School Bored

You've been there, right? School bored. We all have. Somehow we muddle through and get on with life, some better prepared than others. Some much better prepared. Most of us forget about it after that ordeal (until we have to relive it with varying degrees of intensity with our children). For some of us, school was a war zone. We have flashbacks and test dreams. PTSD. Like brave and stoic soldiers returning from war, we don't want to talk about it.

Thank goodness the future of our children's education is not in our hands. There are others somehow fresh with passion and purpose who step into the front lines as adults. They are teachers and principals, counsellors and coaches. And they are school board members. 

Thanks to my friend Elaine Hahn I met two Palo Alto School Board candidates this morning. They were amazing. Highly educated, highly qualified. People with successful relevant career experience and keen interest in the issues that face our school district and its students. I'm grateful to them for wanting to lend a hand.

Palo Alto is a rich school district. Both of the candidates I met this morning were, with Elaine, among the founders of Palo Alto Partners in Education, a local non-profit that raises millions of dollars each year and gives it to the school district to supplement state and local funding. Our schools have modern facilities, well-paid teachers, involved parents, access to Stanford, and on and on. There may be better places in the country to get a public education, but not many.

And yet, even here there are the heartbreaking tales of bullying and suicide, of kids lost in the middle of the pack, of children from poor families who feel they don't belong. Kid-by-kid we have the same issues anyone does. Every child, high and low achiever, is an opportunity for us to do better.

My children are all out in the world. Well, one is in grad school, but that's part of his world now. My grandchildren are in public schools in Atlanta and Philadelphia. My oldest grandchild is a freshman in a magnet high school in inner-city Philly. I believe in public education. But it's so tough out there for so many school districts, for so many teachers. They don't have the resources they need. Often their students don't have adequate support at home. 

The war zone metaphor is perhaps even better suited to teachers and administrators than to students. They have to fight for every child they help. Education ideology as expressed in the curriculum is necessary but not sufficient. Even in places where there are still battles over whether to teach evolution, it is not principally those battles that shape our children; differences in lives are made in the classroom, child-by-child.

Teachers need support and resources. That's where school boards come in. They are the supply line. They make sure the generals--the school superintendents and principals--know what is expected of them. They make sure they know someone is watching their performance in the field and is standing by to relieve them if necessary.

Education is a long war. A grinding one. There are not dramatic turning points. It is won or lost gradually, sometimes imperceptibly; you wake up one day, as California has, and see that from the 1960s when we led the nation in education we have slipped to near the bottom. How did that happen? Did the supply lines get cut? Did the generals quit caring?

Well, the two school-board candidates I met this morning care. They are smart, articulate and energetic. They don't have to do this. They are doing it because they want to make a difference. Thank goodness for them, and for the teachers, administrators, volunteers, parents, and students like them. We are entrusting our future to them.

American DNA

I'm making money in the stock market, and I feel guilty about it. I feel good, too, of course, but strangely uncomfortable. I'm not doing anything to earn my rewards. The market is just going up. It has tripled from its low of five years ago. If you've had money in the market over that period, and left it there, you've made a lot. 

Trouble is, most folks haven't. Less than half of us own stock, and most who do are well off: the top ten percent of households have stock investments totaling $282,000; for middle class households, the average is $14,000. [1]  Some got spooked by the crash in 2008 and stayed away. Many just didn’t have much cash to spare. And the system seemed rigged in favor of the big guys. They didn't trust it. So they kept what money they had in savings accounts that earned almost nothing while those who bought stocks made a killing.

You have to have money to make money, the old saying goes. True. But the big reason most of us make lousy investors, and eventually give up, is the brutal whiplash of greed and fear. As my grandfather Clayton, a stock broker who began his career in 1929, put it: When the market is going up, people think it will keep going up. When it goes down, they think it will never recover. This causes them to buy high and sell low.

If people don't have the money or the temperament for the stock market, they shouldn't be in it, you might say. Maybe. But consider this: the stock market is the only reliable way to stay ahead of inflation and make a real return on your investment. Savings accounts don't do it. Neither do bonds, not very well anyway.

When I say stocks, I'm talking about the broad market. I don't think most of us would make good individual stock pickers. The S&P 500, for instance, is a fair proxy for American business. As goes American business, so goes the S&P 500. There are ups and down in the business cycle, but over the long term America and the S&P 500 have grown steadily. Over twice as fast as bonds. Three times as fast as inflation. If you want to have money for retirement, put it in the S&P 500 or a similar broad market index and forget about it until you stop working.

