fairytale house by ~Siska92

I bought a house for $150,000 eight years ago and had a loan of $120,000. The value of my house increased to $350,000. I took advantage of the situation and refinanced, being a conservative person, only borrowing $280,000 at a favorable 5.5% rate fixed for 30 years paying $1,600 per month for the mortgage and another $400 per month for real estate taxes and insurance. I was conservative and spent the $135,000 of home equity that I took out on improvement to my home (new kitchen, new bathrooms, hardwood floors, finished basement, and a small swimming pool for the little ones). This caused my tax bill to increase by $200 per month due to higher assessments. After a few years, the real estate market crashed and my house is unfortunately now only worth $180,000. I still owe $270,000 and have to pay $2,200 per month to live in “my” house. My choices are a) continue paying the high monthly payment with a giant negative balance sheet or b) rent a place for $1,200 per month, let the bank have the house and start from a clean slate.

I wish the situation was as nice as the above description. Here are a few additional realities:

• All my neighbors got foreclosed and my whole neighborhood has been downgraded whereas before I thought I lived in a decent part of town.
• My town is unable to meet budget demands and has to increase taxes to pay its bills.
• I actually spent the money on Made in China products worth $0 today and a GM vehicle that’s lost a lot of its value instead of home improvements.
• My bank let me borrow up to 100% of equity so I borrowed the full $350,000.
• The loan I got had a variable interest rate and my payments are more than $2,200.
• The $30,000 stock portfolio cushion that I had is now only worth $15,000.
• I am about to lose my job even though I work hard. They say that the company has to cut back because of the economy.
• I also had a credit card balance of $38,000 and student loans of $24,000.
• Even though my wife really loves to shop, we just cannot afford to buy anything any more.
• I had never signed any contracts before buying this house, let alone the sixty thousand mortgage documents they made me sign at the closings.
• I’ve called the bank every month for the last six months asking for help or a way to get me out of this pickle.

What are my choices? I think I better let the bank have the keys, declare bankruptcy if I have to, move out into the $1,200 a month apartment and hope I can find another job so I can pay the rent before the economy gets any worse. How is any of this bull shit they talk about on TV going to help me this month? I voted for Obama to make a change but so far I see more of the same. There is little they can do to make me stay in this house given the reality I am facing.

Simplicity by *chuscli

“Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius – and a lot of courage – to move in the opposite direction.” ~ E.F. Schumacher(?)

In discussion with a colleague, I mentioned that WordPress.org was able to provide very nice functionality with excellent usability through php, mySQL, and Apache. She said these were simpler technologies not particularly suitable for today’s complex corporate environment where more complete frameworks are required to satisfy all of the business requirements. I challenged her by saying that some of the blogs get millions of daily hits with this simple architecture while some corporate systems stall after a few hundred users. She told me that the data model in a blog is much simpler than in any corporate system. I know. I am just not willing to take this man-made complexity for granted. Call me obsessive compulsive when it comes to keeping the world simple but what I have seen and continue to see is simply excessive complexity.

In addition to the computer on which I’m typing this text, many structures around us are systems of varying complexities. Some of the complex systems make the computer seem like a basic child’s toy. Everything can be viewed as a system (often with many nested sub-systems) but here are some examples.

• The human body is perhaps one of the most complex systems with interlinked sub-systems made up of cell-structures, interfaces, etc.
• A corporation is a human system that can be as simple as a piece of paper and as complex as today’s multinationals are.
• Software, the Internet and all other computer systems are built up from many sub-components which further rely on sub-systems to carry out their tasks.
• Banks and markets are also systems playing their part in a larger global exchange, transfer, and conversion system.
• Houses with their electrical, plumbing and other sub-systems can be user-friendly, complex, with interfaces, inputs and outputs.
• Government is a complex multipurpose human system with impacts on all other systems.
• Universal health care initiatives are also systems with many participants.

I could list endless examples but just like an average gasoline engine, I hypothesize that systems built, managed, operated, maintained by humans operate at some very low level of efficiency. I am not just talking about productivity and other similar measures. I am suggesting that in aggregate we build inefficient systems and structures. I see this in computer systems all the time. I would further suggest the larger the system, the higher its complexity, and the lower its efficiency. If I had multiple lives, I would devote one to the study of this subject with hopes of finding a set of principles to guide new efficient system architecture and construction. Why do we need to do this? With the amount of inefficiency growing with complexity, we may find ourselves at a point where the maintenance of the system takes more effort (human lives) than the value of the system warrants (Soviet government). We may find ourselves unable to properly regulate (think AIG) and maintain the system. We may find ourselves challenged with enforcing ethical principles (Madoff) in the system. We may find ourselves slaves to these suboptimal systems that we have imposed on ourselves. When the systems choke us, we end up with a revolution. When the systems clash, we end up with wars.

