Archive for the 'People' Category

Following Your Bliss: Good Advice or Bunk?

One of my favorite musical “acts” is Blue Man Group. The Blue Man Group explores, with primitively modern musical instruments, society, detachment, and collectivism. You may remember them from Intel’s old Pentium commercials. You may also remember them from the television show Arrested Development, in which the character Tobias, played by David Cross, auditioned for the show and failed, later declaring, “I blue myself.” Blue Man Group has shows in New York City, Boston, Las Vegas, and a few other cities, as well as a touring rock show, with each show similar but not identical to the others.

I recently picked up the latest Blue Man Group CD and DVD combination package, How to Be a Megastar! and watched the program. It includes fantastic music and visual performances as I expected, but I am equally intrigued by the special features, including a documentary-style interview with the creators of Blue Man Group, Phil Stanton, Chris Wink, and Matt Goldman.

When originally devising the concept of the Blue Man, the creators struggled at first. These three percussionists, who were working day-jobs as caterers in New York City, were ready to abandon their vision. At the right time, they received a sign. While watching television, they came across an interview with an expert on religion and philosophy. In this interview, the expert was asked to summarize the prevailing philosophical thought across the world, to which he answered: “Follow your bliss.”

Stanton, Wink and Goldman then knew that despite their difficulties, they must continue to create their vision through completion, even if success would never come. Thankfully for them, success did come, and Blue Man Group is now a cultural phenomenon. But the interview made me think about this particular philosophical idea.

First of all, what is “bliss?” Wordnet defines the word’s most common sense: a state of extreme happiness. The true path is the path that leads you towards a state of extreme happiness. In fact, in the interview, the creators of Blue Man Group went on to say that the journey is more important than the destination.

Am I following my bliss? I’m not sure. There was a time when I thought I had my life planned out, but year by year, I allowed this path to change. I’m now quite far from what I thought I would be doing with my life by this point, the age of 32. My job is fine, but it’s not intellectually, emotionally, or artistically stimulating. I like writing for Consumerism Commentary, but I’m not a particularly good writer. I enjoy building online communities, and that may be my personal strength for the moment, but is it my “bliss?”

Who should follow this advice, to follow one’s bliss? Perhaps not everyone has the luxury of doing so. The world needs janitors, truck drivers, bus boys, and others who perform thankless jobs—the jobs children often don’t think of when they are asked what they’d like to be when they grow up. But then again, are we sure that these individuals are not following their bliss? Perhaps their “extreme happiness” is satisfied simply by providing for their family in any manner possible.

In the case of the creators of the Blue Man Group, they needed to complete their project before they could be satisfied. With success, it seems their project may never be complete; shows are revised, new tours are initiated, and new audiences are born constantly.

After leaving the arts world, I thought my goal would be to volunteer for causes about which I feel strongly or become a to philanthropist as much as my budget allows. It seems I may be too picky to do so at the level at which I would be making a difference, and in some cases, to do so at all. Even though the organization closest to meeting my requirements is strongly involved in the activity I wish to support, having been close to that organization with intimate knowledge of its administration, I’d prefer not to do business with them. Unfortunately, no other organization is similar.

Do you follow your bliss?

Most Wealthy Individuals Earned, Not Inherited, Their Wealth

When I first read The Millionaire Next Door by Thomas Stanley and William Danko, it didn’t inspire me. It’s not that I disagreed with the authors, but I found the book uninteresting. It was one of the first financial books I read after beginning Consumerism Commentary, and it came highly recommended from readers here and participants in The Motley Fool’s community.

Without getting too much into my problems with the book, I will say that the idea that a “millionaire” is more likely to be your local business owner rather than someone born into a family of money was new to me.

Recently, PNC Wealth Management conducted a survey of people with more than $500,000 free to invest as they like, a fair definition of “wealthy,” and possibly “millionaire” once you begin including home equity and other assets. Only 6% of those surveyed earned their money from inheritance alone. 69% earned their wealth mostly by trading time and effort for money, or by “working.”

