One of the greatest lies ever told to people is the fallacy of good debt/bad debt.
“A mortgage is good debt! It’s an investment that will pay off!”
“A college education and student loan is good debt! It’s an investment in yourself!”
“A credit card is bad debt! Stuff you buy with a credit card doesn’t increase in value!”
Let’s break this destructive lie right now.
There is no such thing as good debt or bad debt.
There is only debt you are capable of managing financially, and debt you are not capable of managing financially. Are there things you’d like to buy or invest in that have a larger probability of paying off dividends in the future? Of course. Few would argue that a college education or a house to live in are wastes of money. But implying the value of a debt is equal to the value of the investment is a dangerous fallacy. It’s one of the main reasons we’re in the financial situation we’re in now.
Which is better? A diamond that increases in value paid for with cash, or the same diamond paid for with credit? The diamond is the same. How you pay for it is the difference. To be sure, there are some things in life which are exceptionally difficult to obtain without using a debt vehicle, like a house. That said, the mortgage on that house isn’t inherently good because the house might appreciate in value. The mortgage on that house is only as good as your ability to repay it without going broke.
Before you borrow, see your financial picture clearly, and break away from the fallacy of good or bad debt.
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I saw this story on CNN about the vetting process for the Obama administration being too cautious and too meticulous:
…some political observers say the president-elect’s similar caution with respect to recruiting new administration officials and key high-level advisers may be turning away a string of qualified candidates wary of subjecting themselves and their families to the most rigid presidential vetting process on record… political analysts say the Obama team’s unprecedented degree of scrutiny could result in several qualified individuals deciding to forgo consideration for a top post. This could especially be true among individuals considered for economic roles in the administration from the private sector who might be more financially entangled than those who have been longtime public servants.
CNN, get your head out of your ass. Look, it’s simple: if someone doesn’t want to be subject to intense scrutiny because their background may have questionable dealings, then they’re not a qualified individual.
We don’t and never should require invasion of privacy as a condition of citizenship. We should require intense scrutiny of those people who want to serve in the highest offices of the country, and require full disclosure of conflicts of interest, ethics problems, and other problems.
Remember, we’re not talking about the Obama administration knocking on Joe the plumber’s door and saying, “hey, want to be Secretary of State? All you have to do is give up your privacy”. We’re talking about people who are close to the halls of power already being very carefully investigated, and for those individuals, they already know it’s part of the game, the price you pay for access to power. If they’ve had questionable dealings, then I’m glad they’re opting out of the nomination process early.
Careful, thorough vetting of appointees can only be a good thing. I applaud the Obama administration for trying to prevent conflicts of interest and known problems in individuals who want access to more power.
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Our economy is in a great deal of trouble. Far more than a problem in financial services, far more than just hype on the evening news, we’re in a LOT of trouble.
Consider a few things:
1. The jobless reports crested today at 542,000 jobs lost/initial unemployment claims filed. This is huge, and indicates that there is severe weakness in all sectors of the economy. This close to the holidays, jobless claims should be declining as the service sector staffs up for the holiday retail season, yet we see the opposite happening.
2. Major companies are getting pummeled, such as GM, Citigroup, and others. A failure of a major Dow component or Fortune 10 has a significant impact on the economy.
3. Mayors Bloomberg and Daley of NYC and Chicago were warned to prepare for thousands of layoffs by the end of the year.
4. We still haven’t unraveled Bear Stearns and Lehman Brothers’ exotic financial instruments. A GMAC failure would be very, very bad.
5. We still haven’t unraveled the massive derivatives market.
There’s a lot of doom and gloom in the media, but not all of it is unwarranted. There really is no bottom in sight.
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You must be passionate about what you do and what you believe in. You must be passionate, emotional, even a little overzealous, because it’s that passion that will keep you going when times get rough… like now. The passion to make a difference, to be more than the sum of your experiences, to want to promote something greater than just you will make hard decisions easier, forming friendships faster, gathering allies to your cause smoother. Passion will drive you and awaken in you the hero that cannot fail, that cannot be swayed, that cannot be broken.
Passion will clear your vision, open your mind, and brighten your heart. Passion is a virtuous circle – the more passionate, the brighter shines your light – which in turn inspires you again to shine ever brighter.
These are dark times. We need each other’s light more than ever.
Here’s the greatest secret of all:
Passion, like happiness, is waiting there in front of you.
Will you pick up the mantle and become a champion?
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Yep, another economics crossover. Blizzard Entertainment’s Wrath of the Lich King expansion pack for World of Warcraft dropped last week, and its impact on the economy has been fascinating. Veteran players of the Auction House (the in-game free market) have been finding that since the expansion came out, very little has been selling. The reason, however, is not because the most advanced players in the game are in a new part of the game. The reason is likely because the most advanced players (and the wealthiest, or at least those with greatest access to capital) are running out of money.
