Student Finance 101

Last week I wrote a post about the Presidents pandering to college students and recent graduates with his executive order to change student loan financing. There is no denying that the debt load of student loans is extreme, but where I take exception is by coddling students that make poor choices by avoiding talking reality with them.

I found this article the other day that provides recent data on what professions generally pay:

Find a profession that you enjoy but don’t forget that your CHOICE of profession has direct correlation to how well you can pay for the investment in education to get there.

Truth is simple

I have come to a basic conclusion in life that one of the critical tests of truth and wisdom is how simple it is to express or explain. Which is very different from how I started as a young engineer years ago where my very livelihood was built on fixing complex things. But even in engineering I have come to appreciate that the ingredients of a truly successful engineering solution are simple things, not complex ones.

Steve Jobs is quoted as saying:

Simple can be harder than complex. You have to work hard to get your thinking clean to make it simple.

I didn’t know he said this until after his death recently but you can see this embodied in Apple products. I am often chided by my engineering colleagues for using so many Apple products since from their perspective they are “dumbed down” or inflexible. And then I take my iPhone out and do a basic test case side by side with their “better” phone, and most of the time I am done with the task much faster than my friends with their “better” phone. As I tell people, I use Apple products because they are simple to use……they just work.

My experience is that this principle extends to many other subject areas: life, relationships, politics, and religion. Looked at from the negative point of view, many deceptions are built on complexity for the simple reason to confuse and distract from the real story and truth. Some deceptions are not intentional or willful. The complexity vs simplicity principle remains the same but in those cases we use a different word: fallacy, something generally accepted but is not true.

A caution in this is that simple does not mean easy whether taken from the perspective of sharing truth to others or accepting simple truth ourselves. Why? From the perspective of the truth sharer, reaching the simplest form in order to express truth is hard work with a lot of cutting away to reach that point. Alternately, from the perspective of the truth receiver, it may be simple to understand but very difficult to accept the intuitive and natural conclusions that a truth requires.

This reminds me of an old consulting story I heard years ago. An older, retired businessman is asked to give a lecture at a conference and asked his fee for the service. He responded with 3 options:

Option 1 – a 60 min lecture for $5000

Option 2 – a 30 min lecture for $15000

Option 3 – a 15 min lecture for $25000

As any writer or spokesperson will tell you, the shorter the time you have to deliver a message, the more time it takes to hone and sharpen it to the ideas and concepts that truly matter. Truth is simple!

The Great Transfer State

One of the blogs I track is Econompic. Today he had a post that shows the sheer fiscal insanity that has taken hold in the USA in recent years. This is the key graph in his article:

There is a component of personal outlays called Transfer Payments. What is a Transfer Payment and why should you care? Here is the simple definition:

In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income in the market system. These payments are considered to be nonexhaustive because they do not directly absorb resources or create output. Examples of certain transfer payments include welfare (financial aid)social security, and government subsidies for certain businesses (firms). (Source

Basically Transfer Payment is code word for government sponsored welfare.

Why should you care? The data indicates that from 2001 to 2007, the rate of government sponsored welfare tracked the growth of wages. That’s not a bad problem but I would expect better considering over this period of time the USA had a boom in employment. The root of that problem is: DECREASING taxes. This may shock you the reader since I am a fiscal conservative, but in my humble opinion, the broad tax reductions over the past 10 years were very unwise.

Second reason to care about this data, as if you need another? In the economic train wreck of 2008, wages fell through the floor due to unemployment, no surprise. But, transfer payments (aka government welfare) shot through the roof filling a huge gap between wages and personal outlay. Hence why the USA is racking up so much debt over the same period.

The problem is that both policies, tax reductions and massive handouts, are fiscally insane taken to their extremes as is the case over the past 10 years. Put them together and the nation is at a level of insanity that is going to destroy this country. This is the simple truth of our situation:

  • There will always be taxes, it is what funds the government that provides our liberties and secures our safety. Be thankful for it.
  • There is an inherent need for personal responsibility. By providing for yourself, you get the natural satisfaction from working with your hands that a welfare payment can NEVER provide.
Folks, the current dialog in the media and the country is a death spiral. To restore fiscal sanity is to say that some taxes are necessary at a level we need to operate as a free people. AND we need people to contribute productively and get off welfare. Both major political parties are to blame; there is currently no right side of this debate IMHO. If we don’t the sign at the border will read:

Welcome to the Great Transfer State of the United States of America, population YOU!

