Tag Archives: excess

Idea Soup

Black Friday – OptOutside

rei-optoutside

I’m not a great fan of consumerism. And, I especially detest so-called “Black Friday” — a vulgar and avaricious corporate-America-sponsored-gluttonous-shopping-frenzy that seems to infest the public psyche the day after U.S. Thanksgiving.

So, I was pleasantly surprised to receive a recent email from the REI (Recreational Equipment Inc.) co-op, of which I’m a member, declaring that all 140+ of their stores will be closed on November 27 — Black Friday — in addition to Thanksgiving Day. Now, the cynic in me detects some level of self-serving marketing spin designed to increase REI’s foot traffic when their doors reopen on November 28, and beyond. But, I must say I’m all for #OptOutside — a day for fresh air, muddy boots, enormous vistas and no shopping. I hope other retailers follow suit and consumers opt to spend their time outside rather than spending cash inside.

CEO, Jerry Stritzke, penned the following on the REI website:

REI is closing on Black Friday.

You read that correctly. On November 27, we’ll be closing all 143 of our stores and paying our employees to head outside.

Here’s why we’re doing it.

For 76 years, our co-op has been dedicated to one thing and one thing only: a life outdoors. We believe that being outside makes our lives better. And Black Friday is the perfect time to remind ourselves of this essential truth.

We’re a different kind of company—and while the rest of the world is fighting it out in the aisles, we’ll be spending our day a little differently. We’re choosing to opt outside, and want you to come with us.

So, I encourage you to do the same wherever you may be; keep your fingers off Amazon and your feet away from Walmart’s aisles, and be part of nature’s great outside.

Image: Flatirons, Boulder. Courtesy of the author.
Idea Soup

The Haves versus the Have-Mores

los-angeles-billionaires

Poverty and wealth are relative terms here in the United States. Certainly those who have amassed millions will seem “poor” to the established and nouveaux-riche billionaires. Yet these is something rather surreal in the spectacle of watching Los Angeles’ lesser-millionaires fight the mega-rich for their excess. As Peter Haldeman says in the following article of Michael Ovitz, founder of Creative Arts Agency, mere millionaire and landlord of a 28,000 square foot mega mansion, “Mr. Ovitz calling out a neighbor for overbuilding is a little like Lady Gaga accusing someone of overdressing. Welcome to the giga-mansion — Roman emperor Caligula, would feel much at home in this Californian circus of excess.

From NYT:

At the end of a narrow, twisting side street not far from the Hotel Bel-Air rises a knoll that until recently was largely covered with scrub brush and Algerian ivy. Now the hilltop is sheared and graded, girded by caissons sprouting exposed rebar. “They took 50- or 60,000 cubic yards of dirt out of the place,” said Fred Rosen, a neighbor, glowering at the site from behind the wheel of his Cadillac Escalade on a sunny October afternoon.

Mr. Rosen, who used to run Ticketmaster, has lately devoted himself to the homeowners alliance he helped form shortly after this construction project was approved. When it is finished, a modern compound of glass and steel will rise two stories, encompass several structures and span — wait for it — some 90,000 square feet.

In an article titled “Here Comes L.A.’s Biggest Residence,” The Los Angeles Business Journal announced in June that the house, conceived by Nile Niami, a film producer turned developer, with an estimated sale price “in the $150 million range,” will feature a cantilevered tennis court and five swimming pools. “We’re talking 200 construction trucks a day,” fumed Mr. Rosen. “Then multiply that by all the other giant projects. More than a million cubic yards of this hillside have been taken out. What happens when the next earthquake comes? How nuts is all this?”

By “all this,” he means not just the house with five swimming pools but the ever-expanding number of houses the size of Hyatt resorts rising in the most expensive precincts of Los Angeles. Built for the most part on spec, bestowed with names as assuming as their dimensions, these behemoths are transforming once leafy and placid neighborhoods into dusty enclaves carved by retaining walls and overrun by dirt haulers and cement mixers. “Twenty-thousand-square-foot homes have become teardowns for people who want to build 70-, 80-, and 90,000-square-foot homes,” Los Angeles City Councilman Paul Koretz said. So long, megamansion. Say hello to the gigamansion.

In Mr. Rosen’s neighborhood, ground was recently broken on a 70,000- to 80,000-square-foot Mediterranean manse for a citizen of Qatar, while Chateau des Fleurs, a 60,000-square-foot pile with a 40-car underground garage, is nearing completion. Not long ago, Anthony Pritzker, an heir to the Hyatt hotel fortune, built a boxy contemporary residence for himself in Beverly Hills that covers just shy of 50,000 square feet. And Mohamed Hadid, a prolific and high-profile developer (he has appeared on “The Shahs of Sunset” and “The Real Housewives of Beverly Hills”), is known for two palaces that measure 48,000 square feet each: Le Palais in Beverly Hills, which has a swan pond and a Jacuzzi that seats 20 people, and Le Belvédère in Bel Air, which features a Turkish hammam and a ballroom for 250.

