The Most Lucrative Careers

posted Jun 10, 2013, 7:13 PM by Simon Nguyen

Most people would like to say that they choose a particular career or occupation because they enjoy it. Yet, financial considerations have always been the dominant force behind one’s career decision; money tends to outweigh aspiration. Moreover, there is a huge gap in earnings between talented people and the average Joes. Top talents enjoy significantly higher income, no matter what career or industry they are in. This article discusses a few of these desirable professions.

The most lucrative careers tend to concentrate in the financial services industry. This is quite understandable, considering the colossal magnitude of financial dealings taken place daily on Wall Street. Consequently, even a small slice of the big pie that is Wall Street constitutes a lucrative payday. Among the financial sector careers, hedge fund managers and derivative traders are the highest paid. By the nature of their work, most of these professions are not affected by economic conditions. In another word, hedge fund managers and the likes make lots of money in both good and bad economic times.

Obviously, not everyone is qualified to work in the financial sector. Candidates for these lucrative careers would need to have a strong background in economics, finance or computer science as well as considerable industry knowledge. Additionally, careers with lucrative terms tend to be extremely stressful and demanding. You will make a lot of money in this industry, but don’t expect a very long career.

Careers in sales are also lucrative, if one is a good fit. The average salesman does not make a lot of money. In fact, it could even be a net loss considering how much time and effort a sales career demands. Yet, a sales career can be extremely lucrative if you enjoy what you do. Top performing sales professionals can easily make six figures by commission alone. Furthermore, one does not need an advanced degree to be a great salesperson. As a matter of fact, many high-paid sales professionals don’t even attend college. There is one drawback, however. To be great at selling stuff requires vast amount of patience and strong interpersonal skills. You are either very good at it or not good at all.

As mentioned earlier, talented people tend to make a lot more money than their fellow workers. Top singers, actors, and entertainers are the highest paid people in the entertainment industry. Sports superstars rake in millions of dollars in endorsements and prizes; top professionals of even a minor competitive sport like bowling make a very good living. Careers that require a lot of skills and education like surgeons and engineers are equally financially rewarding.

What conclusion can we draw from this? Most lucrative careers are either very stressful or highly skill-based. There are simply no free rides.

Economic consequences of a major earthquake in Los Angeles

posted May 31, 2013, 8:43 PM by Simon Nguyen   [ updated May 31, 2013, 8:44 PM ]

Los Angeles is among the most earthquake-prone cities in the world. Earthquakes, though mostly small in magnitude, are daily occurrences in the city and its surrounding areas. The biggest earthquake ever recorded in Greater Los Angeles is the 1994 Northridge Earthquake. Till this day, the event remains one of the costliest natural disasters in U.S. history. What would be the economic consequences of the next major earthquake in the Los Angeles area?

Since the deadly quake, residents of Los Angeles have been on the lookout for the next earthquake of significant magnitude to strike the area. With the current L.A. population at a record high, a major seismic event in the area will certainly be catastrophic.

Not all earthquakes are equal, however, and magnitude is only part of the reason. Case in point, the 1952 Kamchatka earthquake was measured at 9.0 on the Richter scale but only caused some significant structural damages. On the other hand, the 2010 Haiti earthquake (with a magnitude of 7.0) caused massive damages and loss of lives. Population density and location appear to be better determinants of impact than seismic magnitude. The key difference between Kamchatka (Russia) and Haiti is that the former is sparsely populated, while the latter is one of the world’s most densely populated areas.

As Los Angeles is one of the densely populated metropolitan regions in the U.S., the impact of a major earthquake striking the area will likely resemble that of Haiti. Since California probably has the strictest building code in the world, structural damages and the human toll will be considerably less. Yet, the scale of destruction will certainly be many times greater than Hurricane Katrina which is currently the costliest and deadliest natural disaster in U.S. history.

While structural damages from a possible Los Angeles earthquake might be considerably less than the Haitian earthquake, the costs associated with it are likely to be much greater. Los Angeles is home to numerous top U.S. corporations and institutions; the L.A. region is unquestionably a key world economic center. A major seismic event in the area will severely disrupt business operations of many key industries, and put momentous strains on the world’s biggest economy. Quite frankly, the overall cost could easily be in the hundreds of billions or even in the trillions of dollars depending on the quake’s magnitude.

The human toll of a possible major earthquake is likely to be substantial as well. The Greater Los Angeles area is among the most populous in the world. In point of fact, the region has almost 2 times more people than the whole Haitian population. Imagine a 9.0 earthquake striking the megacity during rush hour and in high winds. There is no question the loss of lives will be colossal.

Finally, new California’s building codes in effect as a response to previous major earthquakes are mostly non-retroactive. There are still many old buildings and homes in the area that may not survive another strong seismic event. Consequently, the possible human toll could be much higher than most estimates.


