Episode 017 - Responsibility

When I speak with people that are working a 9-5 job, investing in their 401K, etc. they ask me why they are not getting ahead. It is hard to tell them this, but I’ll tell you - it is because they are not taking any responsibility for their lives and deferred it to a third party. The unconstrained know the buck stops on their desks so let’s have a chat about responsibility.

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Show Notes

If you have ever started or run your own small business, you know the buck stops on your desk.  Those of us that embrace that philosophy shoulder the burden.  Things in life happen - adverse events, whether they be accidents, medical emergencies, weather events, divorce, etc.  This is life.  But for those that don’t embrace the idea of the buck stopping on their desk, they subconsciously seek out others to either intervene or solve the problems.  Unfortunately many are finding that deferring responsibility to others doesn’t end well - particularly when it comes to your own personal finance and economics.

If you have a thief break into your home, the first thing people do (without really thinking) is call the cops.  They run screaming to a third party to bail them out.  Few look at the process as “normal” and realize they have to harden their security.  Few realize that ultimately they were responsible for the problem, and they need to learn from it, and evolve.  But they look to counter parties to answer their needs.  They sign up for some expensive alarm company because the sales person said all the right words and made them feel secure.  

Or if they have a medical event, they call 911.  In times of dire need, I get that.  An ambulance turns up, takes you to hospital, they (hopefully) fix the issue and send you on your way.  Then you get the medical bills.  More and more bills.  You hope your medical insurance company (another third party) will look after you.  The worst case scenario is that the medical event was caused by your own bad decisions or negligence - obesity, smoking, heart attacks from stress, not going to the gym, etc.  Yet we complain because the medical bills are just so high.

When we were 18, we didn’t know anything.  We signed up for a college education and the debt that comes with that because we put our faith & trust in a counterparty (the college system) because our parents told us that is what we should do.  We come out the other end of it, debt laden and without real skills that are needed to get a first job, or make money.  We can’t get to keep the money we make because it goes to taxes or debt repayments.  But it is what most of us do blindly.  We put our faith & trust in a 3rd party (college) because we didn’t take any responsibility for our own income generation at the age of 18.  We came out the other end without much wiggle room, with most of our graduating class working at Wendy’s or some customer service position - a job they would have been happy to give us at the age of 18 without the degree.  But we hope that this is temporary and we can move from it into a better job, get an apartment, buy a car, get credit cards, etc.

What is the common problem here?  In all cases, the individual (you) gives up your personal responsibility to a third party.  You hope that the third party is there to help you out.  You give up your own personal sovereignty or privacy to government agencies because you hope they will keep you safe.  But we all know they are inept and each day that goes by, regardless of what political party is in power, the national debt goes up, personal privacy goes down, and you are enslaved further and further.  Yet the #1 discussion at the water cooler at work is about what political party is “good” and what is “bad”.  The unbridled allegiance to one over the other is demonstrable proof that people have given up on their own personal responsibility and defer it to some political candidate who is telling you that they can make your life better.

Well I hate to burst your bubble, but it is YOUR life.  YOU make it better.  Not them, not the police, not your employer, not your health insurance company, not your college education.   YOU.  Plain & simple.  YOU.

When we see someone who doesn’t share the same reliance on third parties, they are quickly called “weird”.  Whether it is the hippie, or the counter culture rebel or the anarcho-capitalist.  They are the weirdos.  They don’t think like us.  

Reality check - they are doing better than you.  Why?  Because they don’t rely on anyone but themselves to exist and thrive and as long as they can exist without restriction, they can do very well.  It is for those reasons that most of society is going backwards.  Because of the rampant reliance on third parties to do all the heavy lifting for them.  They don’t want to go on a diet - they will just rely on health insurance when they get diabetes.  They have been told by the media that they deserve that slice of cheesecake, so there could never be any downside risk, right?  Wrong.  We all know that, but we never take personal responsibility until it is too late.

The same is true in investing.  We are told, either directly or indirectly, that just to put your faith & trust in the $USD and Wall Street products and you will do just fine.  That your 401K will save you, and when you are old & grey you can retire with dignity.   How’s that working out?  It isn’t.  Too many society members are unable to get through each month while they are working, let alone have anything to show for it that will get them through their senior years when they can’t work anymore.

Why?  Because they put all of their responsibility in someone else’s hands.  And that person or organization did the dirty on them.  We have to call this out for what it is.  You can’t get any interest on your savings because bankers decided they make more money lending money than holding your liability, and lobbied your elected officials - the ones that you voted for because they “had your back” to create monetary policy that is screwing you over.  The banks who lobbied the media companies and government officials with million $ paying jobs for doing nothing when the govt. politician leaves public office, in this revolving door environment to Goldman Sachs, have been throwing you under the bus for years.  And yet you continue to believe that they have your back.  That you have no responsibility in all of this because they will be there when you need them.

