A Cooper Review commissioned by the Commonwealth Government recommends that art investments in self-managed super funds (SMSF) be banned (read Artists fear super ban will destroy local industry). This, in my opinion, is a poor idea, and it makes no sense whatsoever. I am really starting to dislike the current Labor Government. They plan to slap a giant mining tax on the country and now they want to ban art investing.
Some people say that art (paintings) are not proper investments like stocks or real estate. But they are. An investment is defined as anything that can go up in value in the future. Since art can go up in value in the future, then it is therefore an investment.
Some people say that art is not a proper investment because it does not produce any income. Real estate investments produce income because you can rent the house out and get rental income. Stocks have income because companies distribute profits in the form of dividends. However, just because an asset does not produce income it does not mean it is not an investment. Arguably the world's greatest investment, i.e. shares in Berkshire Hathaway, the holding company of the world's richest man Warren Buffet, pays no dividends. All gains are in the form of capital gains. Another good investment is the safe haven asset gold, which produces no income at all, yet it has been used as an investment for millenia. If you store art in your house, it does not produce any income. However, it is possible for art fund managers to rent out the art to businesses. To see an example of this, read Smith and Hall - Why Rent Art?
Some argue that art has no real value and that people who are willing to pay millions for a painting are fools. Art has value because looking at it gives people pleasure. This is no different to, say, high-end real estate like mansions. It is also no different to stocks in companies that sell luxury goods. If people are willing to pay money to buy clothes, cars, and houses that look good, why wouldn't they also want to pay money to look at a good-looking painting?
18 June 2010
14 June 2010
Annoying Bee Noise During FIFA World Cup
I usually don't get into sport much but many of my friends at work and outside of work are into sport, so I think it makes sense for me to at least read up about sport so that I can have a conversation with my friends and colleagues.
I have entered a FIFA World Cup 2010 tipping competition at work. I paid $10 to get into it and there are currently 40 people who are in it. The winner gets 65 per cent of all the money, so that's $260 for the winner. That's not bad. Second and third place people also get prizes.
I turned on the soccer and thre is an annoying noise at every game. It sounds like there is a bee buzzing around. After a while I notice that it is not my TV because the games played on the FIFA website also make this bee noise. I have realized that this bee noise is due to the fans blowing on plastic horns. It is extremely annoying and FIFA officials should consider banning it. Some people have told me that you cannot ban people from doing something just because it annoys you. My reply is, "Yes you can." Surely FIFA understands that this noise annoys viewers and if viewers are annoyed they are likely to switch off and this may have an effect on advertising revenue. Surely FIFA has the power to ban these horns. If they are indeed the ones who run the game and set the rules, they would be able to set up a rule banning these horns.
Personally I find soccer and even AFL football to be less entertaining than a competition like, say, Survivor. In the reality TV gameshow Survivor you can sort of predict what will happen. You do so by asking yourself who is in what alliance, what would each player do if he were acting in his best interest, and so forth. With soccer and football it is completely up in the air. There really is no way you can create a logical argument to back up whether you think a particular team will win a game because there are just so many variables.
I have entered a FIFA World Cup 2010 tipping competition at work. I paid $10 to get into it and there are currently 40 people who are in it. The winner gets 65 per cent of all the money, so that's $260 for the winner. That's not bad. Second and third place people also get prizes.
I turned on the soccer and thre is an annoying noise at every game. It sounds like there is a bee buzzing around. After a while I notice that it is not my TV because the games played on the FIFA website also make this bee noise. I have realized that this bee noise is due to the fans blowing on plastic horns. It is extremely annoying and FIFA officials should consider banning it. Some people have told me that you cannot ban people from doing something just because it annoys you. My reply is, "Yes you can." Surely FIFA understands that this noise annoys viewers and if viewers are annoyed they are likely to switch off and this may have an effect on advertising revenue. Surely FIFA has the power to ban these horns. If they are indeed the ones who run the game and set the rules, they would be able to set up a rule banning these horns.
Personally I find soccer and even AFL football to be less entertaining than a competition like, say, Survivor. In the reality TV gameshow Survivor you can sort of predict what will happen. You do so by asking yourself who is in what alliance, what would each player do if he were acting in his best interest, and so forth. With soccer and football it is completely up in the air. There really is no way you can create a logical argument to back up whether you think a particular team will win a game because there are just so many variables.
Real Estate Spread Betting
Now that the FIFA World Cup 2010 is underway, there are many betting ads, e.g. from Sportsbet. In the recent Germany vs Australia game, if you think that Germany will win you can put your money where your mouth is and bet on Germany to win.
Wouldn't it be a great idea if you can do the same thing with Australian house prices? Gambling company should allow punters to bet on whether they think house prices will go up or down.
As it turns out, house price spread betting already exists in the UK, as I have discovered in an article in the Times Online about spread betting: "So, is it possible to make money out of property without the boring necessity of actually buying a house, paying stamp duty or dealing with oleaginous estate agents? The answer is yes: by betting on the movements of the British housing market. Spread betting, as it is known, has proved fabulously lucrative for players such as Simon Smith, 33, who makes rather a good living by sitting in his office in Leeds working out what is going to happen to house prices — and placing his money accordingly."
According to the Times article, many home owners are using house price spread betting to hedge against a fall in house prices. On the other side of the equation, renters can use house price spread betting to hedge agaisnt a rise in house prices, so there is a market both ways.
Further Googling has revealed that you can engage in house price spread betting on UK house prices via IG Index. I am not sure whether this site allows Australians to sign up. I am also unsure about the taxation implications of spread betting.
Wouldn't it be a great idea if you can do the same thing with Australian house prices? Gambling company should allow punters to bet on whether they think house prices will go up or down.
As it turns out, house price spread betting already exists in the UK, as I have discovered in an article in the Times Online about spread betting: "So, is it possible to make money out of property without the boring necessity of actually buying a house, paying stamp duty or dealing with oleaginous estate agents? The answer is yes: by betting on the movements of the British housing market. Spread betting, as it is known, has proved fabulously lucrative for players such as Simon Smith, 33, who makes rather a good living by sitting in his office in Leeds working out what is going to happen to house prices — and placing his money accordingly."
According to the Times article, many home owners are using house price spread betting to hedge against a fall in house prices. On the other side of the equation, renters can use house price spread betting to hedge agaisnt a rise in house prices, so there is a market both ways.
Further Googling has revealed that you can engage in house price spread betting on UK house prices via IG Index. I am not sure whether this site allows Australians to sign up. I am also unsure about the taxation implications of spread betting.
13 June 2010
Reading Ebooks on the Train with EBookME
I face a thirty minutes commute to work in the morning and when I come back it is another thirty minutes. I had to commute to the city when I went to university as well, so I've been commuting to the city for about nine years now.
