According to the wikipedia online encyclopedia, "moral hazard" is defined as arising:
" because an individual or institution does not take the full consequences and responsibilities of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to hold some responsibility for the consequences of those actions"
For example, if I were to lend a sibling $40, and he goes to use it for gambling - when he has loads of money of his own (say $2200/month coming in) - then: a) he isn't accepting the full consequences of his own poor money management, and b) he will treat my $40 less carefully say - than if he was really down to his last nickel and had to go and earn that money, in say five hours of 'sweat equity' flipping burgers at a Mickey D's.
In addition, he leaves me holding some of the responsibility for his ill-chosen actions, since I am enabling them by giving him money! Thus, I am enabling moral hazard and he is ensnared via my own ill-considered actions, by allowing him to dodge full responsbility for his own individual choices.
Now, imagine this: a sibling living in Vegas has a total income of $2,200 a month. However, he chooses to: a) live in a 2-bedroom apartment which exhausts $1800 a month, leaving only $400 for food, entertainment. Also b) he chooses to short on his rent by paying weekly instead of monthly and using the balance on slots to try to make more money via gambling than he has coming in via gov't benefits. However, his shorting strategy backfires- leaving him late every month for rent, whereupon he phones his oldest 'bro pleading "emergency", and needing $40 for prescription drugs "for his heart medicine".
What to do? The answer, of course, is nothing. By sending him the money, you are in effect engendering a moral hazard by creating an artificial condition within which he can refuse to accept the consequences for his actions - and hence to continue the same gambling without doing a damned thing himself to correct his cash flow issues. A hypothetical? No, since my own brother "Donnie", living in Vegas, did call over the weekend with this cock and bull story about "an emergency and needing $40". I firmly told him HE was to blame for his negative cash flow and I wasn't coughing up to subsidize him when he was raking in more than enough to cover his bills. At which point I asked if he was gambling again, and noted his tone changed to stone cold, whereupon be barked: "I ain't takin' any more of this shit and don't fuckin' call me no more"
Hey, fine, pard - and don't let the door smack you in the ass on the way out.... Sometimes, the truth hurts, doesn't it?
Let's not be coy here: Las Vegas is not a friendly place for anyone with a gambling addiction. Indeed, no matter how much "bread" they have coming in, even $6k a month (as Donnie once had) they'll always be short - because their stupid gambling eats it up. So, who's to blame for that? It isn't me. Indeed, if they were smart enough they wouldn't even live in Vegas but someplace where slots are banned (though mind you, they'd likely then blow it all on lottery tickets).
In October, 2009, while on a holiday to Vegas I went to visit "Donnie" at a VA Life Care center north of Vegas and he was chomping at the bit to get out. He had said he applied for his social security and was waiting for reinstatement of Veteran's benefits- whereupon he could leave the place in a few months, and be "on my own". Until he emerged, in April, with his own place- I regularly sent him at least $20 a month cash spending money to help him - even though I suspected he was using the dough on cigarettes, which the VA drs. had warned him against, since smoking wouldn't do his heart any favors.
With two months to go before his imminent departure, I mailed him $50 and told him straight that this was it - and there'd be no more cash sent. He had to stretch that til he got out, then he was on his own, with his OWN money. Apron strings, or rather money strings, would be cut.
Later, after he'd settled into his new apartment, originally a single bedroom for $1100 a month, I warned him that he needed to go "all out" to keep his independence and not blow it this time. By blow it I meant spending money he didn't have, namely on slots - like at his favorite joint, "The Joker's Wild". And btw, if you're ever going to play slots in Vegas, you never play at a tiny little hole in the wall, you either go to the Strip and a mainline casino, or stay home. And when you do play on the strip, you use the penny slots, not $5 slots, or even $1 slots. (In this way, while staying at the Bally then the Encore in October last year, I broke even on my slot play: winning $112 and losing $111 - factoring in $50 worth of free slot play from the Wynn-Encore as part of a package deal. Point is, once that was gone, I dipped no further! )
I told him to find something constructive to do, or anything - that would keep his mind occupied and away from slots. If it meant watching 9 hours of soaps and movies on the tube each day, so be it. Better yet, since he's a football fan, get a John Madden football video game and play that! Slots are dangerous, because while they create the illusion of activity and doing something, it's all bogus. Ask the elderly lady we met in Green Bay last December, playing at the Oneida Casino, who (after a snowstorm halted all transit, travel back to Madison) was stuck for three days, and instead of mixing her slot play in with reading novels (as my wife and I did) stayed full time playing the slots and losing all $990 she won the first day! Meanwhile, wifey and I enjoyed the slots plus reading and came away with $34 to spare!