Should employers pay for health insurance of their employees?

posted Mar 18, 2013, 12:30 AM by Simon Nguyen

At a first glance, the idea employers should pay for health insurance (at least a major portion of it) seems like a reasonable thing to do. If you treat your employees well, they will be motivated to work hard for you. In the long run, the benefits outweigh the costs.

Here is the dilemma (in the heartless perspective of an economist.) Let say you buy health insurance for your employees but a number of them leave the company soon after. You won’t be able to recoup the costs you spent on their insurance coverage from their expected output. Even if all your employees are loyal, one or more of your workers may fall seriously ill. You obviously won’t be able to recoup what you spent on this person’s health insurance, and may have to chip in to pay for his long-term care.

These scenarios clearly would cause employers to have second thoughts about buying health insurance for their employees. After all, a business is not a charitable organization. To the employer, the health of the business always takes precedence over the health of the workers.

What could be a solution for this dilemma, such that it would be beneficial for employers to pay for health insurance regardless of circumstances? The employers and their workers could come to an implicit agreement, wherein the employees (as a group and not as individuals) agree to voluntarily increase their productivity (such as working longer hours without overtime pay or accepting a longer wait for a pay raise) in exchange for health insurance for every employee. The "volunteer" aspect is important due to labor laws. The employers will then be able to recoup the health insurance costs, spent on those who abruptly leave the company and on those who are currently inactive. 

There have been similar examples of this informal "agreement". During previous recessions, some businesses and schools opted to reduce the number of (weekly) work days from five to four instead of laying off employees. In many cases, this move was negotiated and agreed upon by the employees themselves who obviously did not want to lose their jobs.

The proposed solution has an obvious obstacle. Economists like me believe people are inherently selfish. Will they make personal sacrifices for the good of their fellow workers and the company? We have seen an abundance of examples of employees stealing things from work, shirking, faking injuries and sabotaging other workers. On the other hand, we have also had instances of employers exploiting and abusing their workers. Any agreement between the two sides that would result in employers paying for health insurance will be met with weary eyes.

Simon Nguyen, M.A. Economics

Equality vs. Efficiency: The Case of Universal Health Care

posted Dec 26, 2012, 3:11 PM by Simon Nguyen   [ updated Aug 30, 2016, 8:23 PM ]

One of the common mistakes people often make is to equate equality to efficiency. While equality can certainly enhance social efficiency, it can also lead to greater inefficiency. Confused? Perhaps a few examples will help you understand this concept a little bit better.

The first example is a simple one. A box of chocolates is to be shared by two children. The box contains 10 milk chocolates; both children like milk chocolates. Each child is given 5 chocolates. Well, it doesn’t take a rocket scientist to realize that the allocation of the chocolates is both fair and efficient.

The second example is bit more complicated; the numbers in this example have been normalized for greater clarity. There was a fruit sale at the local farmers market; my sister was able to buy 8 bananas and 4 mangoes. The bananas cost $1 each and the mangoes cost $5 each. My sister has two daughters, Julie and Christine. Julie loves to eat mangoes, while Christine loves to eat bananas. My sister doesn’t eat fruits.


Pros and cons of a federal ban on cell phone use while driving

posted Sep 13, 2012, 10:51 PM by Simon Nguyen   [ updated Oct 2, 2012, 7:41 PM ]

The National Transportation Safety Board recently issued a recommendation that calls for a nationwide ban on mobile usage when driving. The board cited a NHTSA survey that found more than 3000 people killed in 2010 due to distracted driving as a key supporting evidence. What are the pros and cons of a federal ban on cell phone use while driving?

Although there is no question that talking or texting on cell phones while driving poses a safety risk, the same thing could be said for other things people do when driving such as talking to other passengers, listening to the radio, watching DVDs, caretaking their kids or day dreaming. In fact, a Canadian study found singing or even listening to music when driving to be a safety hazard. Since all of the aforementioned activities are major driving distractions, should we also ban them as well?

A ban on hand-held cell phone use has already been implemented in a number of states. However, its impact in curbing traffic accidents is not clear-cut. In 2008, California passed a law that prohibits the use of hand-held mobile devices while driving. A recent study conducted by state authorities found the traffic deaths related to hand-held cell phone drivers decreased by 47% since the ban was in place. Yet, the results were blurred by the fact that overall traffic deaths also decreased by 22%. The data is likely to have been biased by factors other than the ban.

Also, the tough economy from 2008 and on and high gas prices could have been big factors in the decline of traffic deaths. Fewer drivers on the road mean fewer traffic accidents and deaths.

Proponents of a federal ban would say that hand-held cell phone use while driving is a much more dangerous maneuver, because it limits the driver to only one hand on the wheel. Driving with one hand for long periods has been known to cause serious accidents.

