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lolly pop

I had dinner with some friends at my house last Friday. We had the usual fun, and a couple glasses of wine into the night, we’re all rather chatty. At one point, we hit on work related topics – a different kind of fun, which I usually try not to get drawn into at friendly dinner parties. As you know from my last post (you have read everything at this blog already, right?), I’m giving my opinion more and more on these topics because I’m getting more and more tired of hearing similar stories and letting certain beliefs stand. We hit on the topic of paying dues specifically, and my view is much along the line of Penelope Trunk’s, “Paying dues is so old school.” I’d actually go a step further, though, and say that paying your dues is you getting the wrong end of the stick.

There are a number of cultural and environmental reasons why this change is happening, and is inevitable for most industries. Inevitable or not, though, it’s an insincere power structure that provides no real long term benefit to organizations that facilitate such social structures. The concept of paying your dues is a waste of resources that establishes unfriendly, boring, and corrosive interactions between workers.

As I realize now after Friday night’s discussion, paying your dues can mean a few different things to different people, so any productive debate should probably define what it means to pay your dues. It can range from the small, doing some dull work while you get broken into a job, to doing a lifetime of dirty work to get that one job you really want like head of a department or CEO for you big thinkers. Let me be clear that: I’m not talking about the first with my complaints. When you come out of school, move to a new company, or just face any kind of change, there are things you may just have to do in order to grasp enough of the business to be productive. That’s fine, inevitable in most cases, and most importantly for both the individual and the business, short term, and so hopefully less of a pain because of all the other exciting changes going on.

What I’m really against is the perception of paying dues for two or three years at a new place. Sometimes this can strike along greek fraternity like lines of simple institutionalized abuse of power of those below you, but that’s more of the extreme case. The more common situation is a hiring manager assuming that you won’t be worth your salt until you’ve done two years of grunt work. Only then will you have proven yourself, showing that you’re ready for some of the responsibility discussed in the first interview. This is very common, and if you already think I’m off on the wrong foot, then you’re not alone.

The problem is two fold from the manager’s point of view, poor valuation skills of what you’re getting and poor valuation skills of what you’re giving. Now, I will admit that you’ll find plenty of brats that expect more than they deserve, especially after the dot com bubble years, but that’s more the extreme now that the bubble has burst. With the growth of the internet and a growing openness on work related topics in our culture, we’re getting workers who are better educated on their options in the workforce and their own value within the workforce. Additionally, work has become more flexible and mobile, and in the US the shrinking workforce gives those left more leverage than years before.

This leads to the clash of opinions that were thrown around at dinner on Friday. From the company’s position, they’re used to greater leverage and new demands from workers seem abrupt and uncalled for. The change that has been on the horizon, coming closer each day, came slow enough that many are only noticing it now. This natural change is causing a new lack in valuation skills by managers, and with more empowered workers, new demands and work requirements can easily feel like absurd requests. “Where do people get off expecting four to five weeks of vacation from day one?”

However, even with this natural change in environment where you can’t expect employees to stick around for 10 years, if even a full two years now, hiring managers need better and more creative offerings to attract the right employees. The goal isn’t to get an apprentice that you can bring up to speed after years of hard labor, but instead putting a new hire to use as quickly as possible. It’s like going from elementary school class work to college class work. You get assignments, big ones in some cases, from day one. There’s little or no refresher work, nor easing back into school after months of summer. The reality of a ticking clock and required course work isn’t waiting for you to catch up. The same is true for any competitive, well run company, and you probably needed the person last year anyway.

Your goal after getting a person onto the job is giving them as much responsibility as possible in the shortest amount of time. You can’t wait two or three years to see if they’re good enough, and people of any age don’t want to come in and just sit around doing dull work or the work no one else wants to do. So, if you’re getting some uncommon job requests during an interview, don’t be put off. Both parties want a fair value, which is always changing, and new workers want their fair value from day 1, not the promise of fair value on day 730.

Paying dues is the wrong end of the stick for both parties. If you feel like you have to pay due, then maybe you need to go someplace else. If you feel like you need others to pay their dues, then maybe you need to re-educate and pay your own dues. What’s best for both parties is quick productivity that helps each grow. Companies are losing their long held safety net of under appreciating employees by making them pay dues for more reasons than bratty gen X and gen Y employees. Upcoming generations are products of those before them, and their independent, educated, and sure sense of themselves comes from those before them. And much the same as those before, we thirst for the satisfaction of proving our worth. However, that means starting at day 1, not day 730.



“I hit the wall, and it wasn’t pretty. On the way back home from a work trip, I was walking down the aisle of the plane and passed out. Next thing I knew, the plane had landed and I was in a service area off the plane with soiled pants.”

