Chris Blanc: Play and Projects: Blog

A long time ago, while at a girlfriend’s house, I picked up and read her roommate’s copy of The Millionaire Next Door. It confirmed things I’d already known, and had some valuable life lessons in addition to ideas on managing capital.

This morning, someone sent me an article which summarizes many of the points it made. I’m excerpting and editing part of this to give you a rough idea of how important this knowledge is.

Who is the prototypical American millionaire? What would he tell you about himself?(*)

* I am a fifty-seven-year-old male, married with three children. About 70 percent of us earn 80 percent or more of our household’s income.

* About two-thirds of us who are working are self-employed. Interestingly, self-employed people make up less than 20 percent of the workers in America but account for two-thirds of the millionaires. Also, three out of four of us who are self-employed consider ourselves to be entrepreneurs. Most of the others are self-employed professionals, such as doctors and accountants.
* Many of the types of businesses we are in could be classified as dullnormal. We are welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors.

* About half of our wives do not work outside the home. The number-one occupation for those wives who do work is teacher.

* Our household’s total annual realized (taxable) income is $131,000 (median, or 50th percentile), while our average income is $247,000.

* On average, our total annual realized income is less than 7 percent of our wealth. In other words, we live on less than 7 percent of our wealth.

* Most of us (97 percent) are homeowners. We live in homes currently valued at an average of $320,000. About half of us have occupied the same home for more than twenty years. Thus, we have enjoyed significant increases in the value of our homes.

* We live well below our means. We wear inexpensive suits and drive American-made cars. Only a minority of us drive the current-model-year automobile. Only a minority ever lease our motor vehicles.

* We have more than six and one-half times the level of wealth of our nonmillionaire neighbors, but, in our neighborhood, these nonmillionaires outnumber us better than three to one. Could it be that they have chosen to trade wealth for acquiring high-status material possessions?

* As a group, we are fairly well educated. Only about one in five are not college graduates. Many of us hold advanced degrees. Eighteen percent have master’s degrees, 8 percent law degrees, 6 percent medical degrees, and 6 percent Ph.D.s.

* Only 17 percent of us or our spouses ever attended a private elementary or private high school. But 55 percent of our children are currently attending or have attended private schools.

* On average, we invest nearly 20 percent of our household realized income each year. Most of us invest at least 15 percent. Seventy-nine percent of us have at least one account with a brokerage company. But we make our own investment decisions. ^{^}

This list is from 1996, but the same basic principles are going to be true today. Filed under psychology because being ready to be wealthy is a state of mind.

Schiff defines “middle-class millionaires” as those with a net worth of between $1 million and $10 million who earned their wealth rather than inherited it. They are people, the author says, who live a fundamentally middle-class life, yet are exerting powerful influence on society.
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Folks who are succeeding in America are knowledge workers, in financial services or creative services, where their brain is their No. 1 asset.
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They on average work 70 hours a week and take fewer vacation days…They observe information in a more savvy way and tap into the flow of information capital, and they know how to leverage this enlightened self-interest.
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These are people who have had an average of three career setbacks, and three quarters of the group we surveyed said that each time, they’ve come back in a different way.
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They work hard every day because they want their kids to grow up in a financially stable environment and have opportunities. Middle-class millionaires are people working on behalf of their families. – Who Are the ‘Middle-Class Millionaires’?, US News and World Report, May 2, 2008

Peter Drucker predicted long ago that the future belonged to the knowledge workers. The reason is that while most people are trained in a skill, they lack knowledge of how to apply that skill, which involves awareness of context and market as well as the skill itself. Both Bill Gates and Steve Jobs had other skills, but their ultimate skill was as leaders, where marketing, product design and technology converge.

I think the rise of these middle class millionaires — called by the less politically-correct “the upper middle class” — have been around and acting like this for a long time. They are goal-oriented people in a world of people oriented toward entertainment, social status, religious iconography, and who knows what else. The ones I knew when growing up worked always, even when they were relaxing. They liked getting things done and had re-programmed their brains to enjoy the labor required to get there.

The cost of being middle class instead of what the Europeans call “working class” is rising. As our labor costs drop, the cost of quality labor goes up as it gets rarer, and consequently so do the rewards for being quality labor. This in turn drives inflation faster and requires you to have more cash in order to escape the vicious cycle, and so on.

