kottke.org posts about money
The Index Card is a new book by Helaine Olen and Harold Pollack about simple advice for personal finance. The idea for the book came about when Pollack jotted down financial advice that works for almost everyone on a 4x6 index card.
Now, Pollack teams up with Olen to explain why the ten simple rules of the index card outperform more complicated financial strategies. Inside is an easy-to-follow action plan that works in good times and bad, giving you the tools, knowledge, and confidence to seize control of your financial life.
I learned about their book from a piece by Oliver Burkeman on why complex questions can have simple answers.
But there’s a powerful truth here, which is that people dispensing financial advice are even less neutral than we realise. We’re good at spotting the obvious conflicts of interest: of course mortgage providers always think it’s a great time to buy a house; of course the sharp-suited guys from SpeedyMoola.co.uk think their payday loans are good value. But it’s more difficult to see that everyone offering advice has a deeper vested interest: they need you to believe things are complex enough to make their assistance worthwhile. It’s hard to make a living as a financial adviser by handing clients an index card and telling them never to return; and those stock-tipping columns in newspapers would be dull if all they ever said was “ignore stock tips”. Yes, the world of finance is complex, but it doesn’t follow that you need a complex strategy to navigate it.
There’s no reason to assume this situation only occurs with money, either. The human body is another staggeringly complex system, but based on current science, Michael Pollan’s seven-word guidance — “Eat food, not too much, mostly plants” — is probably wiser than all other diets.
Burkeman wrote one of my favorite books from the past year, The Antidote: Happiness for People Who Can’t Stand Positive Thinking.
This week on Last Week Tonight, John Oliver rails against the penny. This seems like such an obvious thing, that we should stop using pennies, but I bet if the government ever moved to ban pennies, it would set off a firestorm of protest.
A site called SDR Traveller sells ultralight, strong, and discreet bags for traveling to places where such things are necessary. Their most eye-catching item is the 1M Hauly Heist, a bag designed to carry US$1 million in cash that also doubles as a Faraday cage for shielding your electronics from radio frequency tracking.
From the description on the page for the 1M Hauly (which holds the million bucks without the RF shielding):
In many countries project expenses and payroll for the local crew need to be carried in cash. Whether you’re managing a team of thirty working for months at the edge of the grid, or on a solo trip to negotiate a significant cash transaction, the 1M Hauly is designed for discreet, safe carry of up to $1 Million USD in strapped, new or used $100 USD banknotes.
Designed to address the six main issues with carrying significant volume banknotes in field: risk of discovery; risk of damage (especially in high-humidity, monsoon environments); container robustness; carryability; glide; and in-field accounting.
Note that $1 million in $100 bills weights 20.4lbs. The site also sells smaller money pouches (in $10k, $100k, and $400k carrying capacities) as well as a durable duffel. All the bags are made from Cuben Fiber, a material originally used for yacht sails that’s four times stronger than Kevlar at only half the weight. (via @craigmod)
Four years into a twenty-year study of the mental conditions of kids living in rural North Carolina, a quarter of the participants experienced a dramatic increase in annual income. The researchers used this opportunity to find out how that increase in wealth affected the wellbeing of the kids. What they learned is that even a little money goes a long way.
Not only did the extra income appear to lower the instance of behavioral and emotional disorders among the children, but, perhaps even more important, it also boosted two key personality traits that tend to go hand in hand with long-term positive life outcomes.
The first is conscientiousness. People who lack it tend to lie, break rules and have trouble paying attention. The second is agreeableness, which leads to a comfort around people and aptness for teamwork. And both are strongly correlated with various forms of later life success and happiness.
Cities, businesses, and artists are producing small batches of paper currency designed to be spent locally. I love the £20 note from Bristol, England (above)…it’s got Wallace’s head on it!
The local currency, though, is intended not as collectible but to encourage trade at the community businesses where they are accepted, rather than chain stores, where money taken in tends to flow out of town and into the coffers of multinational corporations. (Compare it to the farmers’ market: Homegrown lettuce now has a whole new meaning.)
