Category Archives: Economics

The Consistency of Donald Trump

Donald Trump is often accused of being inconsistent in his political views, and of only “discovering” certain issues now that he’s running for President. However, if you check the actual history of what he’s actually said, you quickly find that this narrative falls apart.

The following video is an interview that Mr. Trump did with Oprah Winfrey all the way back in 1988 – nearly thirty years ago. Let’s take a look.

The protectionism that he advocates now? Check, it’s right there on his sleeve. And in both the modern case and the 1988 case, he’s correct. The nations he’s named are dumping cheap goods on the American market while simultaneously making it very difficult for American companies to sell in their markets. In the 1980s, it was heavily protectionist Japan that made it nearly impossible to sell American products there. Today, Japan has somewhat liberalized its trade – but China is pulling the same trick.

He is 100% correct to note that if it’s not reciprocal, it’s not free trade.

Note also his response when asked if he was running for President: “no, but if things get bad enough I might.” The premise of his modern campaign? Things got bad enough.

The man is far more consistent than he’s given credit for. It’s just that his views don’t completely align with Republican views. But then, I’m Roman Catholic – my views don’t align with Republican or Democratic views, either. But Mr. Trump and I are both nationalist, in an age when the other candidates mostly aren’t.

I’ll take that.

(H/T Mike Cernovich for the video)

Artificially Overpriced Oil

oilwellOil has been artificially overpriced for quite some time. The recent plunge in oil prices represent a correction of highly distortive market forces. Unfortunately, the correction is unlikely to last – in no small part due to the effects caused by lower oil prices themselves.

Oil has been artificially overpriced for quite some time.

Eighteen months ago, oil was trading for over $100 a barrel. At that point, it had been above $80 a barrel for nearly five years. For the five years prior to that it had mostly stayed over $60 a barrel. All of these price points are far higher than a simple business analysis tells us they should be in an ideal market.

A little bit of napkin math makes this clear.

The US Energy Information Administration figures for oil consumption are out of date, but only by a little bit. They list 93 million barrels a day of global consumption. Let’s round that up to 100 billion barrels a day, both for easier math (we’re doing estimates here, we don’t have to be perfect) and to account for the numbers being a few years out of date. The US Energy Information Administration estimates total annual consumption for 2011 (chosen to match most closely with the Wikipedia consumption stats) at 88.5 million barrels a day. [Note: Wikipedia doesn’t provide a good measure of this or I’d use their numbers for consistency.]

Let’s grant that both of these are estimates and likely not quite perfect, but they’re probably close. What we see is that global production doesn’t quite meet global demand. But… it could.

Let’s look at the breakdowns of oil production. The US leads the pack with nearly 14 million barrels per day, followed by Saudi Arabia at 11.6 million barrels per day. We’re going to skip a bit down the list, but not too far, and note a few others. Iran and Iraq, both sitting right around 3.4 million barrels per day, occupy places 6 and 7 on the list. Venezuela, at roughly 2.7 million barrels per day, is number 12.

Every country that I’ve named has producing oil at rates far below their capacity for years (probably several other nations as well, but let’s stick with what I can speak on reliably).

Iraq’s oil production has been hampered for two and a half decades by geopolitical realities: sanctions, then the first Gulf War, then another decade of sanctions, then the 2003 invasion, then years of internal civil war. Iraqi oil production has finally surpassed their peak production prior to the 2003 invasion. But does anybody think their production couldn’t be 10-20% higher – or more – if they hadn’t had their infrastructure ravaged by decades of sanctions and war?

Iran is in a similar boat, only it might be more drastic. [Iraqi production might be as drastically low a Iran’s, but we can’t prove it the way we can with Iran.] Iranian oil production is nearly half what it was at its peak – in the late 70s! That’s right – Iran’s production tanked after the 1979 Islamic Revolution. But that’s not because they don’t want to produce it or because they lack the means. It’s because international sanctions prevent them from selling it. [Sidebar: this is why the “war for cheap oil” argument never made sense; if we wanted cheap oil, all we had to do was lift sanctions on Iran.]

