The Restless Project

Restless LogoWe need drugs to sleep at night.  Nearly half of us don’t have enough in a bank account to cover next month’s expenses, let alone any real head start towards retirement. We buy homes with mortgage payments our parents couldn’t fathom, or we make student loan payments almost that large. We are digitally tethered to work by gadgets that constantly let us down with bad directions or dead batteries. We almost never take vacations, but when we do, we read email every day anyway. We chug Starbucks and Red Bull to try to keep up, but we feel like we are letting everyone down all the time anyway.

America, land of the Restless.

But why?

I have a simple question I ask when I try persuade people that there’s something very wrong with the way we live in America today.

“Can you think of any friends with children who are secure they will be able to pay for their kids’ college?”

There’s always an uncomfortable chuckle, as if I’d just asked if they knew someone who could weave straw into gold. Then there’s usually a discussion about how everyone feels like they are working harder, and perhaps even making more money than they’d ever dreamed, but yet falling behind anyway. So they run on the rat-wheel faster and faster.

Restless.

Today I am announcing a new long-term effort, an on-going series, called The Restless Project.  I plan to unpack the root causes of this Restlessness. I believe they are paradoxically both more subtle and more obvious that most busy people realize. And I think it’s such an important discussion — I think it is the story of our time — that I am interrupting my career to shine a spotlight on it.  Along the way, together, I hope we can explore ways to jump off the Crazy Train.

Trina Foster-Draper. No one should have to undertake a Fourth Act.

Trina Foster-Draper. No one should have to undertake a Fourth Act.

I will talk about humble Americans like Trina Foster-Draper, a 56-year-old single mom of four who will be proudly writing her last check for her kids’ college this year.  She was recently laid off by CenturyLink in Logan, Utah, where she’d worked in customer service for nearly six years.  What will she do now? Go back to school for information technology and begin her fourth career transition.

“Everybody has to keep changing, keep reinventing themselves now,” she said to me, sitting in her apartment she shares with her father – a brand new building adjacent to a massive Walmart. “There’s no choice.”

Despite the occasional catcalls from folks who casually argue that today’s adults are just lazy and selfish, for the most part, there’s general agreement on the problem — the creeping sense that life is somehow spinning out of control.  It is.  Today, we all live under pressure from a diabolical combination of economic dis-ease and technology disruption that keep all of us, not just on our toes, but on the edge of a cliff.  Second Acts are fine, even romantic. Fourth Acts? That’s insanity.

The reasons for Restlessness that I will explore in this series are myriad:

1) It’s an economics story. Just 50 years ago, an American household with one decent job could afford a decent home.  That math is now horribly broken. Today, it takes two incomes, and even at that, a much higher percentage of household income to buy a home. That’s why you never feel like you have enough money.

2) It’s a work-life balance story.  Since you are insecure about having enough (what if one spouse loses a job?) you work too hard. Fear is an excellent, horrible motivator. People don’t take proper nights and weekends any longer, instead putting in hours over remote corporate networks, in large part because they feel like they have to. Forty hour work weeks took hundreds of years to evolve, which is an interesting history I will share soon. Smartphones took them away in five years.

3) It’s a technology story. Smartphones haven’t just wrecked our ability to disconnect from the office.  Pick your favorite restaurant: How many people are staring at phones while half-talking to each other?  Step back from the scene for a moment. We all look like rude idiots doing that, always more interested in people somewhere else than the ones we are with.  Sure, you could be better about phone etiquette. But billions of dollars have been spent figuring out how to make you addicted to these things. You didn’t stand much of a chance.

4) It’s a broken social contract story.  America’s social contract, always part-myth and part reality, has broken down entirely, in a way that doesn’t make sense. Today, people with regular jobs in regular cities can’t afford regular homes there.  That should be impossible. After all, the price of most homes should settle roughly into what most people can pay for them.  But not when the value of those homes is propped up impossibly by a credit system built like a pyramid scheme.  The math, you see, is against you.

5) It’s a disappearing middle class story. A quick thought experiment: What is a solid middle class job that would let someone comfortably own a modest home? Teacher? Cab driver? Bike mechanic?  Today, workers are driven towards high-income, lottery ticket-like professions such as information technology. Of course, a decent home in an IT-friendly neighborhood near Silicon Valley costs $1.2 million. Better work hard and get that big bonus. Meanwhile, not everyone can write computer code or be a physical therapist. What are the rest of American workers supposed to do?  This isn’t a minimum wage story. This is an average wage story.  By every measure, the economic “recovery” after the Great Recession has done nearly nothing to help the middle class. Sure, unemployment is shrinking, but that’s a misleading stat. Here’s the truth: Low-wage jobs represent nearly half of all jobs created as part of the recovery.

6) It’s a marketing story. What do you do when you feel scared of the future?  Well, you drink Red Bull, for one, so you can work all night and impress the boss. And maybe work yourself to death. Or maybe you pay $250 for a new pair of shoes, just so you can put aside for a moment those hopeless feelings that you’ll never, ever, pay off that student loan. Or maybe you’ll hand over your finances to that lovely man in the white shirt who tells you he can help you pay for your kids’ college, even though all he’ll do is suck out a percentage of your money in fees every year. But he does make you feel better.  The cycle of Fear and Consumption, as we all learned in the movie Bowling for Columbine, is powerful.

7) It’s a where-to-live story.  NYC dwellers have always been restless, always with one eye looking out for an emerging neighborhood where it might be possible to afford a dreamy 3-bedroom apartment in relative safety.  All of America lives like this now.  As I travel the country, everyone with a second or third kid on the way is trying to make impossible math work – where are the wages higher and the housing costs lower? North Dakota? North Carolina? Florida’s west coast? Oregon? So-called “second tier” cities are gaining steam and migrants as the recession’s recovery drags on, but these moves bring on other problems – like proximity to meth houses.

8) It’s a hacker story. Sure, computer criminals who might empty your bank account in ways that you didn’t even know possible is enough to keep you up at night. But that’s barely the beginning of the story.  Behaviorists have hacked you and now desperately try to deliver just the right ad at just the right moment so you can’t resist buying your product.  Huge firms with names you’ve never heard of collect data on you by the hard-drive-full – Axciom admits having 3,000 data points on nearly every American.  Heck, folks are hacking your genetic code.  What are your right to all this incredibly important, personal information? Basically, you have none.

