100+ Years Delinquent
Updated: Jul 7, 2021
I. Money as a Brunch Spot It’s too much to think about the Butterfly Effect. For one, there’s the anxiety of thinking flapping your arms might set off a world war or something. Also, there are just so many things flapping all around. I’ve always found comfort in mathematics. To plug something in one side and see the way it comes out on the other has allowed me to find deeper understanding without it getting so complex I shut down. Our financial systems reflect certain realities about momentum that are described in mathematics. For example, the fact a popular restaurant gets tried out simply because it's popular, and all those Instagram pictures herald a new brunch crowd. It's some kind of multiplier. Similarly, to buy stock is to buy into small pieces of a company and their potential to multiply. II. Tusla’s Unpaid Insurance Claims There were $1.8 million dollars of insurance claims filed after a white mob leveled the neighborhood called “Black Wall Street” in the 1921 Tulsa massacre. You can adjust for inflation to arrive at $27M, to get a sense of what those dollars would buy today. An Oklahoma study details that, “Between June 14, 1921, and June 6, 1922, Tulsa residents filed riot-related claims against the city for over $1.8 million dollars… Of course, not all residents took insurance companies or the city to court, but most of the prominent business men and women, as well as the influential residents did have detailed petitions drawn out against both entities. In 1937, Judge Bradford J. Williams summarily dismissed most of the court cases.” I imagine what it might have felt like as they waited for their judgments, in this same season a century ago. That happened to Black Wall Street. What about white Wall Street? Well, in the last hundred years businesses in the S&P 500, an index of the 500 largest corporations, returned 10.75% per year. That means if you put $1.8M into an index fund in 1921 (they didn’t exist until the 70s, but let’s say they did) you would have almost $84 billion dollars today. If you look at a graph of Black wealth in the last 20 years, it’s practically flat. Among millennials, household wealth of Black Americans has actually gone down in the last generation. White households' wealth looks suspiciously similar to the returns of the stock market.
Yahoo Finance S&P 500 levels between 1996-Present (blue line)
III. A $356 Billion Dollar Credit Card Bill Consider debt. Using debt as currency is ancient, as is its negative reputation. Think of laws against usury, or the fact that today many observant Muslims eschew any kind of debt instruments in their portfolios, or taking out loans. Borrowed money can be a great resource—think of how redlining kept Black families out of mortgages (giant loans) in certain neighborhoods. But debt can also ruin lives. The momentum of personal debt can be even more significant than the gains of investing, if the interest rate is high enough. Let's say you had $100 in credit card debt at 22% interest. In 100 years, if you made no payments, you would owe $356 billion dollars. IV. Working Your Whole Life to Save for Retirement I sometimes give my clients a rule of thumb to invest 15% of their income towards retirement. It might be more or less depending on your actual circumstances. If you make $100K/year, and put in $15,000/year over a 40-year career, with 6% annual returns, you'd have $2.6M at the end of it. From that, you might pull 4% a year from your nest egg for a retirement income of $103K/year. Our labor is often the most valuable asset that we own. We are compensated for it in business and employment, and it can become wealth that grows. Or we can give it away, like when we help those closest to us. The support that we provide each other in paid and unpaid forms makes everything possible. V. A Debt Immeasurably Bigger than You Think It’s enough to know that America, now the most powerful country in the world, was built upon 246 years of stolen labor. But when you think about not only what it equals in today’s dollars, but what it equals in lost opportunity, the difference is crushing. In 1865, 400,000 acres of confiscated confederate land along the southeast coast was promised to formerly enslaved people, up to 40 acres per family, sometimes with a mule thrown in. After Lincoln's assassination, Andrew Jackson reversed the order, where it appreciated in white hands to trillions of dollars today. When you look at the returns possible in this time, is it any wonder how we've reached this yawning chasm of inequity? The value of these lives can’t be quantified, but I can tell you that the centuries of lost time are worth more than inflation. The time keeps stretching on with no quorum for discussion of the moral and financial debts owed to descendants of enslaved people of America. Perhaps the heirs of this fortune sense that the amount owed is so insurmountable that they throw away the letters in the mail and hope the lights don't get turned off.