A finger in the dam trying to hold back the flood

It’s May 3, 2022. Here’s the rundown:

• Student loan forgiveness: A finger in the dam?

• Netflix, and our warped expectations

• Numbers, links, and faces

---

Student loan forgiveness: A finger in the dam?

President Biden is weighing some form of student loan forgiveness. Cool. But it doesn’t solve the problem.

President Biden is expected to announce “something” concerning student loan forgiveness in the next couple of weeks. Perhaps the most likely outcome is an executive order forgiving $10,000 per borrower. That could potentially lead to 15 million people seeing their debts wiped out.

Image: Bloomberg

Is it a political move? Sure, and it’s probably going to help galvanize some voters ahead of the midterm elections later this year. But what isn’t a political move these days?

But is it the right move?

Let’s be real: There’s $1.75 trillion in student loan debt among American borrowers. That debt can’t be discharged through bankruptcy. It absolutely serves as an anchor around the neck of tens of millions of Americans. It kills the plans of would-be entrepreneurs. It hurts the economy. It would probably be a good thing, overall, to see that debt disappear.

That said, I think some action is warranted, even if I don’t benefit from it directly.

Now, there are some things to consider: First and foremost, a mass forgiveness order would effectively act as yet another form of stimulus. Given that prices are rampaging ever higher, that may not be such a good thing at the current time.

But another issue that I’ve heard from many people (over the years, not only during the Biden years) is that forgiveness would be unfair to the borrowers who have already paid off their loans.

Yeah, maybe.

I’m in that camp. I didn’t have a ton of student loan debt (relatively speaking), but I paid it off over the years. But I also don’t think of this as necessarily unfair. I think it boils down to this: Just because things were hard for some people in the past doesn’t mean that we should leave obstacles in place for those still to come. I think the real problem is that there are young people out there who feel the need to borrow tens or hundreds of thousands of dollars to pay for a degree — which they believe will open doors and help them improve their lives.

It would be one thing if that was a guaranteed investment. But it’s not. And many young people don’t understand what they’re getting themselves into. They think they’re making the right decision by taking on these loans.

So, is it unfair? Maybe. But I think we should be looking for ways to clear the path for younger generations, not leave barriers in place because it’s “not fair.” Even if forgiveness is off the table, there are other things Biden, or any other president, could do, such as getting rid of interest and debt surcharges for student loans.

Finally, my real beef with forgiveness plans is that it doesn’t actually solve any problems. Yes, it helps millions of people out in the short term, and that’s good. But the problem is that colleges and universities have turned into money vacuums, and we’ve guaranteed access as long as students are willing to pay. They are willing to pay, clearly, so there’s no incentive for schools to keep costs in line.

It’s similar to the healthcare system. There’s unlimited demand for healthcare services and higher education. So, why not charge as much as possible for it?

Forgiving $10,000 doesn’t solve that issue. Because every year, there will be thousands of students lined up to take out new loans, with little understanding of how it could affect their future. For many, they feel that it’s the only viable path forward.

Without a big overhaul or rethinking of the costs of higher education, loan forgiveness amounts to a finger in the dam trying to hold back the flood.

---

Netflix, and our warped expectations

Netflix took it on the chin recently. And it says something about our expectations.

Image: TradingView

This year, the stock market has been getting battered like Johnny Knoxville v. Butterbean.

Connoisseur of Combat @ConOfCombat

Johnny Knoxville vs Butterbean

Given that it was pumped up by stimulus and Fed dollars for more than a decade, maybe that’s a good thing. Most recently, Netflix has made headlines for seeing a huge decline in its share price. For reference, late last year, it was trading for roughly $700 per share, and is currently around $200. That’s mostly due to a rather ugly earnings report, which showed that during the first quarter of 2022, the company lost subscribers for the first time in ten years.

But the company still drove $7.87 billion in revenue, and net income, or profit, of $1.6 billion. With that in mind, the company makes billions, and had a bad earnings report. Suddenly, it’s in “crisis.”

I think this says something about our expectations. We can’t expect companies to grow in perpetuity, forever. And obviously, Netflix can’t grow forever. But it still rakes in billions of dollars.

And that’s not to say that Netflix isn’t making mistakes. It’s criticized for canceling shows too early and without warning. It’s apparently going to start cracking down on password-sharing. It may start including ads, too. All of this, as it continues to increase the price of its service, all while it sheds more and more content to a growing slate of competitors.

In other words, it’s picking up the fumbled football and running with it toward its own endzone.

This is all to say that, yes, Netflix has maybe hit its ceiling. It was a pioneering company, but competition is here, and it’s taking a bite out of its business. But again, it’s still a money machine. One year ago, it saw a first-quarter profit of $1.7 billion. Yes, the markets are always looking ahead, and not in the past, but the fact is, a company had a relatively bad quarter (maybe two) for the first time in a decade, and we have a tendency to pretend that it’s the next Kmart or Blockbuster.

Perhaps it’s time to reframe our thinking. Our expectations for unlimited and unsustainable growth at all times aren’t doing us any favors. That doesn’t just apply to Netflix. And when we expect businesses to do whatever is necessary to keep all lines going up and to the right, what do we expect to happen? They stifle competition. They cut corners. They turn to the metaverse. They literally create a new reality in order to keep growing, even if it’s a reality that no one wants or needs.

Again, this is because we have unrealistic expectations. There are sound businesses out there that can make a lot of money year in and year out. I suppose the question is this: Why can’t that be enough?

It’s also worth wondering if the stock market’s meteoric rise over the past couple of years (this year notwithstanding) has warped our expectations even further. Some people expect 30% annual returns — whereas perhaps a measly 7% return would, traditionally, be enough to satisfy most people. Again, our expectations are warped.

As for Netflix? It’ll be interesting to see what happens. It was a pioneering company at one point, and one that had no competitors. But that time has gone, and it’ll need to find ways to keep people engaged. That includes yours truly.

I’ve been a Netflix subscriber since 2009. I remember the first time I realized I could use it to stream content through my Xbox 360. I was happy to pay Netflix, year after year, for a great service. I’ve paid thousands of dollars for hundreds, if not thousands of hours of entertainment. I really liked “Godless.” I love “The Last Kingdom.” But even I’m ready to cancel my subscription. When I finish “Better Call Saul,” I probably will.

When you start pumping out content like “Is It Cake?” what do you really expect?

---

Numbers, Links, and Faces

• -1.4%: The percentage by which GDP shrank during Q1 2022. (Bureau of Economic Analysis)

• $1.2 million: The estimated amount that a rediscovered copy of Dorothy’s dress from “The Wizard of Oz” should fetch at auction. (AP)

• "If we peel back a couple of layers and just look at underlying domestic demand, the economy looks to be picking up a little bit of steam”: Maybe the ugly GDP numbers aren’t as bad as they seem? (NPR)

• Okay then: People are marrying fictional characters, apparently. (The New York Times)

• Texas on top: Texas led the nation in GDP growth during Q4 2021, clocking in at 10.1%. Just behind it: Tennessee (9.9%), California (9.5%), Oregon (9.8%), and Washington (8.3%). (Bureau of Economic Analysis)

• The Lollipop Guild: A gang of children is terrorizing Boston. (Boston Herald)

• Frowny Face: An in-depth look at the amount of time and resources spent trying to buoy a fragile man’s ego. (ProPublica)

• Smiley Face: An alligator stole a family’s Diet Coke and ruined a birthday party. (WINK)