The pound since I moved to Scotland

I always find it hard to remember the £/€ exchange rate because it’s always about stuff after the decimal point (my brain is a bit funny in that way), so I tend to prefer to keep track of the state of the Pound Sterling in terms of Danish crowns instead (the exchange rate of the latter is tied to within 2.25% of the euro through the ERM-II mechanism).

When I moved to Scotland, I could buy slightly more than 12 crowns for a pound, but it’s now been closer to 8 for a long time:

I wonder whether I would have accepted my first job in Scotland if the exchange rate had been 8 instead of 12 – a monthly salary of DKK 18k sounds a lot less attractive than DKK 27k, and I think my employer would have found it much harder to justify paying me a salary of £40,500 rather than £27k. To be honest, I probably would have ended up somewhere else instead.

Mull of the future?

(Also published on Arc of Prosperity.)

highland village photo
Photo by kingary
I woke up to the crowing of the rooster and the smell of freshly baked croissants.

My butler minion gently opened the door to my bedroom. “Would you like your breakfast in bed, master?” “That’d be great, Bob.”

Bob buzzed in on his wheels and served the croissants together with a gorgeous cup of cappuccino. I’ve spent years searching for the perfect recipe, and I finally found it on a website somewhere in Italy. It was worth the hassle, though. People keep asking me for it, but I’ll not share it for any less than 1kg of scrap copper.

“Master, what would you like for lunch?” asked Bob. “Perhaps a mushroom omelette? Tim found some lovely wild mushrooms in the forest this morning.” I grunted my approval. Tim is my foraging minion, and he always finds the best stuff. At least it sounded a bit more filling that the salads Bob has been feeding me for the past week – I guess my weight is back to where it should be. Not that Bob ever tells me.

“What’s on the agenda for today?” I asked. “You’ve got dairy farm duty from 10 to 12, you’ve got a work meeting at 14.30, and finally you’ve invited your girlfriend for dinner at 19.00.”

I spent the next hour inspecting my home farm. The minions were zooming around me at the same time, collecting eggs, weeding the lettuce and cleaning out the pigsty. I love my home farm.

At 9.50 a car stopped outside the gate, and I strolled out and got in. Yukiko and Pierre, two of my neighbours, were already sitting in it – we do farm duty together. They greeted me with a cheery “Madainn mhath! Ciamar a tha sibh?” and we started chatting in Gaelic. It’s not our native language, and to be honest it probably would be easier to speak English together, but when the founders of our village decided to resurrect the village of Crackaig on the Isle of Mull, they decided that it should be Gaelic-speaking, so it’s now a requirement for moving to the village that you learn the language and use it when interacting with people. Fortunately language-learning is so easy these days – the linguist minions are just sublime language teachers.

At 10 o’clock the car stopped at the dairy farm, and we got out. The car zoomed away, either to park or to drive somebody else somewhere. My grandparents keep telling me that they used to drive cars themselves when they were young. It sounds like a really dangerous and wasteful way of going about it. Computers are obviously much better at driving than humans, and in those days every household had one or more cars, which meant that they spent most of the time being parked. Crazy.

Dairy farm duty is generally pretty easy. The minions do practically all the work, and all we need to do is basically to walk around and talk to the cows – humans can sometimes use their intuition to spot a problem that the minions have overlooked.

This was not one of the easiest days, however. It was time to say goodbye to two of the bulls and hand them over to the butcher minions. I walked with them up the hill, and then the minions led them away into a shed and did their stuff. The minions have perfected bovine psychology, so the bulls didn’t seem to feel any anxiety.

I’ve read that lots of people were going vegetarian or even vegan towards the end of the capitalist era. It was mainly a reaction against factory farming, however, so once people started repopulating the villages and producing almost all their food locally, they started eating meat again. This was reinforced by the realisation that microplastics were destroying the environment, and this led to a complete ban on the use of synthetic materials in clothing and footwear, and having access to leather thus became more important again.

The late capitalist society must have been pretty mad. Instead of feeding your food waste to your animals and letting your cows graze on unproductive stretches of grass, they threw the food waste into landfills and then grew cereals for the sole purpose of feeding animals which they kept in huge factory-like farms. Apparently they even killed many male calves at birth because it would be too expensive to raise them.

In our village most of our clothes are made out of wool, hemp or flax, and we mainly use leather shoes. That’s fairly typical for Scotland, but of course different materials get used in other countries.

