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Saturday, August 16, 2014

Money matters

As much as I have tried to explain money in various posts another seems in order and my motivation is to understand an important area where I think simple concepts can help.

These are just my opinions as I sit here typing them up. Nothing here should be construed as money or legal advice or as a claim of expertise in money matters. Terms may be defined by me for the purposes of this discussion without claim that they are used the same way by anyone else. Money for many reasons is an extremely complex area and it is not necessarily the case that I succeed here in simplifying understanding as I try talking it out. But I'm going to have fun trying. So if you're still here, no promises, as we continue.

Like consider two neighbors where one does a favor and mows his neighbor's lawn, and that neighbor later returns the favor by cutting his hedges. In this hypothetical example we can ask, is it equal reciprocation?

Now in contrast, consider one neighbor pays $50 US to have his lawn mowed, and the other neighbor pays someone $35 US to trim his hedges, and we can say now in this hypothetical scenario that one thing is worth more than the other where money has enumerated the cost of the favors.

So, money is consideration received in exchange for doing a favor, which abstracts the value of the favor and it's a better system than simply guessing at what roughly equals in some other kind of reciprocal exchange.

Use of the word "favor" here may seem odd, as some may think the idea is that a favor is done without expectation of something in return. But I think the reality is delayed return. Generally decent people will return the favor. But there is a delay which can be indefinite.

In contrast, it sounds very different if I say, two neighbors barter where one says he'll mow his neighbor's lawn in exchange for having his hedges done.

Maybe some neighbor might mow lawns as favors without any expectation of any kind of return, but what kind of people would accept it without giving anything back? Maybe if he were rich? Nope. Most people would want to give something back. Decent people return favors. People who never return favors are not liked.

Notice a direct trade of mowing lawns in exchange for doing hedges is not as free floating as the favor. Say you mow your neighbor's lawn as a favor, and know he'll do something in return, and he does your hedges. That has a completely different feel, as he could do something else.

That freedom in the return is what I think can be missing and is encapsulated by talking about a favor. Someone does something for you, so you wish to do something for them in return.

On that level then money is extremely simple and has been a valuable invention as it allows us to figure out the numerical value of favors, store favors for later use, and even transfer the value of a favor to someone else.

Money actually takes the indefinite nature of the favor to the limit. A person may get a return on the favor hundreds of years later with inherited money.

But what about a sheriff who saves a person's life from an attacker, possibly facing danger in that action?

Well the sheriff has a job, for which there is consideration given in the form of some type of monetary compensation where such an event is considered part of that job. And we really don't think of it as a favor! That is part of the job.

Here the notion of favor assumes a desired need and request of some kind. That then would also preclude someone trying to push a favor on you! (People pushing favors on you can be really annoying.)

Doing someone a favor is doing them a service. Handing someone a product is a favor as well, where equal reciprocation would involve a favor in return of equal value.

Now we can figure out just about everything related to money with this simple framework.

So the abstracted value of a favor can be correct, too much, or too little.

For instance a person may get paid $10 US for a service that is actually worth $100 US. Or a person, say a banker on Wall Street, may get millions US for a service which can cost the US economy billions.

Every dollar theoretically traces back to some kind of favor under this framework unless it is counterfeit. So counterfeit money can be said to be an attempt at stealing favors. Like if you told someone you'd actually done something you had not, and they did you a favor in exchange, and you were long gone by the time they found out you had lied.

Information then helps tremendously, so you can know how much a particular favor is worth. Which means I can make a prediction that the web helps monetary efficiency by allowing people to check the value of services.

Which I know is useful as I'll go check now to try and see what things cost in comparison at different places which I suggest has done a weird thing, it has lessened something called inflation.

Now that's a powerful claim, which I think is easily explained in this framework. Theoretically if people could establish accepted values for all favors then that value would not change. Inflation would not exist.

Different cultures use different money, for instance the United States where I live uses the US dollar. Whereas in the Eurozone they use the euro. The value of these currencies relative to each other shifts in an attempt to balance them so that a favor in the US costs roughly the same as a favor in the Eurozone. That constant balancing act can be impacted by a vast array of things, which can change the relative value that people see in exchanges which are about money used to buy money. So it's still set by transactions.

It can be easier when people just use one currency, like the US dollar, which is considered a global currency as lots of people in many countries use it.

Transactions for this discussion are when at least two parties make a buying decision, where there is consideration given in exchange for a favor.

Where that consideration is enumerated by money. So money just lets you put a number on it.

Now we can talk policy, and for instance, to the extent that money is in return for favors as a society I think it is problematic to limit the favors people can do for others! And I think in the US especially the feeling is people should make as much money as they can, as long as they earned it.

We can now say that earning your money involves an appropriate exchange in consideration for a favor within a desired transaction. That is, someone wants something, you provide it, and get a number on that value which is the money you receive.

However, it can be problematic if some people are getting more money than they really earn, though try to get anyone to admit it! Or which may be more common, people are working for less than the value of their work, which I addressed in a prior post.

