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The Psychology of Money

Posted: Thu Jun 07, 2018 11:55 am
by hardlawjockey
I think PP'er's will relate to most of this....

http://www.collaborativefund.com/blog/t ... -of-money/

The piece is chock full of money quotes so it was hard to pick one but here goes (quite relevant to this forum, I think) .....
Anything worthwhile with money has high stakes. High stakes entail risks of being wrong and losing money. Losing money is emotional. And the desire to avoid being wrong is best countered by surrounding yourself with people who agree with you. Social proof is powerful. Someone else agreeing with you is like evidence of being right that doesn’t have to prove itself with facts. Most people’s views have holes and gaps in them, if only subconsciously. Crowds and social proof help fill those gaps, reducing doubt that you could be wrong.

Re: The Psychology of Money

Posted: Thu Jun 07, 2018 1:03 pm
by Libertarian666
hardlawjockey wrote:
Thu Jun 07, 2018 11:55 am
I think PP'er's will relate to most of this....

http://www.collaborativefund.com/blog/t ... -of-money/

The piece is chock full of money quotes so it was hard to pick one but here goes (quite relevant to this forum, I think) .....
Anything worthwhile with money has high stakes. High stakes entail risks of being wrong and losing money. Losing money is emotional. And the desire to avoid being wrong is best countered by surrounding yourself with people who agree with you. Social proof is powerful. Someone else agreeing with you is like evidence of being right that doesn’t have to prove itself with facts. Most people’s views have holes and gaps in them, if only subconsciously. Crowds and social proof help fill those gaps, reducing doubt that you could be wrong.
Of course this is the precise opposite of what you should do if you want to be successful. I always want to know what can go wrong with my plans so I can take appropriate precautions against those eventualities.

Re: The Psychology of Money

Posted: Thu Jun 07, 2018 10:44 pm
by Tortoise
That’s one of the best financial essays I’ve read in a long time.

My favorite quote from the article is the one by Harry Markowitz describing his investment strategy:
I visualized my grief if the stock market went way up and I wasn’t in it – or if it went way down and I was completely in it. My intention was to minimize my future regret. So I split my contributions 50/50 between bonds and equities.
That’s basically the firewall analogy used to describe the PP’s 4x25 allocation. Minimize the maximum possible loss/regret.

Re: The Psychology of Money

Posted: Fri Jun 08, 2018 9:25 am
by moda0306
I find it kind of odd the haranguing about "having to take risk to be successful." I guess I'd ask for their definition of success. And perhaps their definition of "taking risk." To me, when discussing finance, reaching a point of financial independence at 60 is pretty "successful," but I'd include the person that can retire early and keep their expenses below their Social Security income and live a happy life. I would probably not include someone who saved $1 Million by retirement but somehow can't figure out how to live on anything under $80k without being stressed. Also, to me, spending a high percentage of your income and then leaning on RoR of your investments to reach FI is extremely risky. I'd rather take "risks" that have the highest expected value. And saving a ton of your income to reach FI is actually very low-risk and doable.

For instance, my GF and I combined make about $100k. We save about 50% of our after-tax income and live what I consider to be a rich life... mostly because we know how to cook well and have cheap hobbies, drive economy cars to our jobs close to our home, and have a roommate to help with housing costs. Those alone seem to save us a ton of money compared to our friends.

After doing some quick math, if all we did was "invest" in a CD ladder that ends up earning us a -1% Real RoR for 40 years, using a 3% draw-down, could generate enough wealth to "fund" the rest of our life, even with no Social Security.

Add-back even the "75% promised benefits (from tax collections once the trust fund runs out)" from Social Security that one could arguably "plan" on, and our savings would be barely tapped based on lifestyle expenses. We could probably justify retiring a decade earlier.

Obviously, this example is a bit ridiculous but it is to prove a point... and that is you don't have to "take risks" in your investments to be successful. What you have to do is harvest a lot of your income into savings, even if its only going to grow at a rate lower than that of inflation.

The point is, you if you're NOT saving a very high percentage of your income, and then are having discussions about why you "have to" take investment risks to reach your goals (said another way, you rely on a higher expected RoR to not run out of money), then you're leaning on your investments for what is essentially a lifestyle expense problem. I'd assert that if you can't reach your "goals" with a 0% real rate of return in the analysis, then your problem is fundamentally one of savings rate (or if at/near retirement, mostly the spending rate portion of the savings equation)

I don't have a problem with investing in stocks... I do... but if your "monte carlo" needs you to to have a reasonable expected success rate, then you're probably simply leaning too hard on your wealth. The "better" route would be to figure out ways to live cheaper, either now or in retirement, or earn more in your career, or a combination of both.