Fun fact:  They won’t.  They only want your money and they don’t care what they have to do to get it.  They lie, they cheat & they steal.  All with a nice $2,000 Armani suit on.  Yet they sell you some Mutual Fund magic pill or some Index fund potion that won’t work when the economy eventually pops like a Led Zeppelin balloon.

Blind Freddy can see that this can’t work.  You can’t keep printing money out of thin air, increasing the money supply so that bankers can lend it around like drug dealers, without the value of each $1 having less and less efficacy.  Sure, the Federal Reserve talk about monitoring inflation rates, but their numbers are pure fiction.  They keep interest rates down so low anyway - why?  Because your government’s national debt is so high that they can’t afford to pay the interest on the loans and any increase in that is going to force them to raise taxes on you, which they promised they’d never do when you elected them.  This can’t continue to work.  At some point it will blow up.

And that’s where I get back to personal responsibility.  The fundamental backbone of the laws of Financial Sustainability is your personal responsibility to yourself.  That you purchase income producing assets that you have hands-on control over.  You don’t delegate to a third party, or if you do you keep a close watch and tight chain on what is going on.  Because when you don’t control things, third parties will take advantage of you.  That’s just how the world works.  And the further distanced you are from the things you have, particularly investments, etc. the more likely you are going to be disappointed with the end results.  And when it comes to your financial position, that could be a life or death situation.  It certainly is with health care.

Let’s break some social norms here:

1.  Just take a pill for it

I have worked with a large number of pharmaceutical & biotech companies in the past.  One of them provides pharmaceutical claims & billing services to independent pharmacies.  When you go and get a script filled, if it is to a local family owned pharmacy, there is a huge chance that the claim that is filed for you for the pills goes through some software I wrote at some point.

The largest area that I was involved with is in worker’s compensation claims.  Most of them are pain medication due to workplace accidents.  Ie. a worker fell off a roof and broke their backs, or fractured something, and a doctor determined that surgery would be too risky to paralysis.  So the patient is told that for the rest of their lives they will be on some pain medication.  Not a great prognosis.

But I’ve met many of those patients in my travels.  Most of them are not results of accidents.  Most of them are overweight people with no core strength.  Their backs were subjected to often constant physical injury and they did little to have any strength to do the work.  They didn’t go to the gym, they’d eat McDonalds every day for lunch, they celebrated their successes at the local steakhouse or bar, they never wore any support for their backs in their jobs and eventually their backs gave way.

What’s the answer?  Well before the “opioid crisis” was nightly news, they were prescribed Opioids.  That put them in a very difficult position because they became addicted to them.  They deferred their own personal responsibility after it was too late, to a doctor who was given various incentives (and I used to work in the biotech industry, with sales & marketing teams, and how they could increase market share by “incentivizing” physicians) to prescribe certain products, and to Big Pharma which clearly were only interested in increasing their revenue and profit margins.

But the individual just accepted this because their health insurance paid for it.  Until they didn’t.  Then they were screwed.  They found themselves addicted, without a supply and either went cold turkey off them or turned to black market suppliers or dealers who would peddle them “alternative” products such as herion that resulted in the highest overdose rates we have ever seen among under 50 year olds in the USA.

This is just one example of a society that think they have no responsibility for their own health and just defer that to a third party.  Now I’m not trying to be an a-hole with this - I know that many people have chronic medical conditions that had nothing to do with their lifestyle choices.  But when you look at the statistics, they are the minority.  The obesity epidemic is real.  And it is solvable.  I was amazed at seeing the number of cases of diabetes being solved by those that embraced a Keto based diet, or just lost weight and turned it around.  It was their responsibility all along - no magic pill would solve that problem.  Yet for many, they will happily point blame at the high cost of diabetes medication in the USA rather than taking personal responsibility for it.

2.  My employer will take care of me

We would love it if this was true.  Social culture and stories of the past shows the allegiance to the employer by the employee to be a magical thing.  The “old days” when you had a job for 40 years, then retired with a pension and lived out the rest of your days with the support of your past decades that you devoted to your employer.  Those were the days, as they say.

Well they were nothing like that.  The 20th century was a constant battle of workers vs. employers.  Trade unions rose up to give the working man (or woman) a living wage, healthcare, pensions, etc. because they had to fight for it.  Employers, by their nature, would never do something like that.  It was because of the power of the union that those things occurred.  As a result of the demise of the unions, however, the old days of the 40 year commitment to one employer is a chapter in history.  Today the average person would stay in a job for five (5) years max before moving on to a new one - either because they chose to, or because their employer terminated their employment.

