Small business owners need to track all of their business numbers in Excel, and this video introduces the most commonly used functions, Sum and Average. This is video #4 (of a total of 6) that I made on behalf of a regional micro lending organization, Accion Texas.
If you’ve never learned to use Excel before, here’s your chance to get started on this essential software tool.
David Simon, creator of The Wire, wrote the best piece I’ve read in a long time about inequality in the West, and our impoverished political dialogue about it.
Please read this in full because Simon engages with complexity, and that doesn’t work in just one paragraph. Nevertheless, I will summarize it for you: “Capitalism is about to seize defeat from the jaws of victory” by disregarding some of the diagnosis, and some of the methods, of Socialism.
With Bankers Anonymous, my goal is to write non-ideologically. I comment on topics as an ex-finance guy with experience and extraordinary respect for the advantages of markets. I liked selling bonds, I liked investing rich people’s money, I like earning money, and markets work WAY better than anything else we’ve come up with for raising standards of living, generating material comfort, innovating in health care, and creating leisure time. You name it, markets work better for creating a better life for billions of people.
At the same time kids – right here America, within a few minutes walk from my house – kids do not have enough to eat. Markets alone aren’t exactly working for everyone. So please don’t give me your Ayn Rand “Capitalism Uber Alles” libertarian bullshit about free markets are always best, or that a health care reform aimed at insuring children and unemployed people is an inevitable move to Marxist totalitarianism.
Simon’s piece is worth reading in full. You don’t have to be a Marxist in practice – and Simon is not one, and I am not one – to recognize the ways that raw capitalism is unhelpful in some areas, and totally broken in others.
We need a mixed system and anyone who believes in a ‘purer’ system of capitalism, or socialism for that matter, is missing the point.
And now for something completely different: Mexican Democracy.
No, that’s not the name of Axl Rose’s next tortured, long-awaited, magnum opus.
Mexican democracy is a topic I used to obsess over before I became a finance guy, on my distinguished journey to the pinnacle of achievement: an obscure ex-banker typing up his opinions on finance, while wearing pajamas.
Nearly 20 years ago I was among the foremost scholars in the US, writing in English, on historical reforms to the Mexican Constitution.
Seriously. Ok, there were about 3 of us in the whole world who cared, but still.
I’m certain that the other 2 people in the world who read this paper the first time around found my views fascinating.
But guess what? I was right then, and I’m still right, dammit. That’s why I’m removing the foil on some fancy imported beer for Mexico to celebrate this week’s reform.
A visual representation of honoring Mexico’s reform this week
Some Mexican political history background on ‘No Re-Election’
For the past 100 years or so, and up until this week, elected officials in Mexico have never been allowed to run for re-election.
Not the President, not Governors, not Mayors, not Senators, and not Representatives.[1]
A history of authoritarianism
“No Re-Election” in fact has always been the #1 political principal and key slogan of the Mexican Revolution[2] – dating back to 1917 – in response to Mexico’s troubled 19th Century history of strongmen who occupied the Presidential Palace like incurable infectious diseases.
By forbidding re-election at the Presidential level, Mexico avoided cults of Presidential personality that plagued much of Latin America[3] throughout the 20th Century. Most people believe the ban on Presidential re-election served Mexico well.
Unfortunately, the key constitutional weaknesses of Mexican democracy to this day also flow from this same ban on re-election.
An overly strong party system, and an overly strong presidency, are the logical consequence of the constitutional ban on the re-election of legislators.
You don’t like the US Congress? At least they have some responsibilities. Let me introduce you to something worse.
The Mexican Congress has toiled in laughable irrelevancy since the Mexican Revolution.
You see, when you get elected to a 3-year term in the Mexican legislature, with no possibility for re-election, there’s kind of no point in doing your current job. You need the next job. And that next job doesn’t come from the people who voted for you, but rather from your party bosses and the President’s patronage machine.
With no re-election, there’s no possibility of legislators learning the ropes. There’s no possibility in the Mexican Congress of developing a long-term personal power base – through constituent services, long experience, and the ability to pass complex legislation.
