Friday, April 03, 2015

The DIY Poverty Trap

In my previous post I explained how allowing people to specialize in a trade or a skill drastically increases the standards of living for society by allowing us to produce not only MORE, but higher quality goods and services.  However, such specialization, by necessity, requires superiority and excellence, both of which have been under increasing attack since the 1960's.  These attacks have economic consequences, which is the topic of today's post - the "DIY Poverty Trap."

Because of what amounts to nothing more than rank parasitism and envy, America's pillars of excellence, superiority, achievement, accomplishment, and success are all under attack.  The attacks come from all fronts, be it political (the rich don't pay their fair share), educational (privilege, sexism, racism, and all the other childish pablum of academia), corporate (CSR, diversity, etc.), racial (stop acting white, Oreo), or social (27th place trophies, not keeping score, fat acceptance, etc.).  However, while this results in a general, society-wide hatred of those who wish to pursue excellence, the economic effects fall into two general categories.

The first is that it deters those who have already achieved excellence and production in their respective fields.  A doctor, an entrepreneur, an engineer, etc., somebody who is making good money stops and asks him/herself,

"Why the hell should I work more?  Why the hell should I pay more in taxes?  Why am I working for these parasites, ESPECIALLY when they villainize me and blame me for all of their-largely-self-inflicted problems?  Screw that, I'm going Galt/on vacation/moving the headquarters overseas/etc."

The result is less economic growth than what would have been had these people not been as progressively taxed or politically and socially stigmatized.  Medtronic would not have moved overseas.  Google and Apple wouldn't be parking their money in the Caymans.  And people might be willing to invest in the US.  It's hard to estimate what economic growth would have been had we championed success, rich people, and excellence, but in merely getting rid of corporate tax rates an estimated $2 trillion alone would be repatriated over night into the US economy.  Regardless, because success and excellence are under attack, those capable of it choose to scale back or not participate at all.

The second economic effect is a consequence of the first.  With all those "nasty" productive, successful specialists leaving or at least not investing in the US, economic growth has dropped to about 55% of what it used to be back in 1940's-1960's.  Naturally, employment has suffered both in terms of UNemployment and UNDERemployment, especially amongst the younger generations.  So instead of being contracted right out of a high school metals program to work at Boeing in 1948, you are begging and pleading to get a job at Starbucks with your Masters in Nutrition in 2015, replete with $70,000 in student loans.  Regardless, they too are not achieving nor pursuing excellence.  They are merely getting by because of the lack of economic opportunities.

But while both groups are not producing specialization and excellence, the reasons are quite different.  Group 1 is capable of it, but CHOOSES not to.  They have no incentive, they have no desire.  They are opting out of gracing society with their excellence.  Group 2, however, doesn't have a choice.  They are not CAPABLE of providing excellence and specialization either because they lack the skills or there is no economic opportunity for them to do so.  Thankfully, for Group 1, it doesn't matter.  They've largely "got theirs" and can afford to merely scale down.  But because of the lack of economic growth it is the young generations stuck in Group 2 that fall into the "DIY Poverty Trap."

To understand the "DIY Poverty Trap" you have to think of it as the opposite of The Law of Specialization.  With specialization, as evidenced in the previous post, you are allowed to trade your units of time for other people's units of time so that you may specialize and create superior, cheaper goods for them, as they in turn create superior, cheaper goods for you.  It is why it's nearly 300% MORE EFFICIENT for my girlfriend to work in her specialty (accounting) and pay for a professional who specialty is manicures and nails, than try to do it herself.

However, this hinges on one very important assumption that was (purposely) kept out of the previous post's discussion - wages.

The only reason it was economically efficient for The Girlfriend to outsource her French nails to a pro was because her wage was adequately high enough to afford the specialized services of the salonist.  Had she no SPECIALIZATION or EXCELLENCE in her field of accounting, she would only be making $8 as an unskilled laborer/nanny/barista and instead of 119 minutes of her life spent on getting French nails, it would have cost her 265 minutes.

