Creating more than you consume

I’ve hammered on financial radio host Dave Ramsey before, but I’m impressed with his mastery of his show. I don’t listen to it, but I have in the past, and I know a lot of people who do listen to it. The gist is:

  1. Don’t ever go into debt.
  2. Pay off any debts you do have.
  3. Invest in mutual funds.

There’s more detail to it, like the percentage of money you should invest and so forth. But the simplicity of his message distills to “Don’t spend money you don’t have and earn more money”. It makes for entertaining radio.

I was thinking about his format this weekend because the “earn more” bit is grating. A person with $150,000 in debt and a $35,000 a year income will call in and he’ll tell them they have an income problem. They do, but the way to get into a better job never comes up much. That’s for the caller to just figure out.

It’s always about finding a better job though. Ramsey rarely encourages people to go into business themselves. That could be self-selecting because callers looking to go into business often have a bunch of other financial or personal problems.

Here’s the funny thing about all this, though: his advice to grow wealth is tied to the stock market. “Invest in good growth-stock mutual funds” …and wait 60 years. I get that for a lot of people that’s the safe, tried-and-true way. But did Dave Ramsey make his millions investing entirely in the stock market?

No, he did not.

Dave Ramsey made a business out of selling other people advice he wouldn’t settle for. If he called his own show 20 or 30 years ago he would have told himself to “Find a better job, chip away at debt, and invest.”

That’s not bad advice. But what did Ramsey actually do?

  • He wrote a book that simplifies a complex problem on an issue that impacts millions of people.
  • Started a series of talks and classes in churches (soft targets for people to speak about anything to a captive audience) to push that book and his name.
  • Published that book and worked into the syndicated radio show business to finally expand his reach to millions of people.

That’s all very impressive. I’m genuinely impressed at his ability to grow that and keep reinventing the wheel to expand into all kinds of different markets. He’s in the business of lecturing at middle and high schools, writing children’s books and faith-based books, plus podcasts, web series, and designing financial planning services that compete against Mint.

You have to do something else

If I hosted a competing radio show, I’d be telling callers another hard truth on how to achieve wealth: you must create more than you consume.

What you create must be able to scale up and reach millions of people (this is the fundamental flaw with my business).

My three steps would be:

  1. Turn off the TV and video games and spend that time building, writing, drawing, cooking, or creating something.
  2. Ensure what you’re creating can be reproduced or consumed by 10 people or 10,000 people.
  3. What you do consume should be related to your craft (like books on the subject).

This is somewhat antithetical to the notion of getting a job. People who grind at a job all day don’t have much mojo left at the end of the day to work on a book or a wood lathe. It can be done, but realistically most people just don’t have that ability. There’s also something to be said for “all work and no play” making people into dullards or worse.

Ramsey’s advice is an indication of another uncomfortable truth: the path to wealth in American is less and less through a job unless you’re in a highly credentialed field (law, medicine, etc.). It’s more through creation of your own business where you own the means of production.

In a capitalist society the whole thing would fall apart if everyone was a company owner. Eventually you require laborers. Creating a business is always a huge risk for people, too.

Just as Ramsey’s advice is to never go into debt and “make more money”, mine would go above that: “consume less and create more world-class stuff.”

This is what Indianapolis and Indiana will look like in the year 2036

Indy’s Plan 2020 is getting a lot of attention. I tried looking at their site, but almost every link I encountered said nothing or was broken. From what I hear, it’s a lot of zoning and land re-use plans that everyone is holding up as “the key to the city’s future”. I rarely believe that sort of stuff because Indianapolis, like most cities, doesn’t have any money to turn effort into momentum.

Doug Masson is doing an excellent job of summarizing Indiana’s history in his Indiana Bicentennial series.

Given Plan 2020 seems rather lofty and best-case-scenario for the future, and Doug has the State’s overall past covered, I thought it might be interesting to think about what Indianapolis and Indiana might look like in 20 years. That seems like a reasonable amount of time for gears of government to work enough to induce some noticeable policy changes at the state and local levels.

In 20 years this puts Indianapolis in the year 2036. Most millennials will now be somewhere in their 40’s. A new generation will have graduated out of K-12 education.

