Journal of Financial Planning: August 2020
Editor’s note: In the following conversation, Natalie Wagner-Willis interviews Dick Vodra for the What Is Finology podcast, part of the What Is Finology Project (whatisfinology.org), founded by the late Dick Wagner, J.D., CFP®, and his son, Jake Wagner, CDMP. Dick defined Finology as the study of our personal relationships with reciprocity, money, and what money means in our lives.
Wagner-Willis is a Finologist, philosopher, money-wellness coach, owner/founder of Vital Financials, and Dick Wagner’s daughter.
Dick Vodra is an energy and planning consultant in McLean, Virginia, who recently retired from a 27-year career as a financial planner. During his financial planning career, Vodra advised individuals and families on a wide range of personal and financial concerns and was recognized as Planner of the Year for FPA of the National Capital Area and as the recipient of the FPA Heart of Financial Planning award.
In this conversation, Wagner-Willis and Vodra talk about what Vodra calls “Worldview Two,” the framework that treats climate change and resource constraints as fundamental to any planning we do. They explore how people might handle the transition and how money fits in. Although this conversation between Wagner-Willis and Vodra happened before the COVID-19 pandemic, it remains relevant today.
My dad’s [Dick Wagner’s] belief is that money is this bedrock of every human interaction. What I’m hearing from you is that as the world changes, the physical manifestation of economics that is this bedrock of interaction could break down. Do you think money itself as a global system is likely to change considerably?
First, there are lots of forms of wealth. We tend to narrowly define it in financial terms. “Wealth” comes from the word meaning earth, and it was basically where you stand, what you own, what produces life. “Affluence” comes from the word for flow, and thus it is the money flowing through your fingers. So people can be affluent but not wealthy.
If you look at what strong communities have done over time, you’re talking about social capital—the community that you live with. Spiritual capital is the strength of your soul and your relationship to higher powers, if that’s what you believe in, or just psychological strength. There’s personal capital and health capital. Are you healthy? Do you take care of yourself? Do you have a family and a community you can rely on?
And most of those are not financial.
If we asked, “Why do you want to retire” we get answers like, so I can do all the things that I want to do; so I can volunteer, be in nature, do things that don’t involve money. I think it’s interesting that we spend our lives trying to accumulate enough money so that we can live a life that doesn’t require it.
So, you go to church, and you may add your money to the contribution plate, but you don’t go there because of the financial relationship. You go there because of the spiritual relationship and the community relationship. I’ve often felt that the most important things in church happen in the church basement rather than the sanctuary because that’s where people get together and support each other and have potluck suppers. We’ve gone from a world where you had potluck suppers to a world where everybody goes out to eat and pays money.
We’ve over financialized wealth, and we’ve over financialized the world. Money is necessary. If you don’t have money in today’s world, you’re out of luck. Whereas a hundred years ago, there were more social networks to take care of you. On balance, money has been a great thing. But money as the primary medium of society, I think, has not necessarily been a great thing.
One thing I’m taking away from this is that I need to cultivate my wealth outside of financial wealth. It’s wonderful to be sending money to my IRA every month. Nothing wrong with that; continue to do it. But putting all of our eggs, so to speak, in the financial basket is potentially a Finological mistake. Does that ring right?
Yes. And if the world collapses down to the size of your community, the way it often does (think of a post-war world like after World War II in Europe) where the national power sort of collapses and we’re back to a community basis, the people who could make shoes or grow crops or whatever, those are skills that people will value in their community.
Think of California in recent summers, as an example. The main utility there announced that when the situation gets dangerous for fires, they’d preemptively turn off power, potentially for a week. Well, are you prepared for the lights to go out for a week?
Your IRA is not going to help you in that situation. Maybe a generator would help you for a while. Continuing that example, we could have built houses that had two electric lines into them. One for a refrigerator and heat and the other for everything else you do, so that you can have a generator that would keep emergency services on. But we didn’t build those houses, just like we didn’t build houses with two plumbing systems like they have in Las Vegas now. One for drinking water and one for less pure water that you can use for watering your lawn. So what we do is we use the best water in the world to water your bushes in the desert instead of keeping it for uses that we need pure water for. We didn’t think ahead and say, “What do we need quality resources for, and what can we use other things for?”