“If you use a local currency, you keep the money local, and that has a ‘lifts all boats’ vibe to it,” said David Wolman, the author of “The End of Money.”
Adding her voice to a chorus of others, Amy Davidson makes a great case for putting Harriet Tubman on the US $20 bill and kicking Andrew Jackson to the curb.
On September 17, 1849, Araminta, who now called herself Harriet, ran away to freedom, along with two of her brothers. Their owner, Eliza Brodess-Pattison’s granddaughter-in-law-had been making moves to sell them, and the fear was that the family would be broken up. Brodess put an ad in the local newspaper, offering a hundred-dollar reward each for “Minty,” Harry, and Ben. (The only extant copy of the ad was found in 2003, in a dumpster.) Almost immediately, Tubman began making trips back to Maryland, organizing the escapes of relatives, friends, and scores of other slaves, often just ahead of armed men pursuing them. On one trip, she discovered that her husband, John Tubman, who was free himself, was living with another woman; he had no interest in going north. He is a man who seems not to have known Tubman’s worth.
When I was a kid, I read a lot of biographies1 on people like Ben Franklin, Thomas Edison, Abraham Lincoln, and the Wright brothers. My favorite, which I read at least three times, was Ann Petry’s Harriet Tubman: Conductor on the Underground Railroad. Tubman is one of history’s greatest badasses. Put her on the damn bill.
Roger Pasquier hunts for coins on NYC sidewalks and keeps track of how much he finds. He discovered an odd consequence of everyone having a smartphone: people don’t pick up change on the sidewalk anymore.
From 1987 to 2006, he averaged about fifty-eight dollars a year. Then Apple introduced the iPhone, and millions of potential competitors started to stare at their screens rather than at the sidewalks. Since 2007, Pasquier has averaged just over ninety-five dollars a year.
I know, I know, that’s anecdotal and correlation != causation and whatever, but that’s an interesting theory.
For her master’s project, Barbara Bernát designed a set of fictional banknotes: the Hungarian Euro.
I am a total sucker for banknote mockups and aside from the simplicity, what caught my eye about Bernát’s project is the one security feature: if you look at the notes under a UV light, you see the skeletons of the animals depicted on the notes:
Mobile devices and software advances have helped to create a burgeoning on-demand economy that — in some places — makes it possible to live your life without leaving your house (and if you do decide to leave, it’s easy to order a car). But that’s only part of the story. In Quartz, Leo Mirani explains how he experienced the on-demand economy long before tech revolution:
These luxuries are not new. I took advantage of them long before Uber became a verb, before the world saw the first iPhone in 2007, even before the first submarine fibre-optic cable landed on our shores in 1997. In my hometown of Mumbai, we have had many of these conveniences for at least as long as we have had landlines — and some even earlier than that. It did not take technology to spur the on-demand economy. It took masses of poor people.
This is the design that Norway has chosen for their banknotes starting in 2017:
From now on, I’m paying for everything with kroner. (via co.design)
You can mine Bitcoin by hand with a pencil and paper.
The SHA-256 algorithm is surprisingly simple, easy enough to do by hand. (The elliptic curve algorithm for signing Bitcoin transactions would be very painful to do by hand since it has lots of multiplication of 32-byte integers.) Doing one round of SHA-256 by hand took me 16 minutes, 45 seconds. At this rate, hashing a full Bitcoin block (128 rounds) would take 1.49 days, for a hash rate of 0.67 hashes per day (although I would probably get faster with practice). In comparison, current Bitcoin mining hardware does several terahashes per second, about a quintillion times faster than my manual hashing. Needless to say, manual Bitcoin mining is not at all practical.
Two dozen people offer you their best advice on how to invest a single dollar.
