Tuesday, March 20, 2012

All or Nothing

Most Americans fritter away their wealth and then wonder where it all went.  Today, many are blaming the rich for 'taking their money.'  But the cold, hard reality of it is, we gave it to them, willingly.

In my posting Dreams of Avarice, I made fun of Mitt Romney's comment that us "little people", when we drive through a rich neighborhood, don't feel resentment, but rather feel that "someday, maybe that will be me!"

It is a ridiculous proposition, of course.   Our life paths are pretty much determined within a fairly narrow range of possible outcomes, based on our native intelligence, educational levels, starting economic status, and opportunities available.

And yes, Luck.  But while you might get lucky now and then, luck isn't going to un-dumb you, or make you have a sudden insight into the business world or cause to you to invent "the next big thing!"

If you look at a lot of the people who struck it rich in life - the Sam Waltons, the Bill Gates, the Warren Buffets, the Sheldon Adelsons (who?) you see one common thread:  a burning desire to succeed, and a willingness to do anything to achieve it.   These are not people who sat around doing bong hits, or warming a stool at the end of a bar, waiting for opportunity to knock.

And let's face it, most of us would rather be doing things like that - watching television, hanging out, goofing off.  That is just the sum and substance of it.   And there is nothing wrong with not having a lot of ambition.  But, (and this is key) you have to accept the lifestyle that goes along with it.

And this is why I hate pot-smokers.  Well, not hate, exactly.  Just that they annoy me.   They want all the riches, fame, and wealth, but want to just sit around and do bong hits.  They don't see the connection between one and the other.  And they assume that since they aren't rich, than someone must have "taken away" their money.

But no one took anything away.  Rather, we little people just give it away, with our blubbering thanks.  "Gee, thanks Mr. Loan Officer!  Thank you for handing me a hundred dollars and asking me to pay back a hundred-fifty!  This is like free money!"

No really.  We think that way.  All of us.  At one time in our lives, we all think we are "lucky" to get a loan.  Some never break free of this mindset.  Many people spend their lives praying to the false God of the FICO score.  I kid you not!  They go on discussion boards and obsess about a computer-generated number as if it were handed down from the Oracle at Delphi.  It is their sense of self-worth, because "having good credit" we are told, is the key to everything.

Mitt Romney was right, as stupid as his comment sounds.  A lot of us really do think that we will be rich someday.  We all harbor vague notions about becoming wealthy, but have no real concrete plans on how to do so.

So when the circus comes to town, offering to sell us unfinished condos in Fort Lauderdale, Gold Coins, or Facebook stock, we schmucks think, "This must be it!  This is our chance to make it big!  I knew someday I'd be a millionaire!  I'd better jump on this!  My ship has come in!"

It is the same part of our brain that says, "Gee, maybe that man in Nigeria really does have the sum of $5.4 Million US dollars to send to us!"  Chelsea Clinton's Father-in-Law thought so.

Yet, the ability to accumulate real wealth is present for almost all of us, but we reject it.  Why is this?  Why do we seek out long-shot odds to become wildly wealthy, while at the same time rejecting the very wealth that is put on the table?

The median income in the USA is about $52,000, while average income is about $63,000.  This is a lot of money by global standards.    If you could save even 10% of that amount, you'd have a hefty $350,000 before you retired.

Yet many people spend far more than that, tithing to an odious church, or on car payments, jet ski payments, or cable TV, or a combination of all of these things - plus more.  Many gamble that much away.

And when I call them out on this, people say, "Well EVERYONE has Cable TV!  How can you live without it?"   Answer:  Better than with.

They say, "Well EVERYONE buys a new car every three years!  How could you live with an 'unreliable' old car?"  Answer:  Better than you do with your series of econo-boxes.

And so on.  People spend their way to poverty, what I call middle-class poverty.   They have a lot of shit, but not a lot of money.   And they are one pink-slip away from homelessness - due entirely to their desire to have things now and not save a penny.   And I'll say it again and again, The Road to Middle-Class Poverty is Paved with Car Payments.

