The "Future" value vs present value

To start off I will say I am fortunate to be part of a family who has the money to give me whatever I want in terms of school choices, without the risk of financial aid packages. This whole financial aid is very risky because think about if one were to become a doctor and need financial aid for those 12 years. Man you would be looking at some pretty large numbers in parentheses aka losses/debt. I personally have my parents to thank for the money set aside for me in an after-college fund, which helps me to stay solvent on the balance sheet. However, my personal wealth is a little bit different because the money that I’ve made in the summers goes to my yearly consumption because I have the blanket of zero debt.

In terms of future wealth I put together a Roth-IRA to ensure that once again I am only making money, so one could say I’m debt averse because I choose future value of more present consumption. However, my decisions are much different than someone who has to pay of financial debt along the line and be conscientious of how much they spend/save. For future income I feel my parents more than just myself will make sure I have all necessary accommodations like apartments after college/ saving up for a house in the future. This might look bad to my peers, who believe that I’m too dependent on my family wealth, however why not enjoy the time I have right now to spent money on the things I want while having to worry about future implications.

In addition, I believe that how one grows up and how the parent’s monitor their wealth is reflected on how the children learn to become financially solvent. For instance my family has paid off all financial obligations such as cars, homes, etc; enabling them to stay financially solvent. Obviously this means that they are very debt averse because they don’t rack up the expenses, due to knowledge about future consumption and to ensure a very high standard of living.

The whole major decision was based more on the future income more than “enjoyment” because I grew up in an area where money is king and that spending out of your means is just something that isn’t done because one might want to keep all obligations or liabilities to a minimum and ensure that they can start from a strong background and continue to accumulate wealth, without having to really worry about having to pay off large financial aid debt. This can be seen through my sister, who is a recent graduate of Northwestern University and currently a student at Kellogg (NU’s business school). However, once again she has her whole student tuition paid in full and no debts are accumulating; enabling her to be financially solvent with no credit card debt, etc.

This whole risk management I feel starts with the parents guidance and it has to be said that different people in different financial situations would treat this differently. However, I am luckily part of the population with absolutely no debt; enabling me to take advantage of all present opportunities available to me.

The True Cost of Opportunism

Today I have a very disappointing but real example of someone I know not being opportunistic, this is the story of how my best friend’s grandfather missed out on becoming a billionaire. It might sound crazy but his grandfather had an opportunity to invest/become part owner of McDonalds. His grandfather was a friend of Ray Kroc, the founder of McDonalds, and could have invested in the beginning when McDonalds was a new company. To think that if his grandfather would’ve invested with Mr. Kroc, I would never have met him because he would’ve been living a dream life with all the money his family could ever need/want in some mansion in Beverly Hills. This story is definitely a prime example when someone didn’t act opportunistic because he was faced with a very hard decision of investing almost all he had with Ray Kroc and found the company known as McDonalds. One might think that he was incredible stupid not to take up on that opportunity but he made a decision that I feel many people would struggle with and contemplate if this would be a smart move. Obviously someone looking back would say imagine if he would’ve invested all he had and think that now his family would be rich beyond their wildest dream. 

I believe that he made his decision based off of the risk of losing everything, a concept that many people worry about when they make a large investment. While this opportunity wasn’t unethical at all it still resonates with the concept of risk/reward. This idea of risk-taking is a big reason why people contemplate their decisions many times in their head and end up either making a lot of money or losing a lot of money. While I’ve never really had a long conversation with his grandfather I can definitely see why he made the decision he did, while I might disagree with that decision, I haven’t been in his situation before and haven’t needed to make such a risky decision that could’ve crippled him financially. In addition, risk-taking is sometimes seen as gambling, which is a difficult think for a new businessman to rationalize because an investment can be gone as quickly as the company starts to take off. I admire his decision to think before he invested a lot of his money, however as I feel I am a risk-taker, I believe I would’ve invested even though the risks were very high.

This story to me tells a real story about opportunism because every day people are faced with risky decisions and whether or not to either invest in the stock market or make a less sever decision like whether or not to go to a certain school over another. This story just makes me wonder what opportunities will come my way and how I will make decisions to either go with the higher risk decision or not. I hope that you guys reading this will just picture in your head what life would’ve been like for my best friends family if his grandfather would’ve went with the risky decision and invested all he had into McDonalds.

my experience with organizations

My experience with organizations starts with my first job, a lifeguard at Northwestern University. While I was working there was a manager switch, which was that the head of the lifeguards switched jobs into another program within Aquatics. This was a difficult change even though I was a new worker, since I had to learn a different management structure. I feel that even though I was a new employee, it was harder for me to get used to working at a new setting and learning a different supervisor and their management methods. The structure of the organization was there were over 20 lifeguards, which are under 3 “head guards” and the head guards are underneath the true Aquatic Manager, which was the where the change occurred.  This structure isn’t very complex, but since there was a change in the upper level manager, it pushed the employees (lifeguards) to really work together to learn the new management structure. I feel that although my organizational change wasn’t as important since I was a lifeguard, but it meant I had to learn other ways of providing care and the nuances of the new manager.

Just like most other high school students I wasn’t set on going to one school and sent out many applications to see which school I would fit into. My final choices came down to U of Michigan, UIUC, SMU and Miami University (Ohio). This in fact is a transaction cost because I had to choose one of the schools at the cost of declining the other schools. I feel this transaction cost is very familiar to college students because a student might not get into the major he/she wanted to and instead of going into general studies they might go to a different school where the student was accepted into the major of their choosing. This is exactly what happened to me at the University of Michigan because I wanted to go into their business school, however I was accepted into DGS, which helped me to decide to go to Miami Ohio because I was admitted to their business school. However, after one semester at Miami University, I decided that I wanted to switch to Economics, which was out of their business school; causing me to again decide that I should transfer to UIUC because of the improvement in the ranking of Economics. Once again this is definitely a transaction costs because I chose to give up my friends and my business school spot in order to go to UIUC, where I am an Economics major.  This example of a transaction cost is very relevant because I had to make a very big decision that impacted my not only my academic and social experiences, but tuition costs, adapting to a new environment and time of travel to school. My transaction costs might be different than other students, but I feel like every student had to make a decision which school to go to, major decision, social expectations (greek life) and the tuition costs. 

I am in Prof Arvan econ 490 class and am using the alias to hide my identity

I was born on June 17, 1940 in New Haven, Connecticut. My father was a chemist on the Yale faculty, my mother a housewife. They had met ten years earlier at a departmental picnic when my mother had been a chemistry graduate student at Yale. My brother, Carl, was two years older. My father, who was born in Sweden in 1898, had come to the United States on a fellowship to obtain a Ph.D. at the University of Pennsylvania. When his thesis adviser received an appointment at Yale in 1928, my father followed, and continued up the career path as instructor, assistant professor, and associate professor. His own roots were partly in Dalarna, which was the ancestral home of his mother's family, and partly in Stockholm, which was his father's home. My Swedish grandmother was the daughter of a dairy farmer who lived near Hedemora. My Swedish grandfather worked as a clerk for the Swedish railways in the Stockholm station. His avocation was painting, which absorbed more of his psychic energy than his career. At least some of the murals in the Stockholm station are a remnant of his handiwork. Beyond this my knowledge of my Swedish heritage is not expansive. Partly this reflects my father's move to America in an age when travel was both time-consuming and expensive and therefore I lack first-hand knowledge. But it also reflects his taciturnity and also his scorn for history in all forms, even at the family level. He considered himself to be beyond all else a scientist.

citation: http://ideas.repec.org/p/ris/nobelp/2001_003.html