I don’t have any awesome ideas for how to invest a buck, unfortunately. That is my weakness. My first instinct was to invest it in a stripper’s g-string or a barista’s tip jar. But I’m not sure how that translates as investment. I do know that the more frequently you visit/tip a barista — your neighborhood barista, who does not work at a Starbucks — the more often you are treated like family and you get free coffee. I think that the more you invest in a stripper, the less you get free things from that stripper.
One way or another, Bitcoin is going to be huge. It could be the as big as the Internet, it could transform into something else, or it could be one of tech’s biggest busts. Meanwhile, many of us are still wondering exactly what it is (it’s both a currency and means of transporting that currency). GQ’s Marshall Sella decided to score some of this newfangled dough and “blow it on all the pleasures that Bitcoin can buy.” Sex, Drugs, and Toasters: My Life on Bitcoin.
Within two months, I’d be visiting Charlie Shrem at his parents’ place, where he was wearing an ankle monitor and living under house arrest.
(That sounds like the beginning of every great startup story.)
Chris Ware follows the wanderings of a penny in his latest piece for the NY Times.
An anonymous user of 4chan has come up with a brilliantly harebrained scheme for their personal banking. They use video game retailer GameStop as a bank.
Here’s how it works: whenever a paycheck comes in, this person goes to GameStop and pre-orders a bunch of upcoming video games. Whenever they need money, they go to the GameStop and cancel a game or two to make a withdrawal. Here’s the entire scheme:
Does anyone else use Gamestop as a bank?
I got really pissed off with US Bank because I kept overdrafting my account even though I opted out, and the same thing happened with my credit union when I got a debit card.
Now whenever I get paid I go preorder a whole shitload of games. Whenever I need money, I go to the nearest gamestop and ask for my money back on a game I don’t want and make a withdrawal. The lines are shorter at gamestop than at the bank and I can trade in old games and have money go straight to my savings account. Gamestops are just as prevalent as banks in my town and I work at a mall so it’s even more convenient than running an errand to the bank or using an ATM and getting charged.
The gamestop people are starting to catch on that I’m just moving money around and only buying one preordered game a year, if that, but there isn’t shit they can do about it. The best part is, since I always preorder every game coming out I’m still guaranteed to get all the exclusive content whether or not I’m sure I want a certain game. It’s like they’re rewarding me for banking with them.
I love the bits about the trade-ins and the rewards. (via @caseyjohnston)
People had assumed that the name of the secretive creator of Bitcoin, Satoshi Nakamoto, was a pseudonym designed to protect his anonymity. Newsweek’s Leah McGrath Goodman tracked down a man who could be the Bitcoin founder and discovered that his real name is…Satoshi Nakamoto.
Two police officers from the Temple City, Calif., sheriff’s department flank him, looking puzzled. “So, what is it you want to ask this man about?” one of them asks me. “He thinks if he talks to you he’s going to get into trouble.”
“I don’t think he’s in any trouble,” I say. “I would like to ask him about Bitcoin. This man is Satoshi Nakamoto.”
“What?” The police officer balks. “This is the guy who created Bitcoin? It looks like he’s living a pretty humble life.”
I’d come here to try to find out more about Nakamoto and his humble life. It seemed ludicrous that the man credited with inventing Bitcoin - the world’s most wildly successful digital currency, with transactions of nearly $500 million a day at its peak - would retreat to Los Angeles’s San Bernardino foothills, hole up in the family home and leave his estimated $400 million of Bitcoin riches untouched. It seemed similarly implausible that Nakamoto’s first response to my knocking at his door would be to call the cops. Now face to face, with two police officers as witnesses, Nakamoto’s responses to my questions about Bitcoin were careful but revealing.
Tacitly acknowledging his role in the Bitcoin project, he looks down, staring at the pavement and categorically refuses to answer questions.
“I am no longer involved in that and I cannot discuss it,” he says, dismissing all further queries with a swat of his left hand. “It’s been turned over to other people. They are in charge of it now. I no longer have any connection.”
Nice bit of sleuthing by Goodman. But given the interest around Bitcoin, it’s amazing that it took this long, even with Nakamoto’s first name change.
