The discussion of what makes us successful has been going on for a considerable period of time.  Many of us are tempted to fall for fads, schemes or popular culture concerning the meaning and methods for achieving success in our lives.  Many of us have come to believe that success is about setting personal goals, and tracking our progress on those goals.  Others view success as a “life purpose” that we seek to accomplish.

Many of these perspectives contain important elements of truth, but many of them are also missing some very important elements.  By understanding these key factors of personal, professional, and professional achievement, we can learn how to create our own vision of success.

The first step on the journey toward our life’s goals and purpose is to create a clearer picture of what they look like.  Each person’s ambitions are unique, but many people share a common passion for some area of interest in their life, and a desire to pursue those interests.  When we develop a vision of the direction that we would like our lives to move, it frequently involves the ability to spend more time engaged in the activities that we enjoy.  This frequently leads us to believe that they key to success is simply to attain more of what we want.

More is Not Always More

The common conception that many people hold is that they will feel more fulfilled in their life if they can simply achieve more.  More money, a nicer car, a bigger house, more vacation, more time to follow their interests.  The implicit problem that we run into when thinking in the context of “more” is that our time is a finite quantity.  Each day only contains 24 hours, and there is only so much that we can fit into that amount of time.

Thus, the pursuit of more becomes a study in time scarcity.  Assuming that we are able to attain the additional things that we want, it is highly likely that they will create additional time commitments that we must undertake.  When these time commitments are added to our existing schedule, it frequently leaves us with more to do than we have time to do things.  This abundance of projects and scarcity of time frequently leaves us shorting the aspects of our life that are highly important (such as personal relationships) but not articulated on our sheet of goals.

What you Subtract is More Important than What you Add

The next level of insight in the attainment of success is to understand that our most important decisions are frequently not what to add, but what to take away.  The only way that we can avoid a permanent time crunch that leaves our friends and family out in the cold is to re-arrange our personal, professional, and financial priorities on a consistent basis.  This means that when we add something, we must be prepared to take something else away.

In the real world, trade-off decisions are a fact of life.  We cannot have our cake and eat it too.  There are decisions that must be made, and the way that we make those decisions will have a tremendous impact on our future.  The way that we can keep our life in balance is to continually monitor our balance of activities to determine when it is time to add something and when it is time to remove something or change the way we do it.

Success is an Equilibrium, Not an Achievement

What all of this ultimately means is that “real” success is not an achievement … it is an equilibrium.  It is a balance of things we want and things we do that deliver the most total happiness and satisfaction that we are able to achieve.  Unfortunately, there are very few success authors who are teaching this truism, and there are many people who are seeking success in the context of goals and achievements.

Granted, goals are very important.  However, goals are not the end … the are a means.  For example, many people profess a desire to run a marathon as a goal in their life.  What most people really mean by this goal is that they would like to adjust the equilibrium of their life in such a way that they can increase their level of fitness to a state where they can train to successfully run a marathon.  However, what this goal-setting process frequently misses is that it is possible to complete a marathon without being in optimal fitness (albeit at a slow pace), and that it is possible to achieve considerable fitness without ever running a marathon.

What happens when we place too much emphasis on the goals themselves is that the equilibrium can be lost.  The desire to run a marathon can come to dominate our thoughts and actions.  (Especially for Type-A folks)  In this way, the goals we are seeking can take on an obsessive nature that displace many of the other highly important aspects of our life in the single pursuit of a particular goal.

As we go throughout our lives, we should seek to keep our goals and ambitions in perspective so that they are viewed in the context of our life’s larger equilibrium.  This is the way that we can stay balanced and pursue the “real” success that is a (whole) life that we want to live.  The decisions that we make will all echo throughout our future, so it is important to choose wisely.

 

One of the famous scenes from JR Tolkein’s book series “The Lord of the Rings” is when Frodo the Hobbit is talking with Gandalf the Wizard about his quest to destroy the ring of power.  Frodo remarks that he wishes the ring had not come to him, and that it was not his burden to bear.  To this, Gandalf replies that Frodo’s sentiment is shared by all people who face difficult times.  But the times you live are not for you to decide.  All that we can decide is what to do with the time we are given.

