle on credit. Take all of these "credit card debt ruined my life" stories and scale that out to a whole country. That's what going to happen to the US. We're already seeing record foreclosures which means that people are being forced to sell their biggest asset/investment, in some cases their only real investment. People are skipping vacations to make extra money, they have their kids working at 16, then 15, then 13 & 12 just to keep up the pace. Elderly people are coming back to work greeter jobs at Wal-Mart and the workforce continues to churn harder and harder to keep up.

These are not the signs of prosperity, prosperous people work less not more. These are the signs of a people stretched too thin and ready to pop.

Frugal Tips from the Farm?

Found a neat link from Rather-be-shopping.Com, where he talks about his father's "neat" frugal ideas.

http://www.rather-be-shopping.com/blog/2007/08/31/dad-frugal-living/
http://www.rather-be-shopping.com/blog/2007/09/16/more-frugal-tips/

FTA:
-He puts a brick in the back of the toilet tank...
- He puts a five gallon bucket in the shower and when it gets filled he uses the water in the bucket to water his garden..
- He has a wood burning stove and the furnace is NEVER to be turned on...

Our place has a metal farm gate which we open and close each time we leave and return home. I timed it and it takes about 30 seconds to get out of the car, close or open the gate, then return to the car. Since I leave home on the average of twice each day that is four opens/closes of the gate each day. That is 120 seconds or 2 minutes per day. Two times 350 days per year (I am not home every day) is 700 minutes or 11.7 hours that my car idles needlessly. I believe it would require 9 gallons of gas to idle that long. At $3 per gallon that is $27 per year I save by turning the the engine off when opening and closing the gate

The reply:
Wow, I don't know what to say man, I'm just kind of baffled from reading both. But maybe I have a strange sense of Frugality with a very big bent on "my time is important".

Why don't you just install a remote opener and save yourself 11.7 hours/year + part of the overall energy? You're worried about saving $27/year, I'd be worried about saving 11.7 hours/year.

Brick in the toilet? That's basically just saying "Hey my toilet uses too much water" and all things considered the brick is pretty imprecise. Why not just install a toilet that's built to use less water / flush? Then you'll save water and you'll get a correct flush every time. In fact, why not just find/build a toilet with 2 flush buttons (cleverly named #1 and #2) so that you can get a variable amount of water / flush?

The wood burning stove is only "cheaper" if he can chop the wood himself (and his time is worth very little) and he has the place to put the wood. Depending on location, electric heating may be more efficient (such as in Manitoba, Canada, land of Hydroelectric dams). Again, if he wanted to be really efficient he would move over to a high-efficiency pellet stove which is currently getting the most heat/$. A buddy of mine is involved in the manufacture of these (pellet, gas and wood stoves) and he says that the pellet ones are efficient enough that greenhouses have actually started buying them to maintain heat.

As to the "bucket in the shower", well I can't argue with that for utility. However (and this is a personal beef), I really wish that this wasn't actually efficient. I'd really like to see a day where homes had more efficient use of their own water, such as an in-home filtration unit. Right now we basically have "in" pipes and "out" pipes, so water that could be reused isn't being reused. By the same measure we could be capturing rain run-off into our own filters (if we had them) and then we wouldn't need to use as much "public water".

I mean, if you have a roof and a lawn that are about the same size, then every time it rains, you could actually "water" twice. However, right now we're just sending that extra water into the storm sewers. We already have eaves, if we could pipe the stuff into a reservoir, then we can water the lawn two days later using the water we were just going to send away. If we wanted to get fancy, we could run the bath water through the filters and send part down the sewers and part into the reservoir, so now it costs less to water the plants and the lawn.

Don't get me wrong, you and your father are definitely "frugal", but it's worth looking at the old "penny-wise / pound-foolish" deal. You spent 250 words talking about conserving $27 in gas; but didn't seem to care that you were "wasting" nearly 12 hours of your time. At what point do we start talking about the efficiency wonders of driving a manual transmission and when do we finally cave in and say "I was sick of trying to save small money, so I just bought a Toyota Prius (or other Toyota Hybrid) and decided to save big money for the rest of the life of the car". These are all neat ways to "squeak out" a little more efficiency, but the tips are actually just capitalizing on the poorly-designed inefficiencies of the existing systems.

Why not just make a better system?

10 Clichés to live by

Here's quick link to some good material:
10 Clichés to live by :: Discursive Monologue :: Blog Archive

I don't think that I could describe my existence as eloquently.