Why are people building houses the size of shopping malls? Because they can. “Why do you see a yacht 500 feet long when you could easily have the same fun in one half the size?” asked Jeffrey Hyland, a partner in the Beverly Hills real estate firm Hilton & Hyland, who is developing five 50,000-square-foot properties on the site of the old Merv Griffin estate in Beverly Hills.

Le Belvédère was reportedly purchased by an Indonesian buyer, and Le Palais sold to a daughter of President Islam Karimov of Uzbekistan. According to Mr. Hyland, the market for these Versailles knockoffs is “flight capital.” “It’s oligarchs, oilgarchs, people from Asia, people who came up with the next app for the iPhone,” he said. While global wealth is pouring into other American cities as well, Los Angeles is still a relative bargain, Mr. Hyland said, adding: “Here you can buy the best house for $3,000 a square foot. In Manhattan, you’re looking at $11,000 a square foot and you get a skybox.”

Speculators are tapping the demand, snapping up the best lots, bulldozing whatever is on them and building not only domiciles but also West Coast “lifestyles.” The particulars can seem a little puzzling to the uninitiated. The very busy Mr. Niami (he also built the Winklevoss twins’ perch above the Sunset Strip) constructed a 30,000-square-foot Mediterranean-style house in Holmby Hills that locals have called the Fendi Casa because it was filled with furniture and accessories from the Italian fashion house.

The residence also offered indoor and outdoor pools, commissioned artwork by the graffiti artist Retna, and an operating room in the basement. “It’s not like it’s set up to take out your gallbladder,” said Mark David, a real estate columnist for Variety, who has toured the house. “It’s for cosmetic procedures — fillers, dermabrasion, that kind of thing.” The house sold, with all its furnishings, to an unidentified Saudi buyer for $44 million.

Read the entire article here.

Image: Satellite view of the 70,000 square foot giga-mansion development in Bel Air. Los Angeles. Courtesy of Google Maps.

Idea Soup

Retire at 30

No tricks. No Ponzi scheme. No lottery win. No grand inheritance. It’s rather simple; it’s about simple lifestyle choices made at an early age. We excerpt part of Mister Money Moustache’s fascinating story below.

From the Washington Post:

To hundreds of thousands of devotees, he is Mister Money Mustache. And he is here to tell you that early retirement doesn’t only happen to Powerball winners and those who luck into a big inheritance. He and his wife retired from middle-income jobs before they had their son. Exasperated, as he puts it, by “a barrage of skeptical questions from high-income peers who were still in debt years after we were free from work,” he created a no-nonsense personal finance blog and started spilling his secrets. I was eager to know more. He is Pete (just Pete, for the sake of his family’s privacy). He lives in Longmont, Colo. He is ridiculously happy. And he’s sure his life could be yours. Our conversation was edited for length and clarity..

…

 

So you retired at 30. How did that happen?

I was probably born with a desire for efficiency — the desire to get the most fun out of any possible situation, with no resources being wasted. This applied to money too, and by age 10, I was ironing my 20 dollar bills and keeping them in a photo album, just because they seemed like such powerful and intriguing little rectangles.

But I didn’t start saving and investing particularly early, I just maintained this desire not to waste anything. So I got through my engineering degree debt-free — by working a lot and not owning a car — and worked pretty hard early on to move up a bit in the career, relocating from Canada to the United States, attracted by the higher salaries and lower cost of living.

Then my future wife and I moved in together and DIY-renovated a junky house into a nice one, kept old cars while our friends drove fancy ones, biked to work instead of driving, cooked at home and went out to restaurants less, and it all just added up to saving more than half of what we earned. We invested this surplus as we went, never inflating our already-luxurious lives, and eventually the passive income from stock dividends and a rental house was more than enough to pay for our needs (about $25,000 per year for our family of three, with a paid-off house and no other debt).

What sort of retirement income do you have?

Our bread-and-butter living expenses are paid for by a single rental house we own, which generates about $25,000 per year after expenses. We also have stock index funds and 401(k) plans, which could boost that by about 50 percent without depleting principal if we ever needed it, but, so far, we can’t seem to spend more than $25,000 no matter how much we let loose. So the dividends just keep reinvesting.

…

You describe the typical middle-class life as an “exploding volcano of wastefulness.” Seems like lots of personal finance folks obsess about lattes. Are you just talking about the lattes here?

The latte is just the foamy figurehead of an entire spectrum of sloppy “I deserve it” luxury spending that consumes most of our gross domestic product these days. Among my favorite targets: commuting to an office job in an F-150 pickup truck, anything involving a drive-through, paying $100 per month for the privilege of wasting four hours a night watching cable TV and the whole yoga industry. There are better, and free, ways to meet these needs, but everyone always chooses the expensive ones and then complains that life is hard these days.

