Just Do the Math

Overweight and obesity have become national and world problems that do not seem amenable to easy fixing. My experience with the problems reveals an easy concept that obviously isn't easy to do. 

Since I can remember, I've often said "just do the math." Very young, I came to trust math as a system that holds true regardless of time, space or life itself.

Most of my life, I've also been aware of my weight and the prevalence of diets. It seemed that my mother tried them all, including the Air Force Low-Carb Diet. I don't remember any of them working.

The diet plans are endless: Grapefruit diet; low-carb, low-fat, low-proteins diets; Atkins, zone, fasting, Keto, Weight Watchers, South Beach, vegan, paleo, and of course, the Subway diet.

Tens of millions of Americans are on a diet each year. Amazon lists thousands of diet books. My hunch is there isn't much new said in most of them and that they mostly don't work well. I suspect that our society - busyness, cheap and processed food, a focus on wealth and prestige, and the low cost and availability of food - lends itself to easily gaining weight.

From young, I was mostly tall and thin until middle school when I gained some weight. I vividly remember moving into the "husky" sizing at that time. I lost the weight before I entered high school and one of my life goals still is to be buried in the same sized Levi's I wore as a teenager.

Over the past several years, I had gained a few extra pounds, and set out to lose them. I found that technology has come up with some quite accurate and helpful health tools. Mostly, they can track your exercise ("steps" plus more specific activities), what you eat, your weight and lots more. I have spent over a year logging everything I eat, my exercise and my weight.

What happened and what did I learn? Most of all, I learned how amazingly accurate your body is at balancing calorie intake and calorie burn. Yes, your body does seem to have some different responses depending on the food source and timing, and how they are burned. But mostly, it is just simple arithmetic.

When you ingest more calories than your body burns, you gain weight. When you burn more calories than you eat, you lose weight. Yes, it isn't much more than that. Most discussions to the contrary are seemingly justifications for bad behaviors.

I quickly learned that if I ingest less than 2300 calories a day, regardless of their source, I steadily lose weight. If I increase the calorie input a bit or reduce my exercise, I quit losing weight and if I increase my net calories just one or two hundred a day, I start gaining weight.

I'm tall with a small build. I have often been told that I have a tape-worm and that I'm lucky to be able to eat so much and not gain weight. But that is not what the math says. The math says I move a lot and I don't eat excessively. My protein and fats are high and my simple carbs are low. That is, I mostly eat what the computers recommend.

I did learn some other things that seem to be true. There is ample evidence that how your get your calories can be significant to your health and diet. High protein foods stem hunger more than carbohydrates. The saturated fat story is overblown. I returned to whole milk a couple of years ago and it has had no negative effect on my weight nor my cholesterol.

Finally, I've learned that for me, it's much easier to control what I eat if I have to log it. I'm a grazer and it's a bit shocking how many calories I can eat if left to myself.

There are scores or even hundreds of ideas for controlling our weight. Most of them probably have some merit and have surely worked for someone. But behind these diets is some simple math that your body can't fight: They either are trying to reduce your caloric intake, increase your caloric burn or some of both.

Life at -53 Degrees

Yesterday morning, the windchill at our house was about 53 degrees below zero. We live in a very nice refurbished old home in one of the original neighborhoods of Duluth, Minnesota, one of the coldest urban areas in the lower US.

I have lived most of my life in this climate. I remember getting bragging rights as a grade-schooler because we were in school with air temps in the thirties below zero.

At these temperatures, anything outside can be difficult. Putting out the garbage is its own chore. There are safety concerns, too. If you find yourself accidentally locked outside picking up the paper in your boxers, embarrassment aside, you only have minutes to get yourself into a neighbor's house.

A few years ago a local young woman died from hypothermia very close to her home. Inebriated, her friends dropped her off after a late-night party and drove away before she got inside.

So yesterday I took my own extreme measures to get to work. I wore my silk long underwear and flannel lined jeans, a warm Henley and a wool vest. Wool socks and winter boots are nonnegotiables in this weather.

