Ep54 -- Intrinsic Accounting

 Let me start off by asking a pretty common polling question, and I don't really need to hear your answers to know what they are because the answers to this question are very consistent over time and across demographics, except recently for young people, which I'll explain in a second. The question is very simply, what do you value?

What are the most important things in your life, and pretty much regardless of who you ask, you get similar answers.  Gallup did a poll this past June, and the clear winner for most important value was family.  Then bunched together a bit further down were freedom, health, integrity, and faith. Then a bit lower.

You have trustworthiness, happiness, respect, and kindness.  But you have to go pretty far down the list. In fact, when people were presented with a list of 23 values and asked to pick all that were important to them, wealth came in 22nd.  Now, maybe people value wealth more than that, and they're just embarrassed to appear shallow and greedy, so they don't pick that as an important value.

But even if that's the case, that's kind of revealing because it tells you that even if wealth is one of your top values, you probably think it shouldn't be that there's a broad social stigma against valuing wealth above these other values.  I should also note that more and more young people are saying that money is very important to them, but that may be less so because they're greedy and more because a lack of sufficient money is such a prominent feature of their lives. 

So in general, it's pretty clear that wealth shouldn't be all that important as we figure out how to live happy, fulfilling lives. And yet in reality, as I'm sure you all know,  in America in particular, you'd be hard pressed to say that there's anything that's actually more important than money when it comes to how we determine what, and more importantly, who has real value in our society. 

We are a nation of consumers much more so than we are citizens. And in our civil society, money is power and determines who controls what our government does.  And if you had any doubt that that's true,  there was a study by political scientists at Princeton and Northwestern about 10 years ago that found that ordinary Americans have virtually zero impact on policymaking unless their desires align with the desires of affluent Americans. 

When there's disagreement, the affluent get their way statistically every single time.  And that was 10 years ago.  I can't imagine that things have gotten any better, and while it's mathematically impossible for things to have gotten a lot worse, it sure as hell feels like they have.  

As an example of how monetarily focused we are,  if you had to pick one metric that gets more attention than any other, when determining the overall health of American society,  it's probably gross domestic product.

GDP.  Or the sum total of everything we buy and sell.  And the result of GDP supremacy is that anything that falls outside those categories just doesn't really matter.  There's an anecdote that gets told about GDP where a woman owns a house, and she hires a landscaper,  and over the years they get to know each other, they fall in love, and they get married, they have kids and create a loving family. 

Of course, once they're married. The wife no longer pays the husband for his gardening work. He does it for free as part of the family. So as far as the economic health of the country is concerned,  and as an example of what happens when your priorities as society are all screwed up,  this loving marriage could be considered bad for the country because it resulted in less money, changing hands, and therefore caused the GDP to go down.  This anecdote brings to mind a quote from Robert Kennedy. That's Robert Kennedy Senior, who said the GDP measures everything except that, which makes life worthwhile.  

So on this episode, I wanna talk a little bit about this weird disconnect between what we say we value and what we actually value. And how we can do a little intrinsic accounting within our own minds to revalue the things we actually believe are important and regain a little equilibrium so we can live our lives more in tune with the things that actually do make life worthwhile.  

Stay tuned. 

I'm Craig Boreth, and this is The Great On Gaslighting, a podcast about how we all get conned into accepting a manmade culture that's out of sync with our human nature and how we can fight back and hopefully put a little more kind back into humankind. 

But first, I'm proud to announce that this episode is not brought to you by Aspiration Inc. In partnership with the Los Angeles Clippers basketball team.  If you're a sports fan you've probably heard the accusations that billionaire Steve Ballmer, the fifth or sixth richest man on earth, depending on how Microsoft's stock is doing,  found a way to get around the NBA's salary cap by funneling money to aspiration who had Clippers star Kawhi Leonard on their payroll as a very highly paid celebrity spokesperson who did precisely zero spokespersoning whatsoever. 

Believe it or not, I'm actually not that interested in the Clippers' alleged, although very well-documented efforts to pay Leonard off the books.  If you wanna learn all about it, I highly recommend checking out the amazing investigative journalism. Done on this story by Pablo Torre on his YouTube channel and Substack called Pablo Torre Finds Out. 

I'm actually more interested in the pre-bankruptcy, ostensibly eco-friendly financial venture Aspiration,  founded by Democratic Party insiders like Donor Joe Sandberg, and former Bill Clinton speech writer Andre Chernei. 

If you listened to my episode about extreme centrists, you've probably got a pretty good idea where I'm going with this.  They founded Aspiration in 2013 on a massive wave of investment, including $50 million from Democrat leaning Balmer,  plus lots of lefty board members, and a veritable thesaurus of greenwashing eco speak. 

Fast forward several years, and we find that Chernei is no longer CEO, having resigned from the position in 2022,  the same year that he signed Kawhi's endorsement contract. And let me be clear, charity has not been implicated in any legal wrongdoing.  The same, alas, cannot be said for Joe Sandberg, who recently pled guilty to two counts of wire fraud for bilking investors out of almost $250 million. 

