Wednesday, August 24, 2011


Where does the money go?

Microsoft’s Raymond Chen usually blogs about interesting things about Windows. He also throws in assorted items about other things, and today he points to some old articles about how professional athletes go broke, despite multi-million-dollar salaries.

One of the articles is an NPR story from May, and it contains this wonderful quote at the beginning:

They see [their salaries] as infinite, like it doesn’t end, like they can’t spend it all, says accountant Scott Bercu, who has handled the finances of professional baseball and basketball players. But, if you get $5 million a year, by the time you get done paying your agent and taxes, you have $2 million left to spend. That goes very quickly.

That goes very quickly, indeed, hm. I should say so! Certainly the last couple of million I saw went away before I even noticed it.

The point of the story is that unlike most highly paid people, these athletes aren’t hired for their business sense, and managing money is, let’s say, not their long suit... and, so, naturally, when they come into enormous salaries, they do what they’ve always done with money: spend it all. They need, the story says, education — just as they get training in playing their sport, they need training in money management.

I don’t know; I find this really hard to accept. Basic, rank stupidity just isn’t something I have much tolerance for, and most people don’t have to be told that even large quantities of limited resources are still limited. It’s hard to have sympathy for someone who’s paid five million dollars, only has two million left after some necessary expenses, and then finds that the two million just goes very quickly.

Maybe it’s just schadenfreude, but, no, I have no sympathy at all.

Saturday, August 20, 2011


The race for prosperity

Paul Krugman writes in the New York Times about how populations shifts and lower wages can appear to create jobs locally, but notes that it doesn’t translate into prosperity and doesn’t scale to a nationwide job plan. I agree with his analysis. But I have another question, which I’ll introduce in a sort of roundabout way.

A friend of mine once commented about arcade-game scores. Typically, when you hit a target in an arcade game, you score thousands of points — maybe 1000 for this, 5000 for that, and 10,000 for a big target — resulting in final game scores in the hundreds of thousands, and, for top scorers, in the millions.

Is that really any different from having the targets give you, say, 1, 5, and 10 points, with final scores in the hundreds, or maybe the low thousands? Everything is relative, isn’t it? If we peel three zeroes off of everyone’s score, all players still rank against each other in the same way. It may be a psychological thing to have a score over a million, but in comparison to other players, does it matter in real terms?

Put another way, does adding zeroes to everyone, equally amount any real improvement. The numbers are bigger, but is anyone better off than before?


Now, is it the same with wages, prices, and cost and quality of living?

Were I to get a 10% raise, I’d be happy, of course. It certainly feels great to bring in 10% more money. And, hey, my co-workers are good at what they do also, so they deserve 10% more as well, don’t they? And if my boss is going to give us all 10% more pay, he’ll want that for himself as well.

Before we know it, lots of people are getting 10% raises. How does the company afford to do that? The folks controlling the profits want their 10% too, of course. So that means that prices have to go up. Now the people who work at other businesses, affected by rising prices at the ones that are giving out 10% raises, need wage hikes as well — they want to continue to afford the products and services they’re used to buying.

At some point, everything — everyone’s wages, as well as the prices of everything from food to fuel, housewares to housing to haircuts — is up 10%.[1] And, of course, I’m still doing a great job and I deserve a raise... and the process repeats.

But is anyone better off? Does it matter, when this all accumulates for some years, whether I earn $10,000 a year and a dinner for two costs $5... or I earn $100,000 a year and a dinner for two goes for $50? If renting an apartment has also gone from $200/month to $2000 in that time, and gas, which used to cost 40 cents a gallon, is now $4, has anything changed in real terms? Despite the extra zero in my salary, the extra zeroes in the prices mean that my buying power is the same as it was. And if everyone has gotten that added zero, we’re all just keeping up with one another.

Nothing has changed.

I’m better off for a short time after getting my raise, until everything catches up to me. And that’s assuming I’m on the leading edge of the cycle; the people on the trailing edge of the cycle are always behind, and only catch up at the end, just in time for things to start moving away from them again soon.

The economic cycle is a zero-sum game, at least for the vast majority of the population. It will only ever be the people in control of the top who will make out. The rest of us place ourselves somewhere else in the hierarchy, some of us better off than others, and then, for the most part and with only small variations and jockeying, we’re all just running a perpetual race on stationary treadmills.

[1] In fact, since the people getting the profits also want their raises, the prices need to go up by 10% to cover our raises, plus more to increase the profits. And since our suppliers want raises too, and are raising their prices, our prices have to go up even more to account for that. So the cycle is more complicated than this, but the point is the same.

Saturday, August 13, 2011



Daniel Grayling Fogelberg would have turned 60 today, had he not left us at the age of 56, taken by prostate cancer. His home town, Peoria, Illinois, dedicated a memorial garden to him in its Riverfront Park last year.

I first came across Dan Fogelberg’s music with his second album, Souvenirs, in 1974 — it’s playing on my stereo as I write this. His subsequent Captured Angels and Nether Lands stay together in my mind as my two favourites; I can’t choose between them. He’s probably best known, though, for songs from Phoenix and The Innocent Age.

This song, which he wrote for his father and recorded on The Innocent Age, seems appropriate to dedicate to Dan today:

I thank you for the music and your stories of the road.
I thank you for the freedom when it came my time to go.
I thank you for the kindness and the times when you got tough.
And, papa, I don’t think I said I love you near enough.

The leader of the band is tired and his eyes are growing old,
But his blood runs through my instrument and his song is in my soul.
My life has been a poor attempt to imitate the man.
I’m just a living legacy to the leader of the band.

— Dan Fogelberg, from Leader of the Band