Here are some interesting statistics I pulled from an article discussing the survey results.

  • 36% of earners and 27% of heirs are concerned about an economic recession.
  • 77% of earners and 67% of heirs believe they have a lot of control of their financial future.
  • 39% of earners and 21% of heirs are moderate or risky investors.
  • 75% of earners and 50% of heirs have less stress thanks to their wealth.
  • 51% of earners and 33% of heirs believe their wealth has led to increases of happiness.
  • Heirs are twice as likely to believe that their wealth causes more problems that it solves.
  • 37% of earners and 25% of heirs believe that luck played a major role in their financial success.

For me, the choice is clear. There is only one option if I want to find myself with $500,000 of investible assets: earn rather than inherit.

[Yahoo Finance, MarketWatch: Earnings Growth]

Jung Typology and Finance: Sensing vs. Intuition

Recently, I wrote about Jung Typology and Finance, looking at the first of four dimensions used by psychologists and career coaches for categorizing personality preferences. Introverts and Extraverts draw their energy from individual or group activity, and that difference can have an interesting effect on opinions and behavior with regard to money.

The second dimension in the Myers-Briggs version of this personality typology pertains to information gathering. People who take the test are categorized along a dimension whose extremes are “Sensing” (S) or “Intuition” (N). Wikipedia provides a good layman’s definition of this aspect:

Individuals with a preference for sensing prefer to trust information that is in the present, tangible and concrete: that is, information that can be understood by the five senses. They tend to distrust hunches that seem to come out of nowhere. They prefer to look for detail and facts. For them, the meaning is in the data. On the other hand, those with a preference for intuition tend to trust information that is more abstract or theoretical, that can be associated with other information (either remembered or discovered by seeking a wider context or pattern). They may be more interested in future possibilities. They tend to trust those flashes of insight that seem to bubble up from the unconscious mind. The meaning is in how the data relates to the pattern or theory.

The first thing that pops into my mind is stock analysis. While everyone who analyzes stocks looks for facts, I think those on opposite sides of this spectrum will have a different approach. The Sensing individuals might look at a company’s underlying strengths and weaknesses, identifiable in annual reports, for example. On the other hand, those who gather information via Intuition might be more prone to looking for patterns inherent in performance. Both approaches are highly technical.

Perhaps you’ve heard of the Elliott wave principle. This is a method of predicting market trends based on patterns on historical up-and-down movement. The tricks with this principle is that it’s hard to know where you are in any particular “wave.” Someone with an Intuitive personality might be drawn to this type of analysis.

If you’ve read personal finance books, you’ve probably noticed how authors try to reach both types of personality. Often, a particular lesson begins with a story, illustrating a positive or negative approach. The story is usually light on details, but Intuitive people might be able to relate to the story and understand the point the author is attempting to make. If the author is smart, he or she will continue by supporting the story with details and facts that support the conclusion.

When either approach is missing, either half the audience will be bored or the other half will be mistrusting. It’s possible that Robert Kiyosaki’s “Rich Dad” series falls into this category. The books are strong on story and emotion, perhaps drawing in the Intuitive audience. Yet, the books are short on actionable details, frustrating those, perhaps Sensing individuals, who look for facts and hard data.

Who would be better at managing their own finances, the Sensing or Intuitive individual? I think the Sensing individual should be trusted with managing the family’s finances above the Intuitive individual. The type of analysis required, including net worth, expense reports, and budgets, involve the hard data favorable to Sensing individuals.

Smart Women Marry for Money, and Here’s Why

Ginger is a fashionista in her late 20s—a wife and graduate student striving to have it all. She wrote this article for Consumerism Commentary, but Ginger also publishes the blog Girls Just Wanna Have Funds, and you can subscribe to the blog’s RSS feed here.

Let me preface this by stating that I am not suggesting that women marry solely for money, I am after all a believer in love and commitment as a solid foundation for marriage. However, I am suggesting that women who marry partners that are financially savvy, motivated by money and have aligned views about their attitudes to money, are indeed smarter than their counterparts who don’t when choosing a life partner. I will detail the benefits of choosing a partner that has a solid financial plan in place and uses money as a tool and not a crutch.

