Monthly Archives: July 2015

Confessions of a Millionaire Businessman

Author and businessman, Tim Brown, knew what it was like to live The American Dream. But then everything came crashing down. A number of years ago, amidst his struggling marriage, the collapse of his ventures and his declining health, Tim contemplated ending his life while on a business trip. He spotted a location on the roof of the hotel he was staying and pondered his jump. In a fascinating interview I did with him – which captures the essence of his book Jumping Into The Parade: The Leap of Faith that Made My Broken Life Worth Living - Tim discusses how these struggles helped him truly live, take chances and become the person he really wanted to be.

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You talk in your book about becoming a millionaire by age 30 with a beautiful wife, a young son and all the trappings of success. But then things in your life started to head in a less than favorable direction. Talk to us about this

I think there are a lot of messages baked into that question. For starters, I believe the real problems we face can’t be fixed with money. This is something that we all learn at different points in our life. Just looking back at becoming a millionaire at 30, I am often reminded that whenever you connect your worth to a scoreboard, you have fallen into a really dangerous trap.

So where did ‘money’ come into this equation?

Personally, making money was never about me being rich, and it still isn’t. It has always been about not being poor. Those are two very different mindsets.

Can you elaborate on that?

Glad to. As I look back, I can honestly say that money for me was about security and safety. So much of my life was based on choices that my parents made, involving frequent family moves which left me feeling unsafe and disconnected. To me, money represents the type of security and stability that has allowed me not to be at the mercy of another person’s decisions. Moreover, it helped set the course for my own value proposition here on earth in that it kinda proved to the world that I had worth.

And as I recall from the book, you struggled with depression?

I sure did. The depth of this depression hit me hard when I was in my late 30’s. Everything I had worked on in my 20’s was successful. And I also did really well with a lot of what I worked on in my 30’s. But then the demands of my businesses really started to take their toll, and it was only a matter of time before the powder keg went off.

What about self-worth?

It is important for all of us to remember that our self-worth is not necessarily connected to our work life. Your worth is about your character and your capacity for learning, serving, helping others and growing your soul. It can be a real wake-up call when we find that the pot of gold at the end of the rainbow is empty and that we have spent much of our life being on this quest. For me as a kid, I envisioned marrying a beautiful wife, having a family, a great house and security and that all of this would be delivered through money. While money certainly helps for sure, I’ve seen just as many people with a lot of money live unfulfilled lives. It can corrupt people because they let it become their God. And it can become an enabler of ego which can cloud one’s judgement and humility.

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Greek Bartering Reveals The Essence of Money

Barter-Chickens_for_SubscriptionThe Greek fiscal crisis has receded from the 24-hour news cycle, but unfortunately for Greek citizens, their problems are far from over, especially with strict capital controls still in place and likely to remain so for months. We previously noted how the capital controls were suffocating economic activity and giving rise to parallel currencies such as private scrip. Now many Greeks are resorting to barter as well. It is a very unfortunate situation, but one where we can observe what money is and how it evolves.

We are all familiar with barter, and it may even be something we do from time to time in our daily lives, trading a few small services and goods with friends and family without using cash. It was also this way in Greece until the capital controls arrived. As Reuters notes:

“In the past, [barter] was mostly on a family and individual level, but now it is expanding due to the developments in the banking sector and capital controls. Now it is a more structured and organised phenomenon.”

In fact, it has become so organized that citizens are formalizing it and increasingly using websites to facilitate barter:

Tradenow, a website started three years ago to facilitate barter of everything from food to technology, says the number of users and the volume of transactions have doubled since capital controls came into effect on June 29.”

Examples of those using the website range from car repair shops exchanging tires and a burglar alarm company trading services for advertising. Another internet company that operates barter on a larger scale is Mermix, which allows farmers to share heavy machinery in return for cash or cashless transactions.

All of this is certainly a step backwards for the Greeks as it slows the gears of exchange. When bartering, it takes longer to calculate what is a fair exchange; it also takes time and energy to find someone who is willing to trade. Economists call this the “double coincidence of wants problem.” Not only do you have to locate the person who has the thing you want, but you also have to make sure you have something the other person wants.