Most of the time when I'm on the train I love to just look out the window and space out. It's nice to just let your mind wander when you've just woken up or when you've just had a long and hard day at work or university. But sitting or standing in the train and doing nothing sometimes makes me wonder whether I'm wasting time. If I read a book or listen to something on an MP3 player, I might be able to use this idle time to learn something rather than do nothing.
Listening to MP3 players on the train can be useful, especially if you are trying to filter out the conversations of people around you. Sometimes other people say the most annoying and offensive things, and when they say these things it's not easy to denounce them because these people are strangers.
The problem with MP3 players is that the train is a noisy place. It is not just the noise of people talking that bothers me. Most trains in Melbourne are so old they make loud noises. To be able to hear your MP3 player amid all this noise, you have to turn the volume up, and by turning the volume up, there is a risk that you might go deaf.
Reading a book can prevent you from focusing on other people's conversations. You're so focused on your book that the conversations of others just becomes background noise. You can read not only books but also newspapers.
The problem with newspapers is that they take up space. Broadsheet newspapers like The Age are a nightmare to read on the train because they are simply too big. Even when you're sitting down they are difficult to read. Tabloid-size newspapers like Australian Financial Review and Herald Sun are readable if you're sitting down but during peak hour when you have to stand up, they are not easy to read because you need both your hand to hold the newspapers and if both your hands are busy holding the newspaper then you have no hand left to hold on to something for balance. Thus reading the newspaper can put you at risk of falling over if the train jerks around. With Melbourne's massive population growth, it seems likely that commuters on trains will have to stand up more and more. Reading newspapers just ain't easy anymore.
Reading books presents the same problems as does reading tabloid newspapers. You generally need two pages to read a book. Most books are small enough that you can hold them with one hand, but if you want to flick to the next page you generally need two hands.
The best move then is to read an ebook on your mobile phone. I have recently downloaded on my computer a very good program called EBookME. This is free software that allows me to convert a text file into a JAR file, which can be uploaded on my phone. A JAR file is a file that is used for phones that run Java apps. The great thing about this is that I can now download from the internet free books and then put them on my phone. There are plenty of free books from Project Gutenberg. These books are usually written before the 1950s, which means that copyright has expired and you are legally allowed to download them for free. I have just downloaded a text version of The Great Gatsby and I'll be reading it on the train.
Most of the time when I'm on the train I love to just look out the window and space out. It's nice to just let your mind wander when you've just woken up or when you've just had a long and hard day at work or university. But sitting or standing in the train and doing nothing sometimes makes me wonder whether I'm wasting time. If I read a book or listen to something on an MP3 player, I might be able to use this idle time to learn something rather than do nothing.
Listening to MP3 players on the train can be useful, especially if you are trying to filter out the conversations of people around you. Sometimes other people say the most annoying and offensive things, and when they say these things it's not easy to denounce them because these people are strangers.
The problem with MP3 players is that the train is a noisy place. It is not just the noise of people talking that bothers me. Most trains in Melbourne are so old they make loud noises. To be able to hear your MP3 player amid all this noise, you have to turn the volume up, and by turning the volume up, there is a risk that you might go deaf.
Reading a book can prevent you from focusing on other people's conversations. You're so focused on your book that the conversations of others just becomes background noise. You can read not only books but also newspapers.
The problem with newspapers is that they take up space. Broadsheet newspapers like The Age are a nightmare to read on the train because they are simply too big. Even when you're sitting down they are difficult to read. Tabloid-size newspapers like Australian Financial Review and Herald Sun are readable if you're sitting down but during peak hour when you have to stand up, they are not easy to read because you need both your hand to hold the newspapers and if both your hands are busy holding the newspaper then you have no hand left to hold on to something for balance. Thus reading the newspaper can put you at risk of falling over if the train jerks around. With Melbourne's massive population growth, it seems likely that commuters on trains will have to stand up more and more. Reading newspapers just ain't easy anymore.
Reading books presents the same problems as does reading tabloid newspapers. You generally need two pages to read a book. Most books are small enough that you can hold them with one hand, but if you want to flick to the next page you generally need two hands.
The best move then is to read an ebook on your mobile phone. I have recently downloaded on my computer a very good program called EBookME. This is free software that allows me to convert a text file into a JAR file, which can be uploaded on my phone. A JAR file is a file that is used for phones that run Java apps. The great thing about this is that I can now download from the internet free books and then put them on my phone. There are plenty of free books from Project Gutenberg. These books are usually written before the 1950s, which means that copyright has expired and you are legally allowed to download them for free. I have just downloaded a text version of The Great Gatsby and I'll be reading it on the train.
Is the Resource Super Profits Tax Unfair?
After the GFC, the Australian Labor Party led by Kevin Rudd stimulated the economy by splashing cash. As a result, the Australian government created debt that needed to be paid off. The opposition Liberal Party criticized Labor for its reckless spending, but in this year's Commonwealth Budget the government announced it plans to be back in surplus soon thanks to a tax on the reosurces sector called the resource super profits tax (RSPT). Any mining projects in Australia will be taxed at 40 per cent above the 10-year bond rate.
The proceeds of this mining tax will be used to fund a reduction in the company tax rate from 30 per cent to 28 per cent. It will also be used to fund a range of other expenditure items, including benefits to small businesses.
Even though companies will get a reduction in company tax rate, the reduction from 30 to 28 per cent is miniscule. Furthermore, companies will be faced with the increased burden of a higher rate of superannuation it has to pay to workers (from 9 per cent to 12 per cent). The government is currently trying to buy favor among miners by giving them a infrastructure fund that will be used for spending on mining exploration and the like. This is horrible! Why would you take money from someone with taxes and then give that money back? Even if you take $100 from someone and then give that person $100 back, this creates a net loss for the economy because of administration burden plus other inefficiencies.
I am all for fair tax, but this strikes me as unfair. Based on what I have learned in university, the best kind of taxation is one that is difficult to avoid and is broad-based. A tax like the goods and services tax (GST) is an example of a good tax because just about everyone pays it when they purchase a product (ignoring, of course, the exemptions in current GST law on certain food). A flat income tax is good. Land tax is also excellent. A poll tax is probably the best kind of tax, although historically poll taxes are very unpopular.
However, the RSPT is not broad. Rather, it is very narrowly focused on the mining sector. The mining sector is hit by this massive tax on super profits while banks do not pay a super profit tax. The Labor government argues that these non-renewable resources belong to the people and hence the people must get their fair share back. This is all well and good, but if the principle of taxation is to tax those that use natural resources, why aren't farmers slugged with a super profits tax for their exploitation of the land? Why aren't home owners slugged with taxes for using their land they live on? Rather we see massive tax exemptions given to home owners and farmers.