I walked home after farm duty and then sat down to enjoy Bob’s delicious mushroom omelette.

Afterwards I stepped into the VR room to commence the work meeting. I’m part of a small team working on carbon capture technology to roll back global warming. We have created a virtual Greek olive grove as our work environment, based on Plato’s Academy. Lots of other people keep telling us that you want walls, chairs and blackboards in order to work efficiently, but we disagree. Sitting on blocks of marble dressed in a toga while munching on olives is great. To make it even more realistic, we’ve decided to adopt Ancient Greek as our working language. Yes, it’s mad, but we need a lot of creativity to come up with better ways to capture carbon, and creativity and madness are of course closely related.

It’s strange to think that schools for so long were mainly places to learn facts and techniques, when today they’re places to bring out everybody’s innate creativity. Of course you need a certain amount of knowledge and skills for your creativity to kick in, but at the end of the day computers are much better at every known task than humans – however, they’re still pretty bad at coming up with the new and surprising answers, and at dealing with new situations. So of course that’s what we humans have to focus on now.

After work I started getting ready for dinner with my girlfriend, Salome. I was going to bring her some flowers from my greenhouse, but in the end I quickly 3D-printed a pair of golden earrings for her using a traditional pattern from Guatemala.

Salome and I were going for sushi in a neighbouring village modelled on a traditional one from Hokkaidō. A lot of people said at the time that a traditional Japanese village doesn’t really belong on the Isle of Mull, but I must admit that it’s really nice to see something completely different without travelling more than 10 km. In fact, the idea is spreading. More and more villages get the builder minions to rebuild everything in some exotic style – just on Mull we’ve now got places that look like they belong in Bavaria, Viking Scandinavia, Māori New Zealand, and the Shire (from The Lord of the Rings books).

Over dinner we discussed whether we should go on holiday to Paris at some point. The old centre is supposed to be stunning, but like all other former cities it’s surrounded by enormous areas of crumbling ruins that still haven’t been converted back to villages and farmland.

At least the former cities aren’t dangerous in Europe. However, in many other parts of the world they never nationalised the land like they did here, so people who didn’t own any land were left practically destitute when the value of labour dropped to nearly zero after capitalism collapsed. They’re now typically living in the skyscraper ruins and trying to make a living selling personal services (mainly sex) to everybody else. It’s horrible, and we’re so lucky in Europe where we introduced a universal basic income early on and then nationalised the land and gave everybody the right to borrow a plot for the rest of their lives.

Of course it would take a while to get to Paris – flying is completely prohibited for holiday purposes – but we could sail there or take a sleeper car, and that’s good fun in its own right.

We took a boat back to Salome’s village. Life on Mull is pretty good.

Generation X are disappearing

Hugo Rifkind had an article in The Times today about being a Xennial (too old to be a Millennial, too young for Generation X), and I sent him the following tweet as a reply:

Hugo and 77 other people (so far) were kind enough to like it, so I thought I’d elaborate a bit on my theory.

A lot of the stuff about the Baby Boomers, Generation X and the Millennials can be traced back to Howe and Strauss’s Generations from 1991. This book examined earlier American generations and claimed to identify a four-generation cycle. They then defined the new generations that were emerging at the time and tried to predict their future very roughly. In particular, they expected a huge crisis once the Baby-Boomers had started to retire (perhaps around 2020), which Generation X would sort out and then hand over power to the Millennials.

This is clearly not what happened – the crises (9/11 + the financial crash) happened much sooner than they expected, while the Baby-Boomers were still in office. They actually mentioned this possibility briefly on page 382:

What happens if the crisis comes early? What if the Millennium – the year 2000 or soon thereafter – provides Boomers with the occasion to impose their “millennial” visions on the nation and world? The generation cycle suggests that the risk of cataclysm would be very high.

Furthermore, in their historical analysis they clearly don’t assign a standard length to generations, so they would themselves have expected the generational boundaries in the 20th century to require some tweaking once the big defining events had taken place. It’s therefore completely in their spirit to revisit the definitions they suggested more than 25 years ago.

They actually don’t even stick to four generations per cycle all the time. What they call the Civil War Cycle contains only three. As they write on page 192:

[It is] America’s only three-part cycle – the one whose crisis came too soon, too hard, and with too much ghastly devastation. This cycle is no aberration. Rather, it demonstrates how events can turn out badly – and, from a generational perspective, what happens when they do.