Read the entire article following the jump or visit Mr. Money Moustache’s blog.

Image courtesy of Google Search.

Idea Soup, tD

Corporate Corruption: Greed, Lies and Nothing New

The last couple of decades has seen some remarkable cases of corporate excess and corruption. The deep-rooted human inclinations toward greed, telling falsehoods and exhibiting questionable ethics can probably be traced to the dawn of bipedalism. However, in more recent times we have seen misdeeds particularly in the business world grow in their daring, scale and impact.

We’ve seen Worldcom overstate its cashflows, Parmalat falsifying accounts, Lehman Brothers (and other investment banks) hiding critical information from investors, Enron cooking all their books, Bernard Madoff marketing his immense Ponzi scheme, Halliburton overcharging government contracts, Tyco executives looting their own company, Wells Fargo and other retail banks robo-signing contracts, investment banks selling questionable products to investors and then betting against them, and now ever more recently, Barclays and other big banks manipulating interest rates.

These tales of gluttony and wrongdoing are a dream for social scientists; and for the public in general, well, we tend to let the fat cats just get fatter and nastier. And, where are the regulators, legislators and enforcers of the law? Well, they are generally asleep at the wheel or in bed, so to speak, with their corporate donors. No wonder we all yawn at the latest scandal. However, some suggest this undermines the very foundations of western capitalism.

[div class=attrib]From the New York Times:[end-div]

Perhaps the most surprising aspect of the Libor scandal is how familiar it seems. Sure, for some of the world’s leading banks to try to manipulate one of the most important interest rates in contemporary finance is clearly egregious. But is that worse than packaging billions of dollars worth of dubious mortgages into a bond and having it stamped with a Triple-A rating to sell to some dupe down the road while betting against it? Or how about forging documents on an industrial scale to foreclose fraudulently on countless homeowners?

The misconduct of the financial industry no longer surprises most Americans. Only about one in five has much trust in banks, according to Gallup polls, about half the level in 2007. And it’s not just banks that are frowned upon. Trust in big business overall is declining. Sixty-two percent of Americans believe corruption is widespread across corporate America. According to Transparency International, an anticorruption watchdog, nearly three in four Americans believe that corruption has increased over the last three years.

We should be alarmed that corporate wrongdoing has come to be seen as such a routine occurrence. Capitalism cannot function without trust. As the Nobel laureate Kenneth Arrow observed, “Virtually every commercial transaction has within itself an element of trust.”

The parade of financiers accused of misdeeds, booted from the executive suite and even occasionally jailed, is undermining this essential element. Have corporations lost whatever ethical compass they once had? Or does it just look that way because we are paying more attention than we used to?

This is hard to answer because fraud and corruption are impossible to measure precisely. Perpetrators understandably do their best to hide the dirty deeds from public view. And public perceptions of fraud and corruption are often colored by people’s sense of dissatisfaction with their lives.

Last year, the economists Justin Wolfers and Betsey Stevenson from the University of Pennsylvania published a study suggesting that trust in government and business falls when unemployment rises. “Much of the recent decline in confidence — particularly in the financial sector — may simply be a standard response to a cyclical downturn,” they wrote.

And waves of mistrust can spread broadly. After years of dismal employment prospects, Americans are losing trust in a broad range of institutions, including Congress, the Supreme Court, the presidency, public schools, labor unions and the church.

Corporate wrongdoing may be cyclical, too. Fraud is probably more lucrative, as well as easier to hide, amid the general prosperity of economic booms. And the temptation to bend the rules is probably highest toward the end of an economic upswing, when executives must be the most creative to keep the stream of profits rolling in.

The most toxic, no-doc, reverse amortization, liar loans flourished toward the end of the housing bubble. And we typically discover fraud only after the booms have turned to bust. As Warren Buffett famously said, “You only find out who is swimming naked when the tide goes out.”

Company executives are paid to maximize profits, not to behave ethically. Evidence suggests that they behave as corruptly as they can, within whatever constraints are imposed by law and reputation. In 1977, the United States Congress passed the Foreign Corrupt Practices Act, to stop the rampant practice of bribing foreign officials. Business by American multinationals in the most corrupt countries dropped. But they didn’t stop bribing. And American companies have been lobbying against the law ever since.

Extrapolating from frauds that were uncovered during and after the dot-com bubble, the economists Luigi Zingales and Adair Morse of the University of Chicago and Alexander Dyck of the University of Toronto estimated conservatively that in any given year a fraud was being committed by 11 to 13 percent of the large companies in the country.

[div class=attrib]Read the entire article after the jump.[end-div]

[div class=attrib]Image: Mug shot of Charles Ponzi (March 3, 1882 – January 18, 1949). Charles Ponzi was born in Italy and became known as a swindler for his money scheme. His aliases include Charles Ponei, Charles P. Bianchi, Carl and Carlo.. Courtesy of Wikipedia.[end-div]