Engineers and F.I.R.E
Quality, Consequences and the Construction Industrial Complex (part 278).
I am a huge fan of the phenomenon known as F.I.R.E or Financial Independence, Retire Early. Thanks to the excellent David McWilliams Podcast (Ep#118) I am now aware of another F.I.R.E.
- Finance
- Insurance
- Real Estate
These are all activities that extract “rent” and lead to “financialization” of whole economies.
David McWilliams references a paper on falling productivity by Kevin Murphy of University of Chicago where he notes 91 countries have more stockbrokers and lawyers than engineers and they all grow slower than countries that have an abundance of engineers and hold in high esteem, engineering, technology and innovation. Lately, we are repeatedly being advised to follow the data and science. If this is true there is a clear policy direction to be taken, n’est-ce pas?
Financialization leads to government capture and the ability for swagger to overcome brains. Why do a 4 year numerate (Latin for difficult) degree then go and earn an average engineering salary when you can get a far greater ROI working in finance or real estate investing?
For example in the USA if you buy an office building you can:
- Collect rent on a generally appreciating asset.
- Expense maintenance, running costs, betterment and anything else you can get away with.
- Claim large tax deductions via asset depreciation.
- Then sell it and with some accounting gymnastics, role the proceeds tax free into a new property purchase.
This is a sweet deal. If you could raise the money, why wouldn’t you do this? Knowing what I know now, as a young man I would have gone into the City of London to be a trader. Hindsight is 20/20.
The point is, some countries value financialization over engineering, technology and innovation (UK, USA, Canada) and some value engineering, technology and innovation over financialization (Germany, Korea, China). To quote David McWilliams, “if you tolerate this (financialization), your country will be less than“.
In the early 1980’s the future belonged to financialization and rent seekers. I have a feeling that in the 2020’s, engineering, technology and innovation will generate the real returns. How will we know if this is actually happening? IMHO, the signs will be:
- Banks and insurance companies will have their ability to charge “rent” (the spread or “vig”) taken away by Decentralized Finance and Crypto.
- Technology will reduce demand for office buildings.
- Jobs that include the word “broker” will go away.
- Engineers will start to earn above average income.
Price and earnings are signals of value and status. As engineers, technologists and innovators earn more it will attract more people and talent away from F.I.R.E. It will generate a positive flywheel effect. In short, brains will overcome swagger.
This is good news because the world needs more engineers, technologists and innovation to address our infrastructure and environmental degradation issues.
Related
David McWilliams Blog on F.I.R.E
Edifice Complex Podcast
#edificecomplexpodcast #ProjectManagement #makingbuildingswork #podcast #CxM #drawings
#bluerithm #echoknowsyourbuilding #drawingsfound #facilitiesmanaged #Cx #Cxnomad #RICS #property
https://learn.drawingspecialists.com/adam
