Dividend Investing Is A Slow Shift From Being A Worker To Being An Owner

I just finished reading this article by Bill McClellan of the St. Louis Post-Dispatch that discussed how a teacher with over 27 years of teaching experience in the Kirkwood area of Missouri lost her job. The interesting thing about the story is that the archdiocese decided to get rid of her, even though she didn’t seem to do much of anything wrong. She was told that “she lost her passion” and would not be retained.

Although this is just one small story, I think it serves as a microcosm of the changing nature of the informal social contract in American society. One of the reasons why some people look back upon the 1950s, 1960s, 1970s, 1980s, and 1990s with fondness is because it represented an American economic era in which you could put together a good life for yourself if you had a strong work ethic, showed up, and didn’t screw things up.

Now, there are two main shifts taking place in the American economy that are causing growing pains:

(1) The notion of employment without possessing specialized skills will become increasingly scarce. It is going to be increasingly difficult to maintain a job that you can keep while being “on autopilot” for three or four decades. Even Procter & Gamble and Pepsi are slashing jobs in the United States. The ability to automate processes thanks to technology and the desire to satisfy shareholders is going to put substantial pressure on the ability of individuals to find cushy $50,000-$80,000 jobs with benefits that do not require you to be on the top of your game. If you have an employer, the “what have you done for me lately?” mentality is going to become more and more likely to pervade the workplace. This, by the way, is why I advocate dividend investing with surplus capital: it allows you to become a part-owner of a company and frees you from having to answer to an employer. The CEO of Coca-Cola isn’t going to take your 100 shares of Coca-Cola and say, “You’re fired because you don’t fit in with company culture” because he works for you the shareholder.

(2) The middle-men are being cut. This was prophesized by Peter Drucker two generations ago. He argued that technological innovation in America was going to wipe out the middlemen in the economy and allow the producers of goods to reap outsized profits going forward.

We’re starting to see that play out in the American economy in a significant way. Let’s pretend for a second that you are a video game designer. If this was the 1980s, you’d have to get a job with a company like Nintendo. You would have to buy software and platforms to design your video game. Nintendo would have to hire an advertising company to put out the word for your game when it was going to get released. You’d have to pay someone to make the disc for your game. You’d have to pay someone to box your game and put a seal on it. You’d have to hire a truck driving company to deliver your game to stores. You’d have to pay Wal-Mart and other big retailers a slice of the profits to sell your product.

An entire little economy was able to thrive off of the goods that you produced. Those days are gone—now, you can just design a game, slap a $0.99 or $4.99 price tag on it, upload it through a game platform like Apple, and collect most of the profits yourself. This shift is great for the producer, but terrible for the man in the middle.

If you do not like being financially dependent upon the whims of an employer, you have two options, both of which involve become a business owner of some sorts. The first option is to actually take ownership of a business yourself. Run the local pizzeria. Buy a bowling alley. Pick up a car wash. And so on.

The second option is to become an owner of common stocks which allow you to outsource all of the work to others and reap a share in the business profits that you receive in regular 90 day intervals. If you buy 1,000 shares of BP, you get $2,000+ in annual income that is not subject to the whims of an employer. A stock cannot fire you. You’re the part owner, and as long as people buy oil and natural gas at a price that allows the producers to generate over 10% returns on equity, you’re going to have a little oil well pumping deposits into your account on a regular basis. That is the best way to take advantage of a shifting American economy. From an employment perspective, it is frustrating to see how individual companies are able to keep doing more and more with less, because hey, you’re gonna want your kid to be able to find a job someday. But from the perspective of a shareholder, you’re going to be generating more and more wealth because there will be more profits to distribute to shareholders as a result of this efficiency revolution. The key here is to slowly shift your life from being a worker to being an owner.