Growing Up Gen X

Featured Image: Oscar the Grouch (arguably the Gen X mascot) with Caroll Spinney, who played him until 2015. Spinney died on December 8th, 2019. This article is dedicated to him.

If you were to believe mainstream media, the only two generations to ever exist are Baby Boomers and the children of Baby Boomers (Millennials). The world is so focused on these demographic bulges that other groups are completely ignored.

One would think a neglected demographic presents an opportunity for businesses. While executives salivate over Boomers and Millennials, few are serving the unique needs and wants of Generation X.

Who is Generation X?

Generation X is the group of people born between 1965 and 1980. The bulk of this generation were children of the 1980s. This is a smaller cohort than the Baby Boomers, explaining why they tend to be ignored – both economically and politically. Of course, ‘small’ is a relative term. There are about 65 million Gen Xers in America as of 2018. I am one of them.

Not once in my career – which is approaching 20 years – have I heard of a business strategy targeting Generation X. Not once! This strikes me as a massive gap in the marketplace.

Of course, there are industries that fulfill the needs of the current Gen X age range, but that association is purely coincidental, as opposed to strategic. For example, new single family homes tend to be purchased by people in their mid-30s, regardless of what demographic to which they happen to belong. Home builders target people in their mid-30s, not a specific generational cohort.

There are opportunities to truly service the under-serviced generation. However, to do so requires a deep understanding of the collective experiences that shape that generation’s current characteristics. Below is a summary of those experiences, some second-hand and others personal.

I encourage you to share your experiences in the comments section.

Children of Divorce

As children, Generation X saw their parents divorce at a rising rate compared to previous generations. Indeed, by the time I reached high school it seemed less common for someone my age to have married parents. Intact nuclear family structures were a rarity.

In the 1980s, divorced parents rarely had shared custody of their children. This meant that the child lived with one parent full time and saw the other on weekends, if they were lucky. Most of my friends saw their ‘other’ parent far less.

The unbalanced parenting burden created emotional and economic stress for the parent with full custody, eroding the parent-child bond. Meanwhile, because the part-time parent hardly saw their kid, interactions were usually fun and unrestricted. In the child’s eyes, the full-time parent was a tyrant and the part-time parent could do no wrong. One parent was vegetables and the other was ice cream.

These dynamics resulted in many non-traditional family structures and relationship issues that persist to this day.

Latchkey Kids

The 1980s saw women increasingly enter the workforce – particularly in the middle and upper classes. Whether divorced or not, the home tended to be empty for most of the day. While daycare existed, many kids did not attend – some for economic reasons, others because of availability. As a politically neglected generation, social programs for children were being stripped.

Consequently, many kids in the 1980s not only went to and from school alone, they returned home to an empty house.

Picture giving your six year old a key to the house so they could let themselves in after school. This was reality for many.

With this being the norm, adult supervision was absent in much of the Gen X kid’s life, compared to previous and later generations which benefited from intact families, stay at home moms, daycare and nannies. Generation X, in many respects, raised itself.

A meaningful portion of Generation X was also the children of Vietnam vets and crack heads. A combination of PTSD, inebriation and death removed the father from many families that needed them the most.

This created a very independent generation. It also created a situation not unlike Lord of the Flies, with rampant bullying and stupidity. The law of the jungle prevailed.

This went beyond kid-to-kid interactions. Since latchkey kids were left on their own so much, they became easy prey for adult pervs. Gen X kids were fully aware (and warned) of child abductions, but they were on their own to deal with them. The reality was that abductions were still rare, but the fear remained palpable. There are several high profile cases of kids who were my age at the time going missing. In all these cases, the kids were unsupervised.

Some of these kids made it through the filter to become emotionally healthy and independent adults. Many did not.

New to Dumb Wealth? Start Here!

We Were All Going to Die Part 1: Nuclear Annihilation

While not the first generation to live under the dark clouds of the cold war, Generation X was the first to be completely helpless from birth to (eventual) death.

During the early stages of the cold war, Baby Boomers were taught how to survive a nuclear war. Generation X was taught to hope they don’t survive. Baby Boomers also grew up believing they could stop nuclear proliferation. With time, however, Baby Boomers’ anti-war idealism morphed and they elected Republicans. Consequently, Generation X spent its childhood watching Reagan’s unstoppable massive buildup of nuclear weapons, knowing the extermination of humankind was at the press of a button.

There were many popular songs made in the 1980s about the cold war and nuclear apocalypse: 99 Red Balloons (Nena), Guns in the Sky (INXS), Nikita (Elton John), It’s a Mistake (Men at Work), Forever Young (Alphaville), and so on. To this day, Mad Max (1979) is the reference people use to describe a post-apocalyptic world. Also released around that time (1984) was the scariest mockumentary ever made: Threads.

