education

Caps, Gowns, and the Coronavirus

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COVID-19 has caused shifts and pivots across organizations and even whole industries. Along the way, many folks have decided to delay or cancel what would’ve been some wonderful milestones: a long-awaited family trip, a wedding, a move across country.

Some families will still be wrestling with such decisions for the months—and maybe years!—to come.

A college education is a common enough savings category, but some are rethinking their investment goals with so many changes coming for institutions.

We realize it can be hard to get perspective right now. The stress of the upcoming school year is looming, and prospective students will be making huge decisions based on information that seems to keep changing.

We wouldn’t dream of suggesting the “right answer” for you or your family. Here, however, we’d like to offer a little distance on some of the issues at the heart of this topic.

Is it worth it? Schools are being forced to experiment with how they will structure classes and campus life, so as consumers, many families are questioning the value of the experience they’re paying for. To zoom out, we recommend remembering what a degree will mean for a person after they’re done with it.

Yes, we want students across the country to enjoy a safe, rich, and rewarding couple of years at school, but both the journey and the destination should be part of the equation.

One thing that the pandemic won’t suddenly change? The long-term value of a college degree.

“The lifetime payoff to earning a college degree is so very large, in health and wealth, that it dwarfs even high tuition costs,” writes economist Susan Dynarski. “College is an especially smart choice during a terrible job market.”

An education is not armor against all the problems ahead, but it may still be a sound investment and worthy savings goal for you or your family.
Clients, if you want to talk through this or anything else, call or write.

Tend and Befriend

© Can Stock Photo / KalengUang

One concept we hear about in the investment and financial planning world is a real downer. This is the idea that evolutionary bias may force us into unwise decisions. Supposedly, our caveman brains are stimulated by ‘fight or flight’ tendencies in the face of uncertainty or danger.

We have always believed we can learn, we are trainable, we can use reason and logic to our advantage. In other words, there is more in our heads than caveman brains. But it still irritates us when we see the implication that we humans are doomed to stupidity by evolution.

We recently read about another supposed product of evolution, a far more optimistic and different instinct.

‘Tend and befriend’ is a concept first outlined by psychologist Shelley Taylor. It refers to the instinct to reach out to those around us, to strengthen our ties to others and to care for them when threats arise. This seems to us to be the opposite of fight or flight, and is a much more helpful concept.

We do not suffer threats from saber tooth tigers anymore, but volatility in the markets, scary headlines, and viral rumors may produce the appearance of threats and danger.

Back in the early part of my career, I envisioned having clients who, if I took care of them, they would take care of me. This evolved into the belief that the better off you are, the better off we will likely be. Now we read about ‘tend and befriend.’ This strikes me as a wonderful way to think about how we strive to work with you.

Clients, if you would like to talk about this or anything else, please email us or call.

Letters to Our Children #5: Your Human Capital

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One investment supersedes all others: invest in yourself. Renowned investor Warren Buffett promoted this idea in a 2017 interview. It cannot be taken away, it adjusts for inflation, it helps you have a more interesting life and earn more money.

Interestingly, Buffett’s prime example of this is not an Ivy League education, but a simple public speaking course, one that many thousands of others have also pursued. Early in life he realized a crippling anxiety about public speaking would impair his career. Beginning long ago with the help of Dale Carnegie, he is now at ease in front of tens of thousands of shareholders, high powered interviewers, presidents, other business leaders, or any other situation required of him.

When we invest in our selves, we are seeking to improve our value to others. The more valuable we make ourselves, the more an employer or customer will pay us. The collection of attributes that create this value are called human capital.

Many aspects of human capital are free. Years ago I became acquainted with a senior officer of a large publicly traded company whose most obvious super power is kindness. After he moved on to a leading role elsewhere, people familiar with him always remembered that trademark feature, and how he had helped them in the past, how he made them feel.

Kindness is free. So are dependability, punctuality, being true to your word, enthusiasm, diligence, and all the other traits we seek when we deal with others. Others desire those same traits in us.

Some aspects of human capital require time and money, sometimes lots of both. Think of the education and training required of surgeons, for example. Educational paths and career planning are beyond the scope of this essay, but the value and wisdom of all of your choices ultimately comes down to whether you figure out how to add value to the rest of society.

We have heard the idea of “follow your passion” debated back and forth. Understand the difference between doing what you are passionate about, and being passionate about what you do. One of them has a wider range of opportunity than the other.

The source of our wealth is our earning power, which arises from our human capital. In future letters we will talk about how to manage the fruits of your human capital, but it all starts here.

Clients, if you would like to talk about this or anything else, or suggest ideas for future letters, please email us or call.

Knowing and Doing

© Can Stock Photo / yarruta

Knowing and doing are two different things. We were reminded of this recently, during a Financial Literacy Month discussion. A colleague surprised us with a contrarian opinion on financial literacy.

Conventional thinking is that the presence of so many people who fail to save for retirement and make costly mistakes is proof that more and better financial education is needed. Our colleague asked us whether the issue was one of knowing, or one of doing?

“Consider what we know about health and what we do about health,” he said. By some estimates, lack of exercise and poor eating habits lead to millions of deaths each year, not to mention deaths from tobacco use and alcohol abuse. Haven’t we all heard about these things?

Likewise, most people may have heard that investing for the future is a good idea, and spending within one’s means. But surveys show that many are ill-prepared for retirement.

Whoever first said “knowledge is power” perhaps was only partly right. Wall Street pioneer Roger Babson wrote a century ago:

“Experience has taught me that there is one chief reason why some people succeed and others fail. The difference is not one of knowing, but of doing. So far as success can be reduced to a formula, it consists of this: doing what you know you should do.”

Our view at 228 Main is that ‘knowledge in action is power.’ We will continue to promote knowledge and awareness of financial and investment concepts and ideas. But we will also work to motivate and persuade on the merits of taking worthwhile action.

Knowing. And doing. We need both in order to get where we want to go. Clients, if you would like to talk about this or anything else, please email us or call.