Tag: finance

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I was once discussing Social Security with a much younger colleague. She was convinced it wouldn’t be there when she got old enough to receive benefits and couldn’t understand why I was supporting a system that could be belly up at any time soon.

This recurring concern still continues to bother young people entering the work force — social security will be bankrupt by the time I retire. Why should I contribute to a failing system? My argument 30 years ago is the same one I will give young people today.

  1. If you are going to place a bet on what institutions are going to be around in 40 years, my mark goes on the U.S. Government. It has been around, as we know it, since 1789. The best estimate of businesses making it 100 years is 0.5 %.
  2. If Social Security collapses, there is a good chance that there any private businesses handling retirement accounts are also going to be in trouble as well. Hell if Social Security collapses there is a good reason to believe that there is no Federal Government, no Federal Reserve, and no law and order. So, good luck collecting on your 401K in this dire situation.
  3. My colleague, based on absolutely no evidence, thought she could invest her money better. But she wasn’t investing any money at all. She was spending every last dime to live. How she thought she was going to out invest Social Security was beyond me.

The corporate shill that encouraged me to invest in my company’s 401K advised me that retirement was a three legged stool — Social Security, 401K/pension, and savings. We needed all three in order to retire. For some reason, Social Security is seen as the weak leg of this stool is worrisome when it is the most dependable leg of the stool — just ask the 73% of retired people who depend upon social security for over half of their monthly income.

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I managed people who held low level jobs and limited opportunities for advancement. They are, by and large, an unmotivated bunch. They did their work adequately and left on time. They weren’t there for more than a paycheck. Good for them, I say.

One of the things my managers frequently tasked me with is how to motivate these people. And before I could say more money they then added the painful restriction without offering them more money. More money was always the hitch. The companies wanted to motivate the employees without paying them more. Needless to say, nothing we ever came up with worked.

The problem here is that the highly compensated people who run companies have convinced themselves that more money only works to motivate high level people. Low level people want something else. I attended seminars where I was told countless times that employees actually want other things than more money. They want respect. They want autonomy. They want acknowledgment. Notice that all of these things are free for the company. They are also vague and difficult to deliver for the direct managers. How much autonomy can you give to a person who has a highly structured job with expectations of coming in on budget and on time? If you didn’t deliver, you were encouraged to do better; if you did well, you got a pat on the back.

The budget for employee incentives were such that it was easiest to reward the group instead of the individual. So Donut Fridays and elegant Christmas parties were thought of enticements which never delivered the expected punch. I actually had one employee ask if instead of going to the Christmas party could she instead have the percentage we paid on a per person catering charge in cash. She would rather have the 29.99 than spend time at the party. I had to explain to her that this was a group incentive and her choice was the party or nothing. She, obviously, was being facetious but her point was made — the company was giving her something she didn’t want.

Even more ironical is that when I relayed this information to my boss, she completely understood. This to me, speaks volumes, about corporate culture — everybody knows this won’t work, but since we can’t give more money individually we are stuck we these group benefits that nobody cares about and won’t deliver. In other words, everyone knows these actions are doomed to failure from the start but continue doing them because nobody has a better idea.

I worked for a company that diligently surveyed their employees on how they felt about work. A neutral company took the survey, the results tallied and delivered to the employees. Every year the areas where my department scored lowest would be our focus to improve for the next survey. Except, of course, low pay. Everyone knew we couldn’t change that so low pay was a problem when the first survey was taken and low pay was a problem on the last survey I was there for. I am betting, with almost 100 % chance that I am right and after being away for six years, low pay is still one of the lowest scoring areas for my department.

The higher ups, convinced by seminars they attended where they were told that higher pay is not the major concern for employees, made us middle managers attend these same seminars so that we too can understand that higher pay was not the reason people worked. We learned how to encourage employees, how to discipline employees, how to reward them without giving them any money and, of course, nobody was convinced.

What is so baffling to me is this resistance to giving more money when the higher ups know the way to get people to work harder is to give them more money. This is, after all, the argument for giving rich people more money. We want them to work hard right? These people are the innovators, the entrepreneurs, and the risk takers. They have to be rewarded. If you take away their money, they won’t work very hard. But if you give them money — will the sky is the limit.

Exactly. So why should regular employees be treated differently? It is a blindness to the very economic tenets that Business so enthusiastically embraces. But by all means, continue with the Pizza Parties and Donut Fridays. I am sure one day that it will eventually work.

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I had numerous misgivings about Bryan Caplan’s It’s Not Who You Know, It’s Who You Are. Caplan’s bottom line is that there is no advantage to being rich in a capitalist society. The cream always rises to the top and it is because the rich have better genes than the poor and middle class and this is why they always rise to the top.

How did he determine this? Did he give a bunch of poor kids a million dollar trust fund, a financial advisor and entrance into all the best private schools and then compare it to the rich kids who had this advantage already? Or did he force rich kids into resource stretched public schools, make them work three jobs just to meet rent, and made it impossible to talk to Daddy during the length of the study? A little more information is needed here in order for me to buy the bull shit Caplan is selling.