Why Economists Used to Agree on Minimum Wage

Fast FoodThe argument over raising the minimum wage rages on, especially as cities are now looking at increasing the minimum wage above the federal level, with New York City being one of the most recent examples. While this is a contentious topic for workers and employers, the issue has historically been a big yawn for economists. Previously, it was almost unanimously agreed upon by economists that higher minimum wage laws result in increased unemployment. But they are now changing their tune. Unfortunately, this isn’t because the economic profession was wrong on the minimum wage issue. It is because economics today is erroneously being treated like a natural science, rather than a science of logic and deduction.

In 1976, a survey by the American Economic Association found 90% of its members agreed that “increasing the minimum wage raises unemployment among young and unskilled workers.” Fast-forward to 1992 and only 79% agreed; by 2000 only 73.5% agreed and, of this subset, only 45.6% fully agreed with the statement. In a recent debate at FreedomFest, New York Times columnist and economist Paul Krugman stated he has changed his position on the minimum wage issue, noting “…looking at what are very clear experiments, you cannot find evidence that raising the minimum wage reduces unemployment.”

Krugman is just one example of economists increasingly relying on empirical studies to come to conclusions about the implications of public policies like the minimum wage. These empirical studies attempt to look at the unemployment data where the minimum wage was increased and then compare it to a similar or nearby area where it was not increased. While this may seem simple and intuitive at first, this is not how economic studies should be performed.

Windy City Debt Scenario: Blown Away Yet?

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Chicago, one of the great global metropolises, is in a world of hurt…. serious hurt; so badly mangled that if left uncorrected, the Windy City, as it is affectionately known, stands to get blown to smithereens, just like it’s fellow city to the north – Detroit.

The crux of the issue boils down to a simple phrase: fiscal irresponsibility. It’s a storm system that has been building in intensity for years. And for me, a former Chicago resident, it elicits a deep sadness for the city I truly love.

Chicagoans have a term of endearment for the frigid, sub-zero winds that come howling in off Lake Michigan during the heart of winter. They call it “The Hawk.” This term applies equally well to the cold, hard, chilling facts associated with the fiscal ‘winter’ that the city is facing. A $1 billion operating shortfall, combined with a pension crisis registering at $20 billion. On top of that, the Chicago Public School system has a cool $1 billion shortfall along with a $9.5 billion tab for unfunded pension liability.

The warnings regarding the impending financial doom have long been there. In essence, they date back to 2003, a time when Chicago’s municipal budget was adversely impacted by the Great Recession. Making a dire situation worse, former mayor Richard M. Daley engaged in a number of questionable deals that accelerated the city’s debt load. The greatest mess has been Chicago’s pension system which is heavily mired in unfunded liabilty. Closely tied to this are the chronically upside-down Chicago schools that are closing and laying off teachers at an alarming rate due to funding deficits. What makes the school issue such a joke is the position being taken by the Chicago Teachers Union; namely, let’s dig in our heels and oppose any and all fiscal reforms that might help mitigate the debt situation.

6 Reasons Why Rent is So High – and What You Can Do

For-rent-signMillennials are having a tough time finding an affordable house or apartment to rent as they start their lives and careers. A recent report found most rental homes were unaffordable for millennials in 23 of the largest 50 cities in the U.S. The reason is simply supply and demand. But what is driving the demand for rentals and what, if anything, can you do about it?

 

1. The homeownership rate is back where it was 20 years ago, before the campaign to encourage homeownership began.

A chart of U.S. homeownership clearly shows the government-influenced boom to get people to own their own homes and then the resulting bust. It appears there may be a natural rate of homeownership due to the fact that some people will always be renters, such as students, those moving to new cities or young people starting their careers. Trying to artificially increase the homeownership rate beyond this natural rate cannot last indefinitely. Once the bubble popped, all those who owned homes – who normally wouldn’t have been homeowners – came rushing back into the rental market.

2. Millennials are now competing with baby boomers for rental units.

As if it wasn’t enough to compete against other millennials and those still scarred from the housing bubble, rental demand is also being driven by baby boomers looking to downsize or have a more convenient lifestyle. According to a recent Bloomberg article, the sheer size of the baby boomer generation is likely to keep up demand on rental units for the foreseeable future.

3. The middle-aged and middle class are renting too.

Households between the ages of 45 and 64 accounted for about twice the share of renter growth as compared to those younger than 35. Also surprising is the fact that households in the upper half of income distribution contributed 43% of the growth. These are the two groups that traditionally are the most likely to own a home. It’s not entirely clear why, but it’s likely it relates to these traditional homeowners getting burned in the last housing bust and choosing to rent while they repair their finances.