Personal

Memories, Dream Recording and the Present Value of “Stuff”

In my last post, I talked about my son’s consideration of the colleges he might want to go to. That is a decision that he will have to face largely by himself. However, the fact that he will be leaving my wife and me with an “empty nest” has brought us a whole new set of decisions to face, one of which I want to talk about today.

Whatever we decide to do after Adam leaves home, it will almost certainly entail moving to a smaller space. The process of deciding where to live and what to do with the “rest of our life” is obviously another type of Present Value decision and one that I will write about again in future posts, but given that we know that whatever path we choose to take, we will have less space for all of our accumulated possessions, there is really no reason to wait on an important related decision – i.e. what do we do with all our “stuff”?

The “Dream Recorder”

And so, this weekend we started in on our storage shed; the one in the backyard which over the years has become the repository for almost everything that we don’t use, but can’t bear to part with – old toys, photos, school papers, artwork (both Adam’s and ours), comic books, baseball cards, an array of almost useful tools and a vast store of memorabilia filled with magic, associations and significance.

As I started bringing everything out, examining and sorting it into categories (definitely toss, definitely keep and several categories in between) I came across one of Adam’s early creations – the “dream recorder”. He built it when he was 5 years old out of scrap wood, nails and magic markers. Primitive as it is the resemblance to a VCR is unmistakable and, as he had explained to me more than 10 years earlier, that is what it was supposed to be, only instead of plugging it into the TV or a video camera, you plugged it into your head before you went to sleep and after setting the dials appropriately your dreams were recorded and available for playback anytime you wished. This one, despite its bulk, was an unquestionable “keeper”. I didn’t even think about using Present Value; the “Dream Recorder’s” importance and “value” (to me, to Adam, now and in the future) was simply too high to consider the small incremental space savings that we would gain by discarding it. If nothing else, its continued presence in our lives reminds me of just how valuable our dreams and our memories really are.

But what about the rest of the stuff? How would we decide what to keep, sell, give away or discard? And in making those decisions, when should we use Present Value and when should we just go with our first basic instinct? I don’t have space to go into the details of each and every decision, but I do want to talk about one example that may be familiar to those of you who can still remember Ed Sullivan, mini-skirts, and the “British Invasion”.

Albums – The soundtrack to growing up

Unlike baseball cards and old coins, records take up a lot of space. They are also a funny kind of collectible. Of course they bring back all sorts of memories, and many of them have significant investment value, but they also (at least theoretically) can still be played and enjoyed for what they were intended to provide – music to listen to and enjoy. So deciding what to do with our record collection of 500 LP’s as well as the decent turntable that was carefully stored alongside them was a decision that was both complicated and would be of some spatial significance.

Beyond the obvious problem of placing a value on the future pleasure we would get from seeing these albums years from now and recalling the teenage good times associated with them, the really hard part of using Present Value for this decision was steps 2 and 3—imagining possible futures and evaluating their likelihood. As I thought more about it, I realized that to justify the expense, hassle and psychic burden of carrying around a couple hundred pounds of vinyl taking up several cubic feet of space for the rest of our lives we would need a pretty compelling vision of how we would enjoy those records and/or a financial rationale suggesting that a “hold” strategy was better (from a Present Value perspective) than to simply realize the capital gains on some of the unquestionably “savvy” investments I had made in all that “damned noise”(as many of the wise adults around me then called it) all those years ago.

The financial part of the analysis was pretty easy. Beatle records right now are at an all-time high, the market is almost frenzied, and even the records of some of the other more “minor” artists (e.g. The Who, Jimi Hendrix, Rolling Stones etc.) in the collection have been caught up in the market rise and are worth far more than the $3.99 I paid for them (let alone their depreciated value considering the dozens of times each was played). Looking ahead, it seemed to me that if we aren’t yet at a peak, we are probably close – both artists and fans are ageing fast, and those that really want to have and play those records could easily soon be facing the same kind of “space squeeze” we were. Put another way, would I be willing to pay $50 for good quality copy of “Beatles ‘65” today as an investment? And if not, selling surely is the smart move.

But, what about our future “golden years”? We have a farm with an old house up north that we are renovating and it is there, where we hope to spend a great deal of our retirement. Wouldn’t that be the perfect spot to set up the turntable, store the records and spend many a lazy summer evening playing the songs that still make us feel young? How valuable would that be, and wouldn’t the costs of temporary storage and ultimate moving expenses be a modest price to pay for such long term and exquisite pleasure? Even with a relatively high personal rate of discount, that seems, on the face of it like a more than fair trade-off.