We’re restless, and I want to explain why.  I’m certainly not alone.  Brigid Schulte, a Washington Post reporter, recently explored the complex life of American woman in her excellent book “Overwhelmed: Work, Love and Play When No One Has the Time. You’ll recognize some of the concepts about the relationships between two income homes and housing costs from Elizabeth Warren’s classic, The Two-Income Trap.

Since I’ve spent 20 years writing about ripoffs and the dark side technology, I think I have a unique perspective on the problem of restlessness. For the past year, since I left my job at NBC, I’ve been chipping away at stories in this area. Here’s a few examples:

 

I plan on covering the hell out of this topic.  (There’s already 27 stories in my special “Restless Project” section, which you can find here.) And don’t worry, I promise to write about hopeful trends, too, such as the explosive growth in yoga, or the technology tools that really do make our lives easier, or what folks in other countries do to stay sane in our digital world, or the members of the “Resistance” who are fighting for worker rights or simply promising to turn off the cell phones for the weekend. I hope you’ll follow along, you’ll criticize me, and you’ll make suggestions to help bring this story the attention it needs. The best way to make sure you don’t miss a post is to sign up for my email newsletter by clicking over to this form, or just fill out the box on the upper-right hand corner of this page.

The journey is personal. As I look around at my own career, I see the insanity of journalists trying to do an honest job and raise families in world where everyone is judged – not just by Neilson ratings – but by Facebook likes and ReTweets.  That’s a popularity contest which no one can win.  And I see my friends, who are increasingly incapable of having fun without having their faces in a phone or a video game, and I fear the lonely future that seems stretched out before me. I love a good chat.  I hope you will, too.

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See more foreclosure data at RealtyTrac

See more foreclosure data at RealtyTrac

Roughly 7 million Americans lost their homes during the Great Recession. Now, seven years on, the first wave of those consumers might be ready to dip their toes back into the housing market, as their credit reports are finally clean of that negative entry. The group has been dubbed “boomerang buyers.” There’s disagreement about how many of this group will — or already have — decided to take the plunge back into homeownership, and how much that might help the economy. But it’s possible the boomerang group could suffer from being once bitten, twice shy as they weigh their new options.

(This story first appeared on Credit.com. Read it there.)

It takes seven years for negative events like foreclosures to disappear from a consumer’s credit report, though the impact of the event lessens over time. Also, mortgages sold to consumers only five years after a foreclosure can be re-sold to Fannie Mae and Freddie Mac, making this group attractive to banks. Consumers who engaged in short sales get an even earlier reprieve — their loans can be re-sold after three years.

According to FICO, the seven-year anniversary of a negative event doesn’t necessarily mean a dramatic difference in credit scores. A consumer who filed for foreclosure with a less-than-great credit score of 680 could see their score restored to that level in as little as three years, for example.

“While a foreclosure is considered a very negative event by your FICO score, it’s a common misconception that it will ruin your score for a very long time,” according to FICO. “In fact, if you keep all of your other credit obligations in good standing, your FICO score can begin to rebound in as little as 2 years.”

Still, much has been made of the seven-year “anniversary” of the Great Recession. The National Association of Realtors this week said that it believes 950,000 formerly distressed homeowners have become re-eligible for mortgages and have “likely” purchased homes, and another 1.5 million will re-enter the market during the next five years.

“The deep wounds inflicted on the housing market during the downturn are finally beginning to heal as distressed sales continue to decline and home prices in some parts of the country have bounced back to their near-peak levels,” said Lawrence Yun, chief economist for the Realtors organization. “Borrowers with restored credit will likely have the ability and desire to own again, encouraged by the long-term benefits homeownership provides in a stronger economy and more stable job market.”

Access to mortgages is increasingly important as rental markets overheat in much of the country — in some places, owning is cheaper than renting, at least based on monthly payments.

But not everyone agrees with the Realtors’ calculations that millions of consumers have or will be become boomerang buyers.

Housing analyst and loan manager Logan Mohtashami believes the numbers are far lower, citing Federal Housing Administration data showing only about 2,000 buyers with foreclosures on their records used FHA loans last year. Consumers can get FHA mortgages in some circumstances only three years after a bankruptcy.

“The market (for boomerang buyers) just isn’t as good as they think it will be,” he said. “Forget about the timeline (for clearing their credit reports). People in this group have to re-establish credit, and they have to have a down payment, which Americans with good credit and three jobs have trouble with.”

Mohtashami has seen a few boomerang buyers in his office. All of them have been short-sellers rather than foreclosure victims, he said.

“Those people look a lot better as candidates right now,” he said. “Many of them never missed a house payment.”

RealtyTrac data indicates 7.3 million consumers lost their homes between 2007 and 2014. The vast majority experienced foreclosure — 5.4 million. Still, that leaves 1.9 million short-sellers who might be excellent candidates to buy a home again.

Many in the group may not be in the mood, however. Once kicked out of homeownership, twice shy — and renting does have advantages.

“I won’t be buying again. I pay a decent rent now, and everything gets fixed and taxes get paid for me,” said one consumer, who asked that her name be withheld. “I would rather invest my money and have more for retirement rather than a house which ends up being a big money pit all over again.’

Still, with rents rising at twice the rate of wages since the year 2000, consumers can’t write off the idea of homeownership.

RealtyTrac says that the Phoenix area has the most potential boomerang buyers, with 350,000 potential buyers from 2015 to 2022. And the best year for boomerangs will be 2018, with 1.3 million consumers enjoying credit reports that are clear of their housing loss.

Short Sales Bank Repossessions (REO) Total Potential Boomerang Buyers
2007 146,510 404,849 551,359
2008 170,698 848,605 1,019,303
2009 264,741 861,086 1,125,827
2010 278,711 1,046,092 1,324,803
2011 321,381 791,203 1,112,584
2012 305,115 667,760 972,875
2013 232,649 488,356 721,005
2014 128,520 327,069 455,589
2007 to 2014 Total 1,848,325..   5,435,020 7,283,345

“The housing crisis certainly hit home the fact that homeownership is not for everyone, but those burned during the crisis should not immediately throw the baby out with the bathwater when it comes to their second chance at homeownership,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, in a report issued by RealtyTrac. “Homeownership done responsibly is still one of the best disciplined wealth-building strategies, and there is much more data available for homebuyers than there was five years ago to help them make an informed decision about a home purchase.”

