Inflation, Deflation, and Habit Curation: Living Through the Pandemic and the Future of the Dollar
March 5, 2021
By Matt Miner, MBA, CFP®
Today I re-release my late-May-2020 pandemic reflections on financial information sources, asset values, and curating habits during a pandemic - or at any other time. What strikes me in this time capsule is how little my thoughts changed on these topics.
On the other hand, as it relates to Covid-19 itself, I’ve become both less fearful and more sober. I am less fearful personally and for my family, and more sober for American society: the disease burden, children’s development and academics, mental health, drug abuse, loneliness, institutional health like Blair Sheppard and I discuss in our interview, along with rising risks to civil liberties, institutions, and American cohesiveness, at least as portrayed by the media (WSJ paywall alert).
In today’s episode I discuss:
Filters you can apply to evaluate the credibility of information you receive by asking, What’s the source? and Who benefits?
Inflation, Deflation, and what to do about it
Leveraging disruptions (like a global COVID-19 Pandemic) to curate your habits
Case study: What’s worked and what hasn’t as I’ve leveraged Charles Duhigg’s The Power of Habit, and James Clear’s Atomic Habits framework
Emergency fund during a crisis
Business and Career management during a crisis
The next crisis - It’s coming!
Happy Listening!
TRANSCRIPT
[00:00:00] Matt Miner: Most of today’s show was recorded on May 29th, 2020, about two and a half months into our family’s version of Coronavirus lockdown. The shock of the onset of the Coronavirus pandemic had only begun to subside.
This flashback Friday episode arrives about nine months later and the world is a different place. We grieve the loss, nationally, of about a half million people. Vaccines and herd immunity seem to be reducing the number of infections and hospitalizations. As I record this, new hospitalizations are down about 50% from late 2021. I’m thankful for this, and hope the trend is durable.
When I recorded the episode in May 2020, I knew only one person who had been diagnosed with the coronavirus. Today I may know 50 who have been infected. Most of their illnesses have been mild. 3 people have become quite ill, like a really bad flu. One man, who was my age, was hospitalized and put on oxygen, though he was thankfully not intubated. And one old friend who had all the risk factors died.
My own attitude about the pandemic is less scared than I was in May 2020. I believe I am better able to judge the real risk to me and my family, but I am more sober overall. As I think of the disease burden, children’s development and academics, mental health, loneliness, institutional health of the kind Blaire Shepard and I discussed earlier this week in our interview, and big risks to civil liberty and American cohesiveness. As it relates to evaluating information sources, asset inflation and deflation, and the power of habit, my thoughts are unchanged from May 2020.
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Hey, and welcome to the Work Pants Finance Podcast. I'm Matt Miner, your money guide. Work Pants Finance is the show for MBAs, entrepreneurs, and other professionals who want their financial plan to work as hard as they do. This is flashback Friday: Inflation, Deflation, and Habit Curation. You can read more at workpantsfinance.com/6.
I received several questions recently regarding whether we're about to enter into a time of runaway inflation. First, I wanted to define what these things are. Inflation is an environment where prices are rising and the value of the currency is falling. If you think back to what things cost when you were a kid, candy bars used to be 50 cents in the vending machine. I think mostly they're $1 now.
Deflation is the opposite. It's when prices are falling, and the value of the currency is actually rising, and that's been a very rare in our American context, really, the depression and some times like in the real estate market in 2009, where a house in Las Vegas that used to cost $600,000 started costing $300,000. That was deflation, at least for the owner of that piece of real estate.
I don't have a specific view on inflation rates in the future. I would just like to say that whatever inflationary pressures are out there, there are deflationary pressures at work too. If you think about the price of airline tickets and cruises, they are way down. There has been some inflation or at least increase in the price of food, but it's not clear that that's actual inflation of food prices because there are all these costs that have been added in the value chain as people have reacted to the COVID pandemic.
The price that's being paid to farmers, for example, has not gone up during this time. In this context, I want to make two points. The first is a life skill which is that when you receive information, you need to ask yourself the question, what's the source and who benefits? If you'll ask these questions about purveyors of information, the answers will sort of help you understand what may be motivating the message.
One of the people who asked me a question about this had watched a video with an inflationary claim and that claim came from two well-known pitchmen for precious metals investing. One was a guy who sold gold and silver and earned a markup on the sale and the other ran a precious metals mutual fund. These guys were looking to benefit through a commission or a fee if you implemented their advice. Their profit motive is an important data point in considering their claims about inflation and why their version of precious metals investing is the answer.
The second point relates to what to do about inflation. In an inflationary period, you want to own productive assets like public company stocks, directly own real estate, or directly own private business. In addition, directing some of your bond allocation to inflation-protected securities is a reasonable idea. Now I have a view or an opinion on gold investing that is beyond what I can tackle in a quick tip, except to say that gold should represent an incredibly small part of any investor's overall net worth.