#2 (Pick your battles) has been a long-term challenge for me, I'm still learning to pick my battles. Of course, being a perfectionist is the direct cause of the difficulty.

#4 (Don't be a hog) has also been a big issue on my list. Which is funny b/c I think that the whole "global warming" deal is just bad math and I firmly believe that most "environmentalists" are pretty clueless (the whole "save endangered species, but only if they're cute or useful" thing). I'm just a follower of the mentality b/c it's simpler and fairer :) This one paragraph starkly reminds me of Violent Acres and her Americans are Fat because they're broke concept. I live in Canada, but my region (Edmonton) is the land of the truck, with city-slickers driving F250s to and from work. We're one of the least dense major north american cities which means that we spend lots of resources just getting around town.

#8 (Never stop learning) is one of my personal rallying calls and one of the reasons I love to blog. You learn a lot of stuff reading blogs, writing blogs and jockeying back and forth in the comments.

#10 (Don’t do something that you will regret) is probably the strangest but most simply useful piece of advice. Consider the whole is the key component that's generally just missed. We makes lots of decisions without regarding as much relevant information as we can. So you see people who take up sub-prime mortgages and really don't know that won't be able to afford them when interest rates go up. You see people start up unhealthy diets or go to the gym to lift weights and then do it completely wrong (i.e.: dangerously). You see smart people putting their RRSP investments in all of the wrong things. You get people who walk into the Welfare office complaining that they can't buy milk for their kids while they hold an over-priced pop that they just bought in lobby vending maching (true story).

People make all of these bad decisions, sometimes by lack of planning and sometimes just by default (I have nothing better to do, guess I should...), and then they spend time lamenting all of their failed actions and "missed opportunities". Yeah, don't do shit that you know you'll regret; you'll probably end up regretting enough stuff already, why aggravate the situation?

Book Review: Rich Dad, Poor Dad

OK, so it's an old one, originally printed in 1997, but it's been popping up on lots of my blogs so I figured I would give it a read. Truth is, I wish I had read it in 1997, when it was new and I was 17, then it would've been news to me.

The book itself is basically the explanation of his life with two "dads" (the second dad is actually his best friend's dad, but we get the point). One dad is "highly educated" but never rich; the other dad is your prototypical "dropped out of school, got wealthy" type of guy. He typefies the behaviour of both fathers into a "Rich" and a "Poor" mentality. The book is a basically a compare and contrast of the two philosophies centered around his six lessons that his Rich father taught him. The lessons are:

1. The Rich don't work for money


2. Why teach financial literacy?


3. Mind your own business


4. The history of taxes the power of corporations


5. The rich invent money


6. Work to learn - don't work for money

OK, so they don't all sound like lessons, a bunch of them actually sound like chapter titles (hello #4?) and they are. But hey, the history of taxes? The power of corporations? Man sounds pretty complex, pretty powerful... yeah... it's 10 pages long, maybe like 4000 words, it reads like a short essay without the footnotes or references.

Still we can do justice to the history of taxation in America in 10 pages, right? Not really, not when half of it has to be tied in to your vision of the world. And that's the fundamental failing of this book, it's basically 200 padded pages of pump you up, go out and learn. He's basically all about eschewing the establishment and focusing your learning on how to make money. He's very focused on stating how the "old ways" of school, work (house, car, kids) and retire are all gone, without really mentioning that they were never there in the first place.

He talks about how schools don't teach what it takes for people to be independently wealthy as if schools actually had that purpose in mind. We don't build schools to teach the leaders of tomorrow, it's not really a secret, we run schools to build more efficient peons, but hey one visit to my high school would've made that evident. My family had dinner table discussions about this stuff in high school. The smart kids make it through despite the system not because of the system, we knew that, I knew that, I still went to University. Then again, we also talked about the general death of pensions and the "pointlessness" of retirement (see Die Broke). Yeah, so maybe he's right, the smartest kids learn stuff at home as well as at school, but then, my parents aren't Rich either.

Long story short (not that the book is very long), Kiyosaki has some potentially novel ideas. There are tons of people who have never thought in the ways that Kiyosaki is espousing. So I guess that's good for them, it's just terribly unfortunate that he's not really a good writer. His book is like fragments thrown together where the same stories are repeated and the same points belaboured. It's like a series of bad essays with no supporting documents and no footnotes and the same point to all of them: become more financially savvy and you will become "Rich" instead of "Poor". But he doesn't bother with history, he just gives you the short "Kiyosaki"-esque version, he mentions the gold standard in passing and never follows up. He talks about his Cashflow game in basically every chapter but doesn't bother to even provide an Appendix with details or rules of the game. Some of paragraphs read like rewrites of paragraphs from other sections (they probably were), he just repeats himself so much.