Reality is, I think, people can have a hard time figuring out what their work is worth! And companies don't help and even try to exploit, like by going to some other country where wages are traditionally low. The web helps there as those people can talk with others and find out what they should be making so I think that problem is temporary, but great harm can be done when people work for far less than they should.

Some people see unions as a solution, but in my country unions are associated with the least common denominator, and forcing equal pay or a lower limit on pay ignores when some people aren't worth it.

The inability to negotiate an appropriate wage is the primary justification for forcing a minimum wage, in essence, saving certain people from their lack of knowledge about how much their work is worth.

I support wage understanding. Figure out what your work is worth. That is what you should get paid. And don't let yourself be cheated as you make it harder for others. Women especially are problematic in terms of getting their proper wage, which drags down tax revenue. People have a duty to be paid appropriately.

That doesn't remove responsibility from companies, but there are traditional views in this country that see underpaying workers as ok for a company, if you can get away with it. This mentality is hard to break even though it's actually stealing.

People need protection for a wide variety of reasons, and at the highest levels government is tasked with protecting its citizens, but I don't think that covers enough.

My full position is that governments have a duty both to protect and enable citizens. For instance, governments may regulate exchanges enabling citizens to feel safer about engaging in transactions.

So governments by necessity provide services to their citizens.

Government now can be seen to have a cost, and taxes represent what people are forced to pay as otherwise they just take services without giving anything back! Trying to not give anything for government services is something often seen where this behavior seems to be built into the human animal and is immune to reason.

People who have obtained the most by presumably giving the most favors to others, tend to bear a greater weight because they have disproportionately succeeded--your success is not just about you but also about your environment--and they have greater ability to pay without distress.

Distress is very important. One man can only give so much before he's starving. While another can give much more and still not cut into luxury. But both need the society that makes that possible.

Some wealthy are functionally insane: they work to pay nothing back to the society without which they could not have their wealth, and pride themselves on this behavior. There is no fix for this particular insanity so government must simply pursue them and force them to pay.

The simple way of looking at things here leads to rather specific prediction which kind of surprised me, but now lots of things make sense to me that I didn't understand before.

With the idea of a favor enumerated with money, one can say that in an ideal situation every unit of money would trace back to a favor, and would represent a desired transaction between two entities.

Since people will always be doing each other favors that means that money will always be here as long as there are people which really surprised me, as I'm a fan of science fiction including the Star Trek franchise where money is no longer used within the fictional Federation in that idealized view of a possible future.

Now I know, as I bring science to money, from a simple methodology--that bit of science fiction will never happen.

James Harris

Sunday, July 6, 2014

But what is work?

There are many productive things that people can do which can be considered work, and it is interesting to me how conflicts can arise and you can get less positive outcomes by not figuring out what work means to you.

My perspective is a broad overview I think as I was born to Black parents in Tifton, GA, USA, which is a farming community in a mostly rural area. When growing up my parents found it important to instill in their kids a work ethic, which meant for instance helping my father out at his job at the local hospital working in the laundry, or with my mom at times we'd go to the fields.

Did the work but wasn't happy with it. I was really into books. So into books that when I had to walk to school I'd read a book along the way. My classmates would tell me excited stories of their parents concerned about me walking along the side of the road with my face in a book! Guess they were worried I might wander out into the road or something.

So there were times I'd rather be reading than doing things like working in the fields, much to my mother's frustration.

Of course the reality is there is a lot of value in learning from physical labor and I appreciate those lessons, but there is MUCH more money in working with one's mind. Parents who focus their children on intellectual activity over physical and show a value for it are more likely to guide them towards things like college.

But if parents don't value mental labor, maybe because they have no appreciation of it, then it can be harder for their kids to value it as well, even when they have an aptitude for it.

Eventually I would go on to college and get my degree in physics. That was despite the disdain I'd often hear from for instance one particular older male relative who would dismiss "book learning". He worked with his hands as a brick-mason. I deeply respect such work. I wish he'd respected the kind of work I do.

But you can't make people.

Reality that can be lost on those who wonder about differential outcomes among groups is the extent to which parents and cohorts may guide their children against certain types of work!

Recently I got into a bizarre discussion with an older Black male who actually had highly technical skills who also had kids who had done well and gone on to college where we were arguing about what was hard work!

He was convinced that physical labor was harder than mental, and in case you think there was a problem with the meaning of "hard" he also told me he had taught his children to go on to college so they wouldn't have to work hard!!!

The peculiarities of this point of view may simply reflect a sad reality for many Black folks who when Black people were slaves were not meant to think. You don't want slaves to think, you just need them to do physical labor.

And physical labor can be a lot more direct. If you need to harvest hay, for instance, in the morning you can look out over your hay fields and have a good estimate of what it will take. Then it's just a matter of working through till it's done.

But what if you're a city planner trying to figure out whether or not a particular intersection needs a stoplight or not?

