My Brilliant Career

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Includes: AVAV, BA, F, GM, GOOG, GOOGL, IRBT, LMT, NOC, RWLK, TM, TSLA
by: Kevin Wilson

Summary

I started my "brilliant" career as a geologist in November 1979, one month before the all-time high in crude oil prices, which wasn't reached again for 30 years.

Oil business history should have guided me. Oil prices dropped by 85% over the next seven years; my career was all downhill from the start.

But here's the amazing thing about it: I knew nothing of any of this, no one warned me, and I was completely ignorant of the factors that mattered.

My opportunity and out-of-pocket costs for a lost career and graduate school were equivalent to 47% of all future earnings; financial planning would have saved me huge money.

The robotics revolution will cause even more distress; but if you want to speculate on robotics, try Alphabet, Ford, General Motors, Toyota Motor, Tesla, iRobot Corp., AeroVironment, Lockheed Martin, Northrop Grumman, Boeing, ReWalk Robotics.

I started my "brilliant" career as a geologist in November 1979, when I joined Phillips Petroleum after graduating with a master's degree in earth sciences that year. Their recruiters looked at my geochemistry and oceanography background, reviewed my thesis on the geochemistry of carbonate sediments from Bermuda, and decided I was going to be very useful to them. So they offered me the highest initial pay a recruit had ever gotten in the history of the company to that point, or so they said. That record lasted about six months, because we were in the great oil boom of the late 1970s and early 1980s, and competition for talent was fierce. Personally, I don't think I would have been treated so well if it had not been for the fact that I also came recommended by a very fine geologist already at Phillips, who was, and still is, my best friend.

Chart 1: Inflation-Adjusted Crude Oil Prices

(Source: InflationData.com)

Chart 1 above illustrates the exact moment I joined Phillips: one month before the peak of the oil bubble (right there, where it shows the inflation-adjusted price at $116.98/barrel). Talk about timing. From one month after I joined Phillips and started my career, oil prices dropped by 85% over the next seven years. Hence, my "brilliant" career is in quotes. Anybody who knew the history of the oil business (i.e., its cyclicality) or understood anything about OPEC and its control of oil prices would have shown a little caution in joining an industry right at its all-time high. They might also have shown some caution in how they conducted themselves as employees. It is commonplace in highly cyclical businesses like resource exploration and development that when the cycle dips, the high-priced and/or junior talent goes first. And it would be prudent in such an industry to network, make lots of friends in management, and keep your head down. But here's the amazing thing about it: I knew nothing of any of this. No professor warned me, no colleague of my age really understood it, and although many older colleagues did understand it to some degree, they didn't talk about it until it had actually happened again, because they were basically as ignorant about economics as I was. Then the story was, "Just tighten your belt and you'll make it."

Now don't get me wrong: I worked hard, and I was good at what I did. I made tons of money for the companies I worked for, and they were generally happy to have me. But I was impatient and ambitious, and because it was an oil boom, I knew I could move to better positions with very little effort. Headhunters called me frequently for a couple of years, so I became convinced that any significant problem that came up with an employer was not to be tolerated and best resolved by departing. After all, jobs were a dime a dozen. In fact, everything I did was colored by my complacency about having the right qualifications at the right time and in the right place, and my inherent belief, based on ignorance, that this was unlikely to change. So I thought nothing of leaving Phillips when things didn't quite go my way. Probably one of my bigger mistakes, but it's hard to decide, because there were so many.

After leaving Phillips, I got a terrific job in Denver after a one-day search, with better pay and a nice title. The firm was tough to work for, very demanding, and the job was very challenging, but I was also given significant responsibility, and in the end, I found millions of barrels of oil. After beating my pay package at Phillips by a nice margin with their initial pay offer, my new firm gave me a pay raise of 7% at my first annual review. The second review raised it again and awarded me thousands of shares of company stock options. Plus, the retirement plan had the effect of tripling my contributions, when all was said and done. When I left that firm in 1984, due to a double merger that put money (which burned a hole) in my pocket, I cleared enough from options and other benefits to have been set for retirement, but I didn't see it that way at all.