Taking in all the factors, the main problem seems to be the cell phone habit of drivers. If drivers only use cellphones occasionally and briefly or for emergency only while driving, this would not be a safety hazard. Unfortunately, many people often go beyond that especially with texting. Banning cellphone use could help but people will find other ways to be distracted when driving. We can legislate actions but not carelessness.

Simon Nguyen, M.A. Economics

France vs. America - Culture Contrast & Comparison

posted Aug 18, 2012, 12:42 AM by Simon Nguyen   [ updated Feb 8, 2017, 7:02 PM ]

France and America have always had a tumultuous relationship. On matters of military and strategic cooperation, the two countries are the greatest of allies. On matters of culture and social attitude, the two could not be more apart. In this article, I will compare and contrast the best qualities offered by each country. Maybe we will finally be able to settle once and for all the age-old debate: Which country is better?

Consequence of Federal Reserve's Bank Bailout

posted Aug 16, 2012, 1:07 AM by Simon Nguyen   [ updated Aug 16, 2012, 1:18 AM ]

There is an old saying that states, "A picture is worth a thousand words." The above image is actually worth 800 billion U.S. dollars. The featured graph shows reserve balances at the U.S. Central Bank in the last 20 years. What immediately jumps out from the graph is the huge spike in the reserve level (2008). In just one year, the reserve balance jumped from a normal level of around $6-9 billion to about $840 billion - an increase of 9333%.

At some point during the next few years, the Federal Reserve will have to unload the excess reserves and bring the reserve balance back to normal level. In doing so, the Fed will have to tread the line carefully or risk having to print a whole lot of money which will lead to hyperinflation - Zimbabwe’s style. Interestingly, a slow economic recovery is needed for the latter to not happen; the Fed appears to have chosen long-term economic stagnation over short-term economic catastrophe. The real danger, however, is the world’s sinking appetite for U.S. debts. But remember this. If the U.S. suffers, countries that hold U.S. debts or are doing business with the U.S. are likely to suffer as well.

Simon Nguyen, M.A. Economics

The Economics of Insurance

posted Apr 21, 2012, 11:53 AM by Simon Nguyen   [ updated Apr 21, 2012, 11:54 AM ]

Why buy insurance? This is one economic question that has been asked repeatedly. It is very difficult for some people to grasp the idea that we should pay in advance for something that has not yet happened, and only has a slight chance of ever happening.

Many people don't realize how much we rely on insurance in our everyday lives. Let say you have a big job interview at 10 AM tomorrow. It takes you approximately 15 minutes to get from your house to the interview site. But instead of leaving your house 15-20 minutes before the interview time, you decide to leave 30 minutes early. In effect, you have just insured yourself against unexpected events such as traffic jams or parking problems with 15 extra minutes of your time. I bet many of you have never considered things like this as insurance, but they are.

The most popular complaint with regards to conventional insurance is that it is too expensive. People don’t mind paying for insurance as long as the cost is at a fair value. It just does not make sense for a healthy individual to be charged the same amount for health coverage as someone who is overweight and is heavy smoker. The healthy individual is unlikely to demand as much resources as the unhealthy person. It is more efficient to charge the healthy person less and the less healthy person more.

Unfortunately, this can never come to fruition as long as government regulations and adverse selection exist. In most countries, the role of government is to have empathy for its people. It is sometimes illegal for companies to ask people about their health status or to obtain their health information. Additionally, people often lie about their health status; health records are often incomplete. Most importantly, insurance companies typically can’t charge people different rates for the same coverage.

Insurance companies do, however, have the right to deny certain applications for insurance coverage. This leads to insurance companies resorting to excluding people with preexisting medical conditions or who are older. (Note that this maneuver would be banned under President Obama's health care legislation.) 

I would love to explain further how insurance works, but that would make this article longer and render it a dull read. I do want to address the important question of whether or not life insurance is a good long term investment.

Life insurance (with fixed payoff) is never a good investment. Money loses value over time and the rate of depreciation is quite significant. For example, $100,000 in current value probably only worth about $50,000 (in equivalent value) 20 years from now. Unless you know you will die very soon (I doubt you will be able to get life insurance), you are much better off keeping what you have and investing it in something that yields a better return.

Simon Nguyen, M.A. Economics

Economics of Casino Gambling

posted Apr 11, 2012, 8:04 PM by Simon Nguyen

Major gambling entities spend millions of dollars each year on the detection and prevention of high-frequency luck. While it is only natural that casinos and betting sites would want to eradicate cheating and fraud, some gamblers are being blacklisted or banned from casinos even though they have never been found to have cheated. People are apparently punished for being too lucky.

Are the casinos money-hungry corporations who take advantage of the gambler’s misfortune while refusing to pay for their own misfortune?