“So, I was sitting next to this guy on the plane that was almost exactly like me – minus a few years. A veteran salesman who travels around for work a lot. High stress job with high demands. He told me his story of hitting the wall, and I know the feeling because I’ve come close myself. I can tell you all of the symptoms. I should teach a seminar on dealing with it.”

“Really you should teach a class on something you can’t fix yourself?” I rhetorically replied.

The above conversation is a shortened version of a story that an older friend told me. We laughed about it at the time (defensive mechanism or something?), but it’s a pretty appalling story. Frankly, anytime a person hits a mental or emotional wall that physically forces them to shut down it’s tragic, and I have a list of friends headed in that direction. Few seem able to stimulate the change needed to correct course, though.

In case you’re wondering what this has to do with financial complexity, I’ve been trying to figure out how to address other issues around the money life cycle beyond just money management issues. It’s easy stressing that single point because it’s so common for so many people, but money management is also almost the least important part. Money management is as much about money as it is change management, and that’s something everyone has problems with, which money can’t inherently fix.

So, this hitting the wall story is pretty bad, especially when your friend can relate so closely to the person telling it. I have mixed feelings about how to react to these situations because I’ve got a specific view that most people don’t care to hear. It seems like most people just like to complain, and prefer ignoring the next step – fixing or improving the situation. I always try and gauge if someone’s open to hearing what I actually think, but I’m hearing complaints so often, I tend not to care anymore.

I’ve got a great life, and a job that I really enjoy. I like to stress living a balanced life, but personally I hope to live an unbalanced one. One that’s unbalanced towards good situations and away from excessive pains. It’s really easy to do actually, but so few people seem to get this. They’re afraid and feel trapped either because they feel limited in options – either not having options or having options that just won’t work. I have a habit of saying that I’m lucky, but that’s bullshit. I’ve planned this – in a way – so I get easily annoyed when others complain because it doesn’t usually take much to improve things, but as I’ve learned, it takes more than just wanting to change.

You can see the wall coming at you and you know that you don’t want to hit it, but then why do you keep working long hours, taking on more work than you should, flying around on errands for you boss, making excuses for why you can’t change? That really sets me off, but I usually (less so each passing day, each passing complaint) hold back my reply because it doesn’t seem to affect people (so I’ll rant a bit on my blog). It feels hypocritical someone telling a person such as myself that you can’t change when I’m a great example of successful change.

As I said, I planned this. I didn’t plan the exact address or complete picture, but I set out with my values and needs, and I found the situation that would fill them. Those adjust with time, so I’m always on the lookout, checking my internal gauges, to make sure I shouldn’t act again. I don’t settle for mediocrity, and that’s easily the biggest mistake that people make. You don’t have to fight the fight in every part of your life, but it’s almost magical how everything falls together when you make sure that you’re at least fighting the important fights and taking on the meaningful challenges.

However, life isn’t a set of challenges and obstacles to outsmart. That’s another thing my friend said when he told me the hitting the wall story. It makes sense coming from him, a person with a special forces military background, that he sees life as being solved by outsmarting it. It just makes me want to scream, “Life isn’t something you can outsmart. Life just is.” You can plan for situations, and adapted to different problems, but life isn’t an obstacle course that’s set against you, which you can then overcome. Shear force – accepting longer work hours, more demanding work situations, or whatever else – doesn’t break you through to the other side. There is no other side, only that which you’re at now and where you’d mentally like to be. More of the same, or less of the good, isn’t outsmarting an obstacle.

Of course, none of this is all that complex. Most people who want to change know what they want to change, but not how. My friend thinks that he can keep from hitting the wall by going to an annual three day decompression camp, but years – decades – of built up stress isn’t solved by decompression camp when you’re that far down the road already. And my other younger friends think they can keep from becoming like the other, but they’re in the same environment, doing the same things, surrounded by the people they hope they won’t become, and assume that time will make things better or that they can just cut of at some point in the future. “Riiiight,” is all I say. That’s why you’re dad and his dad are workaholics.

You have to push yourself beyond the wanting stage. You have to expect better and demand better. If you’re consistent at that, then you escape from life as a set of obstacles and walls to dodge. You move into a state of flow like finding flow on the soccer field or at bat on the baseball diamond.

These changes and improvements will follow you into your money situation. You might not become the richest man alive, but you’re view of what you need and how you’re fulfilled will change, which usually means you’re happier with less because you know the few things that actually matter. So, if you know you want change, but can’t, then figure out what actually matters to you, and if your values don’t match your environment, then you’ve probably got some clues now what needs to change.

sit’n cool

[Disclosure: I received a free copy from the publisher.]

