The most seminal work on Wealth was by a Scottish moral philosopher named Adam Smith entitled The Wealth of Nations. This post will analyse the Wealth in context of the majority citizens of the Wealth of the Cubicle Nation. For context, please read about the citizens of The Cubicle Nation The geographical context remains the major cities of India.
Smith defined wealth more than two hundred years ago in a straight-manner : “the annual produce of the land and labour of the society”. In today’s terms we can define “produce” as items having economic value and possessing and controlling such items. Let us now apply this in the Cubicle Nation and see the wealth in this Nation.
I am being forced to write this post after I hear arguments from the citizens that they have created wealth by borrowing. It is as ironic (in the margin and in the instant) as telling that “I am rich by INR 1 million as I have been offered a loan of INR 1 million by the bank.”
Let us study the “wealth” of these citizens one by one. We shall start with wealth (material + tangible) and slowly move towards less material and less tangible as we continue our hard-hearted Wealth Audit . We know that for the citizens, home ownership is 80% bank finance and 20% emotion, we shall be talking strictly in terms of finance.
- Home / Apartment / Real Estate : Most of the citizens reside in a home (an apartment mostly which is a box in the sky) which is actually controlled in terms of an item of value by the bank, at least for 15-20 years. Why ? Using the device of float / fixed interest rate, front loaded interest payments, 20% equity from the citizen and with the oversimplified maths of tax-saving, the banks extract not only monthly payments but has an irrevocable claim on a certain percentage of earning (=labour) of the person – generally 40% of the net for 15-20 years. The citizen who pays for the “box in the sky” cannot scratch the wall of the flat and generate some value. The “magical appreciation of value is a myth” and the citizen has no control on this except hoping. So, either when he is using the flat while paying EMI or when the flat is his own, he is not able to extract any value unless someone rents it. Now let us calculate the cost of ownership / cost of rent and it is more than 4 : 1. In other words, once the item is controlled by you (you have paid the loan in full – generally 167% – 221% of the actual money borrowed), you can expect 25% of the cost of ownership at any point of time. The only wealth is that in these years, there will be some gold mine or uranium ore found in your gated community and you shall have quadrillion appreciation. This is possible but we do not call this wealth, we call this speculation. One of the acid-test of wealth is the non-speculation aspect of it. Good health is true wealth because it is here and now.
- Car : Most of the citizens not only have car but upgrade the car. Many consider this as investment ! A car is an asset but a depreciating asset. It is highly unlikely that sitting in their car they automatically design some super value algorithms. Any driver in Indian roads are well aware of the ordeal. The car returns something on cost but it is not wealth. Unless one buys 3 – 4 cars and invests as a travel agent (or in Ola/Uber) and becomes profitable, then we can consider that the car is returning positive on cost. Otherwise, it is simply a cost and an item of pretension and marginally increasing the already horrible condition of our city’s transport infrastructure. I repeat : a car is not an investment and does not make you wealthy.
- Credit Cards : As a a business owner, I marvel at the ingenuity and the brilliance in designing a Weapon of Mass Enslavement like Credit Card. Many citizens believe in the potency of their cards is directly related to their own and they sometimes look down upon a village bumpkin like me who says : ” If I have buy something from a shop/bar/restaurant/mall in credit, I do not need it.”. In one of the malls, one such citizen looked derisively at me when I paid in cash and was counting slowly and I heard a remark he made to his friend : “are yaar, yeah card se kitna asan hota hain.” I waited and saw a credit card opened and swiped with the elan of a Knight Templar’s sword. Credit cards are not investment, it does not make you wealthy. It is rather a very brilliant means to make a hole in your income.
- Life Insurance ; It is not an investment instrument. Period. It is a means to mitigate risk.
- Mutual Funds: Any equity based instrument, in the strictest sense is subject to market risk and market is nobody’s father-in-law. In other words, mutual funds do not create wealth as the control is not with you.
Land / Cash / Gold / Precious Metal/ Government Treasury Bonds/ Gilt-edged securities guaranteed by Government / Business Owned and Controlled to the extent of ownership and control / Skills immediately marketable in return of cash / Patents / Foodstuff / Orchard /Health : These are genuine wealth.
In terms of intangibles, many citizens build houses to enjoy but because of the design and schemes completed much before the citizens were born (our city planning and infrastructure), they will commute 2-3 hours even to commute to workplace (to pay the ownership money of the largest equity they have – the house – the box in the sky) and when they will enjoy the home ? They have no time and hence their sleep is very costly when they apparently use the area mentioned in Tolstoy’s story : How much land does a man need ? The land he needs to lie down !
Other wealth building proposition runs like this :
1 Let us have our first house by toiling hard and paying huge money for the “box in the sky”
2. After 15-20 years, we shall have the second house for the family – the cash-box in the sky
3. The man and woman are 50+ now and the children pursuing their dreams and in a short while they find they have no family now….I see rows and rows of houses in some area where I live where grand old couple live and the whole house is locked with two rooms occupied. What working for family !!!
4. It is not considered that in such long term, events – ranging from mild shocks to cataclysmic are bound to happen but time will not come again.