This scene is very metaphoric for the current economic environment that has left many people wishing for better days or complaining about the burdens of a floundering economy.  It is a time where painful changes are being forced on the populace by market realities and government fiat.  However, we as individuals are not give a choice about the times we live in.  The only choice that any of us really have is about what to do with the time that we are living.

As such, it logically follows that we should seek to focus on the parts of our life that we can actually control.  Said another way, we should concentrate our thoughts and actions on our sphere of influence instead of our sphere of awareness or sphere of concern.  This isn’t to say that we should ‘check out’ from the world . . . knowledge of the local, national, and global marketplace is all a part of making decisions within our sphere of influence.  However, most of us would be well served by resigning our self-appointed post as “General Manager of the Universe” and concentrating our efforts on the pieces of our world that we can control.

Part and parcel to this is the understanding that your life is shaped by our decisions.  Both our good decisions and our bad decisions impact the course of our life.  Most of us seek to take credit for all of our decisions that turn out good, and seek somebody to blame when things take a downward turn.  We want to blame the government, big business, the Fed, or just about anybody else we can.  However, the fact still remains that the investments we chose went down in value.  We didn’t know they would go down … otherwise we wouldn’t have bought it.  Before we can make much progress in our lives, we mus take ownership of the decisions that we make.

The hidden wisdom of this change in perspective is that it actually bestows more personal power.  When we are faced up against a big nameless power, we can easily succumb to a feeling of inevitable helplessness.  However, when our focus shifts to the things that we can control, it puts an entirely different spin on the time that we are given in our lives.  We may not be able to control and influence everything, but we can learn to make the most of what we are able to influence and let go of the things that are out of our control.

It is only by learning to look past what is out of our control that we can learn to focus on what is within our control.  The way that we make the most of the time that we are given is by doing the most with what we can control.  In the end, each of us has a supreme choice to make.  That choice is how we choose to spend the time that we are given to live on the earth.  The quality of our time will depend on the decisions and choices that we make.  It is incumbent upon each individual person to choose wisely.

 

In the midst of the constant headlines concerning government ‘bailout’ initiatives that have resulted from a credit crisis in the financial sector, one must stop to wonder whether the government is acting responsibly and what the likely results of these actions will be. (In truth, one doesn’t have to wonder that much … the government is acting with an almost complete lack of anything resembling financial responsibility.)

The core driver of this problem is that public agencies making market decisions will tend to make them based on political expediency instead of market effectiveness.  From the perspective of a politician, “long-term” thinking only lasts until the next election.  The reason is because most politicians are unconcerned what will happen after they are out of office and can no longer take credit for successes, and will not be subject to blame for problems.

Unfortunately, this decision making framework has spilled into the realm of government subsidies and bailouts.  This has amplified the scope of collective irresponsibility since public resources are not only used to sustain an out of control government, but have now been expanded to supporting businesses that are uncompetitive in the free market and depend on political support with taxpayer money for their success.  This has allowed many companies and executives that made destructive decision to stay in business because of public funds that were granted by government officials.

In a free market, companies that make critical errors would be re-structured in bankruptcy, or liquidated and sold off to new investors.  Unfortunately, the US government is choosing to drastically increase the amount of currency in circulation as a means to finance its spending, including bailouts to keep the failing companies afloat and stem the impact of a sharp reduction in credit availability.  (This process is also known as ‘printing money’)  This drastic increase in circulating dollars will eventually produce significant inflation.  This is caused by increasing the amount of currency in circulation, but keeping the amount of national output the same . . . more money chasing fewer goods MUST result in increased prices.

When inflation occurs, it de-values savings, home equity, and fixed-rate investments like CD’s and Bonds because those instruments tend to increase in value very slowly, and the purchasing power of the dollars they are denominated in consistently erodes.  Conversely, inflation rewards people who have taken out a large amount of fixed-rate debt by de-valuing the principal & interest payments.  Effectively, inflation punishes responsible behaviors like saving and paying down your mortgage while rewarding irresponsible behaviors like taking on large amounts of debt.