I ran my vehicle for several minutes before leaving. Finally, I put on my ski jacket and mittens, grabbed a beanie and facemask, and headed out.

Vehicles do not like cold weather. Left outside, any vehicle, old or new, may or may not start at these temperatures. They require gasoline to vaporize, and that's a challenge in the cold. The best insurance that a car operates in extreme cold is to check the battery in the fall and check tire pressure before the cold arrives.

In a garage, almost any vehicle will start at almost any temperature. Windchills affect vehicles as they do people, and protection from wind is a big advantage. I initially keep my speeds low, but once warm, cars run fine.

I made it to work and soon realized that like many aspects to our lives, cold is another issue to deal with. But even at -53, once I accept my extreme cold routine, I can get through my life fine with about the same discomfort as walking in a cold rain.

When I was a kid, I knew nothing else and it never occurred to me that you could spend a winter without winter jackets and Sorels. Today it's -29 and, yes, I'm getting used to it.

Revitalizing a Rural Economy

Much has been written about the problems of our economically distressed rural areas. The reality is that many of the reasons these communities were developed - agriculture, mining, forestry - although still important industries, have dramatically reduced their need for labor. 

I grew up in Ishpeming, a small city nestled in the gorgeous Upper Peninsula of Michigan, surrounded by amazing waters and forests, with four striking seasons that rotate from beautiful summers and falls to frigid cold and endless snow. It was once booming with its numerous mines.

But I've spent decades watching this wonderful city deteriorate economically, and I understand why: The same mining industry that brought my relatives here from Finland and Sweden now operates on less than a quarter of the labor required to produce the same amount of iron ore.

However, I am very familiar with one idea for helping many of these rural areas, and that is the domestic version of offshore software development. It goes by various names, including onshoring, domestically sourced IT, domestic outsourcing and rural outsourcing. Regardless of name, it's a relatively easy concept that works.

Unlike most jobs from a few generations back, software development does not require people to work in proximity to each other. For a variety of reasons, the cost of living in rural areas can be half or less that of an urban area. 

Somewhat surprisingly, it is not difficult to find highly skilled technical people like myself who are very happy to leave an urban life behind and live in a rural community. Economically, this is a win-win for clients and communities. Not surprisingly, this concept is catching on across the United States.

So how is this done? The simplest way is already widely done across the country, and that is securing a telecommuting arrangement with an employer and moving to wherever you want, provided it has high-speed internet access. With a phone and a laptop, you have most of what you need to work.

However, few will take this risk, and need a more structured environment to make this change. This essentially is a company that finds clients that accept remote software development and software engineers to work for them. 

Getting from a single telecommuter working out of a spare bedroom to a large organization with dozens or even hundreds of highly skilled technical people earning high salaries in rural areas takes more than a few steps. Let me share my experiences in this area.

The initial problem, as in many startups, is getting launched. The first decision is where to locate. This may be easy because, like me, you may have once lived in a rural area that has broad appeal to many, such as a tourist destination. You probably need some sort of small urban anchor that can provide families with the basics of modern life, such as retail, services, education and healthcare.

So how to start? My standard answer for several young techies wanting to jump start their moribund metro life in a Dilbert cube is to rent a large home in one of these areas, and all live and work in one place. That is, return to their college dorm days.

Most likely at least a couple will be able to get their current employer to agree to let them continue their employment as telecommuters. However it is done, the idea is to accept a period of hard work and low income, not so unusual with a new business.

From here, it's critical to name yourself, put together a marketing plan, keep expenses and rates low, and build a foundation to survive in the somewhat turbulent world of consulting. Marketing starts with a website and a LinkedIn company page. 

Then move onto Twitter, Glassdoor, Indeed, Facebook and other social connections. I suggest you don't end the day without someone posting something somewhere that has your name and what you do on it. Monitor and grow connections to your LinkedIn company page. This is all critical even when everyone is working "60-hour" work weeks because eventually you will need more clients and workers.