Thus the importance of CHAMPIONING the specialization of labor and achieving excellence in a specific field, and NOT CRIMINALIZING IT, PUNISHING IT, OR MOCKING IT IN SOCIETY.

However, it is sadly not just merely an issue of getting a "specialty" in something and then "boom" the problem is done.  Different economic and sociological variables have conspired that has resulted in a perfect "economic storm" that creates an effective "event horizon" that keeps people in poverty and in the DIY trap.

When you take the:

1.  Low economic growth
2.  Few economic opportunities
3.  Worthless degrees the majority of young people have earned
4.  The crippling debts they took on to buy said worthless degrees, and (heaven help you)
5.  Any illegitimate children they might have had

they are stuck in the DIY poverty trap and will likely never achieve the "escape velocity" needed to get out of it.  The reason why is that they can't even afford to go back to college to retool themselves and learn an actual skill or trade that is specialized enough to pull them out of it.

In short, since they don't have a specialization or are excellent in anything, they cannot barter for other people's highly specialized (and infinitely economically more efficient) skills, condemning them to this effective "lower tier" part of the economy.

And this is where the DIY Poverty Trap comes in.

Since they can't afford specialized services, nearly everything has to be done on their own because it's "cheaper."  Of course, financially it may be, but not time wise.  This ends up costing them more of their time, denying them the ability to spend that time specializing in something.

For example, no more than two years ago, it largely "financially" paid me to fix my own motorcycle.  One time, in what seemed was going to be a "simple fix," I had a piston misfiring, which led me to believe it was time to change the spark plugs.  While my diagnosis was correct, my estimation of what it would take to fix my motorcycle was woefully inadequate.

The spark plugs were underneath a stubborn airfilter and carburetor and very leaky fuel system.  But none of those could be accessed until I removed a very NOT intuitive gas tank.  After many tries, I still couldn't get the motorcycle to turn over correctly, until I realized that in taking off the gas tank I had damaged the starter wire.

When all was said and done it took the following amount of time:

360 minutes of amateurish mechanical work
1,220 minutes of working up at $15 an hour to pay for the $280 mechanics bill

Total life lost: 1,580 minutes.

However, that was when I worked as an UNSPECIALIZED, NON-EXCELLENT security guard.  Well before I discovered I had a god-given talent at being a SPECIALIZED and EXCELLENT asshole and started billing out $100/hour at my new company Asshole Consulting.

Now of course, I don't work 40 hours a week making $100/hour, but for the sake of analysis, assume I did.  And let's also assume instead of trying to be macho, I admit I would probably make things worse and outsource my motorcycle repairs to a professional.  My new "total life lost" would not have been 1,580 minutes, but rather...

108 minutes.

Now this of course assumes the pro would not have severed the starter wire and that I was a full-time "professional asshole."  But they key point is that it shows you just what a DRASTIC and POWERFUL gravitational pull the DIY Poverty Trap is.  It is (in this instance) 10 TIMES LESS EFFICIENT THAN SPECIALIZATION.  A 10 fold "time sink."  And forget motorcycles, consider that nearly every aspect of your life has to be "do it yourself."

Oil change
House repairs
Computer repairs
Cooking vs. eating out
Grocery shopping

The list is endless and the damage is incalculable to your economic life.

The larger point is to realize NOT just how insane it is that our society, politicians, teachers, professors, racial groups, and media types punish and ridicule excellence, achievement, and specialization, but to realize just what an economic price is paid, especially by those who are in the poorer classes and trapped by the DIY Poverty Trap.  Not only are they kept in poverty by the gravitational pull of low wages, but are lied to about how to get out of it simply so certain leftists political parties and academians may stay in power.

And whereas normally I would feel pity and sadness for people stuck in such a position, when they viscerally and enthusiastically accused me and other people who pursued excellence as "privileged," hate us and call us "racist" or "sexist," and dare to demand that I pay more in taxes to bail them out of their mistakes...I just kick back and say...

Enjoy the decline.


