3 Things 5-10

05/09/2021 Although MAS is a financial services company, not everything published herein will be about numbers or investing. But no matter the topic, we hope for three things: 1) That you find the time you spend engaged worthwhile. 2) That you’ll reach out to us for help in any of our areas of expertise if something we discuss creates an urging in you to do so. 3) That you’ll share this with somebody new each time you read it. Thing One Facts Are Stubborn Things I was having a conversation with a friend recently and we were both lamenting the headlines. Everywhere you look there are problems. Racism. Police brutality. Wealth Inequality. Those are the real attention grabbers and, consequently, they are the ones that are most exploited politically. As I was making this point to my friend, I used the police brutality thing as an example because I’d recently learned some rather disarming facts about the subject. Before sharing those facts, which I've summarized below, I stipulated that I believed any death at the hands of the police is unfortunate: In the year 2019 (the last year for which complete data is available): There were roughly 235 million white people in the US There were roughly 42 million black people in the US 10.1 million total people were arrested by the police 999 people were killed by the police Of the 999 people killed: 424 were white (26 unarmed) 252 were black (12 unarmed) So, of the estimated 235 million white people, .0002% were killed by the police and of the 42 million black people in the United States, .0006% of them were killed by the police. Not quite the epidemic that we are being asked to believe. Facts are stubborn things, but so are people who are invested in narratives. And speaking of narratives, the one about wealth inequality is also pretty persistent. My friend uttered the often-blamed, “they”, in explaining the problem. “We can’t win. They don’t want us to have anything…”. Using an almost whispering tone to avoid sounding argumentative or antagonistic replied, “First of all, I don’t think that’s true, but even if it is, in this country, “they” can’t stop us even if they wanted to – and that even goes for young people working minimum wage jobs.” I then referenced something I’ve spoken about here before where I showed how a person making minimum wage today could retire a millionaire. See the chart below this post: Essentially, assuming a 10% annual return, an 18-year-old making minimum wage could save $47.34 per month (which would be roughly 3.9% of his salary) and have a million dollars if he did so until he retired. Obviously, he could have much more if he saved more as his earnings grew over time. Or he could have much less if he believed his prosperity or poverty was somebody else's responsibility. He said, "...that makes sense but the problem is, they don’t teach us that stuff." On that point, we both agreed and I finished the conversation with a question which I answered before my friend had a chance to: Q: Why do you think that is? A: If we learned enough to start rejecting the ideas of the people pushing this nonsense on us we’d be better off but they’d be out of a job – the activists, the reporters, the politicians, all of them. They’re invested in the lie because they have to be but we don’t. We can win, but we have to play the right game the right way.





Thing Two We're All Economists Now The recent jobs report was mostly seen as a disappointment by economists. Two hundred sixty-six thousand jobs were added versus an expected one million. It turns out you don’t have to be a trained economist to understand why. I’ve had conversations with people who are about as far from being learned economists as possible who have related stories that illustrate their understanding of what’s going on. Several have told me stories about neighborhood restaurants and dollar stores that were planning to close because they couldn’t get people to come to work. They've gone on to explain why by telling me that they knew people who were making more sitting home than they would behind a cash register – “but they’ll go back when the benefits run out.” Meanwhile, economists have theorized about wealth inequality (which was mentioned in Thing One above) forever. Those that favor political intervention typically advocate some kind of income redistribution. And those who take a more conservative approach that favors less government intervention, like the famous economist, Henry Hazlitt, have a different take. In a book (Economics In One Lesson) written well over 75 years ago, Hazlitt opined on the subject of employment/production/income: “… The real question is not whether there will be 50,000,000 or 60,000,000 jobs in America in 1950, but how much shall we produce, and what, in consequence, will be our standard of living? The problem of distribution, on which all the stress is being put today, is after all more easily solved the more there is to distribute. We can clarify our thinking if we put our chief emphasis where it belongs—on policies that will maximize production…Practically all government attempts to redistribute wealth and income tend to smother productive incentives and lead toward general impoverishment. It is the proper sphere of government to create and enforce a framework of law that prohibits force and fraud. But it must refrain from specific economic interventions. Government’s main economic function is to encourage and preserve a free market. When Alexander the Great visited the philosopher Diogenes and asked whether he could do anything for him, Diogenes is said to have replied: “Yes, stand a little less between me and the sun.” It is what every citizen is entitled to ask of his government.” The moral of the story? The dollar store and restaurant workers who are opting out right now and collecting enhanced unemployment are not producing anything. This fact supports Hazlitt's (as well as my amateur economist friend's) theory about smothered productive incentives. Unfortunately, over the long run, their financial outcomes will also likely support the theory that the government's help leads to general impoverishment since the things that aren't produced can't be redistributed. They would be so much better served by listening to Hazlitt rather than their favorite politician or by listening to you or me tell them how much more helpful they could be to themselves by saving $47/month versus letting a politician pretend to help them.

Thing Three Just A Thought "Everybody you fight is not your enemy and everybody who helps you is not your friend.” - Mike Tyson