I’m postulating that this has happened again. The crisis came so soon that at least half of Generation X hadn’t yet managed to get high enough up the housing ladder (or build up assets in other ways) to allow them to benefit from the asset boom that was a result of the financial crash. As a result we now have a huge split in most western societies: On the one hand, older people (Baby Boomers and older X’ers) often are asset-rich and have paid off most of their house, as well as having a good pension. Other members of this generation are less rich, but they might at least have a cheap council house that is affordable on their salary or their pension. On the other hand, younger people (Millennials and younger X’ers) don’t tend to have much wealth: They’re either renting in the private sector, or they’ve paid so much money for their house that a crazy amount of their salary is spent on the mortgage. They don’t have decent pensions, and they don’t really expect ever to be able to retire comfortably. They also typically grew up being told to expect a great and prosperous life, and they weren’t expecting things to turn out like this.

I was born in 1972, so right in the middle of Generation X, and I think we felt different from both the Baby Boomers and the Millennials before the financial crash. However, I now feel more and more similar to the Millennials, and further and further removed from the Boomers. So I think we might have to redefine the Baby Boomer generation as stretching all the way to the late 1960s, and the Millennials starting immediately afterwards. (I don’t believe it’s a clean break – whether somebody belongs in one generation or the other ultimately depends on whether they had enough assets when the economy collapsed.)

I think we can now also tell when the Millennial generation ended: The youngsters who don’t remember the time before the financial crash have a different mindset because they didn’t spend their childhood expecting a rich and easy life. They also happen to be the smartphone generation.

So to finish this blog post, let me redefine the generations as follows:

  • The Baby Boomers (too young to remember WWII, and old enough to have built up their wealth before the financial crash): Roughly 1940–1969.
  • The Car-Crash Generation (grew up expecting an easy life, but suddenly the rug got pulled away from under they feet): Roughly 1970–1999.
  • The Smartphone Generation (they don’t remember the easy years, and they live their lives through their smartphones): Roughly 2000–.

The generation that got lost

Generation Y
Generation Y, a photo by dalechumbley on Flickr.
I’ve written about Howe and Strauss’s Generations before. It’s basically a theory that there are four basic types of generations that repeat in a cycle of about 80 years. For instance, today’s Generation Y (those born after 1982 or so) are supposed to exhibit many similarities to the generation born between 1900 and 1925.

They later produced a sequel called Millennials Rising. Written in 2000, it’s attempting to describe exactly this generation, and it’s failing miserably in many respects, because they’re basically describing a successful, heroic generation, something which doesn’t ring true when you look at all those youngsters saddled with student debt, living with their parents and trying to find a job in a world with sky-high youth unemployment.

I’ve been trying to figure out what went wrong, and I think the basic problem was that the Baby Boomers started running countries much earlier than Howe and Strauss expected (from 1990 to 2010 in the UK and from 1993 to 2008 in the US, rather than the projected 2000-2020). The effect was that they treated 9/11 as if this was a big, once-in-a-century cataclysmic event (although it could — and perhaps should — have been treated simply as a horrible act of terrorism, rather than the beginning of World War III).

As a result, when the Great Recession hit us in 2008, we were already sick and tired of the “Bomb, bomb, bomb!” Baby Boomers, and we duly elected Generation X leaders — such as Obama and Cameron — instead.

The result is drastic for Generation Y (called the Millennials by Howe and Strauss):

The Millennials’ Civic peer personality is not preordained. If the crisis comes too soon or (worse) unfolds badly, the Millennials will mirror the Progressives, a smart but hobbled generation that was later unable to realize the agenda of its Idealist elders. [p. 421]

Of course, the crisis didn’t really come too soon (unless one considers 9/11 to be the cyclic crisis called a turning by Howe and Strauss, rather than the Great Recession), but the fact that the Baby Boomers have been forced into retirement means that Generation Y cannot realise the agenda of the Boomers, so the effect is the same.

In effect, the Millennials are now a useless generation. Instead of being the willing soldiers for greying Baby Boomer leaders during the recession (and crises like Syria), they’re stuck with a frozen housing market (because Generation Y are risk-averse and won’t puncture the bubble), huge youth unemployment (which doesn’t bother Generation Y overly because most of us have got jobs and our kids aren’t looking for jobs yet) and many other problems.