We spent the last 50 years building the wrong America. We can’t do anything without a car in many parts of the country because we zoned it that way. We didn’t want gas stations and 7-Elevens or schools within walking distance in our neighborhood. We want everybody to have to get into a vehicle to do anything they want to do. Many communities didn’t even put in sidewalks. So think about what could happen. For some of those things, money will be useful; for some of those things, other creativity will be useful.
One of the natures of money is that it doesn’t hold inherent value. It holds projected value, and it holds value in its ability to be converted into something with real value. But you cannot eat money. You cannot sleep inside of money. It will not keep you warm when it’s cold outside. And therefore, if the world stops projecting value onto money, it’s instantaneously worthless.
If we’re living into a world where the financial system has the potential to break down, we need to be cultivating our connection to real resources if money suddenly becomes not a means to those ends.
Right. Some people have simply defined money as a claim on future energy. If the energy isn’t there, then it doesn’t matter how much money you have. If you have a lot of money and there’s no food in the grocery stores or on your farm or wherever you happen to live, that money is not going to be terribly useful.
If we started to realize this at an emotional, fundamental level, then we could start rebuilding our lives and our societies so that we would be better, more resilient toward the kinds of changes that might happen. The problem that we face in that is you might say, “There’s no money in it.”
If you joined a community clothing exchange, and you put your son’s clothes that he’s outgrown into the box, and somebody who’s got a 5- or 6-year-old takes them out and their child is able to use them without going to a clothing store, that’s a great system unless you’re selling clothes or making clothes. Thinking of the people who own the building that the clothing store is in, or the people who own the shipping company that moves the clothes from Vietnam to here, or the people who own the TV stations that rely on advertising from clothing sellers. All of those people are going to be unhappy. And those are the people who tend to finance, among other things, the elections of people who are making decisions.
So you look at it and say, “Okay, we’re going to do this thing, which is environmentally sound, and we’re going to destroy the economy in the process because the economy’s going to be destroyed anyway.” But tell that to the guy who just got laid off. It’s not an easy choice.
One of the first things you learn in economics class is what makes sense for one person may not make sense for a million people. If you decide to make things better for yourself and save an extra 10 percent of your income, that’s great. If everybody in your town does that, it’s called a recession.
The economics of transitioning backwards isn’t easy. But it doesn’t have to be a disaster. In 1958, John Kenneth Galbraith wrote a very famous book on economics called The Affluent Society, talking about how our values are affected by the tremendous level of affluence of Americans. And that was a world ago. We had one black-and-white television per house. The average house size was about 1,200 square feet. We had one car, not two. It was also a world in which we used probably a quarter of the physical resources per person than we use now. And at that time, we thought it was an affluent society. So cutting back doesn’t mean everybody starves, everybody freezes to death in the dark. But we need to plan if we’re going to do that.
One of the things I heard with that clothing example is that there is a conflict between efficient energy use and driving the economy. It’s ultimately more efficient to continue to hand clothing down from person to person according to usefulness. But unfortunately, that energy efficiency has a depressing effect on the economy.
[Dick Wagner] would talk about the role of money, and how it’s a lot more efficient for you to work for an hour and make enough money to buy clothes for your kids at the store that were made in Nicaragua or South Carolina, then it would be for you to raise the sheep, card the wool, spin the fiber, and do what your great-great-great grandmother used to do—make the clothing, which was basically a non-financial transaction.
I don’t have any moral objections to living well. I think it’s wonderful that in [a pre-COVID-19 world] I could fly out to Seattle to see my granddaughters and go to The Nazrudin Project meeting in Oklahoma. I don’t think there’s anything wrong with being able to do that, it’s just that the more I do it, and the more everybody else does it, the faster it becomes impossible. [Before the pandemic], airplanes were full, and hotels were full, and we kept building more of them.
We have a wonderful life that is consuming more resources than we will be able to produce. For parts of the world, we’re already reaching limits and it keeps getting tighter. For instance, instead of keeping up our roads and infrastructure, we try to defer maintenance. My wife has a soybean allergy, and when we go out to eat, it is very hard to find food that isn’t cooked in soybean oil, because soybean oil is a lot cheaper than olive oil or canola oil.
