3 Reasons to Stop Living in the Past
Things that have worked well in the past aren’t necessarily going to work well in the future. This is something I have been thinking about for a long time, but this week it came up in a conversation I had with my uncle. I told him the pace of change is accelerating and the conventional rules of work, education and investing are becoming obsolete. These changes are benefiting some people, but most are resistant to change and getting left behind.
1. Employment is Changing
The conventional wisdom for career success has been to go to college, get a job with a good employer and climb the corporate ladder. This advice is still relevant and useful, but it’s definitely not a sure thing. For starters, some college degrees don’t add enough value to a career to even pay back the student loans. Also, many of the rungs on the corporate ladder are starting to disappear, leaving employees with nowhere to go. The days of working for one company for an entire career and retiring with a pension and a gold watch are long gone. Workers starting a career now may have a dozen jobs and a couple of career changes.
Challenges Facing Employees
- Companies are flattening out and reducing middle-management
- Entire industries are being lost overseas, along with those jobs
- Most new jobs created in the past 5 years are low-paying retail jobs
- Jobs are less secure and employers aren’t as loyal as in the past
- The public sector is over budget and many jobs will be eliminated
- Retirees are continuing to work and competing with young workers
How to Prosper
- Save more income to buffer career changes and job loss
- Develop side-income to augment employment income
- Become self-employed to control your future and income
- Keep job and career skills up-to-date for future demands
- Develop a strong professional network to share opportunities
- Select growth areas, such as medical, technical and energy
2. The Economy is Changing
There is no honest way to put a happy face on the economy. It’s in shambles and there is no easy way to fix it. In the past, the economy rebounded quickly after each recession and people went back to work. But, that isn’t happening this time for a number of reasons. First, housing is still too expensive, based on real wages. Second, the government’s misguided easing and stimulus increased the deficit, but produced no jobs. Jobs are created by companies and investors, not by economists and politicians. Most companies are afraid to hire new employees because of economic uncertainty. The government could help the economy a lot by cutting regulations and presenting a balanced budget. But, they are too busy pandering to special interests and trying to get reelected.
Challenges Facing the Economy
- Artificially low interest rates and misleading inflation rates
- Decline of American influence in the world economy
- Stifling government regulation and massive public debt
- Complex and unbalanced methods of federal taxation
- Permanent loss of construction and manufacturing jobs
- Enormous amount of foreclosures and underwater homes
- Rising costs for food, energy, education and health care
3. The Market is Changing
There has never been a consistent strategy for investing in the stock market that delivers future performance, based on past results. The reason is that investors quickly adopt any profitable strategy, which undermines its effectiveness. Recent examples include tech stocks, hedge funds and index investing. The investors who will win in the future will anticipate new trends, instead of following old ones. Dozens of S&P 500 companies will disappear in the next decade and you don’t want to be invested in their stock.
Challenges Facing Investors
- Super-fast computer networks and program trading
- High fees and spread skimming by investment companies
- Massive leverage from derivatives and other instruments
- Millions of baby boomers withdrawing their life savings
- Inadequate regulation and oversight by the government
How to Prosper
- Avoid treasuries and accounts yielding less than inflation
- Invest in rising industries, such as alternative energy
- Accumulate real estate during the weak housing market
- Increase the percentage of global equity investments
- Choose investments with the lowest possible fees
The Bottom Line
The bottom line is that the future is a scary place. The gap between winners and losers is growing rapidly. Anyone counting on the status quo is in danger of sliding into the loser’s bracket. The future will belong to the courageous.
“Change brings opportunity.”
Nido Qubein – President of High Point University
Recommended Reading
Krant Cents – Successful vs. Unsuccessful People
Out of Your Rut – Why Near Zero Interest Rates are Hurting the Recovery
Intelligent Speculator – Keeping a Long-Term Perspective
This post was featured on the Carnival of Personal Finance over at Invest it Wisely. The week, I made the Editor’s Pick. If you aren’t familiar with the Carnival of Personal Finance, you need to check it out.
Change is constant. Can’t avoid it, might as well embrace it. I’m getting better at this, though it’s not inherently natural for me.
