New Capital 2020 Intern: Jeffrey Li
Hello to the clients of New Capital Management. My name is Jeffrey Li, and I worked at New Capital as an intern for two weeks in May/June 2020. During this time, I learned the ins and outs of the financial management business, and specifically, how there is much more to financial management than just buying and selling stocks. During my internship I started the book, The Four Pillars of Investing, by William Bernstein. From this book and conversations with Leonard, I learned a lot about market behavior and common investment mistakes. Having completed an economics-related internship before, I found this opportunity to be a great basis of comparison; New Capital showed me sides of the business that my previous internship had not addressed at all.
One of the tasks assigned to me during my internship was to review infographics from Visual Capitalist and to select several pieces that I found most interesting. With each infographic, I’ve included both an overview of what the respective infographic contains as well as a statement on why I believe that information is important.
Changes in the Global Energy Mix
It should come as no surprise that the current pandemic has caused a significant decline in energy consumption; the recent plummet and revival of oil prices is widely known. As the overall impact of Covid-19 decreases in the coming years, energy usage should find its way back to higher numbers. The infographic offers that, as consumption patterns restabilize, renewables and bioenergy should see significant growth as modern science betters the efficiency of clean energy sources, and oil and natural gas stand to grow a little more as well. Regardless of what exact direction global policy goes in regards to energy-producing resources, we should expect to see the global energy mix diversify in the next couple of decades.
Energy is a business that will not become obsolete regardless of the state of the world. Therefore, it is extremely useful to know which energy production methods have the greatest room and potential for growth over the long term.
Bridging the Gap: Wealth Isn’t Just for the Wealthy
One might think that any individual with a clear understanding of stocks, bonds, and other assets should be able to invest and become rich. Clearly these people greatly outnumber the population of those who are generally considered wealthy. The big question: “Why aren’t they rich yet?” While the infographic describes the status quo in the UK, a parallel can most certainly be drawn to explain the disparity in the US. The average individual tends to lack both the knowledge and management resources to help them make and keep large returns. As a general point, it would not be inaccurate to say that people’s fear of losing money keeps them from gaining it (at least in significant amounts).
There has always been great debate over what separates the wealthy from those who could have been wealthy, with few rational answers to the question and even fewer with statistical evidence. The thought of managing large sums of wealth is seldom considered, especially when it is a discouraging point in becoming rich in the first place.
Life expectancy of women vs life expectancy of men, 1950 to 2015
Historically, men have been known as the “providers” of the household. While working moms and stay-at-home dads have been steadily increasing in the last several decades, the infographic suggests a potential widespread reversal of roles in the future. The global life expectancy comparison between men and women consistently beats the grey line, representing if men and women had equal life expectancies. For many families, women could take over the role of the main income provider due to living longer, and, therefore, working longer.
Media has portrayed the transformation and shift in gender roles to be largely the work of progressive societal beliefs, so I find it very fascinating to see that there are other sources of change besides those brought about by people and organizations.
Visualizing Unequal State Tax Burdens Across America
The fact that America’s wealthiest pay in state taxes on average 26 times than the bottom 20% does not paint the full picture. One must consider that, despite these numbers, the bottom 20% also pays 4% more of their earnings in state taxes than the top 1%. The infographic shows that the state tax system creates startling levels of disparity. Texas happens to be the second most unequal state in terms of state and local taxes. Due to the differences in the ways people from differing socio-economic statuses allocate their wealth, the lowest earners tend to suffer more at the hands of sales and property taxes than those in the top 1%; the poor simply can’t afford to place large percentages of their wealth into tax-exempt assets.
Taxes are designed to theoretically ensure that each individual in society contributes to its well being in proportion to how many resources each has at his or her disposal; that lower-income individuals are impacted more by state taxes shows a startling flaw in the system, one that perpetuates the socio-economic gap.