You may find yourself spending time in meetings with other people just talking. Sheer laziness maybe to people who figure when you got a job you just get to it. Why sit around and talk about it? There may be nights where you spend hours just pondering, with people not understanding how complicated such a thing may be wondering why don't you just DO IT already?

But feel a unique satisfaction when you figure it all out, and realize your decisions are a great help to your town. Where yeah, you can make a huge difference for a lot of people.

Both you and the hay farmer have done work. Both of you are a benefit to your communities, but you're coming from very different work realities.

One last story that puzzled me for a while. I was a software developer--or computer programmer depending on which you prefer where the former is more popular I think lately--and for a wonderful brief time had my own office at this software development company.

There was a Black janitor who was very well liked, but I began to dread when he would come to my office, as often I'd be working on a very hard programming problem staring off into space.

EVERY SINGLE TIME if he arrived at that point he would gently remonstrate me, asking me if I was "on the beach". Then he'd chit-chat with this kind of exhausted, paternal air about him, and I would just tolerate it until he would finally leave and I could get back to work.

I feel a little guilty telling this story. He really thought he was helping me. Thought I was a Black guy I'm sure with a unique opportunity to do well who was unfortunately goofing off staring into space, and maybe thought he was helping the Black race by trying to get me to focus.

Efforts in this country should also be about educating people about the many worlds of work and ensuring that children get their efforts valued across that world.

You see, the United States of America needs all its workers across a vast array of work possibilities.

Kids who were like me shouldn't have to work their way through disdain of family members and ethnic community with a heavy burden in order to make through to higher paying jobs that involve intellectual activity. While it's also true that we should value skilled labor of any type, or unskilled labor.

Work is a great thing.

What work you do, as long as it helps your society, should be about your choice.

The more we value the myriad worlds of work and understand them, the more we can all work towards a brighter future, with equal opportunity for all.

James Harris

Sunday, May 4, 2014

What is your work worth?

The growing disparity between the middle class worker and top earners in the United States should be confusing as technology has helped to greatly grow worker productivity across the board so that an individual American worker can do much more today in the same time than before and thus generate more revenue for a company.

If you noticed at a job that you seem to be doing 4 times as much work since you were hired years ago as technology and workplace improvements help you along, are you paid 4 times as much as then?

My guess is, no.

You may be paid somewhere over 20% more, with a 5% annual raise for 4 years--not going to compound here--despite maybe doing 400% as much work based on productivity increases and just being that good as you've learned your job.

And all of that additional work value goes up the chain in your company, where if it is a corporation the CEO probably gets paid a LOT more than he did when you got hired as a system has been rigged where most of the money is being cycled to the top.

Some say that workers should simply force higher pay, like through unions, but let's face facts: can you imagine say, demanding under any circumstance a 100% increase in any given year? With steep increases, not quite that high but still high, so that after 4 years you're getting paid 4 times what you got when you were hired?

People who are the top earners probably can, especially those in the financial industry.

Few people outside of the financial industry can probably imagine under any circumstances doing such a thing, and besides, how do you really know if you're that valuable?

Some blame globalization as, for instance, call centers went outside the United States, which technology made possible, and I have had more than one conversation where I have been frustrated with talking to some person in another country who really was not good at the job. So what if they were cheaper to the company using them? That cheapness had a cost. And I have talked to excellent people in other countries who did a great job over the phone. I suspect they were underpaid!

If you think it through, those great phone people were probably vastly underpaid. But how would they know what their work is worth?

Let's say over time people start figuring it out, then people overseas who are great on the phone charge more, and eventually achieve parity with people in this country who are great over the phone, and businesses lose the cost advantage of hiring overseas!

People may suspect that wage differences are so steep because work is valued differently in different cultures but currency exchanges tend to shift to balance over time, which means that the real situation is arbitrage.

A lot of companies are taking advantage of a global situation where workers do not know their value.

So the surprising solution is that people need to work harder at figuring out what they're worth, and the web can actually help there as well, as I have been pleasantly surprised by web sites that will help you figure out a salary to request in a job interview.

These issues are really important to me as I am currently unemployed. And I use the situation of someone worth a LOT more than they are being paid as I have been in such situations where I realized I was doing the work of 4 people because technology helped me and I was really efficient at using it!

But I was being paid the salary of one.

Eventually I got laid off, and no I had never made any salary demands. At the time I thought of it as a "day job" while I figured out how to make money on the web, so I was treading water trying to figure things out. No way I was going to rock things by pushing for more money. Nevertheless, got laid off with some other folks.

(Maybe I should add that while it was a group lay-off my being part of it was a bit of a surprise to me, though in retrospect it might have had something to do with me finally putting up a photo on the web the month before. But don't know for sure. Who knows.)

Figure out what your work is worth I think is the best advice, especially at a company where you have worked for a while and watched people leave without being replaced!

Your suspicion should be, especially if your company is still doing well or better, that you simply are doing work that is THAT MUCH more valuable: but are you getting paid for it?

Or are you in essence now doing quite a bit extra--for free?

James Harris