You should be aware also that if deflationary forces rather than inflationary forces are ascendant, historically, dividends and rents fall more slowly than the deflation rate. While the underlying nominal asset value comes under pressure in a deflationary environment, the cash flow, the dividends, and the rents does not experience the same level of decline, at least not as rapidly as asset prices adjust.
In the case of that home in Las Vegas, while the house might have lost 50% of its nominal value, rents did not decrease by 50% from 2008 to 2010. There's your two-part quick tip. Evaluate the motives of the information sources in your life and for your investing. Then point two, a sensible portfolio of globally diversified public securities directly on real estate, and private business remains a wise choice in almost any scenario.
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As our family has lived through the coronavirus epidemic, we've taken this chance. In particular, I would say I've taken this chance to examine my habits. The quarantine has thrown all of our habits up in the air, and this seemed like a good time to focus on cultivating the ones that I want in my life and trying to leave no space for the bad ones that I don't want.
In this, I've been really helped by two books in particular. Now the first is The Power Of Habit by Charles Duhigg, and the second is Atomic Habits by James Clear. These books have been kind of blowing my mind. Duhigg writes about the science and neurology of habits.
The most interesting thing about his book is that he will make a theoretical or psychological point and then he will demonstrate all of it with kind of amazing cases, ranging from Michael Phelps's routine on race days, to how the retailer target learns the most intimate details of its customers lives through the customer's shopping habits, and then a really interesting example about how preventing food vendors from selling to Iraqi protesters eliminated violent riots in Kufa.
James Clear's Atomic Habits is a process book. It's more of an operations manual. He takes a habit science and shows how to implement it in your life. These books together for me have been a potent combination; the theoretical background laid out by Duhigg and compelling stories from Duhigg as well, and then the how-to book from James Clear.
James Clear offers a great framework for habits. He says, basically if we want more of something, we need to make it obvious. If we want less of something, we need to make it invisible. If we want more of a habit, we should make it attractive. If we want less of it, we should make it unattractive. If we want more, we should make it easy. If we want less, we should make it difficult. If we want more of it, we should make it satisfying. If we want less, we should make it unsatisfying.
That's the framework that guides James Clear throughout the book and that he uses to illustrate his how-to points. I'm now in my fourth week of habit redesign, and I've had some success and some not success. I'll share a couple of things that I've learned as I've tried to put these two books into practice in my life. For example, when I get up, I place my alarm clock across the room.
This makes it more difficult to go back to bed. I've also changed up my personal morning routine. I realized through this process that I don't enjoy shaving after my workout when I'm sweaty. On the other hand, I do like shaving right before my shower because I like rinsing my face in the shower, but of course, I shower after my morning workout.
What I realized was that my preference for shaving before showering was actually serving as a deterrent to doing my morning exercise routine because I hated shaving after working out. When I framed the problem this way, the answer was clear. I needed to shave before my workout because working out is more important than shaving right before my shower.
Again, this seems like a small example, but this was pretty revolutionary for me. Now I shave before my workout, and when I get home, I hop straight in the shower. This makes it easier for me to follow through on my workout intention by eliminating an excuse about shaving my sweaty face. I've had some good success with my fitness plan.
The night before, I have a checklist that says everything that I should lay out in order to move quickly through my early morning routine. This makes the routine obvious. The result is that I'm dressed in my running shorts before I'm fully awake. This makes the routine easy. By the time I finished my coffee, done some reading, and I'd have to go take off my shorts in order to avoid a run, and that would feel wasteful.
By already being dressed in workout clothes, I've made it easier to do the workout and difficult to skip, so I go run. I've added or attempted to further cultivate my journaling habit. I've put it on the schedule with a goal of a short entry. This has tried to make it obvious and make it easy. My biggest flailing so far is around my creative work like writing and podcasting. I have scheduled this time for almost 90 minutes each day, but I still find that it gets squeezed.
This area of my life needs the most improvement right now. I'm giving consideration to not eating anything that day until after I've completed my creative routines for the day.
I don't know whether I could stick with this, and I haven't dreamed up the right commitment device.
What I think I need is for the refrigerator to stay locked until I finished this portion of my work, but I have a feeling that would be too hard on the rest of my family. Probably would generate some strong objections from my wife and children. I have not totally cracked the code on that one yet.
Those are just some examples. This list goes on with habits for email and other messages, my business development work, when I'm available for meetings, eating and drinking, time with each of my children and with my wife, time for us as a whole family. I'm far from perfect in any of these areas, but by applying Duhiggs' research and James Clear's framework, I have seen some real progress and I've been really thankful to take this coronavirus quarantine time and spend it working on habits. To sum up then, exercise, reading, and family have flourished during the pandemic. Work has been good in many ways but has come under pressure, both creative work and my professional work, from just the distractions of being home around people I enjoy and in a non-professional environment all day. Because of habit redesign, these areas have largely flourished during this time.