Ultimately, living with an irresponsible government means that you will be indirectly punished for acting responsibly.  By working hard to earn a high income, keeping lots of money in savings, and paying off your mortgage, you will be set-up for a tremendous double-whammy from taxes and inflation.  The massive government deficits make some form of future tax increases all but inevitable … much of this will be driven by inflation pushing up the nominal wages of individuals and corporations, driving “bracket creep” where people’s higher nominal income is taxed at higher marginal rates.  The second half of this pitfall comes from de-valued savings and home equity.  The people who have worked the hardest, sacrificed the most, and saved the most diligently will be punished by the inevitable inflation that is bound to stem from many decades of irresponsibility.

Fortunately, there is a way that regular people can profit from future inflation.  The prime strategy for beating inflation involves using long-term debt leverage to purchase investment assets that produce income and appreciation.  The most common way to do this is through rental real estate investments.  The way this works is that you purchase a rental property with a fixed-rate loan and lease it out to tenants.  When the inflation starts to hit, it will push up the home value & rents because the increased amount of dollars in circulation will be chasing after the same number of houses & rental units.  Since your investment is financed at a fixed interest rate, your expenses will stay relatively flat while your income inflates.

In the end, there is nothing that any one person can do to stem the tide of collective government irresponsibility that is overshadowing the entire global economy.  However, there are things that each individual person can do to protect themselves and their families from the effects of inflation.  Ultimately, our future is driven by the decisions that we make each and every day.  As you go throughout life, make sure that each decision you make is one that will help to create a brighter future.

 

There is a famous statement that an optimist will see a glass half that is full, while a pessimist will see a glass that is half empty.  The basis behind these distinctions is that people who possess a more optimistic worldview tend to focus on what is there, what is present, what is available.  Conversely, people who possess a more pessimistic worldview tend to focus on what is missing, what is gone, what cannot be attained.

To many people, the color of reality is closer to the view of the pessimist than the optimist.  After all, life isn’t fair.  The nice guy always seems to finish last.  Vast inequality exists between people and between countries that defy many people’s imagination.  How can somebody possibly be an optimist?  Optimism seems to be the province of a foolish Pollyanna type worldview that fails to comprehend reality.

The Truth of Reality

In order to objectively examine the quality and power of our worldview, it is important to gain an understanding of the true and full nature of reality.  Simply put, reality is what is.  Reality is and only can be what exists, what is here, what is present.  Reality must be something … it must contain a form.  Reality must be defined by substance, it cannot be defined by a vacuous and subjective notion of what is missing.

Understanding this fundamental truth focuses the context of our experience, and allows us to live in the world of what is.  By focusing our attention on what is, instead of allowing ourselves to be distracted by wants and wishes, it creates a much more solid basis upon which to act.  Accepting what is does not mean that we cannot create change … it means that we understand how change works within the context of our present reality.  We must influence our reality in order to change it.

The Power of the Optimist

The power of seeing a half full glass comes from the focus on objective reality that can only spring from what is.  The reason for this is because our only point of influence on reality comes when we change the nature of what is.  This requires us to focus on the things we can influence, and only the things we can influence.  Most people waste their creative power by obsessing on what they feel to be missing, , what they feel to be wrong, or what they feel to be unfair.

The power of the optimist flows from their focus on what is available and what is present.  Most people possess far more power to influence their life than they are able to understand.  Our futures can be definitively shaped by the decisions that we make.  As the quality of these decisions increase, and as the proximity of these decisions converge on the segments of our life that we can influence and change, our control on the future increases.

Possibility Exists Beyond the Reach of Blame

A principal problem in the interactions between most people, companies, and governments is that too much discussion revolves around blame.  A prevalent destructive assumption is that anything which goes wrong must be somebody’s fault.  This creates a fire storm of blame shifting and blame deflecting.  To the person who seeks to influence the course of their future, they must learn to look beyond whose fault the problem is, and focus on what can be done to improve the future.

To the extent that mistakes are or have been made, it is important to learn from them so that they are not repeated.  However, excessively focusing on who is to blame for mistakes all but guarantees a lack of future achievement.  Even when bad things happen to us that we do absolutely nothing to cause, we must understand that our lives exist in a reality of random events that are largely beyond our control.  Railing out against the person who caused our hardship does absolutely nothing to improve our situation.

When understood and applied properly, these principals create a tremendous base of power for us to influence our personal, professional, and financial lives.  Many of our personal relationships encounter difficulties when we blame one another for problems or mistakes.  Many of our workplace problems revolve around assigning blame, shifting blame, and attempting to avoid blame.  Many of the financial problems that people work themselves into evolve from an unwillingness to admit past mistakes and learn.