If you’re in the Mexican Congress you are the kale salad at a BBQ Meat-opia even. The Mexican Congress is a loaf of white bread at the buffet of a gluten-free Paleo-diet convention.[5] If you’re in the Mexican Congress nobody cares about you.
At least the US Congress matters.
You may not like Harry Reid or Mitch McConnell or John Boehner or Nancy Pelosi or any number of powerful legislators, but you have to admit:
They wield power.
They effectively advocate causes and coalesce interest groups.
They serve as a check on the Executive & Judicial branches of government.
The result of the constitutional “No Re-Election” rule on separation of powers has been catastrophic, historically, for Mexican democracy.
Power has concentrated in the hands of the ruling party and the President unfettered by a stunted Legislative branch (and for others reasons, a flaccid Judicial branch[6])
The consequences of this week’s new law, in context
Do I think allowing for re-election in the Mexican Congress will spark a flowering of good governance, model democratic process, and a beacon of hope on our southern border? Not quickly, and not noticeably at first. I’m an optimist, but I’m not an idiot.
So then how important is this?
Look, re-election doesn’t solve – in the short run – top priorities like grinding poverty, or drug violence, or the myriad other structural challenges for Mexico right now.
On the other hand, I don’t think effective national governance can develop without allowing re-election in the Mexican legislature. So this reform – which partially retracts a key pillar of the Mexican political identity forged in their 1917 Revolution – represents one of those subtle but ground-shifting institutional reforms that over the long run opens up new possibilities. I’m celebrating, cautiously, on behalf of our southern neighbors.
Mexico – my favorite country except my own – deserves so much better than what it generally gets from its government.[7]
In sum, Negro Modelos for the rest of the week, but I’m not breaking out the high-end tequila yet.
Ps. Rest assured, dear fellow finance obsessives, I don’t expect to re-engage deeply with writing about historical reforms to the Mexican Constitution on Bankers Anonymous. I just wanted to share my joy with someone (anyone?) that a small, but key, change is happening in Mexico.
Pps. Also, if you suffer from insomnia, I can help you! Please see my 1997 papers on historical reforms to the Mexican Constitution, in particular this one about the Mexican Judicial Branch, and this one on the Mexican Legislative Branch.
I’ve got boxes of these reprints still cluttering up my basement storage. First person to find me a book agent gets an autographed copy of the physical reprints sent to them in the mail. They make great stocking stuffers!
[1] As in the US, the Mexican Legislature is bicameral, with a Senate and a House of Representatives (Camara de Diputados).
[2] The phrase “Sufragio Efectivo, No Reeleccion,” (“Effective Ballots, No Re-election”) actually dates, ironically, to a campaign slogan by Porfirio Diaz in the 1870s. But Diaz quickly decided – once firmly in power in the 1880s – that his own frequent re-election served Mexico’s best interests! He held on to the Presidency through brutal control of everything, including elections, until fleeing the country in 1911, upon the outbreak of the Mexican Revolution.
[3] And Spain, and Portugal, and Italy, and Germany, and Russia, and China, and Indonesia, and several dozens of other countries in Asia and Africa.
[4] I’m simplifying the issue of disrespect for the US Congress. It turns out people generally like their own representative, but find everyone else’s representative to be extremely loathsome. I suppose this explains the paradoxical 95% percent incumbency re-election and 10% Congressional approval ratings? Also, people generally believe the other side’s hard-core party stalwarts are really driving this country over the cliff. And of course things seem to be getting worse. This has been the prevailing view of all good Americans about their Congress since about 1793.
[5] Forgive me, writing this post has interrupted my lunch hour.
[6] On the Judicial Branch, one piece of data is all you need to know. Teaching law at a decent law school in Mexico traditionally accrues more power and prestige to an attorney than serving on the Mexican Supreme Court. Seriously. If you have trouble sleeping at night, can I interest you in a paper by yours truly on the Mexican Judicial Branch published in 1997?