It’s unclear exactly what sanctions are being lifted on Iran as part of the deal that went into full effect this weak, but it’s at least allowing them to sell more oil than they have been. But we know from historical data that they could feasibly double production if they chose to.

Venezuela’s production is off its peak because socialist dictator Hugo Chavez, spectacularly mismanaged their oil industry. They’re down nearly 30% from their peak.

Saudi Arabia has the opposite issue. It’s been underproducing oil for years – by conscious choice, in order to keep prices high. Note that in the last few years they’ve substantially raised their oil production – specifically to manipulate the price of oil and to try to claim market share from competitors. Note however that Saudi Arabia hasn’t made major new investments in oil production in decades. They haven’t wanted prices to go down. Until now they do for some reason [more on that tomorrow].

Then we get to the US – the world’s largest producer of oil. We use a lot of oil, but we produce a hell of a lot of it, too. But we could be producing more – much more. We have oil reserves all over the country that aren’t being tapped. But it’s not for international reasons or price manipulation. Here, it’s all about environmental regulation. [Note that for the purposes of this post, I’m not arguing for or against this; merely stating that it is reality.]

Now, let’s look at that. Iran alone could be putting out another 3 million barrels per day in an ideal world. Iraq could probably be putting out half a million to a million more. Venezuela could be putting out a million more. The US… let’s guesstimate that they could be putting out a million more (I’d be willing to bet that we could go much higher than that).

That’s a grand total of around 6 million barrels per day – or nearly six percent of total oil production – that is simply missing.

Now, we know from modern economics that the effects of changes in supply or demand on a market’s price are non-linear. A small change in supply or demand causes a small change in price, but a big change in supply or demand results in a huge change in price. In a commodity market like oil, six percent is a huge change in supply.

In an efficiently operating commodities market, the average price should be price just a bit higher than the marginal price. In other words, it should be right around (but probably a tad higher than) the highest cost to produce. Right now that’s fracking oil in the US, which costs around $40 per barrel to produce. So in a fully undistorted market, we should be seeing oil prices hovering below $45 per barrel.

However, that’s not the whole story. Because in a market with 6% higher supply, fracking might not make sense anymore. Saudi oil costs around $20 per barrel to extract, and much of the middle east is the same. So the undistorted market price might be somewhere closer to $25 a barrel. It’s hard to say exactly where it should be without… letting the markets figure it out.

What we’re seeing in the market today represents a price much closer to where oil actually should be (although the current prices might be a tad low, and in need of upward adjustment now; it’s hard to say). This is a direct result of Saudi Arabia ramping up their production.

Unfortunately, today’s low prices will probably not last. Oil is likely to become once again artificially overpriced. But that’s a topic for a later post.

Falling Into Empire

List-Why-Rome-Fell-ENate has signed and sealed the death certificate of the United States.

Seems a bit early to be writing this… but the fact is the history is already written.  The nails are in the coffin.   Its already happened.  The US is down 34 to 10  and there are only 2 minutes to go.  There is no time for a come back.

If you saw the post last night or heard the show you know our friend Rycamor brought a great essay on the life cycle of nations.  This essay is called The Fate of Empires and Search for Survival.  It is written by Sir John Glubb.

I first read the essay Nate refers to several years ago, based on a thread at Vox Popoli. It may well have been Nate who posted the link, or it might have come from Vox himself. It’s been long enough that I honestly don’t recall. It’s a powerful essay, and it’s well worth the read. It’s also quite simple and easy to follow. On the whole, the essay makes a very strong case. But I do have a few issues with it, and I think they’re important.

