The Actively Managed Life

I have a hypothesis - the average middle-class American is being required to actively manage more and more aspects of his life in order to survive in the post-Recession economy. By active management, I mean requiring conscious thought, effort and learning. As a result, what used to be a behavioral pattern among the rich and successful in past generations has become almost a requirement among the middle and upper-middle class.

Let's go back a couple of generations to the 1950s. People in that generation held a steady job, married one person (usually for life), and saved diligently. They also generally had a small, steady group of friends they maintained relationships with, usually for life. If you worked hard, saved, and did right by society, society did right by you. This is what a passively-managed portfolio of securities that tracks a market index looks like - play by the market's rules, and get the market's returns. If the market wins, you win.

Compare that to the lives of 30-somethings today:

Our careers have to be actively managed. Most of the people I work with are regularly courted by recruiters. Many people interview once a year. Yes, coffee with a buddy at a startup counts as recruiting. Friends in the finance industry also recruit actively. The returns to those who actively manage their careers are high - more career options, better negotiating positions in your current gig, and so on. Those who don't have this luxury (i.e. are not in finance, tech or healthcare) are still expected to do this legwork by employers, even if their options are far more limited.

Our close relationships have to be actively managed Whut? Consider the divorce rate in the USA, which has been rising steadily for factors that are beyond this article. I would argue that even marriages have to be actively managed - in fact, there's a small industry serving just this function with marriage counseling, therapy, and even pre-canna classes. Couples have started realizing that it's not just enough to be reactive - you have to be proactive in your personal relationships.

Our personal finances have to be actively managed. You can no longer hope for a successful retirement if you have "merely" worked hard and saved your entire life. Have you accounted for healthcare costs? One of the top contributors to bankruptcy in the US is healthcare costs. Have you accounted for divorce, one of the great reducers of personal wealth (see above)? What about college costs, which are rising at a frightening clip. With so many variables at play, a passive financial portfolio has little chance of being successful.

So where does this leave us? Is active management of your entire life a good thing? There is, after all, something distinctly American about requiring individuals to take charge of their own destinies. Pick up a self-help book for crying out loud!

Unfortunately, I believe that most people are unwilling or unable to sort the signal from the noise when they are asked to tackle so many different aspects of their lives. It seems something is broken in our social contract when everyone is responsible for everything...