The Facebook Thing

FB Logo How old am I? So old that when someone says Facebook I still think of what was colloquially called The Facebook, the hard-bound directory of Harvard’s incoming class, so vital in laying the groundwork for your future cabal to control the world. The website was named after it. I find myself now wondering a) does Harvard still print it and b) if so, what do the kids call it now?

Some time ago, I made the decision to rise above such faddish things and not join. What’s the point of having a computer and going on-line if you are just going to use it to interact with other people? If I wanted to do that, I could do it in real life.

But I think I may have miscalculated. I had no idea just how pervasive Facebook would become. Two days ago, Facebook announced it had 500 million active users. That is a number so large it is difficult to put it in context. The planet contains, allegedly, 1.8 billion internet users, so Facebook has now roped in 28% of them. At the current rate of growth, 10% a month, they should have everybody around September 2011.

I plan to sign up for an account then. Because I am the last person on Earth who would join Facebook.

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Percentages are the Way You Think

[This Thursday re-run first appeared July 24, 2009.]

Time for another episode in my continuing series People Are Idiots. Previous installments have included how to sell your students wine and how to get rich on the internet.

Car_accident_poland_2008 Today we visit another phenomenon of cognitive misbehavior, what I like to call the Small Percentage Effect.  (It has some other fancy name among behavioral economists. I like mine better.)

Imagine that you have decided to buy the latest, totally cool and sexy, iPod. It retails for $200. You are about to pick it up at a shop near your home when you hear that all the way across town a store is running a one-day special promotion, selling this iPod for only $100. It is a 90 minute round-trip drive, but you gleefully head off to score your bargain iPod.

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Are Smarter People Richer?

A while back, I wrote about the assumption made by many personal finance gurus that rich people are good with money. This is a basic tenet of a variety Blackboard Lecturing Crop of millionaire secrets books, that those rich folks got that way because they knew tricks you don’t. Of course, I don’t think it’s anything like that simple.

A new-to-me blog called Pop Economics (which I found via Smart Spending – Thanks Karen) recently brought up a similar but more philosophical question. Are smarter people better with money?

At one level, it is a silly question. Does anybody believe the contrary hypothesis, that they are worse? More or less by definition, we consider smarter people to be a little quicker to pick up mental skills and gain wisdom. That is what smart means.

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When to Start Collecting Social Security, Revisited

Today is the first anniversary of the posting of one of my few evergreen items, When to Start Collecting Social Security. Coincidentally, just yesterday ISocialSecurityposter2 came across an item in Smart Money that made me realize I needed to update my analysis to include an interesting wrinkle in the Social Security rules.

To recap, a person is allowed to decide when to start drawing Social Security payments from the government. You can get them at 62, at 70, or anyplace in between. There is an obvious attraction to getting it sooner rather than later, and about 45% of those eligible choose to start getting the checks on their 62nd birthday.

The reason that the other 55% hold off is that the older you are when you start, the bigger the checks become. The payments for a person starting at 70 are about 70% higher than for a person starting at 62. (But relatively few hold out all the way until 70. The median age is 63.)

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Should You Invest in Gold?

By now, you have either put a little of your precious savings into gold or you have thought about it seriously. With the advent of gold ETFs (technically a misnomer, they are not truly Fs) it Goldvault_nychas never been easier to buy and sell the stuff. And at around $1200 an ounce, gold is up an impressive 50% or so since the fall of ‘08 and has gained an annualized 12.4% a year for the past decade.

Of course, for most investors, the fact that gold has done well lately is more or less the entire argument in favor of buying it. Subtle justifications are available, but, let’s face it, none of them are as powerful as the primal urge to join the party while you still can.

But when you get down to it, gold is one the more peculiar investments out there. Although it is an exaggeration to say that it is a substance of no intrinsic value, it has several industrial uses and would undoubtedly have many more if it were not so expensive, gold lacks some basic characteristics of a typical investment.

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