Complex Numbers

Money Baloney

Thanks for the MB, Andy~hating university !



Today we're going back to that trusted source for all things financial, Cracked.

5 'Truths' About Business And The Economy That Are BS  

Lots of people get money things wrong. Like when they insist they'll take home less money if they move to a higher tax bracket. Well, that might happen if tax laws change year to year, but no, otherwise that can't happen. Or when people conflate "income" with "wealth." Someone could make a million dollars a year and still have nothing left over; contrariwise, you could make 100K a year and save half of it.

But I think this article is more general than that.

Our lives are one long timeline of discovering everything thought we knew about money is wrong. Early on, we're shocked to learn fairies don't really hand out money for teeth but people do voluntarily exchange money for vegetables.

Actually, I knew that last bit from an early age, as we sold our surplus vegetables.

5. Everything People Think About What Companies/Billionaires Are Worth

In general, any given thing is "worth" exactly what people are willing to trade for it, usually denominated in some currency.

And what about those richest people in the world, going from net worths of $100 billion to more like $200 billion in no time at all. Where's all that money coming from?

Built on the backs of labor. Rise up and- oh, wait, no.

They're about stocks, and stocks are a special kind of made-up value. Like, you might say that all kinds of value are made-up, but stocks are super made-up, and a lot of people don't get this.

The article goes on to explain the stock market in what I consider simple terms. But fair warning; there is math involved. But in conclusion (for this first one, anyway):

But you don't have to get extra worked up over the terrifying spectre of unrealized capital gains. You're worrying about money that doesn't actually exist.

And that's the -- pun intended -- money quote. Capital gains aren't taxed until they're realized. We can argue about how much they should be taxed, but keeping one's money in the stock market isn't "evading taxes;" it's kicking the tax can down the road.

4. "You Can't Pay Employees $15 An Hour And Profit!"

"We won't make money if we pay employees more!" say companies. And the general populist response to this is "lol, fine." Higher wages are about letting employees live better, not about keeping profits high, right?

Again, the article goes into the math involved. But my own take on that nonsense: If you pay people more, they will have more income (duh) and they will be able to spend it on products and services, thus keeping the economy rolling.

3. "All Of Our Tax Money Goes Into Defense"

"We'd have enough money to pay for health care for everyone and wiping out debt and universal basic income and more if we only trim that ridiculous defense budget," people say. And the US does spend a lot on defense, more than the next several countries combined. But did you realize that the government spends more on Medicare than on the entire Department of Defense? Going by 2020 numbers, it's $917 billion on Medicare and $714 billion on defense.

And to be clear, we should spend money on defense. And we also should spend money on health and infrastructure. The issue is more complicated than I (or Cracked) can really grok.

For example:

So if you're wondering why Bruce Wayne wastes money on batarangs rather than solving crime by lifting all of Gotham out of poverty, maybe it's because his fortune can only go so far in a city of 10 million. Or, if you're wondering why Bill Gates doesn't just end world hunger tomorrow, well, we'd love to hear what your plan is for permanently feeding billions of people using only tens of billions of dollars. The government would probably like to hear that as well. They have tens of billions too.

2. "College Students Are So Narcissistic Today You Can't Hire Them"

The generation coming out of college right now harbors deep self-loathing. A constant need for approval doesn't signal a high opinion of oneself but rather the complete opposite. Many youngsters today don't even want to be alive. They're bitterly desperate to be hired and will even utterly debase themselves in the process.

Which is, like, the polar opposite of narcissism.

Every generation ends up complaining about "kids these days." We have short (and selective) memories.

1. The Myth Of "Self-Made" Fortunes

Few things get our eyes rolling harder than hearing a newly rich entrepreneur described as a "self-made millionaire" or "self-made billionaire." Because outside of the very rare exception (say, Oprah), these people didn't start from humble beginnings at all, did they?

That is, of course, a rhetorical question.

A self-made billionaire is someone who started their own business and grew their money to a billion, even if they had some money to begin with. If you start out with $1 million and grow it to a billion thanks to the company you start, you are a self-made billionaire.

It's a matter of definition. I figure if you generally grow your net worth, or at least have a plan when you don't, you're in good financial shape. I don't worry much about "self-made." The only time it matters to me is when someone claims to be "self-made" when they, as the saying goes, scored a home run while starting on third base. It sends the wrong message, among other problems.

On the other hand, if you put a bunch of cash into Bitcoin or other Dunning-Kruggerrands a while back, you may have a few million bucks on paper, but the above comments about unrealized capital gains apply.

And then there's the author:

For what it's worth, if I inherited $500 million, I would never manage to grow it to $1 billion or more. I would immediately spend the bulk of it creating Robot Island, and I'd deliberately run the place using a nutty business plan that loses money, as I build ever more elaborate singing animatronics. What do I care about becoming a self-made billionaire? I'm rich.

And you certainly wouldn't be writing for Cracked.

Anyway, the article's a good read, with the usual humorous take on things, but still largely factual.