A word on expenses. Your competitive advantage will always be price, so never abandon this. Make sure any potential client knows that you are "30-50% off metro rates," and make sure that you really are. Otherwise, you are just another bunch of techie prima donnas who at best are somewhat better than the millions of other IT workers that are much more accessible than you are working from some mountain hut. 

And don't fool yourself into believing you can be just as effective working remotely. All things being equal, it is almost always an advantage to have people working in proximity to others. Both communication and relationships are easier and better. But organizations will often gladly put up with your work-style inconveniences if they can significantly cut their costs.

The concept of offshoring originated outsourcing the Y2K fix to cheaper emerging markets such as India. These countries have remained strong competitors in US software development, and rural outsourcing will continue to compete with them. To some degree, you will always find your pricing sandwiched somewhere between them and Silicon Valley.

But foreign resources have several of their own problems, such as language, culture and time-zone barriers, plus sometimes legal issues with foreign services. These all present opportunities for the rural outsourcing firm.

One misconception of low-cost rural organizations is that people are glad to give up the financial rewards of urban life in order to life a substandard life in a rural environment. This simply need not be true. Even with significantly lower rates, employees working in a rural environment, from a cost-of-living perspective, can easily earn as much or more than high priced urban areas.

From the start, it is important to structure your environment so that it works regardless of location. Connect everyone electronically via cloud services, including your phone system, email, documentation, company systems and software development tools. Everyone should be able to move to another location and your company should function well.

These disciplines will ensure that you are as virtual as possible, so that people and clients can literally be just about anywhere and your operation runs as seamlessly as possible. These steps will all help compensate for your big negative: You are geographically located in an inconvenient area.

If you start with a couple of developers supporting a couple of clients, it doesn't take much for you to need more help. This can be tricky but eventually you will learn that there is a strong cadre of people that are very interested in migrating out of a city. Online advertising, a LinkedIn company page and social networking are critical in getting these connections developed before you need additional workers.

You will find that hiring into a rural community is very different than normal hiring. Your pool of resources is probably not nearby. Further, your first challenge is less about finding a specific skill and more about finding an individual who wants nothing more than to live in an area like yours. And to make things more difficult, these individuals may not even be aware of the opportunities you offer.

Therefore, posting ads and searching online databases probably is not going to help you much. Instead, you need to get your name out into areas where individuals you seek may live, realizing that these individuals may not have even considered the opportunities that you are offering. You also may find yourself hiring great raw material that you then train into your particular technical skill-set.

But once you develop a network to proper areas, you will find people who already understand that urban salaries can become play money when a basic house with barely a yard sells for a million dollars. They are looking for a sense of security and a set of basic benefits, such as access to healthcare, paid time off and a 401K. But otherwise, you may not need to sell yourselves as much as you think.

Since your costs will be significantly lower than what your clients normally pay, if you market yourself properly, there is almost unlimited work available in software development, and your growth will probably be limited most by your ability to secure resources. That is why recruitment is so important from the start - by the time you need the people, you may not be able to find them. But eventually you well may be able to build an organization with scores or even hundreds of software developers.

Once a structure for formal telecommuting is in place, the same model can work in other IT areas besides software development. We have expanded into business analysis, quality assurance and project management. Other avenues to consider are database and system administration, plus other areas outside of technology, such as engineering, that can also be done using the same concepts.

And because you have establish an environment that works regardless of location, you may find yourself able to hire people that telecommute from other low-cost areas. We have had people working remotely for us in six different states from coast-to-coast. Depending on the area, they may be seeds to a whole new set of resources.

If you have any questions or are interested in additional information or help in engaging in this area, feel free to contact me via this site; or Twitter, LinkedIn or Google via JonJosephA.

A Low Cost Investor

We hear repeatedly that the best returns are generally found with lower cost firms and financial instruments. Over twenty years ago, I accepted this mantra and opened an account with Charles Schwab. I was intrigued by their low cost indexed mutual funds, the vast amount of information they then would mail me, and their mostly zero account fees.

Fast forward and now there are multiple brokerage firms, including Schwab, that often charge nothing for maintaining an account, close to nothing for an exchange traded fund and often nothing for a trade. 