First, the Sir John’s decision to split the Roman period is a glaring data point. Indeed, the author notes this himself:

(3) The division of Rome into two periods
may be thought unwarranted. The first, or
republican, period dates from the time when
Rome became the mistress of Italy, and ends
with the accession of Augustus. The imperial
period extends from the accession of
Augustus to the death of Marcus Aurelius. It
is true that the empire survived nominally
for more than a century after this date, but it
did so in constant confusion, rebellions, civil
wars and barbarian invasions.
However, this only partially deals with the issue. To be clear, I don’t object to his breaking of Rome into distinct periods. I do, however, object to him leaving out the third distinct period of the Roman empire – the time that we commonly refer to as the Byzantine Empire. It’s important to note that my objection comes not because I think this makes his case weaker, but rather because I think it makes his case generally stronger.
First, the divisions that he does include – the period of the Republic and the period of the Empire – represent a valid and distinct division. We must note that Sir John did not make this distinction arbitrarily – historians have made this distinction for centuries, and for good reason. The Empire was a very different beast from the Republic, and it’s correct to recognize them as so. Indeed, it is also correct to represent the Byzantine Empire as a separate period of its own. All three represent distinctly separate beasts, and although we might quibble about the exact dates of when one became another became the third, we can easily agree that they are, in fact, no longer the same beast.
And yet at one and the same time they clearly are one logical entity. The transition from Republic to Empire to Byzantine Empire honestly is a direct continuum. Roman citizens didn’t just go to sleep one considering their government a Republic and wake up the next morning singing the praises (or curses) of their new Empire. The early Roman emperors, especially Augustus, went to great trouble to maintain all of the outward appearance of the Republican government that they’d replaced. This continued, to one degree or another, all the way through the Byzantine Empire. Until the fourteenth century the citizens continued to call themselves Romans and the Senate – though completely powerless – continued to exist.
The division between the Republican and Imperial periods of Rome makes a nice split that aids Sir John’s theory. At first glance, the existence of the Byzantine Empire – and its thousand year reign – seems to cause the theory some problems.
I submit, however, that it doesn’t. People are fond of saying that every theory has its exceptions, by which they usually mean a glaring counterfactual that doesn’t conform to the theory at all. In reality, however, most real-world exceptions look a lot more like the case of Rome – they kind of fit the theory, but differ in important ways. And that’s why I think the case of Byzantium actually bolsters the theory.
Rome is the exception that proves the rule.
Because make no mistake about it, Rome is an exception – at every level. The very fact that it makes Sir John’s list twice, and with no gap between the periods, demonstrates that. But it’s not just on this list that Rome is the exception. Rome’s exceptional status has been well known for centuries. Indeed, until the current wave of globalism swept our educational system, Rome took center stage in history classes precisely because it was so exceptional.
What made it so exceptional? Lots of things, but here are a few.
  1. Rome built a level of infrastructure that had never before been seen. Their roads and aqueducts ran the length of the empire.
  2. They built to last. A non-trivial amount of that infrastructure still stands today, including some roads and aqueducts but especially a large number of buildings. Some are still even in use.
  3. At their peaks, they weren’t just a power, or even one of a few great powers – they were the great power.
  4. The empires around them had immolated each other (or in some cases self-immolated) so thoroughly that even as Rome’s power waned, there was nobody else to seriously challenge it.

I am hardly the first person to note the parallels between the modern United States and ancient Rome. The comparisons are so obvious that my college history professors had to push people away from making the too-easy notes and force them to look deeper. Yet they are there, and they are real. In looking deeper, we must not forget that they exist. But more than anything, I’d like to call attention to point #4 on my list above.

As the US declines, nobody else is ready to take up the mantle.

The fact remains: on the open battlefield – be it land, sea, or air – no other military on earth can touch ours. Every other military is at least one full generation of technology and doctrine behind. That includes our western European allies. During the initial invasion of Afghanistan, our allies offered their aid. In most cases we either turned it down or imposed limits on it because their generation-old tech made it too difficult to integrate them effectively.

