Category: Flourishing Article

The Most Notable February Birthday

by Helping Families Flourish, posted in Flourishing Article

 Originally published in Flourishing February 2012. 

George Washington, born in Virginia on February 22, 1732, has often been referred to as America’s indispensable man.

Like the other Founding Fathers, Washington was a child of the eighteenth century Age of Enlightenment.  That period was influenced by the scientific revolution of the seventeenth century, and Enlightenment thinkers applied scientific reasoning to human nature, society, and religion. Politically, the result was an emphasis on personal liberty and individual rights, republicanism, and religious tolerance.

The Founding Fathers had a vision of America as the land of responsible, independent, hard-working citizens, prospering in a system of political and economic freedom. George Washington believed thatAmerica would become a beacon of liberty and justice to men everywhere.  And, for most of two hundred and twenty-five years, it has been.

George Washington developed his personal code of conduct through hard work, the embrace of military and entrepreneurial risk, and constant study. By the time of the revolutionary crisis in 1775, he had already achieved military, business, and social success. More importantly, he had achieved the strength of character for which he became justifiably famous.

By the time he was forty, George Washington was a man who had earned a serene confidence in his own judgment. He had developed a principled and iron-willed moral conviction. By 1775, all the personal prerequisites of great leadership were present. When George Washington then stepped onto the world stage – and from that time to the end of his life – he displayed his virtues to the  world, the greatest of which was the integrity that was to place him first in war, first in peace, and first in the hearts of his countrymen.  George Washington’s integrity was on display, relentlessly and without interruption, from the time he accepted command of the colonial army in 1775 until the end of his life in 1799.

At the beginning of the Revolutionary War, Washington arrived in Cambridge, Massachusetts to find a sick and unruly army looking out on a Boston harbor filled with British warships.  Six months later, by determination, discipline, and his personal example, he had created an army that was well organized and prepared to attack from a commanding height.  The British, seeing the vulnerability of their position, quietly withdrew their ships.

Not long after, on a cold and wet Christmas night, Washington led his small and desperate army silently across the Delaware River to temporarily again turn the tide of war in favor of the Americans.

Throughout his military career,Washington led his men into battle fearlessly, frequently riding into enemy fire ahead of them.  Often sporting bullet holes in his hat and tunic, he was a constant inspiration to his young, poorly clothed, and often unpaid and undernourished soldiers.

Then, at the end of the war, he remained true to his values, even as – after victory at Yorktown—he was showered with praise. His officers even urged him to declare himself America’s new king. He calmly quelled the idea on the strength of his character alone.  And later, through two reluctant presidential terms,Washington’s every act underscored his commitment to Liberty and republican government. 

A man like this, who is able to hold to a principled course of action, to pursue his values relentlessly, without compromise, and to do so under duress, deserves our deepest respect. And even more, I think, George Washington was a man who truly deserves our reverential awe.

This Presidents’ Day and forevermore, let’s honor the integrity of America’s indispensable man by honoring and defending what he fought for: Life, Liberty, and the Pursuit of Happiness.  mh

Life Without Oil

by Helping Families Flourish, posted in Flourishing Article

Originally published in Flourishing February 2012

Today, it’s common wisdom – if that’s the right word – to think of our environment as something that starts out healthy, but that we’ve messed up. The worst thing we produce, it is alleged, is “oil”. That just drives me crazy, because it’s the inverse of my entire life’s experience. Yours, too.

In the very early 1950’s, I attended kindergarten at Simpson Elementary School in Russell, Kansas. Our family lived in a rented house – a shack really – a few blocks away on Elm Street (no, not that Elm Street). I remember the day an oil-drilling rig pulled into our unpaved driveway and backed up across the street into the vacant lot next to my friend Nancy’s house. A few weeks later, the rig pulled out and a pump was installed; a black oil storage tank, too. Ker-thump, ker-thump, ker-thump. I was fascinated to watch the head of that pump bob up and down; and it never stopped. Drilling to China, maybe. Ker-thump, ker-thump – twenty-four hours a day. Like a beating heart. I don’t remember being frightened or otherwise damaged by the well, but I do remember that my mother was worried about a polio outbreak in our town that summer that had killed or crippled several neighborhood children about my age.