The RSPT is also very worrying in that it creates an atmosphere of uncertainty. If the Australian government can just implement massive taxes on a whim, who is to say the mining sector will be the only victim? You may not think the mining tax affects you maybe because you are heavily invested in banking shares rather than mining shares. But given that Rudd has shown that he is willing to slug a massive tax on anyone who is successful, who is to say he won't start applying a tax on banks next? If a gunman enters a room and shoots the person right next to you, you would be scared because this gunman is clearly has murderous intend and just as he has shot and killed your friend he could easily shoot you. Likewise, Kevin Rudd is a like a gunman, shooting sectors of the economy with taxes. You may be lucky now but who is say that in the future he might not slug a tax on you or your investments? Think you can run away from the tax by putting your money into gold? He might put a tax on that. He might do anything. The extreme would be some kind of tax on men because they earn more than women. The idea of a man tax has actually been suggested by some people.
I am not anti-tax. I think tax is essentially because government needs money to provide essentials to the public. But why can't the government just reform the tax system by levying a simple and fair land tax or a simple and fair income tax? These various exemptions and deductions that exist in current taxation legislation do nothing but divide citizens.
The proceeds of this mining tax will be used to fund a reduction in the company tax rate from 30 per cent to 28 per cent. It will also be used to fund a range of other expenditure items, including benefits to small businesses.
Even though companies will get a reduction in company tax rate, the reduction from 30 to 28 per cent is miniscule. Furthermore, companies will be faced with the increased burden of a higher rate of superannuation it has to pay to workers (from 9 per cent to 12 per cent). The government is currently trying to buy favor among miners by giving them a infrastructure fund that will be used for spending on mining exploration and the like. This is horrible! Why would you take money from someone with taxes and then give that money back? Even if you take $100 from someone and then give that person $100 back, this creates a net loss for the economy because of administration burden plus other inefficiencies.
I am all for fair tax, but this strikes me as unfair. Based on what I have learned in university, the best kind of taxation is one that is difficult to avoid and is broad-based. A tax like the goods and services tax (GST) is an example of a good tax because just about everyone pays it when they purchase a product (ignoring, of course, the exemptions in current GST law on certain food). A flat income tax is good. Land tax is also excellent. A poll tax is probably the best kind of tax, although historically poll taxes are very unpopular.
However, the RSPT is not broad. Rather, it is very narrowly focused on the mining sector. The mining sector is hit by this massive tax on super profits while banks do not pay a super profit tax. The Labor government argues that these non-renewable resources belong to the people and hence the people must get their fair share back. This is all well and good, but if the principle of taxation is to tax those that use natural resources, why aren't farmers slugged with a super profits tax for their exploitation of the land? Why aren't home owners slugged with taxes for using their land they live on? Rather we see massive tax exemptions given to home owners and farmers.
The RSPT is also very worrying in that it creates an atmosphere of uncertainty. If the Australian government can just implement massive taxes on a whim, who is to say the mining sector will be the only victim? You may not think the mining tax affects you maybe because you are heavily invested in banking shares rather than mining shares. But given that Rudd has shown that he is willing to slug a massive tax on anyone who is successful, who is to say he won't start applying a tax on banks next? If a gunman enters a room and shoots the person right next to you, you would be scared because this gunman is clearly has murderous intend and just as he has shot and killed your friend he could easily shoot you. Likewise, Kevin Rudd is a like a gunman, shooting sectors of the economy with taxes. You may be lucky now but who is say that in the future he might not slug a tax on you or your investments? Think you can run away from the tax by putting your money into gold? He might put a tax on that. He might do anything. The extreme would be some kind of tax on men because they earn more than women. The idea of a man tax has actually been suggested by some people.
I am not anti-tax. I think tax is essentially because government needs money to provide essentials to the public. But why can't the government just reform the tax system by levying a simple and fair land tax or a simple and fair income tax? These various exemptions and deductions that exist in current taxation legislation do nothing but divide citizens.
12 June 2010
Economics is Useless
I recently had lunch with a work friend. During this lunch he asked me what my career plan was. I told him that my plan was to just stick with the job I have. I wouldn't say I love my job, but it's reasonable. My friend and I both work in public finance. He told me that he is keen on going to university to do a masters and then working specifically in health and education, areas he is interested in.
Personally, I am not really interested in going back to university because I feel like I have been in university for a long time. I spent a lot of time in university studying economics. Many people have the impression that you do in your carrer what you study in university. For physicians, lawyers, and accountants, this may be the case, but even though I studied economics in university, I find I do not use what I learned in university in my career very much. In fact, most people who study economics, I find, do not use economics much in their career other than those who work in economic forecasting or economic consultancies like Access Economics. The reality is that there really is not much job opportunities for economists, and studying economics is not really a good career move. I studied it because it was an interesting discipline. Furthermore, many work colleagues who have studied economics are keen on moving to other areas. I know one colleague who works in the public sector who is keen in studying graduate medicine because she believes that economics is a dubious science (it's called the dismal science for a reason). Economics can hardly be called a science in the same way that physics is a science. In physics, almost everything can be proven with a laboratory experiment. In economics, it's very difficult to do laboratory experiments, so economists resort to econometrics to prove things. Having studied it for a long time at university, I find econometrics to be highly questionable. It's not uncommon to see one economist using econometrics to prove one thing and then a month later find another economist using econometrics to prove the exact opposite. Economics has transitioned from an honest science into a tool of propaganda. If politicians want to implement some policy, they usually pay off some professional economist to produce some report filled with mathematics and statistics to provide ammunition in favour of the argument. Economists will only be useful so long as the public is duped or amazed by their impressive numbers and formulae.
It's easy to understand how a physician, an engineer, a lawyer, an accountant, or even a prostitute is useful in the labor market. Not so for economists.
This is why I am thinking about a career change. I need to ask myself what is it that I have a passion for. One thing I am passionate about is investing. I would love to be a financial adviser. Useful professionals like physicians and lawyers actually fix people's problems. If someone is sick, they see a physician and the physician helps fix the disease. If someone has a legal problem then they see a lawyer. But nobody has "economic problems." However, people do have problems with personal finance, e.g. where do I put my money, how do I minimize tax, how do I buy shares, and so forth. In order to fix these problems you do not go to an economist! Rather, you see a financial adviser who probably has a background in accounting or tax law. I would like to see myself in a role where I can actually help people and be useful.