Financially Savvy

Women who choose financially savvy partners fare better than their counterparts who don’t. Why? These women know that in order to have a marriage built to last that finances play a huge role in the viability of the marriage. I know it sounds like we’re discussing a corporate merger but bear with me; after all, marriage in some respects is like a business.

1969 Inc., said it best when asked for her insights to marriage,

It’s like running a corporation. A business venture. You have to go into it knowing that it could fail or it could succeed beyond your wildest dreams and make you rich… If the employees don’t share the vision, believe in the vision and work together, the endeavor will fail. Some businesses will get rich. Some will barely make ends meet. Some will never make a dime. The money does not measure success. The sense of accomplishment will come from the daily struggle… the love of what you do, working together day in and day out.

The reality is that personal finance issues are the leading cause of divorce and in order to live happily ever after, you must be on the same page as far as your finances are concerned. No, if, ands or buts about it. Capisce?

So what makes these women smarter?

Aligned Financial Values

When smart women meet a partner, they aren’t wooed by good looks and the smooth talk, after all those come a dime a dozen. These women are looking at how their potential partners spend money. Does he have an emergency fund? Is he current on their monthly bills such as the car payment and rent/mortgage? Does he spend more than he earns? They’re listening keenly to understand how their potential mates relate to money. Is it a tool? Is it a crutch? They know the difference and conduct business accordingly. Should the potential mate fall into the category of the above mentioned then it’s time to say good-bye. After all, who wants a man who isn’t interested in learning how to manage his money effectively? They are in it for the long haul, not a few cheap dates.

Motivated by Money to Create the Life They Want

Smart women are up to date on the latest issues in personal finance. They understand rate chasing, investing for the long haul and understand that while they may have substantial savings, practice and embrace frugality. They look for similar if not the same qualities in their potential mates. Smart women want to be able to relate not only on a romantic level, but also on issues regarding personal finance.

A Man with a Plan

Who wants a man with no financial plan in place? I certainly don’t. Where does he see himself in 2 years? 5 years? 10 years? Is he thinking long or short term? That answer will determine the course of the relationship. Ideally he should be able to think past next month’s car payment and project how much he will have in his savings account by year’s end. This an expectation for smart women, not a hope or a dream, but something they demand and require in a potential mate.

Take a few minutes to let it all sink in. Gone are the days when gold diggers were secretly envied because they were able to go for the gusto and stifle high pitched screams during musty sex with a shriveled up oil tycoon. Move over and make way for women who are in control of their financial destinies and not afraid to say it. They are armed with a positive net worth and not afraid to flaunt it.

Are you a smart woman?

If you liked this article, read more from Ginger at Girls Just Wanna Have Funds.

Jung Typology and Finance: Introversion vs. Extraversion

One of the most popular personality measurement systems is the “Jung Typology” test, also known as the Myers-Briggs Type Indicator (MTBI) test. These are popular in Psychology 101 college courses and corporate management seminars. The object of this test is to quantify an individual’s personality along four separate dimensions. Each dimension has two options on either end of the spectrum, and most tests provide a measurement of strength in either direction. This results in 16 separate personality types, with additional nuances due to the strength in the pull of either direction.

If you’re interested in determining your personality type, there is a free test at HumanMetrics.com. The test involves a series of questions designed to determine the root of your motivation. The results are best when the questions are answered quickly at face value, without thinking about choosing the “correct” response.

The first of the four personality aspects measures introversion vs. extraversion. Don’t think of this as whether you’re a loner or a social butterfly; the category has more to do with how you draw your energy. This is from the Wikipedia entry:

People with a preference for Extraversion draw energy from action: they tend to act, then reflect, then act further. If they are inactive, their level of energy and motivation tends to decline. Conversely, those whose preference is Introversion become less energized as they act: they prefer to reflect, then act, then reflect again. People with Introversion preferences need time out to reflect in order to rebuild energy. The Introvert’s flow is directed inward toward concepts and ideas and the Extravert’s is directed outward towards people and objects. There are several contrasting characteristics between Extraverts and Introverts: Extraverts desire breadth and are action-oriented, while introverts seek depth and are self-oriented.

