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As a Mets fan, though these days I try not admit being so, it’s bittersweet to see the organization settling its legal troubles relating to Bernie Madoff’s Ponzi scheme. On the one hand, if the owners of the Mets were found guilty of ignoring the possibility of fraud, it could have spelled the end of the baseball team. The prosecution was looking for a restitution of $1 billion from the Mets’ owners in order to compensate other investors who were swindled by Madoff. The lawyers reached a settlement agreement, wherein the charges will be dropped with the owners of the Mets paying $162 million.

Compare this $162 million to a player’s contract; CC Sabathia’s contract with the New York Yankees is $161 million for seven years. The Mets owners will likely have the benefit of paying the settlement, if approved by the court, over a number of years, but for the same expense, the team could have added high-quality players or kept José Reyes from defecting to Miami. Reyes signed a six-year, $108 million contact with the Miami Marlins; had the Mets avoided investment trouble, the team might have been able to offer Reyes a competitive deal.

The good news for the Mets gets even better. Not only do they avoid paying $1 billion in restitution, the owners are eligible to receive restitution from the trustee. As those found guilty of fraud pay into the fund to help those who were defrauded recover their losses, the owners of the Mets will receive their portion from these proceeds. Any money recovered can be used to pay the settlement. The owners of the team could receive as much as $178 million, more than they need to pay through the settlement.

Is it possible the team owners could come out ahead as a result of their involvement with the Madoff scheme?

While this is good news for the team, the investors who were truly swindled by Madoff — if you believe anyone was truly swindled, as it’s the investor’s job to ask questions and understand their underlying investments — will not be able to recover their losses to the extent they would have hoped.

The $1 billion originally sought from the Mets’ owners would have been a great benefit to others who suffered losses, those who might have invested at a farther distance from Madoff’s team, with more layers of investment professional in between, obscuring the relationship between the end investor and the man behind the curtain.

Photo: The US Army
New York Times

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The wealth gap is growing, and if the Occupy Wall Street and its satellite protests are any indication, those not within the top one percent of income earners are not happy with their circumstances or the policies that help foster the wealth of those at the top. It’s been called class warfare, but there are other dimensions to the wealth gap than the spectrum that includes poor, working middle class, upper middle class, and wealthy.

The gap in wealth between young and old Americans is growing. Today, the Pew Research Center released new data showing the widening divide between Americans 35 years old or younger and Americans 65 and older. In 1984, the median net worth for the younger group was $11,521 (adjusted for inflation). The same year, the median net worth for the older group was $120,457. Net worth includes the value of all one’s assets, including a house, minus the value of all one’s liabilities, including student loan debt, credit card debt, and mortgages.

The passing of twenty-five years makes a difference. Today’s median net worth — actually not today’s number, but 2009′s number — for Americans 35 years old or younger is $3,662. That’s a 68% decline! Today’s youth is significantly less wealthy than the youth of the previous generation. In 2009, the older group’s median net worth was $170,494, a 42% increase.

First BaseThis is a comparison between age groups, which I would expect to be fairly similar to each other and similar to the past in terms of socioeconomic distribution. They would have to be, or the data would need to be standardized, for the numbers to have merit. There are great reasons to be happy about the increase of wealth in one group, but there is also a wide variety of reasons why young people (and I am one — I’ll remain 35 for just a few more months, if all goes well).

  • Unemployment within the young age group is high, while older workers are opting to stay in their jobs longer. In fact, recent graduates facing unemployment may never reach their income potential. This problem isn’t just going to go away when the job market improves.
  • Some call today’s young adults (or old adolescents) the Boomerang Generation. After college, they move back to their parents’ house while looking for a job. They delay marriage and purchasing a house, both activities that are correlated with increased wealth. Yesterday’s recent graduates had jobs and houses, both of which contributed to gains over the past 25 years, particularly if the house was purchased in advance of the real estate bubble.
  • Student loan debt is a much more significant part of a young person’s life today than it was in 1984. College costs have far outpaced inflation, and lenders have always been keen to extend the availability of higher education to more students (otherwise known as borrowers and customers).
  • A college education is increasingly seen as the gateway to a good career in any field. It’s difficult to compete in an information-based economy (opposed to a manufacturing-based economy) without a bachelor’s degree. A high school diploma is no longer enough for participation, particularly when companies can afford to be selective in hiring.