As your credit recovers from an event like a foreclosure or a short sale, it’s especially important to check your credit reports and credit scores. You can get your free credit report summary updated every month on Credit.com to track your progress and watch for errors.

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ApartmentsIt’s already hard enough to find an affordable home or apartment to rent (especially if you live in one of these cities). Rental prices are rising fast around the country, even in unexpected places like Kansas City and Portland. But as more people turn to online help to find a decent home, there are more scams and gotchas to worry about, too.

First, let’s look at prices. Nationwide, rents are up about 3% in the past year, according to Zillow, with median rental cost at $1,350 monthly. That increase is not out of line with historical trends, but as we say often, all real estate is local. And in most major markets, rents are up a lot more than that. Seattle is up 5%. Charlotte is up 6%. Portland, 7%. And when you get to Denver, San Jose and San Francisco, you’re looking at double-digit increases.

To put things in perspective, since the year 2000, rents have risen at twice the rates of wages — and that’s a problem for everyone, even homeowners.

“Today’s renters are tomorrow’s buyers, but with more income devoted to rents, less is socked away in savings accounts for an eventual down payment on a home,” Zillow notes. One factor (of many) that is stifling the housing market is lack of new buyers.

Rents are so high that RealtyTrac recently published data saying that buying is more affordable than renting in 76% of U.S. markets — but that’s only true for renters who have socked away cash for a down payment. With so much income going to rent, amassing a 10% down payment gets harder and harder.

All this means that searching for the right apartment at the right price is more important than ever, and the Internet is the obvious place to look. Craigslist has long been one of the most popular places to hunt. There are plenty of new entrants, however. For starters, HotPads and Lovely put usable front ends on top of apartment listings, so they are helpful. Mobile, location-based apps like RadPad have obvious advantages if you are walking around a city looking for places. Trulia, known primarily as a homebuyer site, is good for renters who want something bigger than an apartment.

But scammers invade all these sites. They know that apartment hunters are particularly vulnerable. Many are looking remotely, before a move, and have to trust information — and sometimes money — sent over long distances. Showing up at unknown addresses and chatting about finances with strangers always poses some risk. At some point, renters have to give a potential landlord their personal information. Most of all, renters are almost always under pressure. They have to get a place within a couple of days to move out of corporate housing or their friend’s basement or whatnot. Put all those things together and you have a recipe for disaster.

As a renter, you simply must take the attitude that any potential landlord might be a scam artist. After all, landlords look at you that way. So here’s three things to watch for.

1. Simple Identity Theft

The most common rental scam, and the easiest to pull off, involves identity theft. Criminals post fake ads and trick renters into filling out some kind of application, which always requires enough information for the criminal to open up fake accounts in the victim’s name. Antidote: Never surrender any information until you’ve seen the place, and the landlord, in person. One trick that’s sometimes successful: Get your free annual credit reports at AnnualCreditReport.com, blot out the Social Security number and other personal information, and offer that as a credit check to a landlord. Many won’t go for it, but some will. It can at least be used as a stall tactic while you are determining if the landlord is legit. (It’s also a good idea to keep an eye on your credit reports and credit scores, especially during this period. You can get your free credit report summaries on Credit.com to monitor for any changes — for example, new credit you didn’t apply for — that could signal a problem.)

2. The Prepayment Scam

Another common rental scam involves getting a would-be renter to send money for an apartment that doesn’t exist, baited by a fake listing that’s been pilfered from another rental site. That’s usually a hard sell, so scammers add a wrinkle. They concoct an elaborate story about traveling, or an illness and create a sense of urgency — mainly by suggesting the rental is a great deal that’s about to disappear. Then, they ask for a form of payment that’s hard to reverse, such as a wire transfer or prepaid card as a deposit, or to cover the first month’s rent. While these scams are often attempted on long-distance renters, that’s not always true. Some victims are even advised to drive past the not-really-for-rent apartment, giving them a false idea that the real estate actually exists. Antidote: Don’t send money before you see the inside of the place.

3. Scammers Revenge

Kelly Kane, who was hurriedly looking for an apartment in Massachusetts after the ceiling in her current pad collapsed, found out the hard way that scammers have a nasty new way of exacting revenge when consumers don’t fall for their ploys. After she called out a would-be con artists on a fake ad, her cellphone number was plastered as the contact across hundreds of ads on Trulia.com. Kane’s phone was ringing off the hook for more than 24 hours before she was able to get the bogus listings pulled down.

“I’m guessing it was for spite,” Kane said. “My phone has rang about 20 times from states all over the U.S. with people responding to these sketchy ads. Sad thing is, I spoke with some of the people and one woman said she was so sick of dealing with these scams and made it sound like she’s had several she’s dealt with.”

Kane isn’t alone: There are several other complaints about the phenomenon on Trulia’s message boards.

Antidote: This is a tough one. It’s hard to hunt for an apartment without sharing your phone number with strangers. Your best bet is to be really judicious about emailing your number before you speak to a would-be landlord — try calling first. And if that doesn’t work, be very suspicious of too-good-to-be-true listings, or even a-little-too-good-to-be-true listings.

What do all these scams have in common? They all involve a cover story that prevents hunters from seeing the inside of any apartment before some important transaction or information transfer takes place. Knowledge is power. No matter how elaborate the tale, keep bringing the story back to its basics. Is the landlord insisting on getting money or personal information before showing off the place? If so, something is almost certainly wrong.

(This story first appeared on Credit.com. Read it there)

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See the original Smoking Gun report

See the original Smoking Gun report

There’s something about computers that brings out the worst in us. And there’s something about retaliatory violence against these boxes of frustration that makes (many of) us cheer from a place deep inside.

