Class Matters – Socio-economic class that is (a reprise from 2012)

The following post was written almost nine years ago, but still applies today. I wrote recently how America has fallen in the global rankings on socio-economic mobility This story will shed some light as to why.

When you read this title, there are several interpretations that come to mind. While I am a firm believer in acting in a classy way, treating others like you want to be treated, the “class” I am referring to here is socio-economic class. There is a body of work spawned by research conducted by the New York Times, which led to the publishing of a book under this same title – “Class Matters.” It also led to a revolution of thought and I would encourage you to visit “www.classmatters.org for more information.

In essence, the term class matters refers to the tenet that your socio-economic class is a key factor in your ability to ask questions of those who are trying to serve you. The higher strata of socio-economic class is highly correlated with better education and more confidence. This translates into the greater ability and lesser reluctance to question things. On the converse, those in lower socio-economic classes tend to have lesser education and more self-esteem issues. They have a greater inability and lack of confidence to question those in power or who are trying to serve them.  As a result, those in the lower classes often make poorly informed decisions as they are:

  • too scared to ask questions,
  • feel threatened if they do so,
  • feel they will show their ignorance if they do,
  • do not know the right questions to ask, and/or
  • fall into a trusting mode, whether legitimate or not, that the person serving them knows what they are doing as they are wearing a doctor’s coat or suit and tie.

To illustrate this concept using a real life occurrence, the current housing crisis we are facing has many areas of cause from the lenders to rating agencies to investment managers to developers to buyers. At the heart of the problem, we had too many developers and realtors selling houses to people who could not afford that price of house and mortgage lenders providing mortgages to people who should not have that level of mortgage or who did not fully understand the terms of the loan. The buyers did not understand what a variable mortgage is or, using one of the lender’s terms, what a “pick-a-payment” or flexible payment mortgage entailed. The concept of negative amortization is term that was not well-explained or fully understood. In “House of Cards” a line that resonates with me is lenders were providing money to people who could “fog a mirror.” Then, they packaged up all of these poor risks in collateralized debt obligations (CDOs) and sold them to investors who thought they were buying a less risky product. The rating agencies did not help by stamping these CDOs with a AAA rating.

There are some who firmly believe in the concept of “let the buyer beware.” In their minds, the people who bought these houses and took out these loans should have been more aware “like I would have been.”  As a consequence, they believe the buyers should be held entirely responsible for the housing crisis. This school of thought has some merit, but misses two greater issues. First, if you have ever bought a house, you are asked to sign more papers than in any other transaction. I would wager that an exceedingly high percentage of buyers do not read every word of what they are signing. The legalese is too complex. More often than  not, they will ask the attorneys to explain simply what they are signing. I would also wager that in these transactions people actually sign papers they do not fully understand.

Second, with that context, people in a lower socio-economic class will be even more trusting of those in suits and ties. They would ask even fewer questions and understand even less of what they are signing. When the American Dream is to own a home and people in suits and ties paint a picture that you can afford this home, the buyers believed them more times than they should have. In some cases, the seller put “perfume on a pig” to dress up the sale as best as possible. Individuals were shown monthly payment numbers and did not realize those numbers could dramatically change every two years. In some cases, their income and wealth numbers were inflated to show they could afford a house and mortgage they otherwise would not. The buyers trusted people showing these numbers and signed on the many dotted lines.

Two true stories will embellish these points. The poster child for one extreme end of what happened was a builder based in Atlanta. The CEO and CFO were convicted of criminal and unethical actions they helped perpetuate with home buyers. In essence, the company-realtors representing  new developments did not represent they would make an extra bonus if you bought in this new neighborhood. They did not represent the inspector was being paid off to inflate the price of the house and show no problems existed. They did not represent that the mortgage lender they recommended was affiliated with the developer. So, along comes the buyer who does not know this, does not know to ask these questions and who sees a financial representation that they can afford this house. Even people above the lower socio-economic classes were taken in by this criminal behavior, yet the lower class people did not stand a chance.

The other anecdote took down a bank of which I was shareholder. This bank bought  a mortgage bank who had developed the concept of the “pick-a-payment” mortgage. This flexible payment mortgage concept was geared for a very astute buyer, not the masses of people who bought it. Mortgage people at this bank wondered why the CEO of the acquirer was pushing these mortgages even up to six months before the bank was destined to fail.  A mortgage person for that bank said we are having “pick-a-payment parties” to promote the sale of these mortgages. We are selling these mortgages to people who do not know what they are buying. They do not understand when they do not pay enough, their mortgage principal increases. Like with the above example, the lower socio-economic class buyers did not stand a chance. The people in higher classes suffered as well.

Yet, the class matters concept goes beyond these examples. It happens in everyday life, whether it is visiting the doctor, buying a car or something on credit or being served by the bank on other issues. We have people who will go into debt as they do not know the exposure they are adding with each purchase. In today’s world, there is a dearth of customer service. You have to be the navigator of your own customer service experience. Many people do not realize this as the case and tend to delegate the responsibility to the customer service person. We don’t ask enough questions of doctors seeking alternative treatments or payment plans. We accept the terms of a store credit card without knowing that if we fail to make one of the 30-60-90 day payments, we will pay back interest to the point of sale. We do not understand that we need to pay more than the minimum credit card payment as it will take 30 years to pay off a washer and dryer purchase. We do not ask the question, do I really need yet another credit card? We do not realize we have the power to say “no.”

