The Upside of Down: Chapter 10 + Coda

FORGIVENESS: How I Learned to Stop Worrying and Embrace Easy Bankruptcy (Though Not Personally)

A.K.A. Dave Ramsey Is A Golden God And Other Things I Learned From The Last Chapter Of This Horrible Book

And here we are at last, at the long-awaited conclusion of Megan McArdle's magnum opus. After 240 pages of contradictory arguments, creatively interpreted studies, random facts about logical fallacies, awful jokes, even worse narrative and entirely too much self pity, we are at the end of the road. Would you believe that McArdle ties up all the loose ends in this chapter? No? That's good, because I have news...

As you can see from the title, this chapter is about forgiving people their mistakes by forgiving their debts. This follows a chapter on how people must be swiftly and mercilessly punished for their mistakes, which followed a chapter in which she argued that we shouldn't be too eager to punish people who make big mistakes and cause suffering. Par for the course, then. I think McArdle sees this as "nuance," but indecisiveness and nuance aren't the same thing. This isn't hedging your bets, it's putting half your money on red and the other half on black. Reading it certainly isn't much more productive.

Much of this chapter focuses on McArdle's newest fixation, financial self-help guru Dave Ramsey. For the small media empire he's built, Ramsey's advice is extremely simple: Never borrow money, pay for everything in cash and do whatever you can to avoid filing for bankruptcy. And on that last point, he's kind of a hypocritical prick. McArdle refers to Ramsey's background as "a classic tale of catastrophic fall leading to ultimate redemption" and gives it a much nicer spin than I'd put on it. In the 80's, he borrowed a huge amount of money, blew every dime he made from into his investments into luxury goods, and ended up broke when several banks called in millions of dollars that he had no way of paying back. He declared bankruptcy to get out from under the debt, gave himself a tale of spiritual redemption (his use of Bible verses is key to his popularity in the evangelical subculture), got on the radio courtesy of a friend, and parleyed all of that into a small empire in which he advises people not to do any of the things that made him wealthy.

In sum: Ramsey loses all his money through recklessness and greed, declares bankruptcy, and then becomes famous by telling people who lost all their money through accidents and misfortune that it's their fault and they must never declare bankruptcy. Among his greatest hits are encouraging his followers to join MLM schemes (which have been specifically targeting evangelical women for years, mind) and, of course, this notorious piece he reposted to his site on the superior character of the rich. Nice guy, very Christian, not at all a scumbag. I can certainly see why McArdle likes him so much.

McArdle was so enamored with Ramsey that she decided to follow his plan for a while, just to see first-hand how awesome it is:

We made out a budget, and we vowed to stick with it. Then I drove to the bank and withdrew almost $2,000 in cash. Except for a check to the landlord, that was our disposable income for the next month.

By comparison, I spend about $500 on everything but rent, and less than $100 of that is true "disposable income" - money for things I abolutely don't need. One-half of two grand sounds pretty nice to me. Then again, it does track nicely with McArdle's history of crying poverty. Clearly her expectations are far higher than mine.

When she's not talking about how wonderful and charismatic and brilliant Dave Ramsey is, McArdle finds a few passages to discuss bankruptcy, most of which focuses on one Danish photographer so she can talk about how Denmark is a hellhole. The chapter really dwells on bankruptcy as an cure for people who founded businesses that failed. This is McArdle's weak, last ditch attempt to tie everything up. Remember how she said in Chapter 3 how no one really knows why any business fails? Or all that crap about hunter-gatherers in Chapter 2 that wasn't relevant to anything? This is the closest you'll ever get to coherence - callbacks to material from 200 pages ago. It's something, I suppose.

There are two problems with McArdle's business first approach to discussing bankruptcy. First, she spends all her time talking about Chapter 7 and Chapter 13 (the personal bankruptcy categories) but never even brings up Chapter 11 (the corporate bankruptcy category), even though that would be more directly relevant to people running LLCs. Granted, you can use Chapter 13 to save a small business if you've run up a lot of credit card debt, but why not even mention corporate bankruptcy at all?

The second problem is that most bankruptcies are not the result of failed businesses. The most common reason for seeking debt relief by a wide margin is medical expenses - depending on who you ask, medical debts account for 42% to 62% of all personal bankruptcy filings. Business failure isn't even in the top five, unless you assume that most businesses fail because of excessive use of credit cards.