No other nation can even come close to the logistical capability that the US provides. It is often pointed out that we spend many multiples of the Europeans on our defense budget. It is equally often forgotten that they can spend so little because our European allies completely rely on the US for logistical capabilities. Indeed, this was official NATO doctrine for decades.

Economically, we remain in a similar boat. Our economy dwarfs everyone. The US still provides 14% of world GDP as of 2014, despite having only 5% of the world’s population. That’s well down from our peak, but not because our GDP has declined – it’s because China and other developing nations have actually been playing some catch up. Yet even though they passed our GDP as a percentage of world GDP in 2014, China did so representing 20% of the world’s population – five times ours.

Yes, 4th generation warfare is a real thing and the US sucks at it. This causes real problems to our military dominance.

Yes, our logistical capability is much more fragile than is often realized, and has also been in decline.

And yes, our economy is built on a foundation of debt that will likely soon prove to be catastrophic.

But the reality is that every other nation on Earth fares worse on at least two of these same scores, most on all three. China’s economy has been growing like mad for the last 15 years, but there are increasing signs that the house of cards is about to come down. Russia and the Middle East have built economies that rely on oil staying at quite high prices – prices that look increasingly like they’re not long-term viable. And Europe is too dependent upon the US. If our economy collapses, theirs goes down even further.

[Side note: I’ve believed for quite a long time that the price of oil was artificially high; recent events back up that opinion. But that’s another post for another day.]

In the comments, Nate’s post already start down the road to this when commenter Susan asks what other countries are ready to step into the void. Nate responds – not incorrectly – that there doesn’t need to be anybody to step into the void. But prior to that, his response that ISIS refugees are the ones conquering territory leaves a lot to be desired. It’s a long way from “conquering territory” to “launching a new empire.”

Where am I heading with this? The short version is this. I agree with both Nate and Sir John – the time of the American Republic is just about up. But I disagree with Nate about what comes next. My personal prediction is that the true American Empire arises from the ashes. Yes, I’m well aware of how much we already resemble an Empire. And yet there are certain lines that our nation has not yet crossed.

This is more fodder for another post on another day, but for now, suffice it to say… we will cross it. The historically literate will recognize its passing when a figure very reminiscent of Augustus Caeser comes to power in the American scene. He will probably retain the outward forms of the American presidency, and most notably the title (Augustus’s official title was neither “king (rex)” nor “emperor” nor “caeser” – it was “consul,” just as the countless Republican leaders before him had been called). The most obvious distinction? When we have a President who serves for life, you will know that the line has been crossed.

The time is not yet ripe for Americans to choose to elect that man (remember: Augustus was elected to his first term as consul). But it is coming. The right man has not yet presented himself for the post. But he will.

The US is declining, but not into nothing. We are falling into empire.

Corporations Should be Owned by People

Corporations should be owned by people. They should be owned by living, breathing people. But they’re not. As I mentioned yesterday, at least 67% of all outstanding US stocks are owned by institutional investors. This is a huge problem, and it’s a big part of why the economy of today feels so disconnected from the economy of our fathers – and even the economy of our own childhood.

This problem manifests in multiple ways. The first problem is, who’s in charge? For those who are unfamiliar with it, corporations are organized along a certain pattern that’s more or less universal. The day-to-day operations of the corporation are controlled by the officers of the corporation. These are people with titles like President and Vice President, and sometimes titles like Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Chief Operating Officer (COO). But you can’t rely on title alone, because sometimes those last three aren’t officers, they’re actually directors (more on them in a minute).

Officers make daily decisions. They’re often authorized to spend corporate money – within certain budgets and up to certain dollar amounts – on their own authority. They’re in charge of hiring people. At small corporations, the officers may make all of the hiring decisions. At larger corporations, they usually hire the top managers and grant them authority to higher lesser people. They set corporate policies. They set the overall goals and strategies. They control the organization of the corporation.