In the end, each of us possesses the power to influence the course of our personal, professional, and financial future.  Unfortunately, there are startlingly few who choose to use this power.  Too many people allow their pride, politics, and emotions to block the actions and decisions that can shape the course of their future.  Too many people cannot let go of their conceptions about the problems and unfairness of life, and fail to create the changes in their own life and the lives of people about them that can help to bring about the changes they desire.  Each of us must make our own choices, must decide how we will view the glass, and mus take ownership over the future direction of our life.

 

An Article recently published by the International Business Times explored the potential for problems associated with aggregate student loan debt.  Since the total student loan debt outstanding exceeds $1 Trillion dollars, the scope of the problem seems immense.  When complicated by the 30% of student loans that are 30 or more days overdue, there appears to be a crisis brewing.

The concern expressed by many is that the burden of student loan debt will suppress people’s future disposable income.  To many, this presents a dire scenario where future consumption spending cannot keep growing due to the crushing burden of student loans.  It is complicated by the high rate of unemployment among recent college graduates, and has led many to believe that government action is required to “fix” the problem.

The Solution that Isn’t a Solution

When college students gather in protest rallies, they frequently hold up signs demanding that their student loan debt be forgiven.  Since the overwhelming majority of student loans are underwritten by the US government, all that this would accomplish (besides delivering a free ride to people who acted irresponsibly) is to turn $1 Trillion of private debt into $1 Trillion of public debt.  This sounds great for people that are either looking for a handout or looking to buy votes by giving away a handout with government money, but it does nothing to solve the underlying problem.

By accelerating the government debt problem, it accelerates the extent to which drastic action must be taken.  Many (mistakenly) think that the pile of student loan debt can be dissipated with additional taxes on the wealthy.  Unfortunately, this strategy has two main deficiencies.  The first is that there aren’t enough wealthy people to pay the taxes.  The second is that most wealthy people hire lawyers and accountants to reduce their tax burden with (legal) income sheltering strategies.  The ultimate result is that the government is unable to tax away its debt and will need to inflate the currency.  Since inflation disproportionately impacts the poor and middle class, it will ultimately end up coming back to bite the people who were holding the signs demanding that the government wipe away their student loans.

The Real Problem

A paper recently published by Georgetown University breaks down the average earnings and unemployment rates for college graduates based on the level of education and course of study.  It comes as no surprise that subjects such as education, business, and engineering all have relatively low rates of unemployment associated with them and respectable earnings.  However, studies in subjects such as social sciences and the liberal arts have very high rates of unemployment and relatively low earnings.

Thus, the real problem is not that people carry so much student loan debt, but that people have chosen to take out large amounts of debt to finance an education that does not have a significant market value.  Another way of stating the situation is that people who study subjects like engineering and business do not have a student loan problem.  The reason is because their education prepares them for a career that allows them to generate an income so that their debts can be paid off.

The Real Solution

Understanding the real problem is the first step toward a real solution.  The only way for this lingering problem to be solved is for the people who are under all of this debt to become gainfully employed so that they can pay their debt back.  However, attaining gainful employment requires that better decisions be made in regard to the course of study that one pursues in their path of higher education.  This is the only method of dealing with this problem that will not result in a simple transfer of the burden to somebody else.

The truth is that all choices involve cost.  The decision to attend college is frequently very wise.  However, it is highly important to choose a course of study that is consistent with your long-term career interests.  Studying the arts is fine if you are content with living the life of an artist.  However, if you desire to climb the income ladder, then you must acquire skills that will allow you to generate value for an employer that are sufficient to justify a favorable level of compensation.

Student loan debt is not fundamentally different from any other kind of debt.  It is not good or bad in and of itself … student loans taken out to acquire skills that allow you to earn a good income to support your family are a very wise decisions.  Loans taken out to finance four years of partying a degree that offers no employment prospects are much more suspicious.  All debt is fundamentally neutral in nature.  It only becomes good or bad when paired with an investment that is good or bad.