Out of my twelve readers, I think one of you is independently wealthy, one of you made himself independently wealthy, and the rest of us are working toward this goal, so I post it for your enjoyment. Articles like this never go out of style, because they give us insight into the people who succeed not by the long shots but by the slow and steady, which is more likely to return value and so is probably a better path than something with a low statistical average of success (rock stardom, criminal kingpin, best-selling author, nuclear terrorist).

Why even bother with candidates at this point? Elections have come to resemble fund-raisers or sports events, and I can’t tell which.

When we go to vote, hand us a budget with all known expenditures listed, and the ability to pencil in a percentage of our nation’s budget to each expenditure. At the bottom, let us write in future programs we’d like and how much of our budget they should get.

Throw away all ballots which do not add up to 100%.

Then average the results, and have a second election for the stuff we penciled in.

We’re about at that stage anyway.

Those who have been consultants know a simple truth: when you go to an office that is under siege by workload, you’ll usually find that only half of the problem is the workload. The rest is poor study habits translated into office form, and most offices have these.

Just like most software is junk, most offices suffer confused management and workers misapplying their time. You’ll probably notice some of these at desks in your own office, if not your own desk. It’s not your fault that they occur, but it’s your job to fix it. These inefficient and non-productive habits plague most offices I’ve seen as a consultant, and are really easy to fix. You’ll recognize a few from your own experience:

I can’t claim this list is scientific, but I’ve been into and out of more than a few offices in the past, and have learned from what I’ve seen. While these concepts are easy, putting them into practice, like getting the family out the door for a Saturday outing in under a half hour, is a grapple. The only redeemable fact is that having a disorganized office, while less work, is more frustrating and depletes employees of what excitement and forward drive they retain.

But there is no bigger tribe, and none more zealous, than fans of Apple, who are infamous for their sensitivity to slams, real or imagined, against the beloved company. “It’s funny — even if I write a generally positive piece about Apple, I still get more complaints from Apple partisans” than from opponents, Mossberg says. He has even coined a term for the effect. “I call it the Doctrine of Insufficient Adulation.”

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On issues we’re passionate about, we all tend to think our own views are essentially reasonable, Ross explains. Thus when a reporter, editor, news network, or pundit mentions the other side’s arguments, it stings.

“If I see the world as all black and you see the world as all white and some person comes along and says it’s partially black and partially white, we both are going to be unhappy,” Ross says. ^{^}

This article is from Farhad Manjoo, whose new book “argues that new communications technologies are loosening the culture’s grip on what people once called ‘objective reality.’” His point is that people polarize themselves, become partisan, and so find anything that does not agree one hundred percent with their views to be from the “other” that opposes them.

It often seems to me like society is breaking up into different special interest groups (SIGs) like a workshop at a conference.

You meet people, even the ones you marry or befriend for life, through your interests. Your interests are under assault by a myriad of marketing and social pressures, because everyone else wants you to see it their way. So you get a tough skin, filter out the other stuff, and focus on what you want.

At some point, you’re unable to see anything but that.

I wonder if this is similar to criminals who seem to think they will never get caught for outrageous and frequently transparent schemes. It’s an interesting development to watch, and seems to correlate to what Tom Wolfe calls the fiction absolute.

The fiction absolute is the idea that, whatever life we’re leading, it’s the best that it can be. Heck, we all need some kind of bedtime reassurances from whatever metaphorical parents or gods we have, saying that we’re on the right path and everything is going to be all right. But at some point, we might be sealing ourselves off from other experience.

It’s no great secret that most people dislike their corporate jobs, and yet aren’t quite willing to commit to the insanely higher workload of having their own company. Many of us take the middle path, which is working on contract, because although we don’t get benefits we also don’t have to put up with that feeling that our career hinges on the personalities involved. As a contractor, you see many workplaces, and over time, you start to see the patterns in function and dysfunction which regulate them.

The type I’m going to talk about today is the office ruled by what I call “the inflexible devotee.” This person looks at a company as a long-term investment, and so will start and work their way up, but the consequence is that when they do finally get promoted to management-level positions, they are unwilling to cede much control and so either micromanage or undermanage. These seeming opposites are resolved in the two attributes of this person: first, they are devoted to the company because they see it as their path to success; second, they are inflexible because they know what has worked for them and want it to continue this way.

This type of person generally has a lowercase-c conservative character, meaning that they believe society will reward them for consistent behavior, and that there’s one right way to do things. They run into problems when this right way changes, or their role changes. The inflexibility is a byproduct of the same doggedness that brought them success in the first place. They are people who in times of crisis, turn toward institutions instead of theories, and want hard results. They are also slow to be promoted, and equally slow to leave behind their old role and focus on their management responsibilities.

