Two weeks ago, I wrote about J.D. Vance's insights into payday lending. As I read, reflected, and wrote about this section from his bestselling Hillbilly Elegy, I thought of two podcast episodes from recent years. I've shared those below.
I also added a third podcast episode to the pair because I think it is related to the topic at hand (and also was an interesting episode). Putting the three together gives me the chance for a little edition of 'two truths and a lie'. So the challenge for you today, reader, is to have a look below and try to guess which two of the three episodes came to mind as I wrote about Hillbilly Elegy and which one I've just added to the list to make this (highly entertaining) game possible.
In an upcoming 'leftovers' post, I'll reveal the answers. I'm sure you cannot wait to find out the results...
Thanks for reading and good luck.
Tim
#1- EconTalk: Orphanages or jobs?
About fifty-five minutes into this episode, guest Michael Matheso shares with host Russ Roberts a story about a well-meaning couple who move to Haiti with all their savings. Their plan was to work in an orphanage for about a year. Once they'd learned enough, they'd open their own place and fulfill a dream to serve these unfortunate kids.
During their apprenticeship, they were surprised to learn 80% of these 'orphans' have at least one surviving parent. As they dug deeper into the details, they learned many parents who could not afford to keep the kids chose to give them up to orphanages.
The couple soon changed their plan. Instead of opening an orphanage, they started a business and employed many of these parents. Though as business owners they did not directly care for any kids, their employment of over two hundred people indirectly accomplished the same.
#2- 99% Invisible: The bank idea
Roman Mars makes a point during this episode about how banks intimidate many first-time users. The furniture is new or flashy, the staff is clean-cut and presentable, and the marble columns or oak doors are unnecessary yet obvious symbols of wealth and prestige. Even the pens are chained to the tables!
The point I've always remembered over the years was his observation about the lack of directions. In most banks, there is no menu, instructions board, or pamphlet describing what to do. A person new to a bank would be clueless. To make it worse, the open space magnifies the feeling of being 'on stage' in front of those who know what they are doing. Go to a bank and note the number of people who enter and walk straight to where they need to go. How could someone unfamiliar to a bank not feel intimidated? (1)
I thought this was a brilliant insight. It is so hard to look upon a familiar sight with the perspective of another's eyes. For whatever reason, I never felt confused in a bank. I always knew where to go and what to say. Without this episode, I perhaps never would have considered those who do not know.
Places advertising check cashing or offering payday lending are, by contrast, more like fast food restaurants. A newcomer can figure out pretty quickly what to do. Nothing about the environment intimidates newcomers or makes the financially vulnerable feel out of place. I imagine some of these places are more welcoming than the suits-and-spaces seen in a bank.
#3- The Ringer NFL Show: Cash flow
In this episode, former NFL front office executive Mike Lombardi provides a possible explanation for why a team might opt to use a 'franchise tag' to sign a player for one season instead of negotiating a more team-friendly contract for multiple seasons.
(It helps here to know how these contracts are paid. The franchise tag commits teams to pay a player during the season and the first paycheck is due sometime in the summer. A longer contract often comes with a signing bonus paid as the signature dries on the dotted line.)
The key is cash flow. A team with excess cash reserves can afford to pay a signing bonus while a team with no cash on hand might be limited in its options. Fans often fail to consider this explanation because they think of salaries in terms of revenue minus cost. But not all payments to players are distributed on a bi-weekly schedule. And as anyone who has sweated an upcoming bill understands, having a paycheck hitting an empty bank account next week is irrelevant when the rent is due the next day.
There is a larger idea Lombardi is getting at here. When decisions are made on a day-to-day basis, sometimes the aggregate results are difficult to understand. This is similar to the lesson I drew from the point Vance made about payday lending- to study interest rates for these loans at annual measurements misses the point entirely because these loans are often taken out with only the next few days in mind.
Footnotes / imagined complaints
1. Is TD Bank really the most convenient bank?
Thinking about this episode does clarify a little of TD Bank's recent strategy. Their pens are not chained to the tables and people entering the bank are often greeted by someone on the staff. I'm under the impression their branches are also open longer than others (though I could easily be wrong about this). Combine all these little details and I suspect TD Bank is easier for the unbanked to work with.