Personally, I am not really interested in going back to university because I feel like I have been in university for a long time. I spent a lot of time in university studying economics. Many people have the impression that you do in your carrer what you study in university. For physicians, lawyers, and accountants, this may be the case, but even though I studied economics in university, I find I do not use what I learned in university in my career very much. In fact, most people who study economics, I find, do not use economics much in their career other than those who work in economic forecasting or economic consultancies like Access Economics. The reality is that there really is not much job opportunities for economists, and studying economics is not really a good career move. I studied it because it was an interesting discipline. Furthermore, many work colleagues who have studied economics are keen on moving to other areas. I know one colleague who works in the public sector who is keen in studying graduate medicine because she believes that economics is a dubious science (it's called the dismal science for a reason). Economics can hardly be called a science in the same way that physics is a science. In physics, almost everything can be proven with a laboratory experiment. In economics, it's very difficult to do laboratory experiments, so economists resort to econometrics to prove things. Having studied it for a long time at university, I find econometrics to be highly questionable. It's not uncommon to see one economist using econometrics to prove one thing and then a month later find another economist using econometrics to prove the exact opposite. Economics has transitioned from an honest science into a tool of propaganda. If politicians want to implement some policy, they usually pay off some professional economist to produce some report filled with mathematics and statistics to provide ammunition in favour of the argument. Economists will only be useful so long as the public is duped or amazed by their impressive numbers and formulae.
It's easy to understand how a physician, an engineer, a lawyer, an accountant, or even a prostitute is useful in the labor market. Not so for economists.
This is why I am thinking about a career change. I need to ask myself what is it that I have a passion for. One thing I am passionate about is investing. I would love to be a financial adviser. Useful professionals like physicians and lawyers actually fix people's problems. If someone is sick, they see a physician and the physician helps fix the disease. If someone has a legal problem then they see a lawyer. But nobody has "economic problems." However, people do have problems with personal finance, e.g. where do I put my money, how do I minimize tax, how do I buy shares, and so forth. In order to fix these problems you do not go to an economist! Rather, you see a financial adviser who probably has a background in accounting or tax law. I would like to see myself in a role where I can actually help people and be useful.
06 June 2010
Why Debt is Bad
"The rich rule over the poor, and the borrower is slave to the lender." Proverbs 22:7
Whenever I exercise, I like to listen to podcasts, and one podcast I love to listen to is The Survival Podcast (TSP). TSP teaches about survivalism, but don't think this guy is a psycho right-wing racist who is accumulating guns and ammo to prepare for a war with the government. He (Jack Spirko) gives very useful and practical advice to teach us all how to live our lives and to increase our chances of survival if times get tough--or even if they don't!
One tenet TSP hammers home is that debt is bad. In Episode 193 - Debt Elimination is Survivalism 101, Jack explains how you cannot expect to be focused on survival and have the shadow of debt hanging over your shoulder. In Episode 438 - What Debt Freedom Means, Jack gets more personal, giving us a story about how he struggled with debt fifteen years ago--how the debt start out small but eventually grew like a cancer. He made a stand to fight the debt and how he is free of debt, and as an old man he is appealing to the younger generation to stay away from something that had a profoundly negative impact on his life. Both these podcasts are very insightful and it's incredible to see the sinister side of debt exposed by one of its victims, especially now in Australian during a period in time when many people seem to be so desperate to buy a home that they are throwing themselves at the banks because they want more and more debt to fund their dream homes.Whenever I exercise, I like to listen to podcasts, and one podcast I love to listen to is The Survival Podcast (TSP). TSP teaches about survivalism, but don't think this guy is a psycho right-wing racist who is accumulating guns and ammo to prepare for a war with the government. He (Jack Spirko) gives very useful and practical advice to teach us all how to live our lives and to increase our chances of survival if times get tough--or even if they don't!
Spirko claims that the cost of debt is not just the money (that is, the interest). Debt wastes money but it also wastes time and life. I would add that the cost of debt is definitely not just the money (although debt on, say, a standard home loan can be massive) but debt also comes at the cost of freedom. When you take out a loan, you lose not only money that you must pay back to the bank but you also force your future self to work, which reduces how much freedom you have. Quite literally, as the bible explains, debt is slavery. The people with mortgages, credit card debt, and car loans work like slaves. The banks and their shareholders are the slaveowners.
Mortgage debt in Australia is even worse than mortgage debt in America because in Australia banks have the right to sieze all others assets if you are unable to pay your mortgage. If you default on your home loan, the banks can sieze not only your house but your car, your savings, and all your belongings--and you're broke. In America if you cannot pay your home loan you can walk away and all your other belongings are safe. This means that in Australia those in debt have it tougher. They must focus on paying the mortgage and not consider anything else.
The Good Side of Debt
I'm not saying that you should never ever go into debt at all. I do believe that there are some times when debt is a good idea. I think that you should go into debt if you really need to go into debt. For example, if you are starving and you need to borrow money to buy food, then it's probably a good idea to go into debt. If you are living with your parents and your parents are sexually abusing you and you don't like it, you may go into debt to buy a home for yourself.
There are times when debt can be profitable. For example, if you borrow $100 and use that $100 to buy an asset that appreciated by 10 per cent to $110 and you pay back the bank $105, you make a $5 profit. You can use the borrowings to buy stocks, property, or even to start your own business. It is possible to make debt profitable. However, it is difficult. If there is such an asset that is guaranteed to go up in value more than the cost of borrowing, you can be certain the banks would rather buy that asset themselves rather then hand you the money to buy the asset. By handing you the money to buy that asset, the banks have determined that that asset is too risky for them to hold, so they give you to the money and you bear all the risk.
If you have great skill, you can borrow money to start your own business and make a lot of money, but this is highly risky. If you borrow thousands of dollars and your business fails, you not only have the disappointment of a failed business but also the stress of debt that still remains even after your business fails.
Don't think that debt is costless, that you can just borrow and there will be no consequence to your borrowings. By going into debt you are making a bold prediction about the future. When you borrow money to invest in shares, you are predicting that shares will go up in value. When you borrow money to start your own business, you are predicting your business will be profitable. You may be right, but you are more likely to be wrong. You need to be either very lucky or you need to work very hard.
The bible says that borrowers are slaves and lenders are slave owners. A bank's primary function is to coordinate the interests of borrowers and lenders. Hence the bank's primary function is to bring together slaves and slaveowners. The bank is a slave market. Instead of whips and chains used to inflict pain and limit freedom, instead the threat of default and seizure of assets are used to instill fear.
05 June 2010
Budget Your Savings, Not Your Spending
The result is that I figured out that I spend about $600 per month. That is very nice to know, but did I really need to track where all my cents went?
Keeping track of my spending was difficult. It's not practical to carry around a notebook everywhere you go, so in order to track my spending I used my mobile phone camera to take pictures of things I purchased. If there was no price tag I could take a picture of, I made a voice recording in my mobile phone. In the voice recording I detailed when I purchased the item, what the item is, how much it costs, etc. About once a week or more I went through my mobile phone and entered all this data into the Google spreadsheet. It was a lot of work!