Now from that position, if you find "high-expected-value " investments, either in the stock market or in more closely-held investments, I'd definitely often advocate "taking risk" to collect that RoR if you can keep it as a small-to-modest portion of your net worth and doesn't distract you from your main career. But nobody owe's you a Real RoR, so it isn't something one should naturally expect without having to work for it, but once you have to struggle for something it essentially becomes a "side gig" and is an opportunity cost to your main career. It isn't something that was ever found in nature (most things deteriorate... most things that don't are mostly useless or simply hold their value). The luxury of simply having the ability to harvest a healthy chunk of your earnings into a pot that doesn't need to be managed to not deteriorate is a modern miracle... one that we all take for granted because we are bombarded with stories of "8%-12% RoR" stock markets and 7% interest rates from years-past. Those latter investments are great... but if you're leaning on them, studying them, managing them and whining about them to reach financial independence you're probably foregoing better opportunities in your savings rate. Harry Browne said something to this affect... and it took me years of what was essentially an only semi-useful hobby of understanding financial markets and the PP to realize this. I'd have been far-better off learning how to use a price-book, learning how to cook, rent vs. buy analysis (or just a financial calculator in general), some tax planning fundamentals, career management fundamentals, and finding cheap healthy hobbies to get my savings rate up to 35%+ and save my "PP Learning Experience" and other related investing learning for my 30's.

I hope that doesn't come off as too lectury... it's just that the conversations I see most people having about money/investments appear to be entirely the wrong ones for the stage of financial independence/dependence that they are at. Even at that magic "25x expenses in net worth," being able to find tricks to reduce some expenses can help you enrich your life in other areas, or vice versa (finding ways to enrich your life in cheap ways reduce pressure on your money to "fund" a rich lifestyle).

Re: The Psychology of Money

Posted: Fri Jun 08, 2018 9:39 am
by Libertarian666
moda0306 wrote:
Fri Jun 08, 2018 9:25 am
I find it kind of odd the haranguing about "having to take risk to be successful." I guess I'd ask for their definition of success. And perhaps their definition of "taking risk." To me, when discussing finance, reaching a point of financial independence at 60 is pretty "successful," but I'd include the person that can retire early and keep their expenses below their Social Security income and live a happy life. I would probably not include someone who saved $1 Million by retirement but somehow can't figure out how to live on anything under $80k without being stressed. Also, to me, spending a high percentage of your income and then leaning on RoR of your investments to reach FI is extremely risky. I'd rather take "risks" that have the highest expected value. And saving a ton of your income to reach FI is actually very low-risk and doable.

For instance, my GF and I combined make about $100k. We save about 50% of our after-tax income and live what I consider to be a rich life... mostly because we know how to cook well and have cheap hobbies, drive economy cars to our jobs close to our home, and have a roommate to help with housing costs. Those alone seem to save us a ton of money compared to our friends.

After doing some quick math, if all we did was "invest" in a CD ladder that ends up earning us a -1% Real RoR for 40 years, using a 3% draw-down, could generate enough wealth to "fund" the rest of our life, even with no Social Security.

Add-back even the "75% promised benefits (from tax collections once the trust fund runs out)" from Social Security that one could arguably "plan" on, and our savings would be barely tapped based on lifestyle expenses. We could probably justify retiring a decade earlier.

Obviously, this example is a bit ridiculous but it is to prove a point... and that is you don't have to "take risks" in your investments to be successful. What you have to do is harvest a lot of your income into savings, even if its only going to grow at a rate lower than that of inflation.

The point is, you if you're NOT saving a very high percentage of your income, and then are having discussions about why you "have to" take investment risks to reach your goals (said another way, you rely on a higher expected RoR to not run out of money), then you're leaning on your investments for what is essentially a lifestyle expense problem. I'd assert that if you can't reach your "goals" with a 0% real rate of return in the analysis, then your problem is fundamentally one of savings rate (or if at/near retirement, mostly the spending rate portion of the savings equation)

I don't have a problem with investing in stocks... I do... but if your "monte carlo" needs you to to have a reasonable expected success rate, then you're probably simply leaning too hard on your wealth. The "better" route would be to figure out ways to live cheaper, either now or in retirement, or earn more in your career, or a combination of both.

