Skip to main content

Bias For Clarity

Bias for action. Gets things done. Go-getter. Traits companies big and small look for. And for good reason, you're being hired to do things! However, action is a secondary step that often overshadows the primary step, direction.   Clear direction is the foundation that enables our actions to takeoff. Without it, we're stuck in the mud.  Striving for clarity is an underrated skill. Having the courage to ask ( seemingly ) obvious questions, and to check in, making sure we're all on the same page. "O bvious " questions are a low risk, high reward way to add value. At worst, you'll add confidence to our actions. At best, you discover a misalignment that saves us from a dead-end.  The more people, the more clear we need to be. The bigger the initiative, the bigger the risk of reaching the finish line, only to realize expectations were off.  Success is always uncertain. But we can be certain about what we want and what everyone's job is. Things that can be clea

For Real? The Really Real Returns of Real Estate

brown wooden house near green grass field during daytime

Despite what your parents tell you, a house is not an investment. It's a depreciating asset. A house, like any physical asset lose value over time. They age and wear down. To slow down the depreciation, you need to constantly throw money at it for maintenance. This is simply to maintain the value, not to increase it.

Houses without maintenance is like an unrefrigerated milk, it goes bad fast . Take a look at any abandoned home. After only a few months you see damaged roofs, clogged gutters, cracked windows, and probably some unwelcomed furry tenants.

Maintenance can be pricey. A conservative rule-of-thumb is 1% of your home's value annually. So if your home is valued at $500K, you should budget $5K a year for maintenance. Obviously this is a ballpark figure and should be taken with a grain of salt. Your cost will vary depending on a number of factors such as home age, weather conditions, etc.

You've heard the stories from friends and family, homes doubling in value and people getting "rich". The problem with these stories is, like a lazy artist they don't paint the full picture. These "success stories" are backed by overly-simplified math, looking only at a house's current value against its original cost. 

If you bought a house for $500K and sold it for $1M after 30 years you'd probably be pretty happy. You doubled your money!

Not so fast, let's unpack this. Doubling your money after 30 years, works out to be only a 2.33% annual return. That's even before you factor in inflation, taxes, transaction fees and maintenance costs. Once you factor in the costs, you'll end up in the red.

If you look at US housing data from 1890-2019, the annual inflation-adjusted return for houses is just 0.4%. Again this is before factoring in all the costs associated with homeownership.

Homeownership might be right for you depending on your goals. However, don't treat it as an investment as it'll surely disappoint.








Comments

Popular posts from this blog

The Art of Giving Feedback

Constructive feedback is an awkward affair. You don't want hurt feelings, but recognize the importance of honesty. You've tried the classic "hoping things will get better on its own" and unfortunately it hasn't played out. When giving feedback, here are a few things that I try to keep it mind. Start with empathy. Step into their shoes and understand their story. If you don't know, ask. Be genuinely curious. Feedback is a dynamic affair. Shared communication with a shared goal towards progress. Take the emotion out of it. Focus on the situation, not the person. Focusing on the person adds unnecessary weight to an already emotionally-bloated event.  Be specific. Give clear examples. Vague feedback equals dismissed feedback.  Doing above won't de-awkward things fully, but it will dampen it and increase the chance of better outcomes. 

Step One is Knowing

In school, we listen to our teachers. At home, our parents. Throughout our childhood, following instructions is praised and rewarded. When we're young, there's value in this. We don't understand how the world works quite yet, so guidance can be lifesaving.  The bias to just accept obviously has drawbacks. Insert old jumping off a bridge adage .  This conditioning is especially strong for kids from lower income households. Their parents are more likely in working class jobs involving strict order-taking. Parents of middle-class households tend to be knowledge workers where influence is essential.  Studies have shown kids from middle-income households are more willing to negotiable with their teachers. They learn from their parents that things are not set in stone. This leads to better grades and learning outcomes when compared to their lower income counterparts who don't negotiable.  In business, if we simply accept things as they are, we would never innovate. In work, w

Bias For Clarity

Bias for action. Gets things done. Go-getter. Traits companies big and small look for. And for good reason, you're being hired to do things! However, action is a secondary step that often overshadows the primary step, direction.   Clear direction is the foundation that enables our actions to takeoff. Without it, we're stuck in the mud.  Striving for clarity is an underrated skill. Having the courage to ask ( seemingly ) obvious questions, and to check in, making sure we're all on the same page. "O bvious " questions are a low risk, high reward way to add value. At worst, you'll add confidence to our actions. At best, you discover a misalignment that saves us from a dead-end.  The more people, the more clear we need to be. The bigger the initiative, the bigger the risk of reaching the finish line, only to realize expectations were off.  Success is always uncertain. But we can be certain about what we want and what everyone's job is. Things that can be clea