Indianapolis Neighborhoods

Broad Ripple will experience an overall suburbanization effect. As present-day millennials age and decide they want to hang near work and decent schools with their new families, Broad Ripple is going to look more like an old-school suburb.

Which means all the nightlife, music, and other noisy stuff will continue its trend and firmly supplant itself in Fountain Square. The current colony of artists and other industries that rely on extremely low-rents and low-cost spaces will now be setup around Garfield Park. The Cultural Trail will have extended south to Garfield Park, and East through the New York St/Michigan Street areas. However, we’ll be buzzled as to why all the growth will take place near Garfield Park and not so much on the near east side.

The 16th street corridor will continue its growth just north of Downtown and is likely to grow into something we’ve not seen much before in Indy. I think it’ll become a sort of “uppercrust young people with money” corridor. College students that have wealthy parents, Downtown workers with well-paying jobs, but with a taste that eschews the sort of shiny all-glass all-chrome aesthetic that defines Fountain Square’s new developments today. A new aesthetic of urban, gritty, classical-architecture is likely to take shape here.

The City’s continued investments in new roads, sidewalks, transit corridors, and trails will continue to expand primarily on the north side, north of Washington Street, east of Michigan Road, and west of College Ave. Nothing new here.

Lafayette Square and Washington Square malls will drag down everything around them like a collapsing star. They’ll kill spontaneity, aesthetics, and drag down safety and drive up costs in transportation. Best case is the city will work with Simon to demolish the properties and replace them with a dense node of mixed-use residential and commercial that is affordable and pushes the boundaries of quality, low-cost, office and retail space for entrepreneurs and super small businesses. “Mall to Small” we’ll call it.

Development on the south side will likely cease in this period. The south side will be waiting another 20 years (40 total from today) for suburban counties to struggle with their over-development and sprawl. Their costs will skyrocket, their residents will leave for newer exurbs, and taxes will increase. This will put Fishers, Avon, Plainfield, and Greenwood on a similar tax rate with Marion County. Thus, new development will in-fill on the south side of Marion County to at least get benefits of proximity since costs are equalized.

Shelby and Hancock Counties will benefit from that south side growth in 50-60 years from today as they become the new affordable suburbs.

Families and adults looking to flee from the City will setup shop in Westfield, Whitestown, Lebanon, New Whiteland, and Franklin. These places will resemble Fishers and Carmel today. Danville may also enjoy some exurban growth. Brownsburg will miss this boat because of a lack of vision and planning today. This will be their “lost generation”. Greenfield and Shelbyville will grow once that aforementioned south-side infill occurs.

Greenwood, Avon, Plainfield, Fishers, and Carmel will look like present-day Beech Grove and Lawrence, in that order. Carmel seems to be attempting to avoid this fate by investing heavily now, but heavy debt loads on a fickle population of residents may be their undoing. Greenwood, Avon, and Plainfield are likely unable to avoid this fate and will become old, expensive, and unsustainable once their water, sewer, road, and school systems start requiring immense repairs – all at around the same time. As property ages and becomes less valuable, they will see revenue shrink even more.

It could be that Carmel grows into an urban center unto itself, and between Indianapolis’ core and Carmel’s core the northside of Marion County becomes something else entirely. I think Carmel’s gambles today are likely to be dangerous long-term with debt. Debt is everyone’s undoing.

Indianapolis will maintain healthy bond and debt levels throughout this time, barring an emergency, and resemble our current “slow and steady” conservative approach to growth. But I can imagine a scenario where Indy’s “sports strategy” starts to show some cracks. The Colts are likely to be in negotiations for another new stadium. The Pacers will maintain shop here. The Speedway is going to see a decline in viewership, advertising, and attendance. Baseball, hockey, and soccer will continue to be such minor-players residents will loudly lament the expense of maintaining such expensive hobbies for the City. Particularly as investments in actual quality-of-life issues on the northside incenses people on the east, west, and south sides that don’t see those same amenities, but do see millions pouring into new stadium discussions.

Beech Grove and Lawrence will collapse and be folded into Indianapolis-Marion County government. They will be mere neighborhood names like Nora and Mars Hill conjure up today. Speedway may hang on, but only so long as Allison Transmission is around.

