≡ Menu

Weekend reading: Money and the meaning of life

Weekend reading

Some musings, then the weekly reading links.

I am a sucker for academic papers on happiness and money, and whether watching The Apprentice every Wednesday can do much for either.

True, I’m not sure they’re of much practical use. I’ve got a hangover this morning, making me question exactly where I’m going with my life, and making me feel rotten. It’s severely skewing my personal data set.

On a society-wide level, however, they do provide an interesting challenge to the direction that markets and mainstream capitalism is taking us – which let’s face it is determined more by the invisible hand making come hither gestures than by any 20th Century-style grand plan.

Don’t worry, be a believer in an expensive dress

In their recent paper Happiness, Meaning of Life, and Income, Lois Duff and Artjoms Ivlevs of the University of the West of England pitted these three variables against each other in a cockfight:

The paper explores the non-material determinants of happiness. We go beyond the well-established result that individual ‘religiousness’ is positively correlated with happiness and look at a broader spiritual activity – time spent thinking about the meaning and purpose of life (MPL).

We […] find that the educated, the religious, females and the middle aged are more likely to spend time thinking about the MPL.

The correlation between happiness and thinking about the MPL depends on a country’s income: it is negative in high income countries and positive in low income countries.

You can download the whole paper via the link above, but here’s my summary: If you want to be happy, then be a well-off female in a poor country and believe in God, or if not spend a lot of time wondering whether you should.

Alas, that’s a lifestyle change that few of us can make. And anyway, if you’re a middle-aged man in the UK who believes in evolution (I do) and has decided to bow down before Richard Dawkin instead (I definitely don’t) then a sex-change and a relocation to Burkina Faso isn’t going to cut it.

You can’t forget where you came from because you can’t forget what it taught you.

[continue reading…]

{ 7 comments }
David Brent almost changed office life forever. But not quite.

Young corporate go-getters are often amazed at the attitude of their more jaded peers.

They find some people who’ve been ‘enjoying’ the grind for a decade or more feel entitled to goof around to make the day more bearable.

Early in my wage-earning life I met one of them, a pleasant middle-aged bloke – let’s call him Graham – who told me he adopted a ‘two-for-one’ principle. For every two hours he worked, he took one hour off.

Graham explained that the company sucked up so much of his week, and was run so poorly and inefficiently, that he had to strike back for the sake of fairness.

What about the workers?

Graham hadn’t got a raise or promotion in years, and he moaned about that, too. But what really mattered to me was Graham and I worked on the same projects!

Being young and keen, I wanted to get my stuff done, impress the right people, and push on. By either delaying our projects or forcing me to cover for him, Graham was wasting my time, as well as his and the company’s.

Parkinson’s Law says that ‘Work expands so as to fill the time available for its completion’. It was coined in the 1950s in an Economist essay.

Despite this, I liked Graham a lot – he was helpful, friendly, funny, and even wise in an office otherwise populated by Aspergic alien body snatchers. As I got older, though, I became fed up with his sort of attitude – and others who felt entitled to a sick day every three weeks, and malcontents who’d actually sabotage projects as a misguided blow for workers’ rights.

I wasn’t especially bothered by the impact on my employer’s margins of their actions, even if I myself felt (and still do feel) a moral duty to do a day’s work for a day’s wages. I was never a fan of the rat race – I just wanted to work on interesting stuff – and I already suspected that Graham was correct that management buffoonery was at least as wasteful as his own scheduled mini-breaks.

No, what got me was I felt taken advantage of by my own peers. I became sick of covering for people who’d skip work with a mild headache (perhaps brought on by the sunny weather) or those whose lunch meetings always ran until 4pm (perhaps because of the wine…) A couple of years in work stripped away any lingering leftist sentiment held over from my student days.

Older and even more cynical, I now see this work ethical peer pressure is part of what makes a modern company tick in place of the rigid strictures of yesteryear. I felt a rebel, but I was allied with The Man…

…almost, but not entirely. When I saw a chink of light, I ran for it, went freelance, and used techniques such as the 80/20 rule and Eating The Frog to double my productivity and income, while dumping stress like a balloonist ditching ballast.

The Pareto Principle, also known as the 80/20 rule, can change your life. In summary: A few big clients make you most of your money. Your greatest skill is your key earner. Most of your time should be spent doing a few important things. And so on. You’re either in the 20% who try it and live by it, or you’re one of the 80% who’ll never get it.