Computer rage is a real thing; there’s a whole section on it in my book proposal about The Restless Project.  You know where I’m going with this.   A Colorado Springs man named Lucas Hinch was arrested this week for challenging his desktop computer to an old-fashioned duel.

According to The Smoking Gun, he said, “I just had it,” and mentioned something about the “blue screen of death.”  So he killed the computer by pumping eight bullets into it.  The police blotter entry reads “Man Kills His Computer.” Finch discharged his weapon within city limits, which was a violation. A court date awaits him, where a judge will decide his penalty.  Don’t be surprised if the judge applauds.

One of the most popular stories I’ve ever written involved a dad shooting his daughter’s laptop, and filming the execution, as a public form of punishment.  (That execution also took eight bullets).  The story caught fire because it captured how many parents feel about their kids’ gadgets.   Finch’s tale might not reach the same dizzying TODAY heights, but I won’t be surprised if he gets 15 minutes out of it.

Why? Because computer rage is a very, very real thing. Inspired by a viral set of videos posted online showing half-crazed users smashing, crashing, throwing, slamming, or otherwise inflicting pain on their computers, Professor Kent Norman of the University of Maryland coined the term “computer rage” about 10 years ago. In a survey, he got some half-crazed people to fess up to their acts of techno-violence. Here’s some of what they told him. Don’t judge. Only those who’ve never thrown a gadget should cast a stone.

“I ruin computer desks and chairs venting outrage. Throwing computer mice around also helps… Sometimes I headbutt the monitor screen.”

“Run the ******* over with my truck!”

“Poured gasoline on a computer and set fire to it.”

“One time I took a linksys router out to my driveway, smashed it open with a hammer, covered (soaked) the inside with WD-40, and lit the sucker on fire. It burned for quite a while. I took pictures and sent them to linksys and told them how angry I was that their tech support wouldn’t give me answers.”

“I name my computers, and I use their names pretty much only when I’m mad at them. When my old computer, Charles, use to be bad..I’d yell, but then I tried giving him hugs instead.”

And finally:

“I scream at my computer because I know that it hears me and is laughing at me.”

Have you ever done any of these things? Have you ever dreamed about it?  If your answer is no, you really need to get more in touch with your feelings.

I kid, but I’m serious.  Computer frustration is special kind of angry.  It contributes to high blood pressure, vision problems, and even family issues.  That’s why it’s an important part of The Restless Project.

 

Click to learn about The Restless Project

Click to learn about The Restless Project

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AARP job loss incomeIn the 1970s Sci-fi movie Logan’s Run, viewers are let in on a dirty little secret about a Utopian society — everyone gets killed at age 30.  Sure keeps labor costs down.

America hasn’t quite become Logan’s Run, but we seem to be tilting that way. It’s no secret that older workers — and by older, I mean over 45 — have had a really rough time recovering from  the recession.  Human resource departments love to sort spreadsheet by income and just lop off the higher-paid workers, who are inevitably the most experienced. And the least equipped to hunt for a new job, what with all those 20-somethings out there who are ready to work for next to nothing. A new study from AARP this month reveals this isn’t just middle-aged bitterness.  The phenomenon is probably worse that you think.

Fully 48 percent of previously unemployed workers aged 45-70 have taken a job earning less, AARP writes in a report called The Long Road Back: Struggling to Find Work After Unemployment. And more than half were forced out of their chosen occupation, which no doubt influences the first data point there. Mid-career adults with 20 years experience in one field can end up at the bottom rung in another field, fighting for scraps with the recent college grads. About 40 percent told AARP they were earning “a lot less” at their new jobs.

Second Act? What about a third, and a fourth…

Nothing breeds insecurity like knowing you are working in a dying field.  Problem is, change is so fast now that all of us — yes, you too– are horse and buggy drivers.  And we don’t face just one big career change. It’s continuous change, over and over.  Professionals with decades of experience can’t feel secure they will have respectable work in their critical 50s and 60s. That’s a looming disaster for our society. TV commercials for brokerage houses aimed at the rich constantly extol the virtues of a “Second Act.”  Out in real America, people are facing third and fourth and fifth acts.  It’s crazy. And it’s another reason we’re all so restless.

Perhaps you recall last year’s Restless Project road trip across America, and my profile of  Trina Foster-Draper, a 56-year-old single mom of four.  She had recently laid off by CenturyLink in Logan, Utah, where she’d worked in customer service for nearly six years.  She headed back to school to study computer stuff, about to begin, by her count, her Fourth Act.

“Everybody has to keep changing, keep reinventing themselves now,” she said to me, sitting in her apartment she shares with her father – a brand new building adjacent to a massive Walmart. “There’s no choice.”

Why is all this uncertainty for mid-career pros such a bad thing? CNBC just ran a great series about the failure of the 401(k) experiment. I’ve been harping on this for years. Switching pensions for 401(k)s…”defined benefit” plans for “defined contribution” plans…is one of the greatest financial thefts in history.  The median 401(k) balance is $18,000, or just about enough to get you through the first 3-6 months of retirement. Older folks within 10 years of retirement have a median of $75,000, which might stretch them to age 67. After that? Hello, Walmart.  Meanwhile, all these mutual funds in all these token retirement accounts are leaking 1 to 2 percent of their value to Wall Street every year in fees. It’s unconscionable.

As a practical matter, the reality for most folks today is that they realize how bad things are in their 50s…or, if lucky, in their 40s…and start loading up on 401(k) contributions. (It’s a very good idea to exceed the minimum required for your company match, if you get one).  Problem is, this is precisely the age group that is hit hardest by job loss.  Right as they need excess income to start planning  for the inevitable, they are shoved into a new field and back down the income ladder again. It’s wildly unfair.

“A lot of them are in their pre-retirement years, when their earnings are supposed to be the highest in their lives,” said Lori Trawinski, one of the report’s authors, according to a great story by colleague Rich Eisenberg in Forbes.  Instead, Trawinski said, older workers are more like to end up in part-time jobs than other unemployed. It’s simple: “It’s much more difficult for older unemployed people to get rehired than younger ones.”

Laying off experienced workers to hire cheap, young replacements, and leaving the older folks to fight over crumbs, well…that’s the stuff of Logan’s Run. 

Are you facing the issues raised by the AARP report? Let me know.  We need to talk more about this.