IUPUI will continue to expand east into Downtown for residential and healthcare work. Expect them to push west big time once they have a large enough plan to quickly take over the black neighborhood that’s there now. They’ll eschew growing “up” because of costs in taller buildings, preferring to keep things nice and cheap just over the river.

Indianapolis’ economy

Indianapolis’s economy will continue to be Indiana’s economy, and even more so, despite what state lawmakers will want to recognize, like today. I do not, however, think technology will be Indy’s future savior. I think our economy is likely to look a lot like today.

Salesforce will continue to expand in Indianapolis until the tech bubble bursts and their lack of profits for the sake of growth will cause total collapse of their workforce. Or, Salesforce will continue to expand in Indianapolis until a larger, actually profitable, company (like Microsoft or IBM) comes along and buys them out. That buyer is likely to have no allegiance to Indiana and we’ll enter a period of attrition as they move positions elsewhere. This will cause an undoing of Indy’s tech sector. Many will leave the city for the coasts in job relocations, but many will stay and reenter the workforce as solo entrepreneurs and freelancers. This is going to have a heavy impact on Indy’s income and sales tax revenues, but is likely to even out 10-15 years from then as the market sorts itself out. It’s hard to say which of these two things happens first. They’re racing neck-and-neck with each. What’s clear is that a select few on Wall Street and in San Francisco will be huge beneficiaries while everyday workers and the City wonders what happened and why.

Indianapolis will likely maintain most of its employment stability in government, retail, and biomedical industries (Lilly and Cummins will still do extremely well). Expect healthcare to take a dive as Boomers die and the echo-boomers age into middle-age with relatively modest healthcare needs. In another 50 years healthcare will likely tick up again as Millennials age further.

Indianapolis will continue to be a convention town, as another Convention Center expansion will have happened. Indianapolis will now regularly host large conventions for political parties, the NRA, and the sort of events we view as “just slightly” out of our league today from a capacity and hospitality stance. New hotels will continue to flow into Downtown.

Statewide policy

Indiana’s Legislature will have finally moved on from social issues like gay marriage, but will still be fixated on abortion and immigration. Indiana will likely continue to slide in the direction of less regulation and low taxation, but will compensate by raising more fees and use-taxes. Expect an increase in the gas tax by a bunch, likely within the next 2-5 years from today, and tied to inflation as Speaker Bosma has proposed. Just as electric cars take over more. I’d expect the gas tax to go up in 2-5 years and then a special “electric surcharge tax” will be placed on electric car charging to make up the difference going forward.

Indiana’s Legislature will continue to exert heavy control on Indiana’s municipalities, much to their chagrin. There will also be a push towards improving quality of life, noting that it’s not enough to be good for business if no one wants to live in your state. But this will focus heavily on communities with money. Expect Indianapolis, Fort Wayne, and Evansville to do well here, plus Hendricks, Hamilton, and Boone Counties. Rural decline will continue to heavily decimate the Hoosier hinterlands, placing them in America’s new ghettos: rural, lacking in services, and priced out of useful healthcare, transportation, and high-paying jobs.

Mitch Daniels in his return third term in 2020 will be able to stem the tide for a while, but by 2030 we’ll view rural residents as burdensome and unable to deliver value for the State.

Higher education will continue to be a sore point for Indiana as Hoosiers will still be priced out of it. I don’t expect changes in the pricing of higher education for another generation.

Places currently in economic decline will be largely abandoned. Muncie, Tipton, Seymour, and the like will resemble present-day Gary. Anderson and Kokomo may be able to stem this tide by throwing transit subsidies into Indianapolis’ orbit. Westfield’s gain in residents, for instance, will be Kokomo’s gain in industry.

Very rural counties today, like Cass, Washington, Greene, etc. will decline even further into a barely-self-sustaining entity that is mired in drug abuse, prostitution, underemployment, and anger.

The overarching conclusion: the more things change, the more they stay the same.

The Elkhart Project

MSNBC, whether you love them or hate them, has a very interesting piece on what they call the Elkhart Project — a series of stories and videos from our fellow Hoosiers up north in Elkhart County:

ELKHART, Ind.— Coroner John White is presiding over a sad tally in this northern Indiana county, tracking rising numbers of suicides he believes are linked to the lingering recession.