A few years later, from about the age of ten, my friends and I would swim in the Saline River as it flowed through the Bemis (oil) Field in Rooks County, Kansas between Hays and Plainville. The Boy Scout troop of which I was a member had access to a small cabin and skeet-shooting range in the area. Local oil producers had suspended some of their pipelines above the river, hanging them on steel cables. The pipelines occasionally leaked, but we weren’t concerned about the thin glassy film floating on the river’s surface; we were too busy watching for snakes. The suspended lines were also an adventuresome way to cross the river, swinging as they did from our shifting weight and a gusting high plains wind.

If you had been there with me, you would know that I was more endangered by the campfires we built from cow dung and fallen cottonwoods—or by the aforementioned snakes – than by the oil all around us. We strained and then boiled the drinking water we got from the river, not to rid it of oil – that floats to the top and is easily avoided by dipping your pail more deeply into the stream – but of bird droppings and other such “natural”, non-floating contaminates.

Amazingly, here I am, more than fifty years later, timeworn perhaps, but undamaged by the oily environment of my youth. The greatest risks to my health now seem to be appetite and sloth.

As I look back, I sometimes compare my life with oil to the life of Carl Petterson, Linda’s great-great-grandfather. When Carl came to America from Sweden more than one hundred and twenty five years ago, his first Kansas home was a sod-covered dugout in what is now the Green Mound neighborhood of southeastern Mitchell County. Even a kerosene lamp would have been a luxury for Carl, as I’m sure it might have been for some your ancestors. His nights were lit only by the moon, firewood, and lightning.

Carl didn’t have creosote posts or diesel-powered tractors. He fenced his eighty acres with hand-hewn limestone post-rock, and he walked his plow behind a horse. Still, Carl did well enough to leave five acres of his land for a church, and another five for the church cemetery, where Linda and I will be buried.

Today, his descendants can cultivate his eighty acres and mow his cemetery in less time than it took Carl to hitch up his horse and plow.

I could, of course, tell a similar story about Isaac Martin Harvey, who was born in London, and his son George Washington Harvey, who was born in Peoria, Illinois. They settled together on land that now forms the bottom of Lake Afton west of Wichita and south of Goddard. You know that Afton is a man-made lake providing an important water supply to area residents, as well as a relaxing place for recreation. It was developed in the 1930’s–and is currently maintained—with the use of machinery powered by refined derivatives of oil.

Contrary to modern assumptions, nature doesn’t give us a healthy environment to live in. For those who think that oil and oil pipelines are “dirty” and “unnatural”, I suggest reading some history* about more “natural,” pre-industrial times—or visiting a country where people are still living in “natural,” pre-industrial conditions. One might study places and times where the streets and streams were (and are) filled with both human and animal excrement; where childhood mortality exceeded (and still exceeds) fifty percent; where walking is the standard mode of transportation; and where gas stations and power plants are unheard of. I could go on, but you know all this. Many of you have been there and done that.

We in America live in an environment where the air we breathe, the water we drink, and the food we eat will not make us sick; and where we can even cope with natural catastrophes like Greensburg and Joplin. These are achievements made possible by cheap and abundant energy, e.g. oil. We can live this way only by getting machines—powered mostly by oil and its derivatives—to do more than ninety-nine percent of our physical, and even mental, work for us.

Products derived from oil are what we need to build and maintain comfortable, climate controlled homes. We need oil to produce and transport vast quantities of fresh and frozen food, to build hospitals, and to manufacture pharmaceuticals and orthopedic devices; etc., ad infinitum.

And, how do we travel across the country and around the world, very often for the sole purpose of safely enjoying the most beautiful parts of nature, which pre-industrial people had neither the time nor the energy to do? Oil.