Nailed it

Completing a day’s profitable work by lunchtime once you’ve escaped from the Kafkaesque drag of office life is a heady feeling. But of course the natural order of things strives to out.

After a few months of spectacular efficiency, Graham re-entered my life – only this time he was the flipside of my conscientious Protestant personality.

Compared to wayward freelancers I’ve known (with vices ranging from Australian soap operas and a gardening fetish to life-threatening substance abuse), my own version of Graham was a home office nuisance as opposed to an agent provocateur.

Looking back, I wish I’d taken a few more of the summer afternoon walks he touted. But mainly he encouraged me to waste countless hours on the newly-fangled Internet. Still, this was when I deepened my interest in investing my own money, and though it now took until 2pm to get that day’s work done, in the long run it was time well wasted.

Moreover, I was wasting time on my terms, and could immediately see any impact on my own finances. The Heath Robinson pipeline of cause and effect of the modern office is stripped when you’re freelance to a hammer and a nail.

Hit insufficient nails with your hammer – or hit them screwy – and you don’t get paid. No blaming another department’s poor tools. Nobody cares.

Poacher poached

I immediately loved being a freelance and I’d recommend it to anyone.

Yet as I write – and this is the grand reveal of this post – I’ve actually been in a full-time job since the start of this year.

Given how much I’ve maligned office life during my four years of blogging, I knew I’d have to come clean eventually.

The good news is I’m not about to recant. My employer is genuinely one of the good ones, but sometimes I still feel like a Native American rounded up and penned in to whittle wooden wigwams on a reservation.

The time wasted on the traditional office routine can be extraordinary. My old routine of getting up when I naturally woke up (invariably between eight-thirty and nine) and slotting breakfast, showering, a spot of lunch, and maybe a bit of laundry into screen breaks – has been replaced by the archetypal soul-crushing London commute that puffs out a near-7-to-7 working day and leaves you scrabbling to squeeze in domestic life at the edges.1

“I work all day and get half-drunk at night,” said Philip Larkin. Too right – except he didn’t have to suffer the London Underground to get back to his favourite pub.

A fair cop out

Why then am I doing a job? Because I’m field-testing corporate life and rechecking my prejudices just for you – my dear readers.

Okay, not really. The truth is at a certain point last year my hitherto Teutonic efficiency turned into Old Bloc bungling. And as is the freelance way, I immediately saw it in my bank balance.

There were a lot of factors involved in this farrago, most of which are very personal, nothing to do with money or work, and not something we can generalise into a ten-year itch of the self-employed.

Put simply, I looked about and realised if I didn’t get a bucket of cold water in the face, I could soon be graduating from daytime TV and lolling about in the garden to something far more… unproductive.

The Office

So I got a job somewhere interesting, to push skills I haven’t previously tested enough, in an area that interests me.

And it’s been… okay.

Most of what frustrated me before about full-time employment before can still be frustrating, while like the lead character in Douglas Coupland’s Girlfriend in a Coma I’ve also stepped into a new world of grief.

For example, when I was last in full-time employment, mobile phones, email and remote working systems were all still a novelty. As a freelance I used them all to the hilt, and didn’t mind the way they mixed up work and post-work – but it feels more of an imposition coming from an employer.

But to be honest, I now see it’s not them, it’s me. I suspect if full-time office life annoys you, then it will always annoy you, whatever your urgent motivations for returning to the workforce.

For others, a secure place of work is a comfort. Most of my colleagues seem pretty satisfied with a day’s pay in exchange for the routine and rigmarole. They don’t appear to share my fear that I’m tossing away precious time like sending glinting 50 pence pieces tumbling into a dark and deep well.

Even old Graham knew his place. For all his griping about the waste of corporate activity, office politics that make Labour Party scheming look like a chinwag between Ghandi and Mother Teresa, and about the bizarre doublethink that sees nobody at work saying what they mean and even fewer doing what they say – for all that, Graham was a corporate creature. He was finely tuned to work’s ecosystem, and to its 47-week seasons. He’d starve outside of it.

Me, I’m from the high plains. I’ve come down to the city seeking work, weapons, and perhaps a few tattoos.

But one day I’ll go home.

  1. To be clear, I mean I wake and start preparing to go to the office about 7, and I eventually get home around 7, too. I do not work all 12 hours in an office. I am not mad. []
{ 16 comments }

How to choose the best index trackers #2: Costs

This post is part of a checklist designed to help you choose the best index trackers for your portfolio.