We can get cheap calories if we just downgrade a little bit. And we can let the roads and bridges go a little bit. And we’re not taking the carbon out of the air or preventing it from getting in there. We say, “Well, maybe next year we’ll try to stop emissions and try to reverse the curve.” But we haven’t. It’s nice that we have windmills, but they’re not replacing anything. We’re not using less fossil energy because we’re using windmills; we’re using more of everything. And as long as we don’t have to pay all the bills that come with that, whether in the form of our health from using too much soybeans, or the climate change from burning too many fossil fuels, it looks great today.
Is there a moral question here with regard to the energy that we’re using and what it means to others?
I don’t think it is immoral for you to want to have a nice vacation, or go out for a nice dinner, or drive a nice car. What is immoral and unsustainable is that when everybody does it, it ultimately doesn’t work. On a grand scale, the more we do these things now, the worse the future looks. We are acting like the only thing that matters here is us. It’s like the line in the musical Rent that says, “There’s no day but today.” That tends to be how we live.
So yes, there is a mammoth morality issue when you look at the impact of what we’re doing. But the action itself—wanting to have good food and indoor plumbing and a warm house—that isn’t immoral. The problem is that the way we go about getting it turns out to be totally unsustainable.
It’s very hard. Even people genuinely concerned about environmental issues are still talking about the necessity for growth and how we’re going to have smart growth or we’re going to have sustainable growth.
Well, sustainable growth is impossible. If you simply compound growth at 2 percent per year, it means that in 100 years you’ve got an economy seven times as large as what you started with. In 200 years, you’ve grown more than 50 times—that’s more resource use, more climate change and CO2, less wilderness, and so on—from levels that already stress the planet. So even 2 percent growth cannot be sustainable. Economist Herb Stein once wrote that if something cannot go on forever, it will stop. And the question is, do we stop it, or do we let it stop us?
Fifty years ago, if you had cancer, the doctors would not tell you that you had cancer. They might tell your spouse, or they might tell somebody else, but they’d think, “If I don’t tell you, then you won’t get discouraged.” Gradually people realized that if they knew, then they could participate much more actively in their care and make things better than if they were simply a passive recipient of somebody else’s medical decisions.
It is important that we recognize what’s happening and stop pretending that these issues are in some other category than the overall economy and society. Knowing what’s coming means that we can take steps now to make things better than they would otherwise have been. And that, I think, is the goal of all planning—to make the future better than it would have been if you didn’t do planning.
Whether you buy into Worldview Two and the things I’ve been talking about, the environment or not, I think a very good definition of planning is simply to help someone live a better life than they would have lived if they didn’t have planning.
Independent of the Worldview Two conversation, that is where the value of financial planning rests. And that’s what a lot of Finology is about—understanding where the interventions can be positive, and where they might not be positive, and what kinds of decisions can you ask a client to make? What’s going to be effective in changing behavior? Those are important questions we’ve struggled with for 25 years at The Nazrudin Project, I think with some success. So whether or not you’re focused on climate and energy, there is still an important role for helping people make good decisions. And I think that that’s what the financial planning world ought to be all about. And that’s what Finology and the work of Dick Wagner was all about.
I think that what it comes down to is understanding what resources we do have. And whether our access to those resources may be through money or our community is yet to be seen. But what we can do is understand that wealth is not held wholly in money, and that cultivating our other resources of wealth is an important Finological step.
Yes, and ultimately, an important financial step.
If you think about the people who have been flooded out of their homes, the image we like to see is the community coming together to fill sandbags, to build the levees, to protect the homes. Nobody’s getting paid to do that. This is neighbors helping each other. It’s a lot easier to do that if you know who those neighbors are.
I think those are important values that we as financial planners can encourage our clients to participate in. Whether it’s through joining a volunteer fire department, joining a church, participating in a food bank, supporting a farmer’s market, becoming physically fit yourself, or taking care of your own fire risk or flood risk. Those are all things that you can do whether you’ve got a little bit of money or a lot of money, but they are going to greatly enhance your personal well-being and the personal well-being of the people you care about.
So I think it is possible to have a positive outcome and recommendations from this. A planning process that includes all the forms of wealth is something that will serve everybody well in the years to come.
Listen to the full interview on whatisfinology.org or by searching for “Finology” in your podcast app.