As we close out the 2010s, here's what's shaped my last 10 years:
Conversely, the rest of the world lagged this decade. In 2009 I thought that the epicenter of the GFC would be the last to recover. I was wrong, so I am glad I invested in it anyway.
Not least because the US closes out the decade with a strong stock market and a strong dollar, there is no reason this should continue. With healthy profits and low borrowing costs, there is also no reason this won't.
I don't have kids, but my mates who did essentially multiplied already mounting basics costs. I don't have to send anyone to private school. I don't have to live in a particular school zone. I can stay at home (transport costs: nil) and smash the PS3 (price: -22%). What cost of living increase? Despite not being mainstream, I get the impression people think I'm risk-averse. Go figure.
A boss once told me, 'Do what you love and you won't work another day in your life'. That was douche-code to coerce unpaid overtime. It's nice to know that the need to work can be offset by simply not doing what I don't love.
Aside: Category inflation relates only partially to labor.
Education and healthcare are labor-intensive, and resist automation and offshoring more-so than manufactured goods.
However, property requires no work. It's possible though, that rising rents push everything else up as everything produced in local urban areas cannot avoid them.
Baumol's cost disease means that sectors with low productivity improvements see the same wage rises as sectors which greatly improve productivity. This can work another way if overall production and consumption remains the same: low productivity sectors won't experience the same wage falls as sectors where higher productivity has reduced the demand for workers.
Areas with barriers to productivity improvements are not so much pocketing unwarranted gains as they are protected from warranted losses.
You don't get a raise. You get to keep your job.
A mate confided to me that he was lucky he got hired on one of the 'old' contracts, unlike the new guys who could have their logins changed within hours. Still, having your sole competitive advantage be incumbency doesn't do much for your self-esteem. I guess supporting a family leads you to swallow a few things you otherwise wouldn't.
Decreasing labor share of the economy is lumpy. We don't get as many doctors laid off as we do coal miners. This selectivity is often used to promote education. Right, like redundant tradies are all going to start coding Python.
Rising education costs already point to retraining becoming a crowded trade that's potentially less attractive than alternatives.
In fact, people have always sought to own the means of production rather than be the means of production. After all, people used to own people, so there's no reason why we can't shift focus to owning robots.
To get the cognitive tools to examine my beliefs - be they personal like worker alienation or global like liberal democracy's manifest destiny - required me to get some education in the humanities: history, sociology, which I did at zero cost.
Wait, what? Didn't I just say that school's price tag is going through the stratosphere?
Education standing in for certification clues us in on why it's resistant to downward price pressures from globalisation.
So given that inequality itself is becoming globalised - that being a winner or loser of globalisation is going to be pretty similar wherever you are - why migrate to expensive places that may have put their growth days behind them?
Like, why isn't a China an aspirational migration destination?
Ah, but what if your aim was safety, not opportunity?
The flipside of stagnation is stability. Australian households headed by those aged over 65 represent a quarter of households and hold a third of all wealth. (c.f. U.S., households with heads > 65 years make up a quarter of households and hold 39% of wealth; Japan: households with head > 60 years: 51% of population own 66% of savings.)
Younger populations have less to lose from rapid change, while older richer populations are, I think, more likely to vote to protect the rules that enriched them rather than to risk reforms that may benefit (undeserving) others, and Australians in 2019 did just that.
Countries that import more than they export are naturally positioned to attract foreign investment.
In the shadow of the GFC and the longest bull market, like, ever, people still pile into the U.S. and other developed nations despite increased buy-in cost and mediocre prospects because it's a recognition of how incumbent attitudes, incumbent associations, and incumbent individuals protect asset values from disruption, innovation, and reform.
Places where it's safer to own stuff are preferred over places where it's easier to do stuff.
Education proxies local certification proxies migration proxies security. This has been running for a decade.
Sure, not every fee-payer is looking to shift assets, but it only takes one trade to set the price.
So my questions to my contemporaries staring down the barrel of their kids' school fees: If residency was the endgame and not education or even career, why would you compete with others who are prepared to shell out fortunes - even paying to work in unpaid internships? Particularly if it's something you might already have?
Want to talk about downside risk? One divorce will wipe out a lifetime of alpha.
Talk about buying into a legally protected local incumbency!
So safeguarding the marriage is one of the best investments in safety I could make.
For the next ten years and hopefully beyond.
1. This was a decade for the U.S.
Consider that 5 years to date the S&P 500 is up 57% vs MSCI World's 37%.Conversely, the rest of the world lagged this decade. In 2009 I thought that the epicenter of the GFC would be the last to recover. I was wrong, so I am glad I invested in it anyway.
Not least because the US closes out the decade with a strong stock market and a strong dollar, there is no reason this should continue. With healthy profits and low borrowing costs, there is also no reason this won't.
2. Consumption choices matter
In short, tech got cheaper while education got ... ludicrous.A boss once told me, 'Do what you love and you won't work another day in your life'. That was douche-code to coerce unpaid overtime. It's nice to know that the need to work can be offset by simply not doing what I don't love.
Aside: Category inflation relates only partially to labor.
Education and healthcare are labor-intensive, and resist automation and offshoring more-so than manufactured goods.
However, property requires no work. It's possible though, that rising rents push everything else up as everything produced in local urban areas cannot avoid them.
3. Inflation does not mean higher salaries
Does your doctor pocket your increased co-pay? Do you think little Johnny's teacher sees any of the 'facilities' fee you shelled out? Bahaha. No.Baumol's cost disease means that sectors with low productivity improvements see the same wage rises as sectors which greatly improve productivity. This can work another way if overall production and consumption remains the same: low productivity sectors won't experience the same wage falls as sectors where higher productivity has reduced the demand for workers.
