Feb

12

Father talking about his daughter (triggered by whether she should charge for shoveling people's walks, or do it for free):

No kid among my daughter’s friends or my wife’s students has ever worked for pay (except maybe at camp), but they have put in vast numbers of entirely pointless community service hours in places like Guatemala and Costa Rica, entirely ignorant of the whacked aid economics of sending 14 year olds to “build” houses in rural communities in the Third World. My daughter and her friends are rapacious — not as capitalists, however, but merely as consumers. Once my wife mentioned to someone at one of the DC private schools that this was not an effective way to help people in the developing world, and that as far as she could tell among her private school students, they understood perfectly well that this was crazy — the response was almost exactly, “Well, it’s really about our kids, isn’t it?” The take-away by the kids was, they understood that the economics of it were whacked — and that the priority was that they have a good “experience” doing good things for poor people. In the end, their community service was just another form of consumerism.

To the extent these kids have been educated in the ethics of production — it is entirely an ethics of therapeutic production, the helping professions, in which they are extending assistance to those not in their privileged positions, for which they merely happen to get a paycheck that appears mysteriously from some third party. It teaches them inequality, to start with — the inequality that goes with the patronizing condescension of the expert who ministers to the masses (there are indeed experts; but what I refer to here is not expertise, but the sensibility of expertise, which is a sensibility acquired long before and independent of whether one has actual expertise; my kid and her friends have the attitudes, even by the teen years). It also teaches them that payment comes from third parties, not the party to whom one provides the “services.” It is not the equality of market exchange among freely consenting equals. It is not any kind of market production at all. This is a very big problem when that is the in-training of the next elites, because what we call capitalism is as much sensibility as sense.

My kid’s problem is not to learn to do good things for people. She knows how to do that and understands too well the sensibility of it. My daughter’s biggest need is to learn how to negotiate in a straightforward way, a business-like basis, in which she will not presume that because she’s a nice kid and this isn’t a ‘real’ market transaction, she doesn’t need to do a good job, or that she is somehow a rapacious little profiteering scamp if she thinks she should get paid. Learn that it is okay to negotiate to a deal. You have no idea how hard that concept is for kids raised in a purely pro-bono environment. They are scared to make an offer or bargain; it seems low-class and grasping.

Jeff Watson writes:

As a kid, I was constantly berated because I realized the value and utility of money at a very early age, yet everyone turned to me as the lender of the last resort. When someone wanted to borrow five dollars (a princely sum in 1967) I was more than glad to lend the money provided the debtor paid $6 at the end of the week. At that time, I had around $200 floating around on the street, with a big Greek kid who collected on commission. Many a time, I ended up in the principal's office, the debtor, his mother, and the principal hammering me and threatening me when he refused to pay. I was careful, not doing business on school property and after school hours, but these people were not only trying to avoid the interest, but to bust the trade altogether. Since I had the high moral ground, I spoke my piece about bad parenting, welshing, and the bad lessons taught by not paying one's bills. Still, I ended up in detention and had to get my father involved, as none of these transactions took placed on school grounds or on school time. My dad had a Svengali way of getting me out of trouble, and it was business as usual. Still, I had many deadbeats, surrounded by their overprotective mothers, who refused to pay. Somehow, my Greek cohort would find their bicycle, ride it to Madison Street, and sell it for substantially more than the $6 owed us. In all honesty, we took our rightful cut, and put the rest in an envelope and sent it to the deadbeat. We kept a list of deadbeats, and sold the list for a song to the neighborhood bookie, who was glad to get such information early. If you think it's tough making money as an adult, making money as a kid is twice as tough… It's not the making money, but the collecting money over the shadow of overbearing parents. I tried to be a different type of parent… I let my kid take his lumps, and when he cried due to getting ripped off, taught him that he just had a learning lesson. Since he got ripped off, he learned to think things thorough. Since then, I have financed several of his businesses, such as DJing, Notary Public, crab trapping, shell diver, buying and selling surfboards. While he hasn't gotten rich, he knows the key to retail is in buying correctly.

Adam Kretschmann remarks:

Too bad one of the kids parents wasn't a lawyer. A juvie record for usury and theft might have helped you recognize the "value and utility" of the law as well as the dollar.