Click to learn about The Restless Project

Click to learn about The Restless Project

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Click for my story on CNBC

Click for my story on CNBC

It has been gnawing at me for a while. Why are are most professional sports leagues hurting for offense?  After all, we live in the age of spreadsheets and video cameras. Every athlete has access to hundreds of angles on every action they take on the field, or in the rink.  Every swing, every shift, is chronicled by a bevy of assistant general managers and an army of bloggers.  Shouldn’t all this information be helping hitters and scorers?

Then it hit me: Big data might as well be hold up a sign that says D-FENSE! Everywhere that advanced analytics arrives, a scoring drought seems to follow.  All that information seems to be one-sided.  I started talking to sports folks and found my new theory rang true to them.  In basketball, analytics helps force top shooters just slightly out of their comfort zones.  In hockey, it helps unlock the secrets to “shot suppression.”

As the person that CNBC once dubbed the “Big Data Hater,” I realized the theory fit neatly with my skepticism of the quantitative managing that has swept through American corporate culture — the notion that if you can’t count something, it’s not valuable.  Hugh Thompson and I explored the this “data idolatry” in our book The Plateau Effect.  But here was an even more concise explanation of the problem. Moneyball, analytics, big data — whatever you call it, I worry it has put much of our culture on the defensive. I explored the theory recently in a column for CNBC.com.  The beginning of the piece is below. You can read the rest at CNBC. 

If you are wondering why you feel your place at your company is so fragile, why your creativity has trouble fitting into your annual review forms, or why you are feeling so restless, I think this is part of the problem.  Here’s the top of the piece to whet your appetite:

Is big data behind scoring drought in professional sports? And your business?

As spring training brings the familiar sounds of baseball, and the annual renewal of foolish optimism that this might be the Cubs’ year, Major League Baseball is hoping for something even more dramatic — more runs. From anyone.

Baseball is in a crisis not seen since the 1960s. Pitchers ran circles around hitters last year, with runs per game and batting averages at decades-long lows. There was an epidemic of defensive 2-1 ball games last year — this at a time when baseball is struggling to remain popular with younger, supposedly attention-span-challenged fans.

But it’s not just baseball. The National Hockey League has an offense problem, too. The game’s biggest star, Sidney Crosby, has only 20 goals three-quarters of the way through the season. Goals per game have shrunk since the 2005-2006 season. And in the NBA, hot-shot scoring has also declined. In the2007-2008 season, there were 27 players who averaged more than 20 points pergame. Today there are 15.

What in the wide-wide-world of sports is going on here? If you own spreadsheet software, you know that advanced analytics are the biggest change to hit professional sports in the past decade. As Michael Lewis explained in his book “Moneyball: The Art of Winning an Unfair Game” that popularized the revolution, sports franchises will do almost anything to get a leg up.

Geeks with video cameras track everything now. Baseball has its spray charts. Defensive shifts based on those charts are so effective that some critics have suggested banning them. Hockey has its Corsi and Fenwick, which measure shot attempts during ice time. The National Basketball Association uses PPP, or points per possession now.

But a funny thing is happening on the way to refining these sports — big data had chosen sides. Moneyball tactics seem to help the defense more than the offense. The tiny tweaks and refinements suggested by nerds are simply better at stopping players than enabling them.

It’s a lot harder to find and exploit defensive weakness than offensive weakness. There’s a lot more available data on what offenses are trying to accomplish than on what defenses are trying to suppress. To play a little loose with an aphorism, it’s a lot easier to criticize than create.

What does this have to do with your business? Businesses are projected to spend nearly $40 billion in big data technology this year,according to collaboration site Wikibon.org,most of it with the idea of Moneyball-ing their companies.

It seems like a no-brainer — run a few spreadsheets, find a few million dollars. But I think there’s a flaw in big data that’s big enough to drive a slap shot through. As in sports, big data helps defense more than offense. That might mean companies are spending a lot of money so they can be penny-wise and pound-foolish.

In the corporate world, playing defense means things like limiting overtime and shrinking health care benefits costs. Offense means finding new markets and inventing new products. Big data is great at optimizing work schedules to minimize labor costs, but not nearly as good at giving employees extra time to tinker with a potentially profitable idea.

Economist Tim Harford, author of the book “The Undercover Economist Strikes Back,” has been a critic of big data because its users often seem to forget that no matter how large a dataset is, it’s still subject to sample bias that leads to errors. It remains true that 5,000 carefully-selected survey takers provide better results than a billion random Google searchers. And he thinks sample bias might be part of why data helps defense more than offense.

“Data analytics are excellent at finding subtle historical patterns that might then be exploitable. They are much less useful at suggesting something radically new, or producing a response to something new,” he said. “Analytics favor the optimiser, the tweaker, but usually not the radical disruptor. Analytics help Google and Facebook optimize their services, but they didn’t really help Jony Ive and Steve Jobs create the iPhone.”

Read the rest of this column at CNBC.com

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Homewise.org

Homewise.org

The biggest barrier for many would-be homeowners is the pile of cash that’s needed before a bank will even discuss a mortgage. The Federal Housing Administration, in an effort to boost the housing market, recently lowered down-payment requirements to 3.5% of the purchase price, but by the time would-be buyers consider closing costs, they still need roughly 7%. Even in an FHA loan, families buying a typical $300,000 home need a $21,000 bank account — no small feat when median American household income is about $54,000.

(This story first appeared on Credit.com. Read it there.)

Building up a $6,000 mortgage war chest is a lot easier, and puts homeownership within reach of far more low and moderate-income families. That’s the goal of Homewise, an organization that arranges low-cost financing that covers 98% of the purchase price for buyers. But an easy-to-reach down payment requirement is only one benefit of Homewise, which serves New Mexico residents. Borrowers also get to skip high-cost mortgage insurance, high upfront FHA fees, or expensive second loans often required of less-than-20%-down purchases. And, if they use Homewise real estate agents, they pay a lot less in closing costs, too.

To qualify, buyers must complete a program designed to teach them the ins and outs of homeownership, including what it takes to ensure mortgage payments arrive on time. And their household income can’t exceed about $82,000.