They charge me nothing for my bank account, nothing for my American Express Credit card (with a 1% cash refund) and nothing for new checks. All fees for cash withdrawals from any ATM world wide are refunded. They also charge nothing to trade and hold US Treasuries.

One day I realized that I could put all of my wife's and my money into a couple of low-cost stock and bond ETFs, and a basket of individual stocks and Treasuries, and it would incur very close to zero fees forever.

We now have most of our life's savings with Schwab, and I have wondered to myself, if they charge so little, how does a firm like Schwab make its money from me? So I walked through all of our Schwab accounts and their transactions from the past twelve months. Here is what I found. 

First, Schwab probably does not make much money from us. Much of our money is in very low cost ETFs, plus some international and bond funds that charge a little more. All of our funds in total have an annual fee of about .12%. I also made 6 trades during the year at $5 apiece.

Second, they do get some significant money from us through their bank. We averaged a bank cash balance of $6,000, which they loan out to others and pay us almost nothing in interest. We also have a home equity line of credit that incurs about $2,000 a year in interest.

Further, our overdraft account ran up $200 in interest. Although we get cash back on our credit card, Schwab has surely received something back from the tens of thousands of dollars we charge on it.

I reviewed Schwab's 10-K report and found that they make half of their money from their banking operations, which is consistent with where they make their money from us. The rest comes primarily from asset management and brokerage administrative fees, their next source of money from us. Finally, less than 10% of their revenue is from trading, where we provide them almost no revenue.

Being one of the lowest cost operators in the industry has made Schwab one of the largest brokerage firms and banks in the country. And they did it primarily by providing great products and services at a very low cost.

So, no, Schwab does not receive a lot of revenue from our investments, but at the same time, it doesn't cost them much to hold them. Low-cost, online investing is primarily a rich set of software that automates what was once a labor-intensive manual process. 

When I sign onto their website to either get information or to transfer money in or out of accounts, funds or financial instruments, this all happens electronically. The incremental costs for any of these actions are close to zero, regardless of how much money is transacted. Software doesn't operate differently whether transacting $100 or $100,000. Once software is running, your investments are reduced to bits on a disk that are either on or off.

What does it mean for my wife and me? It means that we retain nearly all of our investments and their gains, one of the most important figures to consider when investing. Compare this with many funds and services that normally charge 1-2% of your investments, regardless of how they perform, and hedge funds that normally charge 20% of gains.

Low-cost, online brokerage and banking services are one of the great wins available to all from the past couple of decades of technological advances, and make available to the lowliest investor amazing opportunities at close to zero cost. Yes, it's for real. And it works.

A Brief History of the Metric System

From Quartz Obsession, Jul 14, 2018

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1215: The Magna Carta declares that there should be national standards for the measurement of wine, beer, and cloth.

1678: Anglican clergyman and philosopher John Wilkins publishes An Essay towards a Real Character, and a Philosophical Language, which proposes a universal language and system of measurement, based on units of 10.
1790: The National Assembly of France drafts a committee to establish a new standard for weights and measures that would be valid “for all people, for all time,” in the words of mathematician (and revolutionary) Marquis de Condorcet.
1799: The distance of the meter—named after metron, the Greek word for measure—is fixed at 1/10,000,000 of the length between the North Pole and the Equator, arrived at after two French surveyors spent six years measuring the distance between Dunkirk and Barcelona, which was used to calculate the longer distance. A platinum bar officially one meter long is cast.
1840: The metric system becomes compulsory in France.
1875: Seventeen nations (including the US) sign the Treaty of the Meter, creating international bodies to standardize weights and measurements worldwide, according to the metric system.
1975: US president Gerald Ford signs the Metric Conversion Act, declaring the metric system the preferred (but voluntary) system and establishing the US Metric Board, to speed America’s conversion.
1982: US president Ronald Reagan dismantles the Metric Board.

1999: Mars Climate Orbiter, a $328 million satellite, disintegrates over Mars because software produced by Lockheed Martin, the contractor, generated numbers in the English system instead of the metric system, as specified by its agreement with NASA.