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Pizza, Beer, & Barrels of Oil: How the Economic Machine Works

Pizza, Beer, & Barrels of Oil: How the Economic Machine Works

May 21, 2019

During my Kansas State University years, I briefly considered getting a minor in Economics. K-State. Go Cats! Not to be confused with our fierce rival, the KU Jayhawks. 6% winning percentange vs. 75%. The numbers don't lie.

Kansas State Football: The Best in the Big 12

A minor in Econ sounded like a resume builder. I had to take two more Econ classes to fulfill the 6-class requirement. I figured I could do that. Junior year, my mid-terms, then finals happened for a Macro or Microeconomics 200 level course. I was dreaming about supply and demand curves. I was waking up exhausted. Who wants to dream about that? And really, the class was quite dry. Conversely, Jim had an enterprising Econ professor, "When the price for pizza increases, the demand for beer decreases." My grad student teacher used barrels of oil examples and had a thick accent. At the time, I couldn’t see the bigger picture. With one 300 and one 400 level class, that together would span another year, my get-a-minor-in-Econ consideration was short-lived.

Twenty years later, Jim started this business. He loves education, loves to educate others, and really loves public speaking. Plus, he’s pretty good at it. His former job had him interfacing with Human Resources at CSI (College of Southern Idaho) here in Twin Falls. They offer some great Community Education classes taught by regular non-professor folk. Always wanting to offer a Penny Stock class, they contacted Jim to see if he’d be interested in teaching one. While Jim is not a stock picker a la Mad Money’s Jim Cramer, he thought, “Could be fun!”

Jim Cramer of Mad Money

He created a Stock Picking Simulation and presented info about how to evaluate penny stocks. But the one item he got the most positive feedback from was a video he recommended as homework. It’s an easy-to-understand explanation of how the U.S. economy works. It’s presented by Ray Dalio. I had never heard of the guy prior to 2015. He’s a hedge fund legend and now that’s he’s getting older, he’s imparting his knowledge instead of guarding his trade secrets. I think it’s cool to see the change in his interviews over the recent years.

This overview of the economic U.S. machine is not dry. Nor does it make me dream about supply and demand curves in order to commit the concepts to memory.

Why spend 30 minutes watching this? Dalio explains it best, “The economy works like a simple machine but many people don’t understand it. Or they don’t agree on how it works. And this has led to a lot of needless economic suffering. I feel a deep sense of responsibility to share my simple, but practical, economic template. Though it is unconventional, it has helped me to anticipate and sidestep the global financial crisis. And it has worked well for me for over 30 years. Let’s begin.”

Hopefully it was worth your 30 minutes. While I don't think this is a perfect explanation, it is Ray's view. I wish there was a bit more about the difference between monetary and fiscal policy, but this is a great starting place. It's got a lot packed into 30 minutes.

Being a business owner, my takeaways currently consist of: how using credit increases productivity, how decreasing debt increases spending power, and how our government's involvement affects this cycle. Having completed my Series 7 exam in November 2018 (although I am not currently registered), I also more completely understand U.S. treasury bonds and how that supply affects the Federal Funds rate. It even gave me some insight on the "too big to fail" theory regarding the government bailout of AIG in 2008.

You will probably take away something completely different based on your experiences. And I love that.

I did walk in 1998 even with one unmet class requirement: Spanish! How that’s applicable to a Bachelor’s in Business, I’ll never quite understand. At least that was more helpful than my Forestry and Natural Resources class. Pine beetles are a part of my permanent knowledge now.

Graduation from Kansas State University's College of Business

Officially, I graduated the same year as Jim, 1999. Yes, I’m older than him by 5 months. He reminds me of it all the time. Then I get to remind him that his distinguished premature grey makes for him looking older than me. It ends well. And it makes us both laugh. Keeping your sense of humor about you is good.

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* Background pizza cover photo courtesy ofunsplash-logoAlan Hardman