Thus, the answer is for more people to make better decisions regarding what they study.  In the larger context, the investments of time, money, and education we make are what will define whether any resources we borrow to make those investments were wisely deployed.  Instead of demanding that other people bail us out after making bad decisions, we should take the opportunity to make better decisions in the future.  Each day is a new chance for us to learn.  We should seize those learning opportunities to make each successive day more prosperous than the last.

 

There is a disturbing trend among both people and politicians to find somebody to blame for each setback, difficulty, or annoyance they experience.  This phenomenon frequently provides a convenient alibi for failure, as some opaque persona such as ‘big business’ or ‘the man’ is blamed for our problems.  The most critical danger of focus on these ghosts of failure is that they give us a subconscious excuse to avoid doing what is necessary for success.  However, the realization of our goals, dreams, and aspirations will require many of us to ‘man up’ (or ‘woman up’ as the case may be) to make our goals happen.

The importance of ‘making it happen’ cannot be overstated, since it shifts the responsibility for our circumstances squarely onto our shoulders.  This means that we can no longer place the responsibility for our wellbeing onto other people (or politicians) and must take full accountability for our achievements and failures.  This means that if there are great things we want to achieve, that we must personally take action.  If there is something that we want to do in the future, we must first become educated and then we must take action.  If things don’t turn out the way we wanted, it is our responsibility to study our decisions and learn what we can do differently next time.

Make Your Own Luck

There is a popular aphorism that you make your own luck.  While this is not completely true, it contains a valuable nugget of insight.  Luck is a factor that is beyond our realm of control.  However, we have supreme control over whether we will be prepared to reap the benefits when fortune turns in our favor.  Every person experiences opportunities that emerge throughout the course of their lives.  However, not all people are willing or able to capitalize on opportunity when it occurs.  Thus, by perpetually preparing yourself to capitalize on opportunity, you will be able to create the conditions for success when luck turns in your favor.

The truth is that we each have the ability to influence the shape and course of our personal, professional, and financial future.  The decisions we make create the basis for our future achievements.  Each step that we take builds on the actions and decisions that we made in the past.  We make our future happen through intelligent decisions.  If we want to enhance the trajectory of our future, we only need to increase the number of intelligent decisions that we make.  In this way, our part of success boils down to a science of increasing our velocity of intelligent decisions.

We may not be able to directly create the luck that we need to achieve all of our ambitions, but we can make the conditions happen that will allow fortune to smile on us.  If we truly wish to achieve our ambitions, we must move beyond ‘hoping’ that they happen and embark on a journey to ‘make’ them happen.  This is likely to involve a significant intellectual commitment, but is a matter of critical importance to our personal, professional, and financial lives.

In practice, this mindset is quite liberating since it frees us from the constant feeling that we are being held down by somebody else.  The counterpoint to that mental freedom is the realization that all of the obstacles in our way that prevent us from achieving success are really self-imposed.  The truth is that those self-imposed obstacles have always been there . . . it’s just that we were previously unaware of their existence based on a belief that something external was responsible for our failure.  Once we become aware of our ability to influence our own achievements, it becomes our responsibility to identify and remove the obstacles that we have placed in our own way.

 

One of the things that we like to do is human beings is to fantasize about how our lives would be different if something were different.  It turns out that this mode of thinking produces two distinctive outputs.  The first is that it allows our minds to drift into a world where events unfold exactly as we would like.  The second is that by using the word if, it absolves our minds of any responsibility for making our dreams a reality.

The effect is very subtle, but it is still very powerful.  By thinking about our life if our dreams became reality, it sub-consciously reinforces the belief that our dreams will stay dreams.  A much more productive mode of thought is to consider how we can traverse the distance from where our current mode in life to where we want to be.  This doesn’t mean that we shouldn’t dream about what life could be like, and use that as a vision to inspire our actions.  It simply means that we should not give ourselves an easy way out of failing to achieve our dreams.

The Power of How

By shifting our mental efforts to considering how to accomplish our goals, it triggers a very important shift within our consciousness.  It changes the context of our ambitions from something that we would like, but probably won’t ever get to something that we are creating a plan to go out and attain.  It may be that our first plan doesn’t work.  It may be that our plans need to change.  However, it is always true that nothing will happen unless we take action.