And actually, even all of that isn't what's most relevant for our ungass lighting purposes.  It's that these guys are representative of that extreme Center. They espouse liberal and progressive ideals, but will probably never confront head-on the concentrations of wealth and power that render those ideals unrealizable.  Well, Sandberg definitely won't since he's now looking at 40 years in prison.  And what's Chernei up to now?  Well,  he is the organizer of the so-originally-named Project 2029, intended to craft a policy agenda for the next Democratic president.  And fun fact, you know, who else was involved with Project 2029 at least until he ran into some PR difficulties of late,  well, it's Larry Summers, that's who. 

So if you're expecting a bold, fresh, new strategy from establishment Democrats and Project 2029, rather than just more of the same vague promises, and our billionaires are better than their billionaires preening from the Democratic Extreme Center, well, I wouldn't hold your breath. 

And we are back.  

There's an interesting phenomenon. That I've noticed here in the People's Republic of Santa Monica, and I imagine it's happening in a lot of other liberal enclaves where the well-to-do and socially conscious gather in large numbers,  and it also kind of ties in with that extreme center that I was talking about. 

I've noticed on more than a few Teslas, different varieties of bumper stickers that earnestly express some version of, I bought this before Elon went crazy.  Now, besides the fact that the sentiment on the sticker just isn't true,  you bought that Tesla before you realized that Elon went crazy. For anyone who was actually paying attention, that was realized long, long ago.  But for the purposes of this episode, what interests me is what that bumper sticker reveals about the internal accounting of the owner. So if you're a left-leaning individual who didn't realize how much you hated Elon Musk until after you bought your Tesla, you have a few options.  

One,  you could determine that selling your Tesla really wouldn't do that much to mitigate Musk's power. And you take a pretty big financial hit if you sold the car. So if keep the car and life goes on as before,  or  you could decide that you don't want to be associated with Musk in any way.  And you're willing to take the financial hit to live those ideals. 

Now, I'm really not here to judge either of those decisions. You do what you feel is right, and that's your business.  But if you take the third option, that is, keeping the Tesla, but putting a little sticker on it that says you hate Elon,  that I kind of feel obligated to say something about that sticker.

It is kind of like the gravitational impact that we can see caused by dark matter, which we can't see.  For those anti-Elon Elon Tesla drivers, they've done an invisible internal calculation. They hate Musk, and they really do want to get rid of their Teslas, but they're just not willing to be honest with themselves that the cost of getting rid of it.

It's just too high like the first group does, and they do feel bad about that.  By the way, this is a textbook example of cognitive dissonance.  Cognitive dissonance refers to a feeling of psychological discomfort that comes from holding two contradictory beliefs or values, or when there's an inconsistency between your beliefs and your actions. 

So that bumper sticker. Represents the owner's effort to relieve that discomfort.  And what that tells me is how easily those folks are willing to sell out their ideals. Ideals that they claim to hold dear.  And those folks definitely fit into that extreme center category that I've talked about. You espouse all these socially aware beliefs, and you probably genuinely believe them,  but when it comes to what really matters, and that is your actions and their consequences, the real-world outcomes of your behavior are anything but socially beneficial.  It all reminds me of Gregory Bateson's observation that we are all in the same ecosystem, whether we like it or not.  So you may wish to improve the lot of others to end homelessness or to make housing more affordable. 

But that is going to change the reality we all live in as well. Remember, same ecosystem, and it will very likely require some sort of sacrifice on your part.  If you are not willing to accept a change in your reality,  you're not really serious about wanting to help others who are struggling. 

Now, I don't wanna dwell on those Tesla owners too much because the focus of this episode is the mental accounting that we all engage in all the time. And what usually happens is whenever we think about our own possible sacrifices, we see those as negatives on the balance sheet of our lives.  We rarely, if ever, give sufficient weight to the positive side of the ledger.

We forget. That if we want to improve the lives of others, that has value to us. It may cost us a little bit financially, but we're getting something in return.  Just knowing that more people are secure in their lives is valuable, and that it embodies the kind of society we wanna live in.  So if you value that, value it, right?

For example, I've talked a few times about Bob's, the independent supermarket, a few blocks from where I live.  Bob's is more expensive than the big chain supermarkets nearby. It's more expensive than Trader Joe's and Costco.

It's even more expensive than Whole Foods.  I couldn't tell you if it's more expensive than Ewon because I have not, and will not ever set foot in Ewon, but it just might be. I don't know.  But I love this neighborhood, and that's due in no small part to the fact that there are no chain stores in these few blocks of storefronts. 

I want to live near that kind of place for as long as I possibly can. That's an important value to me, so I need to actually value it. And the reason why I'm shopping more and more at Bob's is because I choose to consciously acknowledge what I am getting from having that store anchor, this retail area, something that's of value to me.

In return,  I figure that over the course of the year, I probably spend the hundred dollars more at Bob's than I'd spend at some other chain store for comparable purchases and. If that represents a good proportion of the value that I feel like I get in return from living in this neighborhood that I love,  then I'm good with that. 