I remember first arriving in California in the 1990s and coming face to face with those who had held onto jobs they hated because they needed health insurance and was impossible or impractical for them to buy on their own.  When employers hold the employees at ransom over something like health insurance, you have an indentured servant relationship.  That’s a sensitive topic in the USA, but the reality is that it is alive and well and living in 2020.  

Today there are more options for the self-employed or the recently unemployed.  However they are still expensive and not likely to be an option for someone who has just found themselves without income.  The only saving grace right now is a perception of low unemployment rates based on the idea that there are a large number of jobs out there.  In truth, although there might be a larger number of transitional or low paying jobs, they are under constant threat from automation and at the rate of growth of automation & AI, the workers will have little options or little rights.

With that said, I never understood why someone with a job will succumb to a false sense of security with it.  But this is what the majority want.  No one wants to be constantly worried about their job - they want some form of security.  However it shouldn’t be something that is handed over to the employer.  The employer is simply offering a contract for service between two parties - they need something done and the worker is offering to do it.  It is that simple.  If you have skills to do something that is in demand you should, by default, be able to ask a higher price for that thing.  If not, you should be incentivized to go and learn something that will be in demand.  It is how you stay relevant.  

We know we need to do that, but few do.  Re-inventing yourself should be a normal process that we all go through, but laziness and the lack of urgency creeps in and slows down that transition.  Hence the relationship with the employer becomes one of dependence rather than one of a vendor/client relationship.  

And yes, when you need them the most, the employer will not be there for you.  Try to see how it goes if you have to take an extended absence due to medical emergency.  Although (legally) they probably can’t terminate without cause, we all know that they find a way.  Hiding behind “at will” employment contracts means that the employer’s relationship with the employee is more of a “what have you done for me today?” relationship.

3.  Place your faith & trust in your IRA or 401K

Retirement funds like 401K or IRAs are great.  Employers may make matching contributions to a plan so that you can get “free money”.  Plus the contributions to the plans are often tax-deferred.  That means you get taxed when you withdraw from the plan, and the idea is that you will do that when you are likely to be in a lower income tax bracket.

But the assumption here is that you don’t need the money until the age of 65.  Probably will be later as time moves forward, as governments believe that we are living longer.  This is not the case, however.  Since 1980, the average US male life expectency has only risen 6 years.  Yep, despite annual medical expenditure going up about 90x over that time period, the average US male life expectency has only risen to 76.1 years (based on 2016 numbers).  And a lot of that is down due to the massive overdose epidemic I have previously spoken about.

Additionally if you are carrying excess weight, your biological age is going to suffer.  With the easy access to fast food and the harder access to healthcare, we have not done much to extend life at all.  So while they are trying to increase the eligibility ages for social security, etc. the promise of living longer is not being fulfilled by the majority of Americans.  

However if you are socking away money in your IRA or 401K and using that as some measurement of your net worth, stop fooling yourself.  That might be a bunch of money you get access to in your senior years.  But what about today?  What about getting through each month?  What about your ability to buy something that might make you a dividend return every day of your life, well past that 65 year old milestone?

And the worst part of this is that depending on the roll of the dice, the day that you eventually get to need access to those funds may be mired by an economy bear market or adverse event, that could see 50% of your net value in retirement accounts disappear instantly.  Poof - like a balloon popping.

This is why a lot of people that I know have moved to a “self-directed IRA” model, but even with that their options for investments are limited.  

We also know inflation is a thing.  But it is a far more dangerous thing that we give it credit for.  Some countries that have seen collapses in their national currencies have entered a period of hyper-inflation and although I don’t see that as likely in the USA, since so many of the world’s currencies are pegged against the $USD, what I do see is a likely rise in inflation simply because the US Federal Reserve is increasing the money supply to prop up failing business models in such things as federal government budgets, banks, and other institutions that rely on liquidity.  In order to pay back national debt, all US persons will be expected to shoulder that burden.  That means increased pricing on goods & services, increasing interest rates, etc. and with that defaults will abound.  When that happens, we risk a catastrophic depression scenario that will be ugly and painful.

Putting all your money in markets that are going to be subjected to this level of risk is a bridge too far for many.  And yet US government policy incentivizes US persons to do this.  Tax deferrable is a very attract reason, and if employers are also contributing, then there is a further reason to throw caution to the wind here and put your money into US equities or Bonds or other liquid investments.

4.  A degree is a guaranteed entry ticket to the middle class

How’s that working out these days?  I recently watched a few YouTube videos by college students or graduates talking to other college students or graduates about how to make money.  There was some assumption being thrown around that unless you are making a six figure income the day you leave college, working as a software engineer or some other STEM based career, you are a loser.   I got the sense that this was the blind leading the blind.

