Magazine

The insider’s guide to money

We spend much of our lives thinking about money. Do we have enough cash in our pocket to buy a snack? How do we fund a big idea? What's 'the number' for a comfortable retirement? Alumni and professors guide us with their financial principles on earning, investing, and spending.

By Erin Peterson

2018-09-25

Earn it, invest it, spend it

We spend much of our lives thinking about money. Do we have enough cash in our pockets to buy a snack from the vending machine? When will that paycheck hit our bank account? What’s “the number” for a great retirement?

There are plenty of bigger questions, too. How do we spend money to improve communities or countries? How do we invest it to nurture big ideas or the next great technology?

For this story, we spoke to people who have spent their careers and lives thinking about how we can best earn, invest, and spend our money — for ourselves, and for the betterment of the world. They shared what they’ve learned, the principles they believe in, and the time-tested truths they think every reader should understand.

We hope you find their stories and ideas surprising, useful, and hopeful.

Earn ... a community’s goodwill

In late 2015, when Uber’s then-CEO Travis Kalanick announced on a global all-hands company call that they planned to make Uber the biggest revenue-generating company on the planet, John Hamby (BS Business Administration/Finance ’05) was dazzled not by Kalanick’s boundless ambition, but by the opportunities such massive scale would open up.

“My first thought was: If we’re going to be the biggest revenue generator in the world, then we also have to be the biggest giver in the world,” he recalls.

Indeed, for a company that has been beset by problems in recent years, Hamby’s work to build meaningful partnerships with the communities Uber serves has been an unequivocal bright spot.

Great companies, says Hamby, understand that giving back to a community isn’t just the right thing to do — it ultimately smooths the way to make strong company growth possible. During his tenure, Hamby has helped orchestrate numerous pilot programs that make the most of Uber’s capabilities. For example, he’s worked with the governor of Arizona to help ex-offenders get free rides for job interviews. He’s also created a partnership with Meals on Wheels to help deliver food to local seniors in need. Such programs, launched in his home region of Phoenix, now serve as a template for other cities worldwide.

As Uber seeks to find more ways to move people and goods from point A to point B, Hamby expects his own work will expand as well. “How can we give back when we’re working with freight, for example? What about aviation? There are so many avenues where we can be globally impactful,” he says.

Earn ... the invisible markers of financial success

In his wildly popular personal finance courses, David Hoffman asks his students to imagine going on a blind date: The object of their potential affection arrives at dinner and glances at his or her Rolex, mentioning that traffic from Paradise Valley, Arizona, the nearby neighborhood, was a nightmare. The blind date sets down car keys emblazoned with a Mercedes logo.

“You might think,” he tells his students, “that you’re on a pretty good blind date.”

But not so fast: You have no idea why that person was in Paradise Valley, whether or not that Rolex is real, or if that Mercedes is brand new or decades old. And can your date really afford all those status symbols, anyway?

If you want to know the true financial state of the man or woman across the table, you’ll have to go beyond external markers of success and focus on what you can’t see: a credit score, for example, which tells you if they’re responsible enough to pay their bills on time and that they don’t take on excessive amounts of debt. The trajectory of their net worth — is it making a steady upward climb? — can also serve as an indicator of a person’s financial realities. “These are things you can’t see, but they’re things we should be asking about,” says Hoffman, who is a lecturer senior in the Department of Finance. “Maybe not on a first date, but by the time you’re going to get married? Of course!”

Perhaps it seems heartless, but these financial indicators can help us go into lifelong relationships with our eyes wide open. And the larger truth is hard to deny: We often judge people on glossy exteriors, but really getting to know someone requires that we go beneath the surface.

Earn ... your way through hard times

The so-called “gig economy” — the idea that workers go from one short-term project to the next, rather than spend years or decades in a permanent job — has inspired plenty of opinions on its overall value. Do platforms like Uber and Upwork represent transformational new models that open up greater freedom and flexibility for workers? Or a devastating shift that’s providing less security than a traditional job?

The answers to both, according to Kevin Hong, may be “yes.” In research conducted with colleagues Nina Huang (ASU), Gord Burtch (University of Minnesota), and Paul Pavlou (Temple University), Hong found that the popularity of gig work rises and falls with the economy. For example, during the financial crisis a decade ago, the hardest-hit states saw the biggest spikes in new-worker signups on gig-work platforms. But as the economy picked up, that trend reversed.

While people choose gig work for many reasons, Hong believes that the larger lesson in the trends his research found is heartening. “In some ways, [gig work] can be a type of ‘unemployment insurance,’” he says, keeping people above water and stable while they look for permanent jobs. “[These platforms] allow people to find jobs without relocating — it’s more of a digital migration.”

Invest ... in the idea of innovative entrepreneurship

Building a business from scratch in the United States is tough, but compared to the challenges entrepreneurs in Palestine face, it seems like a veritable cakewalk.

“Because Palestine is politically occupied, the economy is largely dependent on Israel,” says Ambar Renova Amleh (BS Marketing ’03). “Palestinians don’t have control of their borders, the resources in the ground, the people coming in and out, or the movement of goods, so any business that requires imports and exports is extremely difficult.” In Gaza, occupied by Hamas, the limitations are even more punishing: The territory often has electricity for just a handful of hours each day.

