Warren Buffett and our kid's future.

[Markola]

Quote:

Originally Posted by Gone4Good If you could live today at your current wages, with all of today's technology, or live with 1970's technology but have more than twice the real income you have today, what would you choose?

Imagining myself as a construction worker driving my leaded gas truck to the job site where I will use my hammer while everyone else has a nail gun. My home phone rings with more work offers from the one boss left on earth who prefers someone who still hammers but I don't get the lead because I have no answering machine, so the opportunity goes to my nail gun competitors who are immediately available thanks to their smart phones. All of this pressure gives me heart problems so I die because I don't have access to stents and dependable pacemakers. Hmmm, maybe double the money isn't everything and Warren Buffet has a rather strong point about constantly improving productivity and quality of life.

[clifp]

It seems to me that this generation will be better than their parents even if wages remain completely flat due to technology innovation.

In the first half of the 20th century, much of the personal productive gains were in labor saving devices like dish washer, washing machines, vacuum cleaners etc. that saved time doing boring household chores. Today there is a lot of time-saving as well. I save 15 minutes an hour watching TV shows due to ad blocking, I know longer have to cut short a shopping trip to rush home to see my favorite show, I spent a fraction of the time being lost in my car than I did 15 years ago, and I know longer play phone tag with a travel agent to book a vacation. Finally, let's not forget the time savings of search. But the technology also brings much more choice like online shopping for virtually anything.


But is also important to understand the economic benefits of this new tech. For a $50 internet connection, $10/month Netflix and $10/month spend on Steam sales have multiple lifetimes of high-quality entertainment available. Now a rich person could spend orders of magnitude more to go see the movie in a theater, buy the game on day 1, go to the sporting event live, or go to a concert. But I'd argue with the possible exception of the concert the quality of their entertainment isn't any better. I remember as a teenager being bored in the summer, it wasn't that there wasn't anything to do, (although with only 5 TV stations all playing re-runs TV wasn't really an option) I just couldn't afford it. I could spend $5 today for a movie, skip movies for two weeks and spend $10 for an album, or save up $20 for a board game and concerts were just too expensive. The range of entertainment choices for a rich person was vastly better than a poor person a generation or two ago. Today, a billionaire who buys every a DVD of almost every movie is no better off than a NetFlix subscriber.,

The smartphone isn't just a time saver it is a huge money saver. A smartphone replaces, alarm clock, watch, tape recorder, camera, scanner, Gameboy, Walkman, paperback novel, DVD player, notebook computer, organizer, GPS navigation, guide book, pay phone, video conference, video camera, and dozen things I haven't even thought about it. This is thousands of dollars on things that a poor person doesn't have to spend money on. A 25 year old today making $34,300 has the same real wage as somebody as 25 year old making $25,000 in 2000. But today's 25 year old has very limited need to buy any of these devices that many 25 year olds desired in 2000.

Last week I got to drive a Tesla with autopilot for a couple of days. It is a huge quality of life improvement, instead of being stressed with bumper to bumper traffic, I move a lever and the car drives itself leaving me to spend the next 20 minutes reading Google News.

Today's batch of babies is going to grow up in a world of on-demand chauffered-driven point to point transportation, aka autonomous Uber cars. Not only will this be a service that only the very rich were able to afford before, but the economics will make it very practical for families to have zero or one cars. A very rich person may still have a driver, and their car will have nicer seats and maybe a bigger screen, but functionally even lower middle-class people will be able to easily get to where the need to go quickly and affordably.

If you don't own a car in SoCal in 2010 you were a 2nd class citizen. I know a group of Gen X and Gen Y in So Cal some are Uber drivers and others Uber customers. While non-car owner still have some quality of life issues, it is lot better not own a car today then it was when I lived there in the 1970s.

My guess is that a 2 person autonomous uber car will cut the price of uber ride by 2/3.
This will dramatically cut the transportation cost of everyone, and luxury item for their parents (a chauffered car) will be normal for today's babies.

[photoguy]

I buy the argument that due to technology innovations things will be better in an objective and quantifiable sense for new generations. But at the same time I think much of a persons happiness is due to their relative standing and relative income. This is old question about whether you prefer to make 50k when your coworkers make 40k or would you prefer to make 100k when everybody else is at 200k.

Advances in technology isn't going to help a young couple buy a home. I know an elderly couple who bought a very nice Eichler home in Palo Alto on two teachers salary. No way that can happen today. Heck I even know tech couples at Google that are struggling to buy a home in the Bay Area and they are clearly well above the median.

I'm sure there are other examples where technology can't increase the supply of a scarce good or resource and the wage gap makes many feel like they are falling behind (I.e. are worse off than their parents)




Sent from my iPad using Early Retirement Forum

[Totoro]

Quote:

Originally Posted by Gone4Good What's left unsaid in the quote is that the 1.2% of "something else" comes from productivity gains.