They also have legal responsibilities to the corporation in most states. If the books of the corporation are wrong, the officers can be held liable. If the corporation commits a crime, the officers might be held liable (maybe – this can be murky). They have legal duties, such as preparing stock reports and filing annual (sometimes quarterly) paperwork with the state.

But they can’t just do whatever they want. Officers are appointed by the board of directors. The board of directors makes the very high level decisions of a corporation. They hire officers – and fire them. They usually set the budgets that are available for officers to spend – dictating not only how much, but also the broad categories that the money should be spent on.

Finally, the directors are appointed by the shareholders. These are the people (ahem) who actually own the company. Shareholders meet at least once per year, and usually vote at each annual meeting on some number of the board of directors (some companies elect directors every year; some stagger the elections and have directors serve multi-year periods).

Although they usually exercise little day-to-day influence, shareholders have ultimate control over a corporation. If they don’t like the way a corporation is run, they have the power to change it. In theory, the board of directors acts as a stand-in for the shareholders. Ideally, the shareholders say they don’t like something, the directors tell the officers to fix it, it gets fixed. In extreme cases, the shareholders fire the directors and appoint new ones and the new directors fire the officers and appoint new ones, and then something gets done.

But what happens when the shares aren’t owned by individuals anymore? When, instead, those shares are owned by mutual funds and investment firms? Mutual funds and investment firms are very different, but at the core, both of them pool money from multiple contributors and invest the larger pot of money as one. There can be a lot of advantages to this, but that’s a post for another day.

The relevant point is this: when you put your money in a mutual fund or another kind of pooled investment, you’re almost always also signing way proxy rights to any investments bought with that money. What does that mean, exactly? Think of each share as a vote in shareholder meetings (the most important vote being the selection of the board of directors). When you put your money into a mutual fund, the director of that fund now has the right to cast your votes for you on any stocks bought by that mutual fund.

So, for example, as of this writing, Vanguard Total Stock Market Index Fund controls 3,089,008,230 of stock (1.64%) in The Walt Disney Company. The director of that group has a larger say in the selection of Disney’s board of directors than any individual person does. In fact, he has more than twice the say of the top five largest individual shareholders in Disney – combined.

Who the hell is the director of the Vanguard Total Stock Market Index Fund? I don’t know. I didn’t choose him. Even if you own that fund (which is a hugely popular fund, so you might), you didn’t choose him, either. Unlike most mutual fund directors, he doesn’t even keep or lose his job based on earning profits – this is an index fund, so the investments he makes with it are almost automatic.

But most of the others who have large votes were “chosen” because their funds make money, by thousands of individual investors who have absolutely no idea what’s being done with the money they’ve invested.

When corporations are owned by people, those people have an exposure to the company’s activities. If they don’t like the way a corporation is operating, they can direct the board to change it. But in this case, who get’s to make that choice? Not the founders of the company. Not the people. Not even a handful of rich bastards who own most of it with their own money. No, the decisions are made by a handful of rich bastards who bought most of it with your money.

These people have no skin in the game. They get their (very high, often in the millions of dollars) salaries for managing the mutual funds whether or not it makes a profit. And it’s not uncommon for them to get seven figure bonuses even when the funds lose money. The company does something illegal or unethical? These guys get to shrug and point out that their only legal requirement is to make their clients money. Then they go live the high life.

Who watches the watchmen? In a word, nobody. Our corporations aren’t owned by people anymore. But they should be.

Nobody Owns Big Corporations

bigcorporationsFor the first time in years, Slate has published an article that’s actually worth reading. I’ll get to it because it helsp make the larger point I want to make today. But first, a question.

Who are the elites who own the biggest corporations in America?

Whoops. It’s a trick question. The answer, believe it or not, is largely nobody. That’s right – nobody owns most of the world’s biggest corporations. Nobody.