Update: The subject of Newsweek’s story now denies he was the creator of Bitcoin.
Kinja user KillerMartinis provides some perspective on what it’s like to live in poverty.
Rest is a luxury for the rich. I get up at 6AM, go to school (I have a full courseload, but I only have to go to two in-person classes) then work, then I get the kids, then I pick up my husband, then I have half an hour to change and go to Job 2. I get home from that at around 1230AM, then I have the rest of my classes and work to tend to. I’m in bed by 3. This isn’t every day, I have two days off a week from each of my obligations. I use that time to clean the house and soothe Mr. Martini and see the kids for longer than an hour and catch up on schoolwork. Those nights I’m in bed by midnight, but if I go to bed too early I won’t be able to stay up the other nights because I’ll fuck my pattern up, and I drive an hour home from Job 2 so I can’t afford to be sleepy. I never get a day off from work unless I am fairly sick. It doesn’t leave you much room to think about what you are doing, only to attend to the next thing and the next. Planning isn’t in the mix.
Her response to the first (agressively negative) comment is worth reading as well.
Update: We can’t have nice things on the Internet…looks like KillerMartinis was not exactly forthcoming with regard to her financial status. (thx, @j4)
Update: Michelle Goldberg at The Nation fleshes out KillerMartini’s back-story. (thx, @tkudo)
Felix Salmon shares perhaps the most reliable technique for turning money into happiness: buying and drinking expensive wine.
But here’s the trick: if you can’t buy happiness by spending more money on higher quality, then you can buy happiness by spending money taking advantage of all the reasons why people still engage in blind tastings, despite the fact that they are a very bad way to judge a wine’s quality. If you know what the wine you’re tasting is, if you know where it comes from, if you know who made it, if you’ve met the winemaker, and in general, if you know how expensive it is — then that knowledge deeply affects — nearly always to the upside — the way in which you taste and appreciate the wine in question.
Mark Wagner constructs intricate works of collage out of pieces of US $1 bills.
I love that last one. No Photoshop…he cuts and assembles the pieces by hand:
File this under “markets in everything”: people will pay big money for US currency notes with interesting serial numbers.
In addition to the “low numbers,” which stop at 100, there are “ladders,” which have numbers in sequence, such as 12345678 or 54321098. These sell for as much as $1,300. A “radar” (selling for $20 to $40) is a palindrome, such as 35299253, and “repeaters” are notes with two blocks of the same four digits, like 41884188. Undis observes subcategories of each of these, such as “super radars” ($75 to $100) that have all internal digits the same, like 46666664.
And here I thought I was being pretty eagle-eyed by fishing a $2 bill out of the tip jar at the bagel place this morning. (via digg)
Some countries, the cool ones, put physicists and other scientists on their money. Here’s Niels Bohr on the Danish 500 kroner note:
Even the US sneaks onto the cool list with Ben Franklin on the $100.
US currency is already embarrassing and this new design for the $100 bill is not helping.
This may be worse than the horrible US passport.
For a project called The Fundamental Units, Martin John Callanan used a very powerful 3D microscope to take 400-megapixel images of the lowest denomination coin from each of the world’s 166 active currencies. This is the 1 stotinki coin from Bulgaria:
And this is a small part of that same coin at tremendous zoom:
More information is available here.
From a site called Celebrity Net Worth (I know, blech), a list of the 25 richest people of all time, adjusted for inflation. Gates, Buffett, and Rockefeller all make the list but the big cheese is Malian emperor Mansa Musa I, with a net worth of $400 billion in today’s dollars.
Mansa Musa I of Mali is the richest human being in history with a personal net worth of $400 billion! Mansa Musa lived from 1280 - 1337 and ruled the Malian Empire which covered modern day Ghana, Timbuktu and Mali in West Africa. Mansa Musa’s shocking wealth came from his country’s vast production of more than half the world’s supply of salt and gold.
