Starting a new business! And some thoughts.

I've been very busy lately as I have decided to start my own business, but I wanted to get some thoughts down here that I've had lately. Some of these thoughts stem from my research in launching a new business. I'm starting a financial advisory that will cater to younger, less affluent individuals to help them improve their financial situation. The reason I'm starting this company is that, after working in the financial services industry (I was a portfolio manager and also assisted in creating financial plans and advising 401k participants), I realized that the cost of advice is simply out of reach for most people. The company I worked for had a soft $300,000 minimum for assets. I say "soft" because if you were young and had $300,000, you were in. If you were over 60 and had $300,000, you were probably going to get referred somewhere else. The kicker? That $300,000 portfolio would land you in the 1.25% fee bracket, meaning you are paying $3750 per year out of your investments for advice. So if you were one of the very few who amass a large amount of wealth at a young age, you are still going to get killed on fees. My own plan is to charge an affordable monthly subscription instead, which I hope to open the doors to sound financial advice to anybody who is interested.

This leads me to my next thought. Much has been said about the dissatisfaction among the working poor and middle class. When Trump was elected, the reasoning that I saw (and continue to see) is that people wanted and outsider, someone to burn down the current institutions because, as they saw it, the current institutions weren't working for them. The middle class seems to have turned on "the elite" (I hate that term, but I'm referring to public figures in media, politics, and generally recognized experts in the private sector) because they feel betrayed. So, they now are turning to other sources of information, which mostly turn out to be uninformed iconoclasts. I laughed when Trump tweeted "who knew health reform was so hard." EVERYBODY WHO KNOWS ANYTHING ABOUT HEALTH MARKETS KNEW THAT IT WAS HARD. Sorry, I get a little excited about this stuff. Even after expert after expert talked about the difficult trade-offs that must be considered when creating health insurance regulation, they seriously had no clue that this stuff is complicated.

One of the biggest issues I found when preparing to launch this business is that with so much information available, it is more important than ever to have trusted experts to sift through all that information and discern right and wrong. Basically anybody can write anything and use the megaphone that is the internet to reach a large audience, but popularity is a poor proxy for accuracy. Unfortunately, experts are held in pretty low esteem right now. While part of that is on us, I think the experts are at least as responsible. Why? Well, if you are an expert on polling data, you should not try to use your expert platform to talk about infrastructure. And if you are an expert on infrastructure, you should use your platform to rationally and reasonably inform people about infrastructure. The hyperbole has gotten so awful (even when people talk about things they are well qualified to talk about) that it seems like every conversation turns into an ideological battle. These conversations end up so far removed from facts, they do nothing but misinform and create deeper divisions.

I'm not sure how this business will turn out. Because I'm going to price this service at a very low cost, I will be doing it part time. Even if it is a booming success, I would have to take a steep pay cut to do it full time. So why am I doing this? Because I think it's important. The term "death spiral" gets thrown around a lot when people talk about health insurance. Well, people's personal situations are starting to teeter on the edge of a death spiral. Poorly informed financial choices combined with distrust of actual experts could spell ruin for all but the wealthiest individuals. If you are interested in learning more, feel free to contact me (@thetillett on twitter).

A quickie - thoughts on DeLong's article in Vox

This is just a quickie (both in thought process and writing, so forgive the brain dump), I'm entirely too busy with work/school/family right now and so this is going to be neglected a lot more than I would like. But I did see this article that I wanted to share - it is from Brad DeLong on Vox about trade and it's a pretty good piece.

The comments I hear following the election is that the common wisdom regarding trade is wrong; that trade isn't the boon that everybody has always that it is. In 2016, nobody wanted to come out and defend free trade. Instead, we had both parties pledging a reduction in trade deals, and even potentially increasing trade barriers. In the linked article, DeLong pushes back against trade's critics. From the article, trade has not been the main cause of manufacturing job loss. Technology has displaced more workers than trade, and it isn't even close.

Noah Smith has recently attacked a lot of "foundational economic principles" as not really working in the real world. Among those, Smith has criticized trade, saying that it may actually produce a net negative benefit. I have a lot of difficulty believing that. The argument Smith provides is that trade is reducing income and personal/social well-being in exchange for cheaper stuff. The value of the cheaper stuff, according to Smith, is not enough to offset the reduction in jobs and reduced social status for displaced workers.

Isn't this just the opposite of the diffuse cost, concentrated benefit argument? In this case, we have diffuse benefit and concentrated cost. Everybody gets cheaper (and generally higher quality/dollar spent) goods, but some people get a really awful outcome, even with cheaper goods, because their previously well-paid skills are no longer valuable. Isn't that still an overall better outcome than before? It sounds awful, but wouldn't we want to generally raise everybody's standard of living a little, even if a small minority's standard of living is reduced by a lot? Another issue with this argument against free trade is that even if we don't allow companies to offshore labor or import foreign goods, those jobs are going away regardless. The reason is simple - people are expensive and inefficient. So now, not only are we not going to get cheaper, better goods, but people are going to lose their jobs anyway. The problem that free trade has created is a workforce training problem - we turned skilled labor to unskilled labor. The solution, then, to free trade is that it requires a system to mitigate the negative labor externalities.