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  October 7, 2011
The Ride of Your Life...


Faster and faster...until the thrill of speed overcomes the fear of death... - Hunter S. Thompson

Maybe I’m just getting older, but to me the world seems to be moving at breakneck speed and I’m having a real hard time just keeping up.  I get this uneasy feeling that life is becoming like a fast-moving amusement park ride where people hold on for dear life as they get tossed and turned in multiple directions, bracing themselves for the next jolt or sudden movement.
The real scary part of it all (for me at least) is that there doesn’t appear to be any planned course or direction as to which this ride is heading.  We are continuing down a random dark track as the next sudden turn awaits us.

As we anticipate a move in one direction, the track hurls us into another.  Predictions as to where we are going are near impossible as the ride is moving so quickly. 

Many of the beliefs and conventions that we have come to know are now turning out to be false assumptions in this new economy...

Real estate will always be a safe investment

While this was true for much of the 20th century, the 21st century has not been so kind to real estate.  Real estate speculation, fueled by easy credit, high leverage, and low interest rates, created a great economic bubble over a 30-year span.  The bubble finally burst in 2008 and with it, people lost their homes and much of their life’s savings. 

The outlook for a strong recovery in the real estate sector, at least in the near future, looks to be highly restrained due to the large excess inventory of homes in the market combined with very restrictive lending rules (although interest rates are at historic lows).

A college education will always pay for itself

At one time, college diplomas were relatively rare.  University graduates were seemingly always able to find higher paying employment in the marketplace regardless of the degree program they chose to follow.   

Because of this belief, more and more high school graduates chose to attend a university rather than enter the workforce after high school.  Colleges and universities became impacted with new students and needed to raise tuition rates to cover the rising costs.

Due to the increased demand, college tuition has continued to rise at a rate more than double that of inflation over the past 25 years.  An incoming freshman at a public university in 2011 will be expected to pay over $100,000 (and over $200,000 for a private institution) for their four-year degree, including room, board and books, and will be indebted to the tune of $40,000 upon graduation.  For those children being born today, the cost of a college degree is expected to be over $350,000, 18 years from today.

The high paying jobs, that were once plentiful for new college graduates, have become rare, perhaps with the lone exceptions of those in highly specialized technical fields. 

Significantly higher costs combined with no viable method to repay the debt has forced new graduates to move back home with their parents while working at menial jobs to earn enough money to repay their college loans or suffer the wrath of collection agencies in perpetuity (college loans are not dismissible via bankruptcy).  

Technical advances will make our lives easier

At one time, our economy was based on agriculture.  Life was simple but hard.

Then technology helps us to transform our agrarian society into an industrial society.  Mechanized farm equipment and new irrigation methods helped to increase efficiency of farms allowing for greater agricultural yields using far less labor.    

As the farms disposed of workers, these people moved into the cities where new technologies helped to automate factories and produce goods at lower costs and higher quality.

People were needed to run these manufacturing plants and provide essential support services.  Goods and services, once reserved only for the wealthy, were now being produced for the masses. 

Technology also helped to transform and improve transportation and communication bringing us trains, cars, airplanes, radios, televisions and phones; all at affordable costs.  Household white goods such as vacuum cleaners, washers and dryers, microwave ovens, refrigerators and freezers helped us to save time and money and allowed society to create more leisure time. 

A large middle-class was created through technological advances by lowering costs and raising availability.
As we moved into the computer and information age, steno and typing pools were replaced with word processors and laser printers.  Entire accounting departments were replaced with a single desktop computer and spreadsheet program.  Switchboard operators were replaced with digital switches.  Gas stations, banks, and grocery stores now have self-service options.  People moved from industrial manufacturing to service sector jobs.

Today, the Internet, portable computing (smart phones), and low-cost international delivery services have now decimated the barriers of geographical and national boundaries.  Market efficiencies of capitalism are now exploited by multi-national corporations finding places around the world to produce goods and services at the lowest delivered costs.

These market efficiencies have decimated the manufacturing base of the United States and Europe and moved manufacturing jobs to countries with far less labor costs and regulation. 

New technology transformed the western world from a strict agrarian society to an industrial society to an information based society.  The information age allowed for much higher efficiencies but at a cost of manufacturing and service sector jobs and ultimately the loss of a middle-class.

The solution is a change in our system of beliefs

In order to survive (and thrive) in this new world, we need to find a way to adapt to it rather than resist it.  We can never go back to the past but instead we need to look into the future.

Real estate should not be an investment, it should be a place where people come to gather, a place to shelter us from the cold, and place to rest and nourish our tired and hungry bodies.  We should think smaller rather than bigger.  We should build, maintain and beautify our houses as though we will live our lives in it forever rather than trying to "flip" it in a few months.  We should think of a house as a home, not as real estate or other investment instrument.

An education is a combination of knowledge and experience.  It is not a piece of paper from a highly sought-after university.  Perhaps a better way to spend the $100K is to start a small business in which to gather knowledge and experience (even better is to band together with other "students" to partner and share in the development of a business).  In the end, a successful student will have their education along with perhaps a thriving business to generate income in the years to come. 

Perhaps the time (and money) might be better spent in an "apprentice" program with another successful business.  The "student" might not be paid but instead will be taught valuable business knowledge and given priceless experience by the company.  A four-year apprenticeship would turn companies into places of learning rather than strictly that of production.  

As it turns out some of the richest people in the world never completed college (the college drop-out list includes billionaires Bill Gates, Michael Dell, Richard Branson, Paul Allen, Larry Ellison, Mark Zuckerberg, Ralph Lauren, and Steve Jobs (may he rest in peace), just to name a few)...these people didn’t need a piece of paper to become financially successful.  They had great ideas, tireless work ethics, and passion to drive them to success.  They achieved their great success by inovating and doing rather than trying to read about success in a book.

We are never returning to the places of the past (regardless of how many people long for this to happen).  Proposed protectionist government policies will surely fail as geographical, transportation, and communication boundaries continue to crumble around the world.     

The world is flat and getting flatter with each passing day.  The road to success will be built by those embracing these changes rather than resisting them.  While some are spending their time protesting and complaining (or simply giving up), the success stories of tomorrow are being written today.  The visionaries are searching for new ways to seize the multitude of opportunities before them today rather than bemoaning the current state of affairs.

Yes...the world is scary...but for some, it’s the ride of a lifetime. Thank you very much for supporting OptiFuse where we hope to join you on your ride to success...

Jim Kalb


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