I know that you believe in making decisions based on facts, not fantasies. So, consider the fact that so-called “green” technologies have given us no evidence that they can produce the plentiful, cheap, reliable energy that a modern and healthy human environment requires. Despite more than forty years of government subsidies, which draw resources from more viable and freely chosen purposes, and utopian “green” fantasies incessantly promoted by the government, the media, and in our schools, only two percent of the world’s energy comes from solar and wind technologies. Even that two percent must be backed up by conventional power-generating sources like nuclear, coal, hydro, natural gas—and oil. The sun is helpless at night; and even in Kansas, the wind is calm sometimes. But, these are the least of the obstacles to “green” energy efficiency. The laws of physics pose far greater, even insoluble, problems.

I know I’m old-fashioned: I still believe in a day’s work for a day’s pay and stuff like that. But it’s amazing to me that we’re so gullible as to take energy advice from politicians who tell us to trust our health and prosperity to unproven unprovable and wasteful “green energy” technologies. All the while, they condemn as “dirty” the very energy source—oil—that has brought us the cleanest, healthiest, most prosperous environment in the history of mankind.

Go figure. There are literally billions of people around the world who yearn for a liquid fuel, carried through a magnificently stout pipeline – or any pipeline – to help them create a modern human environment for themselves and their families. Yet here we are, so pleased with our own “green-ness” that we take the practical and affordable energy we get from fossil fuels for granted. And now, we’re actually putting another clamp on the aorta of our energy-driven, oil-dependent economy by postponing the proven, subsidy-free, Keystone XL Pipeline.

Our nature as human beings is to use our intelligence to create more livable and more comfortable environments for our families and ourselves. Dug-outs and dung fires will no longer do. Moreover, in America, we don’t need rulers or czars to dictate or approve what, where, and how we can produce and transport the energy our lives require. Perhaps I digress, but I don’t think so.

We are intelligent and independent individuals living in a society dedicated to liberty and prosperity. As such we have every right and obligation to embrace market-based energy production and privately financed transportation systems; in particular, the Keystone XL Pipeline which is needed now to bring oil from Canada to America’s gulf coast refineries.

The Keystone XL Pipeline would double the capacity of the existing Keystone from 591,000 barrels of oil per day to 1.3 million barrels. The CEO of Gulf Oil estimates that Keystone XL would save American consumers about $.20 per gallon on the price of gasoline. Alternatively of course, we can continue to import that oil from Saudi Arabia. No joke, that’s another price we’ll pay for being “green”.

So, the “dirty oil” objection is really just a dirty trick. Every energy source creates some kind of unpleasant byproduct. I’ve already mentioned firewood and cow dung, and I trust your experience is close enough to my own, that no further detail is needed. I could tell you about the side-effects of mining the materials that go into solar panels and windmills, and the incredible amount of coal and oil that goes into manufacturing, transporting, and assembling their parts, but you can easily intuit all of that for yourself. The “dirty oil” objection is just a shell game used by scoundrels—and that is exactly the right word—to divert our attention from the fact that they really don’t want any kind of industrial development at all.

Let me say it again, plainly: Virtually every necessity and convenience of modern life depends on the production and flow of oil—a Herculean task. It is sheer fantasy to imagine that the likes of Solyndra or Beacon Power will ever match the life-enhancing power of North America’s great oil industry. mh

* A good place to start is Civilization and Capitalism, 15th-18th Century, Vol. I: The Structure of Everyday Life, Fernand Braudel, University of California Press, 1992.

Web Tips

by Helping Families Flourish, posted in Flourishing Article

Originally published in Flourishing January 2012

Are you wondering how working while collecting Social Security will affect your benefits?  Are you having trouble managing all of your monthly expenses?  Perhaps you want to start an education savings plan for your child or grandchild, but are wondering which type is right for you.  To help with these difficult questions, Family Wealth Management LLC has a wealth of resources available to you on our website.

Simply go to http://www.lpladvisorweb.com/michael.harvey/ and click on Downloads in the Client Center drop down menu.  Available to you at no charge is information on retirement plans, long term care insurance, Medicare, Social Security, estate planning, education funding, and much more. 