Of course the Baby Boomers will eventually start dying off and vacating their expensive houses, but that could take another decade, and by then it could be too late for Generation Y. They will become the generation that never really got a good career and who never got to own their homes.

It’s good news, on the other hand, for the post-Y generation (let’s call them Generation Z). They were originally forecast to be a somewhat jaded generation, a bit like the generation preceding the Baby Boomers (the ones who were too young to fight in World War II but old enough to remember it), but now I predict they’ll be the new Baby Boomers: They’ll grow up with cheap houses and plenty of jobs, and with sharper elbows than Generation Y who thought participating was all that mattered. (As a parent, I’m already seeing signs that the schools are starting to toughen up a bit, but that’s perhaps better discussed in a separate blog post.)

Generation Y are starting to attract a lot of attention. Below, I’ve assembled some excerpts from various blog posts and newspapers articles.

Firstly, here are some comments from the London Evening Standard:

If you’re renting in Mile End, another surge in house prices is likely to fill you with despair, not elation. A teenager on a zero-hours contract in Enfield may wonder what he’s supposed to do with a 0.7 per cent rise in GDP, just as an unemployed history graduate in Woolwich will struggle to see how a new car plant in Solihull will help her job prospects. Meanwhile, a retiree in Richmond whose experiment with the buy-to-let market is paying off very nicely, thank you, may wonder what all this recession business is about.

To put it another way, any economic forecast is a generalisation that conceals huge inequalities and inequities. Generation Y (those born 1980-2000) have very good reason to feel that Osborne is describing a country to which they don’t belong.

After all, it is Britain’s young who are most likely to be trapped in the over-heated rental market, most likely to be on a zero-hours contract, most likely to use payday loan companies, most likely to have slaved under an unlawful “Workfare” scheme, and most likely to be unemployed even now.

According to the most recent statistics, there are 973,000 young people (16-24) still out of work. The figure rose by 15,000 in the last quarter, even as Osborne talks of a “game-changing” year for employment. And let’s not forget that four out of five jobs created during the Great Recession are in the lowest pay bracket. As the economy returns to “normal”, normal for this generation has shifted to something very different from their parents’ definition of the word.

The most striking shifts, however, are in attitudes. Iain Duncan Smith has persistently argued that this is an “X Factor generation” of “job-snobs” who believe that “success is not related to effort or work”. As Ed Howker and Shiv Malik note in their new edition of their book, The Jilted Generation, it seems that the young believe him. Surveys published this week show that Generation Y are more suspicious of welfare claimants than their parents — even though they are the most likely to be welfare claimants themselves. They are also more sympathetic to pensioners than to jobseekers — despite the fact that today’s pensioners are the richest ever to have lived.

The lessons Generation Y have drawn from the recession is that they are on their own. Their failures are their fault. Their successes need not be shared. Is this what Osborne had in mind all along?

Here’s an American commentator:

So what are millennials known for, so far? Well, to start with the obvious, we’re fucked financially. Anecdotes abound of millennials slaving away as unpaid interns and underpaid assistants, or slacking off as overqualified retail reps and baristas. “Generation Screwed,” Joel Kotkin called us in a thoroughly depressing July 2012 Newsweek feature that laid out the various headwinds holding us back: staggering levels of student debt (at least $25,000 on average, according to the latest reports); a 13.1 percent unemployment rate for 18- to 29-year-olds, compared to 7.9 percent nationally; and “a mountain of boomer- and senior-incurred debt … a toxic legacy handed over to offspring who will have to pay it off in at least three ways: through higher taxes, less infrastructure and social spending, and, fatefully, the prospect of painfully slow growth for the foreseeable future.”

And an article from the New York Times:

The millennials have developed a reputation for a certain materialism. In a Pew Research Center survey in which different generations were asked what made them unique, baby boomers responded with qualities like “work ethic”; millennials offered “clothes.” But, according to new data, even though the recession is over, this generation is not looking to gorge; instead, they are the kind of hungry that cannot stop thinking about food. “Call it materialism if you want,” said Neil Howe, an author of the 1991 book “Generations.” It seems more like financial melancholy. “They look at the house their parents live in and say, ‘I could work for 100 years and I couldn’t afford this place,’ ” Howe said. “If that doesn’t make you focus on money, what would? Millennials have a very conventional notion of the American dream — a spouse, a house, a kid — but it is not going to be easy for them to get those things.”