Combine low down payments, cheaper monthly costs, and educated borrowers and what do you get? Default rates that are stunningly low compared to traditional low-down-payment FHA loans. The Urban Institute recently released a study of Homewise, and found that the organization’s 90-day delinquency (“serious delinquency”) rate was 1.1% for loans serviced between 2009 and 2013. This rate is well below the 7.3% serious delinquency rate of FHA-backed loans at the end of 2013.

“This is a neat model that appears to work,” said Brett Theodos, who wrote the report. He’s a senior research associate in the Metropolitan Housing and Communities Policy Center at the Urban Institute. “And they’ve captured something like 25% of the (low-cost loan) market share in that area.”

Thanks in part to the low default rate, Homewise is profitable, making it potentially repeatable around the country, Theodos said.

So far, Homewise is still relatively small: it’s financed about 3,000 home purchases, while working with 11,908 clients, said spokeswoman Rachel Silva.

Plenty of nonprofits have offered housing counseling before; separately, others have offered low-cost loans. Part of the Homewise charm is it works with buyers through the entire process — from helping them open special down-payment savings accounts, tosigning closing papers. Most nonprofits’ housing counselors prepare would-be homebuyers and then hand them off to traditional banks, where things might not go smoothly. And those nonprofits have to struggle for funding.

In the Homewise model, modest profits from closing loans are used to fund the counseling activity. Homewise loans are ultimately sold to Fannie Mae like traditional mortgages, allowing the firm to originate new loans.

“This allows them to capture the value. What would be exciting is if this model caught hold with other types of orgs doing this kind of work,” Theodos said. “In an era where foreclosure mitigation counseling is going away, HUD counseling is being pared back, there needs to be some model that’s sustainable for helping people get into homes.”

It shouldn’t be very surprising that Homewise clients pile up success stories. Just avoiding mortgage insurance saves average clients about $130 monthly, the Urban Institute says. And there’s another serious benefit — Homewise real estate agents are paid by the hour, not a commission based on percentage of the sale price. That saves clients money and helps make sure buyers get into homes they can afford.

“Homewise’s model suggests that with a carefully structured, vertically integrated system, homeownership can be encouraged in a way that better aligns risks and incentives for the counselor, the borrower, and the lender,” the report says.

Homewise is not a nonprofit. It’s a “Community Development Financial Institute,” a set of small financial institutions authorized by the Treasury Department that have a stated goal of being profit-making, but not profit maximizing. They offer personal and business loans to consumers who might not otherwise be served by traditional banking.

One barrier to replication of the Homewise model — for-profit banks might balk at the idea, although Theodos is not too worried about that. Many banks aren’t crazy about doing these low-cost loans, anyway. That risk would only arise if Homewise started reaching into higher-income client pools.

Instead, Theodos thinks the real challenge is finding institutions that have both the heart to do counseling and the head to do loan underwriting.

“We don’t expect it will replace FHA loans, and don’t think that’s the goal or expectation,” he said. “(But) the ability of the program to make revenues … and through those efforts to fund counseling and coaching, that’s really interesting.”

Can You Get a Low-Down Payment Mortgage?

What if you want a low down-payment loan? Unless you live near Santa Fe, or Albuquerque, where Homewise is now expanding operations, you can’t work with Homewise. FHA loans are the closest alternative, with the aforementioned caveat of higher down payments, a big upfront insurance fee, and ongoing insurance premiums.

Military veterans have the option of getting a zero-down Veterans Administration loan, but they pay a “funding fee” of roughly 2% to 3%. Some credit unions offer similar zero-down, funding-fee programs, such as Navy Federal Credit Union.

Finally, many consumers can qualify for more traditional 5% down payment loans if they agree to pay private mortgage insurance. That can easily add a couple of hundred dollars per month to a mortgage payment, but PMI can be canceled once a homeowners’ equity reaches 20% through a combination of loan payments and increased housing value.

Your credit score will be a key factor in how much house you can afford, as well. If you haven’t checked your credit recently, you can see two of your credit scores for free on Credit.com.

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Percent change millenials chartYoung people are flocking to big, expensive cities, according to data crunched by housing market information service RealtyTrac, and that might not be the greatest of ideas. Well, if you look at the chart above. you will see that young folks are moving to the Washington D.C. area, which occupies three of the top 10 counties where high percentages of millennials are moving in. They are also moving to places like San Francisco, Denver,  and New York.   That’s probably not much of a surprise: Young adults go where opportunity is.

Opportunity is in the eye of the beholder, however.  That fourth column up above helps explain why those young people aren’t buying houses, which is bad for them and for the economy. That’s the average down payment made for home purchases in those areas.  Not price, down payment. So in Washington D.C., the average buyer shows up with a wallet full of $100,000…or more.  Avert your eyes from that San Francisco entry there. Even in Denver, which is clearly not San Francisco, the average down payment is $43,000.

Raise your hand if you knew where to get $275,000 when you were 25.  That’s certainly enough to keep young people up at night, and the kind of thing I’m following in The Restless Project. 

Mind you, these figures don’t represent *required* down payments. Plenty of folks are buying homes with far less cash.  There’s even a new HUD program that allows buyers to put down as little as 3 percent of the purchase price, as long as they are willing to pay higher fees.  The average figures are a bit lopsided by big-ticket purchases.  But nationwide, the average down payment is $31,000, or 14 percent of the home purchase price; while in the top 25 markets that are attracting millennials, the average down payment is more than twice that — $66,000 — with an average down payment of 17 percent. It’s hard enough to buy a home in a hot market without having to worry about being the low-down-payment bidder, which can hurt a buyer’s chances if there are multiple bids.

Taken together, it means that young folks — who remember, average some $30,000 or so in college debt — may not really find the opportunities they are looking for in America’s big cities.  But there are alternatives.