And maybe that's my big issue with the whole book. Kiyosaki is not trying to provide you with "information" so much as "inspiration". He wants you to read his 200 hundred pages and subscribe to his philosophy. Some call this their PF bible, but to me it is to personal finance what Rocky is to boxing training; it's all sizzle, no steak. Of course, great steak needs some sizzle, just like great boxers need heart, but reading this book won't make you rich, it'll just make you want to be rich.

If you want to actually be rich, then look elsewhere, he simply doesn't provide any more details: pay yourself first, make your money work for you, hire people smarter than you, blah, blah, blah. He doesn't list a book on hiring skilled people; or point you to specific books on where to start investing and where to finish investing; or send you to guides on being frugal; he doesn't give you the top 10 wealth ways of ordinary people. All of this important, actual information, is left as an exercise to the reader. He just wants you to agree that he is right about wealthy people. He simply doesn't provide any real direction on any of these things, he's not interested in teaching PF 101 he just wants you to agree that he's right and then he wants you go out and teach yourself.

Yes Mr. Kiyosaki, you are correct. There it's done, now go read something with information like Tom Hopkins: "How to Master the Art of Selling" or Stephen Covey's 7 (or 8) habits.

PS: If you want to know a lot more about the Gold Standard, look here, and check out the first two videos. They have propoganda issues, but it's a good run at understanding money and the banks and the actual history behind the whole deal.

Paying down the mortgage early?

OK, there have been a couple of posts on the blogs that I read discussing the benefits of an early mortgage paydown vs. an alternate investment.

And me, well I'm kind of a chump, so I ran the numbers quickly. For reference, this is a 200k fixed mortgage at 6% over 25 years. Here's what the monthly breakdown looks like for the standard mortgage. That Purple Stuff is the money the bank is taking for interest which, as you may know, is mostly taken first. And the Light Tan stuff is what you're actually paying down. For the last two, I've taken an equal size payment (~$4600), off the principal at different points in time. So that Blue Strip on the last two is the amount of interest that you save each month as time goes on.


When you pay down interest early on, things change like so:


Paying things down late gives you something like this:

Now, the original posters were talking about applying extra money against the principal and calculating the interest saved as a percentage of that principal. So if I paid down 10k on a 6% mortgage with 10 years left, I'd basically be saving $600/year or $6000 in interest.

However, the graphs would seem to imply that something terribly different is going on here, I mean, you can only save chunks of the purple stuff and if you're paying down the mortgage later rather than sooner, there's a lot less purple stuff to save on.

Imagine it this way: say you took out 100k @ 10% for 10 years and made your regular monthly payments ($1321) for a full year. Then, magically at the end of the year you win the lottery and pay down the house in one swoop, how much would you pay? A quick run to my information source, indicates that you still owe $93.8k, you were going to pay $58.5k in interest on that mortgage, but you paid $9.7k in interest in the first year alone, the bank took 16.6% of the money you owed them in the first year. In fact, in the next year, they would've taken $9.1k which was 15.5% of what you owed them, or 18.6% of what was left. By the end of two years, they have 32% of what we owed them, that's 32% in only 20% of the time.

So let's back off and go to our equation. Both posters are saying: if I drop 10k on a 10% mortgage I'll get a return of 10% times the number of years, and I'm saying that the calculations are flawed. So we'll use the 100k @ 10% for 10 years example to make life easy, if I put down 10k, it will "earn" 1k/year. Let's say that I get to my final year and decide to put down the 10k. With 12 months to go, we've paid 57.7k out of 58.5k in interest and we owe 15k on the place.

Wait, hold on right there! we're supposed to save 1k in interest, but we don't even have that much owing in interest. If I put down my 10k, I'll still owe 5k on the house, but I won't have saved 1k in interest, there's not even 1k in interest to save! What if I do it the previous year? At this point I owe 28.6k on the house and I have 3k left in interest to pay. So now the model is telling me that I can save 2k (or 2/3 or the remaining interest) by paying 10k of the 28.6k principal that I still owe (or more than 1/3)?

