Money is based only on faith

Posted by on Dec 21, 2007 in Money | 6 comments

Money is based only on faith

I had the terrific experience of speaking in front of high school students today, and the part that I think disturbed them most was the opening discussion about money and where it comes from. It’s unsettling to a lot of people to realize that money – currency – has no intrinsic value. Its value is entirely based on the faith you have in it and the government that’s backing it, as well as the faith of the vendors from who you buy stuff.

Once upon a time, money had backing and intrinsic value. You could redeem a United States dollar bill for a dollar’s worth of silver or gold, albeit a small amount, and thus the money had intrinsic value. Today, it’s only a medium of exchange, as there’s no store of value any longer. Your money is worth only what you think it’s worth, and more importantly, only what others think it is worth. Ask anyone in the currency exchange markets just what the worth of a dollar is relative to other currencies in the world.

At the end of the day, if there ever was a serious crisis of confidence in the US dollar, it wouldn’t matter whether you were a pauper or Bill Gates – your money would be worth the exact same amount – the paper it’s printed on. Ask anyone still alive who survived the Weimar Republic, when citizens burned Deutschmarks to keep warm, so low was their value. History was not kind to the Weimar Republic or what came after – a dictatorship led by a guy with a scrubby mustache who gave us a second World War.

A new definition of community

Posted by on Dec 17, 2007 in New media | 4 comments

I’ve been giving this a lot of thought as I work on a presentation for Emerson College tomorrow night with Chris Brogan. What is community, in a world where friends can be a click away but a thousand miles apart, where you can be next to someone but can’t talk except via Twitter, where you don’t know your neighbors next door but you do know their daughter on Facebook? What is community when a recession is imminent and when it seems like there’s more call for help, more people in need than ever before?

A community is the place where you can do the most good.

Maybe it’s online, maybe it’s your church group, maybe it’s Second Life or MySpace, maybe it’s coworkers. Your community is the place where you can be most effective at making the world a better place, for yourself, for your friends, for everyone.

Scratch troubled, we are screwed as a country

Posted by on Dec 15, 2007 in Money, Rant, Real Estate | 24 comments

Scratch troubled, we are screwed as a country

I read with great alarm on CFO.com that as the housing and mortgage crisis deepens, people are dipping into or even cashing out retirement funds.

“In the last four or five months we have seen an absolute onslaught of people trying to do hardship withdrawals and loans out of 401(k)s,” Mark Anderson, CFO of Granite City Electric, told CFO magazine in October. “What has happened with housing and the economy has really blown up for people at the lower end of the spectrum.”

When you cash out a retirement fund to pay down a mortgage, you take a double hit. First, you lose the money itself in a market that is declining rapidly, dumping good money after bad. Second, and most perilously, you create an enormous opportunity cost for yourself that you will in all likelihood never recoup in your lifetime.

Let’s do the math. Let’s say you are an eager 21 year old college graduate, with a great outlook on life, a job that pays a salary of $2,000 a month before taxes, and 45 years in the workforce ahead of you. If you start saving today, 3% of your income with employers that match with a 3% contribution, and your investments give a safe return of 6% over your working lifetime, you’ll retire at the age of 66 with roughly $330,000, give or take.

Now, let’s say you, at the age of 50, make some bad choices and consider bailing yourself out of a mortgage problem with the $110,000 you’ve accrued so far in life. Boom, problem solved, right? Wrong. You’re now in incredible trouble. You will retire in 15 years with a grand total of only $35,000 in the bank (at the same savings rate). To retire with the same amount of money as you would have had, you would need to save 30% of your income instead of 3%, have an employer that matched 6%, and hope for an 11% return over those 15 years. Otherwise, you have to depend on the government and HOPE that Social Security is still solvent when you retire – otherwise, you will not retire.

