Monday, February 18, 2013

The Hallmark of Class

People in the service industry can make a lot of money. Depending on how much charm and experience a person has, combined with the venue, a waiter or a bartender can make just as much money as an engineer or a lawyer (of the non-partner variety). But we, as a society, don't think of waiters and bartenders as part of the same class as an engineer or a lawyer. A key component is missing. What is it?

Is it education? Well, there are plenty of waiters and bartenders out there with bachelor's degrees. There may even be a few of them toting master's as well. So that can't be it. Maybe it's the fact that most waiters and bartenders don't have college degrees. And, on average, waiters and bartenders do make less than engineers and lawyers.

Society looks down upon waiters and bartenders as a group. But what about individuals? Why do we also not give the same amount of credit to say, a bartender who can make low six figures as we do to the lawyer who makes a low six figure salary? Therein lies the rub.

When F. Scott Fitzgerald wrote The Great Gatsby, he painted high class society as divided between two distinct groups: the nouveau riche and the old money. The old money crowd had respectable family names. They could trace their lineage back to the patriots who fought in the Revolution. Their fortunes were accumulated from generation to generation through a variety of means. But it endured for a very long time.

The nouveau riche were a different group. America during the Roaring 20s was caught in transition between the 2nd Industrial Revolution and the post-industrial era. Great fortunes could be made and lost within a generation, as various technologies matured or were displaced. Rockefeller, Carnegie, Vanderbilt, those individuals whose names are synonymous with great wealth and patronage today built their entire fortune within their own lifetime.

As you can imagine, there were tensions between the old money and the new money. But, ultimately, there was intermingling. Old money families might have seen their fortunes erode while new money families, eager to ingratiate and insinuate themselves into the establishment, would marry into an older family. And this was not some new phenomenon. In the Middle Ages, rich merchants would marry into old aristocratic Houses, combining land, title, and wealth.

And this is why money is never viewed as endgame. People are searching for something more. They dream of dynasties. Of titles and lands handed down from generation to generation. Because money has always been viewed as something that could be wiped away in the blink of an eye. Its perceived transience has always been its downfall. Things that couldn't be taken away, that were concrete, such as land, castles, and titles (concrete in the sense that it couldn't be destroyed except by monarchical fiat), those were the things that people craved in the end. Money was simply a means to that end.

And although money is still power, the ability to "make" money was seen as a greater power. Lands generated tithes. Castles and titles compelled people to serve under you as serfs and vassals. Because as long as you had land, you could always generate money. Bankers and merchants were viewed with suspicion and wonder because they could generate money without land. But it was always viewed as more precarious. More risky.

So going back to the waiter/bartender question. The reason why we look down upon even the successful and high-earning waiters and bartenders is because we do not think they can continue generating money. Maybe their looks fade or their charms get dulled or stop working. Maybe people simply stop tipping well. Because their incomes are so dependent upon the whims and generosity of others, we think of their income as transitory. They can make money, but they have no perceived wealth.

But lawyers and engineers are always in demand. Their incomes are tied to things other than generosity or whimsy. People will always need lawyers to wade through the murky waters of government regulations and statutes. People will always need engineers to build things that make modern society possible. And so their income generation is viewed as more permanent. They have wealth and income.

But that perception is still flawed. Because you can be a lawyer or engineer, make a ton of money, and still be living paycheck to paycheck. And if for whatever reason you find yourself unemployed or out of work for an extended period of time, at that moment in time you're no better than that waiter/bartender.

The secret to wealth in modern society has been in our face this entire time. Wealth is financial assets. The only problem is, the vast majority of society still views finance as something bordering on sorcery. They don't trust it. But the knowledge to use finance to your advantage. To save and invest in financial assets. That is the modern equivalent of land and titles. The hallmark of class today is not about who you are or how much money you make, it's about how much money you save and the knowledge to invest your savings intelligently.


  1. Interesting subject. I’ve known the lawyer living paycheck to paycheck. He worked weekends, had a mortgage, car loan, student loan and barely any vacation.

    I’ve also known the state worker. She had no mortgage, car loan, student loan, was off at 4:30 every day, had every other Friday off and five weeks of vacation a year.

    The lawyer might be better off when he’s 55 years old, but he’ll never get those years back. The state worker was happy now and will continue to be happy as long as she’s content.

    The more and more I look at professions, the more I realize it’s not about job titles or salaries, it’s about quality of life. I know people say they would rather work to live than live to work, but I really believe that.

    The smart play for the state worker is to buy a multi-family home, live in one unit and use the income to pay her mortgage. Then rent out all the units to pay her mortgage on the home she wants. Have her money make money.

    1. Well, if the lawyer lives paycheck to paycheck for his entire life and never builds up any savings, he's screwed once he retires as opposed to the state worker who built up a nest egg on top of the usually generous pensions that retired state employees receive.

      I agree with you 100% when you talk about the quality of life for a profession. To me, working a real 40 hour work week and making a decent chunk of change is way better than 60-70 hour weeks and making a big salary.

      But that furthers my point. Wealth isn't about the job title or how much money you make. It's about the money you invest. The name of the game is everlasting wealth.

  2. Of all my friends, I only have one that invests his money. He’s technically self-employed and along with some clever booking, pays himself into a traditional IRA. He also owns rental property. His father once told him, “Only suckers work for their money.”

    When people hear the word “Invest” they think of stocks, ETFs, mutual funds, etc. They also think of the potential loss. I think that people get into trouble by investing beyond their means. For me, I only invest what I’m willing to lose. It’s a form of gambling. You’ve stated before that you took a big hit back in ’08. You didn’t miss that money because you didn’t rely on it to live. Not only that, but you were confident that it would rebound. People see that loss, panic, then never invest again. Probably it would be wiser for those people to invest in other things, such as property. At least then they could see money coming in regularly.

    People invest in retirement plans for the long haul. I’m less concerned with the immediate satisfaction and more concerned with not working past the age of 60 (55 if I’m lucky).

    1. I think very few people invest beyond their means. Most people don't invest at all, and it's a huge problem when they retire and all they have is their Social Security check and a house that might not even be paid off.

      I don't rely on my investments to make money for my living expenses. I never set aside more than I can afford to while maintaining my current standard of living. As I said before, I'm not sure if I could have stayed put if more money were on the line, but I think with the experiences I've gone through, I probably would have.

      You touched on an important topic about the timing of investing. It's interesting because me and a friend had this exact same discussion. I'll talk about it in a blog post soon.

  3. Funny read.

    1. Yeah. The terrible environment for newly minted JDs is something that has shouted from the media's rooftops for about 2 years now. But there's still no doubt that an employed lawyer is still viewed as a top tier job.