He says so in the previous paragraph:

Quote:

U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more. This all-powerful trend is certain to continue: America’s economic magic remains alive and well.

Quote:

Originally Posted by Gone4Good The chart shows that those productivity gains have not translated into higher wages for the past 40 years. So unless we think that's going to change going forward, it's not clear how Buffet's caveat in bold below doesn't present a major obstacle to his thesis.

Agreed. What he doesn't address directly for example in the Heinz takeover is that there were alot of firings (as in, half and more of senior management replaced) and staff reductions. It was and is pretty brutal there. You can tell from the way he writes about it, it makes him a bit uneasy too, as well as some of his portfolio companies. But hard to argue with the resulting shareholder return ..

[bclover]

Quote:

Originally Posted by Gone4Good When I was growing up in the 1970s/80s I remember having cable T.V., a telephone, a personal computer (1982), a car in the driveway, video games (1970s), dishwasher, clothes washer & dryer, a microwave oven, etc. If I had to guess I'd say my family was probably a bit on the low side of middle class back then. Today, I basically have all of those things plus the internet. That's not as huge an improvement as everyone seems to think.

Gotta disagree with you G4G. the basic functions were/are the same but sorry what we have now is a huge improvement.

my dad was a NYC cop, mom a civil rights attorney (lol translation, low pay)

Yes, we had a washer/dryer. couldn't use both at the time because they were electric sucking monsters that blew the fuse all the time. inefficient cleaning at best.


I grew up in the 60's/70's so no computers period. no microwave either.
you had a car in the driveway, now most Americans have 3 (well 2.28 but those numbers are a few years old)

no way can you say our standard of living has not had major improvements

[bclover]

Quote:

Originally Posted by photoguy I buy the argument that due to technology innovations things will be better in an objective and quantifiable sense for new generations. But at the same time I think much of a persons happiness is due to their relative standing and relative income. This is old question about whether you prefer to make 50k when your coworkers make 40k or would you prefer to make 100k when everybody else is at 200k. Advances in technology isn't going to help a young couple buy a home. I know an elderly couple who bought a very nice Eichler home in Palo Alto on two teachers salary. No way that can happen today. Heck I even know tech couples at Google that are struggling to buy a home in the Bay Area and they are clearly well above the median. I'm sure there are other examples where technology can't increase the supply of a scarce good or resource and the wage gap makes many feel like they are falling behind (I.e. are worse off than their parents) Sent from my iPad using Early Retirement Forum

I wonder if that is more a case of what we define as what makes us happy.
I never understood this "American" dream of owning a house=happiness. Maybe because I'm a native NY'er where housing has always been scarce and expensive.
Born and raised in a Harlem apartment, can't say anyone was "striving" for home ownership.

I'm living a version of your question but I would probably rephrase it. would I rather make 50K and enjoy my work and be happy or make 100K, hate my job but have the increased standing among my coworkers.

I did the second choice and regretted it. One ulcer and a bunch of anti depressants later, I'm retiring early and while the increased salary is letting me do that, I would have preferred to retire early because I was anticipating doing other things as opposed to retiring early because I loathe, hate and despise my job.

[Tadpole]

Quote:

Originally Posted by Markola Imagining myself as a construction worker driving my leaded gas truck to the job site where I will use my hammer while everyone else has a nail gun.

Has the nail gun led to more affordable houses for the construction worker whose salary has not benefited or did the productivity increases/savings go to pay for someone else to increase their standard of living from a $2M to a $10M house?

[Gone4Good]

Yes, of course technical advancements are good. But how much are they worth in dollar terms? How much of your current income would you sacrifice to maintain today's technology versus making do with the similar, albeit inferior, technology of the 1970s?

Would you give up four decades of wage gains? More? Less?

Would your answer change if you were currently earning close to the poverty line? I'd think it would have to.

Several folks are making the case that nobody needs to care about future wage gains because technology will make life better even if pay stagnates or even declines. I'm of the view that different folks in different economic situations will see those trade offs differently.

[ERD50]

Quote:

Originally Posted by Gone4Good Yes, of course technical advancements are good. But how much are they worth in dollar terms? How much of your current income would you sacrifice to maintain today's technology versus making do with the similar, albeit inferior, technology of the 1970s? Would you give up four decades of wage gains? More? Less? Would your answer change if you were currently earning close to the poverty line? I'd think it would have to. Several folks are making the case that nobody needs to care about future wage gains because technology will make life better even if pay stagnates or even declines. I'm of the view that different folks in different economic situations will see those trade offs differently.