I tell my children “people want your money, so you need to understand that.” Sometimes, they want it by legitimate means. Sometimes they have enticing commercials which are too good to be true. And, sometimes they will try to steal it from you online or by lying to you in person. You have to guard against this. With this backdrop, someone in a  lower socio-economic class will not ask enough questions to be served. They will take that extra credit card that arrives in the mail. They will sign up for the 30-60-90 day store plan to get a 10% discount not knowing the full ramifications of the transaction. I have also witnessed in helping homeless families, budgeting skills could be improved and asking questions about “must have” purchases are not done often enough. Sometimes these “needs” are actually “wants” and could be postponed. They do not know how to zealously navigate the use of coupons or the best times to buy products. They do not ask for the manager or supervisor when being ill-served.

This week I read a series on the inability of hospitals to uniformly offer reduction or the abatement in cost to those without health insurance and in an impoverished state. Someone wrote in that they successfully navigated payment options from one of the studied hospitals asking why couldn’t others have done that. When I read the letter critical of the people short-changed, the concept of class matters entered into my head. The people in need did not navigate the system as they did not know or have the confidence to ask the right questions. They did not relentlessly pursue options. This is exacerbated by the lack of transparency of the payment system, so it takes a concerted effort to understand what is happening even for people in higher classes. There are other examples in our society where you have to make a concerted effort to understand the details.

In closing, my hope is for more people to understand that class matters in getting proper help and service. We have to make it easier for people to ask questions, search for answers and be better served or, at least avoid being ill-served. It is OK to ask questions. As the teachers often say “the only dumb question is the one not asked.”  Please help others remember that. Offer to go with someone to the doctor to help ask the right questions. Or, encourage people to write their questions down beforehand. Encourage people to not get into credit exposure beyond their means.  Share your wisdom of purchasing or not purchasing items. Sources like Consumer Reports, BBB , Angie’s List,  http://www.cars.com are vital tools, e.g. Yet, I guess the big take away is to not assume people are like you. You may have avoided stepping  in the hole, but you would have asked more questions. Not everyone will. Offer them your help and understanding.

Bumper sticker solutions

Bumper sticker solutions may get people elected, but they rarely solve problems. Most problems are complex and multi-faceted. And, some bumper sticker solutions don’t address the greater causes.

The most obvious example is “Build that wall.” Building a wall was sold as the cure for disenfranchised economic areas. Yet, immigration, legal or illegal, is down the list as causes. The two primary causes are companies chasing cheap labor and technological gains. As a CFO once said, companies would get by with no employees if they could.

Bumper sticker solutions also dilute the focus and dollars from addressing the underlying causes. “Saving coal” fits nicely on the bumper, but it overlooks that coal has been in demise for both cost and environmental reasons and has been for ten years. Only Senator Bernie Sanders told coal miners the truth in 2016 saying “your jobs are going away.” But, what could not fit on a bumper is “here is what I plan to do about it.” He then defined transitionel compensation and training to help miners learn new trades. It should be noted the demise in coal fired plants has accelerated under the current White House.

Our problems are real and complex. Very few, if any, can be solved with implementing a bumper sticker solution. Repealing Obamacare will hurt tens of mullions of people. Any improvements or changes have to be well thought out and not slapped on a wall as was done in 2017.

Let’s ask more questions of politicians. What, how, when, how much are good ones. But, let’s start with why?

A path forward

As we end one decade and start a new one, there are plenty of posts and articles telling us what is wrong with the world. I agree we have numerous challenges, but please remember this one truism – negative news has a higher bounce than positive news.

Since the many good things happening don’t get reported with the appropriate frequency, it is hard to avoid getting despondent. Our friend Jill has a weekly summary of about three to five good news stories (see link below to a recent one). These folks are the “points of light” the elder George Bush spoke of. We must shine a spotlight on these exemplars.

Pulitzer Prize winner Nicholas Kristof wrote a year-end column (see link below) called “2019 has been the best year in human history – here’s why.” He largely makes the above point, but cites the following observations:

“The bad things that you fret about are true. But it’s also true that since modern humans emerged about 200,000 years ago, 2019 was probably the year in which children were least likely to die, adults were least likely to be illiterate and people were least likely to suffer excruciating and disfiguring diseases.

Every single day in recent years, another 325,000 people got their first access to electricity. Each day, more than 200,000 got piped water for the first time. And some 650,000 went online for the first time, every single day.

Perhaps the greatest calamity for anyone is to lose a child. That used to be common: Historically, almost half of all humans died in childhood. As recently as 1950, 27% of all children still died by age 15. Now that figure has dropped to about 4%.”

But, what do we do about those negative stories with a higher bounce. They are real and concerning. Here are few thoughts, some of which may be Pollyanna-ish:

– engage in thoughtful discussion asking probing questions and listening – only then will you be permitted to offer your thoughts that may be heeded (“Help me understand,” “That is an interesting view, why do you believe that to be true?”, etc.).
– advocate your beliefs, focusing on the issues, not the people are parties; often one party is not 100% wrong and the other is not 100% right.
– write and call legislators – they may not be listening, but we need to let them know where we stand; calling is better, but don’t chew the head off a staff member – give it like you want to get it.
– write to the news paper, publications or other blogs, again focusing on the issues and not just wanting to disrupt.
– avoid name calling, labeling, denigration, smugness and raised voices – all of these are masking poor arguments; when I hear name calling or labeling, it raises a red flag (unfortunately, a certain global country head does this often).
– avoid less than credible sources – be a truth seeker; if they do not print or post errata when they get it wrong, it is not credible; fact check claims made by various sources, especially those who have a habit of sensationalism or conspiracy BS.
– finally, understand that almost every issue is more complex than portrayed, so solutions are less black and white; be wary of easy fixes and panaceas.

Happy New Year to all. Happy decade to all. Let’s be civil and active truth seekers.

Good People Doing Good Things — Little Things Mean A Lot

https://www.iol.co.za/news/opinion/2019-has-been-the-best-year-in-human-history-heres-why-39896456