[7] Mexicans sum up their historical suffering with a phrase attributed (probably wrongly) to 19th Century dictator Porfirio Diaz :”¡Pobre México! ¡Tan lejos de Dios y tan cerca de los Estados Unidos!” (Poor Mexico, so far from God, so close to the United States!)
Excel is so useful for small businesses that I’m posting a series of short instructional videos I made in collaboration with Accion Texas, a regional micro lending organization. The idea is to get entrepreneurs to start tracking their sales, customers, revenues, and profits in a more useful format than a sheet of paper or the back of a notebook.
This is video #3, introducing the idea that Excel can be programmed to do any math you can think of, something which is especially useful for small businesses.
I’ve gotten in the awkward habit on Bankers Anonymous of stealing monthly thoughts from an investment advisor named David Hultstrom of Financial Architects LLC – about whom I know very little – except that he writes very clearly and sensibly about personal investing.
In this month’s note to his clients he addresses the issue of time horizon and the probability of stocks beating bonds, or more broadly stated, risky assets beating non-risky assets. Hultstrom provides a graphical illustration of the probability, based on historical data, of higher returns from stocks than from bonds. What his graph shows is that the longer your time horizon, the higher the probability that you will outperform if your portfolio holds stocks, or risky assets, rather than bonds, or non-risky assets.
Probability of outperformance stocks vs bonds
Of course, history is no guarantee of future outcomes, but it can be a useful guide.
[NOTE: What I say next is my own personal interpretation of Hultstrom’s graph, not a paraphrase of his investing advice. I suspect from reading him over time that he would be more cautious than I am about to be. Also he has actual clients with money on the line and I do not have fiduciary responsibility for any individuals beyond my own family. So I can be pleasantly improvident and bold. Apologies in advance to Hultstrom for taking his great graph and using it for my own aggressive statements.]
Question: Where to invest?
Answer: 100% equities, for the long run
Whenever I hear someone wonder whether her retirement account should invest in a mix of stocks or bonds, or even whether his young child’s college fund should hold bonds, I wish for this graphical presentation. Maybe I will start carrying it around in my back pocket, and I’ll wave it in front of people seeking the false security of bonds. Long-horizon projects like retirement – or a young child’s college fund – must be almost entirely dedicated to equities or similarly risky assets.
You can’t afford to invest in bonds, or cash, or money markets.
Of course, not necessarily for the short run
If you have a 1 to 5 year investment horizon, you take a considerable risk owning stocks, relative to bonds. Considering Hultstrom’s graphic, you run a 30% risk of underperformance owning stocks for a short term, say less than 5 year, period.
If, on the other hand, you have a 15-year investment horizon, or longer, you’re hardly taking any risk of underperformance at all. On the contrary, you practically guarantee underperformance by owning bonds – close to a 90% certainly over a 15 year period, and a 99% certainty over a 20 year period, if history can be believed.
Be prepared for volatility
Hultstrom also helpfully points out that during your holding period – sometime within that, say, 20-year time frame – your stock portfolio can be expected to lose 40% of its value because that’s what risky assets do. But your entire return, held for the long haul, will beat bonds or riskless assets 99+% of the time.
I’m only 41, and I’ve got another 70 years or so before retirement.[1] So it has to be 100% stocks in the retirement portfolio for me.
[1] I’m descended from Hobbits. No retirement until my 111th birthday.
The Washington Post published this last month and I missed it, but there’s no time like today for good graphical representations of inequality. The Washington Post ranks zip codes from the 1st to 99th percentile based on the average income and college education of residents, relative to all other US zip codes.
A few fascinating points, at least for me.
I agree that the combination of income and education level matter when comparing the geographic distribution of inequality.
Zip code is a crude measure compared to street-level granularity. Some consider my immediate neighborhood relatively affluent, but my zip code ranks a 9 on the map, the bottom decile in the country.
Many affluent people, in addition, would not choose to live in my neighborhood because it is relatively heterogeneous. Which is a fancy word for rich people don’t want to live near poor people, so they avoid my neighborhood. My neighborhood also borders and is very close to poverty-stricken areas on the map, zip codes that rank a 1 nationally.