Another important piece of asking how to reach our goals is that it broadens our perspective.  It forces us to consider the causal chain that spans the distance and traverses the obstacles between where we currently are, and where we want to be.  Allowing ourselves to escape this analysis can bring our progress toward the goals and ambitions of life to a screeching halt.  It is almost always true that achieving our ambitions requires many thing to come into place.  It is also true that most of these things will not fall into place by themselves.  Unfortunately, when we think in terms of if, it robs us of the opportunity to organize the events of our life in a way that builds a bridge to our ambitions.  In order to make sure that we construct this bridge, it is critically important to think in the context of how.

Turning How into When

Once we have mentally constructed the map of how our goals can be achieved, it is important to shift our attention to thinking of when this will all happen.  The reason for this is because time is a finite resource.  Of all the resources that are available to us, time is the only one that we cannot produce more of.  Each day contains only 24 hours, each week contains only 7 days and each year only contains 12 months.  There is a practical limit to how much we can do (well) at any given time, so we must prioritize our activities to ensure that the things we hold most important are addressed first.

The notion of priorities is critically important when we traverse the distance between thinking of how to accomplish our goals and figuring when it will happen.  Everybody can create a list of things they would like to do and accomplish that is many miles long.  However, very few people have created a list of priorities that is reflected in their actions.  Most of us act on whatever happens to be the most urgent item of the moment and allow our priorities that are not immediately urgent to slip into the back of our mind until they are all but forgotten.

Ultimately, the factor that will most strongly influence when our goals become reality is where they land in our personal, professional, and financial priorities.  Each decision that we make is an implicit decision not to do something different.  Similarly, pursuing one set of goals is an implicit decision to ignore or delay another set of goals.  Because of this, we must be very mindful of what we prioritize and what we pursue so that we do not ignore things that are of greater importance for the sake of something with greater urgency.

Thinking of Possibilities

One of the buzzwords that has emerged in the popular vernacular over the past decade is “possibility thinking.”  In simple terms, this is a method of thinking how things ‘could’ be organized to create better outcomes.  The basis of the thought process is to avoid anchoring on the way that things work today and think in an unconstrained fashion to discover new solutions.  This mode of thinking can be very helpful in the context of our personal, professional, and financial goals.  Instead of starting with where we are in life, start with where we want to be.  Instead of attempting to trace steps forward from our current position into the future, trace steps from the future back to the present.

By changing the context of our thoughts, we can change the direction of our lives.  By changing the way we think about the world around us, we will change the way we interact with the world around us.  In this way, the way we think creates ripples that affect the way we act, which influences what we achieve.  Thus, the first step toward achieving your goals is to carefully craft the way that you think about your goals.

 

The current world is becoming very polarized and divisive.  There is an increasing trend of people to think and act as groups, instead of as individuals.  The subtleties of unique individualism are being concatenated into “black” and “white” or “Republican” and “Democrat.”  The problem that is created by this brand of mass conformity is that people stop looking to learn from people that are not a part of their group.

Ralph Waldo Emerson is famous for his belief that every person possesses some talent that exceeds his own, and that each interaction with another person gave him an opportunity to learn.  I believe that it would be wise for each of us to extend this philosophy into our own lives.  There is an unfortunate tendency in popular culture that has created a “cult of success” where people that show their financial affluence are worshiped and followed religiously by people who think that copying every facet of that person’s life will make them equally successful.

One of the important points that people frequently overlook is that luck plays an important part in many stories of fabulous success, and another even more prescient point to understand is that many things in life are more important than money.  Of all the important things that are ignored, this is probably the most frequent occurrence.  The reason for this is because wealth is quantitative … it is some thing we can easily measure.  However, relationships are qualitative … there is not a simple way to measure the quality and value of our relationships.  Unfortunately, this leads many to believe that the qualitative relationships possess less value because their value is difficult to compute.

In practice, the purpose behind building quantitative wealth is for the nurturing and maintaining our qualitative relationships.  Because of this, lifetime learning takes on an entirely new context.  Our learning takes on a magnitude that is much greater than simply earning money.  Because of this, the context of learning takes on two distinctive flavors … namely, learning what we “should” do and learning what we “should not” do.