Palestinians are known for their business acumen throughout the Arab region and entrepreneurs have always seen opportunity where others see only obstacles, which is what drove Amleh to co-found the Ibtikar Fund in 2015. The venture capital firm invests in early-stage Palestinian technology startups.

Among the 20 or so companies in Ibtikar’s portfolio, several have already seen significant traction. Mashvisor, a real estate analytics company, has experienced triple-digit annual growth and has grown from a pair of founders to a team of 17. Other companies include Rocab, an Uber-like startup for taxis, and Play 3arabi, a mobile games publisher.

While not every venture that Ibtikar backs is destined to rocket into the stratosphere, even companies that eventually disband impart startup-style energy and innovative ways of thinking that employees can apply wherever they work next.

For Amleh, the fund isn’t just about giving the right companies the resources that they need to succeed on an international stage. It’s about creating much-needed jobs and economic opportunities, and placing Palestine on the global startup map. “Through technology, our startups can grow beyond Palestine, to the Arab region, or the world, and that can change everything.”

Invest ... in people who want you to succeed

Over the course of his career, Gabriel Shahin (BS Business Administration ’06) has burrowed deep into the financial weeds for commission-based financial advisory firms, discount brokers, and registered investment advisory firms.

But the lesson he took away from those experiences when he started his own financial firm in 2014 had nothing to do with balance sheets or bottom lines: It was about relationships. He was ready to move away from pushing products to his clients in favor of creating a true partnership with them, which included a fiduciary responsibility to them. “Our clients are the coaches, and we’re the quarterbacks,” he says. “It’s our job to win the game for them.”

That shift meant that he had to look up from performance charts to dig deeply into the lives of the men and women who hired him. “We’ll ask questions like: ‘How’s your health? How old were your parents or grandparents when they passed?’ That can affect how we plan for things like Social Security benefits, for example.”

While clients may hire him for his financial acumen, Shahin is also often privy to more details about his clients’ lives than their best friends and family members, and it’s a responsibility he takes seriously. “Personal finance is often more ‘personal’ than ‘finance,’” he says.

Invest ... now, in what you know

Kevin Kelly (BS Finance ’08) knows that even for business school alumni, investing can be intimidating. “There’s a lot of jargon, and it’s easy to get lost in the minutiae,” he says. “But there’s never been a better time to start investing.”

He’s not just talking about the old saw that the best time to invest was 20 years ago, but the second-best time is today. He means that in recent years, costs have plummeted, choices have skyrocketed, and it’s possible to build a balanced portfolio with just a few thousand dollars, and often even less.

Kelly’s been part of the revolution, developing exchange-traded funds (ETFs) for specific real estate classes including hotels, retail, and health care, which can be purchased for as little as $25.

Thanks to minuscule initial costs, almost anyone can set up a just-for-fun investment account based on their specific interests. Like green energy? Social media? Politics? China? You can easily find ETFs or other investments that allow you to use your own insight to make bets on specific areas. “There are so many different things for people to invest in and be excited about. There are great opportunities for them to put their capital to work and make their money work for them,” says Kelly.

Spend on ... the next big thing

When Jeff Bezos founded a little book-selling website called Amazon in 1994, he was prescient enough to see that someday, almost all of us would be happy to put credit card information online to buy ... well, just about anything. Long before retail behemoths including Walmart saw the trend, Bezos understood where our spending was headed.

A quarter-century later, Payscout’s co-founder and president Manpreet Singh (BS Accountancy ’97) is placing his bets on what he believes will be the next wave: virtual reality commerce. If his predictions are right, Payscout — a company that drives the authorization, approval, funding, and security that happens after you swipe your credit card at a face-to-face transaction — is poised to win big. Global giants such as Oracle and Accenture are also strong believers in a virtual-reality future.

He paints a vivid picture. “Imagine a virtual reality movie where you see something that you want — a car, a dress, anything — and all you have to do is blink your eyes to make a payment and buy it,” he says. “You don’t have to reach for your wallet or your phone.”

Of course, such purchases aren’t limited to physical items: Watch a compelling ad about the Humane Society or the Red Cross, and you’ll be able to blink to donate. We can quickly and seamlessly act on our very best intentions. Companies like Payscout will invisibly transform our desires into action.

Early research suggests that we’re more than three times as likely to buy in these virtual reality experiences, and Singh is confident that today’s tech is just scratching the surface. “It’s time for companies to embrace virtual reality commerce and become the kinds of early visionary thought leaders Jeff Bezos was 25 years ago,” he says.

Spend on ... a financial roadmap

As someone who made the transition from being a NASA engineer to the owner of an accounting firm for small businesses (yes, really!), Deirdre Morhet (MBA ’07), knows that life can take any number of unpredictable twists. But that doesn’t mean you shouldn’t try to plan for them.

While she’s seen plenty of people launch diverse businesses based on their passions, from construction companies to mom-and-pop retail shops, the owners who succeed over the long term are the ones who underpin that passion with planning.

“Business owners might go into a car dealership and buy a new truck because they think it’s cool and they can write it off,” she says. “But if they do that, what are they taking money away from?”

Illuminating those opportunity costs and helping business owners plan for the best use of every dollar that comes into their lives is how Morhet helps them transform their businesses from so-so to spectacular.

Everyone can benefit, she says, by moving from a reactive approach to finances to a reflective and planful one. “If the only time you pay attention to your finances is when you get your tax bill, that’s not enough,” she says. “A great plan can help you move forward productively.”

Autumn 2018