I have now stopped tracking my spending. The reason why is because it is so tedious. It is good to be able to figure out how much you spend, but there is an easier way to do this. Quite simply, you follow this formula:
Savings or Investments = Income - Spending
In other words, how much you save or invest is equal to how much money you get in the form of income subtract how much you spend. If we rearrange this formula, we get the following:
Spending = Income - Savings or Investments
In other words, in order to figure out how much you spend, take your income and then subtract your investments or savings. This is much easier because your income (I'm talking about take-home pay here, which is how much actually goes into your bank account every fortnight) is usually fixed and it's easy to figure out what your income is. Investments or savings is also easy to figure out for me because I usually buy shares in increments of thousands of dollars. That is, I buy shares thousands of dollars at a time. Therefore, when I invest I do it not very regularly and it's easy and simple to keep track of.
I spend money on a lot of small things, for example, coffee, mints, and restaurant meals. When I buy non-investment goods, I tend to buy cheap things very frequently. However, when I buy investments, I tend to buy expensive things infrequently. It therefore made sense to ignore spending and focus instead on savings.
Giving Money to Bums
Whenever I walk around in the city I always see bums sitting on the pavement. I feel sorry for many of these people, especially if they are young, female, and shivering--but many colleagues warn me not to give any money to these bums because, apparently, the money is likely to be spent on illicit drugs or alcohol rather than food.
I currently use my credit card to regularly give the humanitarian organization World Vision a regular amount every month. The hope is that a humanitarian organization like World Vision will use the money to provide for the poor useful things like food, water, and shelter rather than alcohol or cocaine. World Vision Australia is audited by PricewaterhouseCoopers (PwC), the same external audit organization that audits Victorian Government entities to make sure they are in compliance with public sector regulatory requirements. World Vision also has an internal compliance team.
I have a lot of faith in large organizations. I have a lot of faith in government and trusted corporations like Google, AAMI, Commonwealth Bank, and so forth. It's not that I am naive. I am sure there are elements of corruption in any large bureaucracy, but I also think that the incentives are there for shareholders, voters, and clients to establish frameworks to hold agents accountable for what they do. In corporations, executives are accountable to the board of directors and to shareholders. In government, the bureaucracy is accountable to the legislature, which is accountable to the voting public. In many prosperous countries there are checks and balances or institutions that put a limit on fraud and ensure things work. Even though I have no idea what is in the food I eat, I trust that government regulations ensure there is nothing harmful or poisoning in my food. Even though there is no guarantee the judiciary will continue to fair and impartial, I trust that contracts will be honored and anyone who breaks the contract will be punished under the law. Even though I know little about climate science, I trust mainstream scientists when they say climate change is a worry.
Back to the topic of giving money to bums--talk about being sidetracked!--I have recently wondered about the merits of handing over cash to bums on the street. As much as I trust World Vision, I do think that charity, like investments, should be diversified, not only to diversify away corruption risk but also to spread the money around in the interest of fairness.
More Jobs, Less Cash Handouts
I am a believer that the best way to help the poor is to give them a job. While the trend nowadays is for people to be cynical and pessimistic in the topic of charity, I am an optimist because I think much progress has been made and the world is getting better and better. I believe that the world is a much better place now mainly because of the rise of India and China, countries with massive labor markets that are liberalising their labor markets to give the poor access to employment. If countries in Africa were to liberalise their labor markets and essential copy China's emphasis on exploiting cheap labor, I think Africans will experience a massive escape from poverty. I think the opportunity is there because wages in China and India are starting to rise and multinationals searching for cheap labor may have to look elsewhere--perhaps Africa--for cheap labor to make shoes, t-shirts, and other essentials we buy. The problem with many African governments lies in the governments there. I am hoping that one day there will be stablility and harmony in Africa so that multinationals will feel comfortable hiring labor.
Worker Benefits Destroys Jobs
In developed countries like Australia, it is surprising to see bums on the streets. Many might wonder why these people don't simply get jobs and start working like normal people do. The answer may be that government regulations give workers benefits like minimum wages and holidays. It is brillant for workers that the government force employers to give holidays (annual leave) and sick leave, maternity leave, superannuation, and so forth, but employers are not happy. These benefits for workers make it less profitable for employers to hire workers, and if workers are costing employers money, they will have to compensate by hiring fewer people. Why would BHP Billiton hire a bum who may only give $10 per day of value when that bum may cost, say, $50 per day in minimum wages, sick leave, superannuation benefits, and so forth? In my opinion, in an ideal world, there should be no minimum wage, no superannuation, no sick leave, no holidays, no maternity leave, and perhaps the government should subsidize companies who hire workers rather than punish them by imposing payroll tax. I am aware these policies will never materialize because of political reality.
Begging as Working
If I hand a bum on the streets some cash, I can help the poor because I am effectively giving this bum a job. Because this is a cash transaction done without government oversight, I effectively pay this bum a low wage for the job of sitting around in the cold. Because there is no government oversight, there is no superannuation I have to pay him, there is no sick leave or holidays.
The Problem of the Rich Bum
There are some objections. One objection to giving money to bums is that the bum may not be poor. The bum you see on the streets may be a bum during the day but when it's night he goes home to his mansion to sleep on a bed only to wake up the next day and start begging again. The risk of giving money to a rich bum is greatest if the payoff from being a bum is high and the costs are low. The cost of being a bum includes being cold and suffering from shame. Some people have no shame so the only creditable pain from being a bum is from the cold. Therefore, it is safer to give money to a bum who is shivering and looks like he is cold. This is because a rich bum would rather stay at home where he has ducted heating rather than shiver in the cold. An authentic bum is so despearate he is willing to work for money, so a way you can filter out rich bums is to subject them to pain. By subjecting themselves to pain, they signal to others that they are authentic bums rather than rich bums. If you see a shivering and cold bum on the streets, he or she is likely to be authentic. If the bum is wearing lots of clothing, it pays to test the bum. For example, talk to the bum and say, "I will give feed you dinner tonight if you take off most of your clothes and walk with me to the restaurant." If the bum is rich, he won't bother taking off his clothes and shivering while he walks to get his next meal. If he is an authentic bum, he will agree to do this.
Rich bums may exist because the payoff from being a bum may be high. If people only give bums $1 a day, you can be fairly certain that only poor people will beg for a living because no rich person in his right mind would work for $1 a day when he could do something else and earn more. However, some bums may be so effective at begging that they may earn, say, $200 per day. This is a major problem. Even if you subject a bum to pain to test the bum (e.g. make the bum walk to the nearest restaurant with little clothing) the pain may be worth it if he is being paid $200 per day for it. One potential solution is to give bums perishable food rather than money. If you see a bum but don't have any food on you, ask the bum to follow you to a cafe where you will buy the bum some cheap and perishable food or beverage. The problem with this is that it can be a lot of effort on behalf of the donor. Not many people have time to walk a bum to a cafe and buy her food.