Areas with barriers to productivity improvements are not so much pocketing unwarranted gains as they are protected from warranted losses.
You don't get a raise. You get to keep your job.
A mate confided to me that he was lucky he got hired on one of the 'old' contracts, unlike the new guys who could have their logins changed within hours. Still, having your sole competitive advantage be incumbency doesn't do much for your self-esteem. I guess supporting a family leads you to swallow a few things you otherwise wouldn't.
4. The overall picture does not look good for labor
Rising education costs already point to retraining becoming a crowded trade that's potentially less attractive than alternatives.
5. Learning to break up with work
Gotta admit, I'm biased. My careers lasted only twice as long as my degrees so I don't see the sense spending more to start (again) from the bottom for a shorter ride. Despite that, I'm still hooked on the idea of working towards a vocation, a calling, a passion. I want to be asked, 'what do you do?' and not cringe. 'I own stuff that gives me money' doesn't feel so good despite it being bread and butter for most of this decade.In fact, people have always sought to own the means of production rather than be the means of production. After all, people used to own people, so there's no reason why we can't shift focus to owning robots.
To get the cognitive tools to examine my beliefs - be they personal like worker alienation or global like liberal democracy's manifest destiny - required me to get some education in the humanities: history, sociology, which I did at zero cost.
Wait, what? Didn't I just say that school's price tag is going through the stratosphere?
6. Education is free, Certification is expensive.
(Over)simplified, education is the transmission of knowledge. Know what else is transmission? Actual transmission, as in sending data packets, and the cost of that has cratered. I learned how to repair my tablets and program a flight simulator by reading webpages. I wouldn't be surprised if I could learn how to perform minor surgery on YouTube. If I successfully put scalpel to skin, the only difference between a government-sponsored income and jail would be a $60,000 piece of paper.Education standing in for certification clues us in on why it's resistant to downward price pressures from globalisation.
7. Certification is expensive is Migration
So why would you pay $11000 a year to study medicine in Australia instead of ₹30,000 ($610)? It's not like human biology is regional. Spoiler: Territorial license is part of that price gap.
In Australia, education is a pathway to permanent residency. Given the option, people would rather live in Australia than in India.
But why?
Step back. Total Migrant stock went from about 6M in 2010 to 7.5M in 2017. Of the top 10 international migrant destinations, 7 are first-world countries (Australia ranks 9th).
Australia may have non-economic pull factors, but would you honestly pay high five-figures for nice beaches and larrikin locals? No. Migrants pay an economic price, so they would be total idiots not to expect an economic reward.
Of economic factors, India - typical of emerging nations - has higher unemployment but also higher GDP growth. The potential for progress is higher in the younger developing world.
Indeed, one of the big deals in the last two decades has been the fall in global poverty. Why would you not want to be part of that success story?
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| Extreme Poverty Rate (USAID) |
Aside: inequality has risen within nations and fallen across them. We no longer marvel that we can find McDonalds or Starbucks wherever we are, we expect it. Going further, every city displays legions of homeless sleeping in downtowns that look like Apple stores.
So given that inequality itself is becoming globalised - that being a winner or loser of globalisation is going to be pretty similar wherever you are - why migrate to expensive places that may have put their growth days behind them?
Like, why isn't a China an aspirational migration destination?
Ah, but what if your aim was safety, not opportunity?
8. Age be for Booty
Australia, like Europe, like Canada, like the U.S., is a stable economy with a history of the rule of law. This benign description also fits the type of place that resists disruption even though established incumbencies invite it. GoJek and Grab grew faster in South East Asia than Uber did in the U.S.The flipside of stagnation is stability. Australian households headed by those aged over 65 represent a quarter of households and hold a third of all wealth. (c.f. U.S., households with heads > 65 years make up a quarter of households and hold 39% of wealth; Japan: households with head > 60 years: 51% of population own 66% of savings.)
Younger populations have less to lose from rapid change, while older richer populations are, I think, more likely to vote to protect the rules that enriched them rather than to risk reforms that may benefit (undeserving) others, and Australians in 2019 did just that.
9. Respect for Private Ownership is an export
One good thing about this decade's election victories of populist demagogues is that it prompts us to re-educate ourselves. Case in point: many developed nation politicians decry their countries' current account deficit. So I got to learn about how that's not the end of the story. In short, current account deficit (oh no!) = capital account surplus (hell yeah!). It's Balance of Payments. It's accounting. Rich countries make it easier for foreigners to own their stuff so that their population can have nice things. It's totally win-win.Countries that import more than they export are naturally positioned to attract foreign investment.
Tying this jumble so far together: The decade of the entrenched.
In the shadow of the GFC and the longest bull market, like, ever, people still pile into the U.S. and other developed nations despite increased buy-in cost and mediocre prospects because it's a recognition of how incumbent attitudes, incumbent associations, and incumbent individuals protect asset values from disruption, innovation, and reform.
Places where it's safer to own stuff are preferred over places where it's easier to do stuff.
Education proxies local certification proxies migration proxies security. This has been running for a decade.
Sure, not every fee-payer is looking to shift assets, but it only takes one trade to set the price.
So my questions to my contemporaries staring down the barrel of their kids' school fees: If residency was the endgame and not education or even career, why would you compete with others who are prepared to shell out fortunes - even paying to work in unpaid internships? Particularly if it's something you might already have?
10. Marriage
I've been totally lucky this decade, but this has been my unicorn.Want to talk about downside risk? One divorce will wipe out a lifetime of alpha.
Talk about buying into a legally protected local incumbency!
So safeguarding the marriage is one of the best investments in safety I could make.
For the next ten years and hopefully beyond.
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