How stupid is stupid?

So Canada Mortgage and Housing Corporation has ridden to the “rescue” of all those stupid homebuyers out there by refusing to back the 40-year-mortgage, effectively killing it.

Too dangerous, say CMHC's clients (lenders) who have been spooked by the US subprime mortgage crisis, which they aided and abetted. According to the boffins, always willing to help save us from ourselves, a 40-year, no money or little down mortgage tends to draw the marginals who can't really afford mortgages.

Normally, I'd be with them. For most people a 40-year mortgage is about as stupid as stupid gets. You end up paying three times the cost of your home in fees and interest, just for the dubious privilege of getting into the housing market.

But there's fallout in this move, and it's going to affect millions of Canadians, most specifically in BC.

That's because the 40-year flexible mortgage was perfect for the self-employed, or micro-business operator (who make up more than 90 per cent of BC businesses). The long-term mortgage meant they could get into homeownership, which meant they could have an asset to help fund their businesses.

And, in many cases, it was the only way they could get a mortgage at all.

Ever since mortgages were invented, the lending system has insisted on a dependable repayment schedule, almost always tied to a steady job. The bankers are right from a math point of view, but not from a life or business point of view, which is filled with ups and downs. This is especially true for the self employed and very small business people, who have routinely been treated like pariahs by bankers.

Self employed and micro business operators have extremely variable income: Their businesses have rhythms, which cause bankers to shudder and recoil in horror. Undependable income? Take a hike.

Most (I hope) experienced business operators know about these rhythms and usually budget for them. In entrepreneur training, I've long taught a form of this called feast or famine budgeting. Or they have coverage in the form of operating lines of credit – usually tied to their homes -- to smooth out the peaks and valleys.

But most bankers, firmly rooted in the mid 20th century when everybody had a job, don't like non-conformity. So they tend to give these potential mortgagees the bum's rush.

As an example, I can recall one situation where a couple applied for a mortgage, and the husband who nominally owned the (successful) company was rejected because he was self-employed, but the wife was approved because she was “employed” by her husband.

More generous lenders insist that the self-employed bring in tax forms for three years, or often, five years to prove they have steady revenue. But if entrepreneurs are doing their jobs properly, they show very little taxable income: Their imperative is to get their taxable income down to as little as possible.

So the long-term mortgage was very helpful for these people. It meant they could keep their expected payments very low – budgeting for lean times, so to speak – and then could slap on extra payments during fat times. Usually this flexible approach resulted in a mortgage paydown similar to those performed by the steady jobholders.

But, of course that would mean self-control and discipline, and the authorities obviously don't think these people have that.

Sure entrepreneurs might be able to leap into the business world and carve out a living on sheer skill, drive, and ability to react to change.

But trust them to be able to pay back a mortgage? Forget it.

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That's rich

So now I know the economic boom is peaking in this country, and maybe even in this province. That's because recently an event was held that promised to show everybody HOW TO GET RICH IN CANADA!

This FREE lecture featured “Canadian 'Rich Dad' Darren Weeks”, who was going to show all and sundry how to Get On the Canadian Fast Track to Success. Weeks, is in his own words “the most successful Facilitator of CASHFLOW events in Canada,“—which is interesting because I've never heard of anyone facilitating these events except him.

I don't know how many people showed up for this event, but I'm betting they were all there for the same reason. They think that everybody right now is making a fortune and they're not.

These how-to-get-rich seminars always appear near the end of an economic boom because they're aimed at the lowest end of the scale—ordinary workers who feel they've somehow missed out because they're “working for someone else.”

You know the drill. Their lives suck because they have to (in Weeks' words):
     Deal with rush hour traffic
     Limit holidays to two weeks per year
     Send their kids to daycare
     Order the cheapest items on the menu at an expensive restaurant
     Argue with their spouses about money
     Worry that they won’t have enough money each month

Well, I've got some news for these people—that's life.

Everybody has to deal with traffic, limit holiday time, mind their money, and worry—whether they're working for someone else or not.

Underlying these kind of events is usually advice to get into your own business, often through some system—franchise or other—the event holder is selling. Why else would this kind of “financial education” be free?

And while entrepreneurship may be a way to “get rich,” it's usually not in the way it's presented in these seminars.

First you have to define what rich is. For most entrepreneurs rich means independence, not money. In fact most entrepreneurs earn less than workers, but are happier because they're their own bosses.

And if everything on the above list bothers you, wait until you get into your own business. You'll be rushing around (it's called selling) all day; you'll be overjoyed to get two weeks of work-free holidays per year; you'll gladly send your kids to daycare because you'll probably be working 60 to 80 hours a week; and you'll constantly be worrying about money each month—it's part of your job to keep an eye on the business' cash flow.

Look, despite the prevalence of these kind of rah rah seminars, entrepreneurship is not for those who dream of an easy life.

Success takes a long a long, long time, and it's damn hard work. And you have to weather a lot of hard times—like when the economy sours.

And, judging by the timing of this seminar, it's about to.

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Surviving the internship

Jessica Scharien, a summer intern at BCBusiness and TV Week, will be returning to the study of journalism at Thompson Rivers University, in Kamloops, in September 2008.

I recently spent two months interning at Canada Wide Media, whose offices are in Burnaby. A resident of Kamloops, I was excited at the prospect of the “big city” and its offerings (Kamloopsians who don’t know better consider Burnaby the “big city”). And although I am heading into my fourth year of Journalism, have written a slew of articles, and am generally confident of my editorial abilities, upon entering that office, I felt like a fish out of water.