Except, that when I really took the time to consider it, I realized that this possible future was just a fantasy and that there was virtually no chance that we would ever find a prominent place in that house (which isn’t all that big anyway) for records, a turntable (with all its accoutrements) and such an antiquated mode of playing music. We have plenty more CD’s that we still actively listen to and with streaming audio services advancing at lightening speed, even if I did get a sudden urge to listen to Iron Butterfly’s “In-a-Gadda–Da-Vida”, Spotify or some other service would be able to deliver it to me with a quick click (or maybe even a voice command). In short, this particular future should be evaluated as having a VERY small probability of being realized.

It was a sad realization, made even sadder by the fact that having the fantasy itself was a source of pleasure, and that as soon as I understood that it wasn’t going to happen, even that modest (and near term) benefit of holding on to the records disappeared. And so this weekend, the best of the lot goes up on E-Bay and those that don’t sell there, could soon be available at your local used record store.

It was an important lesson albeit not a pleasant one to absorb. Specifically, just like (even unrecorded) dreams and memories, fantasies have value too, but more often than we’d like, it makes sense, at least from a Present Value perspective, to face reality and let them go.

Relearning to Love Math – How I Became an Actuary

“You can do ANYTHING with Math.”

-Deborah Hughes Hallet to a 1st year calculus class for non math majors

Math is hard and math is scary. This is particularly true when your father is a theoretical mathematician who viewed every report card A as an opportunity to describe how what you just learned is a special case of an even more beautiful and abstract area of mathematics that is waiting just beyond your current level of comprehension. So for me, learning math as a kid resembled nothing more than being on an arduous hike in the mountains with an overly enthusiastic trail guide who rarely let you stop and enjoy the view, but instead kept pushing you to scramble up more and more challenging screes and rock faces, all with the promise of “just wait until you see what’s up ahead!”. I stuck with it through most of high school and then simply walked away. It was not until my junior year in college that I decided that Math was something I could do, would serve me well, and with my father 300 miles away, it was safe to try again.

Sometimes you get lucky, and with my reintroduction to the subject I got the best possible teacher I could have hoped for. Deborah Hughes Hallet was one of the only female professors in Harvard’s Math department, and that fact alone should have clued me in that she was something special. Originally from England with degrees from Cambridge and Harvard, she was anything but your typical tweedy academic. She was full of kinetic energy and looked like she would be much more comfortable climbing Half Dome than lecturing to a classroom full of students. She was an extraordinary teacher, whose passion was communicating her love of the subject to her students. Her explanations were clear and direct, and she gave us all the feeling that Math was not only accessible, but fun as well. Beyond that she had the uncanny knack of knowing just where the difficulty lay in each particular subject and she would take pains to address it even before the questions were asked. For the first few weeks of the class, it was smooth sailing and I wondered why I had ever abandoned the subject.

But then I hit the wall. Calculus has some deep and apparently paradoxical concepts (like instantaneous change, infinitesimal differences etc) and when I hit my first, I just froze. Needing help, I visited Professor Hallet during her office hours and within 30 seconds she cleared my conceptual block. I think we were both taken aback at how easy it was and when I showed her some willingness to hear more (something I rarely had given my father), she spent the next half hour showing me all kinds of fascinating applications and extensions of the concepts. Unlike my father, she seemed to know exactly what questions I would find interesting, and what answers I would find exciting. I left the room with a renewed enthusiasm for math that has rarely wavered in the almost 40 years since.

I went on to take one more year of calculus and a couple of other math courses in areas of interest (Geometry, Probability etc), but then faced the prospect of graduating college with no idea of what I was going to do next. I had applied to law school, but hated the prospect of more classes and no real world exposure. It was already April and I began to panic as almost everyone that I knew had a plan in place. Needing help once again, I visited with Professor Hallet and told her I was stuck and didn’t know what to do. This time she seemed a bit disappointed in me and just a little amused. She laughed a little and chided me for not paying as much attention in her class as I should have. Then she told me to simply go to the Career Services office and look up all the jobs that used math. She said there were plenty and that as math was something I loved and was good at, any job that used it, would almost by definition, be a good fit for me. It was simple but good advice. Before I even got out of the “A’s” I found listings for entry level jobs as an actuarial student. This was a job that not only used math, but would pay me to take more math tests, something that I had become particularly good at. I quickly signed up to take the first exam in May, and within weeks was hired for my first actuarial position at the Connecticut General Life Insurance Company (“CG”) in Bloomfield Connecticut.

In the 35 years since I started at CG I have never once regretted my decision. It is an unusual profession that has given me unique perspective to look at the financial world and Life in general. In future blog posts I will explore the actuarial viewpoint more deeply and share how that perspective can be applied to a variety of issues ranging from the mundane and individual to the most global and societal.

 I would love to get any and all feedback on what I have to say, so please feel free to comment or e-mail me. I look forward to our conversation.