Of course, friends, travel, and socializing in real life have faded to almost nothing. It's going to be interesting to see how we begin to restart those other important areas of our family's life, and how getting going again in those areas will bring pressure to bear on these other habits that I've been trying to cultivate during the quarantine.
I'm hopeful to be able to keep the new good, add back some of the old good, and hold at bay some of my less desirable habits. I think this just really highlights the importance of doing well in the areas you can, knowing that there will be a time to pivot and emphasize other areas at other times.
Crises highlight the need for preparedness. An emergency fund is an important part of being prepared. Please check out workpantsfinance.com/emergencyfund for my white paper on the topic.
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Besides habit cultivation, there've been some other stuff that we've learned during the pandemic; one is pandemic dining. This has forced a high-degree of grocery shopping design to timeout our fresh foods. For example, you eat the pineapple before the pears, and romaine lettuce stays fresh the longest. We've learned these things as we've limited trips to the store to about once every three weeks and then have filled in with just narrowly tailored deliveries in the meanwhile.
Now, during this time, if you're seeking work or business, it's a good idea to shoot where the ducks are at. At the moment, that looks like government, logistics, consumer staples, online and remote services, entertainment delivered virtually, including this fabulous podcast, pharma and med devices, virtual healthcare services, freelancing and self-employment of various kinds, and then electronic contactless payment systems.
These are just my ideas that I've come up with of areas that could be a good place to aim as you seek to cultivate either employment or new customers in this world that we're living in with the global pandemic of spring 2020. Now, if you have work or customers, it is an incredibly important time to be amazing at your job and also to show your customers some love.
I have several recent MBA graduates seeking advice from me right now. For those whose job offers are still viable, my message to them is that they need to consider every action they can take to be the one who still gets start work this summer or fall, not the one whose offer is either pushed back or rescinded.
Thinking about your hiring manager as a real person and then taking steps to cultivate a relationship where you help that person even between now and the time that you start is an extremely good idea. All right, next up. While this crisis is still raw in your thoughts, ask yourself what you want your life and financial plan to look like when the next shot comes along.
Are you satisfied in your family and your friendship relationships? Are you trading the right amount of time for money? Were there things that the pandemic made you wish you'd done before the pandemic, from getting a haircut to taking your family traveling internationally? As you think about these things, write them down and evaluate your desire to do them once the pandemic eases.
Then put those events on the calendar and make a plan so that those life goals actually happen. This crisis was the first time our families’ plans were stress-tested since coming out of business school in 2009. For the most part, our plans stood up well to the stress. I'm thankful that we've always been focused on family and friends first.
I am thankful for the decade of choices we made to be debt-free, to live in a place that we love, to live there with a very conservative operating budget, and with a high degree of family independence in my career, and in our choice of homeschool for our children. My main regret through the pandemic has been my slow progress on Work Pants Finance and that I didn't have this platform built and launched before all this happened because there has been a lot of stuff that I've wanted to share with you.
There you have it. Advice for evaluating information, preparing for inflation or deflation, habit-sculpting when everything's up in the air, emergency funds, and being ready for the next crisis. On that note, here's your free preview of the next crisis. None of us knows what it will be or when it will get here.
All we know is it's coming, and when it arrives, we'll all be surprised. That's just how crises work.
Next Wednesday’s show focuses on acting locally and within your circle of control as I reflect on the Blair Sheppard interview. Then, for flashback Friday, I welcome Anne Mercogliano back to the show with a story of how she got into business with Gretchen Ruben. You won’t want to miss it. Until then, this is Matt Miner, encouraging you to make a financial plan that works has hard as you do.
[00:15:55] Disclosure: Matt Miner is a fee-only, fiduciary financial advisor and Founder & CEO of Miner Wealth Management, a North Carolina Registered Investment Advisor where Matt provides personalized, unconflicted, advice to clients for a fee. He’s also my dad, so please be nice when you talk to him! Matt is a Certified Financial Planner Professional and holds a Series 65 securities license. He earned his bachelor’s degree in Finance from Arizona State University, and his MBA from Duke University’s Fuqua School of Business.
Work Pants Finance is Matt's financial media business where he talks about work, entrepreneurship, kids and money, taxes, investing, and other personal finance topics. WorkPantsFinance.com exists to share wisdom and provide general financial information. It is not financial, tax, or legal advice. You are an individual and probably need personal advice for your specific situation. You should consider building relationships with helpful, caring, and competent professionals who understand your unique context and can provide advice that is tailored to your needs
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