A quick technique for testing to see if you are giving money to a rich bum from an authentic bum is to offer to buy her clothing off her. Especially on a cold day, clothes are necessary to protect you from the elements. If a bum is willing to give up his clothes for a small amount of money and thereby be subject to pain from coldness, he is likely to be an authentic bum. When you see a bum, you can say, "That jacket you're wearing looks nice. I will buy it from you for one dollar." If you are talking to a rich bum, she won't accept the offer because her comfort is more important than the money. If you are talking to an authentic bum, she will likely accept the offer because she needs that money so badly for food that she is prepared to subject herself to pain from coldness. A bum will always have clothes you can buy. He the bum is naked, he probably deserves your money anyway. You can buy not only the jacket but also shoes, gloves, and socks.
Make Bums Work for Pay
Many people think bums deserve to be bums because they don't want to work. This is unfair because minimum wage laws and other government interventions do not give an incentive for businesses to employ cheap labor.
However, I don't think you should give money to a bum who just sits around. You must subject them to tests so that they work for their pay. Below are some ideas:
- offer to buy their clothes (socks, shoes, jacket, etc) for a low cost so that they suffer pain from coldness
- get bums to do a certain number of pushups before you give them money (you can usually infer willingness to pay by looking at how much the bum sweats)
- give a bum a free copy of the bible and tell her to read, e.g. the Book of Genesis, and then the next time you see her you ask her some questions about Genesis to ensure she has learned it, and then do the same thing for Exodus, Leviticus, etc until the bum has studied the whole bible.
Webcam Philanthropy
A great idea for World Vision is to allow members to test the recipients of charity to see whether they are genuinely poor. For example, a World Vision employee can walk around in a poor area with a laptop and a bag of cash. The employee asks for a poor person to come along. This poor person is then recorded with a webcam and someone like me, the donor, looks at this poor person via the webcam. I then type in my computer what tests I want the poor person to do, e.g. 10 pushups, run on the spot, and so forth. Then when I think the poor person has done enough work to deserve cash, I can use Paypal to wire the money to World Vision who then give the same amount in cash to the poor person doing the pushups. I will pay the poor person just enough so that he can live, e.g. assume that you need about $1 a day to buy food to live, then that means you should get about 13 cents per hour assuming a person works for eight hours a day. Therefore, a person should get about 1 cent per five minutes. I will then subject a poor person to five minutes of pushups and then pay him or her 1 cent for this.
This I think is a corruption-free method of giving to the poor. There is perfect signalling because I am getting the poor person to work for his money, therefore separating poor from rich. There is perfect accountability because I can see with my own eyes the poor person working. When I transfer to the money to World Vision, the charity organization must hand that exact same amount of money to the poor person and I must see it on the webcam.
Obviously World Vision needs to make some money from this to pay for the cost of the laptop, webcam, workers, and so forth, so for every $1 that is transferred to World Vision by members, say, 97 cents will go straight to the poor in cash.
This is a brilliant business idea. Anyone is free to establish this idea. If nobody does, I will try to establish it in the future once I feel secure enough to start a business. This business will not make much money. If you take 3 cents of every dollar that a donor gives, that's not much, and competition may drive this profit down even more to say, 1 cent for every dollar given. But this business idea is not designed for profit (it's designed to help the poor), so if I can get the profits from this business to simply cover bare costs (e.g. the cost of the laptop, etc) and thereby make zero profit, that will be good enough.
Problems with Webcam Philanthropy and Solutions to Those Problems
I've thought about this idea some more and there are some problems with it. One problem with this idea of getting World Vision to cover the costs by taking a percentage of whatever is donated is that a particular donor may ask for a poor person to do a lot of work but not pay anything. To discourage this, it is important for World Vision to charge a time-based fee, say a few cents per minute depending on the cost of the laptop, etc. Furthermore, a recipient of the money can decline if he or she wants to. For example, if a donor offers $1 but in return the recipient must do one million pushups, the recipient may deem that to be unreasonable, decline the offer, and the donor will be randomly allocated to another webcam. The donor cannot waste time by not giving anything because he will be paying a variable fee based on time and this fee is used to pay the cost of doing all this. There needs to be bargaining power on both sides for this market to work.
Another problem is if there is coercion. For example, suppose an abusive husband orders his wife to go to a World Vision webcam and do whatever the donor on the othre side of the webcam wants for money. The wife who is a victim of abuse may go to a World Vision webcam and then do 100 pushups for $1 and then when she gets that money she goes back home and gives $1 to the husband. The way to make sure the wife benefits from this money is to give the donor the option to pay in food and to watch via webcam the recipient eat the food. For example, the donor offers to pay $1 worth of rice to the recipient in return that the recipient does 100 pushups. After doing the 100 pushups the donor transfer $1 over to World Vision who in turn give $1 worth of rice to the woman in real time and then the recipient eats the rice then and there while the donar watches her eat the rice. This is useful if the woman has children. You cannot make children work because of child labor laws, so the mother can instead bring these children along and show them via webcam to the donor and the donor can give the mother rice that she eats then and there and gives to the children. The children eat then and there in front of the webcam and the donor can monitor this.
Another problem is that some poor people may be better than others at doing pushups. For example, a pregnant woman cannot do pushups easily. This can easily be fixed by giving the donor the ability to get the recipient to so other easier things like situps, starjumps, or even getting the recipient to sing. The donor can even type some other novel task if he wants to. This ensures accountability and freedom and makes sure the donor can dictate exactly how his own money should be earned.
Webcam Busking
How can this idea be sold to people? You need to take something that is already familiar to them. Busking is a concept that has been around for a long time. According to Wikipedia, busking is "the practice of performing in public places for tips and gratuities." That is esentially what I am advocating, but I want the idea to be carried out online so that more money can go to the poor.
I have Googled "onling busking" and the idea has already been touted by other people, but what other people are suggesting is not good. Most of what I have read online involves a musician recording his own music and then posting it online and asking for donations. This is not good because a rich person can easily make his own music, record this music, upload it online, claim that he is poor, and then ask for money. He only needs to perform once and then he may make millions. What I advocate is donors giving money to performers in real time so that there is accountability. When I log into World Vision's online busking area, I want to be able to be able to browse through many buskers and then watch a busker of my choice via high-definition webcam. While watching I can give money and when I do, in real time that money must drop near the person and the money must be visible to the donor via the webcam. If I drop, say, a $1 coin then I must see that $1 coin dropping. As I said before, giving food may be a better idea. It may also be a better idea if the donor can see the busker eating the food in real time.
When you are browsing to see which busker to watch, I think it would also be a good idea to allow people to see how much a particular busker is getting paid in terms of hourly rate. This will make the whole thing more equitable so that donars can target those buskers who are not paid livable wages. The currency for this will be in dollars (maybe US dollars or maybe even in gold given how much the US dollar has depreciated lately) or in rice. Donors can see how much each performer is paid in dollars per hour or grams of rice per hour.