Experience matters in any field that you choose and simply gaining entry into a job that pays well doesn’t reflect the actual value of the individual.  And no, if you came to me as a junior software engineer and your only experience was a “boot camp” for coding, I’d show you the door.  I’ve spent decades of my life cleaning up the mess left behind by those that thought they were god’s gift to programming, and had no appreciation that developing systems is only a small part of the actual cost of owning them.  That if what was developed was done in such a way that it was next to impossible to maintain over the system’s lifetime, then the originator is going to have a really bad reputation in their field.  But in a world where there is a revolving door policy towards employment, I guess it doesn’t matter.  You get paid a massive amount of money to occupy a seat.

But for every one person that falls into that situation, there are 10 that don’t.  They choose to study fields that they thought they were interested in, only to find that there wasn’t much demand for it.  Or that it didn’t pay that well (like teachers) and consequently they can’t make enough money to cover the costs of their new found independence.

The middle class is being eroded because it can be.  It represents a huge extortable collective for taxes, bank interest, etc. and that means it is a target.  So having a guaranteed entry ticket into a pen of lambs to the slaughter isn’t such a great thing these days.  

And it is super competitive.  The employers have created a marketplace for jobs where having post graduate degrees gets you a better chance at a higher wage.  At least that is the theory.  But a cushy job with all the benefits and job security might be the goal of many, however if you sell your soul at the door to get it, what did that get you?  

Yet the promise of this utopian world means 18 year olds are signing on the dotted line for student loan debt and that’s creating an army of indentured servants that not only can’t quit their jobs because of their student loan payments, can’t afford health insurance and can’t seem to save enough money to put down on a home mortgage.  The end result is this delayed entry into making money, participating in a real economy and supporting all the other local businesses, etc. in the neighborhood drags down on all of us.  Not just those that look at a gloomy future.

5.  The government will take care of me

I don’t want to get political, but it amazes me when I see those that favor Team Red or Team Blue and have anger filled discussions over why one is right and one is wrong, that they don’t see that neither party have been good custodians of their economic future.  Regardless of who is in power, the government debt is going up and up and up, the Federal Reserve continue to pump more and more money into the monetary supply reducing down the efficacy of our spending power, and because of this total debt enslaved mess, no one can earn any interest on their savings.

This means our seniors have no options to retire now.  Gone are any form of sane argument for the “4% rule” and all savers are forced into higher and higher risk investments, with the chance of it all coming crashing down and their money disappearing into thin air.

Given this dynamic, how on earth can we even believe the mythology that the government will be there with social security when you turn 65?  And how can we even entertain the idea that Medicare will be there either, when they are allowing hospitals to charge $600 for an aspirin to a bedridden patient?  When medical costs are 10x what they are in neighboring countries, rather than addressing that issue, people blindly believe that any candidate who promises fairy dust of “Medicare for all” can actually pay for it.  It won’t work, and no - your government will NOT be there for you when you need them.

And in my book, that’s ok.  I don’t want them there if I can do it myself.  I don’t want to give up my own personal sovereignty to a state that extorts money from me at the end of the barrel of a gun, and are legally allowed and empowered to do that.  My freedom is valuable to me, and selling it out for the mythology of security by government doesn’t work.  It is no different than security by employer or security by insurance company.  These things should be services of “last resort”.  The fact is that we are all personally responsible for ourselves.

Yes, there are always cases where you can’t be.  If you are infirmed or have chronic illness and have no other alternative than to rely on government services, I get that.  But that is not what we have here.  What we have is a cartel of government directing the wealth of the country (or really the debt of the country) to services that don’t really help the average guy, leaving the average guy to fend for themselves.  Therefore I would prefer to take that responsibility myself, and effectively self-insure.  It is something corporations do all the time, and I’d like the option to do the same.  Because I know that I’m fooling myself to think that the government will be there to bail me out.  All of our plans for retirement income (if you buy into that charade) should be self-funded.  Which is why I have thrown out the concept of retirement entirely, and live on Smart Income right now - not waiting until I’m too old and physically incapable of doing fun things with my time.  

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So there are five illustrated fallacies regarding responsibility.  Ultimately YOU are responsible for YOU.  Yep, the buck stops on your desk.  The sooner we embrace that, the sooner we start respecting each other and realizing that together we can make significant change for all of us.  We remove the unknowns and reduce the stress level.  Then maybe we can solve our collective issues as smart contributors and not relying on who has the most money to swindle us out of our democratic voting rights.  Because as I see it right now, there is no white knight on a horse coming in to bail us out of the mess.  Just more of the same, and that’s really sad.

Be your own white knight and look in your own backyard before assuming that someone else will fix your problems.  Once you get your own backyard in order, then offer a hand to your neighbor.  That’s how problems really get solved that mean something.