Ask the people on this forum who are happy with their knee/hip replacements, or even some life-saving treatments that simply weren't available back then, and/or were far more invasive/risky.

Health care is part of the tech revolution, and also probably a contribute to flat wages, since the availability of those procedures is also driving up how much is spent on them.

You can't just cherry pick smartphones and video games, in many ways, those are off-shoots of the tech advances, not the causes (though it works both ways to an extent).

-ERD50

[ElizabethT]

Quote:

Originally Posted by DrRoy It's only anecdotal, but I can safely say that my kids will not likely match my income on a real basis. The chart above is part of the reason.

Also anecdotal, but both of our children have already surpassed where we were at their age (inflation adjusted of course), the result of advanced degrees and picking, accidentally in the case of one, 'hot' industries. To be fair, we paid for both undergraduate degrees, but we did not pay for the advanced ones.

Likewise, both DH and I surpassed, by far, what our collective parents earned and saved, paying for both of our undergraduate degrees ourselves.

[samclem]

Quote:

Originally Posted by photoguy I buy the argument that due to technology innovations things will be better in an objective and quantifiable sense for new generations. But at the same time I think much of a persons happiness is due to their relative standing and relative income. This is old question about whether you prefer to make 50k when your coworkers make 40k or would you prefer to make 100k when everybody else is at 200k.

Yes. According to one survey, the median worldwide household income (2013) was about $9,700 per year. The lowest quintile of household income in the US tops out at about $20K, so those people are making more money than probably 60% of the people on earth. They, in general, probably don't think they are well off, but they surely are by current global standards, and much moreso by historic standards (global or US). We can quibble about relative buying power in various economies, but we also have to factor in the value of free available public services, a safety net, clean water from the tap, etc. How do/would people vote with their feet if there were no impediments to migration?

As humans, we're generally a dissatisfied, ungrateful, covetous lot. That's likely what keeps progress moving. But the passions of envy, when animating the public, can do immense harm to the general welfare, too.

[Gone4Good]

Quote:

Originally Posted by ERD50 Ask the people on this forum who are happy with their knee/hip replacements, or even some life-saving treatments that simply weren't available back then, and/or were far more invasive/risky.

Yes, you and everyone else keeps arguing a point no one is arguing.

So let me be clear . . . I concede that things are much better today.

What I'm trying to understand is how much you'd be willing to sacrifice to keep those gains.

Because everyone is saying that they'd trade future income gains (or more precisely that we shouldn't care if other people are forced to trade their future income gains) for future gains in technology. But no one seems willing to put a price on that.

Presumably there's a price at which people would choose the older tech. But judging from the comments in this thread, there is no such limit.

And maybe that's an indication that folks here have a lot of disposable income they'd be willing to trade. But it isn't so hard to imagine that someone with less income would arrive at a different conclusion.

[ERD50]

Quote:

Originally Posted by Gone4Good Yes, you and everyone else keeps arguing a point no one is arguing. So let me be clear . . . I concede that things are much better today. What I'm trying to understand is how much you'd be willing to sacrifice to keep those gains. Because everyone is saying that they'd trade future income gains (or more precisely that we shouldn't care that other people may be forced to trade their future income gains) for future gains in technology. But no one seems willing to put a price on that. Presumably there's a price at which people would choose the older tech. But judging from the comments in this thread, there is no such limit.

The limit is demonstrated everyday.

For starters, drop cable, don't buy a smartphone with $$$ monthly data plan. You now have more money in your pocket, an effective raise.

Buy a used car at a bargain because the A/C doesn't work - don't fix it. More money in your pocket. Don't run the A/C at home. Don't go to the doctor. Grab an old CRT TV from the giveaways (Good-Will won't even take them any more). And on and on.

A few of us do a few of these things, but they are available to anyone who wants to trade today's technology for more money in their pocket (and since money is fungible, it makes no difference if that money in pocket came from a raise or from savings). Not too many people do.

There's your answer.

-ERD50

[dallas27]

Quote:

Originally Posted by dallas27 I'm sorry, but it is an intriguing chart, and has a obvious inflection point at 1973. How we can discuss it without singling out the event that caused it is just not possible for me. Inquiring minds want to know. Sent from my iPhone using Early Retirement Forum

Best read I have found explaining chart.

Understanding the Historic Divergence Between Productivity and a Typical Worker’s Pay: Why It Matters and Why It’s Real | Economic Policy Institute

[photoguy]

Quote:

Originally Posted by bclover I never understood this "American" dream of owning a house=happiness. Maybe because I'm a native NY'er where housing has always been scarce and expensive. Born and raised in a Harlem apartment, can't say anyone was "striving" for home ownership.