Taking a financial viewpoint, which side of this spectrum is better for personal finance? Here are some thoughts.

Introverts may be more inclined to create budgets and analyze progress over time. The “reflect-act-reflect” method can be interpreted as “budget-spend-evaluate.” Introversion can manifest itself in the way an individual sets goals. Do the goals use internal metrics, like a competition with oneself, or do they focus more on parity with the surrounding culture or community? The latter may be the approach taken by an Extravert.

Extraverts thrive on the energy they derive from being around other people, and as a result, may have a more finely honed ability to use “small talk” and network with other people in larger settings. That could lead to better job opportunities and more money in the workplace. However, 40% of CEOs are Introverts or “closet Introverts.” They’ve learned how to act like Extraverts when necessary while retaining their own personality features.

In The Psychology of Money, the author, Adrian Furnham, cites a 1984 study.

[The study] found that extraverts tended to be more extravagant and less stingy than introverts. People with strong feelings of control over their money reported less general anxiety and tended to be more extroverted.

Managing personal money is a skill that is best tended by the introspective nature of an Introvert. While Extraverts can certainly handle the responsibilities just as well, if defined by their personality type, Extraverts will find introspection draining. Does this mean that Introverts tend to be better money managers?

Not all successful CEOs are extroverts [USA Today]

Financial Attitudes: Charles Schwab’s Categorizations of Generation X

I found this in my spam e-mail box today. It’s not spam, it’s marketing from Charles Schwab. The message is interesting enough for me to post because it brings up a nuanced topic: personality categorization. When the media invokes the term “Generation X,” they’re referring to a certain age group in which everyone has enough in common with everyone else to justify generalizations.

fight apathy, or don'tAccording to Wikipedia’s entry on Generation X, this particular group of individuals invoke the descriptions of “apathetic, cynical, disaffected, streetwise loners and slackers.” The entry goes on: “Generation X was generally marked early on by its lack of optimism for the future, nihilism, cynicism, skepticism, alienation and distrust in traditional values and institutions.” The outlook doesn’t seem very positive.

The Charles Schwab study doesn’t attempt to group all of Generation X into one category. They managed to find six separate groups pertaining to attitudes towards life and money. Here’s what they found. I left out some of supporting statistics, but they are interesting

Money Mindset One: Paycheck to Paychecks. By far the largest group representing 25 percent of Gen Xers, members of this predominately female group are extremely stressed about their personal and professional lives. They are less confident than any other group about having a bright future, and are twice as likely to be unsettled and pessimistic about their financial situations.
Money Mindset Two: Spend Now, Pay Laters. Seventeen percent of Gen Xers fall into this category of predominately city dwellers that tend to be optimistic, yet somewhat unrealistic about their futures. Overwhelmingly male (77 percent), this group is incurring significant debt, and believes that Social Security will be there for them when they retire.
Money Mindset Three: Confident and Risk-Tolerants. Representing 15 percent of the overall Gen X population, members of this group have high incomes, active lifestyles and high levels of engagement in their financial future. They are more likely to be married, and believe that by taking risks they can reach lofty financial and lifestyle goals.
Money Mindset Four: No Money, No Worries. This group represents 15 percent of the Gen X population. They are at the bottom of the earnings spectrum yet are very optimistic about life. They are more likely to be single, consider investing risky, and have the fewest number of credit cards. This group also has very little trust in financial firms or advisors.
Money Mindset Five: Cautious Savers. Approximately 14 percent of the Gen X population, this group tends to be financially conservative and concerned about money, highly educated and financially secure, yet is late to adopt new products. They are also more likely focused on home and family than they are on having active social lives.
Money Mindset Six: Overwhelmed but Optimistics. Predominately female, these Gen Xers have significant debt, adjustable rate mortgages, and high rates of financially-induced irritability or anxiety. Despite this, they manage to stay positive about their futures. This group represents 13 percent of the Gen X population.