Many folks have a hard time doing that, though. There are a number of impediments, including the two mentioned above: not enough money and not an investor temperament. There are other difficulties too. There's not, for instance, an easy way to invest very small amounts in stocks periodically and hold them for the long term. But perhaps the biggest problem is that despite attractive returns there is not a powerful incentive to choose putting money away in stocks as opposed to buying a new car, a new cell phone or a new outfit. Investing is easy if all of your basic and even frivolous needs are met, but it takes either the frugality of a Quaker or a strong economic incentive to make a weekly deposit in your investment account and skip going out to dinner on Friday night.

Let’s get the easy part out of the way first: the mechanics of making investing easy. What we need is a big institutional investment vehicle that is like piggy bank: put in your loose change at the end of the week and let it grow. Maybe it could be run by the government, maybe private firms. The cost of investing in the S&P 500 through mutual funds like Vanguard or Exchange Traded Funds like SPY has been pushed down to nearly zero, so the costs of the enterprise would be primarily related to bookkeeping and marketing. In the computer age, bookkeeping will be easy. The marketing will be tougher. It will require something like going door to door to convince people to put a little something away for their future. Tough as that may sound, if the funeral industry can sell funerals in advance of need, a smart marketer ought to be able to use the same logic to sell retirement investments: You don't want to be a burden to your children, do you?

Now, let’s tackle the tough part: providing an incentive to invest. We are a nation of consumers, not savers. Seventy percent of our GDP comes from consumer spending. So we’re talking about changing pretty deeply ingrained habits. To do that, we’re going to have to come up with compelling reasons for people of modest means, for whom disposable income is precious and consumption is a way of life, to put money away and leave it there. Here are two simple ideas:

1. Matching government contributions for those willing to sock away their funds until retirement. The way many private employers match employee contributions to retirement accounts.

2. Tax free returns. We already have Roth IRAs, on which gains to the owner are never taxed. The requirements for contributing to a Roth-like retirement account could be relaxed to permit broader use (apart from income earned, for instance).

For a family who saves regularly, the retirement payoff could be huge. Let’s say they save $1,000 per year for 40 years and the government matches their annual contributions. And let’s assume a 7% annual real return (net of inflation) for the stock market, which is the average since WW II. [2]  At retirement the family’s investment account would have a value of $400,000. And that’s after taking into account inflation. (Since WW II the S&P 500 has returned 11% before adjusting for inflation, which would make the nominal value of the family’s investment account in 40 years $1,164,000, but in terms of what that amount of money would buy 40 years in the future, the value would be the same as $400,000 today.)

Why would the government provide these incentives? It would have to pay for them with tax revenues from other, presumably wealthier, people, so it would amount to a wealth transfer. Why do it?

One way or another a moderately compassionate society always gets stuck with the tab for caring for those who can’t care for themselves. We do this now through Social Security, Medicare, Medicaid and other social welfare programs. Why not increase the incentives for people to put more of their own resources toward their ultimate well-being? And why not harness the power of the equity markets to add to aggregate available retirement resources? (The Social Security Trust Fund is by law required to invest only in obligations backed by the full faith and credit of the United States;[3]  safe but low returns, lower even than corporate bonds.)

From the government’s standpoint (and therefore all of society’s), the economic benefits are powerful. Let’s say that 30 million families enroll in this new program. If they all invest $1,000 per year and the government matches their contributions, the families and the government would each be putting up $30 billion per year. Run that out for forty years and the total invested would be $2.4 trillion, half by the families, half by the government. If those investments earned the 7% per year average of the post WW II S&P 500, the families would end up with $12 trillion in inflation-adjusted value. In terms of social welfare spending, that’s a pretty good bang for the buck for the government: $12 trillion for its $1.2 trillion investment; a ten for one multiplier.

Think of it this way: Instead of the government matching citizens’ contributions, imagine citizens matching the government’s contributions to their future welfare. And we’d be using using good old American Enterprise (in the form of the stock market), which we love so dearly and which built this country, to provide the growth in value.

I don’t know how such a system would fit in with the ones we have now, particularly Social Security. I don’t think we have to know that for sure to get started. It will take decades to change savings habits; only four percent of us now have enough saved for retirement. [4]  But over time this new approach could lead to a categorical shift in the compact between government and its citizens from “let us help you” to “let us help you help yourself.”

And there might be another huge benefit: shifting us from a nation of spenders to a nation of investors. An economy based on consumption must constantly artificially boost consumer spending, with the result that you end up, as we have, with a lot of old folks with scant resources. It’s likely that this much new money would distort investment markets, perhaps even lower returns, but there would be more capital for new enterprises to access. We might shift from a nation of spenders to one of savers supporting innovation.

