Everything you want is on the other side of fear
Chinese demographics, Student Loans, What your CFO Knows
The Chinese government has released a report that predicts that in the next four years, amount of babies born will fall under 7 million, as opposed to 17 million babies born in 2015. The report, released on Weibo, tries to spin this as a net-positive since it will mean less necessary investment in schools, children’s hospitals, labour and delivery hospitals, children’s products and clothing. The report doesn’t explore exactly how fewer babies, which equal fewer adults, are going to support the massive generations that came before them, or even how the shrinking workforce will work the extremely manual manufacturing jobs that makeup China’s working culture today.
A commenter on the Weibo article has an idea on how the local governments are preparing for the demographic crisis. She complained about her primary school child’s arts and crafts homework which involved learning to produce string, dye it and knit it. Additionally, for older kids the curriculum teaches how to knead dough, raise silkworms, keep bees, breed quails, and how to keep insects out of granaries.
To Peter Zeihan’s point, China isn’t looking at de-industrialization, it’s looking at de-civilization in the coming 10 years.
“There is only one cause of unhappiness: the false beliefs you have in your head, beliefs so widespread, so commonly held, that it never occurs to you to question them.”
—Anthony de Mello
Tomorrow the Supreme Court will hear arguments in the case of Biden v. Nebraska in which the current Administration asks the Court to overturn a lower court decision that blocked the implementation of Biden’s student-loan forgiveness executive orders.
By way of backstory, in 2003, Congress delegated to the Department of Education the authority to waive or modify federal student-loan provisions “as may be necessary to ensure” that certain defined goals are achieved. One of those defined goals is that “recipients of student financial assistance” who are affected by a military operation or national emergency “are not placed in a worse position financially in relation to that financial assistance because of their status as affected individuals.” The administration now argues that under this law, it has the authority to forgive billions of dollars in loans across millions of borrowers.
It does so by arguing that COVID was a national emergency, that every borrower lives under this emergency, and that defaults will occur because of it. In order to avoid the risk of mass default, it argues, these loan repayments must be waived … to the tune of $400 billion.
This case will likely turn on a technicality-based analysis of what is called the “major questions doctrine.” In essence, since the action here was not “necessary” (the statutory keyword) to achieve the government’s aim, there is no other statutory text granting the secretary, and by extension the President, any such power.
Whether to grant nationwide debt forgiveness is undoubtedly a major question, one that Congress debated as it considered bills that would explicitly make that choice. I’ve argued before that Republicans are completely missing the financial and electoral importance of this issue. A $400 billion debt-forgiveness plan is a major policy decision that must be made by Congress—and Congress has declined to make it.
For anyone listening, Congress should simply allow college loans to be credited in the first 5 years of employment, dollar for dollar. If you take out $100k in loans, graduate and get a job paying $50k per year, you’ll owe $4200 in federal tax. You pay your loans, and don’t pay your taxes. At the end of 5 years, you’ll owe roughly $80k and your salary will have grown over that time to better balance the payments. We pay some, you pay some … and the American workforce gets better educated over time.
And before you start … I don’t care that you put yourself through college working at the malt shop for a penny an hour. College tuition, room and board, and everything else involve is 1000x more expensive and wages haven’t kept pace with the increase because Boomers are working longer, paying less tax, and retiring in droves now to suck up 121% of Social Security. You better do something for the workers who are shouldering that load … or they won’t.
“Art is in what you leave out.”
—Kevin Kelly
Lessons from the CFO:
1. Cash trumps everything. The key is capital reserves. As Gordon Gekko famously said “If you don’t have enough, you can’t piss in the tall weeds with the big dogs.”
2. Revenue is always the best source of finance. Bootstraps don’t come with buyer’s remorse. Finance yourself into the next phase of existence.
3. It's cheaper to keep existing customers than it is to find new ones. The rule of thumb is that its 5x cheaper to make your existing customers happy, than it is to go convince new customers to be happy. If you knew this, your sales commissions structure would reward people for generating customers who stuck around.
4. Give data to your team and watch them exceed their own expectations. The more transparent you are about where you’re going and how things actually look today, the more growth your team will build for you without you ever knowing they’re doing it. Open up the kimono.
5. Negotiate everything, if you don't try, you don't know. “Could we do any better?” The answer is always yes, even when’s it’s a no, you vendor will give you a matrix to make a deal. I just bought an insanely expensive car for 17% less just by letting them finance it at a cheaper rate than I could get at my own bank. How? I asked what financing would be worth to them personally and how we could do better on the price. They wrote their own ticket.
6. If you fail to plan, you are planning to fail. Such a tired old chestnut … that is so true. Walking around in a haze has never produced a result you’re happy to live with, in business, love, or life in general. Make a plan.
7. 100% of forecasts are 99% wrong. But we need them to base legitimate decisions on. The problem is that we never revisit them and say publicly, “We were 80% wrong last time and we’re going to adjust our math this time.”
8. Your banker is not your friend, a bank exists to make money. Banks are for using until you don’t need them any more. Your responsibility is to make that happen. They are chummy because they make money arbitraging interest. Adopt the best strategy and Be Your Own Bank as soon as you can be.
9. You have three levers - increase revenue, improve gross margins, decrease costs. Maybe there are more but who cares, these are all you need. I guarantee you didn’t start your annual planning session this year saying how can we better accomplish each of these. Even more importantly, did you ask your team how they could do it? You are sitting on mountains of dollars that are obvious to others, but are you asking the right questions of the right people?
10. No better way to understand your business than to do the accounts for one month. This needs no explanation. If you want to understand how you make and lose money, look over your bookkeeper’s shoulder one month during month end. You’ll learn more about your business in 1 day than you thought you knew with all of your experience.