Treat the disease not the symptoms

One of the things that I have been frustrated with over the last year is that we tend to spend a lot of time talking about the economic crisis and the various government actions without realizing that what we are talking about are symptoms to a disease and the treatments of said symptoms, while we ignore the disease. The economic crisis is simply a symptom of the disease that is the lack of *financial literacy* in the country.

Walk into a room of highly educated home owners and ask them what percentage of their gross income should be spent on housing, and I am willing to bet that less than 10% will have any clue. Ask the average American about interest rates, how much debt they should carry given their income, the costs of credit card debt, etc. and they will look at you like you are their HS math teacher asking them about trigonometry. Yet, these are the practical life financial decisions people make every day.

I had the privilege of going to some great schools and I didn't take a single course that focused on any aspect of financial literacy. We have college students graduating with a mountain of credit card debit, and they don't even understand the hole they are in because they aren't financially literate. How many people who are carrying credit card debt run around passing along hot stock tips? Their financial ignorance results in them not knowing that the best return on investment for them would be to pay off their credit cards.

I believe that financial ignorance + greed is what fuels speculative bubbles and the logical crashes that follow. If the government wants to truly address the financial problems of the country they should put in place policies and programs to address the financial literacy disease that faces our country. After all, it was financial ignorance + greed that took us from one bubble (internet stocks) to the next (homes).

If don't improve our financial literacy today's financial crisis will feel like a walk in the park compared to the decades ahead of us when we will have millions entering their retirement years without the cushion of a pension and social security.

Finally, the lack of financial literacy makes it impossible for our elected officials to make the right financial decisions for our future, because their constituencies don't understand the problems we are headed for with respect to entitlements & our twin deficits.

Until I see action in this area I am going to continue to buy gold, because the worst will be ahead of us, rather than behind us.

Standard vs. Necessary

I am going to test out a new approach to blogging. In the past I wanted to make sure what I had to say was really insightful, well I am going to switch to posting whenever I think what I am going to write *might* be insightful... so here we go.

In the course of starting a new venture co-founders are faced with innumerable decisions in areas they really don't have expertise. The vast majority of these decisions land in the legal arena where the "legaleze" is astonishing - making the decisions harder. I am fortunate in the fact that I have founded a company in the past, so I am able to read through the documents pretty efficiently and comprehend the material well. But I have found that the most important question to ask yourself and your legal counsel when faced with "legaleze" is the following: Is this standard or is this necessary?

Agreeing to terms simply because they are standard is something that I am not a fan of. It results in a situation where you don't really understand what you are agreeing to and why it is important (b/c your lawyer will constantly say "that is standard" and you will just nod and move on, rather than really understanding what is going on). So probe when you are reading through legaleze and understand what is going on and only accept a term if it is necessary, not because it is standard.