In this week’s New Yorker, Chrystia Freeland writes about how the ultra-rich have taken a dislike to President Obama and his anti-business policy and rhetoric, even though the President “has served the rich quite well”. This article is infuriating, a bunch of very powerful men (and they are all men) sitting around crying about their powerlessness. A few choice quotes:
Cooperman regarded the comments as a declaration of class warfare, and began to criticize Obama publicly. In September, at a CNBC conference in New York, he compared Hitler’s rise to power with Obama’s ascent to the Presidency, citing disaffected majorities in both countries who elected inexperienced leaders.
Strong argument there. Per Godwin, that should have been the end of it.
Evident throughout the letter is a sense of victimization prevalent among so many of America’s wealthiest people. In an extreme version of this, the rich feel that they have become the new, vilified underclass.
Underclass! Boo hoo! Do you want some cheese with that 2005 Petrus?
T. J. Rodgers, a libertarian and a Silicon Valley entrepreneur, has taken to comparing Barack Obama’s treatment of the rich to the oppression of ethnic minorities — an approach, he says, that the President, as an African-American, should be particularly sensitive to.
Yes, I can imagine the President nodding, upset at missing the obvious parallel here. The police chasing hedge fund managers through the streets of lower Manhattan with firehoses is a scene that I will never forget.
[Founding partner of the hedge fund AQR Capital Management Clifford S. Asness] suggested that “hedge funds really need a community organizer,” and accused the White House of “bullying” the financial sector.
Clifford S. Asness swinging from the bathroom door knob by his underwear. Clifford S. Asness called “Assness” in trigonometry class. Nude photos taken of Clifford S. Asness in the locker room and distributed to the freshman girls. Clifford S. Asness teased so mercilessly about his acne that he has to stay home from school throwing up from the emotional pain of being so thoroughly and callously rejected by one’s peers.
In 2010, the private-equity billionaire Stephen Schwarzman, of the Blackstone Group, compared the President’s as yet unsuccessful effort to eliminate some of the preferential tax treatment his sector receives to Hitler’s invasion of Poland.
Hitler again! Obama is obviously a fascist communist.
“You know, the largest and greatest country in the free world put a forty-seven-year-old guy that never worked a day in his life and made him in charge of the free world,” Cooperman said. “Not totally different from taking Adolf Hitler in Germany and making him in charge of Germany because people were economically dissatisfied.
Hitler, take three. Stick with what you know.
He was a seventy-two-year-old world-renowned cardiologist; his wife was one of the country’s experts in women’s medicine. Together, they had a net worth of around ten million dollars. “It was shocking how tight he was going to be in retirement,” Cooperman said. “He needed four hundred thousand dollars a year to live on. He had a home in Florida, a home in New Jersey. He had certain habits he wanted to continue to pursue.
Shocking. Needed. Certain habits.
People don’t realize how wealthy people self-tax. If you have a certain cause, an art museum or a symphony, and you want to support it, it would be nice if you had the choice.
We didn’t realize that. And it’s such an either-or thing too…can’t pay your taxes *and* help the Met buy a Vermeer.
In 1985’s Brewster’s Millions, Richard Pryor played a man who stood to inherit $300 million if he could spend $30 million in a month without telling anyone why. Great movie. They should remake it. It’s not a perfect analogy, but billionaire Charles F. Feeney is trying to spend all of his money just the same. In 1982, he used $6 billion of his fortune to fund Atlantic Philanthropies. Feeney was able to run the foundation anonymously for 15 years by utilizing Bermuda’s flexible disclosure laws. This also meant he wasn’t able to deduct these donations from his taxes.
He’s raised his profile lately with the hope of inspiring other rich people to spend their money the same way, and Warren Buffett refers to him as the “spiritual leader” of the effort to encourage billionaires to pledge half their fortune to philanthropy.
