#28 Retirement

The entire self-help industry boils down to this one thing: delaying gratification in the short term in favour of the promise of a larger payoff in the future. The difference between a good lifestyle choice and a bad one hinges on this one thing. It is the common thread across choices we make on our diets, fitness and finances. To be on the right side of this conversation, you have to forgo the 2-minute delight that is a New York-style cheesecake lest you endure a lifetime of finger pricks before your meals having developed insulin resistance and type II diabetes. You have to expose your body to controlled stress voluntarily at the gym now to become more resilient to the stresses that life will force upon you later and of course you plan for your retirement while you still have the energy to do work and have 30 years of a career ahead of you.

People retire when they are old and senile, or near enough. At those advanced ages, capacity for production is likely to be lower due to physiological and mental constraints. Your joints will ache, you’re sleepy all the time, your memory can’t retain anything for longer than 5 minutes, and after decades of experience you inherently entrench serious biases that may be obsolete in the obtaining era. You are, he said politely, somewhat of a disaster as part of a work force and so we ask you to go home. If your productive years are inordinately spent delighting in the present and not planning for life after the active income dries up, you’re in for a nasty surprise.

The Emperors of old Rome contemplated the ends of their subjects and invented what developed into what we refer to as pensions and provident funds today. The nuances between the two are irrelevant for our purposes. Ancient rulers would award their most valiant lieutenants pensions to express gratitude and to coax… no, more like preemptively manipulate posterity to serve the empire as their forebears had before them to stand a chance of getting recognised and rewarded by the king. This military pension included the whole suite of benefits and annuities that could be related to disability or what you people lenisebenta kahle call “a bonus” and everything in between.

Augustus, for instance, set up a retirement plan in Rome for returning soldiers who had served at least 16 years. He paid for it from his own pocket at first. Later, his genius would birth the establishment of a special fund that would be financed via taxes. Eureka! A sustainable solution! Total taxes back then were around 5%. Other rulers would reward their soldiers by way of a land grant or an appointment into a special office in the king’s court. You read that right. A pension in days past could take the form of a new job. Annoying if you’re already old and tired. Alas, you do not refuse a king. But as already alluded to, these benefits were not strictly paid after having reached a certain age.

Military pensions were so successful that we started adopting them for other occupations as well. It’s crazy how much innovation traces its origins back to military efforts. The internet, GPS, the microwave, duct tape, canned food, blood transfusion and sanitary pads were all invented by soldiers. Emasotja bruv! To be totally transparent, it was not always the hands of a soldier that built the technologies but it was always a soldier’s brain that thought it possible. They get points for that. Business strategy models itself after the military. It is not uncommon to find office spaces marked as “war rooms”. As if we could last a Ukrainian minute in an actual armed war. We wouldn’t even make it past training. But now, here is my question. Is warfare good then… like… overall? Should you be picking up the phone and asking your soldier friends what sort of ideas are bubbling under their helmets?

Contemporaries often refer to Otto von Bismarck of Prussia/Germany to have been the first to propose financial support for “those who had been disabled from work by age” in 1881. They overlook that by that time, teachers, firefighters and cops in the United States had been receiving pensions for 30 years. The first private pension had already been established by the American Express Company in the 6 years preceding Bismarck’s date. Not to mention that since 400 C.E., soldiers had beeeen (with four Es) pensioned.

Soon after Bismarck, and much like the Romans, private enterprises established pension funds for their workforces as a lure to attract talent and to breed a dedicated workforce that could look forward to a handsome payout if they bided by the firm. In the US, the retirement age was set at 65 in 1935 when life expectancy at birth was 60 years. The government did not expect many people to reach retirement age and concluded that it could afford social security benefits for the few that did. Even upon reaching retirement age, one did not live much longer after that. Today this is very different. A human being in the first world reaches the age of 80 as a matter of routine. It’s very ordinary. Where I’m from, I do not personally know even two 80 year olds. Statistically, we die on retirement day or thereabouts. In this respect, Southern Africa is stuck in the 1930s.

How do you approach your own retirement? If you have basic finance knowledge, I do not think you need much help here. Modern legislation does a lot of the heavy lifting anyway. You and your employer partner to fill up your coffers 12 times in a year. You implement what the finance nerds engineered about compound interest, risk vis-a-vis reward, asset allocation, cost averaging and beating inflation. Those that do not have much confidence in their financial acumen can speak to their friends that do. If they are not helpful, tap into your workplace's financial wellness programme. If that is not an option, pick up a book, read an article, watch a YouTube video, whatever. Hey, some people’s retirement plan is their children. Have a few of them… maybe? It does not matter how you start your planning. Only that you are aware. Your financial wellness will require some effort but not much. How much of your today should you give up for a better tomorrow? What is the point of scrumping through life so that you can have one hell of a 90th birthday bash? Maybe answer that for yourself. The secret sauce to any type of wellness is luck anyway 🤷🏾‍♂️.