Black Poison Soul said...

Haters are gonna hate. Idiocy has its own rewards. Because of their kind of mentality, I keep myself to myself.

1432fpchero said...

amen Cappy

Paul Chappell said...

Well written and overall I would agree with most of it... I would add that while specialization is good in general, there was that Heinlein quote about specialization that I always liked. I wound up working a LOT of different jobs over the years putting myself through school, being broke after the Army, etc... So, I have worked as a line cook and can cook pretty well. I rebuilt my motorcycle and have done 99% of the maintenance on it, being an IT guy building my own computers over the years has been a given, etc... So, specialization(s) might be a better way to put it. Always good to be able to do a fair number of things yourself with the "more time than money"... But, yes... For most folks this is not the norm, and it would be FAR better for them if they DID specialize in something useful...

Anonymous said...

Speaking as a diehard DIY enthusiast, you are of course absolutely correct when you say that DIY is bad economics. But what you are forgetting is the other side of the story: the non-economic value of DIY. The satisfaction that comes from learning new things, mastery of your environment. This can not be measured in money. As Robert Hienlien famously said: specialization is for insects.

Reido said...

You are also forgetting about the effect of taxation on income. If I DIY an oil change, I am not paying income tax on my effort, if I pay for an oil change, it still takes about the same amount of time as I have to drive to the oil change place and wait for them to do it, but I have to use my after tax dollars to pay the oil change guy, plus pay the consumption/sales taxes that he charges. So sometimes, after tax it is a wash to DIY, plus you know that it was done right.

grey enlightenment said...

specialization is how you get rich,especially if few people can do what you specilaize in, the stakes are high, and the demand is high

deborah harvey said...

hi, cappy,
enjoy your blog.
heard the npr news thursday while driving.
macdonald's employees protesting a raise in pay!
girl interviewed said it was a pr scam and would not pay for her to move out of her grandparents' house nor for her daughter's needs.
[no husband or child support from the other parent was mentioned.]
how did this generation get the idea that their employers are responsible for their every need?
i got the impression that the protesters thought that the employer was somehow in a seat of responsibility for the total lives and living arrangements of the employees.
where did this come from? it is totally irrational.
how about saying, 'gee, thanks for the raise. i'll try to be an even better employee.'?
i am in my sixties and am bumfuzzled by this way of thinking.
talk about poverty trap. they have built their own trap and seem determined to stay in it.
deb harvey

Paul, Dammit! said...

I guess you have to take in opportunity costs and all that other econ 101 stuff too, although I think that's what some folks are talking about here. You CAN put a price on watching a beautiful sunset, after all.
In my line of work, almost everyone comes here as a second career, and since we only work 2 weeks out of the month, most guys either are DIY enthusiasts or do side work related to their old career, which were often skilled trades.
Me? Outside of work, I drink, write, grow orchids and pay someone to do the things I don't want to do, and choose my DIY tasks more carefully. Today, my leisure time is worth more than my salary's equivalent, as I can always work more, but can't always not work more.

William Hughes said...

Several years ago I deliberately set out to do less, earn less, and pay less tax. I have succeeded beyond what I set out to do, and now have more time to do what I want, and far less of my time is spent earning money to pay parasites.

I still tinker with shit I don't know how's to do, but it is because I enjoy it.

cecilhenry said...

Refugees, ‘single mothers’, the drug addicted all wander the streets collecting welfare, ESL, ODSP and whatever other free socialist services they can avail–its a growth industry!. Others are in subsidized apartments collecting benefits, ‘child care’, ‘free’ health care or going out and working on the side. Disability has become profitable–because dependence gives control, and those who pay are never the ones who decide or benefit. The State steals from the productive to redistribute and dictate for everyone else. Taxation of 30-40-50% plus is slavery. Period. Proud of this???