The workplace, economy, and market for labor are all definitely changing, and the pace of change does seem to be accelerating. One must be dialed into how things are evolving more than than ever. Yes, there are people left behind, and it’s unfortunate. Best not to be in that position!
That’s kind of the way I feel about it too. It’s sad to see the divide widening and people struggling. But, when you try to tell them what is happening, they look at you like you bumped your head.
I have a couple of friends who are a little older than me, one with an MBA, and they are having such a hard time. But, they can’t see the landscape changing or adjust to the new opportunities. It’s almost like we have to reinvent ourselves.
Great advice Bret, especially the employment portion–I completely agree with your observations. I think that many people right now are looking back at previous recoveries and the job increases they brought, thinking that it will be the same this time out. Very doubtful.
We’re largely going to be forced to invent income situations, that will look less and less like traditional jobs. It may even mean a mix of incomes–a business, a significant investment and a part time job, all at the same time. All of that is doable, but it will require a very different mindset, as well as different expectations.
Against that backdrop, health insurance becomes a major point of contention, and not something easily addressed.
I was also sucked in at first Kevin. I thought the stock market would come roaring back and it didn’t. And I thought employment would pick up and it didn’t. I knew the housing market was toast and it will be for years. So, I’m one for three. I am definitely cultivating other sources of income right now. I have a great job, but I know a lot of people who can’t find work.
Health care is a massive problem. So many huge special interests are parasites on the system, such as lawyers and insurance companies and they add zero value. Hospitals are plundering Medicare and companies are making bank off of percription drugs and free electric wheelchairs. Something has to be done, because paying 18% of GDP for health care isn’t sustainable.
Bret, it’s been a while. Sorry I haven’t stopped in for a bit. I may differ with you on politics, but I think some of the old truths continue to hold, if in a different form. You touched on them in this post, but I think the two most important things people can do are save money and be a person of character, both of which have been good advice throughout history.
By saving money, you’re rendered a bit more impervious to economic ups and downs. Savings accounts may not make you a millionaire, but you’re almost guaranteed to have that buffer in place at the end of the day.
You mentioned maintaining networks; I think this equates to maintaining good character and reputation. If you are a man or woman of your word, treat others fairly and consistently demonstrate a good work ethic, you’ll never be out of gainful employment for long.
Hey Cognoramus,
Long time no hear. I though maybe you got deployed or something, because your blog hadn’t been updated.
You are so right about being a person of character. It’s something that is very important, but it has fallen out of fashion. It’s almost acceptable to lie and steal now days. When I was younger, people looked down on the dishonest. Now, people brag about it. It’s a sad change to our society.
I’ve been back for a couple of months now, but those couple of months have been busy. Hopefully now I can get back on the horse 🙂
As for lying and stealing, my unsubstantiated theory is that it stems from the competition we’re constantly told is necessary for us to succeed. “Getting away with” something illustrates how much smarter and better we are than those around us, kind of like getting a good deal. Maybe if we didn’t have all of facebook and twitter awaiting news of our latest triumph all the time the perceived pressure would be lower.
I’m glad you are back and I’m sure your readers are too.
My unsubstantiated theory is the goverment and corporations have led society into moral decay and individuals have followed along. Unless we take the special interest money out of politics and kick a lot of people out of office, we can expect more of the same.
There is a saying that goes like – The only constant in life is change, right? We might as well accept it and embrace the changes. The most drastic change for me personally was moving to the US as an young adult and living on my own in a new country. I am very grateful for that experience, because of that now everything seems possible.
Great advice Bret. With the economy changing fast, the ways to get noticed also needs creativity. The type of jobs have changed. I think now it is more like the person who can adapt well and take change easily will win.
It’s pretty inspirational Suba how you came here from another country and succeeded. That sums up everything that is right with America for hundreds of years. Opportunity is the most important thing you can give anyone.
I hadn’t thought a lot about creativity, but it’s a huge factor. All of the greatest triumphs of mankind started out in someone’s mind.
