Archives For January 2016

When Ayn Rand is wrong

January 18, 2016 — 2 Comments

I originally wrote this post in 2011 when the 2009 financial meltdown was fresh on our minds and the timing also coincided with a resurgence in Ayn Rand’s popularity due mostly to her most popular book, Atlas Shrugged, released as a movie. I think I was also a little more arrogant then, so now I’d say in no way would I ever attempt verbally spar with a brilliant mind like Any Rand’s, but it’s at least fun to take a shot at it!

Ayn Rand’s resurgence in popularity the last few years has mirrored the government’s acquisition of large amounts of debt in ‘saving our country’ from the perils by bailing out the banks.  Her popularity previously peaked in the 1950s as a philosopher on moral values as they relate to economic potential.

Wikipedia’s description of Rand says:

“Ayn Rand’s principles of objectivism states that the proper moral purpose of one’s life is the pursuit of one’s own happiness or rational self-interest, that the only social system consistent with this morality is full respect for individual rights, embodied in laissez faire capitalism, and that the role of art in human life is to transform man’s widest metaphysical ideas, by selective reproduction of reality, into a physical form—a work of art—that he can comprehend and to which he can respond emotionally.”

I’ve read two of her most popular books (Atlas Shrugged and Fountainhead) which were quite entertaining and convincing in her philosophies. Based on my knowledge from her books and interpretation of the quote above, I think she infers the best system is one where we watch out for ourselves and don’t sacrifice our own self-interest for those of another. In other words, sacrificing our own interest for others (altruism) is bad and will not lead to a more advanced society.

Rand’s views of objectivism are nearly indisputable in a utopia or possibly even a controlled experiment where the wide array of human emotions are limited. However, when it comes to reality, many of her assertions are wrong. Specifically,

1.  Altruism (sacrificing our own interest for others) is bad

Altruism is our willingness to put other’s needs before our own. Altruism is crucial to hold our civilization together. Rand argues that altruism is ruining us because it pushes us not to focus on our own rational self-interest. She says it turns us into a welfare and socialist state. However, I argue that without altruism, we would haven’t a state in the first place!

Altruism is important because it builds trust in our society. We must have faith in our fellow man that he will be altruistic and be willing to put others over himself at certain points. This doesn’t mean we must always sacrifice our own needs for other’s needs. Most of our actions will be self-serving either for ourselves or family, but that doesn’t mean all of them should be.

What happens when you know someone won’t sacrifice for you?

The person who always puts their self-interest first will soon reside on an island they mistakenly built through selfishness and lack of trust. There are times in my life when it’s not in my own self-interest to hear a friend’s problems, but if I’m not there for them they’ll find someone else and the friendship will weaken.

2.  Faith is bad for us

Next, objectivism rejects faith. Faith is another crucial component of civilization, and I’m not talking only from a religious perspective. We must have faith that our fellow man will not work solely on his self-interests when associating with us. A sales conversion works best when two parties are supporting each other’s mutual interests. If I don’t have faith you’re looking out for me at least partially, I’m not going to buy from you.

Her theory doesn’t take into account that we are emotional beings who are sometimes irrationally driven by our feelings. It’s always going to be that way because only the most enlightened individuals can live beyond that (maybe only monks).

3.  Government should only be used to protect our individual rights

Rand also says that the government should only be used as a force to protect our individual rights. At an individual level, this means a police force to protect our rights and at a higher level a government army to protect our country’s rights against other countries. I disagree, because I think the government must have powers outside of simply protecting rights.

One of Rand’s examples is the government shouldn’t take my money away and force me to contribute to roads and infrastructure. She says that in her objective world, the roads would be built by the motivation from someone’s self-interest. For example, a retail complex owner would build a highway straight to his mall to get people to show up.

Theoretically, this sounds okay. However, when you look at what would actually happen, our infrastructure would be a mess. First, we need a central planner to ensure the best highway and road systems are laid out. Next, there would be no reason to maintain roads and highways in poor areas because it wouldn’t feed the self-interest of the person who would have to pay for it.

Rational self-interest will not lead us to the Utopian society that Rand envisions.  In a theoretical world it might, but there is a reason being our brother’s keeper has maintained strong civilizations. At some point, most of us need help and can’t rely solely on ourselves to handle every situation.

The great thinker and philosopher Adam Smith explains the importance of a strong national government, not as a monopolistic industry leader, but more for protection and for the facilitation of large public projects. Even if you don’t believe in a strong national government, it’s hard to follow Rand’s oversimplified version of government that only provides protection.