This is a book all investors should own, especially if you’re looking for a place to start learning. If you’ve been a part of the indexer crowd, then it won’t reveal any surprises, but it’s a good quick read at just over 200 pages that re-enforces a basic, simple, common sense understanding of investing. John C. Bogle, founder of Vanguard Group, has written a book that should help beginners see what their options are and how to go about investing, and it should also help anyone experienced with investing, but wanting to understand the enormous advantages of index funds. The one fault I have for this book is that it’s missing a major section of the investing population as it’s written at an audience that already considers themselves investors. Although, it’s probably expecting too much from any book to cover so much ground for such different audiences, so that shouldn’t stop anyone from picking up this little book.

As the book progresses each chapter covers a little more information on investing, but there’s one basic theme throughout all of them – low cost, cap weighted, index funds will provide you with the simplest and most guaranteed return. From the first chapter, which highlights the problems with the current investment industry through a parable about the Gotrocks family (a story adapted from one told by Warren Buffett), to the last, you’ll have a hard time dodging all of the facts thrown at you like balls thrown at a high school principal sitting in the school fair’s dunking booth. Actively managed mutual funds just don’t have a chance, and each chapter makes that more obvious from multiple angles. Again, nothing surprising for anyone who’s studied up on index funds, but it’s nice having that reinforced by John and the many successful investors, professors, and business people that he quotes in the book at the end of each chapter.

All of the praise aside, I’m still waiting for a heavy weight in the industry to reach out to the smart savers. Those people who don’t consider themselves investors as they’re just putting away some money here and there, not watching the market, but still putting a portion into investments in the market like a 401(k) or a Roth IRA. They understand that a return matters, especially compounded return, and that a savings account doesn’t compare to an equity fund. Still, they’re looking for a simple and safe option that lets them step away and concentrate on their life and not day to day market events, which is why index funds are just right.

Both audiences use the same strategies and have the same options (index funds), but they approach the topic from different point of views. Either way both would benefit from reading this book. Showing this is my favorite line from the last chapter, What Should I Do Now?. It’s spot on for this blog as John writes, “You must now be as exhausted as I am by the unremitting pounding of my theme that simplicity is the answer and that complexity simply doesn’t work” (p201) [emphasis added]. After reading through this book and understanding the very basic “arithmetic of investing,” there shouldn’t be much question about the validity and proven success of this simple strategy.

Recommendation: Buy it now.
Pros: Easy and fast read packed with loads of eye opening facts.
Cons: A good starter and intermediate book on investing, but still not aimed at the smart saver. It’s all about investing and money, and nothing about the investment life cycle beyond the investment itself.

* For those looking for even greater insight and a good second phase after you’ve read John Bogle’s book, check out a copy of Richard Ferri’s books, especially All About Asset Allocation or All About Index Funds in the side bar links.


I’ve been reading a lot about souls in business lately. Doc Searls has a thread of posts going with other bloggers about the souls of businesses, and my last post highlights a speech by John Bogle about the soul of capitalism. So, that begs to ask, what or where is the soul of personal finance, and do the companies who handle our finances – the banks, fund companies, brokerages, etc – have a definable, desirable soul?

I definitely believe that soul is missing from personal finance. It’s too much about the money, and not enough about the people and the things people do with their money. As the Chief Happiness Officer, Alex, writes, money does not make you happier, always thinking about money is bad, fairness is what really counts, and more great and true points. That’s what I consider your money mentality, and companies have that too.

A company’s money mentality is derived from its soul, and that shines through (we hope) in how they treat customers and what services they offer. So, what makes up the soul of companies that handle our money? You get poor customer service, long holds on the phone with annoying music and ads that you don’t care about, high interest and credit card rates and companies ready to raise them on the drop of a hat. You get companies that profit their managers more than they profit their investors, and you get a general picture of a bad soul. Excluding a few special companies, I doubt many people would argue with me on this point.

I believe the problem begin with money. These companies see their job as money mangers, people who take money, move it around, and make more money. Banks have become so large that they number their customers just like they number their employees. These companies need to define themselves by more than the dollars they’ve been given. John Bogle defines this as returning to a “trusting and being trusted” environment, but that trust is built on top of action, and that begins by engaging customers and being concerned with their values and goals. Focusing on the easy bottom denominator of big numbers doesn’t provide any added value to the retiring couple or the college graduate.

It might feel strange talking about the soul of business, but if you think about it, then it’s hard to deny that it’s there. Companies are run and owned by people who have their own soul, and this feeds the soul of their companies. Companies have to do more than service a basic need, and I think we can all list off a number of annoyances or grievances, but both companies and customers need to understand their needs, values, and goals before either can help the other.

pretty thinker

I’ve been doing some research, and found John Bogle’s eBlog as he calls it. Great site with some very solid speeches and such for you to read. I was inspired to email Mr. Bogle in connection to a few of his speeches, but primarily his The Battle for the Soul of Capitalism speech. My email is rather long, though, I’m not holding my breath for a reply, but I think this may be interesting and possibly informative to those interested. John Bogle was the founder of Vanguard Group and is considered the mastermind behind index funds, which I’m a huge fan of.