Jeff Watson replies:

In Illinois in the 1960s the usury rate was ~45% thanks to Sears Credit. Anyway, if any adult messed with me in a legal sense, they would have city inspectors crawling over hsi house and business, before their mortgage was called. My dad and grandfather always insisted in a call provision in a loan, just for certain unexpected contingencies with intransigent borrowers. I feel no empathy for people borrowing money, as they walk into it with both eyes open, and their promise to pay it back is more than a promise, it’s a covenant.

Russell Sears adds:

I remember well the few times I spent hours shoveling a sidewalk for a negotiated price of $5, only to be handed a quarter or a buck. It is hard for a kid to argue with a old miser. But it was easy to watch him become snowbound the next big snowfall. Word spread quickly.


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11 Comments so far

  1. Russell Sears on February 12, 2010 3:53 pm

    From Daily Speculation, "Teaching Kids about Money" by Russell Sears:  Don't forget to teach the ability to bargain. Help them sell unwanted items on eBay or online. With some jobs a parent may want to negotiate the price. Mowing the lawn, for example, may depend on how hot it is or who is available. Teaching a child to take advantage of supply and demand may cost the parent more, but learning the lesson to value their effort is priceless.

  2. Kermit Johnson on February 13, 2010 12:25 pm

    I’m reminded how fortunate I was to grow up in a rural area and in a family that practiced communism. I willingly worked hard from the time I was able, and I realized how fortunate I was to have everything I needed plus much of what I wanted. I can’t say that it hindered me in understanding how markets worked, and, in fact, it probably provided a balance. I’m certainly thankful that I did not grow up thinking it was smart to profit from other kids who needed a few dollars from time to time. Isn’t this indicative of the current problems we see in this country right now?

  3. james ramsey on February 14, 2010 6:56 pm

    It doesn't surprise me that our current situation is as bad as it is. Your baby boomer generation, which could otherwise be called the I-care-only-about-me generation, hijacked the well-furnished American ideal of mutual concern and replaced it with unbounded ambition. It came at the expense of community. It also came at the expense of happiness. I'd rather take lessons on life from your daughters, who would likely be a voice for the disenfranchised and not charge for the service, than someone who's only claim on life was his P&L — which, of course, he'd gladly blow up for the chance to be number one, even if it came at the expense of his family's well-being.

  4. Nathaniel Long on February 15, 2010 12:03 am

    Twenty percent interest per week is higher than 45 percent per annum.

    Theft is inexcusable, as is being an accomplice.

    Here is an online definition of Svengali:
    The word “Svengali” has entered the language meaning a person who, with evil intent, manipulates another into doing what is desired. It is frequently used for any kind of coach who seems to exercise an extreme degree of domination over a performer (especially if the person is female or believes he or she can only perform in the presence of the coach).
    http://encyclopedia.thefreedictionary.com/svengali

    That said, I heartily agree with the article’s main point, that children need to learn to negotiate, and growing up under expectations to provide free services solely for the sake of providing free services to prove one’s goodness is counterproductive to instilling integrity in youth.

  5. Jeff Watson on February 15, 2010 8:07 am

    Nathanel, I don't see lending money as theft. I see usury as the government's attempt to further regulate our personal freedom and increase control over our lives. I see an added risk component to loaning to kids for the aforementioned risk. Have you ever loaned money to kids while you were a younger? It's a tough gig with a 40% chance you will have a trouble loan. It's easy to preach from your armchair, and accuse me of theft, but there was no theft going on,merely a business transaction, No one heald a gun to the kid's head to accept the terms of the loan…he borrowed money of his own free will. While you looked up Svengali, you should have looked up the definition of theft. I wasn't stealing from anyone, taking what doesn't belong to me…..initially. One might argue that the collateralization was suspect, and I;ll accept that, although such circumstances were rare. When you're a kid, it's tough to make real money. Kool aid stands don't cut it, lawn services are tough as you have to hire decent, reliable people to do the year work(and make sure they don't steal. Construction clean up is tough as it's hard work and the kids want to lolly-gag. I learned to pay by the job and not the hour to avoid that, but still had to finish many a job from those who quit. Kids are limited to paper routes,selling door to door, selling illegal fireworks, lawn services, snow shoveling, selling drugs, making book, and loaning money. I preferred the loan business and bookmaking business as it was a clean business, the only commodity being money, All other business ventures I tried were too hard physically and I'd rather work smart than hard. Plus, the line of work I chose earned the begrudging respect of the cops, as I wasn't doing anything dirty like drugs, and was an entrepreneur trying to make a buck.

