Basic income, Warren Buffett likes choo-choos, and an NFT primer
Welcome to “Not Pretty, Not Rich,” a newsletter about money and the economy.
A quick note: No newsletter next week, so I’ll be back in two weeks.
It’s Friday, March 5, 2021, and here’s this week’s rundown:
In the news: A successful basic income experiment
Perspective: Warren Buffett’s annual letter
Feature: NFTs — the nifty new digital collectible
Numbers and links
Basic income works, basically
A basic income experiment in California was a success.
What’s happening: Basic income — an idea that gives cash to people, no strings attached, in an attempt to help bolster the economy (here’s an explainer I wrote about it a while back) — has become a more popular concept in recent years. There are and have been numerous basic income experiments around the world, too, including one in Stockton, California.
Stockton’s program gave 125 randomly-selected people living in low-income neighborhoods $500 per month for two years. No tests, no work requirements — just $500 per month.
Now, we know what happened as a result: Basic income recipients in Stockton were more likely to find full-time jobs, and lead happier, healthier lives. That’s according to researchers Stacia Martin-West of the University of Tennessee and Amy Castro Baker of the University of Pennsylvania, as detailed by The Atlantic.
What’s it mean?: It’s kind of obvious on its face, but the results of the year-long study into Stockton’s program basically conclude that giving poor people more money is…helpful. These are people with few resources, and an extra $6,000 per year made a big difference for them.
As for how they spent the money? From the Washington Post: “Most of the money distributed was spent on food or other essentials. Tobacco or alcohol made up less than 1 percent of tracked purchases.”
In essence, Stockton’s program is just another form of welfare, of which we already have several existing programs in the U.S. But with housing, food, and education costs continuing to climb, and wage growth not keeping up, people are financially stretched, perhaps more than ever.
So, basically…: As mentioned, basic income was already an idea that’s gaining steam, especially as more and more people fall behind. The conclusions about Stockton’s program will give basic income proponents more ammunition.
These programs already exist in many forms, too, in certain areas. In Alaska, for example, residents get a check from the Alaska Permanent Fund. So, it’s not that crazy of a concept.
But should we expect some sort of national basic income program in the near future? I doubt it — we’re still sharply divided over increasing the minimum wage. Even so, Stockton’s program has provided some additional interesting insight into a controversial, but apparently effective, social program.
Warren Buffett’s annual letter
When Buffett speaks, people listen. So, what’s he saying?
Warren Buffett is a likable guy. He eats McDonald’s every day. He likes Coca-Cola. He lives in Nebraska — he’s your standard everyman, except that he’s also one of the richest dudes on Earth. He also interviewed to replace Michael Scott on “The Office”:
He got rich the most boring way imaginable: He invested a bunch of money and just sort of…let it grow. It worked out, obviously, and that’s why so many people’s ears perk up when he voices his thoughts on the markets.
He just released his annual letter, too, which he writes to the shareholders of his holding company, Berkshire Hathaway.
What’s Warren saying?: There’s a lot, as always, but Buffett did mention that he made some investing mistakes (paying too much for a manufacturing company, for example) and that most of Berkshire Hathaway’s value is concentrated in four companies, which he calls “family jewels.”
Here are a couple of other takeaways:
Don’t buy bonds: “Bonds are not the place to be.”
America rocks: “In its brief 232 years of existence, however, there has been no incubator for unleashing human potential like America. Despite some severe interruptions, our country’s economic progress has been breathtaking.”
…railroads are cool?: “The history of American railroads is fascinating. After 150 years or so of frenzied construction, skullduggery, overbuilding, bankruptcies, reorganizations and mergers, the railroad industry finally emerged a few decades ago as mature and rationalized.”
Okay, that last one is nonsensical. But take a look at the letter if you want to get a feel for why so many people listen to Buffett so attentively.
NFTs: The nifty new thing everyone’s buying
They’re actually not nifty, and I don’t understand them. But they’re still the hot new commodity.
A few weeks back, I wrote about collectibles like sports cards, and how they’re having a renaissance as investments. Basically, people are buying up collectibles again, and paying top-dollar for them.
Well, there’s a new collectible in town, if you want to call it that. And they’re called NFT — non-fungible tokens.
NFTs?: Yes, NFTs.
They’re basically like digital trading cards. An NFT is a digital file, like a GIF, that people can own, trade, and sell. They’re all different, too, which separates them from cryptocurrencies (one Bitcoin is the same as another Bitcoin). Hence, “non-fungible.”
But similar to cryptocurrency, NFT ownership is recorded via blockchain.
Here’s a better explainer than I can put together.
The most popular NFTs are more or less the same as digital sports cards. NBA Top Shot NFTs are selling like hotcakes, and if you’re lucky, you can buy a pack for $9. But they’re sold out.
Just how much are they worth? A Lebron James NFT recently sold for $200,000. Lindsay Lohan is selling Daft Punk NFTs for $15,000. And NFT artwork is now being auctioned by Christie’s.
So, yes, they have some value. For now.
But..why?: I don’t know. I’ll admit that I don’t get it. But I suppose it’s the same as any other collectible — there’s hype, and that hype is translating to value, so people are climbing aboard.
Remember Beanie Babies? Same thing. NFTs are offering a way for people to make speculative bets and try to make some money. What else would we expect when people are bored, have money to burn, and when we’ve gamified everything to the point where it feels like innocent fun?
I mean, yeah, it’s mostly innocent fun. But just wait for the stories about how people spent thousands of dollars on a GIF and feel like they’ve been cheated.
My take: If it hasn’t come across yet, I don’t really know what to make of NFTs. As mentioned, they’re just another form of collectible, I suppose, and yeah, some people will probably make some money while they’re still popular.
It does make me wonder what the next commoditized collectible will be? Either way, I think I’ve finally turned into Roger Murtaugh and can’t keep up anymore.
Numbers and links
18.3 million: Hours of chess people watched on Twitch via Chess.com in January; Chess.com is a giant (Protocol)
$25,000: The monthly fine facing 25 Colorado high schools if they don’t change their mascots from derogatory Native American symbols under a proposed state law. (Denver Post)
$250,000: The prize offered to anyone that can provide proof of their paranormal abilities. (OneZero)
46%: Percentage of Wyoming’s land that’s owned by the federal government. State legislators are looking to claw it back. (Big Horn Radio Network)
48 billion: The number of robocalls Americans are on pace to receive this year. (Fortune)
Beyond Meat looks like it’s coming to Pizza Hut, KFC, and McDonald’s (The Wall Street Journal)
Shoes are investments now. (Bloomberg Businessweek)
“Not Pretty, Not Rich” is a newsletter about money, finance, and the economy, written by Sam Becker. You can connect with me through my website, Twitter, LinkedIn, or send me an email at firstname.lastname@example.org. Also, if you enjoy this newsletter, I’d really appreciate it if you would share or forward it to others.
And remember, the contents of this newsletter are not meant to be taken as advice. It’s informational and entertainment only.