If you’ve never played World of Warcraft, it’s a virtual reality game, an online role playing game in which you are an adventurer beating up other people or game-generated opponents. Part of the game is buying and selling equipment to make your character better, more effective. Whenever you defeat a creature in the game, you typically get a small reward of some kind, plus some experience points which contribute towards making your character better. Once you hit the maximum level of experience points, money is substituted for experience points. For a long time, since the last expansion pack, top players have been generating hundreds of gold (the in-game currency) a day, and pouring that money into the virtual economy.
Here’s where the expansion pack changed the economy. The expansion pack now allows top players to earn more experience points, up to a new cap. Because they’re fighting stronger, better opponents, their equipment repair bills (yes, you can’t escape bills, even in virtual reality) have increased, but more importantly, there’s not generating capital any longer – they’re generating new experience points to reach a new maximum level. On top of that, a new class of character was introduced, and experienced players have been trying to build up those characters as fast as possible, again taking a lot of money and earning potential out of the virtual economy.
Think about that for a second. Your top sources of capital in an economy have dried up, while expenditures of capital have increased.
You have, in other words, deflation. Deflation, economically speaking, is when the amount of money in an economy decreases with respect to goods and services in the economy. A dollar (or gold, or whatever measure of currency) is worth more tomorrow than it is today, because there’s just less money available. Deflation brings prices down, but that means it also brings wages down, too. Consumers lose spending power. Demand for items drops because there’s just less money to buy things with.
As a result, economic activity slows down. Supply outstrips demand. Items in the Auction House are still being listed, but buyers are getting harder to find. If you look at the moving averages of prices, you also see that prices are falling – exactly what you’d expect in a deflation. This is a double whammy for sellers trying to move goods in the Auction House – fewer buyers and falling prices.
Sound familiar?
This is exactly the situation that the real economy, especially real estate, finds itself in. You have an absence of buyers complicated by falling sale prices due to foreclosures and lack of demand. Because housing has been a disproportionate amount of economic activity over the past 5 years, the collapse of the housing market has in turn spread malaise to the rest of the economy.
This is also why inflation isn’t a concern right now. Governments of the world have been printing money like crazy recently, borrowing against future taxpayer earnings, or just outright inflating their currencies. However, inflation isn’t a concern because capital – money, in the form of credit – is being destroyed faster than the governments are creating it, as investments go bad over and over again. Without the capital generators of top players in a virtual game or an engine of growth in the real game of life, money is being used up faster than it’s being generated.
How will things change? Well, in Warcraft, those top players will again in the near future hit their maximum levels of experience, and will once again return to income generation. As that happens, capital will return to the markets and you’ll see sales and buying rise again. It may take some time to get there, as reaching maximum experience does take time and effort, but it will happen. In Warcraft, at least, the engines of the economy – top players – can be counted on to bring new influxes of currency to the world.
This is the conundrum that faces the real world economy. The practices – irresponsible lending, irresponsible buying, irresponsible investing – that drove the last economic engine are broken. We can’t go back to them. We need a new economic engine that can begin to generate growth and capital. When we figure that out, when we figure out what will bring money back into supply without the danger of another bubble, we’ll see things turn around in real life.
What should you be doing? Both in the game and in real life, in a deflation, preservation of capital is essential, in the form of saving money, reducing expenditures. Both in the game and in real life, if you have a capital base, you should be looking for very cheap opportunities for investment and growth, and spending the money you do have very selectively, looking to pick up serous bargains. If a dollar is worth more tomorrow than it is today, then it makes sense to hold onto those dollars, to not spend beyond necessities, and to find new opportunities for growth. Find that next economic engine, be very picky about where you spend your money, and keep your eyes open.
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Truffa brand purified drinking water delivers refreshment like few other bottled waters. Inspired by the Italian village of San Pellegrino in Terme, Truffa starts with delicious cold water from the same source as the famed Ice Mountain waters, a highly publicized and recognized source of great water.
We don’t stop there, though. Truffa is triple filtered in a unique processing system for bottled water, involving state of the art styrene methyl methacrylate copolymer filtration systems, food-grade activated carbon, and ion resin exchanges.
After that, in yet another advance in purified drinking water, Truffa brand purified drinking water is energized with a powerful 21% oxygen mixture to provide a clean, crisp taste.
Unlike other bottled waters, Truffa brand purified drinking water is artisan-crafted, all natural, and strictly supervised by experts throughout the purification process to ensure that you get only the best, most refreshing water possible.
Once crafted, Truffa is bottled in elegant solid glass to ensure that no impurities from manufactured plastic corrupt the purity of our water on its way to you.
Of course, a water this sophisticated and pure isn’t for everyone. But for those who choose Truffa, it’s unparalleled refreshment.
Does this sound good? Would you buy this?
Here’s the part that you don’t see.
Truffa does not exist. It’s an Italian word for scam. Bottled at the same source as Ice Mountain? That’s Framingham tap water, courtesy of the MWRA. The SMMC filtration system? Styrene methyl methacrylate is the long name for the plastic that a Brita pitcher is made out of. 21% oxygen mixture? That’s the natural amount of oxygen in the air. So here’s what’s behind this bottled water:
1. Put tap water into the Brita.
2. Pour filtered tap into a glass bottle.
3. Shake briefly.
4. Resell at ridiculous markup.
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The water coming out of the sink in my kitchen is Ice Mountain’s source as well – the MWRA municipal source for metrowest Boston, filtered the same as I filter my water at home.