This condition is becoming particularly severe for the group that economists call younger millennials: the young adults who entered the job market in the wake of the recession, a period in which the unemployment rate among 20- to 24-year-olds reached 17 percent, when graduate school competition grew more fierce and credit standards tightened. Many also saw their parents struggle through a pay cut, a job loss or another economic disruption during the recession.

[…]

The millennials, in other polls, remain optimistic about their futures. Economists are less so. There is a persistent fear that they have entered a permanently lower earnings and savings trajectory. Even if the generation recovers, even if it ends up wealthier than the one before it, the scars will be deep and long-lasting. Kahn has started comparing recent graduates during the recent recession with recent graduates in the 1981-82 recession. She said the initial wage losses were comparable, and the trend looks set to repeat. “My inclination is pessimism,” Kahn said. “If anything, these guys might experience something worse.”

Other economists also envisioned a future in which millennials would spend less and save less. “I was talking with a mom who has a son in his mid-20s and told her the generation is not on the same wealth-building path,” said Signe-Mary McKernan, one of the authors of the Urban Institute study. “She had this look of terror on her face; our children are in trouble, and that’s such a worry for a parent. I told her, ‘Maybe this generation won’t have a worse life, but just a different life.’ ” And that may be true. Millennials are the best-educated generation ever. Their challenge may just be to preserve that advantage for their own children.

And finally:

Right now, most of the permanent underclass feels politically frozen: When one missed paycheck means descending into poverty without a safety net, unions and political activism seem like a low priority. Educated young people are frozen, too—caught in the privileged-poor paradox. Our meager (or nonexistent) paychecks incite righteous anger—especially when we think of our middle class parents’ luck at their age—but they also choke our very ability to organize, create, and take risks. As our wages fall, our degrees lose value, prices of food and rent rise, and workdays expand, we have less and less time to read a book, to join a rally in the next town over, to hop a bus to Washington, to even have a hours-long discussion about politics with our friends. Most Millennials aren’t starving, Great Depression-style, but they are starved for a low cost of living and a baseline of economic freedom.

It’ll be interesting to follow Generation Y over the next few years.

Historic Scotland and large families

Leon and Anna as King and Queen of Scots in Stirling.
Leon and Anna as King and Queen of Scots in Stirling., a photo by viralbus on Flickr.
We often feel modern companies are on a mission to punish large families. Cinemas, budget airlines and many others charge almost as much for kids as for adults, and the result is that a family with five kids have to pay almost seven times as much as a single person, although they are likely to have more or less the same income.

So it was an absolutely pleasure to join Historic Scotland today. The yearly membership fee for a family with an unlimited number of kids (up to 15 years old) is £84.55, which compares very favourably with the £45.60 that an individual would have to pay.

Historic Scotland is really worth joining, by the way. It gives you free access to lots of famous castles such as Stirling, Edinburgh, Linlithgow and Urquhart, plus a long list of other places and events.

We decided to go to Stirling Castle first, and if you haven’t been, it’s definitely worth seeing. It’s huge, and there are many things to interest the kids, too.

Simplifying taxation through personal companies

Berkshire Hathaway Shareholders Meeting
Berkshire Hathaway Shareholders Meeting, a photo by timbu on Flickr.
Companies have lots of advantages compared to real people. Amongst other things, they generally only pay taxes on their profits, not on their income (revenue), and lots of companies are registered for VAT, which means they don’t pay any VAT on what they buy.

Companies have these advantages to encourage investment and promote growth.

However, one might argue that this should apply to individuals, too.

Imagine if every individual automatically owned a “personal” company (i.e., at birth I would have been made sole director of Thomas Widmann Ltd.), and all their work took place through their company (it would be illegal for companies to employ people rather than other companies). In this scenario, everybody would need to decide when to take profits out of their personal company instead of investing the money (which would be tax-free).

With the move away from direct employment towards self-employment, this is increasingly becoming a reality for a large number of people, so perhaps it would be worthwhile making this approach universal.

After this change, it would be possible to completely abolish income tax, because employment would then always an issue between two companies, and all that would be needed would be company taxation and taxes on withdrawing profits. I guess many people would let their personal companies own their house and their car and let their personal company provide free meals to its employee in order to minimise tax and VAT, but that would be a good thing as it would just be levelling out the playing field (which is currently distorted in favour of companies and rich people).

At the moment, most rich people have companies (or charities) to lower their tax bill, so giving everybody a VAT-registered company would basically just give normal people the benefits that the rich currently enjoy.