Look back at the list above, and you’ll see some surprises, like Montgomery and Davidson, in Tennessee.  Average down payments are comfortably below the national average. And if you expand the chart a bit, you’ll find some interesting places with growing populations of young people, and affordable homes without the huge down payment barrier. In markets like Durham, N.C., Columbus, Ohio, Augusta, Georgia, and Des Moines, Iowa, average down payments range within a much more reasonable $15,000-$20,000. Near Fayetteville, N.C., average down payments are less than $10,000. In all those cities, the millennial population has grown at least 20 percent since 2007, according to RealtyTrac’s data, and median down payments are 14 percent or less.   Have a look at this chart:

Best mill markets

That’s an interesting list of places.  Remember, it is possible to to get low-down-payment loans in places like New York and San Francisco, and that’s the right thing for many folks.  It’s also important to remember that such loans have their drawbacks, like big up-front fees  and/or mortgage insurance. And it’s important to at least consider some alternatives.

Bottom line: If you are weighing job prospects, don’t be fooled by a sexy six-figure salary. There are places in America where you can make a life, or at least start one, on half that amount.  Don’t count them out too quickly.

(To conduct the analysis, RealtyTrac analyzed purchase loan and sales data for single family homes and condos in 2014 in 386 counties nationwide, examining a total of 1.5 million loans.) 

(The chart at the top of this story has been updated, as have down payment figures in the text for Washington D.C., Denver, and Montgomery.)

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Happy employees = happy stock price. Click for study.

Happy employees = happy stock price. Click for study.

Do you lie to people all day to make a living?  OK, perhaps you don’t “lie” to the extent that this credit card telemarketer did when he confessed to me a few years ago, or as bad as this time share salesman.  But perhaps you sell things you know are bogus, or spend most of your energy tricking people into thinking they need things — expensive data plans, TV packages, excessive title insurance — that you know they don’t really need.  Or maybe you work for a tutoring center or a health club selling things to people that just aren’t suitable.  But you do it, like those two folks did, because you need to pay the bills somehow.

“I hate flat-out lying to someone, but that’s exactly what we do, 150 calls a day,” said the credit card telemarketer to me a few years ago. Of course, he requested anonymity out of fear of losing his job. “I have seen so many people ripped off that I had to attempt to let people know.”

One of the saddest parts of the Gotcha economy — and our general economic malaise — is the way it turns people against each other. Workers are in no position to say no when there aren’t other jobs to be had.  It’s a reality we don’t talk about nearly enough. In a down economy, many jobs suck.  Many of the ways people make money are pretty crappy. Lower unemployment is one thing. Finding meaningful careers — jobs that folks can be proud of — for those Americans who have borrowed $1.3 billion earning fancy college degrees is something else entirely. Nothing can make a person lose more sleep at night than being forced to lie or mislead or do meaningless work all day.

So let’s talk about it.  Are you forced to do tasks at work every day that make you feel sick inside?  Why do you persist? What would you tell consumers if you could, to warn them about what you or your colleagues do? Tell me anonymously, if you prefer.  Just create a disposable email account and write to Bob at BobSullivan.net.

Of course, companies persist in this behavior because someone, somewhere thinks it’s profitable. And on some level, it is. But the Wall Street Journal’s Real-Time Economics feature has an excellent feature today about workplace happiness. And guess what? Firms with happy workers actually outperform those with unhappy workers.  By a lot. Even when you measure stock price!  Pay attention executives who think cost-cutting is the way to satisfy the angry beast that is Wall Street: If your workers are unhappy, your stock price will ultimately suffer, too. 

For a bit more on the kinds of things people have to do for money in a down economy, read my story about the credit card telemarketer. Here’s a quick excerpt:

The telemarketer’s job may be unsavory, but the call center pays $8.75 per hour – an offer that’s hard to refuse in an area where minimum wage is standard for many employers. When openings occur, applicants go to great lengths to land one of the jobs, he said.

“Before the minimum wage went up, this was by far the best-paying job in the area,” he said.

The power of the debt cancellation pitch lies in the presentation, said the telemarketer. The first lie, he said, is the price. Scripts handed to phone operators there have been carefully worded to make the program sound like it’s free. Here’s what the script provided to (me)  instructs telemarketers to tell customers:

“The cost is only $1.89 per $100 of the outstanding account balance shown on your statement at the end of a billing period and best of all, there is no charge when you don’t have a balance shown at the end of a monthly billing period.” That assertion is repeated later: “And remember, if you have no outstanding balance at the end of the month, there is no charge. “

That’s deceptive, the telemarketer said, because consumers who pay their balance on time every month are left with the impression that the debt-cancellation service will be free. It’s not. Re-read the cost description. The cost is computed when the billing cycle ends and a bill is generated, not after consumers pay their bills. That means consumers who initiate any charges during a month will have to pay for the service. There is no “grace period” for debt cancellation, and even if there are no finance charges, there are debt cancellation charges.

“This information is not told to the customer,” the telemarketer said. “They are only told what I quoted above. If the customer asks, ‘Well what if I pay off my balance every month?’ we are told to just read the ‘cost of program’ script again, and hope they don’t ask any more questions.”

The telemarketer said he is closely monitored while on the job, and penalties are severe for straying from the script. On second offense, a sales rep will be suspended without pay for three days. A third offense results in firing, he said.
“There are new classes all the time, there are always people lined up for our jobs,” he said. “But the turnover rate is unbelievable, too. … There’s only two people left from my original class of 12.”

The telemarketer said he is required to close four sales per 100 calls, leading many operators to resort to ever more persistent and aggressive tactics. But most consumers who fall for the pitch are either poor or elderly women, he said.

“Honestly, the little old ladies are the people who buy the most,” he said. “What if it was you mother daughter or calling, would you want them to be lied to?”

Post-script: After years of criticism, most credit card issuers have dumped debt cancellation services.

Click to learn about The Restless Project

Click to learn about The Restless Project

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Click to read David Brooks column. (Paywall)

Click to read David Brooks column. (Paywall)

College graduates are entering the work force with horrible job prospects, into an economy of stagnating wages, and owing an average of $33,000. What’s the solution?  Doubling down on school and on debt, says David Brooks in a Friday column that only a 1 percenter could love. OK, college grads may have bad prospects, but people with advanced degrees are doing really well, he argues, in a column designed mostly to throw mud on people who are becoming terrified that all America’s money and power are being concentrated into a tiny class of rich and powerful.  The real point of his piece is to throw the word “redistribution” around, a trigger term and bumper sticker that’s designed to frighten anyone who lived through the Cold War.