The information is in easy to view formats, such as PDF and Excel spreadsheets.  Some, like the Monthly Budget Spreadsheet, can even be personalized for your unique circumstances.  Visit our website often, as we’re always looking for, creating, and adding new and useful content to help you manage your money.  ab

Faulty Lens Follow-Up

by Helping Families Flourish, posted in Flourishing Article

Originally published in Flourishing January 2012

In the November issue of this newsletter, I discussed the Occupy Wall Street protestors, saying that they were viewing the world through a “faulty intellectual lens”.  The point of the article was that many of the protestors are confused.  Among other things, they don’t understand the “capitalist function”, which is to provide financing for the improvement of the human condition.

So, I was very pleased to read* about protestor Tracy Postert.

Tracy has a PhD. in biomedical science, with a specialty in pharmacology.  Frustrated at being unable to find a job in academia, she held signs in Zucotti Park saying “Reagan Sucks”, and “I’ll Vote After the Revolution”.  (Yes, the logic escapes me, too.)

Tracy finally realized that those signs weren’t helping her find a job, and she put up a new one: 

PhD. Biomedical Scientist Seeking Full Time

Employment—Ask Me for My Résumé

And, what do you know?  Wayne Kaufman, Chief Market Analyst at John Thomas Financial (located at14 Wall Street) saw her sign, read her résumé, called her in for an interview, and offered her a job analyzing medical companies as potential investments.

She accepted.

Tracy is now studying to become a Chartered Financial Analyst, saying, “I want to get a perfect score.”

Q.E.D. (quod erat demonstrandum) The way you look at things really does make a difference.  mh

*Occupier Gets an Occupation, nypost.com, December 5, 2011.

The Pessimists’ Dead-End

by Helping Families Flourish, posted in Flourishing Article

Originally published in Flourishing January 2012

In 1957, Bennett Cerf, then CEO of Random House, took a chance on a wildly dystopian and philosophically radical novel.  You may have heard of it—more than seven million copies have been sold, and many of its author’s personal papers are now housed in the Smithsonian—Atlas Shrugged, by Ayn Rand.

I mention Atlas here, because its author is now widely perceived to have been incredibly prescient.  For example: One of the most interesting characters in the novel, Ellis Wyatt, had figured out how to get oil from shale, a crazy idea back in 1957.  Like today’s high tech oil and gas producers, Wyatt’s genius had the potential to lift the nation’s economy out of a deep recession. In the novel, government leaders conspired with their business cronies and political supporters to destroy a railroad needed to transport crude oil from Wyatt’sColorado oil fields to distant refineries.  Equivalently today (December 20, 2011), after three years of environmental studies, our President and Congress are still fighting over the construction of a similarly needed pipeline.

But pessimists and dystopians, please make a note:

In the real world—sooner or later—rational economic self-interest trumps political ideology, always. 

And, increased oil and natural gas production, along with an efficient transportation and pipeline system, are in the best interests of American businesses, American job-seekers, and American consumers.  So, let’s get right to the good news.

Shale gas production is not just increasing, it’s growing almost exponentially.  In 2010, shale gas production represented 29% of natural gas wells completed and 27% of total natural gas production in the U.S.  By 2020, it’s expected that shale gas production will more than double, and by 2035 shale gas will represent 60% of all American natural gas production. IHS Global1, a respected worldwide research firm, estimates that the value of the natural gas extracted from shale will grow from about $26 billion in 2010 to $72 billion in 2020, and more than $153 billion by 2035; and that estimate assumes that natural gas prices will increase at a rate less than the overall inflation rate.

In 2010, shale gas production contributed about $76 billion to domestic GDP, and more than $18.6 billion to federal, state, and local government tax and royalty revenues.  Those numbers are expected to triple to $231 billion and $57 billion by 2035.

At a time (2010) when jobs were—as they are now—seemingly in short supply, the shale gas industry supported more than 600,000 American jobs.  By 2035, that number is expected to grow to 1.6 million.

And, here is why I’m really excited about the potential expansion of the shale gas industry:  Increasing production of natural gas could mean lower energy costs, and lower energy costs could mean a new industrial renaissance forAmerica.  According to the IHS study, increasing production of shale gas could lower the cost of manufacturing in many critical American industries. 