Stop working, start complaining and look to the state. Fleecing the productive is a sure way to make the productive disappear or at least foster the parasitic mindset to steal, lie, coerce and destroy. Taxed on the money you earn, then taxed on savings, taxed on investments, taxed on tax. The only tax-free investments left: hookers and homemade beer. There’s never a problem that someone else shouldn’t be compelled to fix (taxpayers) and never a failure that more government won’t solve. .

Government regulation and coercion in Ontario and Canada is just insane. Why work??? WE have communism. The government control wages and incomes AFTER the fact with taxation. The government takes 50% of everything. If you work hard then it is simply given to someone else by force. Bureaucrats love regulation as it justifies and entrenches their power and income. If you have a business well by God do your best to hire NOBODY or you will find yourself working for your employees instead of the other way.

Glen Filthie said...

Well done Aaron. I might point out one misconception you and far too many others have about this particular "black hole".

Reaching escape velocity from the DIY Poverty Trap CAN SO be done - but you will need booster units! I was in this exact same trap decades ago and decided to go back to school as a mature student. We had to move in with my in laws and live as an extended family while I got my education. It sucked, but we did it.

These 'booster units' require a functional healthy family with proper mothers and fathers - which is pretty much unheard of these days.

General P. Malaise said...

yes and no

DIY can be / should be always on your mind. Doesn't mean you have to DIY.

......but I think it should always be a question you ask yourself, as well as asking yourself would someone else do it better?

I do a lot of things myself. If I couldn't then I would not be able to afford to live in the country in a mcmansion.

Another point is that DIY even under failed circumstances is not always a failure in life and learning.

You really need to look at silver linings that non-ideal DIY provide.

I do agree that in the past DIY was more of an option as men did have exposure and ability to do more things. Now things are definitely more complicated.

Think of it as say 30 or 40 years ago all guys knew something about what was under the hood of their car and they could name and possibly repair said. Women not so much and they were routinely being taken advantage of. NOW MEN are also being taken advantage of because they don't know what is under the hood of their car.

A small amount of knowledge allows one to know when it can be a DIY or you need to go for a specialist.

Even though it is harder for people to DIY there is a lot more information available to research anything or how to fix near anything.

Also equipment to DIY is astonishingly inexpensive today. 30 to 40 years ago a basic set of mechanics tools would cost months of paychecks. Today that is reduced to weeks of paychecks. In fact I can buy specialized equipment for repairs and still come in cheaper then the specialist.

Citizen Liberty said...

Great point and real example:

Your "DIY Trap" concept even happens with the highest income earners.

I owed a high-end chauffeur service in a NYC suburban area driving clients who typically earned over $1,000/hr. but couldn't rationalize hiring me or one of my drivers at $40/hr.

Hiring us for a trip to or from the airport was generally accepted by them as normal, but hiring us to drive them to and from work so they could turn their car into a mobile office was retarded in their minds. So some would waste 3 hours suffering each work-day commuting in NYC traffic! :D

These are people who typically worked in the financial industry but when I tried to explain the economic reasoning of the "DIY Trap", their capacity for logic would die.

Paul, Dammit! said...

Anyone able-bodied who works less than 80 hours a week AND complains about not having enough money is missing the point. Being broke is often a choice. You can't choose whether or not you're born an idiot, but even idiots can get second jobs unloading trucks and cleaning floors.

My solution for these idiots who think that McDonald's is an acceptable job for an adult is to work at two McDonald's and get more hours. Otherwise, I don't want to hear it. I haven't worked only 40 hours a week since I was 16, and anyone who works less than me isn't entitled to being listened to.

Cadders said...

I agree up to a point. Being a competent DIYer is part of rounding yourself out as a man.

Not everything of value is measured in money. I have in the past made the calculation you have and STILL performed a task myself, simply because I had not done it before and wanted to know how to do it. Sometimes it worked, sometimes it didn't (and like your example sometimes it cost me dearly in terms of time and money). But the point is, I learned something - either how to do it, or my limits in a particular area. Things I could build on or that would inform my future choices.

