Thursday, November 10, 2011

But Who's on YOUR Bus?

In Jim Collins'  bestselling business book "Good to Great," he and his research team explore the commonalities between a handful of companies that they have identified as being "great." The rules of success, they decipher, have far less to do with having a rockstar CEO (who, as it turns out, can actually drive a company into the ground in his or her pursuit of personal greatness) and much more to do with the company culture - the tone set by management and whether or not the team below believes in its leaders and the company as a whole. Collins assigns to this concept a metaphor of a "bus," saying "we found that [the great companies] first got the right people on the bus, and the wrong people off the bus."

If there are people at the company who do not believe in its potential, it's in everyone's best interest to show them the door - or invite them to make the decision for themselves. Collins advocates building a team of people who believe in the company strongly enough that they would work for it even without a salary. People who feel passionate about the company's mission; who demonstrate faith in its potential and motivation to help get it there.

This particular chapter inspires the reader to pause and ask him or herself: am on the right bus?!

And yes, that's a normal question. When I read "Good to Great," I was coming to the realization that I was not on the right bus. I felt largely indifferent about the direction of my company (probably largely due to the fact that it seemed to be set on its track, which was decent even if unrelated to my own, and had little history of straying from the tried and true.)

But then I thought: now, wait a minute. This "bus" metaphor doesn't just apply to companies! It's not companies alone that have direction and momentum. It's individuals too. We all have our own personal bus; we each have our own directions, regardless of whether we consciously and deliberately define them or whether we allow them to be defined by outside influences. We each have a path as individual people. And just like successful companies need a support team of people who believe in it unconditionally, each person needs the same network in order to realize personal success.

And that's when I questioned whether my company - the same one whose bus I knew I should disembark - should even be on my bus.

These were good people, at my company, who were doing good things for the business and for their own careers, but unfortunately exhibited very little enthusiasm for me as a person or confidence in my potential.

Over the course of several months, I pursued a new career, and have since found a position at a company whose employees regularly inquire about my longterm career goals and discuss how the company will help me reach them, advising me on steps I can take in the short term, who to go to with particular ideas, and what responses I should expect. Their unyielding message is: we want, most of all, for you to realize your career goals, whether with this company or outside it.

And that message makes all the difference in the world. Rather than exhausting myself with anxiety over how to conform to their rules, I am instead trying to navigate their framework in order to best climb it. And they're not only letting me do it, but are encouraging it.

And it's not just the company you work for; it's also the people you keep in your life. Many successful professionals have discussed, in books and articles and interviews, enduring a divorce from a partner who did not believe in their work, and subsequently marrying someone who expressed absolute confidence in it - and what a difference it made. They advocate figuring out what you want to do with your life - what bus you're driving - then admitting only those passengers who feel ceaselessly passionate about that bus, and refusing those who question its direction. Because when the bus breaks down - and it will, from time to time - you want passengers who can help you fix the flat or push it to the shop and pitch for the mechanic's fees. (Incidentally, though this isn't a post about "love" or "The One," you should also choose a life partner whose own bus instills in you the same unwavering desire to be on board.)

Choose the right bus. Choose the bus whose direction you consistently believe in and for which you do not only ride half-heartedly, while harboring doubt in clandestine. You owe it to yourself, and you owe it to the company.

And while you're looking for the right bus to board, you must also bear in mind that you will always have your own bus, and be ruthless when surveying the passengers on board. Take the time to define your objectives, and surround yourself with people who think that those ideas are bad ass. Ride with only those individuals that believe in you without skepticism, and remain diligent in your direction. It is better to spend the first ten years of your life with one person on whom you can depend than to surround yourself with a dozen who imply that your aspirations are silly.

And once you've got your bus on the road and some solid passengers along with you, then your job is to enjoy the ride.

Wednesday, November 9, 2011

There Is No Gender Gap

That's right, I said it.

I have read countless books marketed towards the professional woman, warning her to watch out for sexism and salary inequalities. I have read tons of the research concerning this argument. I took gender theory classes in college. Two months into my very first job, I discovered that a male peer hired on the same day and likewise lacked experience was being paid 10% more. 

And even after all of that, I still assert that there is no real gender gap. 

Yes, women may be paid $.75 for every man's dollar (a discrepancy that, as a former senior colleague informed me (however jokingly), is because maternity leave requires an absence for a fourth of the year, therefore justifying that we surrender a fourth of our pay.)

As much fun as that theory is, I think the reality is: women ask for this difference in salary. 
Or rather, don't ask for it to be eradicated.

Now, before we get up in arms with one another, let's consider some key points:

Get Hungry For It
In articles and books that discuss the 75% pay debacle, many go on to later admit that most women don't appreciate the value of money, meaning that when they're asked what drives them, fewer women than men answered "wealth." (As a rule, I actually reject most stereotypes. I particularly do not identify with this one, being a woman who expects to be compensated for the value she offers. That aside, this may very well be true for most women.) So, let me ask you: are you hungry?

Ask and You Shall Receive
When women don't put the same value on money, they don't fight for it - but men do. I frequently read research stating things like "women say they feared to negotiate when offered their first position... even women who are firmly entrenched and recognized for their achievements continue to take new positions without negotiating."(1) Ladies, listen up: accepting a job offer is like buying a car. The sticker price is never the "real" price at which the dealership is willing to sell the car; the salary a company offers is never what they're willing to pay you.