Among the possible beneficiaries, the electric utility industry is likely to move away from coal and toward natural gas as a fuel for its generating plants.  Exports of PVC and related products manufactured in theU.S.have already tripled since 2007 as a percentage of total production.  Other chemical producers, including agricultural chemical manufacturers, and aluminum, steel, and cement producers could benefit, too.

This is all confirmed by another new study2 by Pricewaterhouse-Coopers,   which found that seventeen chemical, metal, and industrial manufacturers commented in their 2011 SEC filings that shale gas developments drove demand for their products, compared to no—zero—such statements just three years ago.

 The PwC study also says that it’s very likely that there will be a significant return of manufacturing from offshore in coming years—as many as one million new jobs by 2025—especially to areas of the country friendly to shale gas production and/or with easy pipeline access. 

Labor costs overseas and corporate tax rates at home could be negative factors, but don’t pooh-pooh these more positive conclusions too quickly, as tax and labor conditions could change suddenly, dramatically, and favorably, too.

Like the heroes in Atlas Shrugged, I have an implicit trust in the American entrepreneurial spirit. I first witnessed that spirit as a teenager among the roughnecks of Ellis County, which at the time was the highest oil producing county in Kansas.  That spirit still lives in America—especially in the shale gas and oil industry—and that’s why I’m so sure the pessimists are wrong. mh

 

  1. The Economic and Employment Contributions of Shale Gas in the United States, IHS Global Insight (USA) Inc., December 2011.
  2. Shale Gas: A renaissance in U.S. manufacturing? PricewaterhouseCoopers LLP, December 2011.

Achievement is Not Normal

by Helping Families Flourish, posted in Flourishing Article

Originally published in Flourishing January 2012.

Many personal attributes, such as height and IQ scores, are distributed “normally” throughout the population.  In most things, most people are near the middle of the range and very few are far away from the middle. The distribution is symmetric, which means—as in the case of height—that as many people are taller than average, as are shorter than average.  Almost no one exceeds the average in height or IQ by more than about 25%.  You could plot this on the “normal distribution” chart above.

Achievement is not like that. The highest achievers accomplish far more than the average person. For example, the best computer programmers are many times more productive than average programmers.  Think Bill Gates, whose programming and entrepreneurial genius has literally changed the world. 

Best-selling authors far outsell average authors.  Think J. K. Rowling, whose seven Harry Potter books have sold more than 350 million copies and enriched the lives of millions more.

Achievement doesn’t graph as “normal”.  Statistically speaking, it’s “log normal”.  Those few who achieve at the extreme do things that virtually no one else does. Altogether, those things—whatever they are in particular cases—don’t just add up to higher achievement, they multiply.  That’s a good thing to know.

If you’re still wondering why 20% of the population earns 60% of the income and the top 1% earns 20% of the income, that’s the reason.  They’re not “normal”.  They create extreme value.

That’s a good thing; and a good thing to know, too.  mh

Outwitting The Difficult Child

by Helping Families Flourish, posted in Flourishing Article

Originally published in Flourishing January 2012

The worst thing that can befall any parent is to outlive one of their children. In that regard, Linda and I have been very lucky, and a day does not pass, but that we give thanks.

I believe that it’s equally sad when a parent or grandparent has given up on their child or grandchild. This is perhaps a more common tragedy. Thankfully, we have not had that experience, either; but at times, we have had serious communication gaps.

I’m neither a psychologist nor family therapist, but here is what I think I’ve learned:

When you feel your child is shutting you out, or just talking past you; that child may be telling you something important about your own communication habits. Please know that I’m telling you this as a friend, and as a serial offender: That child may be, in effect, your family’s Jiminy Cricket.

From more than twenty years of working closely with hundreds of families, I’ve concluded that a key to the success of flourishing families is their ability to extend unconditional love, and to convey an unconditional commitment to listen non-judgmentally.

So, if you’re considering giving up on your child or grandchild, you might want, instead, to step back and ask yourself, “What message am I missing—and what opportunity is our family forfeiting—because I’m not willing to listen and learn?”  mh 

HT:  John A. Warnick, http://johnawarnick.typepad.com/seedlings

A Notable January Birthday

by Helping Families Flourish, posted in Flourishing Article

 

Originally published in Flourishing January 2012. 