Could the fundamental source be our insecurities and yearning to appear more intelligent, more capable, stronger… strong enough to handle complexity? Or is it that we are the inefficient, ineffective ones who are capable of creating nothing more than a highly ineffecient system? Is it our methods of education? Or perhaps for our systems to be efficient, we would need to become machines, losing all creativity. Could it be that each time we step into a system, we feel the need to make changes thus destabilizing the entire structure?

Firewood by *LadyRSanti

Growing up in an apartment building, we had a hallway that had four doors to four homes. My mother would always clean the entire hallway but for some reason our neighbors would only clean the small area between their own door and the hallway entrance. It would always puzzle and bother her why they only cleaned in front of their door. Did they think dust in other areas would not move? A few years later, when none of us had any heat in the winter, neighbors would gather together in one of the apartments to conserve firewood. After those days, somehow the hallway was also kept clean by everyone.

It is not uncommon to see entire neighborhoods full of foreclosed homes these days. Just a few days ago, I heard how a condominium association could not pay its bills because many units were empty under foreclosure proceedings. Towns with high foreclosures have similar issues of being unable to cover their expenses. Homeowners in such towns find themselves under greater burdens for town expenses and under heavy pressure of dramatically lower equity of their own homes. We have learned the lesson that when our neighbors become poor, we too become poor.

As we are witnessing right now, when consumers (that would be us and our neighbors) are unable to spend as much as we typically spend, companies that sell us stuff, sell less. When companies sell less, they need less workers and they invest in machines and equipments less; they also spend less. When companies spend less and we also spend less, there’s really no way to sell more than the year before. It’s all too obvious… When we do not sell more this year than last year, our economy doesn’t grow and we know that stock values increase when the economy and companies grow. As a result, we earn less money (remember inflation even if you get no pay cut), stock values decrease, we become more unemployed, and we spend even less. Bottom line, when our neighbors spend less, they become poor. When they become poor, we too become poor.

When our neighbors have no homes, we have more homeless people. When our neighbors have no money, we have more poor, unemployed people to help. When our neighbors are hurting, we are hurting. This is because we’re one and the same, all interconnected, affecting each others’ lives, hurting together, happy together. There are many examples of this starting from global warming (if we do not all cut our emissions, the results do not change) to local crime (if we do not all keep our neighborhoods safe, the results are unchanged).

America has a vibrant individualistic society with everyone in constant motion pursuing our happiness. As you chase your own dreams and fulfill your objectives, consider your neighbors and your community.

Asphalt story by ~JK89

“5 Trust in the Lord with all your heart and lean not on your own understanding; 6 in all your ways acknowledge him, and he will make your paths straight.” ~ Proverbs 3

This might be a bit long but I have to share. A couple months ago I met with a few paving contractors (actually their salesmen). One of them (let’s call him Chief), an elderly man, in poor health with difficulty speaking came by, measured, gave me the lowest quote and left. He came across as trustworthy. In all my recent dealings I look for integrity and trustworthiness above all. The other salesmen were… stereotypical and  their quotes were very high. So, I told the Chief he had the job but I needed to get a few other projects completed before we were ready for the asphalt. He called me every two weeks to check on my status. We met a couple more times and during the last meeting I got a surprise. He raised the price of the job stating that the cost of asphalt had gone up considerably. My first thought… what did I miss about this man earlier when I got the impression he could be trusted. My second thought… I was too tired to have a second thought. I told him I did not like surprises and would have to get back to him with our decision.

I found out that the neighbor had also used the same company and was very happy with the end result but the owner had a very poor attitude and had tried to cut corners until confronted (typical story). I also found out that the price of asphalt had increased though it was hard to know exactly what part of the total job cost increase could be attributed to this. I decided to go ahead because the other salesmen were not people I wanted to meet again and Chief’s proposal was still lower than their estimates.

Having been through similar situations many times, I was dreading the day of the job perhaps because I had not insisted on meeting the owner, I had been surprised once already, I had not been through this type of job before, and a few details still had to be worked out on that day. In the morning, I reminded myself Proverbs 3 and the Golden Rule and marched ahead.