Pew Research Center - Age Wealth GapIf you’re in the younger group, the question should always be what you can do to reverse this trend. While there can be some results by supporting public policies that don’t include bail-outs for the rich (socialization of losses) while cutting back resources for those with the least opportunity (privatizing the gains), it’s important to put yourself in the best position possible so that you don’t need to rely on public policy in your favor.

Assume you’re a major league baseball player. (That will easily put you in a position where your wealth is quite healthy, but that’s besides the point at the moment. Just go with the unexpected metaphor for a second.) You have three balls and two strikes, there are two outs, you’re down by one run, the bases are loaded, and it’s the bottom of the ninth inning. You hit your next pitch to the shortstop. He mishandles the ball but gets it over to first base. It’s a close play, a tie, but the umpire calls you out. Your manager rushes the field from the dugout to argue, but it’s no use. You head back to the showers momentarily defeated.

It’s easy to blame the umpire for getting the call wrong on such an important play. It’s your job to perform well enough that there’s never any question about whether you’re safe or out. The “system” that requires an umpire to make a snap judgment call on a close play is the same “system” that makes it difficult for people to succeed financially. By taking control of your finances, you make the “system” — the job market, the economy, politician’s policies, to name a few societal aspects that aren’t easily controlled by one person — less relevant to your long-term success.

Photo: Jinx!
Pew Research Center

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If there’s anything to take away from an extended period of unemployment, it’s that human capital can mean the difference between receiving a good job offer and remaining unemployed. There are many facets of human capital, and as your human capital increases, so does your marketability. There are many ways you can gain an edge, including seeking more education and gaining experience. One way to grow your human capital is to broaden your focus.

I came across a joke yesterday that described becoming an expert as learning more and more about less and less until one knows everything about nothing. There’s only room at the top in any field for very few, and in some fields, you have to be at the very top to take the most advantage of the effect on human capital. For most people, learning more and more about more and more is a safer approach to boost your human capital.

The specialism vs. generalism debate can be heated, and I often face opposition when I claim that I usually side with generalism. I believe broadening your horizons and being versatile is better in the long run than focusing intently on one skill. Even in the most recent article in this series about becoming an expert, I cited one of my favorite examples, Ron Howard. He broadened his scope beyond acting as soon as possible to gain more skills and allow himself to be open to more opportunities.

The box outside of which you should thinkWhile I am sure this director and producer has other interests, he is not known for anything outside of the film industry.

Moving beyond a narrow focus

Nick Mason is best known as the drummer for Pink Floyd, but he is also a racing car enthusiast. He was able to use his success as a member of the band whose most popular record still has holds the record for most consecutive weeks on the Billboard chart to fund his classic car collection. After his responsibilities with the band slowed down, he had the opportunity to spend time racing. With his wealth, Nick will likely never need to worry about his human capital, but the ability to explore your interests, hobbies, or notable skills can lead to a more fulfilled existence, discovery of other talents, and possible changes in career paths.

My story is a little different. From my time in elementary school, I planned on being a teacher. In high school I decided I would teach music, and I attended college with that goal and the appropriate degree in mind. I earned my degree, but I followed other interests at the same time. I built online communities long before there was a World Wide Web. Even while I was learning to teach, I managed bulletin board systems accessed with modems and eventually taught myself how to program websites once Mosaic was available to the public. This eventually led to more experience writing and the beginning of this website. I’m pretty far away from where I would have been if I had focused solely on learning how to teach and practicing musical instruments as certain professors would have preferred.