I discovered a few things that will help anyone survive an editorial internship:

Don’t let on that you sometimes have no idea what’s going on
You’ll become more self-reliant and confident in your abilities by default. Figure things out for yourself and ask for help only when absolutely necessary.

Eavesdrop often
I can’t tell you how valuable it was for me to throw that social norm out the window. Unbeknownst to my officemates, they were my best source of information—and gossip! They taught me a lot.

Jessica Scharien

Make certain you know the tone and audience of your publication
Pitch is everything, and having a finely-tuned ear—not only for language, but for your target reader—is a skill sure to ingratiate you to your editors.

Revel in positive feedback
Enjoy any praise you get for your accomplishments, then get on with your work. You’re only as good as your last assignment. Conversely, don’t dwell on criticism: your writing will undoubtedly suffer.

Take charge
Try to do this without stepping on toes, of course. It's essential to show that you're eager to contribute, even if it means getting out of your comfort zone. Perhaps one way to do this is by—cough—writing a blog entry, your first ever.

Kiss ass but know where to draw the line
A publishing house is populated with editors and journalists, people with an anorexic appetite for insincerity.

Embrace the overall opportunity
Regardless of your feelings about your internship when it ends, you'll have learned something from it—not only about magazines and media, but also about yourself and what you want in life.

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The enemy within

It's long been said – by me, at least – that if you torture a statistic long enough, it will always tell you what you want to hear.

For example, a recent Conference Board of Canada report that decried Canada's economic performance, particularly in the areas of productivity. This added to several reports that highlighted B.C.'s even worse performance.

B.C., it seems, is a major slacker in the productivity department. And, apparently, we're masking this shameful lotus-land thinking by producing raw resources for big bucks, which we spend on...stuff.

Can't argue with that. Too much of our economy is geared to either digging up or cutting down, and servicing retirees with nice steady – but unproductive – incomes.

But it's the experts' fingering of the culprit that bothers me. According to them, in B.C. we have too many small businesses, which in 2006, contributed 27 per cent of the province's GDP, the highest proportion in the country.

Small business makes up 98 per cent of all businesses in B.C., and 83 per cent of those are micro-businesses, having fewer than five employees. More than half are self-employment businesses with only a single “worker” who, as the Vancouver Sun's Harvey Enchin pointed out, “is not likely to make the kind of investments that will increase capital intensity.” Rather, the experts say, the solution for BC is more big companies with big capital investment budgets.

Wrong! (And I'm not saying that because I'm not too far removed from being one of those guys working with a laptop out of my home.)

It's wrong because these economists – and the people who slavishly follow them – use a 19th and 20th century measurement of success and apply it to the 21st. It measures economic output in terms of goods produced.

And guess what? Under those measurements, we in B.C. clearly suck as productive workers. I guess if we just had a couple of hundred more factories pumping out consumer trinkets , everything would be right again.

Unfortunately, that's no longer the world we live in, and perhaps these economists might want to start using different measurements that capture the value of intangibles that make up much of the economy today. Maybe the real situation is that B.C. – like much of the Western world – is rapidly moving into a knowledge world, where the production of high-value (and high-profit) services based on knowledge is much harder to measure.

As an example, look at Germany, where GDP is stagnant, but much of the country is happily creating extremely high-value services such as environmental technology. Or how about Silicon Valley, where everybody's office seems to be a coffee shop, but the economy runs in to the many many billions – almost all of it intangible?

Any independent or small business person will tell you that they have to be entrepreneurial in B.C., usually by selling their knowledge or skill, because, there aren't many traditional big company jobs.

So the solution might not be more old-fashioned capital intensive big businesses pumping out more and more goods, a la Ontario. It isn't going to happen, and they're hurting anyway because of foreign competition.

Instead of complaining about how they're a drag on the economy, it might be that we need more of those independent consultants and micro businesses. And then we help them grow into intensive knowledge-based businesses.

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The relic of my calling

Recently, I wrapped up a college course I was teaching called “Writing for Magazines.” Twenty-one aspiring writers—most too young to remember the pre-Internet era—sat attentively, if quizzically, for eight weeks as I made the case for that 18th-century technology: the magazine.

The course was part of an intensive magazine publishing program; somebody else taught about design, another imparted the cryptology that is editing. In my class, we talked about Bob Fulford’s Saturday Night and Clay Falker’s New York, and studied stellar feature articles by award-winning writers like Jane Kramer and David Foster Wallace.

For me, the experience produced mixed emotions. I love magazines, and love to proselytize about their virtues whenever I get the chance. But at the end of eight weeks, I couldn’t escape the feeling that, much like a Grade 10 teacher on the BNA Act, I was peddling moldy history.

Magazines are undoubtedly a more considered medium than the Internet—with original research, in-depth analysis and fresh insight being their hallmark. And people hold onto magazines for months, if not years, while the Internet is a constant work-in-progress.

But my students are graduates of the Internet age, and they value the immediacy and interactivity that print can never afford. They signed up for the magazine publishing course, I think, for much the same reasons one takes etiquette lessons: it seems a good and proper thing to study. Magazines have the weight of history—appealing to diehards like me—but the Internet has the weight of currency. I may not have converted them all, but with some luck there is a young fogey (or two) among them—someone willing to embrace the technological relic that is my calling.

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