I work with one younger guy who is a specialist at his job and good at it. But he is hamstrung by a lack of confidence. Recently he asked me to 'help' change a tire on his car. It soon became clear I would have to do it all as he had no clue. He is 30 years old.

I'm sure his confidence issues are related to never pushing outside his specialism.

There is room for both in a well-rounded man.

Ecclesiastes said...

Another advantage of being one who does it himself is then he can properly monitor and check for the workmanship.

A Port Captain would spend 2-3 years fishing, return to the dock, and lousy captain's BS no longer flew.

BTW none of those minutes of yours were wasted. This is education, the real kind. I know my limits, sort of. I do wiring, plumbing, carpentry. I do the maintenance on MY truck. I don't know about anyone else's. I do not rebuild lawn mower carburetors.

I'm going to build a CNC router.

Finally, if you'll forgive the repetition from upthread, it forms your character. Without the will to do what you did, you're just a girl.

Mike said...

Aaron, I think that there is a fallacy in your DIY argument.

Say I want my car washed. I have the hour it takes to do this. With this hour, I can wash the car. But with this hour could I earn my specialist rate to pay someone else to do it? Perhaps it's a weekend and I can't bill a client hour, but I can wash my car.

Dan99 said...

Lower skill DIY doesn't necessarily have to replace your specialized work.

For example, let's say that you earn $100 per hour as a Software Programming Super Advanced Specialist. But I really doubt that you'll be able to focus on this highly productive work for more than 5-6 hours per day.

So your $8 per hour car washing will not replace your $100 per hour software work, but it will more likely replace your $0 per hour of Facebook browsing.

Anonymous said...

This is an interesting post. But this type of thinking only works in a vacuum. Many specializations have fallen out of favor overnight. The individual artisan must hedge against his own obsolescence. DIY is one of the most effective strategies against this because your investment is in your own two hands and you mind, the only things you have control of in the first place.

Anonymous said...

You are right only to the extent that one has chargeable or billable hours that are being "misallocated" to DIY and there are no distortions caused by taxes. The reality is we effectively have ~80 hours per week of time but only a fraction of that is spent on billable hours. Never pay someone else to do what you can do yourself in your free (i.e. unpaid time). America's tax system massively distorts markets. If I pay someone to do something I can do, I have to earn twice what it costs to pay a third party with most of the extra cost being taxes (FICA, federal income tax, state income tax, sales taxes, etc). If I do it myself, I pay no taxes and can even write off the costs of my tools. Your approach is exactly the sort favored by communists in government as it leaves the population broke, dependent on others, and unable to do things themselves.

Anonymous said...

Yes, specialisation is a good thing. In a high trust society. When societal trust is low, and thus your mechanic pulls one on you, your doctor pulls one on you, and your bank pulls one on you.. You might not have any other options.
The average salary in europe is something like 17 euros an hour. a mechanic, after tax, costs around 70 euros an hour.
You do the math on that one.

DIY furthermore has a civil defense value, when things break down after a catastrophy more citzens know how to restore order.

Now, on about societal Trust. Remember game theory? When everyone is being productive for a living, and it is a high trust environment, it pays off exponentially more to be the bad actor amongst then, and to go about loan sharking and usuring. Warren Buffett for instance did not get where he is today by being one of the "good guys" or following someone else's script. He got where is today by a good deal of insider trading and the like. But that's okay, because people work together to achieve common goals right?

One Fat Oz Guy said...

I'm afraid I've got to disagree with you on this one Cap.

Firstly, I think Big Government would approve of your post because you'd be creating jobs outsourcing your own domestic stuff.

Secondly, there's got to be some financial break even point because if I only earn $50 / hr and I pay a good cleaner $15 / hr to clean my house then I'm really paying them half my after take pay to do a job I could do 30 minutes every night.

It makes sense for a CEO on millions a year to outsource, but for the middle class? That'd have to be a case by case basis.

Besides, all of the people I know who outsource their house cleaning (some of them are entitled little princesses) seem to just spend their newly discovered spare time watching TV anyway. I'd rather save the money and do the cleaning myself.