And now that writing has been my main focus, I’m looking at other activities to fill any spare time I can grab, which isn’t much. I’ve mentioned that I’ve been learning more about photography. I’ve completed several classes presented by local experts and I try to spend time every month improving my art. It may never lead anywhere professionally — this is a field where anyone can buy a digital SLR, use a wide aperture, and declare themselves an expert and fool a lot of people — but it is something I enjoy. The enjoyment may add to my human capital indirectly; if professional opportunities open up it will have added to my human capital directly.

In my last full-time job, where I worked for a financial company, my job wasn’t technical in nature. However, my experience and skills with information technology, database management, Excel, as well as my capabilities as a good communicator and teacher, opened some opportunities for me in that position that went beyond what others in my position would have been expected to do.

  • The programmer who also has experience running his own business is better suited for management opportunities.
  • The lawyer who has a passion for the arts could be comfortable working for a variety of companies.
  • A mortgage broker who writes professionally can earn income when banks stop offering loans to the public.
  • The baseball player who learns about finance can manage investments when an injury destroys his career.

In high school, extra-curricular activities are generally assets on college applications; in college, experience in your field lead to well-rounded résumés. Being able to include a few sentences or bullet points on these résumés to inform readers of worthwhile but unrelated or tangentially related endeavors could give you an unexpected advantage over other applicants. Having some skills beyond your job description could increase the probability of receiving a promotion or a transfer. If your industry disappears, having alternative skills will make a transition easier.

Looking beyond your field is about more than “having something to fall back on;” it’s increasing your worth to others by having a varied set of skills and interests that make you compelling as an individual.

How have you spent time to focus on skills or activities other than what your job calls for or what your main education track provided?

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The concept of turning your passion into a vocation, making a living doing something you love, easily generates two opposing viewpoints. I wouldn’t say I’ve had a privileged upbringing, but it depends on the perspective. I had the freedom to explore a variety to activities to help nurture my mind, soul and body. As a kid, I explored computer programming, music performance, acting, summer camp, karate, Little League baseball, and even tennis lessons. This alone is enough to make people less fortunate scoff at the futility of my time while growing up. I could have lived in a developing country where kids have no choice but work so their families could survive day-to-day.

In an effort to develop artists, one recurring theme always present in my activities was the idea that life provided endless opportunities. There was no need to be resigned to an unsatisfying job, working for money rather than soul satisfaction. With enough education and practice, everyone would have a chance to find a way to earn money doing something with passion, an activity that was more than just “work.”

To characterize the two perspective, one would say that everyone, at least those with sufficient resources, can find a way to sustain a family while pursuing a passion completely. The other perspective takes the position that following a passion is a luxury and most people would be better off finding a job that pays the bills right away and looking for passion elsewhere, like with hobbies or family.

I wrote about pursuing my passion six years ago. I mentioned that I was stuck in a rut and was still trying to determine what my “dream job” would be. I went on to spend five more years working for a corporation in a job I had little interest. At the time, I didn’t really consider Consumerism Commentary a business. I didn’t consider it my passion, either. I never desired to be a writer or a publisher, but an interesting theme running through the last twenty years of my life has been building communities, particularly online, and that is a bigger passion for me than writing.

With a less personal approach, I suggested starting the decade off right by doing something you love.

I wouldn’t have been able to pursue Consumerism Commentary if I wasn’t already meeting my baser needs. I started this website after I had already started moving in the right financial direction, with a new income at a corporate job ready to help me pay off my debt and save for the future. If I had been struggling to find affordable shelter and scrounging for food, I’d have greater concerns than finding a web server.

Abraham Maslow's Hierarchy of NeedsWhen considering the idea of following a passion, particularly if that passion doesn’t naturally coincide with a potentially high-paying career like mathematics or engineering, I find that Abraham Maslow’s Hierarchy of Needs is an appropriate metaphor. Following your passion is related most to the top of the pyramid, self-actualization. All the issues pertaining to the levels below self-actualization must be met before a quest to reach one’s full potential can be moderately successful. Because of these pre-requisites, paving one’s own way to create a successful life that doesn’t rely on typical social structures (like corporations) is rare.