If the numbers seem weird, it's b/c they are, I mean, they're clearly wrong. You're not going to save 66% of the interest over 2 years by paying down 35% of the principal, that's pretty clear.

What's going on here is equally clear, if you're at the end of the 10% mortgage, you're not actually paying 10%. In the last 2 years of the 100/10/10 example, you will normally pay 31k into the mortgage and only 2.3k will go towards interest, i.e.: you only pay 2.3k/28.6k or about 7.5% interest. If you're in the last year, that number drops to like 5.5%. Here's the "effective interest" chart:


At the start of year 2, the 100/10/10 mortgage owes 93.8k, but will only pay 9.1k, which is actually just under 10%. So where did the original posters go wrong? Well, you can't "save" 10% interest if you're only paying 7.5%. The other problem is that the 6% is relatively small, so it's easy to gloss over the math. In the 200k @ 6% for 25 examples (the first graphs), you're actually paying between 5.15 & 5.95% "effective interest" for the first 22 years, so you can basically just gloss over the number (even if it's wrong) b/c you're still within a percentage point. If interest rates go to 10%, then suddenly you're losing whole percentage points and the bad math becomes evident.

So after a few hours of number crunching, what do I think? Well, the basic premise of both posts is actually still good: where am I going to get better returns? And the simple answer is that all things equal you'll get better returns from whatever is paying/charging the higher "effective interest rates". (where the "effective" part is key)

However, right now, things are pretty muddled b/c today's interest rates are yesterday's mortgage rates. This is complicated by tax law. You see, in Canada, we get tax breaks for RRSP investments and in the US you get tax breaks for mortgage interest. So in Canada if you have room to contribute to your RRSP (they do have caps), then you actually get an immediate 20-40% return on putting the money in the RRSP. In the States you'll only get a tax break for a certain period at the beginning of the mortgage, and then the interest will become too small. All in, the numbers could really "go either way" so there's no clear winner.

Personally, I'd rather have the money in something liquid and diversify. "Cash is King" and your home isn't bringing in any cash (unless you're renting rooms). Give the cash to someone who can make you more cash and if you're still itching to pay down the home then use the income from that cash to help with payments. At least this way you're making and spending money rather than just spending it. That way you can redirect the cash flow if you need to.

Coding Horror: Leading by Example

Coding Horror: Leading by Example

I read Dennis's story and just had a flashback to some "olden days", FTA:

I was recently brought in to help a software team get a product out the door, with a mandate of helping with some web app code. I've been trying my best to integrate with the team, trying to earn some credibility and respect by making myself useful.

I've been forwarding various Joel On Software essays to all, recommending that the office stock up on Code Complete, Peopleware, and The Mythical Man Month, and I make an effort to point out everything I believe could be done better. I regularly browse through the source repository to find ways that other members could be working better.

When other developers ask for my help, I try to maximize my input by broadening my assistance to cover the way they're developing, how they could improve their typing form, what naming standard they use, to advocate a better code editing tool, and to give my educated final word regarding the whole stored procedure/dynamic SQL debate.

Despite all of this, I keep facing resistance, and I don't think the team likes me very much. Many of my suggestions aren't adopted, and several people have replied with what I suspect is thinly veiled sarcasm.

What's going wrong?

Well, I'd start with the fundamental problem: People are resistant to change. Inertia is not just a physics concept it's a people concept. If you are asking a team to change in any way, they won't like you very much.

Dennis is working from the fundamental concept that his teammates are actually interested in becoming all-star programmers. From the sounds of it, Dennis is fundamentally wrong. He's probably right, his team probably doesn't like him b/c he's making them look quite bad. But that's OK, most programmers don't want to be all-stars, that's just the way it is. I work with a team that has some star programmers, but goodness knows that they don't read the magazines we have sitting around, nor do they visit the boss's extensive library or follow blogs like Coding Horror or Hanselminutes. They care, but not quite that much.

What really makes things worse for Dennis is that he has years of doing the stuff that makes an all-star programmer. Excellence is a habit, it's not some sudden burst of inspiration. Even the geniuses with seemingly sudden bursts of inspiration have generally built that up with their daily activities. Dennis has more suggestions than even the dedicated can reasonably perform in a year. I mean, just reading Joel Spolsky's books and Code Complete and Peopleware and Mythical Man Month, that's like a 6-9 month journey.