If he is just looking at where people ended up, then he failed to prove his point. Are you telling me that knowing other rich people isn’t helpful to rich kids looking for jobs? Almost every job I have ever gotten was because I knew someone in the company. I knew a job was available and I knew who to talk to in order to be seen. Being seen is half the battle in getting a job. This is a tremendous advantage over someone who knows no one. How does he factor that in to his analysis?

Why would rich people spend upwards to $100,00 a year for private education if this doesn’t give their child some advantage? If their child got the same education in a local public school, they would be a fool not to — it comes with their taxes. Yet these rich people, and Caplan believes smarter people, still spend a lot of money on a private education for their genetically superior kids. There can only be one explanation — expensive private schools make a difference. They are worth the money. If, of course, you have it.

Finally, I thought one of the assumptions of market capitalism is that poor people have to learn to work hard in order to pull themselves up by their own bootstraps. Anyone can make it to the top if they work hard, they too can become rich. But if they are too genetically inferior to make it happen, why needlessly raise their hopes if they are going to end up being poor no matter how hard they work. How sadistic is that.

Genetic superiority is a pernicious and dangerous lie. When people believe they are superior, it opens them up to differentiate between human beings. There are better people who deserve more. To diminish the value of money is equally dangerous. Why have public schools and Head Start if the kids are hopeless. You can’t spend enough money on rich kids and no amount of money will change the results for poor kids. Why waste time and money on lost causes? Nothing personal here. It is all genetic.

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Marianne Lake, who runs Chase Bank, announced that Free Checking is going to end for that bank and she anticipates the other big banks will follow.

I only stay with the big banks for 2 reasons — Free Checking and Free ATM’s. If this ends I see no reason to stay with the big banks. They are completely useless to me as a normal business customer because every time I use my ATM, I am taking money out of my checking account. I am guessing that means if I use an ATM, I will be charged for writing a check. This ends Free Checking and Free ATM in one fell swoop.

The big banks are useless especially to those of us on the more modest side of the pay scale. I tried getting a saving’s accounts at a big bank. It cost more money to have the account than I received in interest. CD’s are better in the sense that I don’t lose any money but when I close out my last CD with a big bank I was getting in the neighborhood of .50 cents. You heard me right — .50 cents.

The sad part of this whole thing is my leaving will not be a problem for my big bank. In fact, a clerk accidentally spilled the beans with me one day when I was trying to find the best place for my $5,000. The answer was loud and clear. I just didn’t have enough money for the bank to bother with my accounts.

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Tom Knighton explained why the above CEO Salaries are in line even though they are disproportionately higher than the average employee. It has, you guessed it, something to do with capitalism.

First, Knighton rightly points out that the excess money that these CEOs makes, if confiscated from the CEO’s and divided among the average employee, wouldn’t make a difference in a lower paid employees paycheck. Well, yeah, one executive’s salary wouldn’t make much of a difference but what about the other executives’ compensation. Most companies have VP and executive VPs coming out the ying yang who are also grossly overpaid. Throw those salaries in and I imagine you would have a much bigger kitty to distribute.

Then CEO’s have a responsible position. If they make mistakes, they could endanger other people’s jobs. Spare me. If CEOs are doing their job right, they could be eliminating jobs, so it doesn’t much matter much to the average employee. Let’s face it the average employee’s job is always under threat whether it be automation, elimination or outsourcing. The idea that the CEO is protecting his employees jobs is laughable, at best. If the shareholders and top executives are making money, there is little concern about the lower paid employees. Indeed, the average employee might be in more danger from a good CEO than a bad CEO. Besides the CEO has a team of executives working with him. If he makes a decision, it is being vetted by Board of Directors and other Executives, he rarely, if ever, makes an important decision alone. The risk is low of something disastrous.

Finally, and most importantly for Capitalism, Knighton believes you can find lower paid employees anywhere, it is difficult to find someone who can be a CEO. Knighton might look into the meat packing industry who are trying to find workers to operate dangerous machinery. Slaughter houses are having such a difficult time hiring people for these positions that they are breaking the law and hiring minors. They are also lobbying state legislatures to lower the age to work in these slaughter houses. As opposed to say, raising wages significantly in order to attract adults willing to risk life and limb to operate these machines. Why doesn’t the same philosophy of higher wages attracting the best people used to attract the best machine operators? If it works for CEO’s, it just might work for average employees as well.

As far as CEO pay is concerned it would be interesting to see if a lower pay was offered to smart ambitious young people who have yet to prove themselves what the results would be. What’s the worse that could happen? It’s not like the CEO would lose his life if he made a mistake, not like the teenagers working in a slaughter house. And, if they succeed, a lower wage for CEO would then bring more revenue into the business. Which is a win win right. I mean isn’t keep wages low one of the primary goals of a CEO? Why shouldn’t the CEO’s salary be included in this consideration. I am pretty sure you could find someone willing to do the job for less and I am betting that a good number of them could do a job. On the other hand, I know for a fact that slaughter houses can’t attract the right people to work in their establishments. Who, then, is more important and deserving of higher salaries?

Sorry, I still ca