What of the tax break? Many want to reduce or eliminate capital gains taxes, but since investments are now principally the province of the wealthy, reducing capital gains taxes only adds to wealth inequality. This new plan would create a new and potentially large group of middle class savers who would be benefited by eliminating taxes on their retirement accounts; as such, it would mitigate rather than exacerbate wealth inequality.

The last great retirement welfare programs were Social Security and Medicare. They are good programs, but we are uneasy with them. We see the problems corporations and other governments are having with their underfunded pension liabilities, and we look at our aging population and we just know that as a nation we are likely to face similar funding shortfalls. We are free-marketers at heart, not socialists. But we are a compassionate people, as well. Using free markets and tax breaks to provide savings incentives and savings growth is in our national DNA. 

We talk a lot in this country about not liking welfare. Even those getting it, don't like it. People want to be as self reliant as they can. This would help them get there. And it would help the government regain sound fiscal footing as it supports its citizens and invests in their future.

--

sources:

1. http://money.cnn.com/2014/09/18/investing/stock-market-investors-get-rich/index.html

2. http://dqydj.net/sp-500-return-calculator/

3. http://www.ssa.gov/oact/progdata/fundFAQ.html#a0=1

4. http://www.statisticbrain.com/retirement-statistics/

Birthright

      --A right, privilege or possession to which a person is entitled by birth.


Birthright means what you get just for being born who or where you were. The "right" part of the word causes some trouble. Kings thought being king was their birthright. Being born on U.S. soil makes American citizenship your birthright. Inheritance is your birthright...unless you piss off the family or they blow it all before they die. Golf at the country club was my birthright. That is I got to play because my dad was a member, and kids whose dads weren't members did not. A college education was also my birthright, although I almost blew that.

Those who are born well usually think they deserve what they have, while everyone else thinks they just won the conception lottery. This creates arrogance in one group and resentment in the other. Sometimes the arrogance morphs into noblesse oblige, which has given us many fine black-tie charity affairs. Sometimes the resentment morphs into vaulting ambition, which has given us many fine department stores.

The circumstances of our birth classify us. By wealth, religion, education, city block. And they divide us. I can't think of many examples of their having brought us together, or even fostering compassion or empathy. We are born with what we have and we cling to it like immigrants clutching tattered suitcases.

Sometimes, when there is almost nothing to hold onto, we walk away from our birthright and make something new of ourselves. These are the great stories of self-made men and women, of triumph over adversity. On the other hand, if we are born with a lot, we hang onto it. These are the stories of selfishness. If we have way more than we need, as we get older we may begin to loosen our grip on worldly goods in the hope of improving the odds of landing good accommodations in the next world, or out of a lifetime of feeling guilty about how much we have and how little so many others have. These are the stories of philanthropy.

Karl Marx had a grand notion that we could all share. From each according to his ability, to each according to his need. That didn't work out so well. An approach that socialists like is to tax inherited wealth heavily so that we all come closer to starting from the same point. That hasn't been embraced in America, primarily because those who have wealth want to keep it and those who don't think they might someday and don't want it taken from them after they've worked all their lives to get it.

So we continue to have classes. We don't like to think of ourselves that way, but there is no other word for them. We want to believe we are a land of equal opportunity, but nothing could be farther from the truth. Indeed, it is so far rom the truth that it makes me wonder why we have continued the delusion. It's not our only one, I suppose. We are prone to delusions.

The truth is that if you are born into wealth, you are likely to end up well-educated and have a prosperous life. If you are born into poverty, especially if you are a black boy, you are likely to end up in prison.

If I said to you that the birthright of a poor child, white or black, is a life for struggle and paucity, you might say he or she just has to work hard to raise himself or herself up out of those circumstances. That is our common delusion, the Horatio Alger story we tell ourselves to justify looking away. If you were prone to split hairs over semantics, you might protest that that being born into a life of struggle and poverty is is not a right, it is a curse. And you would be right.

Quick Takes

Remember when book covers were boring? Tooled leather with gold lettering. Elegant, I suppose would be a better description. But you certainly couldn't tell anything about what was inside. You had to read the book, or at least some of it, to find out. Despite a whole industry focused on "Buy-Me!" covers, you still can't know what's inside until you read a book. Some would say that modern covers can't be trusted to be honest about the story, as opposed to what the marketing department thinks you want the story to be. All the more reason not to judge a book by its cover.

