The False Home Renting/Owning Dichotomy

Home ownership is  cornerstone of the American dream and is a sign of success. Home ownership is also viewed by many as an investment vehicle due to the expectation of continually soaring home values. But in recent years, due to changing economy realities and also social norms among other reasons, a lot of assumptions surrounding home ownership are increasingly coming under question.

A key debate revolves around whether people should rent or own homes. Those who are against renting say  that rent is a drain and not an investment while those who are for home ownership see it as an investment vehicle. But on close examination, both a wrong viewed from the asset/liability prism.

An asset can be defined as anything which creates a positive cash flow and generates an income stream while a liability is the opposite.

In Rich Dad Poor Dad, Robert Kiyosaki argues that home ownership is not necessarily an asset or investment because at the end of each month  a negative cash flow exist. Thus, depending on how things are structured, how ownership is actually a liability due to all mortgage cost and also cost associated with the house.

But if things are structured correctly, a home can be turned into an asset. For example, owners of duplexes can rent out the other half in the hope of generating enough money each month to cover their mortgage payments while possibly reaping a profit. With the rise of Airbnb, almost every has the chance of turning their property into cash cows. Even if you rent and don’t own a home, you can always Airbnb where you live depending on how the landlord is receptive to that. Even, though that option might be unrealistic up to a point, it shows the possibilities which exist when it comes to using Airbnb to turn where you live into an asset.

Misunderstanding of issues to do with assets/liabilities when talking about housing comes down to misunderstanding as already pointed out. This has wider societal consequences because an understanding of this distinction can be carried over to other financial areas. In debates around so-called income inequality in society, a key driver is a misunderstanding of what assets and liabilities are. In many cases, for those who tend to be on the higher end of the income spectrum, their assets outweigh their liabilities while many people who are not on that end of the spectrum tend to have their liabilities outweighing their assets.

In housing decisions, a good understand of concepts to do with assets and liabilities is key. With that knowledge, things can be arranged in such a way that a net gain happens and home owners have a passive source of income.

 

The Net Neutrality Debate

In recent weeks, the net neutrality debate has come back into discourse. Net neutrality can be defined as: regulations under which Internet Service Providers (ISP’s) treat all internet traffic equally. While this sounds good, it deserves more critical examination. The main issues which deserve examination are:  issues of bandwidth being a resource and issues to do with cartels/monopoly, competition, and innovation.

The Resource Angle

Fundamentally, we live in – and always will – a world in which human wants outweigh resources and means available for achieving those ends. In other words, we live in a world of scarcity. The challenge – as it has been through the ages – is how to overcome these constraints by making sure scarce resource are controlled by those who can put them to the most efficient use.

Even thought bandwidth is an intangible good, it is a resource like another and is governed by the laws of economics. On any one day, millions of people in the United States are vying for the use of limited bandwidth. These uses range of watching movies on Netflix to running businesses. What net neutrality implicitly assumes is that all use of bandwidth is equal; that is patently absurd. It does not take a bright person to know that broadband usage in watching a movie on Netflix is not equal to broadband usage in running a business.

Just as with any resource whose uses outnumber availability, bandwidth producers should be able to change prices and speed accordingly so it can be redirected towards the most pressing needs. When barriers to entry are either minimal or no existent, changes in prices and speed signal that profits exist to be made. Consequently, competitors enter the market to meet this demand with services of equal or better quantity at equal or lower prices. Through this process, prices decrease over time while quality increases. Most importantly, competitors enter different segments of the market to meet consumer needs.  For Netflix and YouTube users, services could be developed for that niche while services could be developed for business uses. This is the story of the production of everything from automobiles to clothing and electronics in this country and in whatever country this process is allowed to work itself to the logical conclusion.

Net neutrality in effect is a  price ceiling (i.e prices below market price).  With providers being forced to treat all traffic equally, prices will paradoxically be  driven up as producers try to recoup lost revenue due to preferential pricing not being allowed. This could have a distortionary effect with some segments of the broadband consuming population subsidizing other segments in addition to broadband already being inefficiently allocated.

Monopoly, Competition, and Innovation

One of the hardly spoken about issues in the net neutrality debate are the effects it could have on monopoly, competition, and innovation among ISP’s. As alluded to already, net neutrality is a price ceiling of sorts. Its worth examining the effects price ceilings have on the development of cartels (i.e. producers colluding to set prices and quantities) and monopolies.

Cartels which emerge on an unhampered market are highly unstable because cartel members usually bolt when profit opportunities emerge. With net neutrality, an unintended consequence of a legally sanctioned cartel among major ISP providers emerging is a possibility. Unlike cartels which might emerge on an unhampered market, this type of cartel is very stable because deviating from the set price incurs legal penalties.

With a legally enforced cartel of sorts, competition would be stymied and the industry would become dominated by a few. Already many small ISP’s exist who are against net neutrality and contend that such rules would make their cost of operations higher. With the industry being dominated by a few, the level of service would not improve and competition would be slowed.

At a time when worries about crony capitalism and corporate interest trying to influence government policy is widespread, net neutrality and its effects on corruption should give everyone a pause.  With a regime of uniform prices, the few big players who dominate the industry could lobby to have net neutrality rules changed so it could have the effect of prices which they charge being increased. With higher prices, they are able to reap monopoly profits while erecting an effecting barrier to entry.