Mr President, seriously?

I understand politics well enough to see from a mile away the motives for moves like this one, and it makes me want to wretch every time. My beef with the president on his “move” is that it perpetuates a mindset:

  1. That people can be isolated from their choices…even when they don’t understand the choices
  2. Personal responsibility doesn’t exist, the government will protect me and fix it for me
  3. Financial common sense is a virtue that is to be punished instead of rewarded

I don’t want to over-simplify the problem with Student Loans but why can’t people just speak the truth on these subjects instead of pacifying, pandering, and coddling?

I have room to speak authoritatively about this subject because in 2010 I finished my MBA and paid for it myself out of my own pocket. It’s no hidden secret that College is expensive and just this morning I saw the average cost increased by 8.3% last year alone! The problem will have to be attacked on both ends of the curve: the cost of education side AND the student education side!

Here is some basic Student Finance 101:

  1. Target a career post education and understand it’s basic structure of pay and benefits
  2. Estimate the costs of education to qualify you for the career you’d like
  3. Pick a college that fits your estimated costs
What I see far too often now days is this:
  1. I have no idea what I want to do as a career or what it takes to make a living
  2. Since I have no idea, that degree in Basket Weaving looks fun, let’s do that!
  3. I want to tell my friends I went to “CoolSchool U” now and later in life, I don’t care what it costs
And then you wonder why kids drop out of school as the reality of college cost sets in with no career in mind? Or they get out and then can’t find a job? We’re not giving our kids the skills to make intelligent choices based on FORESIGHT, UNDERSTANDING, and WISDOM! Mr President, please speak the truth about this problem and just maybe you can be taken seriously as the leader of the free world. Until then, you make us look like a Banana Republic that tries to change the rules of reality in an attempt to stay in power.

I could see that coming from a mile away

“I could see that coming from a mile away.” It’s cliche and hyperbole all in one! The phrase is often used when an obvious outcome reaches fruition. Sometimes you get lucky based on intuition with an outlook. But what separates the lucky from the good is the ability to use Strategic Analysis to cut through the “chatter” and see what really matters and then do that over and over again.

Now before those not interested in business click off the window, this is also a life principle. Instead of “Strategic Analysis” replace it in the above sentence with “Wisdom” and you have the same relationship and outcome. Wisdom provides the ability to see where others cannot. To project out in time with a reasonable confidence that an outcome will take place. Crazy thing is this as I’ve observed: people love Wisdom when it reaches a conclusion they like, but they despise Wisdom when it reaches a conclusion they don’t like. That is completely upside down thinking when you look at it objectively and hence why I do this blog.

Anyway, here’s a real world, bonafide case in action in the business world. Two years ago as I was having dinner with a colleague while on a trip in Germany, I whipped out my pen and drew this diagram on a napkin and then took 2 minutes to walk through the implications of what it means to the Semiconductor Test Equipment segment:

Given where the industry segment was at the time I said these are the following long range implications:

1) There will be industry consolidation of existing firms

2) The companies in the ditch must choose to stand toe-to-toe with the emerging “big guys” or become industry specialists

3) The industry has matured and with that the game is now about making money, not beating each other up through market share

So what’s happened over the last 2 years (and no, I’m not revising my memory or history, my colleague can attest to me saying this):

1) Two attempts at consolidation with the last one successful: Advantest buys Verigy. This leaves 2 big guys at the far right of the curve in the diagram above: Advantest and Teradyne. This principle is called the “Rule of 3” unless the market is clearly dominated or too small which can be revised to the “Rule of 2”.

