Friday, January 10, 2014

Cameras and Real Wealth

EOS 5D File Photo

The first thing that pops into most people's minds when you mention the word "wealth" is "money". The common way of thinking is if a person has lot's of money, then they are wealthy. But when you think about it, this is only true sometimes - it is true during those rare times when money itself is actually worth something, but this is seldom the case, and it certainly is not the case today! We're living in very strange times, when there seems to be an unlimited supply of money in the system, and those who have it are really spending it in big ways. On certain "days" like the infamous "Black Friday", people line up outside the big stores for hours, ready to spend huge amounts of money on "something".

But, truth be told, and everybody I'm sure knows this, it's not cash they're spending, it's credit. Most of these big fad purchases made on big-screen TV's and the latest Tablet Computers are made with credit cards, and even for those rare few who might be purchasing with cash, this particular cash they are spending is really defined as "units of debt" not "units of wealth". This is because the supply of money in the system far exceeds the real worth of hard assets and labour in the same system to back it up. Everybody knows this, but spending what has essentially become phony money has become so normal over the past several decades, we've all lost sight of what we're really engaging in when we participate in this type of economy.

So, what does this have to do with cameras? That's an easy question to answer, but most people don't seem to possess much wisdom about it. To answer the question with another question should make the point -

"What is your real measure of wealth - the camera you bought, or the money you used to buy it with?"

Easily answered - it's the camera of course! Once you've purchased the camera (or anything else for that matter), the money is gone. But if we leave it at that, we're totally abandoning the true definition of "wealth" and what it really is. Are you any wealthier if you stand in line on one of those special retail days and buy a new camera, even if you did get a great deal on it? Not really. Let's say the camera was bought for 30% off - it will still loose an additional 10% of it's value as soon as you walk out of the store with it. That's a total of 40% in lost value... it doesn't matter if you paid full price, or if the store saved you the first 30% - the camera has still lost 40% of it's value before you even open the box and start using it! People know this is true, but don't seem to care, and when you multiply this effect by every new thing that we buy at a store - think about it - is this any way to accumulate true wealth? Of course it isn't!

"Wealth" is the stuff we own. "Money" is simply the temporary means of attaining it. So, how could it possibly be a wise way to accumulate wealth if we are first of all, 1) buying it with a credit card, which might add at least another 15% in interest to the purchase price; 2) buying it in a retail store which must add 15% in sales tax to the price, and 3) buying it brand new, when 40% of its true value disappears before you even get to use it? That's a total INSTANT loss of value of 70%!

It's a kind of inherited madness. But there is a better way. How about buying a camera that will never be worth less than what you actually paid for it for many, many years to come? Even better, how about buying a camera that might be worth more than what you paid for it years from now? It's easy to do - buy it second hand. This allows the original purchaser to take that big 70% hit up front, leaving you with the real "meat on the bone", which is the real wealth of the item. This is more or less true of every big purchase, not just cameras. For example, it's certainly true of cars, where the initial purchase loss might be more like 30% and not 70%, but buying a car second hand is a bit more of a gamble, especially if the warranty has run out, and the dollars lost are in the thousands, not hundreds.

But, seeing that this is a Photography Blog, let's just talk about cameras, and you can use your imagination to apply it to everything else that you buy. Digital Cameras, I believe, have hit their peak in terms of design development - in fact, that happened 5 years ago. Think about what you really need in a camera - a) do you really need 36 MegaPixels when everyone knows that 8 to 18 is more than enough for 99% of the pictures that we take? b) How high of an ISO capability is really necessary, especially when it's a not-so-well known truth that a lower MegaPixel count also can be made to create lower visible noise in a picture -and so can correctly processing a Raw Data file? c) Do you really need a camera that makes movies too? If the answer is "yes, occasionally", have you considered the option of buying a dedicated digital video camera, also second hand? (The market is absolutely flooded with these now, BTW, because everybody thinks it's better to have two functions in one device). d) What about Wi-Fi... if all you're doing is sharing JPEG image files directly from your camera over the Internet, are you truly making photographs? That is a question worth asking.

After considering all these things, and well after making a lot of mistakes in my camera - lens purchases over the years, I set out to find the one camera I truly desired, and wasn't long finding one for sale locally - the Canon EOS 5D Mk-1 ("Classic"), in excellent near-mint condition, for which I paid $500. At that price, I know it is highly unlikely that it will ever be worth less than $500 (in long-term equivalence), and so, I can truly say that with this purchase, I truly added a unit of "real wealth" to the stuff I own. The same goes for most of my film camera purchases, which have been on average, around $30.00 per unit. Again, these are rock-bottom prices that'll never be worth less than what I paid.

This is just to give you an idea of what I mean by acquiring real wealth, and not just buying stuff. As another great example, just this week I've paid off my Mortgage! I used money I had sitting in a Mutual Fund to do it, and last year at this time, I also paid off my car loan in the same way.

I have no idea what's in store for the world's economy in 2014--- many are making some very dire predictions about "something" that could indeed happen ---- but nobody really knows. But as far as I'm concerned, no matter what happens, or even if nothing at all happens, I feel far more secure having my house and car paid for in full than I do having that money sitting in a Mutual Fund over which I have no control. I can know for certain that I am now much wealthier in real terms than I was, because if every financial institution in a perfect storm worst case scenario were to crash, I now have some of the basics of life fully owned by me, myself and I. If you look at my "paper holdings" however, (and I still have some), it looks as though I am far from being a "wealthy man". But, if in a worse case scenario we enter into another global "great depression", I expect the paper would lose all of it's value, but I would be able to at least barter my EOS 5D for a side of beef if I ever got that hungry!

One other example of accumulating "real wealth" - I am currently putting together a small back-up solar electrical system in my house - a mere 100 KW-Hr system compared to the 700 KW-hr per month that I actually consume from the Utility - but for emergency power it is adequate, and just having it up and running will save me close to $200 per year on my electric bill. I purchased the batteries - the heart of any off-grid system, second hand for 1/3 of their retail price new - a bit risky perhaps, but I've fully tested them, and they are right now good as new.  I should mention that I'm doing this now, because Solar Panels use a lot of silver in their construction, and the price of silver right now is very low, and so the panels themselves are now available relatively cheap, and the price can only go up, as the price of silver begins to rise again.

My philosophy about real wealth is this - "the things that will hold most of their initial purchase value that you can actually hold in your hand". Others call this "investing in the tangibles". Whatever you call it, anybody can do it, enjoy doing it, and most importantly of all, benefit greatly in terms of real wealth accumulation.

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