It would be best if donors can give money via Paypal. They can initially put busker credits into an account and then this account balance goes down as the donor gives money or rice to a performer in real time. I think to get this idea going there should be no fee paid at all. Instead, ask for donations and say that donations will allow new performing rooms to be created. A performing room is simply a room where the poor person performs. It is just a room with a computer and a webcam. A machine that gives out money or rice would need to be made as well. Probably the most expensive part of this is the real estate. Make it so that anyone who donates money to build a performing room gets to name the room. If it's quite expensive to make a room and multiple people donate money to create a room then maybe make it so that the person who contributes the most money names the room but other donors may write their names or put an advertisement on the wall. This I think should encourage many companies to help out so that they can advertise.
I currently use my credit card to regularly give the humanitarian organization World Vision a regular amount every month. The hope is that a humanitarian organization like World Vision will use the money to provide for the poor useful things like food, water, and shelter rather than alcohol or cocaine. World Vision Australia is audited by PricewaterhouseCoopers (PwC), the same external audit organization that audits Victorian Government entities to make sure they are in compliance with public sector regulatory requirements. World Vision also has an internal compliance team.
I have a lot of faith in large organizations. I have a lot of faith in government and trusted corporations like Google, AAMI, Commonwealth Bank, and so forth. It's not that I am naive. I am sure there are elements of corruption in any large bureaucracy, but I also think that the incentives are there for shareholders, voters, and clients to establish frameworks to hold agents accountable for what they do. In corporations, executives are accountable to the board of directors and to shareholders. In government, the bureaucracy is accountable to the legislature, which is accountable to the voting public. In many prosperous countries there are checks and balances or institutions that put a limit on fraud and ensure things work. Even though I have no idea what is in the food I eat, I trust that government regulations ensure there is nothing harmful or poisoning in my food. Even though there is no guarantee the judiciary will continue to fair and impartial, I trust that contracts will be honored and anyone who breaks the contract will be punished under the law. Even though I know little about climate science, I trust mainstream scientists when they say climate change is a worry.
Back to the topic of giving money to bums--talk about being sidetracked!--I have recently wondered about the merits of handing over cash to bums on the street. As much as I trust World Vision, I do think that charity, like investments, should be diversified, not only to diversify away corruption risk but also to spread the money around in the interest of fairness.
More Jobs, Less Cash Handouts
I am a believer that the best way to help the poor is to give them a job. While the trend nowadays is for people to be cynical and pessimistic in the topic of charity, I am an optimist because I think much progress has been made and the world is getting better and better. I believe that the world is a much better place now mainly because of the rise of India and China, countries with massive labor markets that are liberalising their labor markets to give the poor access to employment. If countries in Africa were to liberalise their labor markets and essential copy China's emphasis on exploiting cheap labor, I think Africans will experience a massive escape from poverty. I think the opportunity is there because wages in China and India are starting to rise and multinationals searching for cheap labor may have to look elsewhere--perhaps Africa--for cheap labor to make shoes, t-shirts, and other essentials we buy. The problem with many African governments lies in the governments there. I am hoping that one day there will be stablility and harmony in Africa so that multinationals will feel comfortable hiring labor.
Worker Benefits Destroys Jobs
In developed countries like Australia, it is surprising to see bums on the streets. Many might wonder why these people don't simply get jobs and start working like normal people do. The answer may be that government regulations give workers benefits like minimum wages and holidays. It is brillant for workers that the government force employers to give holidays (annual leave) and sick leave, maternity leave, superannuation, and so forth, but employers are not happy. These benefits for workers make it less profitable for employers to hire workers, and if workers are costing employers money, they will have to compensate by hiring fewer people. Why would BHP Billiton hire a bum who may only give $10 per day of value when that bum may cost, say, $50 per day in minimum wages, sick leave, superannuation benefits, and so forth? In my opinion, in an ideal world, there should be no minimum wage, no superannuation, no sick leave, no holidays, no maternity leave, and perhaps the government should subsidize companies who hire workers rather than punish them by imposing payroll tax. I am aware these policies will never materialize because of political reality.
Begging as Working
If I hand a bum on the streets some cash, I can help the poor because I am effectively giving this bum a job. Because this is a cash transaction done without government oversight, I effectively pay this bum a low wage for the job of sitting around in the cold. Because there is no government oversight, there is no superannuation I have to pay him, there is no sick leave or holidays.
The Problem of the Rich Bum
There are some objections. One objection to giving money to bums is that the bum may not be poor. The bum you see on the streets may be a bum during the day but when it's night he goes home to his mansion to sleep on a bed only to wake up the next day and start begging again. The risk of giving money to a rich bum is greatest if the payoff from being a bum is high and the costs are low. The cost of being a bum includes being cold and suffering from shame. Some people have no shame so the only creditable pain from being a bum is from the cold. Therefore, it is safer to give money to a bum who is shivering and looks like he is cold. This is because a rich bum would rather stay at home where he has ducted heating rather than shiver in the cold. An authentic bum is so despearate he is willing to work for money, so a way you can filter out rich bums is to subject them to pain. By subjecting themselves to pain, they signal to others that they are authentic bums rather than rich bums. If you see a shivering and cold bum on the streets, he or she is likely to be authentic. If the bum is wearing lots of clothing, it pays to test the bum. For example, talk to the bum and say, "I will give feed you dinner tonight if you take off most of your clothes and walk with me to the restaurant." If the bum is rich, he won't bother taking off his clothes and shivering while he walks to get his next meal. If he is an authentic bum, he will agree to do this.
Rich bums may exist because the payoff from being a bum may be high. If people only give bums $1 a day, you can be fairly certain that only poor people will beg for a living because no rich person in his right mind would work for $1 a day when he could do something else and earn more. However, some bums may be so effective at begging that they may earn, say, $200 per day. This is a major problem. Even if you subject a bum to pain to test the bum (e.g. make the bum walk to the nearest restaurant with little clothing) the pain may be worth it if he is being paid $200 per day for it. One potential solution is to give bums perishable food rather than money. If you see a bum but don't have any food on you, ask the bum to follow you to a cafe where you will buy the bum some cheap and perishable food or beverage. The problem with this is that it can be a lot of effort on behalf of the donor. Not many people have time to walk a bum to a cafe and buy her food.
A quick technique for testing to see if you are giving money to a rich bum from an authentic bum is to offer to buy her clothing off her. Especially on a cold day, clothes are necessary to protect you from the elements. If a bum is willing to give up his clothes for a small amount of money and thereby be subject to pain from coldness, he is likely to be an authentic bum. When you see a bum, you can say, "That jacket you're wearing looks nice. I will buy it from you for one dollar." If you are talking to a rich bum, she won't accept the offer because her comfort is more important than the money. If you are talking to an authentic bum, she will likely accept the offer because she needs that money so badly for food that she is prepared to subject herself to pain from coldness. A bum will always have clothes you can buy. He the bum is naked, he probably deserves your money anyway. You can buy not only the jacket but also shoes, gloves, and socks.