A month ago, after hearing of some health problems I checked in on "Donnie" to learn he was now ensconced in a two bedroom digs (at the same complex in Henderson, outside Vegas) for $1800 /month because the $1100 a month apt. was "too small". However, he complained of being short of cash and only having $400 to spend- like for a whole month of food. Well uh....duh!
I knew he was hinting around for help but I wasn't about to give it. Not when I'm receiving barely $400 a month in an immediate annuity (I've deliberately postponed receiving Social Security to receive a larger monthly amount - what's called "postponing gratification") or less than five times what he's raking in via VA and SS benefits! I advised him to immediately - by the end of the month - move his ass out of the higher rent apt. and move back to the $1100/month digs which would effectively nearly triple his cash flow. Instead of listening and following my advice, he gave me a spiel about waiting for a new VA benefit check. I told him to forget about it and get serious - don't make ANY assumptions about any new benefits. Deal only with the birds in the hand.
So nearly a month elapses and on Saturday I receive this plea for "emergency" money. And the episode which transpired, as related.
Sad that another brother chooses to cut contact, but as they say, c'est la vie. That's his choice and I'm not about to be extorted by any brother - whether out of fear of Hell for some bogus salvation on offer (Pastor Mike) or in return for brotherly contact ("Donnie"). In either case, whoever's doing the extortion - salvational or emotional - can go f*ck themselves. No family even in name, is worth it, and I won't invest in it. No moral hazard either way.
As for "Donnie", the best advice to offer him, since he clearly can't manage his own finances, may be to check into a nursing home and let them care for him. He'll get a comfy room, TV but no slots to tempt him.
Sadly, "Donnie's" case is not at all unusual in Las Vegas. In an issue of Las Vegas Life from about four years ago, a piece noted that nearly 1 in 3 Vegas adults are gambling addicts. Type in "gambling addiction" on Google and you'll generate thousands of hits, and hundreds of pages. At least in Vegas they DO have outreach programs to help the gambling addicted, as well as 12 step programs, and others. Many of these are offered free of charge, but obviously one must first want help before he can elicit the assistance needed and climb out of the hole he's in. No sibling or family member can do it for him, and lending or giving money is no answer or response, merely enabling.
In any case, as my grandfather who once owned a corner store in Milwaukee put it, in advice given to me more than three decades ago:
"As far as family goes, my advice is neither a borrower or lender be"
He added that money borrowed, lent or even just given - ostensibly without strings- merely becomes troublesome later. A source of dissension and other issues.
As far as I'm concerned, however, the issue is simple: if you're pulling in $2200 a month it is YOUR job to make that money last, not mine to assist you (by parting with my money) to make it last. If you can't do that, learn some basic budgeting, move into a nursing home, or better yet - kick the gaming habit to be able to acquire actual adult independence.
" because an individual or institution does not take the full consequences and responsibilities of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to hold some responsibility for the consequences of those actions"
For example, if I were to lend a sibling $40, and he goes to use it for gambling - when he has loads of money of his own (say $2200/month coming in) - then: a) he isn't accepting the full consequences of his own poor money management, and b) he will treat my $40 less carefully say - than if he was really down to his last nickel and had to go and earn that money, in say five hours of 'sweat equity' flipping burgers at a Mickey D's.