Now from that position, if you find "high-expected-value " investments, either in the stock market or in more closely-held investments, I'd definitely often advocate "taking risk" to collect that RoR if you can keep it as a small-to-modest portion of your net worth and doesn't distract you from your main career. But nobody owe's you a Real RoR, so it isn't something one should naturally expect without having to work for it, but once you have to struggle for something it essentially becomes a "side gig" and is an opportunity cost to your main career. It isn't something that was ever found in nature (most things deteriorate... most things that don't are mostly useless or simply hold their value). The luxury of simply having the ability to harvest a healthy chunk of your earnings into a pot that doesn't need to be managed to not deteriorate is a modern miracle... one that we all take for granted because we are bombarded with stories of "8%-12% RoR" stock markets and 7% interest rates from years-past. Those latter investments are great... but if you're leaning on them, studying them, managing them and whining about them to reach financial independence you're probably foregoing better opportunities in your savings rate. Harry Browne said something to this affect... and it took me years of what was essentially an only semi-useful hobby of understanding financial markets and the PP to realize this. I'd have been far-better off learning how to use a price-book, learning how to cook, rent vs. buy analysis (or just a financial calculator in general), some tax planning fundamentals, career management fundamentals, and finding cheap healthy hobbies to get my savings rate up to 35%+ and save my "PP Learning Experience" and other related investing learning for my 30's.

I hope that doesn't come off as too lectury... it's just that the conversations I see most people having about money/investments appear to be entirely the wrong ones for the stage of financial independence/dependence that they are at. Even at that magic "25x expenses in net worth," being able to find tricks to reduce some expenses can help you enrich your life in other areas, or vice versa (finding ways to enrich your life in cheap ways reduce pressure on your money to "fund" a rich lifestyle).
Very good analysis.

Re: The Psychology of Money

Posted: Fri Jun 08, 2018 10:25 am
by moda0306
Libertarian666 wrote:
Thu Jun 07, 2018 1:03 pm
hardlawjockey wrote:
Thu Jun 07, 2018 11:55 am
I think PP'er's will relate to most of this....

http://www.collaborativefund.com/blog/t ... -of-money/

The piece is chock full of money quotes so it was hard to pick one but here goes (quite relevant to this forum, I think) .....
Anything worthwhile with money has high stakes. High stakes entail risks of being wrong and losing money. Losing money is emotional. And the desire to avoid being wrong is best countered by surrounding yourself with people who agree with you. Social proof is powerful. Someone else agreeing with you is like evidence of being right that doesn’t have to prove itself with facts. Most people’s views have holes and gaps in them, if only subconsciously. Crowds and social proof help fill those gaps, reducing doubt that you could be wrong.
Of course this is the precise opposite of what you should do if you want to be successful. I always want to know what can go wrong with my plans so I can take appropriate precautions against those eventualities.
Yeah, it's hard to tell what the article is trying to say... it's almost as if they're advocating being in an echo-chamber to give you more confidence in your investments if/when the fail (temporarily, of course, cuz they ALWAYS come back).

I really liked some of the overall lessons, but a lot of it seemed to contradict other parts.

When you think about what it takes to become completely Financially Independent (25x annual expenses (300x monthly) in wealth, arguably (if-not higher at a young age)), you run into the fact that the human brain is just not designed to stare at a stock of wealth that is both very liquid (modern marketable securities) and also 300 times larger than one month's expenses and not have a ton of anxiety about that number or just spend it cuz you feel rich. Most people can barely manage their cash flow from month to month and build up a stock of 6 months savings while doing it. Think of hitting 300!

I think that is the ultimate first hurdle of "psychology" to get over. You're going to start to see a stock of wealth and while you're going to want to focus on the stock or spend the stock, you should continue to focus on the FLOW that is your income/expenses. The investing is far-secondary, and is usually a lot of mental m@sturbation for little risk-adjusted expected value.