Hold that thought, because we’re coming back to it. Our excerpt from Slate is from an article that purports to show why bank fees are so high. Ignore that part – it’s a side issue; a distraction. The important point is this:

Because numerous banks exist in most markets, the HHI for banks is quite low, and that is why economists have thought of the banking industry as competitive, and the prices as presumptively fair. However, Azar and his co-authors make an important observation: While many banks exist, different banks are frequently owned by the same entities. If 100 banks exist, but they are all owned by just a few institutional investors, then competition may be low rather than high.

Imagine, for example, that your neighborhood is served by six banks—JP Morgan, Bank of America, Citigroup, Wells Fargo, U.S. Bancorp, and PNC Bank. You might think that these banks—which happen to be six of the the largest U.S. banks—would compete vigorously for your deposits. However, it turns out that the biggest shareholders of these banks are, roughly, the same companies: BlackRock, Vanguard, State Street, Fidelity, Wellington, and Berkshire Hathaway. These institutional investors earn profits by owning shares in other companies and managing shares owned by their clients.

[Emphasis added]

That’s right – all of the large banks are actually owned primarily by institutional investors. Let’s take a look at one of those corporations – we’ll just pick the very first one, JPMorgan Chase. As of this writing, JPM has 3.8 billion shares outstanding, valued at roughly $59 a piece, for a total market cap of $224 billion dollars (actually a tad less than that because I rounded; but close enough). That’s a big company, no doubt.

But here are some interesting factoids. There are no individual investors who own more than 5% of the company. The largest individual shareholder owns 3,148,451. To be sure, that holding is valued at around $180 million dollars – a hell of a lot of money. But it’s also less than 0.1% of the entire company. In fact, the top five insiders and largest shareholders combined control only 4,210,264 shares – or 0.11% of the entire company. That’s right – no single individual owns a controlling interest in the company. Not one.

In fact, there’s only one investor who does own a controlling interest, and that’s not an individual. It’s The Vanguard Group – an investment firm. In fact, a full 76% of the company is owned by institutional investors: investment firms, mutual funds, etc.

What about those funds? Where do they come from? Much smaller pools of money invested by individual investors – the vast majority invested by very small time investors, typically in the form of retirement accounts.

Big Banks aren’t alone. Big corporations across the globe are largely owned by these same institutional investors. As of 2010, 67% of US publicly traded corporations were owned by institutional investors – and that number has been steadily rising since for decades. In the 1950s, only about 7 or 8% of US publicly traded corporations were owned by institutional investors.

Later this week I’ll be discussing why this is not only bad, it’s very bad. As it turns out, this has a ton of consequences on how our economy, culture, and even our political system runs today. But for now, take a moment and let it sink in.

Income Inequality is Unavoidable

For the poor always ye have with you; but me ye have not always.

John 12:8 – King James Version

Income inequality can never, ever be eliminated from society. No matter how hard we try, it simply can’t be done. Here’s why.

Income does not fall along a “normal” (bell curve) distribution. It follows a power law distribution. This is necessarily and always the case. It’s an unavoidable law of nature. To understand why, let’s review the six factors that bring about the rise of a power law distribution. From my original post:

  1. A competitive event.
  2. The population of competitors is unequal
  3. The inequality is distributed along something resembling a normal distribution.
  4. Winners from any given round of competition keep their winnings.
  5. The winnings form any round confer an advantage in subsequent rounds.
  6. Competition is iterated over multiple rounds.

Let’s take each one of these in order.

A Competitive Event

Income is and always will be competitive. This will not and cannot ever change. You can pass all the laws you want. People will find a way around them. They always have. They always will. People have an ingrained drive to compete with each other. We must compete with each other. Evolution demands it. The organism that does not compete will eventually lose out to the organisms that do. Eventually those who don’t compete will be bred out of existence. Only those whose ancestors competed will be left.

The population of competitors is unequal

Human beings – like all other organisms – are inherently unequal. Whatever our status in the eyes of God, here in this realm we are not identical. Take a look at any individual field – or even any individual job description. Among the people who perform that job, some will be better than others. Some will perform it worse. It’s that simple.