We don't expect to have an opinion about a book until we read it. Not so with people. We take one look at someone and instantly size them up. Portly white guy at the country club in lime-green pants. Black man in a  hoodie on a dark street. Woman in a short dress and platform heels. When it comes to people, we're better than Cliff's Notes, and faster. Take one look and sit down and discuss the character. Instead of book clubs, we could have photo clubs where everyone gets together, has a glass of wine and gossips about the person in the photo. No more oppressive reading lists. And more fun, too. Why bother with the author's imagination when you've got your own?

I know why we do it. We all know why. Nature taught us. Instant assessment is a survival skill. And we still need it often enough that it hasn't atrophied. Trouble is, its overkill. Like blowing up a city to kill a terrorist. Well, I guess we still do that too, but most of us realize that it's not such a good idea. Innocent people are harmed.

We're engaging in another kind of overkill every day on our streets and in our malls, and innocent people are bing harmed. We make a snap judgement about someones character, and Boom!, there go all the other possibilities, all the inner life, all the back story, all the hopes and dreams, the family at home, the sick mother. Everything else is vaporized in that moment of judgment. And then we walk right past the rubble of that life that we will never know as if we've done nothing wrong.

True, we didn't actually hurt the person. I suppose you could say it's just ourselves we hurt. Closing ourselves off to the rich diversity of human experience. In the moment of that walking by, that may be all the harm that's done. The damage to that person's life comes later. We have seen him. We have judged him. He now falls into a classification system we have created for our own intellectual and emotional convenience. And later, when we act on the basis of those classifications, whether by voting for some anti-immigrant politician or railing against the taxes that support poverty programs, that's when the damage is done. The bomb goes off inside our brains and explodes into our actions. And keeps exploding. And keeps exploding.

We know we can't understand a book without reading it. Wouldn't it be nice if we gave the people around us the same benefit?

Affirmative Action, Country Club Style

It’s Labor Day, so naturally I’m thinking about work and workers. I’ve always been a big fan of the labor movement of the early twentieth century. It was needed to ameliorate capitalist exploitation of labor. Today, the issue of the good and bad of unions is more complicated. Most union members are no longer in manufacturing companies; they are in public employee unions. Workplace safety is now covered by federal law. It’s not 1935 (the year the National Labor Relations Act was passed). Personally, I’d like to see us concentrate on raising the minimum wage—a lot. I think that would do more for lower income workers than anything.

But there is another labor issue of perhaps even greater importance: the opportunity to get a job at all. We are coming out of the Great Recession, but we have not yet regained full employment. Who gets the jobs that are there to be had is telling. It’s not high-school dropouts. It’s not people, young or old, with no skills. Today’s workers need education and job skills. And in many cases, they need something else: a helping hand onto the employment ladder. 

I was an industrious boy. I sold greeting cards and holiday wrapping paper. I sold pots and pans. I cut lawns. I had a paper route. I was a sack boy in a grocery store. I worked the graveyard shift at a printing plant. By the time I really got out into the world, I knew how to work. And I had confidence in my ability to do any job. I was a poster boy for American self-reliance.

Not really.

I was a country club brat. I was the son of a well-to-do doctor who bought a new car when the ashtray on his old one filled up. After my paper route, I played golf at the club and ate chicken sandwiches and told the white-jacketed waiter to put it on my father’s tab. I didn’t need to work, I just wanted to. I liked having my own money. I liked the independence. And getting a job was a piece of cake. Here’s why:

I did sell holiday cards door to door, but most were bought by family and friends of family. Ditto with the yards I cut. The lawn mower was Dad’s. I got the paper route myself, but I couldn’t have handled it if Dad hadn’t bought me a moped to deliver the papers. The grocery I worked for was the one where my mother shopped. The printing company where I loaded pallets was owned by a friend of hers on our block who had a mad crush on her.

A way of looking at my early work experience is that I was an apprentice in the family business, or on the family estate. The owners weren’t all Claytons, but they were friends of Claytons. Dad delivered their wives’ babies. Favors were passed back and forth as naturally as greetings at the country club.

Now, think about what a different situation an industrious lad like me growing up on the south side of Chicago has. It’s unlikely that his family’s friends are the owners of businesses that can employ him (unless you count drug businesses). It’s unlikely that his family can buy his equipment for his jobs and support him so that he gets to save all he earns for college. So he needs help from some other part of his life. That’s where affirmative action comes in. Programs that look for talented, ambitious kids with maybe a few rough edges and help them onto the education and employment ladder.

Affirmative Action seems to have fallen out of favor lately, not just in the Supreme Court but in the hearts and minds of many, especially young people, many of whom have benefited from the same kind of privileged affirmative action that aided me. I think we need to resist mythologizing our success as something we earned for ourselves. We’ve all had help. Everyone needs help. There’s no shame in that. The only shame is in denying it to those for whom it is not their birthright.