When the last of its money has been spent and it closes its doors sometime around 2020, Atlantic Philanthropies will be by far the largest such organization to have voluntarily shut itself down, according to Steven Lawrence, director of research for the Foundation Center. (The much bigger Bill and Melinda Gates Foundation plans to shut down 50 years after its founders die.)
By its end, Atlantic will have invested about $7.5 billion in direct medical care, immigration reform, education, criminal justice advocacy and peace-building initiatives. It was an invisible hand at the end of armed conflicts in South Africa and in Northern Ireland, providing funds to buttress constitutional politics over paramilitary action. It has supported marriage-equality campaigns, death penalty opponents and contributed $25 million to push health care reform.
More like this please. (via @randomantonym)
Writing for IEEE Spectrum, New Yorker staff writer James Surowiecki writes about the development and evolution of money, from that of tribal societies to today’s highly abstracted currencies.
It’s really in the seventh century B.C.E., when the small kingdom of Lydia introduced the world’s first standardized metal coins, that you start to see money being used in a recognizable way. Located in what is now Turkey, Lydia sat on the cusp between the Mediterranean and the Near East, and commerce with foreign travelers was common. And that, it turns out, is just the kind of situation in which money is quite useful.
To understand why, imagine doing a trade in the absence of money-that is, through barter. (Let’s leave aside the fact that no society has ever relied solely or even largely on barter; it’s still an instructive concept.) The chief problem with barter is what economist William Stanley Jevons called the “double coincidence of wants.” Say you have a bunch of bananas and would like a pair of shoes; it’s not enough to find someone who has some shoes or someone who wants some bananas. To make the trade, you need to find someone who has shoes he’s willing to trade and wants bananas. That’s a tough task.
With a common currency, though, the task becomes easy: You just sell your bananas to someone in exchange for money, with which you then buy shoes from someone else. And if, as in Lydia, you have foreigners from whom you’d like to buy or to whom you’d like to sell, having a common medium of exchange is obviously valuable. That is, money is especially useful when dealing with people you don’t know and may never see again.
In this same vein, this reply on Reddit to “Where has all the money in the world gone?” is also worth a read.
The thing to remember is that all throughout, from the initial trade to this central-banking system, all of this money is debt. It is IOUs, except instead of being an IOU that says “Kancho_Ninja will give one bushel of apples to the bearer of this bond in October”, it says “Anyone in town will give you anything worth one bushel of apples in trade.”
The money is not an actual thing that you can eat or wear or build a house with, it’s an IOU that is redeemable anywhere, for anything, from anyone. It is a promise to pay equivalent value at some time in the future, except the holder of the money can call on anybody at all to fulfill that promise — they don’t have to go back to the original promiser.
Frontline is doing a four-hour show about the world financial crisis, which, according to many people featured on the program, is ongoing.
Since 2008, Wall Street and Washington have fought against the tide of the fiercest financial crisis since the Great Depression. What have they wrought? In a special four-hour investigation, FRONTLINE tells the inside story of the struggles to rescue and repair a shattered economy, exploring key decisions, missed opportunities, and the unprecedented and uneasy partnership between government leaders and titans of finance that affects the fortunes of millions of people around the world.
The program airs on April 24th.
Sara Blakely is one of the few women who has joined the Forbes Billionaires list without help from a spouse or an inheritance. She came up with the idea for Spanx and spent two years and $5000 developing it and the $1 billion company it would become.
Blakely, then 27, moved to Atlanta, set aside her entire $5,000 savings and spent the next two years meticulously planning the launch of her product while working nine to five at Danka. She spent seven nights straight at the Georgia Tech library researching every hosiery patent ever filed. She visited craft stores like Michaels to find the right fabrics. She sought out hosiery mills in the Yellow Pages and started cold calling, only to be told no repeatedly. Immune to rejection thanks to years selling door-to-door, she decided just to show up. At the Acme-McCrary hosiery factory in Asheboro, N.C., she was turned away, only to receive a call from the manager two weeks later. He had daughters, he told her, who wouldn’t let him pass up her invention.