The middle-class has the opportunity to better itself, by saving money and building wealth.   But alas, few choose to do so.   They spend like demons, borrow until they are broke, and when they do invest, it is in long-shot lottery-ticket kind of deals that they tout on the TeeVee.  And of course, they lose their shirt, every time., in these flaky deals.

We saw this with the dot-com boom in the 1990's, the Real Estate booms of 1989 and 2009, the gold bubbles of 1981 and 2011, and now a new dot-com boom of 2012.  Millions of Ralph Cramdens investing in things they really didn't understand, saying "Norton!  This time we're going to be rich!  And I'll buy Alice that fur coat!  This investment is going to the moon!"

And it never quite worked out as planned.   Over the last four decades, the middle class has been leading a more and more opulent lifestyle, fueled with borrowed money - credit cards and home equity loans.  We are told that consumer spending is the end-all to our economy.  And people think it is "normal" to give grade-schoolers their own cell phones, and teenagers brand-new cars.  And no one stops to think about the cost of it all.

And when it all goes horribly wrong, we want to blame the "1% ers" for "taking our money away" - when in fact, we handed to them, with our blubbering thanks.

So, today, we have the sight of a young person claiming they can't pay back their student loans, protesting on Wall Street, and twittering about it on their $499 smart phone that costs $100 a month with a data plan and texting.  They complain they can't find a job, but they can find the time to get a tattoo and a nose ring. They just don't get irony.

Middle-class people complain they are living "paycheck to paycheck" in an e-mail "sent from my smart phone" and wonder why they are broke.   

Or we have people whining about how their home is being "unfairly" foreclosed upon when they stop making payments on it.   And they sit in their marble-bath luxury and granite counter-top kitchen, watching their 500 channels of wall-screen TeeVee and say, "It must be Obama's fault!"

No one has a "right" to luxury goods and expensive services.   But for an increasing number of Americans, this is the mindset.   Cable Television is like oxygen - they need it to live.   Smart phones are not a "should I buy one?" proposition, but a "which one should I buy?" kind of deal.   We are all told that we should have it all now, and the media portrays us all as having all this neat stuff.  Every movie and television show depicts us middle-class schmucks as having fabulous homes, apartments, and of course, brand new cars.

And we buy into it.

The odds are, you will not strike it rich.   In fact, the odds are very much stacked against you.  Unless you have a burning desire for wealth, some intelligence on how to go about getting it, access to capital and economic connections, and a willingness to scrimp and do without, in the interim, you will never become wealthy.

And right there is where most of us miss the boat.  If you look at the bios of the rags-to-riches billionaires, like Sam Walton, you see one common thread.  Old Sam didn't spend his days flopped on the couch, in front of the tube, smoking weed.  He didn't spend his days working shitty jobs so he could make payments on his Trans Am.  He didn't squander money on bullshit consumer goods - he made money selling that crap to the rest of us.

Those habits of his frugality from his early years stuck, too.  And of course, later in life, when he was a Billionaire, he still drove around in a clapped-out pickup truck and lived in a fairly modest house.

Did being cheap make him rich?  Yes and no.  Living simply allowed him to gamble on starting up his own store, early in life.  By not tying himself down to material things and car payments, he was able to plow every nickel he had, back into the business.  Few people are willing to live like this.

We trade that off for a Trans Am in the driveway, or worse, a Chevette.  You have choices in life, and you make them - and suffer the consequences.   If you want to know where all your money went, and you are sitting on a cheaply made microfiber sofa, watching your 52" flat screen television, I have a pretty good idea where.

So maybe you won't be super-rich.  That's not such a huge tragedy.   But you can still be financially independent and wealthy, on a global basis, in your own right.

It does mean, however, giving up the trappings and appearances of wealth, and making some sacrifices, for your own personal good.   Trying to "have it all" now and hoping, down the road to "strike it rich" in some vague and unspecified way, is never a very good plan.