The Chief was already waiting for me. He told me that a different company would be doing the job… the second surprise! I looked straight in his eyes and said that this was the second surprise and he already knew I did not like surprises. I also told him that I had trusted him and was sure he would not let me down. Then I reminded him the terms of our agreement, the price, and the main requirements. He nodded  and told me I’d be much happier with the new company.

The crew showed up, and did their work going the extra mile in a number of different ways. Half way through the job, the owner, a 51-year-old man strong as an ox, said that his daddy had taught him the Golden Rule and promised that he’d never go wrong if he practiced it. He and his brother did the work the way I had expected, often smiling, making jokes and laughing as if trying to lighten up the grueling physical job of spreading and compacting tons of material.

Four police officers stopped by and left shortly after speaking with the Chief. After the fourth one left, I asked him why they had come. He said they wanted to have a police detail at the site (this would have cost me more money) but he had convinced them that none was needed. Seeing my puzzled face, he said he had been the police chief in the town next door for over thirty five years.

The job was done as best as it could have been done (as best as I could judge quality). While writing the check, I asked the Chief why had he switched companies. He told me that he was recovering from a major lung cancer operation and the owner of the other company was a very mean, untrustworthy man who often made him feel bad to the point where it was affecting his recovery. The owner would often not respect prior commitments making him appear untrustworthy. All I could think of was Proverbs 3…

house by Galadrielbg

Having experienced the house building process, I have learned a lot and wanted to share a few thoughts here in case you ever face the dilemma of building vs. buying. There is an Armenian saying that every man must “plant a tree, have a child, and build a house.” I think the last one is questionable in the literal sense (though in the saying it’s really about making a home for a family).

The Emotional Dimension: The project of building your home is unlike any other project. It is an emotional project directly hard wired to your self esteem. After all your house may be one of your largest assets. Your house is also most likely one of the key elements in your external and internal image. As if trying to make this even more emotional, building a house is about your ability to take on a large, expensive, and complicated challenge and seeing that through to completion. You might be trying to make a statement to your spouse, your in-laws, many others but most importantly to yourself.

The Business Dimension: At the same time, building involves many business relationships where trust, money, specifications, deadlines, and quality matter a lot. This project comes with numerous interdependencies between many parties such as the banker, the builder, the subcontractors, the family, the city, the designers, the lawyers and the suppliers. In addition to everything else that you do (work, home, school, activities, etc.), you must make quick and correct decisions daily and sometimes hourly for months. Large sums of money are handled in legal transactions. There is significant uncertainty in all aspects at all times.

Should you build? Success requires the ability to balance these two separate yet intertwined dimensions constantly which is extremely difficult. Furthermore, the benefits are a bit overrated given the massive investment. By investment, I mean the financial, emotional, but more importantly time investments required for a successful house building project. As a result, I believe building a house makes little sense for most people who are not in the residential construction business already. If you are seeking the knowledge or the experience that comes with building a house, why not build a house for someone else or manage a few smaller house remodeling projects instead? Buying a house is generally also much more economical.

Should you buy? I think so. In good markets, you may be able to get a great deal on a house of your dreams. The buying process is far simpler with greater odds on your side. Given the thousands of homes for sale, chances are that you can find one that’s very close to your needs and need not build a house to satisfy the family. Also, given today’s dynamic lifestyles, you can sell what you bought easier than what you have built (due to amount of hard work invested) even though in the case of buying emotional attachment also takes place. If maintenance is your main concern, why not buy a recently built house.

Looking back at all of the details that we had to consider, all of the work that we put into the process, and all of the time that we invested, I feel the reasons to build hardly justify the price you pay.

Unless you are working on an antique car that appreciates in value over time or fix cars for a living, I think any time you spend on the car is worth only the present value of your time. On the other hand, let’s say you spend time on your business, career, or investments, this time can and will certainly pay dividends later in life.

Almost weekly I cut the grass and every time I feel I’m completely wasting two hours because the future value of this time is about as close to zero as it gets. To have someone else cut the grass would unfortunately cost more than we can afford now. So, my challenge is to continue investing in activities that pay dividends in the future, so I don’t have to waste time on this every week. Time spent learning something new, on the other hand, can have huge benefits (often unforeseen) later and usually when least expected.

Next time you’re working on something consider if the object will appreciate or depreciate over time. That’ll help determine the amount of time investment you should make. Appreciation includes both financial appreciation as well as non-tangible appreciation such as physical, emotional, and spiritual appreciation. One lesson I’ve learned while writing this blog is how much of our days are spent on “noise” and how little of what we do truly deserves to be retold. I hope you make it your challenge as I have made it mine to fill up your life with what really matters and leave the rest to everyone else.