Six categories are better than one. I think they’ve managed to capture all attitudes, but it would be more interesting to compare the findings with categorizations of different age groups. Is Generation Y different?

Image credit: aaronmerrell
Supremely Confident to Super Stressed: Landmark Gen X Study From Schwab Uncovers Six Distinct Financial Mindsets [Charles Schwab]

Apologies Given: More Common Among High Earners

If you earn more than $100,000 a year, you are more likely to apologize for your own errors than you would be if you earn less. According to Fortune Magazine’s report of a Zogby survey:

More than nine out of ten (92%) of $100,000+ earners apologize when they believe they’re to blame, compared to 89% of people earning between $75,000 and $100,000, 84% of those who make $50,000 to $75,000, 72% of those earning between $35,000 and $50,000, and 76% of people earning between $25,000 and $35,000. Among survey respondents who make $25,000 or less, just 52% say they usually apologize when they know they’re at fault.

Should you practice apologizing if your goal is to earn a six-figure income? Well, correlation doesn’t imply causation, but some of the reasons one might be more willing to apologize may be the same reasons one is inclined towards a higher salary.

Why do you think those with higher income apologize more than others? I think the ability to admit fault is a strong management and interpersonal relationship trait, one that helps lead an individual to a position of responsibility in the workplace. Perhaps there are other reasons as well.

By the way, those earning over $100,000 are also more likely to say they’re sorry even when they know they are not at fault, as well.

Want a Higher Paycheck? Say You’re Sorry [Fortune Magazine]

Fairness and The Brain (and Other Neuroeconomic Studies)

The California Institute of Technology is undertaking a study in neuroeconomics, and it has to be one of the most interesting things I’ve come across in the realm of finance in the past few years.

brainThe researchers are undertaking experiments in which they measure reactions in the brains of individuals [WSJ] who must decide to distribute food to starving children equally, or allow some children to receive more food for the benefit of the entire community.

Of course, no children are actually affected by these experiments, but the subjects don’t know that.

To trigger the brain behavior, the 26 volunteers had to believe their decisions really would affect orphans being denied their seat at a groaning board of plenty where others feasted. So, the experimenters made them all study a 10-page brochure with pictures of 60 orphans. In 36 rounds of testing, each subject had 10 seconds to choose the lesser of two evils: Allow some children to keep more than their fair share of meals or take away their food to eliminate inequity.

I never really looked into the field of neuroeconomics before, but I’ve been finding it fascinating.

In the New York Times last year, an article focused on research to determine why investors do what they do. These researchers discovered that people are more likely to take a foolish financial risk when their brains are in a “positive arousal state.”

But when people think about costs, they use different brain modules and become more anxious. They play it too safe, at least in the laboratory. Furthermore, people are especially afraid of ambiguous risks with unknown odds. This may help explain why so many investors are reluctant to seek out foreign stock markets, even when they could diversify their portfolios at low cost.

Marketers must already understand this to an extent. People are more likely to buy a product when they are thinking about the potential benefits of the purchase and when their minds are immersend in positive thought. The costs, like fees, are in the fine print or otherwise hidden for view, and the hooks are set in large type and are shouted from the front of the seminar floor.

If you like research, here are several of the studies taking place at The Center for the Study of Neuroeconomics at George Mason University:

Call Auction Experiments. In a call auction participants indicate their willingness to buy or sell units of a good by placing an order to buy or sell some number of units at their buying or selling price…
How People Trade. We take the view that the ability to trade is an evolutionary adaptation to social environments. Using language, theory of mind, and reciprocity, people succeed in forming trading partners with little institutional support.

At the Stanford Neuroeconomics Lab:

  • Neural basis of financial decision making
  • Reward dynamics
  • Neural basis of experienced reward
  • Neuroeconomics of giving

    For another interesting take on neuroeconomics, read Mind Games, an article from The New Yorker.

    Image credit: Gaetan Lee

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