The idea is that you can quickly whizz through the checklist whenever you need to buy a fund, and it will help you pick out the key features that should guide your choice. Part one covers the basics of choosing an index tracker.

This time, we’re looking at the vitally important issue of costs.

Costs are a crucially important factor to consider.

Keep costs low

Your return is eroded by costs, which are as manifest as the incarnations of the Hindu god Vishnu.

As real UK equity returns historically hover around the 5% mark, every extra slice salamied off your return is a kick in the chutneys for your future self.

Look out for the following costs and squeeze them hard.

Ongoing Charge / Total Expense Ratio (TER)

A fund’s Ongoing Charge or TER includes its annual management fee plus other bits and pieces. While important, the Ongoing Charge is sadly not a full picture of a fund’s costs, as we’ll see in the rest of this post. The Ongoing Charge is a quick and easy number to compare against other funds, but it’s not the be all and end all.

  • Under 0.2% is good for a broad UK equity or gilt fund.
  • Under 0.4% is good for developed world funds.
  • Under 0.5% is good for emerging markets.
  • Over 1% is a rip-off.

Take a butcher’s at our pick of low Ongoing Charge funds.

Tracking error

Index funds should hug their index. If the FTSE 250 returns 5%, then theoretically so should its tracker (minus fees).

In practice, fund returns can deviate from their index for all sorts of reasons. If they do so regularly, and with gusto, then bad management may be at work.

Every time a tracker returns less than its index, that’s a real cost to the investor, so check a fund’s tracking error (or more realistically tracking difference). Unlike Madam Spank’s rubber parlour, the less deviation the better.

Portfolio Turnover Rate (PTR)

The more your fund buys and sells, the more return juice leaks away in the form of trading costs that aren’t accounted for in the TER. Check a fund’s annual report for its PTR. The lower the better. The median PTR for UK index funds is around 13%.

Initial fee

Don’t pay one for a tracker, unless you’re buying a Vanguard fund. Vanguard TERs are generally so low that they still beat their rivals even with the initial fee lumped in.

Dilution levies are an exceptional, benign form of initial fee. A dilution levy covers the cost of your entry into a fund rather than spreading it across your fellow investors as well.

While it may sting a bit, a dilution levy also means that you’re not paying the costs of other fickle investors trading in and out of the fund every five minutes. That’s a good thing for long-term passive investors, as long as the initial fee isn’t so high as to make the fund uncompetitive.

Redemption fee

A redemption fee is the opposite of an initial charge in that you pay up as you exit a fund. Like a dilution levy, this fee can be a good thing for buy ‘n’ hold investors, if the fund’s other costs are especially keen.

A redemption fee is meant to make market-timers think twice about flitting out of the fund, thus incurring trading costs that are borne by everybody else. Redemption fees commonly taper off once you’ve held the fund for a certain length of time, and the fees should be fed back into the fund’s assets rather than snaffled by management.

Part three of the checklist covers the more often-overlooked aspects of index trackers.

Take it steady,

The Accumulator

{ 9 comments }

Weekend reading: Tune in, drop out, live longer

Weekend reading

Some good money reads from around the Web.

A strength of blogs (present company excepted!) is how they snappily zero in on the tastiest morsel in a smorgasbord of geeky data.

Update: This data is apparently an urban myth! Another strength of the Internet is its ability to spread information regardless of their truth, so let’s put the brakes on this one. Thanks to reader Tony who pointed to this rebuttal from Boeing.

Such was the case on Five Cent Nickel this week, which trawled this piece of writing on longevity [PDF] for one arresting table.

It shows how Boeing Aerospace workers who retired later died sooner:

Retirement Age Age at Death
49.9 86.0
51.2 85.3
52.5 84.6
53.8 83.9
55.1 83.2
56.4 82.5
57.2 81.4
58.3 80.0
59.2 78.5
60.1 74.5
61.0 74.5
62.1 71.8
63.1 69.3
64.1 67.9
65.2 66.8

(Source: “Actuarial study of life span vs. retirement age” by Ephrem Cheng)

As blog author Nickel says:

Perhaps the scariest bit of data here is that those that work through the traditional retirement age of 65 only cash their retirement checks for an average of 17 months.

17 months!

Is that what you have in mind when you think about your future? That your “retirement years” will be reduced to little more than a “retirement year”?

One chunk of data does not a systematic review make: Boeing staff might have been particularly over-stressed, younger retirees might have been extra healthy (and they almost certainly were extra-wealthy, which has all kinds of positive impacts on lifespan).

[continue reading…]

{ 11 comments }