Vernon Lomax Smith was born in Wichita on January 1, 1927.  After his father lost his job as a machinist during the Great Depression,Vernon’s family moved to a farm in western Sedgwick County.  As a teenager, he attended my parents’ alma mater,Wichita North High School, graduating in 1945. 

Vernon said that after high school, he wanted go to Cal Tech, but his high school grades weren’t good enough; so, he attended Friends University in Wichita to rehabilitate his academic record.  He then went on to earn a B.S. in Electrical Engineering from Cal Tech in 1949, an M.A. in Economics from the University of Kansas in 1952, and a PhD. in Economics from Harvard in 1955.  I guess that ain’t too bad for a farm kid. 

Dr. Smith has since held teaching and research positions at Stanford, Brown, Cal Tech,Arizona, and George Mason University, among others.  He is currently Professor of Economics at Chapman University’s Argyros School of Business and Economics and School of Lawin Orange,California; a research scholar at George Mason University Interdisciplinary Center for Economic Science; and a Fellow of the Mercatus Center.  But Wait!  There’s more:  

In 2002, Dr. Vernon Smith was awarded a Nobel Prize in Economics for his work in behavioral and experimental economics.  Most of the research that earned Dr. Smith the Nobel Prize was conducted at the University of Arizona between 1976 and 2002.

Then, at the age of seventy-eight, Dr. Smith spoke publicly for the first time about having Asperger’s Syndrome, a developmental disorder on the Autism Spectrum.  Social deficits, communication difficulties, stereotyped or repetitive behaviors and interests, and cognitive delays often characterize these disorders. 

Thank you, Dr. Smith, and Happy Birthday!

******************

I wonder….  Who—other than Vernon, and perhaps his mother—would have predicted his outstanding achievements?  mh

Entrepreneurs, Capitalists, and Income Inequality

by Helping Families Flourish, posted in Flourishing Article

Originally published in Flourishing January 2012.

In 2009, there were 211,254,000 Americans over the age of fifteen who earned income.  If you earned more than $205,000 in 2009 you were in the top 1%.  If you earned $55,301 or more, you were in the top 20%.  Median household income in 2009 was $49,777. * 

So, for those of you in the top 1%, please know that I appreciate that you don’t have to be on Wall Street, much less the head of Goldman Sachs, to earn at that level.   I also know that none of you started in the top 1%, and I know that concerns about falling from the 1% can keep you awake at night.  Nobody wants to travel backwards in life. 

For the rest of us, it might be helpful to ask, who are the 1%?  The answer is that they come from all walks of life, but they generally fall into three broad categories.

Many of the top 1% of income earners in Americaare small business owners or entrepreneurs.  An entrepreneur can be defined as someone who acts to identify and fulfill the needs and desires of others in the marketplace in an attempt to earn money over and above the cost of acting; e.g., to earn a profit. 

Entrepreneurship—or running a business—involves every bit as much creativity as oil painting or novel writing. It requires imagination, understanding of the relevant tools and resources, and combining them into something new and different and valuable to others.  It’s hard work, even if—and especially because—it’s mostly mental work.  Very few people want to think as much, work as hard, take as much personal risk, or assume as much responsibility as is required of the successful entrepreneur and small business owner.

Others in the top 1% of income earners inAmericainclude highly skilled professionals, such as doctors, lawyers, executives, athletes, and entertainers.  Let’s give them their due; most of them work really hard, put in very long hours, and they have to study and train continuously to keep up with the demands of their professions.  For better or worse, most of us are lacking either the candlepower, or physical attributes, or work ethic that it usually takes to succeed in these challenging fields of endeavor.

That brings me to the capitalists, who make up a substantial portion of the 1% and much of the top 20%.  Most of today’s capitalists are people just like you and me.  In fact, they include you and me.  So, what do we do that makes us capitalists?

We do two things, and each is an incredibly valuable service to our fellow human beings; and each was an essential factor in the advance of our species from cave-dweller to homeowner, from fruit scavenger to grocery shopper.  The two things?

We defer consumption (we wait); and B) We assume risk.