Although I have no high regard for gambling firms, I would have to defend their calculated actions. The gambling business works much like the insurance business. Every time someone places a bet, he or she is actually contributing to a “pot”. The more people gamble the bigger the pot. If someone happens to win the bet, the casino will pay the winner with money from the pot. What is remained of the “pot” then becomes the casino’s profits. For the business to be profitable, the casino needs people to win less often than losing.

Since the odd of winning a bet is on average very low, the gambling business is extremely lucrative. Casinos do not mind if you win money as long as the frequency of winning is low. If a gambler is consistently lucky, that would pretty much break the casino’s business model and severely cut into its profit. It is this reason which I believe gambling entities have every right to prevent such an anomaly as to remain financially viable. This is not unlike American insurance companies refusing to provide flooding/wind insurance to people living in the U.S. Gulf States where powerful storms are the norms.

If you have followed this website for sometime, you would have come to realize how much I despise the gambling industry. I don’t mind gambling entities making money (lots of) even if it is on other people’s misfortunes. My grudge with them is with regards to what they have to do to grow their business. Since they need a constant inflow of new gamblers and people do not become gamblers without a cause, gambling entities need to somehow motivate or create an environment for people to become gamblers.

In recent years, poker has become wildly popular in the United States. This is mostly due to high-stake poker tournaments becoming a fixture on American television. Additionally, poker websites are popping up everywhere offering big prizes for online tournaments.

Call me naïve (sarcasm) but I don’t believe this is coincidental .The victims of the poker phenomenon appear to be young college students. These foolish youths are giving up dreams of becoming doctors and engineers in pursuit of career as professional poker players.

Simon Nguyen, M.A. Economics

How a Ponzi Scheme works

posted Mar 30, 2012, 6:02 PM by Simon Nguyen   [ updated Apr 9, 2012, 1:41 PM ]

After Madoff’s “Scam of the Century” finally came into light, the media quickly seized upon the foreign idea of a Ponzi’s scheme. In fact, Ponzi became a celebrity overnight. Yet, I do not believe the media did a good job in explaining what a Ponzi’s scheme really is. I will try my best to explain this not-too-complicated concept.

One of the main goals in life is to enjoy it to fullest. The only reason why a person chooses work over leisure is so he can enjoy a better life. After essential expenses are deducted, we are left with a certain disposable income. This is when one has to make a difficult decision – to consume or to not consume. An irrational person would spend all of his or her disposable income on consumption.

A rational person, on the other hand, thinks about the future. Life is full of uncertainties. What if he gets laid off tomorrow? What if there will be a big expenditure in the future? Eventually, he will come to the decision of consuming only a portion of his disposable income. He will either save or invest the rest.

Madoff's investors were of the rational type. Enticed by promises of decent rates of return, they continually entrusted their life savings to Madoff. Their persistence actually worked to their disadvantage in this case, as no investment actually took place. This conman was merely holding their money. He even used some of it to finance his lavish lifestyle. 

Does everyone who invested with Madoff lose money? Absolutely not. Life is full of uncertainties. During the decades Madoff’s investment firm was in business, some of his investors encountered financial difficulties that prompted them to withdraw money "invested" with Madoff. The guy was happy for comply because he did not want his fraud to be exposed. They not only got the principal money back but also the big payoff Madoff had promised them. These people were the real winners of the whole Madoff’s ordeal.

The reason why Madoff could afford to do this is because most of his investors can be classified into two groups – the wealthy and the hardworking. The wealthy investors rarely encounter financial hardships; they had no reason to withdraw their investments early or stop sending money to Madoff.

The investors from the hardworking group live a modest life; they maintain a steady job and are frugal with regards to spending money. These people didn’t have a lot of money, but they saved enough to continue to funnel the funds to Madoff.

Since there were more money coming in than coming out, Madoff was able to payoff his obligations to the few that opted to withdraw their investments early. This was the reason why Madoff’s scheme had not been exposed sooner.

But then came the economic crisis. For Madoff, it was the perfect storm. People were worried about their financial situation. Not only Madoff’s investors could no longer afford to give money to Madoff, they wanted to withdraw the principal money plus the high returns Madoff had promised. Moreover, the fraudster could not get new investors to buy into the scheme.

It was very much the end of the road for Madoff. A large portion of the money had already been transferred to the fortunate investors who withdrew their money at an earlier time. If it was just the principal money, he might have been able to pay his investors. But to hide his fraud, he would also have to pay investors the ridiculously high returns he had been lying to them. He had no choice but to plead guilty to his crime.

This explains why the government has not been able to recover all the money. They would have to identify and force former Madoff’s investors, who made money with him, to return the money. That is definitely not an easy task.

Simon Nguyen, M.A. Economics

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