Learning What To Do

It is important for us to seek out people whose holistic success we wish to mimic.  One pitfall that we must seek to avoid is the belief that the we can mimic a certain aspect of a person’s life without any spillover to other sections of our lives.  In truth, everything that we do has some impact on everything else that we do.  As such, when we are seeking coaching and mentoring, we should think in the context of both the skills we want to build and the person that we want to become.

Learning What Not To Do

An equally important aspect of learning is learning what we want to avoid.  In this way, we can shape the form and direction of our personal, professional, and financial lives.  The problem that many people encounter is an excessive emphasis on the factors that create external signs of success, but ignore the relationships and personal growth that is not on display to the public.  It is not a secret that many affluent businesspeople and celebrities are very unhappy, in spite of their financial success.  Thus, we see that in some cases learning what NOT to do can be just as powerful as learning what behaviors to mimic.

In the end, there are tremendous opportunities for gain available to people with the humility to constantly seek learning opportunities.  It is worth noting that these opportunities are not always easy to embrace, since they frequently involve admitting that previously held beliefs and actions were ill informed, rashly decided, or simply wrong.  These are not always the most pleasant of thoughts to embrace, but people who are willing to undertake this thought exercise will reap great rewards over the tenure of their lives.  It is certainly true that there is something we can learn from everybody, and that developing the discipline to learn will enable each person to walk on a path of constant improvement.

 

Our world is one where there is a considerable amount of risk and uncertainty.  Unfortunately, the current trend is that this uncertainty appears to be growing.  In nearly every facet of our personal, professional, and financial lives, the things that used to be taken for granted are no longer considered to be certain.

One of the most influential events of recent history is the financial crisis of 2008.  The credit bubble had escalated the stock market and real estate prices to unbelievable highs, just before they came crashing down.  A startlingly large percentage of people had been lulled into a belief that the government and Federal Reserve could “fine tune” the volatility out of the marketplace.

The reason for this belief was that for a long time, the fantasy of stable continuous growth was a reality.  In what appeared to be a triumph of financial science, the geniuses at the helm of our nation’s fiscal ship had guided us to what seemed like a magical place … a financial world where the market followed a nice smooth upward trajectory with no big disruptions.  All seemed to be bliss …

However, there is one critical observation that does not seem to receive much attention and that is asking why we allow a small group of people to have so much power over the US financial system?  It has always been true that the power to do good is also the power to destroy.  Our natural hubris dictates that we would rather have somebody be ‘in charge’ of the financial system who can ‘fine tune’ interest rates and the money supply to soften the impacts of recessions and accelerate recoveries.

The unfortunate problem with having ‘somebody in charge’ of the financial system means that any small mistake by the people in charge can create massive devastation for the entire national and world economy.  Realistically, it is inevitable that any system which relies on the discretion of a powerful committee for the health of the financial system is going to experience a dramatic collapse since it is not possible for any group of people to act correctly every time they need to make a decision.  When decisions are fragmented down to individual buying and selling decisions, prices are dynamic as people individually vote with their wallets.

Many years ago, Milton Friedman advanced a simple proposal for the Federal Reserve to grow the supply of money at the approximate annual rate of productivity growth (Somewhere around 2% and 3%) and allow the market to reach equilibrium on interest rates and asset prices.  Such a system would not attempt to mask the effect of economic downturns with accommodating monetary policy.  However, it would also lack the false sense of stability that was created by a prolonged period of smoothed cycles that was ruptured in a crash that nearly collapsed the entire financial system.

Any time that volatility can be artificially suppressed is conditioning people to panic when the inevitable market disruptions transpire.  The fundamental question that we must ask ourselves is whether it is more advantageous to make our own decisions instead of relying on the government authorities to create stability.  Change is a reality of life, and attempting to create artificial stability will not accomplish anything more than further conditioning people for panic when the fictional expectations of stability are eventually broken.

In this way, it is much better for us to pattern our lives in a manner that allows us to adapt to changes rather than be destroyed by them.  This is most certainly easier said than done, but it is nonetheless quite important to do.  One of the first things that we should make sure to do is ensure that our financial future is dependent on our own efforts.  Many people have been promised pensions or entitlement payments from both private companies and government entities.  Unfortunately, the same entities that have promised pension benefits are proving that they may be unable to make good on their obligations.  This has the potential to leave many people in a very difficult financial position if the pensions they had depended on for their financial future disappear.