  6. Sumit on February 15, 2010 1:41 pm

    I think that as a kid, making a buck on 5 bucks for a week, from another kid, is a reasonable rate and an acceptable transaction.

    Idea of prevailing interest rate only becomes clear much later in life and at that time one usually transacts with established counter-parties whose risk is well understood.

    Maybe selling his bicycle is a bit of stretch, but a serious businesskid could do that. Banks do it all the time.

    There is certainly many a deeper malaise in the society but I do not see the point in picking up on this particular incident and extending it to reflect on the whole rest of them.

    Maybe I am wrong, and I would love it if u can correct me.

  7. Rocky Humbert on February 15, 2010 2:43 pm

    Jeff:

    Providing a loan at reasonable rates of interest has tremendous value to two willing participants, but you’re skating on thin historical, moral and practical ice to suggest that usury is a fictional manifestation of government’s interference with personal freedom. You can find plenty of great examples of government interference — but 13,000% interest isn’t one of them.

    It’s a silly argument to make, because as a practical matter, the lender who charges 13,000% interest will never collect on his debt if the debt remains outstanding for any length of time. It also presumes that all of your debtors cannot collude to hire some “big Greek kids” too. (I’m not smart enough to know what interest rate defines usury, however, if there is no reasonable liklihood that a loan can ever be repaid, that’s a good smell test.)

    I’m also assuming that you don’t support Debtor’s Prison and/or indentured servitude to re-pay own’s debts. If you do, please correct me, and I’ll really have some fun responding!

    http://en.wikipedia.org/wiki/Debtors%27_prison

  8. Adam Kretschmann on February 15, 2010 3:55 pm

    “I see usury as the government’s attempt to further regulate our personal freedom and increase control over our lives.” as long as we are getting all relative maybe the people you were lending to viewed money the same way Crocadile Dundee did, “Well, you see, Aborigines don’t own the land.They belong to it. It’s like their mother. See those rocks? Been standing there for 600 million years. Still be there when you and I are gone. So arguing over who owns them is like two fleas arguing over who owns the dog they live on. ” so you see? You never really owned the money you had in the first place so it really doesn’t matter if you get paid back or not does it? Of course you wouldn’t accept that would you since they made a “covenant”. Strange world you live in where the borrowers have all the obligations and the lenders none - sounds like a nice kids fairy tale. As long as we are breaking out the dictionaries maybe someone could look up self serving for Mr. Watson. Sumit if you believe that this is all just child’s play remember that Mr. Watson was arguing hard that the banks had zero responsibility for the mortgage crisis - teach your children well…

  9. Jeff Watson on February 15, 2010 6:27 pm

    Rocky, 5 for 6 is cheaper than you can get on the street now, and I didn't compound like most street lenders do so the 13,000% is a fallacy. I was always kindhearted throughout the whole transaction and always considered that a man's word was his bond and meant something, I was always willing to work out a solution, but most deadbeats made it a point of avoiding me. Even as a kid….just because you're less than 18 doesn't make your word and less worth any less. Hiding behind age makes for difficulties and emotional issues later in life.

  10. Rocky Humbert on February 15, 2010 6:59 pm

    Jeff - I think you know me well enough that I poke fun in good humor. I also believe that whatever extreme (and misguided) positions you may take, I know you you are a good and honorable man.

    That said, one of my favorite sayings is: “Ain’t no point in beating a dead horse — but ain’t no harm in it neither.”

    Hence, I am obligated to correct your statement that “the Illinois usery rate was 45% … in the 1960’s … because of Sears Credit.”

    This link from the Chicago Sun Times of 1969 says Illinois State Senate raised the interest rate ceiling to 9% — it had been in the mid-single digits for most of the 1960’s.
    See: http://tinyurl.com/y9dfl28

  11. Jeff Watson on February 15, 2010 9:19 pm

    Rocky,
    I’m surprised that my dad didn’t send the 60’s in Jail. Banks had certain rates, but there were enough loopholes to drive a truck through. Also, according to lectlaw, http://www.lectlaw.com/files/ban02.htm

    “ignore state usury limits and pegged the rate of
    interest at a certain number of points above the federal reserve
    discount rate. In addition, specially chartered organizations like small
    loan companies and installment plan sellers (like car financing
    companies) have their own rules.

    Usury laws are a sham, and there;s a million ways to get around them. In other words, between two non commercial parties, you can charge whatever you want.

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