Rumors of an economic recovery may be whispered elsewhere, but here, where the downturn remains entrenched, 22 people have killed themselves this year, and two more cases were likely suicides, outpacing the county’s annual average of 16 self-inflicted deaths.

In more than a quarter of the cases, White said, distress caused by job loss or financial failure was cited as the last straw.

“We have a real problem,” said White. “They left notes specifically stating that the reason they did this was because of the economy.”

Debra K. Gibbs, a 54-year-old homemaker in Goshen, in Elkhart County, didn’t leave a note. Instead, she simply sent her worried daughter out for soda pop on a summer morning — and then shot herself in the head.

The infographic as part of the story is very interesting, particularly when you look at Gov. Mitch Daniels’ claims that Indiana, for much of his first term, was “an island of growth”. It seems that claim was buoyed by the Indianapolis-Carmel metro area and left out the other 2/3 of the state.

Starting in June 1994, when the data starts, Indiana wasn’t in a recession. Nor were many other states. Then, in December 2000, Indiana slipped into a recession along with nine other states. Indiana was the only midwestern state to be in a recession. A few months later in March 2001, Indiana was still in a recession but was joined by Michigan, Kentucky, West Virginia, Tennessee and Iowa (in the midwest). This was during the O’Bannon Administration.

Come August, 2001 Indiana was “an island of growth” — during the O’Bannon years.

Then, 9/11 hit and pretty much knocked the whole nation into a recession.

Fast-forward to November 2005 when Gov. Daniels took office, Indiana was “at risk”, likely from ballooning state debts. By December, we were expanding. A year later in 2006, we were in recession. During the 2008 campaign, Gov. Daniels was evidently twisting numbers because we most certainly were not “an island of growth”. We were more like a boat going down with the entire eastern seaboard.

Today, ironically, we are the “island of growth”. We’re one of the first states in the nation to be entering a recovery period.

Private Sector: No Job Growth in 10 Years

At first blush, I was inclined to call “Bullshit” on this piece from ritholtz.com that claims:

Over the past decade, the U.S. private-sector has lost 203,000 jobs.

That’s right: Zero job growth for 10 years.

In the 1940s, we created 10 million jobs. In the 1990s, we added 19 million new jobs. Even during the much-maligned 1970s, we added almost 16 million jobs.

The 2000s might be zero. Some economy, huh?

The government has created 2.1 million jobs over that period — primarily teachers. And, that’s the weakest government job growth in nearly two decades.

I can’t find information on how or why this happened. Over the past 10 years, George W. Bush was in the White House for 8 of the 10 years, so we can’t claim that tax cuts on the rich work. I’m inclined to believe this is the direct cause of heavy taxation on the low and middle classes. For my purposes, $250,000 doesn’t entitle you to be middle class. You’re middle class when you have an income of $60,000-$100,000 annually. And these are the people that think up the jobs that employ 2/3 of our workforce.

Sure hope Obama keeps his promise to not raise taxes on the middle class. If he does, we’re one step closer to becoming wards of the state.

Justin Fixes the Auto Industry

Justin’s Plan to Fix Ford, GM and Chrysler: The U.S. Government and any willing state government should immediately update their ENTIRE fleet of vehicles over the next three years. Purchase hybrid or electric GM, Ford and Chrysler vehicles.

Since the government will require the vehicles to be hybrid or electric, the government should offer to help re-tool plants to mass produce hybrid or electric vehicles by offering low-interest loans or grants.

The vehicles being replaced can be sold and donated to low or no-income citizens, organizations or qualifying small businesses.

The end result? The auto makers get a guaranteed contract over the next three years worth untold millions, capable of keeping people at work and keeping The Big Three in business with re-tooled plants to compete better in the future. Not to mention, more folks in America will be able to qualify for newer-model vehicles they wouldn’t ordinarily be able to afford, possibly reducing maintenance costs and getting more older vehicles off the road. That saves gas for the rest of us if older models aren’t guzzling up the gas supply.

You’re welcome.