It is that tendency that makes them difficult. They will work hard with great dedication, but they won’t let go of the reigns. This leads them to either micromanage, or try to do each employee’s job for them save the most repetitive tasks, or undermanage, which means they will divide tasks into important ones and less-important ones, and they’ll hand off those underimportant tasks and keep the others for themselves. The result is that they drive away their most qualified help by forcing them to either be limited in creativity through too much oversight, or slog through mindless tasks without ever being given a chance to exercise their abilities.

I wish I could say that in my years as a contractor, I have seen companies be well-run. Rather, that’s the exception to the rule, which is that companies are founded by people who don’t know how to lead them, and they keep promoting whoever doesn’t flake out, shoot up the office, or die young. This means that often total incompetents are promoted, and that most times, the people who are running departments are good at the skill needed in that department but are terrible at leadership. Large companies become liberal tyrannies that favor people who are friendly and replaceable over the talented, and small companies become gnarled fascists who want to squeeze every last drop out of their employees, without handing over any of the power.

As smart people have known for some time, there’s a relationship between creativity and power. By creativity, I mean the desire to do things right in some way other than axing bad stuff. I mean coming up with new methods to replace the old, refining what exists, thinking around problems, rising to challenges. That’s creativity. For creativity to exist, the people exercising it must have as much power as they need to make their vision manifest, and this is where all human politics begins. Power between individuals, and between those individuals and the larger company or society, determines what can be done.

Between the extremes of anarchy and fascism in the workplace, there is a sensible middle ground where strong leadership directs the company, but is able to allow enough breathing room in its hierarchy that those who can lead are given the positions they need, and individual employees aren’t unduly hampered in what they do, so they can be creative. The inflexible devotee is one of many errors on this path, just as much a creativity killer as the company that requires forms in triplicate for any move the employee makes. It’s the same principle. Power from above doesn’t want to let go of enough power to let people be effective and think outside of the way things were done two company-sizes ago.

I think about these things a lot, but most when I’m leaving a contract. I like to sit down in a quiet space, with some very English tea, and think about what I would have done differently. I’m convinced that the people who screw up worst are often those who mean best, and that most situations can be alleviated by talking out what people actually want to achieve, and forcing them to describe their own behaviors in trying to get there. But too often, this causes people to lash out and make people’s lives hell, which is why I remain enamored of contract employment.

Baboons always attack the weakest party in an altercation. Quite right too. We must never forget our glorious simian heritage.Naked Lunch, by William S. Burroughs

It is still controversial to say we evolved from monkeys. Some use their acceptance of this idea to claim higher social status than others, but I can’t be happy about comparing degrees of partial ignorance and calling one the winner. For the purposes of this article, we are going to assume that evolution occurred and that humans have a recent origin in simians, and even more, that some humans interbred with apes relatively recently.

Not surprising, then, is that they share some of our most basic cognitive traits:

This self-delusion, the result of what’s called cognitive dissonance, has been demonstrated over and over by researchers who have come up with increasingly elaborate explanations for it. Psychologists have suggested we hone our skills of rationalization in order to impress others, reaffirm our “moral integrity” and protect our “self-concept” and feeling of “global self-worth.”

Once a monkey was observed to show an equal preference for three colors of M&M’s — say, red, blue and green — he was given a choice between two of them. If he chose red over blue, his preference changed and he downgraded blue. When he was subsequently given a choice between blue and green, it was no longer an even contest — he was now much more likely to reject the blue. ^{^}

The article goes on to point out that cognitive dissonance is a coping mechanism. If you want the red fruit, but get given the blue one, and still need to eat, you have to find some way of liking that blue fruit. Similarly, we don’t all look like movie stars or have the skills of Bruce Lee. We have to find some way of still liking ourselves, which we often do by enjoying watching society’s truly stupid and ugly struggle (this sadistic aspect of human behavior has revealed itself enough to me that I no longer have any guilt about stating the obvious).

Like any coping mechanism, this can lead to problems, since it’s a weakness we’d rather not reveal. Our problems begin when we cross our individual coping mechanisms with social pressures, and we hone our skills of rationalization in order to impress others, reaffirm our “moral integrity” and protect our “self-concept” and feeling of “global self-worth”, as the article says. Look to the grossest examples of retrograde stupidity in humanity and you will see this mechanism at work.