This was pop culture based on impending doom. Gen X grew up in the shadow of fear.

Since birth, Generation X has lived at the whims of others and the hope that cool heads prevail. If there’s anything that explains the generation’s cynical ‘fuck it, I don’t care’ attitude, it’s the persistent worry of nuclear annihilation. Of course, this is oversimplifying. Generation X cynicism is caused by a combination of general disappointments in humanity.

As Generation X approached adulthood, the cold war came to a close. Russia and the former Soviet Republics suddenly became allies we needed to assist through the transition to democracy. Without an enemy hidden behind an iron curtain of secrecy, the threat of nuclear war declined and the Doomsday Clock was turned back to 17 minutes to midnight by 1991. During the peak of the cold war in 1984, it stood at 3 minutes to midnight.

With the Doomsday Clock currently back at 2 minutes to midnight due to inaction over climate change and the (once again) threat of nuclear war, I wonder if today’s kids will grow up with the same cynicism as Generation X.

We Were All Going to Die Part II: AIDS

If you have sex you will die. That was what Generation X was taught as we came of age during the late 1980s. When you tell a kid something will kill them enough times, you will have a lasting impact on their behaviour and attitudes.

The AIDS epidemic created mass panic during the 1980s because people didn’t know how it was transmitted. Until more was known, AIDS patients were ostracized, even by the medical teams treating them. The disease was a death sentence, putting a halt to the sexual revolution in which Baby Boomers actively participated.

Because AIDS is more easily transmitted via anal sex, it was rampant in the gay community. In the early years, it was referred to as the ‘gay plague’. The disease destroyed gay communities as older gay Gen Xers (and younger Baby Boomers) saw many of their friends die. I speculate that AIDS slowed the acceptance of gay men and women in general society – either because people feared the disease or because of ultra-religious convictions that AIDS was a curse from god.

People still had sex during the 1990s. But promiscuity and casual encounters declined considerably. Monogamy became the norm for Generation X.

The Birth of Grunge and Hip Hop

Out of Generation X’s chemical soup of cynicism, nihilism and angst arose new forms of self expression. The two most notable being grunge and hip hop, which overflowed with testosterone – both an outward projection of internal struggle, disenfranchisement and anger.

In particular, the destruction of inner-city New York City during the 1970s and the crack epidemic of the 1980s combined with cultural isolation and helplessness to cause black youth to take matters to the street corners. Rapping arose from street culture but it was also the antithesis to street life, providing a non-violent outlet for rivalries and an alternative to drug dealing. Intertwined with the other elements of hip hop – graffiti, breakdancing and DJing – a cultural phenomenon was born and soon spread outward. The message of poverty and struggle resonated with a large part of Generation X, which could relate – even from the suburbs.

Technological Transformation

Generation X witnessed the demise of the typewriter and the birth of the personal computer. With relative ease, we transitioned from the Dewey Decimal System to Google.com, books to iPads and rotary phones to smart phones.

While Baby Boomers also experienced these changes, most were too used to the analogue world to easily transition and were late adopters. Baby Boomers are now technologically capable, but lack the digital instincts of younger generations. In contrast, Millennials and Gen Z were born in a digital world. This is all they know and what they’re used to.

Generation X is uniquely positioned to straddle the analogue world of Baby Boomers and the digital world of Millennials, allowing them to relate to both worlds.

I’m sure there is tons of stuff I’m missing. There is probably enough to fill a book. I’d love to hear about your views on this. Please share your thoughts on the Gen X experience to the comments section below!

Police Officer: How to Protect Your Wealth from Thieves

This comes straight from the writing of a police officer on Reddit, who was answering the following question on how to protect your wealth from thieves:

“Former burglars of reddit, where is one place people should never hide valuables?”

Here is his answer:

Hiding your valuables is fine, but ideally you don’t want to get even to the point where someone is in your house. Most people worried about where to hide their valuables would be better off spending time considering their house’s security from the outside.

My advice:

  1. Front perimeter. Unless you have a gated mansion then your front door is going to be accessible from the street. That means there is no benefit security-wise in high fences, prickly hedges, etc. All these do is screen your house from view, making it far easier for someone to break into without being seen. If you’re looking at two houses and only one can be seen from the road then you’re 100% going to be breaking into the other. That’s why picket fences, low hedges/walls, etc. are ideal. A gravel driveway is a nice touch too – nice and noisy so anyone approaching your house makes their presence known.
  2. Rear perimeter. Completely the opposite advice is true here. At least here in the UK, the rear of most houses is shielded from view, so anyone getting into your back garden will have undisturbed access to your house. So you want to shield your house from view and make access difficult. Tall hedges, solid fences, prickly bushes, etc. are your friends.
  3. Flat rooves. Here in the UK it’s common to have a single story garage with a flat roof attached to your house. Often the house will have a window that opens over it. That window needs to be closed.
  4. Exterior lighting, cameras and alarms. Both make a house much less attractive to a burglar. Lights (both motion-sensing and just a simple porch light) make someone scoping out the house or trying to force entry much more visible. Cameras and alarms are pretty obvious deterrents. Again, it’s about making your house a less tempting target than others as opposed to creating an impenetrable fortress.
  5. Sheds. Sheds are a soft touch for burglary. Garden tools, bikes, DIY tools, etc. are expensive and very easy to sell second hand. Go on Ebay and look at the price of a decent second hand petrol mower or leaf blower – that’s easy money and low risk when you consider that it takes about 2 seconds to cut off a padlock and no-one will be sleeping in the shed. Don’t leave expensive kit in sheds, cover the windows so that the contents can’t be readily seen, and install motion-sensing lighting to cover them. If you’re keen as mustard, there are even cheap wireless alarms that link to basically a doorbell in the house. But the best advice is just be sensible what you’re storing there.
  6. Breaking and entering tools. Don’t leave your ladders and other tools that can be used to break into your house readily accessible outside it. I’ve seen houses with open upstairs windows and a set of ladders stored visibly down one side of the house. If you’re leaving out tools that a burglar can use to break into your house then you’re doing it wrong.
  7. Tradesmen. When you park your van outside your house you are saying “I’ve got expensive tools here”. Don’t leave them in your van.
  8. Letterboxes. This probably isn’t an issue for the states, but here in the UK we have letterboxes through our front doors. Most people also keep their house and car keys by the front door. If you can look through your letterbox and see your keys then you need to move them – they can easily be hooked through the letterbox using e.g. the top segment of a fishing rod. Then someone will be driving around in your car with a set of keys to your house.
  9. Spare keys. Don’t hide a key outside your house. Certainly don’t hide it in a fake rock etc. If you absolutely must, then at least bury it in a flower bed or something. You’re better off leaving a key with a friend (or burying it in their flower bed, if you must) – but don’t give it to them with a keyring identifying your house! Also, don’t leave a spare key in your car – someone breaking into your car won’t need to look up your address – there’ll always be some paperwork or other in there that identifies it.
  10. Perhaps most importantly, get to know your neighbours and share your plans with them. If you’re going away for a week then tell them. Neighbours who generally know each others’ habits will notice when there is a strange van parked in your drive, or lights are mysteriously turning on whilst you’re out of town. And they’ll be more likely to act rather than minding their own business.
  11. Be conscious of what you can see through your windows. For example, as you approach my front door you walk past the window to a room full of various computing kit that look expensive. When I’m not using the room, I normally close the blind simply to conceal what’s inside – otherwise I’m suggesting to anyone calling at the house for any reason that there is expensive gear lying around the place.

Finally, break into your house. Or at least, figure out how you would. That will show you the weaknesses. When I was a student I was really bad at locking myself out of the house and would regularly need to break in. I’ve climbed the back fence to access a backdoor I suspected was left unlocked, used a piece of card to flick open the locks on sash windows, managed to wriggle down an old coal chute into the cellar, etc. Each time I’d fix the problem but next time I was faced with the need to get inside I’d find another way in. It’s a very helpful exercise to test your security.

Time to Stop Loving That “Hot” Portfolio Manager

…and by “hot” I’m not referring to looks.

Rather, I’m referring to a portfolio manager who is having a hot streak of outperformance.

The fact is, manager outperformance is not persistent and it is not a predictor of future outperformance. Indeed, most portfolio managers see their hot streak come to an abrupt end within a year. Almost all meet their demise within two years.

The lack of outperformance persistence suggests any hot streak is the result of luck and not skill. Therefore, the active management fees charged by portfolio managers are not worth paying. Investors would be better off using low cost index funds.

This is all based on research performed by Standard and Poors:

For funds categorized as top performers in September 2017, 47% maintained their top-quartile performance the subsequent year. However, there was a dramatic fall in persistence afterward—just 8% of domestic equity funds remained in the top quartile in the three-year period ending September 2019. This result (8%) is consistent with the notion that historical performance is only randomly associated with future performance.

They continue…

An inverse relationship exists between the time horizon length and the ability of top performing funds to maintain their success. Less than 3% of equity funds in all categories maintained their top-quartile status at the end of the five-year measurement period. In fact, no large-cap fund was able to consistently deliver top-quartile performance by the end of the fifth year.

What about poorly performing fourth quartile funds? Could they experience a swing into outperformance territory in subsequent periods? Unfortunately not.

Fourth-quartile funds were most likely to be merged or liquidated across categories over the five-year horizon. This supports the view that underperformance typically precedes a fund’s closure.

Yet another nail in the coffin for active managers and the exorbitant fees they charge. You’re clearly better off ditching that hot portfolio manager for a portfolio of low cost index funds.