Make Bums Work for Pay
Many people think bums deserve to be bums because they don't want to work. This is unfair because minimum wage laws and other government interventions do not give an incentive for businesses to employ cheap labor.
However, I don't think you should give money to a bum who just sits around. You must subject them to tests so that they work for their pay. Below are some ideas:
- offer to buy their clothes (socks, shoes, jacket, etc) for a low cost so that they suffer pain from coldness
- get bums to do a certain number of pushups before you give them money (you can usually infer willingness to pay by looking at how much the bum sweats)
- give a bum a free copy of the bible and tell her to read, e.g. the Book of Genesis, and then the next time you see her you ask her some questions about Genesis to ensure she has learned it, and then do the same thing for Exodus, Leviticus, etc until the bum has studied the whole bible.
Webcam Philanthropy
A great idea for World Vision is to allow members to test the recipients of charity to see whether they are genuinely poor. For example, a World Vision employee can walk around in a poor area with a laptop and a bag of cash. The employee asks for a poor person to come along. This poor person is then recorded with a webcam and someone like me, the donor, looks at this poor person via the webcam. I then type in my computer what tests I want the poor person to do, e.g. 10 pushups, run on the spot, and so forth. Then when I think the poor person has done enough work to deserve cash, I can use Paypal to wire the money to World Vision who then give the same amount in cash to the poor person doing the pushups. I will pay the poor person just enough so that he can live, e.g. assume that you need about $1 a day to buy food to live, then that means you should get about 13 cents per hour assuming a person works for eight hours a day. Therefore, a person should get about 1 cent per five minutes. I will then subject a poor person to five minutes of pushups and then pay him or her 1 cent for this.
This I think is a corruption-free method of giving to the poor. There is perfect signalling because I am getting the poor person to work for his money, therefore separating poor from rich. There is perfect accountability because I can see with my own eyes the poor person working. When I transfer to the money to World Vision, the charity organization must hand that exact same amount of money to the poor person and I must see it on the webcam.
Obviously World Vision needs to make some money from this to pay for the cost of the laptop, webcam, workers, and so forth, so for every $1 that is transferred to World Vision by members, say, 97 cents will go straight to the poor in cash.
This is a brilliant business idea. Anyone is free to establish this idea. If nobody does, I will try to establish it in the future once I feel secure enough to start a business. This business will not make much money. If you take 3 cents of every dollar that a donor gives, that's not much, and competition may drive this profit down even more to say, 1 cent for every dollar given. But this business idea is not designed for profit (it's designed to help the poor), so if I can get the profits from this business to simply cover bare costs (e.g. the cost of the laptop, etc) and thereby make zero profit, that will be good enough.
Problems with Webcam Philanthropy and Solutions to Those Problems
I've thought about this idea some more and there are some problems with it. One problem with this idea of getting World Vision to cover the costs by taking a percentage of whatever is donated is that a particular donor may ask for a poor person to do a lot of work but not pay anything. To discourage this, it is important for World Vision to charge a time-based fee, say a few cents per minute depending on the cost of the laptop, etc. Furthermore, a recipient of the money can decline if he or she wants to. For example, if a donor offers $1 but in return the recipient must do one million pushups, the recipient may deem that to be unreasonable, decline the offer, and the donor will be randomly allocated to another webcam. The donor cannot waste time by not giving anything because he will be paying a variable fee based on time and this fee is used to pay the cost of doing all this. There needs to be bargaining power on both sides for this market to work.
Another problem is if there is coercion. For example, suppose an abusive husband orders his wife to go to a World Vision webcam and do whatever the donor on the othre side of the webcam wants for money. The wife who is a victim of abuse may go to a World Vision webcam and then do 100 pushups for $1 and then when she gets that money she goes back home and gives $1 to the husband. The way to make sure the wife benefits from this money is to give the donor the option to pay in food and to watch via webcam the recipient eat the food. For example, the donor offers to pay $1 worth of rice to the recipient in return that the recipient does 100 pushups. After doing the 100 pushups the donor transfer $1 over to World Vision who in turn give $1 worth of rice to the woman in real time and then the recipient eats the rice then and there while the donar watches her eat the rice. This is useful if the woman has children. You cannot make children work because of child labor laws, so the mother can instead bring these children along and show them via webcam to the donor and the donor can give the mother rice that she eats then and there and gives to the children. The children eat then and there in front of the webcam and the donor can monitor this.
Another problem is that some poor people may be better than others at doing pushups. For example, a pregnant woman cannot do pushups easily. This can easily be fixed by giving the donor the ability to get the recipient to so other easier things like situps, starjumps, or even getting the recipient to sing. The donor can even type some other novel task if he wants to. This ensures accountability and freedom and makes sure the donor can dictate exactly how his own money should be earned.
Webcam Busking
How can this idea be sold to people? You need to take something that is already familiar to them. Busking is a concept that has been around for a long time. According to Wikipedia, busking is "the practice of performing in public places for tips and gratuities." That is esentially what I am advocating, but I want the idea to be carried out online so that more money can go to the poor.
I have Googled "onling busking" and the idea has already been touted by other people, but what other people are suggesting is not good. Most of what I have read online involves a musician recording his own music and then posting it online and asking for donations. This is not good because a rich person can easily make his own music, record this music, upload it online, claim that he is poor, and then ask for money. He only needs to perform once and then he may make millions. What I advocate is donors giving money to performers in real time so that there is accountability. When I log into World Vision's online busking area, I want to be able to be able to browse through many buskers and then watch a busker of my choice via high-definition webcam. While watching I can give money and when I do, in real time that money must drop near the person and the money must be visible to the donor via the webcam. If I drop, say, a $1 coin then I must see that $1 coin dropping. As I said before, giving food may be a better idea. It may also be a better idea if the donor can see the busker eating the food in real time.
When you are browsing to see which busker to watch, I think it would also be a good idea to allow people to see how much a particular busker is getting paid in terms of hourly rate. This will make the whole thing more equitable so that donars can target those buskers who are not paid livable wages. The currency for this will be in dollars (maybe US dollars or maybe even in gold given how much the US dollar has depreciated lately) or in rice. Donors can see how much each performer is paid in dollars per hour or grams of rice per hour.
It would be best if donors can give money via Paypal. They can initially put busker credits into an account and then this account balance goes down as the donor gives money or rice to a performer in real time. I think to get this idea going there should be no fee paid at all. Instead, ask for donations and say that donations will allow new performing rooms to be created. A performing room is simply a room where the poor person performs. It is just a room with a computer and a webcam. A machine that gives out money or rice would need to be made as well. Probably the most expensive part of this is the real estate. Make it so that anyone who donates money to build a performing room gets to name the room. If it's quite expensive to make a room and multiple people donate money to create a room then maybe make it so that the person who contributes the most money names the room but other donors may write their names or put an advertisement on the wall. This I think should encourage many companies to help out so that they can advertise.
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