Re: The Psychology of Money

Posted: Fri Jun 08, 2018 12:14 pm
by Cortopassi
Desert wrote:
Fri Jun 08, 2018 10:30 am
Libertarian666 wrote:
Fri Jun 08, 2018 9:39 am
Very good analysis.
I agree.
I as well. For me it is the little cheapo mindset we are passing along to our kids. Like how I call up my internet provider every year and get them to keep last year's rate. Like seeing $60+ sweatshirts at the Notre Dame bookstore, but also finding out Burlington Coat Factory carries at least some official (overstock?) ND sweatshirts/T-shirts and paying $7.99 to $14.99 instead.

I know we can live on practically nothing, but retiring here, in suburban Chicago, is going to be the major issue when real estate taxes will be >33% of our typical spending in retirement. Not doing it.

Re: The Psychology of Money

Posted: Fri Jun 08, 2018 7:52 pm
by Cortopassi
MangoMan wrote:
Fri Jun 08, 2018 3:46 pm
Cortopassi wrote:
Fri Jun 08, 2018 12:14 pm
Desert wrote:
Fri Jun 08, 2018 10:30 am


I agree.
I as well. For me it is the little cheapo mindset we are passing along to our kids. Like how I call up my internet provider every year and get them to keep last year's rate. Like seeing $60+ sweatshirts at the Notre Dame bookstore, but also finding out Burlington Coat Factory carries at least some official (overstock?) ND sweatshirts/T-shirts and paying $7.99 to $14.99 instead.

I know we can live on practically nothing, but retiring here, in suburban Chicago, is going to be the major issue when real estate taxes will be >33% of our typical spending in retirement. Not doing it.
Dude, if the $12,000 RE taxes are a third of your spending in retirement, you're not spending enough. My goal is not to leave a huge inheritance for my kids. Something, sure, but they can bust heir own asses like I did.
Hah. Yeah, I am pretty sure we won't run out of money in retirement...

Re: The Psychology of Money

Posted: Sat Jun 09, 2018 9:21 pm
by Libertarian666
MangoMan wrote:
Fri Jun 08, 2018 3:46 pm
Cortopassi wrote:
Fri Jun 08, 2018 12:14 pm
Desert wrote:
Fri Jun 08, 2018 10:30 am


I agree.
I as well. For me it is the little cheapo mindset we are passing along to our kids. Like how I call up my internet provider every year and get them to keep last year's rate. Like seeing $60+ sweatshirts at the Notre Dame bookstore, but also finding out Burlington Coat Factory carries at least some official (overstock?) ND sweatshirts/T-shirts and paying $7.99 to $14.99 instead.

I know we can live on practically nothing, but retiring here, in suburban Chicago, is going to be the major issue when real estate taxes will be >33% of our typical spending in retirement. Not doing it.
Dude, if the $12,000 RE taxes are a third of your spending in retirement, you're not spending enough. My goal is not to leave a huge inheritance for my kids. Something, sure, but they can bust heir own asses like I did.
Yes, but think of all he gets for that $12k! There's, um, hmm, I'm pretty sure there is something!

By comparison, we pay about $2k a year in real estate taxes, for which we get:
1. Publik skools, which we have never used and will never use (most of the taxes);
2. County roads and sheriff services, which we do use (the former fairly often and the latter very rarely);
3. A hospital, which we have used on occasion.

Somehow I doubt he is getting 6x as much as we are in services, but maybe he is.

Re: The Psychology of Money

Posted: Sat Jun 09, 2018 10:42 pm
by Cortopassi
Libertarian666 wrote:
Sat Jun 09, 2018 9:21 pm
MangoMan wrote:
Fri Jun 08, 2018 3:46 pm
Cortopassi wrote:
Fri Jun 08, 2018 12:14 pm


I as well. For me it is the little cheapo mindset we are passing along to our kids. Like how I call up my internet provider every year and get them to keep last year's rate. Like seeing $60+ sweatshirts at the Notre Dame bookstore, but also finding out Burlington Coat Factory carries at least some official (overstock?) ND sweatshirts/T-shirts and paying $7.99 to $14.99 instead.

I know we can live on practically nothing, but retiring here, in suburban Chicago, is going to be the major issue when real estate taxes will be >33% of our typical spending in retirement. Not doing it.
Dude, if the $12,000 RE taxes are a third of your spending in retirement, you're not spending enough. My goal is not to leave a huge inheritance for my kids. Something, sure, but they can bust heir own asses like I did.
Yes, but think of all he gets for that $12k! There's, um, hmm, I'm pretty sure there is something!