2) There is one company, LTX Credence, that has been historically in the “ditch” for the past decade. They have a choice, become a specialist or languish with below average returns. The trouble with most Executives is that shrinking the firm in the course of specializing doesn’t align with their ego even if it means the outcome will result in making profit. So the bad news is that LTXC probably languishes with below average returns.And lo, you get headlines like this morning from them that their orders dropped off a cliff in the last quarter:

3) Sometimes the hardest to rationalize is that an industry has reached maturity. I know this one from the inside given I grew up with the birth of modern technology era and innovation. Folks here’s a message for Tech Workers: the industries making up Tech have matured in general. The days of tabloid grabbing headlines are largely over, and it’s down to the day-to-day life of making healthy profit. The implications are harder to swallow though. No more “risky tech projects” with visions of huge gains. No more acceptance of an idea just because it sounds cool. Get used to having to rationally justify your ideas and projects in ways that show they MAKE MONEY! Hype and visions of grandeur will no longer sell ideas.

I’m no wizard at business but I did stay at a Holiday Inn. LOL! Actually, I just spent time gaining practical business wisdom and then applied it to a situation. See wisdom itself is not what’s hard, it’s the application of it to myself that is truly challenging.

Common sense can prevail

I saw an article this morning on Yahoo! news feed from AP:

Superintendent gives up $800K in pay

Please overlook for the moment some of the glaring inconsistencies leading up to this such as: how in the world did he get a pay package that enormous to begin with? Since both my parents were teachers I have a natural affection to paying teachers what they are worth. But $800K for 3 years, that’s over the top. Which makes forfeiting it feel a tad less generous than the headline would seem.

None the less, the guy did do the right thing and it was his manner of doing it that caught my attention:

His move was so low-key, his manner so unassuming, that it took four days after the school board meeting for word of his act to get out to the community. There were no press releases or self-congratulatory pats on the back.


“When you make good choices, good things happen to you,” said Powell, who tends to talk in the kind of uplifting phrases that also make him a sought-after motivational speaker.

Now if only it would catch on!

There is a generation….

History repeats itself over and over again. As one generation grows from youth and then dies, the gains or losses they experienced don’t transfer to the next. It’s intuitive to see that people learn most from first hand experience which is unfortunate. I’m a history buff and World War 2 history in particular. There is a term coined for the people in America that fought and won WW II: The Greatest Generation. What made them “great”?

As I have reflected on that question I am of the mind that what made them great was not because they won the war. If it was limited to just winning, then the success of the United States the following 60 years would have been fleeting. Instead I believe that generations greatness was found in personal character built on morals that are immutable. Were they born with that or was it built from the ingredients of the moment, the time period they lived in? Again, fairly intuitive answer is they built it, each of them that were called to serve their country, one at a time through labor, sacrifice, and conviction. Put that together and in the face of world domination from two dictators the nation collectively said “This is not right!” and then were willing to do what was required based on that conviction.

Here we are 70 years from when WW II started and what are the ingredients of our time period, this era? I am gravely concerned what prosperity in the US has taught, or more correctly stated lulled, people of this time into. Character is mocked in favor of “group think”. Labor is marginalized in favor of a handout. Conviction is forgotten as the morals no longer matter.

Proverbs 30:11 begins four sayings from Agur about “there is a generation”:

  • Disrespects parents and authority (v11)
  • Self-righteous with no morals (v12)
  • Arrogant (v13)
  • Prey on the poor (v14)

And how many of these mark our present time and era? I dare say all four of them. A survey of teachers in 1945 asked what were the biggest problems in the classroom with top responses such as speaking out of turn, cutting in line, and running in the halls. Fast forward to 1995 and the same survey has responses of teen pregnancy, guns in school, drug and alcohol abuse. Why so much change in just 50 years? I’ll leave that for you to reflect on and find the answer for yourself.

What kind of generation do you want to be part of? A generation that builds character or watches it wither before your eyes? The greatest gift I can give the next generation is this: there are morals and character worth fighting for and that the greatest sense of accomplishment is found in knowing you’re right and willing to stand for it regardless of what “other people” think.

Find truth and build inner character based on conviction. It really does make a difference.