Is Bob's overpriced? Well, it's more expensive, but on net, when I take into account what I get in return, it feels like a pretty good value. 

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Obviously one of the biggest and most prominent imbalances that we're experiencing as a society today has to do with housing affordability,  online rental marketplace. Zumper found that in 2024, the average rent was 42% of the average pretax income.  That's up significantly from 2021 when it was only 35%.

Only 35%.  Now it's likely that 2025. We'll show a slight decrease in this percentage,  but it's also likely that it will go up again next year.  This is clearly a tricky problem to solve. You need to decrease rent or increase incomes and ideally both to make a significant improvement.  What's interesting to me is that if you even hint to landlords.

That their rents need to come down. They will respond with borderline hysterics about how poverty stricken they'll become should rents fall even a tiny bit.  Now, full disclosure, I have had the great good fortune to be a landlord for over 20 years, and I gotta tell you, it's a pretty cushy gig.  I mean, pretty much every tax law is written in your favor. 

Here's a good example. The value of real estate goes up pretty much every year,  but for tax purposes, the value of the asset is depreciated and you get a pretty significant tax break.  Now, those in the know will say, sure, but you gotta pay all that back in capital gains when you sell. And to that, I say  not necessarily. 

The same tax code that lets you depreciate an appreciating asset wouldn't be so cruel as to not provide ways to defer those capital gains almost indefinitely. Of course it wouldn't, and so real estate offers a pretty good example of the sort of misaccounting that I'm talking about, the emphasis on the negative and a disregard of the positive.

So when a landlord is figuring out how much they need to charge for rent.  They'll calculate their expenses using the acronym PITI ,  which stands for Principle interest, taxes and Insurance.  It's kind of fitting that it sounds like pity since that's definitely what property owners are looking for when adding up these numbers. 

The problem is they're not looking at the other side of the ledger, which includes all the tax deductions. These costs provide. Plus the deduction for depreciation that I mentioned a minute ago.  And also, let's take a look at the P in PITI. That stands for principle, which is the money that goes towards paying down your mortgage.

Or in other words, the owner is really paying that to themselves. So it's not really an expense that needs to be passed along to the tenant, is it?  Of course, I know landlords will say, I never actually realize that equity until I sell the property. And to that, I say, okay,  I'll concede that it's not the same thing as cash in your pocket, but the one thing it is, in no way whatsoever is an expense that should be passed along to your tenants. 

To give you some real numbers to show what I'm talking about. I did a quick calculation of the gross cost of pity versus the net cost or actual costs to the landlord,  and these are pretty conservative numbers. If you make a hundred thousand dollars a year and you own a property with a $500,000 mortgage at 5% interest, your monthly outlay is roughly around $3,500 a month. 

So you'll conclude that you need to charge at least that in rent and probably more.  But, when you take into account all of the tax deductions, plus the money that you're paying to yourself, your actual cost is closer to $2,500 per month.  And all of this kind of feels like a bizarro world version of the 1944 Howard Arlen and Johnny Mercer classic "Accentuate the Positive".  In this case, it's accentuate the negative, and if possible, eliminate the positive. 

And sure, I can call out greedy landlords for this, but it seems to be sort of a natural human tendency to focus on the costs and ignore the benefits, especially if doing so is rewarded handsomely.  And also, this is something that I've engaged in plenty of times in my life.  

For example, when I was regularly participating in a meditation class at an amazing meditation center called InsightLA,  we would occasionally do a gratitude meditation, which, at its simplest essence, is just an acknowledgement of things that you're grateful for.  I remember the first time I did this, I was kind of in a bad mood, and I couldn't really think of anything that I was feeling grateful for at the moment,  and the instructor said.

Well, that's actually good because it'll allow us to see that gratitude is always possible, even if you're really not feeling it.  So suppose you're not feeling particularly great about the big things in your life, your relationships, your job, how thoroughly you fulfilled your childhood dreams, et cetera. 

Then what you wanna do is expand the set of things which you could conceivably feel grateful to include smaller things.  For example, it could be something as simple as, I'm grateful that the coffee machine worked and I've got a hot cup of coffee, or that I can walk without pain, or that I don't need to worry about where my next meal is coming from. 

And the power of this is that as far as your brain is concerned,  gratitude is gratitude regardless of why you feel it.  It's like when athletes visualize hitting a golf shot or a free throw or a penalty kick,  your brain logs that visualization as reasonably close to the real thing.  So when you do take the actual shot, you've got a little more mental experience of it.  

So I guess the big takeaway from this episode check, so I guess the big takeaways from this episode are to consciously value the positive things in your life.  That you might take for granted or that you want more of, and to understand that money only really matters in terms of what you can exchange it for.  And sometimes those things are intangible, like a vibrant neighborhood or a community of people who feel more secure.  And whenever you can, even when you're feeling crappy, especially when you're feeling crappy,  here's what I suggest you do:

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Well, that's it for this episode of the Great Ungaslighting. If you enjoyed it, please forward it to anyone you know who might also appreciate it. And until next time, be kind to yourself. Cut each other some slack and use your damn turn signal.