I think comfortable shelter is one of the "big rocks" that people try to fit in their life and that doesn't seem unreasonable to me. It's clear that in many metro areas that housing is becoming much more expensive on a real basis and the wage gap is probably a big part of that. E.g. the graph I clipped from the economist suggests that it's become twice as expensive for places like NY, LA, SF, etc. People do have the ability to rent instead of buy, but probably we'd see a similar affordability graph for rent.

Living in CA I think a lot folks are unhappy that they can't afford a home in the neighborhood they grew up in. Or that house prices are forcing them into terrible commutes.

Quote:

Originally Posted by samclem As humans, we're generally a dissatisfied, ungrateful, covetous lot. That's likely what keeps progress moving. But the passions of envy, when animating the public, can do immense harm to the general welfare, too.

I'm not suggesting any solutions or policy directions, just offering a perspective as to why some may feel like they are not in a better position than their parents despite material advantages from technology.

[samclem]

Quote:

Originally Posted by dallas27 Best read I have found explaining chart. Understanding the Historic Divergence Between Productivity and a Typical Worker’s Pay: Why It Matters and Why It’s Real | Economic Policy Institute

Increasing productivity enables an increase in wealth (more goods/services produced per hour=more goods/services available with a given number of work hours). Pay (like any other commodity) is set by supply/demand. If the supply of workers is plentiful, we should expect pay increases to be low. Workers don't automatically get a pay increase because their companies are productive and profitable. If they want to share in that (and the accompanying risk when there are not profits), they need to become owners--buy stock.

Regarding the EPI report--well, consider the source and their viewpoint. There's very little in that report that takes into account true labor force availability and demand (which is the major factor affecting wages--a key item they are supposedly studying). U.S unemployment figures tell us little about the "slack" in the labor force (a better measure is labor force participation, not mentioned by EPI in their report, but nearing historic US lows right now). There are plenty of available people to work in the US for the number of jobs available (esp at low skill levels), that's going to drive down pay. And that's before we consider the inevitable foreign labor market factors.

[marko]

Back when I was a kid, a guy with a stay at home wife and a lower level job as a milkman/factory worker/grocery clerk/shoe salesman/car mechanic could buy a decent home, drive a new-ish car and put his kids through school with little problem and still have a little left over for two weeks vacation by the ocean.

Sorry Mr Buffett, I don't see folks with moderate income being able to do that today.

Yes, they can now just veg out in front of their gigantic affordable TV in their apartment and pretend it's all good, but....dunno.

[AnonEMouse]

Quote:

Originally Posted by marko Back when I was a kid, a guy with a stay at home wife and a lower level job as a milkman/factory worker/grocery clerk/shoe salesman/car mechanic could buy a decent home, drive a new-ish car and put his kids through school with little problem and still have a little left over for two weeks vacation by the ocean. Sorry Mr Buffett, I don't see folks with moderate income being able to do that today. Yes, they can now just veg out in front of their gigantic affordable TV in their apartment and pretend it's all good, but....dunno.

Yours and Samclen's posts meshed together perfectly. The solution is to put all the ladies back where they belong - in the kitchen. That would drastically reduce the supply of labor thereby driving wages back up.




[Just kidding. It obviously won't increase wages because of foreign labor competition and automation. Oh, also kidding about that kitchen thing. ]

[HFWR]

Quote:

Originally Posted by marko Back when I was a kid, a guy with a stay at home wife and a lower level job as a milkman/factory worker/grocery clerk/shoe salesman/car mechanic could buy a decent home, drive a new-ish car and put his kids through school with little problem and still have a little left over for two weeks vacation by the ocean. Sorry Mr Buffett, I don't see folks with moderate income being able to do that today. Yes, they can now just veg out in front of their gigantic affordable TV in their apartment and pretend it's all good, but....dunno.

Might still be able to do it, if you buy a 1000sf home and one economy car, similar to the 1950s lifestyle.

[Markola]

Quote:

Originally Posted by Tadpole Has the nail gun led to more affordable houses for the construction worker whose salary has not benefited or did the productivity increases/savings go to pay for someone else to increase their standard of living from a $2M to a $10M house?

On a per square foot basis, I bet housing is cheaper and better today in relative terms, thanks to more efficient global supply chains and interest rates of 3.6%. The problem is that new 1500 sf house of our parents in a dense inner suburb seems to have gone the way of the dodo. Now that construction worker and his/her working spouse drives to the farthest exit out that the monthly payment becomes affordable for a 2500+ sf house with much bigger operating costs and massive commuting costs for two cars. In this country, average real wages have flattened but average consumption has increased dramatically. So has average debt. We assume that consumption has lead to a higher quality of life, even though we are less happy as a people as demonstrated by how we're all mad at each other and can't govern ourselves well, so it also turns out quality of life can improve while happiness declines. I do like typing into my iPad, though, and am going to get a new version ASAP!