But pretend for a moment that they are actually equal in their actual job tasks. Somebody will eventually figure out a way to extract an inequality in some other way. Sleeping their way to the top. Brown nosing the boss. Playing off of connections to get better pay. The source of the inequality doesn’t matter. It only matters that it exists.

And this is just within one job. Spread that out over multiple jobs, over multiple fields… it doesn’t take a genius to see that the competition is inherently unequal.

 

The inequality is distributed along something resembling a normal distribution.

We know this to be generally true for most ways in which individual human beings are unequal. Height is distributed along a bell curve. IQ is distributed along a bell curve. Strength – or at least, potential strength – is distributed along a bell curve. And so on. It may not be the case that every conceivable competitive advantage is distributed along a bell curve, but in general that’s going to be the shape of things.

Winners from any given round of competition keep their winnings.

Once again, you will never, ever be able to take all of the winnings from all of the winners. You can try. Somebody, somewhere will always find a way around it. When you have a competitive event (see above) and stakes are high and you have a lot of competitors, somebody will try to cheat.

The winnings form any round confer an advantage in subsequent rounds.

It takes money to make money. Better income in year A will most likely lead to better income in year B – probably even better than year A was. In the long term, these advantages add up fast. Better income pays for better nutrition, better tools, better education, better connections. In short, better everything. This is big for an individual. On the multigenerational front, its effect is staggering. Your better income pays for your child’s better education, better connections, etc. Which pays for your grandchild’s even better… well, everything.

Competition is iterated over multiple rounds.

Pick your definition of round: hours, days, weeks, months, years. Generations. The competition is iterated forever.

Income Inequality is here to stay.

Income inequality is here to stay. It will never leave us. So… if we can’t eliminate income inequality, what can we do? That is a much more interesting question, but it will have to be the topic of future blog posts.

 

Let There Be Incandescent Light

I have tried nearly every kind of light bulb out there. I was a very early adopter of compact fluorescent bulbs. Pay a bit more now for a bulb that lasts longer and uses less energy, thus saving a lot of money in the long run? What’s not to like?

Nearly everything, as it turns out. First, the bulbs were a lot more expensive than the plain old incandescent light bulbs. I spent a pretty decent amount of money to change everything out in my house. Second, after literally changing every single bulb in my house… the energy savings was far too small for me to pick it out of the noise in my month-to-month energy bills. I probably really was saving energy, but it was such a small amount that I couldn’t even prove it to myself. Hardly worth the time and effort. Third, there’s a bit of an annoyance factor with them because they take a bit to “warm up” and really come up to full light. Fourth, there’s a new environmental factor: disposing of them without leaving mercury traces everywhere.

But worst of all – by far – is that the light quality absolutely sucks. Now, most people don’t notice this – but that doesn’t mean that they aren’t bothered by it. Light quality has a huge subconscious effect on us. Seasonal Affective Disorder (SAD) is a real phenomenon, and the primary driver of it is light. A decent portion of that is physical – a lack of true sunlight causes vitamin D deficiencies. But some of it is purely mental. The visual quality of the light has a direct effect on our subconscious minds. This effect is also present in other forms of depression, not just SAD.

As it happens, depression runs in my family and in my wife’s family. SAD also runs in my family (and, although undiagnosed, probably in my wife’s family as well). So after dealing with shitty light for a few months, I made another sweep through my house later and threw out all of the compact fluorescent bulbs. I replaced them all with good old fashioned incandescent light bulbs again. Only this time, not the cheap ones. I paid a bit more for the good ones that were a bit fuller spectrum.And it made a difference. Not a huge one, but it was noticeable – more noticeable than the energy savings I was theoretically getting from more expensive light bulbs.