Source

Does McArdle mention this? Yeah, but here's how it comes up:

Why do people declare bankruptcy? There are many answers to that question, but at the most fundamental level it comes down to this: They have made promises they can't keep. They borrowed money and couldn't repay it. They had a kid, which comes with an implicit promise to support that child to adulthood. They signed up for utilities that let you pay the bill at the end of the month. They checked in to a hospital and promised they would pay the bill when they checked out.

I don't know what's worse: That McArdle slipped in the number one cause of bankruptcy as an afterthought and will not address it in this chapter, or the implicit suggestion that a person who was just in a car accident should be financially sound and check his bank account and credit score before deciding to have that leg put back together.

But would you believe that McArdle tries to address this?

One study, which looked at every bankruptcy case to go through the Delaware courts in a year, found that the single biggest predictor of bankruptcy was not illness or divorce, or job loss. It was how much debt a person had taken on. The average debtor in Delaware's bankruptcy court had half the income, but 10 to 20 percent more debt, than the control group. If you follow Dave Ramsey's advice you are almost certain to stay out of bankruptcy court.

Okay, I really transcribed that to prove that McArdle can't go more than a page or two without name-dropping the unheralded genius Dave Ramsey. Also, would you believe that this study doesn't have a citation? And because there's no date or organization listed, I can't look it up? Thanks, McArdle.

The rest of the chapter is pretty drab. There's a section about the Bankruptcy Abuse Prevention and Consumer Protection Act which describes the legislation while glossing over most of the effects or the boon it granted to the banks and credit card companies. There's an incongruous section on the effects of giving homes to the homeless which is probably in here so people won't leave thinking McArdle is a sociopath. There's more about how Denmark sucks and Dave Ramsey is awesome. And at the end of it all, McArdle concludes that bankruptcy is awesome because it protects business and encourages risk. Here's a bit of the last paragraph, with as many mixed metaphors as the editors would let through:

Getting the up side of down often means letting go of your instincts, ignoring conventional wisdom, and leaping for something no one's ever done before. Obviously, if you shoot at a target you can't see, you'll often miss.

So in the end, risk is good.

...But wait a second, what about Chapter 9? What about all that crap about swift and inexorable punishment for people who violate the sacred Process? Remember, that thing you've been rambling on about for half the book? This is the best way to do things. It is the only way to do things. Process is good. Process is king. You do not know better than the Process. Deviate from the Process and you will be spanked.

Maybe there's an explanation for that just a few paragraphs up:

Bankruptcy lawyers shouldn't be criticizing Dave Ramsey; they should be thanking him. It's people like him, encouraging debtors to pay off as much as they can, who make it possible for us to maintain the easy bankruptcy laws that give relief to the clients of the consumer groups and lawyers who complain about Ramsey's message.

American bankruptcy law is the best thing in the world and it only works if most people don't take advantage of it. Debt forgiveness is for some people. The rest of them get to drain their 401(k)s and children's college funds and sell all their worldly possessions so that the system can continue forgiving those job creators. Letting them declare bankruptcy for something as trivial as keeping their homes would be unacceptable moral hazard.

There's your explanation for everything. There are two sets of rules.

My assumption going into this was that McArdle was using this book to justify her own success, but that was far too narrow. She's in it to justify the success of every elite who's fallen upwards. That's the one connecting thread. That crap about mindset and "hunter-gather" mentality from the beginning of the book, the sermonizing on moral hazard and punishment, the criticisms of auto workers and nurses and the unemployed...and then forgiveness for bankers and energy tycoons and those entrepreneurs who swear that Swamp Castle will stay up this time. The obsession with Process for some people, but not the author. And finally the great and powerful Dave Ramsey, who taught me that the rich are driven, erudite, literate and bold and that the poor are lazy, thoughtless, impulsive and ignorant. Of course those people have to follow the Process, otherwise they'd be out of control. Ultimately, the rich are adults and the poor are children, and adults ought not be obligated to follow rules meant for children.

The elite class is made up of disciplined souls who learn from their mistakes (when they can find them). There's no "process" for the wealthy, they don't need it. They don't need punishment to keep in line, they keep themselves in line. They're above moral hazard. What they need is forgiveness for their errors so that they can continue to do good work. What the poor folks need is a kick in the ass to North Dakota or some other dumping ground where people who didn't go to expensive schools can make money for the people who did.