In the end, each of us must condition ourselves to accommodate uncertainty, since change is becoming an unavoidable fact of life.  Since we are unable to stop the risks and uncertainty of life, we must take action to ensure that we are able to withstand the changes that are an inevitable part of life.  Ultimately, the future of our personal, professional, and financial lives come down to the decisions that we make.

 

In the world of economics, there is a term called “Free Riding” that describes people who benefit for services and innovation that they did not pay to produce or develop.  There are many ways in which ‘free riding’ benefits people, since technology tends to be prohibitively expensive when it is first developed.  However, as it is adopted by more people the prices come down and quality increases with the increased competition.

Thus, the people who benefit the most from technology are the ones that wait until prices decrease and quality increases before making a decision to buy.  However, none of this would be possible unless there were people that were willing to pay high prices for the new technologies.  In this way, the ‘early adopters’ of technology indirectly subsidize the lower prices for people who wait to buy since the research costs of new products are frequently dissipated by charging higher prices when the products are released.  The beauty of this system is that it is provides very real benefits to both the early adopters who pay prices and the late adopters who buy at lower prices.  Since the system is completely voluntary, all of the people involved must necessarily be made better off by the transaction, or they would not buy.

There is another version of ‘free riding’ that is much less beneficial, and considerably dangerous.  This variety of free riding involves the phenomenon of using government legislation to re-distribute resources from one group of people to another so that they can get a ‘free ride’ in the form of direct payments, government services, or tax subsidies.  The implicit danger comes from the fact that the people who are riding for free have a tremendous incentive to organize for the purpose of extracting more resources to create an even larger free ride.

This results in a ‘moral hazard’ as the number of people receiving government benefits increases relative to the number of people who are producing and paying taxes.  The source of this problem stems from the fact that a vast disconnect can grow between the number of people who produce and the number of people who ride for free on the backs of the producers.  If this imbalance grows too large, the free riders can add to the burden of the producers by continually adding new taxes and regulations.

The unfortunate part of this event chain is that if the people who produce the resources are taxed too heavily, they will either find ways to legally avoid the taxes & regulation, or choose to produce less.  For some reason, politicians seem to be terminally infected with the notion that taxes and regulations can be increased indefinitely without impacting incentives to produce.  The fundamental problem is that most people (especially politicians) are only able to see the world as it currently exists.  However, it is always true that the world of the future will look different than the world of the present.  It is also true that the activities which produce the highest returns will garner the most effort and attention.

If the best returns come from creating new products and services, vast amounts of resources will go into finding ways to develop these emerging businesses to capitalize on the opportunity.  Alternatively, if the only path to exceptional returns is through lobbying and litigation, it is all but inevitable that a bureaucratic state will emerge where a perpetually smaller portion of the populace produces anything of value while everybody else attempts to fight for a bigger share of the pie.

The problem is very similar to the farmer who killed the goose that laid the golden eggs because he wanted all of the eggs at once.  Of course, when he opened up the goose there were no eggs to be found.  Each of us should be very careful with our desires for a free ride that is financed with golden eggs.  It may be a lot of fun for a while, but big problems can emerge when the golden eggs run out.

Greece is currently experiencing this exact scenario, and the prospects are grim.  With a tremendously inefficient economy, and an extremely high percentage of total spending driven by the government, they are stuck in an economic trap.  In order to shift toward a market oriented economy with the ability to produce sustainable growth, Greece needs to go through a period of very painful economic adjustment.  However, if they attempt to forestall this “tough medicine” through continued government spending, it will only serve to expand the scope of the problem.

Ultimately, riding for free in the political arena continues to carry dangerous consequences.  Politicians love to create free rides, because it allows them to purchase votes with public resources.  However, there is a limit to how much of this structural inefficiency that a country’s economy can absorb.  Greece has already pushed past their limit, and the Unite States is approaching its breaking point at a rapid rate of speed.

As this point of no return approaches, each individual person must become aware of the fact that they will ultimately be responsible for their own financial future, since the government is all but certain to be unable to deliver on its past promises.  In the end, it is the actions that we take, which will determine the future of our lives.  With each passing day, we should seek to take actions that propel us closer to our goals.  This is the best defense against the danger that is posed by a societal free rider problem and its inevitable consequences.