I’d invite him to, with a straight face, invite an underemployed college grad with a $500-a-month loan payment to jump right into a $30,000-a-year graduate school.

I like David Brooks. I’m a big fan of his books, and when we’ve met, he’s been nothing but incredibly gracious.  I’m really surprised at the broken simplicity of his argument here. It’s important to discuss, because it’s the argument you will hear again and again as this election cycle heats up.   Here are a few points to note:

Worker productivity trumps all, Brooks claims, which is why better education is the way forward, citing a classical economics tenet that’s kind of true, but not all the time.  And certainly not now.  Today’s more productive workers are making other people rich, not themselves.  That’s an easy claim. Wages have been stagnant this entire century, and really since 1980.  Wall Street keeps hitting record highs. You can do that math.

Economic Policy Institute (Click for study -- Commentary mine)

Economic Policy Institute (Click for study — Commentary mine)

Further, Brooks claims that wages have shown signs of life recently — as in 3 cents signs of life?

Brooks criticizes “redistributionists” who claim that modern capitalism is fundamentally broken, with the same dismissive air that Wall Street ignored Occupy Wall Street. He intentionally avoids mentioning economist Thomas Piketty, who wrote last year’s runaway best-seller “Capital in the 21st Century,” which makes a heck of a scientific case explaining why rich folks actually prosper during down years.  The book academically turns classical economics on its head. By classical economics, we all really mean Western post-WWII glassy-eyed economics suggesting a rising tide lifts all boats, and there’s nothing more to say about economics.  That’s naive.  The truth: Recessions are good for the wealthy. Of course they are. Worker leverage disappears when labor is tight.   Brooks knows all this. He knows Picketty’s book is all the rage. It’s sad he would dismiss Piketty without doing so by name, and at least taking on some of the arguments.

Another brief dismissal comes in the form of “small sample size,” which is the fashionable way to sound smart today when disagreeing with someone.  As a proxy argument to claim the 99 percent are missing the big picture by complaining about wage stagnation, Brooks says, “the argument that college doesn’t pay is partly a product of a short-time horizon.”  What time horizon? It’s unclear, but he’s suggesting the analysis only holds true since the recession. Piketty spent years gathering data about several Western economies dating back to the late 1800s. That’s not a small sample size.   Meanwhile, how long would Mr. Brooks and others who see the world this way have everyone else wait for that rising tide?   Should this generation of millennialls sacrifice their main earning years until we get to a reasonable sample size?

It’s a common rhetorical tactic to name-call a position you dislike, and to change the subject when the facts are getting in the way of your argument.  Here are the facts: Concentration of wealth in America is so bad that even a billionaire plutocrat is publicly worried that the American public will soon take up pitchforks.  Forget income for a moment. Let’s talk about assets — homes, retirement accounts, and so on. Most Americans own less than they did in 2005, and odds are 50/50 that you own less than you did in 2000.

Extremes are bad, in whatever form they arrive.  You can question concentration of wealth without being called a Communist.  I’m no more a redistributionist than a Man on the Moon. But our economy is badly broken, and requires some serious adjustments, and if you don’t see that, your eyes are closed. Telling people to go back to school as a fix is a bit like telling a man to go boil water when his pregnant wife begins to give birth.

If all this talk makes you uncomfortable, let me tell you a story. I’ve never liked the concept of affirmative action, and many of you don’t either.  After all, growing up a white male, it sure felt like I was getting picked on for no reason when it came time to apply for college, etc.  Then this happened:

As a cub reporter 25 years ago, I was covering school board meetings in a nice New Jersey suburb just a few miles from Newark, N.J.  The town wasn’t nearly  as diverse as Newark, but it had a sizable African American population — about 10 percent, as I recall. One day, a parent complained about the racial makeup of teachers in the school district. Board members scoffed, and several spoke about their dislike for affirmative action. But the board president dutifully ordered a report with a racial breakdown of instructors.  At the next meeting, a clearly embarrassed board released the results. In a district with about 250 teachers, there were only 8 African Americans — and seven of them were either aids or phys ed instructors. There was only 1 Black teacher that students of this town might encounter if they spent the full 12 years in this school district.  This, despite the fact that 1 in 10 kids in the classrooms were Black. Those kids were, however, very likely to encounter Black custodians, Black cafeteria staff, and so on. The board president, a kind man, then spoke at length about the trouble the district had recruiting qualified Black teachers, but vowed to do something.

My brain hurt. I no more imagined myself supporting Affirmative Action than wealth redistribution. But here was a situation where clearly something had to do be done.  The problem was extreme, and obvious, and there was no time for an absolute philosophy with no breathing room.

So here we stand, at Nasdaq 5,000, with a Restless population driven half-crazy by the costs of basics like mortgage payments and health care.  As I’ve chronicled in several places, average families with average incomes can’t afford average homes in many American cities.  No, I don’t think the key to our problems is cutting CEO pay, let alone taking away their mansions with pitchforks. That would be a waste of time, and wouldn’t help those restless families either.  And yes, I think education is a great idea.  But to suggest that “increasing worker productivity is the key” to solving our problems is comical. We’ve done that. To the tune $1.2 trillion in student loan debt.  Today, there is more — FAR more — education debt than credit card debt. Doubling down is no solution.  Throwing around the word “redistributionist” doesn’t really help much, either.  You know what would? A fair tax structure that keeps corporations from hiding profits overseas and sees Mitt Romney pay the same tax rate as working moms.  Renewing worker portability by giving them leverage as they bargain with employers, a fighting chance to sell their houses, and creating a world where people don’t stay at jobs because they are terrified of losing health care.  Sure, you could cast any of those things as socialist if you like.  But yes, you are whistling past the graveyard if you do that.

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Click to learn about The Restless Project

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Pay higher-than-average property taxes? This map tells you (and who pays 7x the national rate?)

March 5, 2015 The Restless Project

The average American homeowner pays $1,290 in property taxes for every $100,000 in home value, according to report by real estate data firm Realty Trac. That means taxes on a $250,000 home average $3,225. But some homeowners pay a whole lot more. RealtyTrac’s report this week reveals effective property tax rates for single family homes in […]

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