Rational self-interest would lead to a total corporate takeover if the company leader’s values were corrupted – which seems to happen all too often. If not for government regulation, we’d still be working in the Rudyard Kipling’s Jungle, living in an environment full of dangers where humans are sacrificed at the altar of production and leaded fuel and paint become our beverage of choice. We wouldn’t need death panels because a simple lack of an individual’s money would make the ultimate decision if they get the life-saving surgery.

Although I disagree with many of her concepts, as I mentioned in a previous post there’s still a lot of merit in her writing and philosophies. Atlas Shrugged and Fountainhead are both really good books that are both enlightening and entertaining. In fact, I do believe in some of her principles and think we’d be in a much better place if we all lived by them.  However, as mentioned above, many of these would only work in an utopia.

Wow, $1.5 billion dollars, can you imagine winning? We all already know our chances of winning are beyond minuscule – like we have a 2x greater chance of getting stuck in an elephant’s butt – but that won’t stop many of us from playing. I tend to be a bitter old man about this stuff because I know it’s a complete waste of money, but even I went in with some friends for a ticket on Saturday night!

After we didn’t win I refrained from being that guy who no one likes who says “I told you so” to something already so obvious. However, my old man bitterness reached a whole new high when I read this article on how the rules were changed back in August to make sure this exact thing happened!!!

According to think progress:

Under the new rules you select five of 69 numbers, up from five out of 59 numbers. The choices for the Powerball was actually reduced from 35 to 26. Still, this decreased the odds of winning the jackpot from 1 in 175 million to 1 in 292 million

Sure, it went from “no chance of winning the big one” to “really, no chance of winning the big one” but it’s the plan behind it that makes me want to write a mean letter to the lotto commission (kidding, I’m too lazy).

They wanted exactly what’s happening right now to happen. They wanted to hit the billion dollar mark:

At the time the rule changes were first floated in July, FiveThirtyEight estimated that the chances of a $1 billion prize pool increased from 8.5% to 63.4% over a given five year period.

And why would they want to hit the billion dollar mark? Because people lose their ever-loving minds!! It’s the talk around the water cooler, is mentioned on every news outlet and has people throwing away their hard earned money. It’s a self-filling pot of hopelessness fueled ever higher by all of the free press. They wanted this exact thing to happen and now have all of our attention.

This shit should be illegal.

But hey, it’s a great way to buy a $2 thrill – where else can you get that kind of adrenaline rush for that cheap besides maybe Thailand?

Or you could view it how it really is – a regressive tax on the poor:

“People in households earning under $40,000 accounted for 28 percent of South Carolina’s population but made up 54 percent of frequent players. Uneducated people also made up a disproportionate share.”

“But people should spend money however they want! If they want to be idiots than so be it”. Ok, but idiots shouldn’t promote it:

By the way, if anyone wins, can I have a cut????????

It’s a scary time in the stock market right now. Oil is plunging, China’s stock market crashes day after day and the rest of the world seems to be going down with it. Famed investor George Soros sees a crisis in the financial markets that echoes 2008 when of course, we had our last major crash.

The end is near and all of the financial analysts are starting to get on board. Every day investors like us are getting scared and many are probably thinking about getting out.

BREATH… the stock market can be scary, especially when the tides of optimism turn and everyone starts projecting worst case scenarios. The truth is, no one really knows what the market will do and often times the fear or success is already built in before we even know about it.

I’ve failed in trying to time the stock market before, so now I largely ignore it. In fact, I first started day trading early on:

“I was a senior in high school, sitting in my Physics class and watching my road to millions pave before me.  My dad and I started a stock account with $3,000 and within four months took it up to $28,000.  This was too easy.”

I was right, it was too easy and little did I know, we were in the peak of the dot com bubble and months later I’d see those tens of thousands disappear even faster.

So here I am, trying to ignore the fear, but even scarier, I continue to invest and buy more Apple stock when it’s getting even more negative press than the overall market! The benefits of diversification are very real and if you’re not real interested in stocks, you should continue to stay diversified and buy funds like Vanguard’s Total Stock Market Index Fund (VTSAX) – instead of individual stocks.

However, if you’re a little more familiar with stocks, let’s dig a little deeper so I can explain why I’m buying Apple even though it’s getting beat up. To start, from Warren Buffett:

“Diversification is protection against ignorance. It makes little sense if you know what you are doing”

Easy for Warren to say, he has one of the brightest minds (and teams) in the whole financial industry. However, “ignorance” sounds like a pretty harsh word, but in reality, it only means “lack of knowledge or information”. So yes, most of us are very ignorant on the stock market. But what if you had a few stocks you really followed and knew something about. Maybe you do have a chance then:

“And it makes sense to load up on the very few good insights you have instead of pretending to know everything about everything at all times” – Charlie Munger

I’ve invested in Apple since 2013 when they had their last major beat down by the market. This article has a pretty good summary of the negative press, but everyone joined it and said Apple was done innovating and had reached “peak iPhone demand”. Their stock was in the dumps and the end was near.