Back in Chapter 1, McArdle quoted John Scalzi's observation that being poor means suffering your whole life for mistakes you didn't remember making in high school. She didn't explain then how this advice would help those poor kids, but I think she finally did. The freedom to fail and the forgiveness when you do - that's for the rich. The poor don't need those things, they wouldn't even know what to do with them. They need order and discipline and punishment so that they don't fail.

What this book taught me is that Megan McArdle is better than me. To which I reply: Fuck you, Megan.

...Wait, we're not done? Oh, right - the "coda." The Upside of Down ends with a four-page aside that looks like a conclusion but is really more like an extension onto Chapter 10. I'm not sure why it's here - it's an original hardcover so this isn't new material, and it's not like Chapter 10 is especially long. This post is already running long but I don't want a whole new one for four pages, so we'll knock this out here.

So one of the oddities about this book is that while it's obviously sold on the strength of McArdle's name, it's apparently written for someone who doesn't know that much about her. Perhaps the target audience is people who caught her on some news program or heard the name from a day trader friend. Anyone who knows about McArdle would laugh at some of the claims she makes about her own life. And the "coda" is a perfect example. It's all about McArdle and Suderman (empowered by Dave Ramsey, natch) buying a house. Thrilling stuff, right?

We were not one of those couples who solemnly debates the pros and cons of ownership and then spends eighteen months dutifully trodding around open houses. We stepped into homeownership the way one steps over a doorstep. One morning, two happy renters idly decided to stop by an open house "just to look." A week later we were preparing our first offer.

Well, that's a lie. Much like her descriptions of her time at The Economist and The Atlantic, McArdle has opted to write this part of her personal history in rose-colored ink. While the article is classic Veruca Saltian self-indulgence with McArdle complaining that she couldn't just kick out the people renting those houses, it's the comments that truly rule. This was back when McArdle still engaged with commenters, and her responses to them reveal her rather specific set of minimum demands for the house. It's not like the two of them turned into one of those HGTV power couples obsessed with crown moulding, but it also wasn't the breezy decision of a humble young couple.

And speaking of lies, here's the punchline to this entire wretched book, the moment that made it all worthwhile to me:

Don't get me wrong: we hardly live like monks. We eat at very nice restaurants at least once a year, enjoy cable television and smartphones, and even take the occasional vacation...

And a $1500 programmable blender that no home cook would ever need. Let us quote:

The money I spent on a Thermomix, after all, would have more prudently gone into an emergency fund, or retirement savings...Was it worth $1,500? Hard to say, but I wouldn't sell it back.

McArdle wrote that in 2011, two years after learning the virtue of frugality from amazing space genius Dave Ramsey. And boy howdy, does she love that blender, maybe more than her own life. She's incorporated it into multiple articles (most of which appear to be antidotes to buyer's remorse).

McArdle's professional life is a testament to conspicuous consumption. She's a insatiable gadget hound for one, who feels a need not just to own every device that comes out but to write about it - the iPhone refugee article being the most notorious, but that's hardly the only time that she's found some pretext to talk about gizmos. That's predictable, though - gizmo obsession is endemic to the upper-middle class and nouveau riche these days (I live in a college town and the only time I notice it is when some eighteen year-old drags two grand worth of redundant devices to the library to cadge free Wi-Fi). It's her love of overpriced and unnecessary kitchen ware that stands out. McArdle does a yearly holiday shopping guide that's basically just a list of crap she bought that year. Here's the one from 2009, i.e. the year she developed her ascetic sensibilities at the feet of grand overmaster Dave Ramsey. It features a $50 cutting board, a $70 knife block (just the block, not the knives, because "no one is an all-in-one-cook"), an $800 copper pot and, of course, a bamboo salt cellar for the $15/pound imported salt that she insists on using in everything.

This is the David Brooks strategy to media success - change your persona to fit the needs of your new position and then burn the evidence that you were ever any other way. Over the last decade and a half, McArdle has gone from fire-spitting femme warblogger to whiny libertarian economic analyst to mushy prevaricating centrist (and if Brooks is anything to go by, then angsty self-flagellation comes next). Each was a step up in pay grade, but only as long as she pretended that she never held any previous positions. Hard to do when there are so many people on the internet with long memories.

So how do you convince the world that you're a serious person and not a crank? You write a book. Simple, no?