Kyra Ward, St Andrews Economist columnist, spoke with Walter R. Obermeyer, the President of ObermeyerWood, one of the largest private investment advisory firms in Colorado. They sat down to discuss his insights into savings as it relates to university students as a economic and financial expert. He is consistently listed as one of the leading investing advisors in the nation: appearing in Forbes’ 2016 list of Top Wealth Advisors, Barron’s 2016 list America’s Top Financial Advisors, and Top 100 Independent Advisors. 

Kyra Ward: Hi Mr. Obermeyer can you please introduce yourself and tell us a little about yourself? 

Wally Obermeyer: Hi! I’m Wally Obermeyer. I live in Aspen, Colorado. Business wise, I am a 60-year-old entrepreneur and split my time between various activities—including the design/manufacturer of ski apparel , the generation of hydroelectric power, real estate management  and investment management. In addition, I spend about 15 percent of my time on charitable activities. Clearly, however, I spend the majority of my time on investment management.

KW: That all sounds great, can you tell us a bit about what makes you tick? Why economics?

WO: I have a deep interest in and care very much for how societies function and for how people live. I remember years ago reading E.F. Schumacher’s Small Is Beautiful, a seminal treatise on how to truly help people in developing countries. To me, the study of economics—in terms of the good it can do for people—is on par with the study of medicine.  Both fields can have a profoundly positive effect on society.

 KW: Excellent, so to the topic we’re really interested in, what advice do you have for college students in terms of savings? Obviously it can be really hard to think about saving money on a tight budget, and when it doesn’t seem necessary or relevant what advice do you have to that end?

 WO: When you think about it, students are in the mode of investing in their own human capital through purchasing and earning their education. The cost of their education is tuition plus the opportunity cost of what they could otherwise earn in a job—room and board they would need regardless. Parents frequently contribute to tuition and many students help by working at least part time, plus loans and scholarships can help ends meet.  This does not leave much for savings. Plus, as young adults, it is also a time when some travel and adventure, especially with peers, can be very formative. So there just isn’t much left for savings. That said, I would personally want to have maybe six month’s spending money stashed away.

KW: So college students are investing in themselves, that’s a great concept. There’s a common phrase when it comes to finance, which is, “making your money work for you.” What does that mean?

 WO: One can think of money as ether really helping or hurting you. If it’s your money, and you own it, you can invest it, you can loan it out for interest and it can work for you. For example, if we suppose you can earn five percent per year after tax, and you have £1 million, then you could literally enjoy a stipend of £50,000 per year. However, the opposite is true as well so, if you owed a million dollars, and had to make interest payments of £50,000 per year, that could be painful. Capitalism is great when you have the capital—so start accumulating it early. As a rule of thumb, work hard, earn as much as you can, live relatively frugally and try to save and invest 10-15 percent each year. Right now, however, focus on your education. Human capital also pays big dividends.

KW: That’s true, but is the opposite possible? Can you save too much?

WO: Yes, it is possible to save to a fault. Economists term one’s preference for the present versus the future as one’s discount rate. Behavioral scientists are finding that to a great extent, we are born with relatively higher or lower discount rates. So some people spend to a fault (high discount rate) and other’s literally save every penny. My advice is to live a little each day, spend money on some special things that are fun, but also plan and save for bigger ticket items such as future housing, money to start a business and eventually, if you have children, their education. And, I hate to say it, but some of you will be supporting aging parents.

KW: Well thank you for the advice. Now I want to know some more about you, who are some people who inspire you?

WO: Both Ben Franklin and Aesop come to mind. Ben practiced principles of frugality, ingenuity and productivity. Aesop taught us that a bird in the hand is worth two in the bush. It was perhaps the first economics lesson on discount rates.

KW: It’s always about economics with you! So, who are your economics heroes?

 WO: Two of my heroes are Warren Buffett and Charlie Munger, Chairman and Vice Chairman of Berkshire Hathaway. They are heroes not because they are filthy rich, but because they are very bright, kind and ethical. Throughout their careers they have built an incredible business employing many thousands of people, enriched their shareholders and taught many people (especially students) how to better and more rationally invest. For those interested, I suggest reading Warren Buffett’s Letters to Shareholders (berkshirehathaway.com)

Also, may I suggest that the Scot’s are also among the world’s economic heroes. Charlie Munger recommends How the Scot’s Invented the World by Arthur Herman. Any serious student of economics should read about the achievements and ponder the lessons from this relatively small and at one-time poor population contributing so significantly to the world’s progress. You all are in the ideal place to stoop yourselves in these lessons.

KW: Haha, yay for St. Andrews then! Well thank you for your time Wally.

 WO: You’re welcome. Just remember, keep studying!

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Featured image from ObermeyerWood.