In addition, he leaves me holding some of the responsibility for his ill-chosen actions, since I am enabling them by giving him money! Thus, I am enabling moral hazard and he is ensnared via my own ill-considered actions, by allowing him to dodge full responsbility for his own individual choices.
Now, imagine this: a sibling living in Vegas has a total income of $2,200 a month. However, he chooses to: a) live in a 2-bedroom apartment which exhausts $1800 a month, leaving only $400 for food, entertainment. Also b) he chooses to short on his rent by paying weekly instead of monthly and using the balance on slots to try to make more money via gambling than he has coming in via gov't benefits. However, his shorting strategy backfires- leaving him late every month for rent, whereupon he phones his oldest 'bro pleading "emergency", and needing $40 for prescription drugs "for his heart medicine".
What to do? The answer, of course, is nothing. By sending him the money, you are in effect engendering a moral hazard by creating an artificial condition within which he can refuse to accept the consequences for his actions - and hence to continue the same gambling without doing a damned thing himself to correct his cash flow issues. A hypothetical? No, since my own brother "Donnie", living in Vegas, did call over the weekend with this cock and bull story about "an emergency and needing $40". I firmly told him HE was to blame for his negative cash flow and I wasn't coughing up to subsidize him when he was raking in more than enough to cover his bills. At which point I asked if he was gambling again, and noted his tone changed to stone cold, whereupon be barked: "I ain't takin' any more of this shit and don't fuckin' call me no more"
Hey, fine, pard - and don't let the door smack you in the ass on the way out.... Sometimes, the truth hurts, doesn't it?
Let's not be coy here: Las Vegas is not a friendly place for anyone with a gambling addiction. Indeed, no matter how much "bread" they have coming in, even $6k a month (as Donnie once had) they'll always be short - because their stupid gambling eats it up. So, who's to blame for that? It isn't me. Indeed, if they were smart enough they wouldn't even live in Vegas but someplace where slots are banned (though mind you, they'd likely then blow it all on lottery tickets).
In October, 2009, while on a holiday to Vegas I went to visit "Donnie" at a VA Life Care center north of Vegas and he was chomping at the bit to get out. He had said he applied for his social security and was waiting for reinstatement of Veteran's benefits- whereupon he could leave the place in a few months, and be "on my own". Until he emerged, in April, with his own place- I regularly sent him at least $20 a month cash spending money to help him - even though I suspected he was using the dough on cigarettes, which the VA drs. had warned him against, since smoking wouldn't do his heart any favors.
With two months to go before his imminent departure, I mailed him $50 and told him straight that this was it - and there'd be no more cash sent. He had to stretch that til he got out, then he was on his own, with his OWN money. Apron strings, or rather money strings, would be cut.
Later, after he'd settled into his new apartment, originally a single bedroom for $1100 a month, I warned him that he needed to go "all out" to keep his independence and not blow it this time. By blow it I meant spending money he didn't have, namely on slots - like at his favorite joint, "The Joker's Wild". And btw, if you're ever going to play slots in Vegas, you never play at a tiny little hole in the wall, you either go to the Strip and a mainline casino, or stay home. And when you do play on the strip, you use the penny slots, not $5 slots, or even $1 slots. (In this way, while staying at the Bally then the Encore in October last year, I broke even on my slot play: winning $112 and losing $111 - factoring in $50 worth of free slot play from the Wynn-Encore as part of a package deal. Point is, once that was gone, I dipped no further! )
I told him to find something constructive to do, or anything - that would keep his mind occupied and away from slots. If it meant watching 9 hours of soaps and movies on the tube each day, so be it. Better yet, since he's a football fan, get a John Madden football video game and play that! Slots are dangerous, because while they create the illusion of activity and doing something, it's all bogus. Ask the elderly lady we met in Green Bay last December, playing at the Oneida Casino, who (after a snowstorm halted all transit, travel back to Madison) was stuck for three days, and instead of mixing her slot play in with reading novels (as my wife and I did) stayed full time playing the slots and losing all $990 she won the first day! Meanwhile, wifey and I enjoyed the slots plus reading and came away with $34 to spare!