Conclusion

Net neutrality is a perfect example of looking beyond the stated intentions of policy and thinking about its unintended consequences. I doubt that anyone exist who would be against having an open internet or would be against the internet being opened up to more people. But as discussed with the issues analyzed, net neutrality could have a series of unintended consequences which in the end might  bring about some of the evils proponents of net neutrality were trying to prevent.  Going forward in the net neutrality debate, questions should be asked about what brought about the revolutionary  spread of the internet in the past 20 years and what can be done to speed up those mechanisms and reduce the barriers to entry ISP’s encounter.

 

 

 

 

Regret

The following has been adapted from a social media post.


One word drives my ambition and craziness (and probably what some people see as border line delusion; who cares what they think): REGRET. Never do I want to look back at things I possibly could have done later on in life.

I am determined that at later stages in my life never will I look back and say things like “I could have done ABC if I just showed some courage and did not allow what people thought and said to affect my decision making” or “How I wish I could have done XYZ when I still had so much energy and I was younger with less responsibilities”.

Fear of the unknown  and what has never  been tried is natural. Different people have different levels of fear and different tolerances for trying new and unknown things. Complicating this natural tendency is social pressure and not wanting to do things which deviate from what the crowd does.

In putting so much premium into what people say and think when making life decisions, a couple of questions need to be asked. We need to always ask ourselves if those people whose opinions we put so much value will be around or remember what they said during our later days of regret.  We also need to ask, if such people will easily be swayed if they were in our predicament and making their life choice and decisions.

Their is nothing wrong in chasing our life dreams and ambitions and being guided by what you see as best for yourself once you respect the right of others to do the same. Obviously, such decisions occur only after some consultation from family, loved ones, and friends in which they give you their opinions. In all my observations, I can say that people who follow their dreams and are undeterred by the opinions of others or how crazy and unrealistic they might look or sound usually live the most productive and fulfilled lives.

Overcoming Resistance

The following is based off a reply I gave to a discussion question on a Facebook Workplacce group by someone who asked how they can overcome resistance and the feeling of being overwhelmed at times. I have corrected for grammatical errors here and there and also expanded on my original reply. 


I never knew that I had ADHD until I was in college. But whether ADHD is even a valid or overblown phenomenon, I question at times. Maybe ADHD is simply kids reacting to the assembly line model of education and wanting to spread out their wings and explore. But one thing I can say is that you need to plan your days out as much as possible while prioritizing your interest and hobbies and also take a long run perspective.

For everything which you plan to do or even like, give it a ranking. For example, for all the task you plan to do each day, place a ranking next to each and begin with the highest priority till you finish off your lowest priority task.

Attach greatest ranking/priority to those things which will advance you professionally, enhance your value creation abilities,  and your ability to reach your aspirations in life while putting less priority on things which don’t help in reaching these goals. When I say “less priority”, I don’t meant abandon them, I just mean put less time and energy into them and work on them over longer periods of time.

Create something mental in your mind which makes you strive and stay focused. For example in my cases, its the image of a better tomorrow which will allow me to live and do things which I definitely would never be able to  if I went on a career engineering path.

Everyone differs in how they would go about doing this. Even though some general principles seems to work for everyone, its everyone’s task to find out as quickly as possible what works for them so they can effectively develop tools for overcoming resistance.

Finding out how to beat resistance can be done by researching and reading around to find out what people who face similar challenges  do.  No clear cut route exist in trying to find out and develop methods for overcoming resistance. Each person is unique and faces their unique challenges. But its up to everyone to furiously explore using all avenues they can possibly think about till they hit on something. In my case, I have become better at overcoming resistance over time with greater results to show but even then, this is still a work in progress!

Two Factors When Deciding To Move

One of the most important decisions to be made in our late teens and early 20’s is where to move to in search of opportunities. Many factors ranging from the cost of living, to rent, to availability of career/life building events and networks, and even safety are considered. But probably the two most important factors are the cost of living and rent.

In my case, things were/are kind of unique. Knowing that I was not going out to find a career job and was/is trying to build something from scratch and embark on an entrepreneurial journey, I was not constrained in having to move to a big city such as New York City or San Francisco by all means. I figured that even if I move to those places one day – I’ll confess I don’t want to – I could rather begin in a small city and fast growing city in which living expenses are more manageable for someone like me without job security.

I also figured that since Orlando is a city which is fast growing, a lot of avenues will exist for me to add value with a growing populations which would have needs to be met. From the research I have done and also from what I have seen since arriving, the tech scene is fast growing.  Also, a number of Orlando businesses have emerged in the past 7 years which have become national (and even international) names and brands (e.g. BitPay and Rife Paper Co).

In deciding where to move to, peoples decisions will be based on whether they are looking for jobs/careers or trying to create businesses and create jobs for others. For those looking for jobs, high quality and pay jobs usually (but not always) gravitates towards certain areas and they are constrained in where they can move to. But for those of us crazy enough to  try and create businesses and jobs for others, as much as the business climate in an area is a big factor, more scope exist in where to move to. At the end of day, in all cities – small, medium, or big – value would always exist to be added for those who know how to look around carefully and are patient enough.