Drivers as Insurance Policy

I have been in Jakarta for a week. I enjoy the experience, although I learn the true meaning of traffic jam in Jakarta. All the traffic jams I experienced in New York, Boston, or Toronto are pale in comparison. Traffic jams in Jakarta are chaotic and at the same time fun to watch.

I used to think Jakartans wasted their money by hiring drivers. But no more. I had suspected that these drivers must have filled an important role. I found that role yesterday when I discussed the madness of Jakartan traffic jam yesterday with my junior high school reunion.

Basically drivers in Jakarta serve two roles: (i) time saver and (ii) liability protection. It is not unusual to spend 3-4 hours per day in traffic, so drivers are huge time savers. One can work in the car, make phone calls, and coordinate work activities.

The chaotic mixture of motorcycles, trucks, carts, and cars of all sizes creates a high-risk situation for car drivers. If a car is involved in an accident with a motorcycle, the car driver is by default on the wrong side. Having a driver removes the risk of personal liability for the owner of the car.

Anak Kampung

Anakku bilang aku akan rindu steak Alberta
Lantas aku bilang kamu akan suka nasi Padang

Walau aku tahu harga daging memang mahal
Aku sudah putuskan waktu pulang kampung

Aku dulu pamit cari kehidupan lebih baik
Sekarang aku cari kehidupan lebih berarti

Kalau aku tak pernah berani melangkah
Aku tak akan tahu kemana aku berakhir

Sudah aku susuri jalan sepi Rocky Mountains
Sekarang waktunya aku lalui jalan ramai tanah airku

Walau aku sudah lama terasing tapi aku tak bisa lupa
Aku anak kampung dan rindu juga sapa ramahmu

Penultimate

We met again after a long while. He hugged me tight and wished me well. We have been good friends and could be best friends. We caught up on our life stories – well, mostly work stories. My decisions and his ventures. It worked and didn't work last time. It might work again in the future. Always keep the door open, but never overdo it since both parties have to come to the table.

A 10 K run after that. It was cloudy and drizzling a bit, but the sun showed up in the last 2 km. Never worry too much, I said to myself. The clouds are what make life interesting and the sun will show up eventually. Yesterday I was drenched though, but funny thing is I ran a lot better. Cool weather helps soothe aching muscles. I hope much warmer weather will still be good to me. I will find out soon.

The day is not over yet. I had to do a quick bike. Storing this and that. Last minute stuff. Always like that. Life; my life. It was coincidence I ended up here, I remind myself. Though what I did helped that happen. My life is full of that. Coincidence after coincidence. If I tried too hard, it always never worked.

If I tried too hard, it always never worked. I am reminded of that when I read around-the-world bike adventure books tonight. That's what I want to do, I said to myself. I know what I want. I just have to make sure I never try it too hard.

Buying a House?

If you make a right call for an impending housing bubble – like what happened in Calgary 7 years ago – it is quite justifiable to purchase a house. But this is not an easy call to make and such bubble does not happen every decade.

Buying a house is not automatically profitable. The up-front cost is roughly 5% overhead cost due to filling up the house with furniture, upgrades if buying a new house or realtor's fee if buying a resale (used) house, moving cost, and lawyer's fee.

The biggest cost chunk actually comes from mortgage interest. For the first 10 years of paying down bank loan for your house purchase, a 4% annual interest rate means roughly 50% of each mortgage payment goes toward the mortgage interest. For example, if one pays $2000 monthly mortgage payment, $1000 will go to the bank, while $1000 will go toward paying down your mortgage. Over 10 years, one will give away about $100,000 to the bank.

Living in a house also means paying fully heat, electricity, water, and garbage collection. This works out roughly $500/month. Over 10 years, one will pay $60,000. In addition one has to pay property tax which depends on the market-value house price. For Calgary, this works out roughly $1500/year for a $350,000 house.

So, over 10 years, the total cost of owning a house is (5%×$350,000) +  $100,000 + $60,000 + $15,000 = $192,500. Yes, you will save $1000/month × 120 months/10 years = $120,000 in your house, but you will spend $192,500 in order to save $120,000!

Bottom line: Owning a house is not a cheap proposition. $192,500 – or 55% of the $350,000 house price – is the opportunity cost of owning a house. For what opportunity, you might ask? For the opportunity of house price inflation (i.e., housing bubble in the best case scenario). To break even, you need a steady 4.5% house price inflation over 10 years. If you don't get this house price inflation, your house purchase is definitely a losing proposition!

But remember that $192,500 could be spent differently. If you think about this, the cost could be even higher. You could accumulate this amount for 10 years as a retirement saving, as a business capital, or simply as money for travel or education. You need to really do your homework before deciding for sure to buy a house.