Fake It Until You Make It / Act The Part
I am an advocate for being conscientious about your appearance. You may not want to judge a book by its cover, but everyone does. That's why first impressions have so much weight. When you're going to work, what you wear sends signals to those around you on how they should perceive you - and, incidentally, how they should treat you.

I am endlessly surprised by the number of women (of all ages) who stride into work wearing short skirts, sky-high heels, fluorescent nails, blue eye shadow... the list goes on. If we do not take ourselves seriously, nobody else will. If you expect to be paid six digits, present yourself as someone worthy of that salary. If you'd wear it to a club or on the couch when you're hung-over, don't wear it to the office. (And this isn't sexist: if men rolled into the office on a Monday morning with their top three buttons undone, bright red shoes, or jean shorts, they'd probably be making 25% less too!)

In Short: Wake Up!
If the gender gap is alive and well, it is because we as a whole have fed it. Women apparently tend to be more complacent than men. Some of us also don't take ourselves as seriously as our male counterparts do. Just like many of you, I have been subjected to lower wages and being addressed as "sweetheart" in the workplace - but I refuse to accept this as the standard of my career progression. I know I'm worth more. 

I'm not saying you won't have to work twice as hard as your male colleague at least once in your career - we all probably will. But if you see yourself as making 100% of his salary, and present yourself that way, I do not believe that there's a reason it won't be a reality.

(1) - "Be Your Own Mentor" -Wellington

Wednesday, November 2, 2011

A house in not a great investment

Houses have long enjoyed the reputation of being a good investment. Many people consider their home to be their first - and probably their biggest - investment of their lives, and many young couples (and, increasingly, individuals) spend the first several years of their career "saving for a down payment." There is a societal push toward owning a home, and having a mortgage under your belt brings with it a new status (that of a "home owner" rather than a "renter," with the former being superior to the latter) and the promise of having landed for yourself a "good investment."

But the truth is that, from a purely financial perspective, a home is generally anything but a good investment. And when we're dealing with dollar amounts that demand a third of our paychecks, it pays to look at the thing through personal finance lens, and understand why they're not great investment vehicles:

Appreciation Equals Inflation
Outside of the housing boom of the late 1990's and early 2000's, houses really don't earn their owners that much. And though homes may have made people a lot of money during the housing boom, they caused tremendous losses for their owners during the subsequent housing bust in the last few years. This collapse of house values was actually thought to be impossible by the same people who have historically pushed home ownership as a good investment. Homes, in their entire history, barely outpace inflation. (By contrast, in every 30-year period since 1928, the stock market's average annual return has beaten inflation by at least 4 percentage points and typically by 7.) (1)

If a house will earn you inflation, it's essentially a savings account. It seems that mortgages may have been attractive to people and encouraged by society because they act as a "forced savings." However, you don't need a mortgage to build equity - in fact, if you have the discipline to allocate a third of each paycheck to better investments (that don't have contractual obligations), you could build the same $300,000 in equity in fewer years - and buy a house for cash faster than you'll own a mortgaged one outright.

If you allocate the "recommended" third of your paycheck to your mortgage, you've signed over a third of your income over 30 years to one single investment vehicle. So what happens to 30 cents of every dollar you earn for thirty years, and how much you make from it, will be tied to the performance of just one asset. Would you ever allocate that much of your money to a single stock?

When you've decided to sell some stocks or bonds, it takes less than ten minutes - even if it's $300,000 worth. When you decide to sell your home, however, it will never, ever happen that fast - unless you're willing to take a loss. When you're ready to sell your house, it takes months to find a willing buyer. And though this is largely accepted as the way real estate market works, it becomes an issue if people ever need to relocate - or simply get their money out - quickly. In this situations, homeowners will often be forced to take a hit.

Transaction Costs
Not only can we sell that $300,000 of stocks in less than ten minutes, it only takes $7-30 to do the transaction. You could never expect to get through buying or selling a home that cheaply. After inspections, legal fees, application fees, land transfer costs, movers and the myriad of other charges, buyers end up paying far more for their home than is ever discussed. In fact, according to a study, "buyers who sold within four years of purchase on average paid 19 percent more as owners than they would have paid as renters. For these short-term owners, transaction costs averaged 23 percent of their total costs of owning." (2)

Opportunity Costs
This is obvious and goes without explanation for those that recall the concept from economics courses: if you're allocating a third of your paycheck to your mortgage, you can't invest it in other (and potentially more lucrative) opportunities. So even if you hear about a great stock, your money is already tied up in your mortgage. You can't change course and switch strategy from month to month or even year to year as the economy evolves to offer new opportunities.

So Why Buy?
Because home is where the heart is! A home will forever inspire in us, as a society, emotions of security, comfort, and consistency. We recall our own childhoods; summers spent at Grandma's, playing horses in our fathers' carefully manicured lawns. We will never stray far from the tradition of home ownership; mortgages represent "building a life" and becoming adults. Home ownership still yields the same status over renters, and does still help us build a little equity as we age.

But, this is my hope: though we are understandably reluctant to dissect our connotation of home ownership and separate our emotions from the financial aspect, if we take a moment to consider it from a strictly "personal finance" perspective, we might collectively come to admit that houses are, ultimately, not a good investment. And that while many of us will continue to own homes in order to build our lives and raise our children, we might do so by allocating a little less to our mortgage and a bit more to other - better - investments.

(1) MSN Money -
(1) National Multi Housing Council -