A month ago, after hearing of some health problems I checked in on "Donnie" to learn he was now ensconced in a two bedroom digs (at the same complex in Henderson, outside Vegas) for $1800 /month because the $1100 a month apt. was "too small". However, he complained of being short of cash and only having $400 to spend- like for a whole month of food. Well uh....duh!
I knew he was hinting around for help but I wasn't about to give it. Not when I'm receiving barely $400 a month in an immediate annuity (I've deliberately postponed receiving Social Security to receive a larger monthly amount - what's called "postponing gratification") or less than five times what he's raking in via VA and SS benefits! I advised him to immediately - by the end of the month - move his ass out of the higher rent apt. and move back to the $1100/month digs which would effectively nearly triple his cash flow. Instead of listening and following my advice, he gave me a spiel about waiting for a new VA benefit check. I told him to forget about it and get serious - don't make ANY assumptions about any new benefits. Deal only with the birds in the hand.
So nearly a month elapses and on Saturday I receive this plea for "emergency" money. And the episode which transpired, as related.
Sad that another brother chooses to cut contact, but as they say, c'est la vie. That's his choice and I'm not about to be extorted by any brother - whether out of fear of Hell for some bogus salvation on offer (Pastor Mike) or in return for brotherly contact ("Donnie"). In either case, whoever's doing the extortion - salvational or emotional - can go f*ck themselves. No family even in name, is worth it, and I won't invest in it. No moral hazard either way.
As for "Donnie", the best advice to offer him, since he clearly can't manage his own finances, may be to check into a nursing home and let them care for him. He'll get a comfy room, TV but no slots to tempt him.
Sadly, "Donnie's" case is not at all unusual in Las Vegas. In an issue of Las Vegas Life from about four years ago, a piece noted that nearly 1 in 3 Vegas adults are gambling addicts. Type in "gambling addiction" on Google and you'll generate thousands of hits, and hundreds of pages. At least in Vegas they DO have outreach programs to help the gambling addicted, as well as 12 step programs, and others. Many of these are offered free of charge, but obviously one must first want help before he can elicit the assistance needed and climb out of the hole he's in. No sibling or family member can do it for him, and lending or giving money is no answer or response, merely enabling.
In any case, as my grandfather who once owned a corner store in Milwaukee put it, in advice given to me more than three decades ago:
"As far as family goes, my advice is neither a borrower or lender be"
He added that money borrowed, lent or even just given - ostensibly without strings- merely becomes troublesome later. A source of dissension and other issues.
As far as I'm concerned, however, the issue is simple: if you're pulling in $2200 a month it is YOUR job to make that money last, not mine to assist you (by parting with my money) to make it last. If you can't do that, learn some basic budgeting, move into a nursing home, or better yet - kick the gaming habit to be able to acquire actual adult independence.
2 comments:
Putting aside our (theological) differences for a minute - I have to AGREE with you re: "Donnie."
I Thank GOD I was able to 'kick' the Satanic hold of gambling as well as alcohol.
With a wife and two teenagers (by the grace of God) I am able to have our needs met with my net pay of $980.00 bi-weekly (and I'm working AGAINST Dr's orders.)
Oh BTW,FYI I DO have a HS diploma via Hialeah HS Adult Education Ctr.,that I rec's April,1973 - the State of Fla. does NOT allow NON-HS grads to become Fla. Certified Police Officers. Additionally,I rec'd my AA degree from Palm Bch.CC in July,1988,hence my promotion at that time to the rank of Lt. (Asst. Chief of Police).
"Oh BTW,FYI I DO have a HS diploma via Hialeah HS Adult Education Ctr.,that I rec's April,1973 - the State of Fla. does NOT allow NON-HS grads to become Fla. Certified Police Officers. Additionally,I rec'd my AA degree from Palm Bch.CC"
Ok, I stand corrected on that and was misinformed by a 3rd party. I promise not to invoke that against you in any future blogs!
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