Deferred consumption (waiting) was and is essential to human advancement for the simple reason that the production of food, clothing, and shelter takes time.  While we capitalists are waiting for the return of our money, entrepreneurs are using it to build and finance factories, houses, and automobiles; to create and market cell phones; to plant and harvest crops; and to do a million other things that take both time and money—a lot of time and a lot of money.  Because we wait for the return of our money (our capital), entrepreneurs and businesses can offer their hourly or salaried employees a regular paycheck.

We capitalists also bear the risk that the money we’ve saved and invested (rather than consumed) will be lost.  While the worker expects to be paid regularly, usually at least once a month, the capitalist may have to put his money at risk for years while awaiting a return on his investment. 

Sometimes, of course, two or more of the roles of entrepreneur, professional, capitalist, and employee are combined in one person.  And for each of those functions, it’s reasonable to expect compensation—sooner or later—depending on the terms and performance of each role. So now, let’s consider the fact of income inequality. 

First, although members of each of the three top earning groups I’ve just discussed are typically very smart, work really hard, and are very disciplined; that’s not the only reason they are in the top 20%, or even the top 1%.  We know this, because there are millions of smart, hardworking, and disciplined people, who are not in the top 20%.

The most basic reason that people make it into the top tiers of income earners is that there is a significant demand for who they are, or for what they do, or for what they’re selling—and they fulfill that demand more effectively or more completely than their competitors.  Each and every day, millions of Americans, and billions of people around the world, make purchasing decisions.  Those decisions ultimately determine what every product and service will cost, how many of each will be produced, and who will be rewarded.

If you’re a really good soldier, marine, or sailor; or teacher, or policeman, or fireman; or if you’re working in any of the thousands of worthy occupations from which we all choose, and you’re not in the top tiers of income earners, that may not seem fair.  But, of course, each of us makes our own “purchasing decision” when we decide what kind of work we want to do.   

We know going in what the potential of any job or career is or might be.  That potential is set by the demand for our occupation, how well we perform in it, and how many others are competing with us for a limited number of jobs, customers, clients, patients, investment opportunities, etc.

For example, investment bankers generally earn more than accountants, because, although accountants may be just as smart and hard-working, they are usually less tolerant of risk.  There are many more good accountants, therefore, than there are really good investment bankers.  A good chef will usually earn more than a short-order cook for very similar reasons.  In any field, skill and the willingness to tolerate risk and uncertainty are rarities, and they are usually accompanied by higher compensation. 

Which brings me to the concept of The Pyramid of Ability and The Law of Comparative Advantage. 

When it comes to playing basketball, I’m no Michael Jordan.  Heck, I’m no Jay Hrabik.  You may not know Jay, but he was the best player on our high school basketball team. (I was the 25th player on a team of 12.)  After serving in the U.S. Army for three years during theVietnamera, Jay became a CPA; but I’m getting ahead of myself.

After high school, and before Jay enlisted in the Army, he and I worked together at Bike’s Burger Bar.  Though Jay still disputes it, our skills as hamburger flippers were about equally developed.  I’m just guessing, but in hamburger flipping, Michael Jordan could probably have kept pace with either of us.  My point is that on the pyramid of ability, the three of us may have been equally talented hamburger flippers, and if we had all held that job at that time, we might have earned similar incomes. 

Again, I’m just guessing, but it’s very possible that Michael Jordan could have become either an investment advisor or an accountant.  On the pyramid of ability with regard to numbers, Jay, MJ, and I may have been similarly skilled, and we might have earned similar incomes, just as in flipping burgers. 

The good news for Jay and me is that fewer people can qualify to be accountants and investment advisors than can flip hamburgers.  That helps to explain why we gave up our jobs at Bike’s Burger Bar. 

But, Michael Jordan not only waived the opportunity to flip burgers, he passed on the chance to become either an accountant or an investment advisor.  That may not have been good news for the few people who would have become MJ’s clients, but it was great news for the millions of people who enjoyed watching “His Airness” play basketball. 

That’s The Law of Comparative Advantage, which probably also explains why Michael Jordan is making underwear commercials, and I’m not.   Neither, as far as I know, is Jay.