I didn't understand either money, investing, or financial planning back then. So, I had no idea how important it was to set aside most of my savings for retirement and never touch it. To me, this money was very nice, but it was just the start. I had no idea that the long-term peak for the industry was one month after I started in 1979. My first move after leaving my job in Denver was to buy into a small start-up service company in the industry as a major shareholder, but that didn't work out very well, so I swallowed a big loss and moved on.

Then, I started my own consulting firm, but a year and a half later, the bottom dropped out of the oil market. I tried to get full-time or even part-time work with many people I knew, but I've always suspected that I had changed jobs so often that I had no real network left when the big crunch came. In any case, my resume and experience turned out not to be enough, because eventually, 60% of all professional geologists in the world were let go in this downturn. If I had stayed put somewhere, there might have been some institutional loyalty; I don't know this, and the very term makes me smile nowadays, but I still suspect it may have existed to some degree back then. Anyway, given the dire situation, I went back to school for my doctorate, but it was hardly an original idea; I was part of the largest group of graduate students in the geology program at the University of Colorado in its history.

My grad school costs were covered by research grants, and I received a small stipend that, for some reason, wasn't taxed for Social Security or Medicare. I couldn't live on it because I still had a house, cars, kids, vacations, etc., just like when I was employed in the oil industry; I was not a typical graduate student. I made the naïve and rather hare-brained decision to spend down my savings to support our lifestyle, because I assumed when that I graduated four years later, my new credentials would pave the way to a solid revival of my career. Sound familiar? It's a similar problem to what petroleum geologists and engineers are going through once again since oil prices collapsed (for the fourth time in my adult life) in 2014.

My first job after graduating with my PhD was a half-time "tenure-track" job. I'm still not too sure what the heck that means. I was able to get enough grant money to boost that a bit, and the school asked me to work full-time on a temporary basis, so we were fine for a while. But then austerity budgets arrived at the college, and the full-time position was destined to return to part-time. I started working on the side as a consultant, and then started two oil & gas partnerships; a few months later, I sold their assets and got a meaningful consulting contract, which meant I made good money but was then over-committed, since I was still a professor.

Eventually, I resigned from my teaching position and joined the same oil company in Oklahoma City that I was consulting to, for a reprise of my petroleum geologist career. It lasted a grand total of about two years, before the next downturn in oil prices took me out again in 1992 (see chart above). After 134 rejections and one offer of a temporary position in Canada, I finally realized what I should have seen years before: without a network of long-term clients or an active business partner to help keep things going, I was finished. I survived the year by finishing a consulting project funded by a research grant on paleoclimate, and by spending the severance package I received based on the contract I had negotiated with my former employer.

Summing up, I had a few good financial years initially, followed by four relatively bad financial years as a student, followed by two financially mediocre years as a junior professor, and then two more good years as a petroleum geologist. My Social Security statement and some inflation calculations on InflationData.com have confirmed all this in detail. I had made excellent money for a young guy, and my benefits were absolutely great compared to just about any place. But you know, just like an NFL player in a way, the career was so short that, in my case, the money was actually not very good given the risk involved.

What kind of risk? Well, look at the opportunity cost of going back to school for a PhD. Net of my graduate stipend, but not counting my free tuition, my opportunity cost was equivalent to 10.75% of my total earnings over the next 22 years (on an inflation-adjusted basis). I lost another 5.13% of my cumulative pay over the next 22 years (inflation-adjusted) due to opportunity costs coincident with being an underpaid junior professor. Admittedly, neither of these "investments" was likely to be an actual loss if I had stayed in academia, but that was not to be. But it gets worse, because during those six years of low pay between my two main oil industry jobs, I spent down much of my retirement savings in order to maintain my family's lifestyle. That cost another 17.50% of my cumulative earnings over the next 22 years. And if we really want to be accurate, I had to deal with very low pay for several years in my new field (financial advising) before I was up and running again. That cost me an estimated additional 13.81% in opportunity cost, based on the 22 years of earnings over my second career.

So altogether, my mistaken choices involving my first career potentially cost me and my family about 47.19% of my cumulative earnings over the next 22 years, in today's dollars. Fortunately, I had some oil & gas royalty income and some income from investments to help out, but it has literally taken decades to recover. As you might guess from the numbers, I have had to save like a miser to get back to where I was when I was 37 years old. My new career has provided earnings that have far exceeded what I made as a geologist, because this time around, I have actually had a real career, not a jumped-up temp job with a great title and no future.