5. This proposition takes huge toll on one’s health as many do not exercise, do not sleep well, remain in perpetual stress and anxiety and ruin their health. Simple but invaluable pleasures of Life now become very costly and the medicine men of all variety and all corporate emblem now find repeat customers.
There is a spiritual aspect of this : as net worth now becomes the whole of self-worth, the greatest illusion now tightens it grip and a descent into the grossest and most horrid materialism is reached : there remains no self-worth but only pursuit of net worth. This is done in a relative scale and slightest difference perceived in neighbour’s lifestyle and possessions now get magnified and becomes a sense of equally false self-satisfaction or self-hate. It can be as banal as the modular kitchen of the neighour as compared to one’s own and although most of the time eating is outside, this fact hangs in the mind like bitumen in trouser and a source of irritation.
In a dispassionate and mathematical analysis taking into consideration entities like risk, control, time-value of money and body, societal and cultural context, citizens of Cubicle Nation do not create much wealth for themselves. They have only one asset – the home and in order to build that asset, huge risks are undertaken with one irreversible damage : health : physical (sore eyes, distributed aches and pain in the body, poor appetite, sleep problem, fatigue) mental (anxiety, stress, anger and a perpetual worry translating into : Why am I not worried now?, and spiritual. The spiritual health can be understood best in a negative sense. Imagine your office does not have that soul crushing politics, back-biting and fight onto trivial issues (for the universe ) like raise, promotion etc.
When I was a cubicle man some decade back, a colleague narrated a story – rather a question from his five year old boy and I remember this just now. He was at that time a 3 BHK, Wagon R, 3 credit card (2 Lac credit Limit total) man and was slogging hard in one of the cubicles in Norther India. His five year old boy once asked him as why, in spite of his Daddy studying for some 18 years still stuck in Wagon R whereas his classmate’s father – having studied up-to class 10th only – who rather built their gated apartment travels in a turquoise blue BMW. He was not able to answer. Fifteen years hence, he is still there – struggling with his job and against Formula 40 and finding work and life a drudgery and not much of great promise ahead.
In retrospect, the Cubicle Nation citizen were easy cash cows for the following business and these businesses just boomed near the office and residences of these citizens : banks, bars, credit card companies, transport companies, car sellers, tax department, promoters, local landlords, local brokers, junk food sellers, malls, brands of all kinds. It is only some 30 years ago when salaried class of India witnessed a miracle – a miracle so profound in terms of cultural impact that it will take at least 200 years to understand its full impact. They are in order : transport (car and motorbikes), phone, TV channels. Then IT and ITeS happened. This explains the behaviour of Indian driving on Indian roads, Using Phone in public spaces and Entertaining oneself.
Somewhere, these whitest of the white collar jobs – the cubicle citizens felt something like the British of late Victorian era- the sun will never set. The white collar sun was radiating stronger and these citizens thought that they will now become wealthy, upper class, elite and rich. Finally they will catapult into the higher echelons. A thin segment actually did – middle class boy having no suit commanding a business empire after 30 years. But this dream had a democratic downside. A considerable proportion felt that borrowing money to buy prestigious box in the sky and uberlong car and credit cards were signs, trajectory, trail and propellant of the upbeat journey. And a great faith – natural in a country accustomed and conditioned to believe. A herd journey followed.
The sub-golden generation of this period of India are in the forties. After the heady days, the natural rebound and re-thinking is happening ? Is this 3BHK (box in the sky) + Longish Car + Credit Cards + 12 hours of work each day and 3 hours of commute really taking me anywhere into the stratosphere ? In simple money terms, isn’t the sadakchap broker having better net worth in ready cash and assets than me ? The fellow does not pay even tax !!!
Many of this generation now at the precipice of the 40s find their health ruined, their career stagnant, their days long and nights restless. Many try to show that things are fine and upbeat and world domination (synonym :superpower ) is just around the corner but things are not golden anymore.
In the last 30 years, this generation has learnt something devastating in a general sense and they hesitate to tell this to the next generation. They must as within a decade, they will slowly slide away – some very tenacious and politically savvy will be able to overcome cubicle politics and other but a large section will exit sideways – the white and grey corporate forgetfulness.
But there is a great opportunity – many will rediscover Life. Many will face truth – truth in its all nakedness and splendorous intensity – they will realize many truths which will make them free – really free.
They will be angry as well. But the anger will sooner or later turn philosophical and they will realize that it was their own illusion that made them vulnerable and we remain what novelists (the novels they had never read because they wanted entertaining and engaging and feel good novels) had long explored : We are playthings in the hand of History.
This generation, which is also my generation in India is both the plaintiff and the victim in the courthouse of History and we can only hope that History will be kind to us.
Disclaimer : I am not against buying a home, car or anything. Everyone has the freedom to make choices. The purpose of this post is to request the citizens to become critical of the received wisdom and try to see who benefits. This exploration – the greatest one of being critical with one’s cherished belief system and the prison of current wave of thoughts and approach to Life may be guidance for the next generation.