Do I resent the fact that Michael Jordan is in the top 0.01% of income earners?  Would I be better off if Michael Jordan earned less than he does?  Is Michael Jordan somehow taking something away from me? 

If Jay had grown up in another town, would that have made me a better basketball player?  If Michael Jordan had earned less money, would I have earned more?

The answers to all of these questions are obvious:  No!

Now, imagine that instead of becoming the greatest basketball player of all time, Michael Jordan had become a billionaire oil producer; or a billionaire investment banker; or a billionaire movie star. Are the answers any different? 

They are not.  Each of us is judged in the marketplace by our employers and our potential employers, our customers and our potential customers, our clients and our potential clients, our fans and potential fans.  Through their purchasing decisions, they tell us what our products and services are worth to them, and we can choose whether to provide them, or not. 

The incredibly wide range of products and services—and the equally wide  range of qualities and skills—offered in the marketplace, explains why there is such a wide range of income. 

Sometimes, we may feel we’re being judged unfairly or inaccurately.   But if that’s truly the case, it’s our responsibility to seek other markets or to develop new skills.  mh

*http://politicalcalculations.blogspot.com/2010/12/thats-your-us-income-ranking.html

America’s Anne Frank

by Helping Families Flourish, posted in Flourishing Article

Originally published in Flourishing December 2011.

November 11, 2011—Veteran’s Day—I was privileged to be in New York City, attending Nick Murray’s  Behavioral Strategies Conference.   I attend Nick’s conferences whenever I can, for the same reasons that I read his books, essays, and newsletter: Twenty years of reading Nick Murray has not just made me (I hope) a more effective advisor; it has (I know) made me a better husband, father, grandfather—and a better American.

As one example, in the March 2010 issue of his newsletter, Nick reviewed and recommended Delayed Legacy, by Conrad Netting IV.  Conrad’s father was the same age as my father, and like my dad, Conrad John Netting III set out to do his part to rid Europe of the Nazi scourge.  From June of 1944 through May of 1945, Ted Harvey walked and belly-crawled across Europe—from Omaha Beach through France, Belgium, and Germany—to the banks of the Elbe River.  Conrad Netting’s job was to provide air support for soldiers like Ted.

So, even before Allied infantry forces were fighting their way through the hedgerows of  Normandy, Conrad Netting was skillfully piloting his P-51 Mustang on missions to Berlin, Frankfurt and other German industrial centers.  Then, while on similar missions  after D-Day, Conrad—like many other courageous young pilots—didn’t hesitate to drop out of the clouds to take on German ground forces whenever the opportunity presented itself. 

It was on just such a mission on June 10, 1944 , as he strafed a German convoy—effectively saving the little French town of Saint-Michel-des-Andaines—that Conrad Netting III became a casualty of war.  Five weeks later,  his bride, Katherine Henderson Netting, gave birth to their son, Conrad John Netting IV.  (Look closely and you will see that Conrad’s P-51 was named ConJon IV.)

Katherine never remarried.  She packed up her husband’s belongings, and the many letters that had passed between her and Conrad, and stored them all—along with her memories—in a place that was to remain private for nearly fifty years.

On July 4, 1994, a year after his mother’s death, Conrad Netting IV learned about the foot locker stamped with his father’s name.  For the next decade, he explored—at home, and with the gentle people of Saint-Michel-des-Andaines—his long-delayed legacy. 

I bought Delayed Legacy on Nick Murray’s recommendation in April of 2010, and I’ve returned to it many times.  I never expected to meet its author.  But, in New York City on Veteran’s Day– 2011, Conrad Netting IV—who Nick Murray had likened to Anne Frank for the illustrative power of his personal story—autographed my well-worn copy of his book.  As I visited with Conrad, I found him to be just as charming as his book is wise. Katherine had raised a good man! I don’t know that I’ve ever felt so honored.

Today, Conrad Netting IV is a CPA and financial advisor in San Antonio, Texas, the city in which he was born.  You can get his book at Amazon or from Barnes and Noble, but I’ll be happy to order an autographed copy for you, directly from Conrad.  Just ask.  mh