Even if you could physically read all of those books in 2 weekends, you need months of work-time to actually process and apply that information. Dennis here was brought in to save a project and is probably making good money to do so. If he wants to make a better team, he'll need management's approval for some Professional Development time during 9-5 and he'll need a specific plan of action.

Creating an all-star programmer takes months and years, not weeks.

So you can do three things:

1. Accept that people don't like being one-upped from their "comfortable" positions, especially the types you find in big corporations or union positions.
2. Find a way to improve morale first so that people want to learn out of pride rather than being forced to learn out of shame.
3. Ensure that management respects and supports your efforts and that you're making way more money than the "unwashed masses".

After that, just do what you do best, you can't replace great programmers.

Donating Money

Here's a big response to Million Dollar Journey's post on Charity MERs.

I haven't been really big on donations and it's part MER, part philosophical. I used to work for the YMCA (which is basically a charitable organization and pays that way), but I continued to work there even after getting a pay raise elsewhere b/c it had the greatest people to work with.

From an MER perspective, big charity organizations have all kinds of overhead issues and donating money to an group means that you're effectively empowering that group to take decisions you may not agree with. If I donate $500 to the Cancer Society, where does that money go? If I have a deep-seeded belief that future research money should go into retro-virals (say b/c I don't "believe in pills"), the Cancer Society may not share that belief, heck they may spend most of that money researching new pills and chemotherapy mixes, which is exactly what I don't want them to do.

Take a look at the Red Cross during 9/11 (and other crises on a smaller scale). Millions of dollars were donated to the Red Cross as part of a knee-jerk reaction but nobody knew where it was going or what it was for, they just donated.

And this is where we venture into the philosophical.

Why am I donating to the Cancer Society or the MS Society or Breast Cancer or any of these Hospital Research Foundations?

"Curing" cancer is undoubtedly a noble goal, but why do they need my donations? Don't they already get government grants, aren't we already paying for these in some way? And if we're not when do we switch it over? Why do we authorize big drug companies to do Cancer Research when they have conflicting interests with the public good? Drug companies spend 15% on R&D and 85% on Marketing & Advertising and they have no interest in curing people b/c it's not good for their investors. Cured people do not bring in as much money as people who "remain sick" while they're not using your drugs. Now any publicly traded company is required by law to be acting in their investors' best interests. So we're actually requiring drug companies to behave in a manner that isn't good for public health AND we're applying free market concepts to a system that isn't ruled by supply and demand (see Hospital Bills in the US).

When I donate money to a "healthcare"-related field, I'm basically just throwing more of my money into the already bloated and poorly-designed healthcare field. So obviously, I have some philosphical reservations about making donations (despite losing 2 family members to cancer in the last 2 years).

By the same measure we get groups like Make Poverty History (no, you're not getting a link), that hire on tons of big stars but have this horrible, unsustainable plan. I want to make this clear, I spent one hour on their site, a site dedicated to "Making Poverty History" and I did not find one definition of Poverty, not one. Most systems use some type of sliding scale: i.e.: everyone making less than X is poor, but that makes it pretty tough to eliminate poverty b/c it's a sliding scale! They have a goal that is basically impossible (like the War on Drugs), so they don't get any of my money!

Same goes for most of the "help the poor" type of groups. Given the unfit definitions of "poor", giving money to these organizations is pretty sketchy. I mean, we're already paying money into the welfare (EIA) system and numerous government subsidy programs at the provincial and federal level. So we're already donating tons of money to help those less fortunate, shouldn't we be more scrutinizing of the programs we're already paying for before we offer more money?

Truth is I haven't donated money in a few years, b/c I just can't find people I'd like to give to. My fiancé and I have discussed Kiva a couple of times, and that's probably my only good lead, b/c you're not actually giving, you're helping people help themselves.

At the end of the day, I've come to a pretty simple personal conclusion: I don't believe in giving money (with maybe Kiva as the exception). I believe in giving time and stuff, especially for those who are less fortunate. Money is corruptible (very liquid) and often hard to trace. Money is not the type of thing we want to give those who are less fortunate. We want to give a means of survival to those who are less fortunate so that they can earn the money to support themselves.

I don't want to send a million dollars to Kenya to build a new school. I want to send a boatload of building supplies and a pair of contractors to help the Kenyans build their own school. Heck we could even earmark the money to pay the Kenyans. I don't want to give money to a country that just lost 100,000 people in a landslide, they don't need money. They need a flotilla of medical supplies, foodstuffs, blankets, clothes and building materials and that's what they should get.