On occasion since then I’ve run similar experiments with newer technologies – although I’ve never since changed out the whole house without running smaller scale experiments first. I learned my lesson there. And I have yet to find a bulb that lives up to good old incandescent light.Until recently, it was hands down the price winner as well (ignoring energy costs). So I paid a bit more in energy, but saved on the bulbs. Even the more expensive full-spectrum incandescent bulbs were cheaper than the “high efficiency” bulbs. This became an even bigger deal when we moved into our current house. Something isn’t right in the house. It burns through light bulbs like no tomorrow. At the moment, there are at least nine light bulbs burned out in our house. And this is only in the last few weeks – we replace them frequently.Or, at least, we try to.

The problem is that some assholes in Washington (aka Congress) decided that for some reason this was in issue that just absolutely needed their input. And now the manufacture or import of incandescent bulbs is heavily regulated. The result is that the full spectrum bulbs we used to get now cost four times what they used to. At the rates that bulbs go out in our house, the price is killing us. We’re having to drop back to cheaper incandescents (which still cost twice what we used to pay for the more expensive ones).

I’m all for saving energy. I’m all for helping the environment. But I refuse to do so at the expense of my family’s mental health. Congress should never have placed this burden on us – and on you. Because whether you know it or not, this is effecting you at a subconscious level as well (the degree to which this effects people varies, but the effect is very real and well documented).

Side Business – You Should Have One

I’ve long been a believer in small business. I believe it’s the lifeblood of the economy. Small businesses (those with less than 500 employees) have created 64% of all new jobs in the US since 1995. I also believe it’s the path to true prosperity for most individuals. But for most of my life I’ve believed that you needed your small business to be your full time job for it to be worthwhile.

In the last five years, I’ve learned better. Most people should be operating a small side business. My wife and I currently operate two side businesses (a third business we operate is technically and legally part of one of the others) – and they’ve been really great for us.

Side businesses have several huge advantages over businesses that require you to work full time.

  • You don’t have to quit your day job, so you don’t lose that income.
  • You don’t have to find the cash to pay yourself a full time salary that replaces your day job, so it’s much easier to make the business profitable. In fact, with some kinds of businesses they can be profitable – or nearly so – from day 1 (Ever After Videography was profitable after Morgon’s first paying job).
  • If you pick the right business, the major investment can be your time rather than your money.
  • You don’t have to make a full time living at it, so you can scale the business up or down to fit your needs. If the workload is too high, scale it back.
  • Keeping it part time can make it a great fit for a “stay at home” spouse.
  • You get (almost) all the same tax benefits as if you had a full time business.

A quick example that combines several points: my wife is a stay-at-home-mother. Her side business does videography. She does all kinds of video work, but the main “bread and butter” work is weddings. This is a wonderful fit. Most of her workload occurs on Friday evenings or Saturdays – times when I’m already home. So we very seldom have to pay extra for childcare for her to work (we do, very occasionally – 4 to 5 times a year – have to make use of a drop-in daycare facility near us; the kids go so seldom that they view it as a treat).

The business has been profitable since the first paying job we landed her. Now… it’s not making us enough money for me to quit my day job. It’s not even making her what a typical “professional” job would make. But for about a dozen weekends a year worth of work, she makes more money than she would if she worked full time at a fair amount above minimum wage. That alone isn’t bad.

But on top of that, there are quite a few tax benefits to be had for having income in the stay-at-home-spouse’s name. You can now contribute to retirement accounts for the second spouse, not just the first. Dependent care expenses become tax deductible, if they help the second spouse work (or go to school). A lot of things you’re already paying for can become legitimate tax deductions (be careful with this, though – you do need to understand the rules well; or better yet, get an accountant who does).

I just finished doing our taxes for the year, and the business deductions alone from my wife’s business just impacted our personal tax bill to the point where they effectively increased her net profit by 25% (anybody need 20% off on TurboTax?). Now… if you grow your business past a certain point, it will definitely increase your tax bill – but then, you’ll be making a tidy profit at that point, too.

Think carefully before you jump in – not every business model will work as a side business. And you need a plan, not just an idea. But there can be a lot of benefits. What side business are you thinking of?