By comparison, we pay about $2k a year in real estate taxes, for which we get:
1. Publik skools, which we have never used and will never use (most of the taxes);
2. County roads and sheriff services, which we do use (the former fairly often and the latter very rarely);
3. A hospital, which we have used on occasion.

Somehow I doubt he is getting 6x as much as we are in services, but maybe he is.
Taxes are $10,200. 66% is for the school districts. Up until last week, I had two kids in them, now one. Have they been worth $6700 a year? Absolutely. Will I want to pay it when they are both done? No.

If the system ever changes to where users of specific services pay a surcharge during the years the service is used, like schools, and when done using, taxes go to a much lower level, I would have done that, and would do that. And it would allow me to stay in the area.

Re: The Psychology of Money

Posted: Sun Jun 10, 2018 8:33 am
by Libertarian666
Cortopassi wrote:
Sat Jun 09, 2018 10:42 pm
Libertarian666 wrote:
Sat Jun 09, 2018 9:21 pm
MangoMan wrote:
Fri Jun 08, 2018 3:46 pm

Dude, if the $12,000 RE taxes are a third of your spending in retirement, you're not spending enough. My goal is not to leave a huge inheritance for my kids. Something, sure, but they can bust heir own asses like I did.
Yes, but think of all he gets for that $12k! There's, um, hmm, I'm pretty sure there is something!

By comparison, we pay about $2k a year in real estate taxes, for which we get:
1. Publik skools, which we have never used and will never use (most of the taxes);
2. County roads and sheriff services, which we do use (the former fairly often and the latter very rarely);
3. A hospital, which we have used on occasion.

Somehow I doubt he is getting 6x as much as we are in services, but maybe he is.
Taxes are $10,200. 66% is for the school districts. Up until last week, I had two kids in them, now one. Have they been worth $6700 a year? Absolutely. Will I want to pay it when they are both done? No.

If the system ever changes to where users of specific services pay a surcharge during the years the service is used, like schools, and when done using, taxes go to a much lower level, I would have done that, and would do that. And it would allow me to stay in the area.
I have a much simpler solution: parents pay for their children's education.

Re: The Psychology of Money

Posted: Sun Jun 10, 2018 8:53 am
by WiseOne
Cortopassi wrote:
Sat Jun 09, 2018 10:42 pm
Libertarian666 wrote:
Sat Jun 09, 2018 9:21 pm

Yes, but think of all he gets for that $12k! There's, um, hmm, I'm pretty sure there is something!

By comparison, we pay about $2k a year in real estate taxes, for which we get:
1. Publik skools, which we have never used and will never use (most of the taxes);
2. County roads and sheriff services, which we do use (the former fairly often and the latter very rarely);
3. A hospital, which we have used on occasion.

Somehow I doubt he is getting 6x as much as we are in services, but maybe he is.
Taxes are $10,200. 66% is for the school districts. Up until last week, I had two kids in them, now one. Have they been worth $6700 a year? Absolutely. Will I want to pay it when they are both done? No.

If the system ever changes to where users of specific services pay a surcharge during the years the service is used, like schools, and when done using, taxes go to a much lower level, I would have done that, and would do that. And it would allow me to stay in the area.
Actually there's a few things left off your list:
1. Police, fire, and rescue squad services.
2. Public parks, hiking/biking trails, other outdoor venues (e.g. in NYC we have things like outdoor movies, concerts, kayak launches, community gardens, public pools & skating rinks, tennis courts etc).
3. Street cleaning, wastewater treatment, trash pickup, municipal composting, reservoirs etc. Some of this may be covered by trash & water bills.
4. Public transit (subways, buses, water taxi, light rail, commuter rail). The cost of this is only partially covered by fares.
5. Random stuff that doesn't fit into above categories, like the suicide prevention measures for the George Washington Bridge (seriously).
6. Municipal court system and city government. I suppose some might not consider the latter to be a benefit :-)

Obviously it all depends on which of these services you have, but it still kind of amazes me that property taxes can be so drastically different between locations. It's usually explained as due to cost of living, but that can't even come close to explaining the differences.

Cortopassi - Many municipalities have senior citizen discounts for property taxes. It's usually not well advertised so you need to do some investigating.

