Tuesday 2016-10-11

Working a construction job will take a toll on your body, so how do you organize a construction crew so that people can have a career and a pension?

      | Pension             |
 ^    +---------------------+
 |    | Sales / Specialists |
 |    +---------------------+
 |    | Senior Crew         |
 +    +---------------------+
Age   | Crew                |
        # of people ---->

The guild system of apprentice, journeyman, and master doesn't prescribe the number of people at each level. So the organization can have three basic demographic forms: 1) the rectangular shown above, where roughly the same number of people are working at each level; 2) a pyramidal one, where there are few at the top and many at the bottom; and 3) an inverted pyramidal.

Note that the age-skill levels are a rough approximation; ideally, people skill up as fast as possible so that they have more opportunities to contribute more to the crew.

The benefits of a pyramidal organization is that the pension costs are relatively small, and when people leave at any level, it's relatively easy to replace them by promoting the most ready from the level below. However, the pyramid will have to keep growing forever; which is fine as long as the slope of the pyramid is less than the rate of growth of the economy.

Assume that it takes 25 years to become a Sales / Specialist, and the local economy grows at 2% per year.

exp(0.02 * 25) = 1.6, so the maximum total number of Crew can only be 1.6 times the number of Sales / Specialists in a stable pyramid. Should the economy geometric-average 4% real growth for 25 years, the ratio rises to 2.7.

The rectangular and inverted-pyramid orgs seem to have no benefits over the GDP-growth matched pyramid org.


The bane of any crew is an economic downturn, as most crews are forced to downsize. Guilds ancient and modern -- such as Buurtzorg Nederland -- have sought to regulate supply and demand through districting, lobbying, etc. which are infeasible for a single non-gov't-contract construction crew. In order to avoid downsizing during downturns, the crew will need to make its own work.

Downturns in the US occur roughly once every 10 years and persist for roughly 2-3 years.

So during the ~7 years of economic growth, we need to save enough to get through 3 years of pain, and the savings need to be held in a strongly counter-cyclical assets.

Assume that during downturns crew are paid 50% of normal salaries, while during upturns they are paid 70% cash and 30% into savings. E.g. 40000 USD/year * 7 years * .3 saving rate = 84000 USD savings
84000.0 USD / 20000 USD/year = 4.2 years of downturn avoidance

The capital gains from the counter-cyclical savings should be used to make work, e.g. for a down-payment to buy a property, convert it to a duplex, and then rent it out. When that work is exhausted, switch to charitable development works in the local community.


The make-work development purchases from the savings plan should be held as pension assets. By the time someone fully retires, they will have seen roughly 4 economic growth cycles, with 4 make-work periods spent building out pension assets.

Assuming the 84000 USD savings from above, a counter-cyclical savings holdings of an ETF such as TLT will gain ~20% during a downturn, 84000 USD * .2 gain = 16800 USD.
Assume that the crew has 6 people, so gains total 16800 USD/person * 6 people = 100800 USD.
That's enough for a down-payment on a property and the costs to develop it into a duplex.