What SHOULD you do if you find yourself in super-serious, no end in sight mortgage trouble? Walk away. Mail in the keys to your lender, declare bankruptcy, rent a nice apartment somewhere, and work off the bankruptcy. Does foreclosure look bad? Yes. Foreclosure and bankruptcy means you’ll be paying cash for a lot of things for a while. But it lasts 7 or 10 years at the most. 7 to 10 years of bad credit is easily survivable, and you may even develop good personal spending habits by only being able to spend what you have. Compare 7 to 10 years of conservative living with 30 years as an elderly man or woman trying to make ends meet with meager savings. Can’t declare bankruptcy? Leave the country. As long as you have useful skills, there are PLENTY of nations on this planet that are all very nice, and very few of them have credit bureaus connected to the United States.

Truth: the United States is NOT the best country in the world. It’s one of many very good countries, and any flag-waving moron who blindly believes that one country is the best has probably never traveled more than 20 miles past his doorstep. LOTS of good countries in the world.

Unfortunately, for a lot of people, they’ve already dived off the cliff, and that means a certain percentage of the population in the years to come will be gambling that social services and the government can assist them in their “golden years”.

Is that a gamble you’d take?

Like the old Willie Nelson song goes, know when to hold ‘em, know when to fold ‘em, know when to walk away, know when to RUN.

Dear Non-Profits and Political Campaigns

Posted by on Dec 13, 2007 in Money, Second Life | 4 comments

Could you use an extra $45,000 per week?

If so, you might want to consider having a subscription object written for you in Second Life.

A “bonus” called an allowance is issued in Second Life every week to residents. It’s L$50, or roughly US$0.18 per avatar.

18 cents doesn’t sound like much, but hire a developer to create a script for your cause and ask people to donate their L$50 every week to your cause. A quarter million Second Life residents would be US$45,000 per week. Not too shabby!

It's not easy being legal

Posted by on Dec 13, 2007 in Music | 10 comments

Dear music industry,

Please make it easier to be legally compliant.

Thanks.

–

I had an unpleasant experience this morning in the iTunes Store. I mentioned on Twitter to my friend, Bronwen Clune, that Josh Groban’s new album, Noel, had a very good version of Little Drummer Boy on it. I figured, heck, it’s only 99 cents, I’d send her a copy of it legally through the iTunes Store, make a nice Christmas gift, right?

Apple apparently had a different idea:

“An email you’ve specified to receive a Gift is set up for an account in a different country’s iTunes Store (Australian). Gift recipients may only redeem their gift in this iTunes Store (United States).”

Apple, did it ever occur to you that I might have friends outside the country I live in? This is, after all, the Internet, where borders are crossed with the click of a mouse. I checked other digital stores that have a pay per download, and no luck on Amazon or CD Baby. Everyone loses. The musician doesn’t get paid, the label doesn’t get paid, Apple and other providers don’t get paid.

Instead of buying and sharing the music legally, I had to go dig up a YouTube video that someone else had posted with the track as its soundtrack. I’m not willing to break the law by ripping the track myself but if someone else has already done the work and stuck their neck out publicly, I’m not opposed to sending a link.

Here’s the thing. Apple – you missed a revenue opportunity. Please let me BUY music for friends internationally. I realize the US dollar is close to worthless overseas, but still. How many musicians in iTunes miss out on revenues and sales every day because of this e-commerce paywall between nations?

Music industry – the lesson is not that free will always win. EASY will always win. I could rip this track for free by breaking the DRM and converting to an MP3, but that’s 10 minutes of my day I can spend doing something else (like blogging about it). That would be free, but I want easy. I value my time more than my money, because I can always make money, but my lifespan is finite and irreplaceable. Make it EASY for me to legally buy, share, and distribute the music I love, and I will. Yes, price is a consideration, but it’s not the ONLY factor.

Musicians – always have more than one e-commerce store distributing your stuff, because occasionally a customer will want to do something unexpected with your music, and if they can pay you for it easily, all the better. For example, I can imagine a tip jar being set out on a musician’s web site that says, “Feel free to rip my CD and if you want to send an MP3 to a friend, all I ask is that you drop 99 cents in the jar per track. Thanks.”