Once physiological needs like food, water, and shelter are met, the next needs pertain to safety: having sufficient finances, job security, and health security. A good portion of the middle class doesn’t really get past this stage of needs. Living paycheck-to-paycheck keeps the lower middle class unfulfilled. The upper middle class may not have money that could be used in an emergency other than the wealth locked in the value of their primary residence, or those who do have emergency funds would not be able to live off savings for a year to pursue a financially risky endeavor. The working class relies on employers and rarely sets out to build their own business, again due to risk.

To get past this second stage, you need to be in a position where worrying about finances is unnecessary. When there is little concern about whether you can afford to fail, you have the opportunity to try different approaches to life-sustaining pursuits of your passion.

In my work with non-profit organizations, I noticed that many people involved with activities were not in a financial situation where they needed to worry about finance. If the organization failed to provide a paycheck one week due to the company’s negative cash flow, they didn’t start a riot. If you’re “independently wealthy” the paycheck from one week to another is not the main concern, and you have the ability to take some risk in order to spend the bulk of your waking life working with your passion. If you’ve retired from your former career and just looking for a good way to spend the last few decades of your life doing something meaningful, and if you’re done raising a family and paying for a house, you have the flexibility to work for little or volunteer without concern about moving up the corporate ladder. If your spouse brings in the money and you’re only working to keep yourself from going insane alone in the house, your options are wide open.

When I was working for the non-profit, I was in a significantly different financial position, and this was a message I had some difficulty getting through to the executives. Then again, why should I receive preferential treatment of any sort when the rest of the employees were happy with the poor financial situation within the company. In the end, I made some sacrifices in my living situation and other expenses to make things work a little better, but I was also sacrificing my future financial stability. My following a passion early on in my career, I was skipping over the more basic needs like a safe living environment and financial security while seeking higher-order fulfillment. It didn’t work out so well for me.

While it’s good to persuade young students to follow their passion — and this is a great topic for motivational speakers for adults as well — it’s more important to look at any particular individual before condoning leaving reason behind to search out a living following a passion. For some, the risk of financial failure could be a good motivational tool for bringing about success while following a passion, but for others, it’s nothing more than false hope and results in a delay in building a solid financial foundation.

Abraham Maslow

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Man Gives Derek Jeter’s Baseball to Team, Criticized for Everything

by Flexo
Baseball

The other day, Derek Jeter achieved his 3,000th hit, a major baseball milestone. The hit happened to be a home run, and the fan who recovered the ball, Christian Lopez, has been in the news — well, the sports news, anyway. Players like to be able to claim milestone baseballs for their own collection, so ... Continue reading this article…

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Baseball Statistics for Player Salaries

by Flexo

If you love baseball, you might also love statistics. I suppose analyzing players’ performance numbers gives spectators something to do during long at-bats. Very few other sports engage fans by providing scorecards, and learning how to score a game is like learning a language or a code. I enjoy baseball, as much as a Mets ... Continue reading this article…

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Podcast 97: 8 Ways to Great, Dr. Doug Hirschhorn

by Flexo

Today’s guest on the Consumerism Commentary Podcast is Dr. Doug Hirschhorn, author of 8 Ways to Great: Peak Performance on the Job and In Your Life. Doug and podcast producer Bryan J Busch discuss goals, risks, and what it takes to be successful, based on Doug’s observances through his unique background. 8 Ways to Great ... Continue reading this article…

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How to Invest $300,000 — Or Any Amount

by Flexo

Last week I wrote about lump sum investing vs. dollar-cost averaging, voicing the opinion that in most cases, if a lump sum is available, it’s a better choice in the long run. But how do you invest that lump sum? It’s great that the financial media has been encouraging young people to start thinking about ... Continue reading this article…

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