That’s when I bought my first Apple stock at a split-adjusted price of $56 per share. Analysts said it would go even lower and many people agreed with them. Over the course of the next year, the stock price doubled.

You see, as much as we like to pretend the stock market is “efficient” or “rational”, it’s not. It feeds off of emotions and it’s incredibly good at getting you to “quit it” just before it makes the next major jump. The market is an incredible psychological test that isn’t for the faint of heart. The best bet is to remove your emotions, invest for the long term, and think of “Mr. Market” the same way one of the strongest minds ever in investing, Benjamin Graham, described:

“Instead of thinking the market was efficient, Graham treated it as a manic-depressive who comes by every day. And some days Mr. Market says, “I’ll sell you some of my interest for way less than you think it’s worth.” And other days, he comes by and says, “I’ll buy your interest at a prices that’s way higher than you think it’s worth.” And you get the option of deciding whether you want to buy more, sell part of what you already have, or do nothing at all.

To Graham, it was a blessing to be in business with a manic-depressive who gave you this series of options all the time.”

Right now, I think Mr. Market is depressed and willing to sell me stocks much cheaper than what they’re worth – especially Apple. You can find many analysts who disagree and many who agree, but based on my knowledge of their financial strength, their incredible reach around the world and their continued ability to make more money, I’m in. I traveled to Singapore, Bucharest and Bangalore last year and all three country’s residents either had iPhones everywhere or wanted to.

In the end, I’m not a financial adviser, I use a lot of anecdotal evidence, and I would encourage you not to make any investing decisions based on what I say. The best way to invest is to think long term and have a plan to regularly contribute. It’s funny, the last time I wrote a post about investing for the long term was back in August 2011 when the market was in the middle of a 15% correction… and in the next two years it jumped around 50% in value! I may be wrong this time and the market may crash, but if that happens I’ll continue investing just like I do now.

Now that we’re in the beginning of a new year, I thought I’d remind you that your countdown has started for 2016. More importantly, your countdown is continuing in life. I’ve known to be a bit morbid at times, but it’s all for good reason…

Because life is short!

We let the years tick by like seconds and sometimes forget our time here is finite. My wife and I visited New Orleans this weekend and it blew our minds that we moved away almost three years ago. It seems like just yesterday we were standing on the St. Charles median watching another Mardi Gras float go by… those were the days.

That's me on the left (pre-beard)

That’s me on the left (pre-beard)

Our Nola friends asked us how life is going now and we’ve settled on the fact that we’re currently in a stable “accumulation” phase because we’re still DINKs (dual income, no kids) and progressing well in our careers. We have good friends here and we’re close to family, but our 10-12 hour work days mean little time for each other or to explore life.

We’re very fortunate to be in the position we’re in, but our minds have been corrupted by the combined forces of New Orleans and traveling the world for ten months. We don’t exactly know what’s next yet, but we’re enabling ourselves to have a “next” as we’re living very intentionally. We’ve almost finished our major home renovation, we’re keeping our spending down and we’re still driving our high-mileage, paid for cars. We’re saving and investing as much as we can.

What about you, what are you doing in 2016?

Are you living intentionally towards a purpose you’ve defined? Are you avoiding the golden handcuffs and staying out of the company store? Your life is incredibly important and you deserve to live it to your standards. You may not be in a position to do that yet, but build a plan to get you there. As always, you can start here if you need help figuring out how to manage your money.

What will you do in 2016? Start that college savings plan for your kids you keep meaning to do? Finally figure out investing and open up a Roth IRA? Or are you further along and want to figure out how you can retire in 10 years (even if you are 30 years old now)?

I’m not big on New Year’s resolutions because they so often fail that it’s become socially acceptable just to let them fail. However, I’m a big fan of you living intentionally towards a purpose you’ve created.  You can figure this out.

I’m going to spend more time on writing investing and tax posts the next couple of months, so if you have any specific questions, let me know! Good luck in 2016!

We went to Las Vegas three years ago and decided to go through the “Timeshare experience”. Well, it didn’t disappoint and you can find the entire story here, but I had to share this comment with you!! I’m pretty sure it’s real, but it’s almost too good to be true. Here it is:

Jason the TimeShare Rep

Woww, what a response! I even have his email address if you want to get in contact with him to buy a timeshare. He seems like a great guy, and I’m sure his response would be even better than my “mean manager” if you don’t buy one!

I didn’t previously realize I didn’t have the right to tell people not to buy a timeshare, so sorry about that. Also, if anyone talks to Jason, please teach him grammar.