I got a real kick when I saw the marketing on the Ice Mountain web site:
Slick, well made, and the claim that you could have Ice Mountain delivered to your door for just a dollar a day was awesomely funny – when you do the math, 4 bottles of 5 gallons each for 32 works out to1.60 per gallon. Why? Because that’s my tap water, and the tap water of just about everyone who lives in the metro Boston area.
Figure that you can buy Brita filters on Amazon for 16 or so for 120 gallons of capacity (more, actually, since these filters can easily do 80-100 gallons). That puts your cost per gallon around 13 cents if you go by manufacturer’s filter life ratings. Add in the cost of water –763 for 61,000 gallons, and you’re at 1.3 cents per gallon.
So do the math. $1.60/gallon for home delivery of the same water you can get out of your Boston-area faucet WITH filtration for 14.3 cents.
Only marketing can make a 10x markup like that work and still get consumers to buy product by the truckload.
Oh, and those individual bottles? If you pay 1 per bottle at 16.9 ounces, you’re talking about paying3.78 per gallon of the same water – a 26x markup.
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Barack Obama won the presidency on a combination of many factors, but one often overlooked by marketing is the absolutely essential use of data. Obama’s campaign under manager David Plouffe was a data machine. Consider:
1. Web sites, social media, blogs, etc. – all with Google Analytics, which you could see on page load.
2. The Biden SMS play was brilliant. Get a bunch of people to sign up for your text messaging service by revealing your VP pick on mobile first, and you’ve populated your database.
3. The iPhone app was brilliant. In this Newsweek article, the app’s back end arranged the “call a friend” by states where the campaign wanted to focus. What might have seemed random or casual was in fact well thought out.
4. Email, email, email. Think email marketing is dead? Tell that to the campaign, which sent out more email than I could count, with different voices, topics, subjects, and every combination you could imagine.
5. Word of mouth. The Obama campaign actively encouraged word of mouth at every opportunity, from telling supporters at rallies to call and text friends to encouraging sharing of media by posting to YouTube, broadcasting on UStream, every avenue available to it.
The clear winner in the Obama campaign was marketing. It helped that the product was worth talking about, but without the massive, well-run marketing machine, we’d be talking about a very different president elect today.
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I’m very happy that Barack Obama won the presidency of the United States.
Here’s what I wonder. His campaign amassed millions of emails and addresses. Just his campaign for announcing Senator Biden as his Vice President brought in millions of SMS numbers. His campaign brought out millions of supporters to canvas for him, to put him in office.
I hope and wonder if he can continue to use those assets, that massive database. To keep the mailing list active as President of the United States, to text us when he needs to engage us. To drop a line on Twitter in addition to a White House Press Secretary. To podcast the radio address and blog from the Oval Office.
Most important, I wonder what an America would look like if the Obama campaign’s supporters become the Obama presidency’s volunteer corps, millions of Americans being directed and taking guidance from the White House as they were from campaign headquarters, cleaning up rivers instead of canvassing for votes, feeding the hungry at soup lines instead of voting lines.
I’m more than willing to continue hearing from President Obama on Twitter, on my phone, and in my inbox. I’m more than willing to join up and volunteer, too.
Perhaps this is the start, as Gradon Tripp put it, of a Digital New Deal. Count me in.
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I went to the polls yesterday with my mind set on who I would vote for (President-Elect Barack Obama) and a Nikon D40 with an SB600 speed flash. As I’ve mentioned before many times, perception is everything. Lugging around a DSLR with a speed flash and a long lens instantly creates the perception among many people that you’re a photographer in some official capacity. No fewer than 8 times waiting to vote, I was asked by fellow voters and election officials if I was a reporter.
In the 2004 elections, the answer would have been no.
In 2006, the answer would have been I don’t know. Blogging, podcasting, new media was still so new that no one really had a feel for what they were doing, for what kind of power they had.
Yesterday, I quietly and confidently said yes. Yes, I am a reporter. I may not be to the caliber that will ever put a Pulitzer Prize in my office, but I fulfill the role of a journalist by finding and presenting news to an audience, whether it’s for the Financial Aid Podcast, Marketing Over Coffee, or my blog here. I am a journalist, even more so than the “traditional” media in my hometown, which couldn’t even get a photographer to one of our largest polling sites until late morning, and the photos I’d taken were up on Flickr and CNN iReport shortly after they were taken as polls opened.
More important, you are a reporter, too. If you have a blog, if you have a media production like a podcast, if you have anywhere you publish online, you are a reporter. You are a member of the media, and that carries great opportunities and great responsibilities.
As we open a new chapter on America after the election, we legitimize all of new media for playing a role in the outcome of the election and for President-Elect Obama’s judicious use of new and old media combined to engineer a victory.
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Here’s what I wonder. His campaign amassed millions of emails and addresses. Just his campaign for announcing Senator Biden as his Vice President brought in millions of SMS numbers. His campaign brought out millions of supporters to canvas for him, to put him in office.