Re: The Psychology of Money

Posted: Sun Jun 10, 2018 8:58 am
by Cortopassi
Libertarian666 wrote:
Sun Jun 10, 2018 8:33 am

I have a much simpler solution: parents pay for their children's education.
Let me get democratic/socialist/communist on you here, but not everyone has high paying jobs and this would seem by default to not allow many families to improve their situation through education. This likely wouldn't have worked for that Italian immigrant with a 7th grade education to end up with sons who are an orthodontist and an engineer (my case).

It might have, sure, but seems less likely for a minimum wage immigrant to afford to live and pay for good schools.
---------------------
WiseOne, there are senior citizen's freeze/exemptions available here.

Re: The Psychology of Money

Posted: Sun Jun 10, 2018 12:46 pm
by hardlawjockey
MangoMan wrote:
Sun Jun 10, 2018 8:50 am
Libertarian666 wrote:
Sun Jun 10, 2018 8:33 am
I have a much simpler solution: parents pay for their children's education.
What if they can't afford to? Or choose not to? Isn't it better for society to have everyone educated?
When and where I grew up, the prevailing thought seemed to be that the children paid for their own education, perhaps with a little help from their parents if they were well off (which not many were where I grew up). My own parents bought an off-campus boarding house as an investment that paid for itself and gave us a place to stay for free. Beyond that we were expected to work and save to pay all of the other expenses (and if I remember correctly, the tuition for my first quarter was only $250 - but a lot of money working as a busboy at $.85/hour).

God I'm old.

Re: The Psychology of Money

Posted: Sun Jun 10, 2018 1:07 pm
by Libertarian666
MangoMan wrote:
Sun Jun 10, 2018 8:50 am
Libertarian666 wrote:
Sun Jun 10, 2018 8:33 am
I have a much simpler solution: parents pay for their children's education.
What if they can't afford to? Or choose not to? Isn't it better for society to have everyone educated?
1. If someone chooses not to pay for their children's education, why should I do so?
2. If they can't do it, which would be VERY unusual without the enormous overhead imposed by today's bureaucratic nightmare of public school systems, that would be up to charitable organizations. Would you contribute to such an organization? If not, why not?
3. I'm certain that society would be far better off if everyone got to spend his own money the way he wants to. That's called "freedom".

Re: The Psychology of Money

Posted: Sun Jun 10, 2018 1:09 pm
by Libertarian666
hardlawjockey wrote:
Sun Jun 10, 2018 12:46 pm
MangoMan wrote:
Sun Jun 10, 2018 8:50 am
Libertarian666 wrote:
Sun Jun 10, 2018 8:33 am
I have a much simpler solution: parents pay for their children's education.
What if they can't afford to? Or choose not to? Isn't it better for society to have everyone educated?
When and where I grew up, the prevailing thought seemed to be that the children paid for their own education, perhaps with a little help from their parents if they were well off (which not many were where I grew up). My own parents bought an off-campus boarding house as an investment that paid for itself and gave us a place to stay for free. Beyond that we were expected to work and save to pay all of the other expenses (and if I remember correctly, the tuition for my first quarter was only $250 - but a lot of money working as a busboy at $.85/hour).

God I'm old.
I doubt you are much older than I am; maybe a few years at most.

My first job paid $1.25/hour, and my first "real" job paid about twice that.

Re: The Psychology of Money

Posted: Sun Jun 10, 2018 4:00 pm
by Cortopassi
Libertarian666 wrote:
Sun Jun 10, 2018 1:07 pm
MangoMan wrote:
Sun Jun 10, 2018 8:50 am
Libertarian666 wrote:
Sun Jun 10, 2018 8:33 am
I have a much simpler solution: parents pay for their children's education.
What if they can't afford to? Or choose not to? Isn't it better for society to have everyone educated?
1. If someone chooses not to pay for their children's education, why should I do so?
2. If they can't do it, which would be VERY unusual without the enormous overhead imposed by today's bureaucratic nightmare of public school systems, that would be up to charitable organizations. Would you contribute to such an organization? If not, why not?
3. I'm certain that society would be far better off if everyone got to spend his own money the way he wants to. That's called "freedom".
tech, I wonder if you are actually an anarchist guy I know... ;)

I guess it is called society. I am happy to pay for roads, for schools, for snow removal, for police, for fire, etc. There are costs to living in a society. Of course it is not as efficient as it could be but with instant information of the internet, it actually seems to be getting better. Scams, corruption, etc are exposed much more often and in real time, so I have hope.