Re: #1. The bubble in college tuitions, coupled with the fact that so many people have a bachelor’s degree today, are changing the old paradigm that says it is necessary to get a leg up on the competition.
I think kids today need to consider focusing on controlling their own destiny by preparing themselves to become entrepreneurs.
Another excellent article, Bret.
All the best,
Len
Len Penzo dot Com
Thanks Len,
Times sure have changed a lot from when you and I hit the job market. Back then, you could make a good living swinging a hammer. Or, you could get a union job and live in comfort and security.
I worry about what our kids are going to do in their future. Even a college degree and a professional job is barely adequate to afford a house where I live. And, it’s going to be really tough to raise a family on a single income, like I did.
I am also nudging my kids towards self-employment. But, it takes a driven person to walk that path. There are interesting times ahead.
Thanks for the link, I appreciate the recommendation.
Things are definitely changing – I worry in particular about our healthcare system which is dependent on employer funded health insurance. Nice post.
Thanks for stopping by Brian.
Healthcare is an unmittigated disaster. I have posted about it before, including some potential solutions. I firmly believe the new government healthcare bill is one of the reasons for the stubbornly high unemployment. Small companies are terrified to hire anyone right now, because of this liability.
Excellent written article on changes in Employment, Economy and the Market. The best advice for individuals and families is to start NOW to live within their means, destroy your debt and build up a 6 month Emergency fund. In addition you need to keep reading and learning.
Jeff
http://www.debtfreesquad.com
Thanks for stopping by Jeff.
This is great advice. High debt and living above means are two huge contributors to the Fianancial crisis in 2008. I think people have gotten smarter from this, based on the new 5% personal savings rate. I hope it lasts and people don’t forget their past mistakes.
The previous post was very interesting. I would recommend that all you college fans listen to the college conspiracy at the national inflation association website.
This is an interesting website Dennis.
For anyone who is curious, here are the links:
National Inflation Association – College Conspiracy
College Conspiracy Video on YouTube
Its true, change is the only constant. If you want to succeed you have to be willing to change as the market and times change. Look at Facebook and Twitter, people would have never thought 2 years ago that those would have played a huge role in how businesses market a product. Now you can’t go anywhere without seeing ads telling you to ‘facebook friend’ them. Go to the movies and you will see their ‘facebook’ page. Go to a fast food joint and you will see a facebook logo with their page id.
Change is constantly changing
Ben,
We may be looking at a Facebook bubble or a Twitter top.
I remember when the same thing happened with advertising and MySpace and the dotcoms before that. By the time the mainstream media catches onto a trend, it’s usually on the way out.
I agree with much of what you’ve written, but here’s a fly in the ointment, as I see it. Yes, we all need side-hustles, and yes, it would be great to be self-employed (my husband is, I used to be), but where, pray tell, is a hardworking, self-employed 50-something going to get health insurance? That’s why I stay at my “it used to be a career, now it’s just a job” corporate gig. I’m not making a political statement here, I just think that while the work paradigm is changing, this big part of our lives is keeping it from surging ahead. If everyone who wanted to consult, repair cars in their driveway and pet sit went that direction, our economy, I believe, would be the better for it. Frankly, I see health-care and insurance costs as the fly in the economic ointment. And that’s the view from my little corner of the world.
Health insurance is a massive problem, especially for the self-employed. Two of my brothers own businesses and my Mom did, before she retired. Health insurance is one of the biggest problems they face, both for themselves and for their employees.
Current solutions (I hate to call it Obamacare, but that’s what it is) did zero to reduce the cost and improve the affordability of healthcare. In fact, it raised the cost substantially and created a bigger liability and bureaucracy for employers and the self-employed alike. But, the government had the wisdom to exempt themselves, the unions and other special interest groups from the plan. And, the government can’t figure out why small companies aren’t hiring and unemployment is still around 10%.
In my opinion, health care is a defining issue of our time. Our nation can’t afford to pay 20% of GDP for health care. We can’t afford to see Medicare insolvent and millions of individuals being bankrupted. But, to fix health care, someone has to cut the special interests out of the loop. I haven’t seen anyone running for office lately that has the guts to do it.