The evils of over-engineering

My reply to a great Slashdot comment: http://it.slashdot.org/comments.pl?sid=264749&threshold=3&commentsort=0&mode=nested&cid=20164481

Ugh, Java frameworks...Somebody needs to drag the people who make these things in a room, erase their memories, and make them use what they have created...

The end result is you end up with what should be a fairly simple task (like OO-relational mapping) have 400 page manuals because it ends up doing every little thing that people want to do. In the time it takes you to choose the right framework, download and install the binaries, wade through the required config files, sift through the quickstart, and actually get familiar with how it is done, you could have just written and tested the tedious JDBC code to load and unload an object from the database.

You know, this seems to work both ways. Ever worked with a homebrew framework that didn't have good exception-handling or some type of passable tracing? The other end of the spectrum from these IBM Java guys are the people who still hardcode strings everywhere in the system and hand-code ALL of their stored procs and data access layer.

There are actually two problems here:

1. The Principle of Least Threshold


2. Enterprise Hubris

From the top, Javaheads like your above description are trapped in the Enterprise way of thinking. And hey they're building apps that will process more transactions in one day than many other small business apps will ever process. They have the right to be a little proud, the problem is that they're not very good at "scoping downwards". These frameworks all scaled up and came together, but now they have 400 pages of documentation and 12 different config files and everything is interdependent b/c they didn't want to lose functionality.

Even written a good business logic layer (BLL)? Nor have I, nor have like 90%+ of programmers, but it's ok, most of them never need it. The BLL is just useless abstraction for the typical database front-end that we develop. BLL just gets smushed in with Entities and UI b/c it's pointlessly complicated to develop on all but the biggest systems.

On the flip side, you get the Principle of Least Threshold, which is my term for the phenomenon where the perception of quality is limited by the highest level quality one has experienced. There are millions of small developers out there (VB 6 was the second most-used langauge at one point), who have never worked with any thing close to these monstruous Struts frameworks. So they don't understand them and they don't need half of the functionality and they can't spend 4 months figuring out how the system works, so they just build their own system one piece at a time and keep re-creating the parts of the wheel that they actually need.

I'm living this, our Data Objects framework doesn't have tracing. Nobody cares but me, b/c I'm the only one who knows what a godsend it is to have instrumentation code. Just yesterday, wasted 2-3 hours diagnosing a problem that would've taken 10 minutes if we'd had minimal tracing (queries?).

Of course, the real solution lies between the two camps. The Javaheads with the arcane infrastructure and architecture knowledge need to enable mechanisms to scale the complexity of their frameworks. The other guys need to start pushing from the other direction. But most of all the leaders in the field need to learn to embrace differences and change (man that sounds corny).

When anyone starts spouting off about good software or bad software, they must at least identify the scale of the software with which they are working (and when was the last time we saw that). Unacceptable mistakes in an Enterprise Framework are just ignored in a 12-user system. In fact nearly every piece of code posted to the web is unacceptable in an Enterprise environment, b/c it fails to catch errors or instance tracing or define attributes or use fully qualified types or validate inputs or even comment in a way that is compatible with JavaDoc/NDoc/Sandcastle.

A twenty line class in an Enterprise app could have 80 lines of associated "overhead code" that just plugs the class into the framework. Is this elegant and beautiful or just clunky and cumbersome? That answer could vary by system size, by programmer skill or even by personal taste. But no one seems to want to acknowledge this reality. The small guys call the Enterprise guys "clunky" and they in turn call the small guys "clumsy". So in the end they just ignore each other and throw rocks in each other's general direction and nobody stands and up and says "Hey guys, it's a continuum, it's not black and white, our solutions can only be inspirations for yours."

We need new leaders. The guys in my CoDe & MSDN magazines aren't sitting around handing out three different solutions of different complexity for the same problem. They're writing one-solution articles to solve problems that happen at all kinds of levels. How do you store user-specific data in a web app? Well in this article we'll talk about how you can solve this problem using my framework that doesn't actually work with your chosen method of storing data... if stuff isn't in an SQL Server-persisted Session then you're SOL... blah... blah... blah..." thanks guys. These are the same guys that write articles showing drag 'n drop data connections and then wave their hands about storing encrypted connection strings in the config files or using parameters to protect from injections.

Point is, we as programmers need to get off our high horses and actually learn about other people's problems so that we can learn to develop beautiful solutions to the problem rather than just solutions.