What I’m Reading

1. I started the week reading a book called World Order by Henry Kissinger. This book had the promise of teaching me how the countries of the world, particularly the influential countries, formed and how they define justice and their respective attitudes towards international relations. When I say influential countries, I mean those in Europe, Asia or the United States. The concept itself is intriguing, the delivery in Kissinger’s pages was wanting in my opinion. I closed the book and put it away after 82 pages. I did not like the writing at all. It felt like driving on a gravel road in a cheap vehicle.

An interesting nugget I can recall from Henry’s work was his pages on Napoleon Bonaparte of France. Apparently this man took the crown with his own hands from the Pope to crown himself on his coronation day. This should’ve been the sign. If he were on Game of Thrones, the main theme song would’ve started playing there and then. Soon after crowning himself, he turned his army against all of Europe. He was not of royal blood which rendered him an illegitimate ruler of the French. He must have had a chip on his shoulder and believed he could earn legitimacy by conquest. And boy did he conquer! He enjoyed historic military success. In the end, it took a united Europe to stop him.

That is only as far as I could go with this work that struck me as lacking coherence. It’s not well written and almost all over the place. I think it’s ridiculous. It’s like it’s not even planned. This was the same feeling that was evoked by Tim Ferris’ 4 Hour Work Week when I read it many moons ago. It read like it was written in 4 hours. I love Tim. I love his podcast. I am listening in at least 2 times a month but his book was an offence to my brain cells. But maybe I was young. I might give it a go again. I’ll give him grace for his work on the podcast.

2. I am now reading Dealing With China by another Henry. Henry Paulson. It only took one paragraph in the preface for me to recognise that I was going to love this one. Some authors have that je ne sais quoi. The book is about China if the title does not give it away. China’s economic rise was breathtaking. They’ve taken hundreds of millions of people out of poverty in less than 30 years. They have surpassed all the world powers that were once the substance of Napoleon’s obsession to become the second largest economy in the world behind only the US. The US has held on to this rank for 150 years, but even they look at China like King Senzangakhona regarded Shaka. This kid is definitely up next.

China is home to the world’s fastest super computer, longest sea bridge and biggest wind power base in the world. China was the US’s biggest creditor for more than a decade until the Trump administration escalated tensions between the two states forcing Beijing to withdraw from the economy. They are still only behind Japan in this regard.

You can start the Chinese story from any era you like and you’ll find a wealth of history. The land of the Orient is quite rich in culture, mystery, knowledge, ideology, superstition and ambition. We start with Mao Zedong in the 20th century. History remembers him for many things, none of them good. He appears in history’s mass murderers list; he appears in history’s tyrants list; He appears in history’s political failure’s list. I think you get the idea. Mao’s communist strategies forced university graduates to vacate cities to farm fields in rural areas. When this domino fell, a chain of disastrous consequences followed culminating in the death of 30 million Chinese during the feminine that ensued.

Deng Xiaoping who succeeded Mao maintained some of the communist policies like forcing farmers to meet arbitrary quotas that had no economic basis. However, he tweaked these policies to great effect. He allowed farmers to sell any surplus in grain in the open market where they could charge any fee to make entrepreneurial profits. This policy was an instant hit. It led to a boom in harvests. Grain yields rose by 34%. These increased yields provided some relief and meant fewer workers were needed in the countryside. People started working factories again. State owned enterprises (SOEs) were given more autonomy and decision making was decentralised. Factory managers were given a quota dispensation similar to that of the farmers in the rural areas. Beyond the legislated quota, factories could sell in the open market at flexible prices.

If you’re one who is keeping score on the communism vs capitalism debate, 20th century China was a win for capitalism. This success was fraught with bumps along the way. SOEs would buy from fellow SOEs at reduced government pricing and on sell in the open market to pocket a profit for themselves. Quite devilish indeed. Quite human. No legal instrument had been contemplated at the time to prevent this SOE cannibalism.

The Chinese economy would overheat and require cooling every few years. Special economic zones in coastal cities like Shenzhen enjoyed reduced taxes and little to no international trade levies. Shenzhen would ship goods at cost to Hong Kong before adding margins to trade with the international community. Henry goes on to detail how he was personally involved in China’s push for privatisation where they turned government institutions into public companies that were traded in international stock exchanges. This began with the privatisation of Chinese telecoms which, a copy and paste of the German’s successful manoeuvre to list Deutsche Telekom that had occurred 6 months prior. The Chinese are pragmatic. Counterfeiting is not something to be ashamed of. In the words of the prolific Deng, “it doesn't matter whether a cat is black or white, as long as it catches mice.”

Till next Sunday 👋🏾.