None of this is of much interest to others except perhaps in the lessons that may be drawn from it. Since the demise of my first career in 1992, I have watched the tech meltdown destroy the careers of a generation of computer and telecom engineers (Chart 2), just like what happened to my generation of petroleum geologists, geophysicists and engineers. Then, I watched the same thing happen again to the financial engineers and mortgage brokers who lost their careers in the Great Financial Crisis (Chart 3). Entire generations of talented people are discarded by their employers on a regular basis, due to extreme cyclicality in some industries. This should be a warning to young people planning careers. That is, people should look at potentially cyclical industries and consider financial strategies for surviving the down years. But people should also look at whether they are well-advised to even begin a career in a given field, based on where that career is headed in a macroeconomic sense.

Chart 2: Sharp Decline in Computer Engineering Jobs After 2000

(Source: e-janco.com)

Chart 3: Big Layoffs in Financial Services, 2008

(Source: tradesecretslaw.com)

Recently, I wrote about another career problem that is related in a way: the impact of robotics on employment and career paths. Here is part of what I wrote:

"The Age of Robotics is upon us. What will we do in coming years when 40% or even 60% of all jobs in some industries are taken over by some type of robot? I have let this one creep up on me a bit, but now I realize that this is not some far off problem that only science fiction writers need to worry about. It is happening now. The automotive industry has already seen massive labor dislocations due to the rise of industrial robots. Other industries are undergoing rapid and massive change as a result of the improving economics of robotic systems. Drones are being used extensively, for good or ill, but in any case they are rapidly increasing as part of many economic activities."

The robotics revolution (Chart 4) is therefore introducing a more pernicious kind of problem: permanent job loss due to automation or robotics, with little chance to regroup using one's original skill set. In other words, just like I did, many people are being forced to start over from scratch. The decision on which field of study to undertake in college is, therefore, not a trivial one. I would add that I loved geology and science and would have done it for free if that would have made any sense. So, I would have started down the same path either way. But when I had a family to help support, things should have changed more than they did. The consequences of mistakes became much bigger in scale without really appearing to do so. So, when the economic signals arrived that suggested my career path was going to fail, I was too ignorant and too irrational to see this was the case.

Chart 4: The Robotics Revolution Is Costing Jobs

(Source: Robotenomics.com)

A simple look at oil price history, some readings on the political and economic power of OPEC, some understanding of the cyclical nature of resource extraction, and some openness to other career paths would have made all the difference. There were several other fields I could have gotten an advanced degree in. Still, although losing a career can be tough, many good things have come from it as well. I haven't really suffered all that much, but it has cost me a ton of money on paper and a fair amount out of pocket. I recommend that others starting out in college take a cold and clear-eyed look at their chosen path before they are fully committed. For example, there are projections that petroleum geology will be a great career going forward, since my generation (Boomers) is now all retiring (Chart 5). All I can say is, don't you believe it.

Chart 5: Supposed Demand/Supply Gap for Petroleum Geologists

(Source: serc.carleton.edu)

In the meantime, for those who want to embrace the new technology in the pursuit of fun and profit, there are a number of interesting robotics stocks to look at. Those that follow will not necessarily end up as the winners, because it is early goings in what looks like a revolution. But they are worth looking at: Alphabet Class A (NASDAQ:GOOGL), Ford Motor (NYSE:F), General Motors Company (NYSE:GM), Toyota Motor Corp. (NYSE:TM), Tesla Motors Inc. (NASDAQ:TSLA), iRobot Corporation (NASDAQ:IRBT), Aerovironment Inc., (NASDAQ:AVAV), Lockheed Martin (NYSE:LMT), Northrop Grumman Corp. (NYSE:NOC), Boeing Company (NYSE:BA), and ReWalk Robotics Ltd. (NASDAQ:RWLK). Many others are working on robots, but are privately held.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks or other securities mentioned or recommended. This post is illustrative and educational and is not a specific recommendation or an offer of products or services. Past performance is not an indicator of future performance.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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