Dear Mr. Bogle,

I’m a young man in my mid twenties, and I have an entrepreneurial dream of erasing financial complexity. I started a blog not long ago, Removing Complexity (, in the hopes of sharing various points on personal finance that I know and am learning as I continue my own education on the subject, and also because I found a lack of discourse in an industry that thrives on confusion and misinformation. I arrived at your blog because I share many of your views, and was hoping I missed, and might find through some connection to you, some forum of conceptual or directional conversation about where the industry should go. However, I’m still left with the question, “where is the public discourse?”

This is a question you yourself asked in one of your recent speeches that you posted on your blog, “The Battle for the Soul of Capitalism: Doing Your Part to Begin the World Anew.” I’m not so much looking for an answer as continuing some discourse on the subject, which you started by posting your speech on your blog, by offering some of my own thoughts. Additionally, I am publishing this email to you on my blog, along with a link to your site and the speech, where my readers and others might participate as well. I hope and would appreciate if you had the time to read this and respond as your schedule might allow, but in any event, thank you for putting your thoughts out there already.

I agree with most everything in your speech, however, I think a couple points were missed, and I’ll propose some changes that are required in turn. In your Battle for the Soul of Capitalism speech, you highlight the distinction between a past owners’ capitalism and today’s agency capitalism – the pathological mutation. I would agree that this agency model has produced companies that “came to be run to profit its managers” (p4, a quote by William Pfaff) and that this is bad for investors. However, I think this move away from a traditional owners’ capitalism to an agency model has produced much social value. Additionally in another speech, you connect this agency model of capitalism to a rise of the expectation market – a move away from the real intrinsic value market. Again, though, I would disagree that this is wholly bad, and there are some lessons we can learn from these situations.

We have the agency model today thanks to the continued expansion of investment options and the growing availability of those to the general public. Your own contribution of creating the index fund and providing it through Vanguard has greatly helped as it addresses a number of the cost and manager compensation problems in the mutual fund industry (although index funds are still vastly under appreciated and unknown as my own parents didn’t know what they were until I convinced them to move their investments into index funds from Vanguard). That openness and inclusion of a large portion of the population has been a wonderful benefit to capitalism. However, these people are starkly different from those who participated in the past ownership model.

While, in your speech, you hope for a return to the ownership model, you also acknowledge that it won’t happen. Additionally, you criticize the expectation market connected with the move to an agency model, but I think you misunderstand the inherent benefit in that for these new investors. These new investors, which include baby boomers like my parents, don’t care about actively tracking investments and understanding the real intrinsic market. They have an expectation of return from the market, but benefit little from taking the process much further then buying diversified mutual funds, especially broad market index funds. That expectation is derived from at least a basic understanding of the real market, though, and they put faith in the expectation of overall return. In that sense, the expectation market is good for these new investors who prefer minimum interaction with portfolio management.

The problem that you note, though, is that of “short-termism,” which I believe is a direct product of the expectation market. However, we’ve arrived there because these new investors preferred minimum interaction with their investments, and preferred the mutual fund managers as the established experts. These professionals then saw the value in fighting for more investors and larger funds, and have driven the mostly unaware public into a frenzy for greater than market returns (which Jonathan Berk and Richard Green [2002] have shown kill a fund’s returns). Mutual funds learned that they could prosper if they became more like salesmen and marketers, and less managers of investors’ money, and in doing so, they’re listening to these new investors and speaking to them in their own words (albeit confusing investors more than clarifying, but this only drives them deeper into managers’ pockets).

What needs to be done is not return to the old ownership model, but an education of future managers, beyond relearning “trust and being trusted,” and include an education on these new investors – what they care about, how they communicate, and how to build relationships with them. They must learn to speak not in investment terms, but the terms of those disinterested in investments beyond providing a better and more solid retirement or other goal, and the first step in doing so is throwing out the very term investor. Investors take care to understand the intrinsic value of the markets, and find ways to make money in that real business world. The new investor, the indexer, or casual investor, is tired of being confused by current fund salesmanship. They themselves must be spoken to in plain terms that help them understand the value of low cost, long term in the face of chasing higher returns. Academic studies and discussions at universities don’t help foster that any better than pundits discussing politics helps clear the air.

As people like Doc Searls, a coauthor of the Cluetrain Manifesto, and Hugh MacLeod, known for the Global Microbrand, have helped redefine the communication between media and companies in general for the benefit of both consumer and company, the personal finance and investment industries need to learn and draw lessons from that situation, and reconnect properly in open dialogue with old investors and new about their values. We cannot accept the current environment, but must push forward in improving our relationships with all parties.

Thank you for reading this. Any comments or thoughts would be much appreaciated.

Matt Blass