Applied Genius. Maximum Utility.

How to Spend Money

We all spend a lot of money on everyday purchases, whether we realize it or not.   There is a brand-new credit card designed to reward you for charging those everyday purchases (gas, groceries, and drugstore) rather than using "cash" or some similarly antiquated 20th-century method. 

The new AT&T Universal Rewards MasterCard is the Applied Genius choice, hands-down.  It offers an amazing 5% back in these categories, which is worth nearly $300 the first year alone without any effort at all!   Mycroft carries this card (along with the the Citibank Diamond Preferred Rewards MasterCard and the recently discontinued Chase Cash Plus Rewards Visa, which are similar), and uses it for all his gas, grocery, and drugstore purchases.  He's already persuaded several of his PhD-holding friends to get one of these cards.  You should get it too; here's why.

Save $100 per year on gas.  Gas costs $2.79 a gallon in Applied-Genius land; getting 5% back knocks the effective price down almost $0.15.  You could spend a lot of time driving around to find gas at $2.65, or you could just whip out your AT&T Universal Rewards Card.  If you consume 12 gallons of gas per week the way Mycroft does, that's worth about $2 per week, or nearly $100 per year just for the gas rebate.  But wait, there's more.

Save $100 per year on food.  Groceries and drugstore purchases also qualify for the 5% rebate.  According to the USDA, the typical US household spends 5.4% of its disposable income on food at home.  This amounts to approximately $2000 per US adult per year.  (If you're reading Applied Genius, it's probably higher than that.)  Guess what?  5% of $2000 is another $100 per year, just for the food rebate.  It's $200 per year if you buy groceries for two adults, $300 per year for three, and so on.  But wait, there's more.

Get $100 Free Money to Start.  Citibank (the issuer of the AT&T card) also gives back 1% on all other purchases, which you can get from other cards, too.  With AT&T Universal Rewards, you can take this rebate as cash on your statement (which is taxable) or as gift cards at many merchants (which, let's just say, "doesn't get automatically reported as income to the IRS on a 1099-MISC.")  As if this weren't enough, Citi will give you $100 to start off with, after your first purchase.  But wait, there's more.

Earn $270 or more in Free Interest.  Lots of cards offer introductory "teaser" balance transfers.  The AT&T Universal Rewards Card and the recently discontinued Chase Cash Plus Rewards card are unusual in that it gives you 0% APR on all purchases for the first 12 months.  As you rack up charges for your everyday purchases, simply pay the minimum monthly payment -- and defer the rest until 2007 with no interest charged.  If you're really ambitious, you could deposit the rest of the money into a high-yield savings account (such as offered by Citibank, HSBC, or Emigrant Direct) to earn 4.5%, risk-free, for a year on money you've already spent.   If you spend $1,000 per month, this translates into a $270 gain in free interest alone.    If you spend more (especially early in the year), you gain even more. 

Total Benefit:  $650 the first year. After you pay off your whopping bill at the end of the year, having racked up rebates the whole time -- $100 for spending $2K on gas, $100 for spending $2K on food, $100 free for signing up, $80 for the 1% rebates on the other $8K of stuff you bought, and $270 of free money from the 0% offer --  you'll have $650 to splurge with.  (You could even buy some fluorescent light bulbs for an official Applied Genius parlay, turning $40 into $1400.)   You can earn up to $300 each year after the first, a common cap in the industry.  If you're a really big spenda, I understand Emigrant Direct has a capless 1.4% rewards card, which would be worth only $196 to our example consumer but would be worth more if you spent more than $46,428 on your card (thanks to reader J.E. for the tip.)

Now how much would you pay?  Since you're reading Applied Genius, instead of Clueless Idiot, you already know that there's no annual fee.   (Forbes has a list of very high annual-fee cards, which cause Mycroft to shake his head in wonder.)

You'll find a tasteful link on the left (and a really, really garish link at the bottom of the post.)   You're welcome to try to apply for the Chase Cash Plus Rewards Visa (our old recommendation), which is being phased out; please call 1-888-787-0329, or apply for one of the other Citibank cards that also give 5% on gas, groceries, and drugstores listed on the left (which are very close substitutes.)

(In the interests of full disclosure, I'd like to remind you that Citi will, indeed, pay us if you sign up directly through us.  And wouldn't your significant other, sibling, or parents like one, too, with their very own free $100 to start?)

The Best Investment Ever

Fluorescent light bulbs have been around for a long time, but there are still a lot of households that don't use them.  They should. 

Let's do a back-of-the-envelope calculation about how much one of these bulbs is worth.

Assume that we replace a traditional 100-watt traditional incandescent bulb with a 23-watt fluorescent bulb.  The traditional bulb costs $0.50 and lasts for 2,000 hours of light, whereas the fluorescent bulb costs $X and gives 10,000 hours of light.   Electricity in Applied-Genius land costs $0.135 per kilowatt-hour these days (twice the 1999 rate!)  Finally, assume for the sake of argument that you're flat broke and would have to buy the bulbs on your credit card, paying 20% APR for the privilege.  Solving for the price $X that exactly equalizes the cost of doing it the old incandescent-bulb way vs. the new fluorescent-bulb way gives us the Net Present Value of buying an incandescent bulb.

The Net Present Value of buying a fluorescent bulb under these assumptions is -- ready? -- a little over $72.  For each bulb.  If your money's worth only 8%, the NPV rises to $90+.   For each bulb.

At Amazon, these 100-watt replacements are $17 for a 4-pack.  At these prices, your NPV exceeds your cost for an gain of $271 per 4-pack.  In other words, buying a houseful (20 bulbs) is like winning $1355 in the lottery (and you don't even need to pay taxes on it!)  And that's ASSUMING that you need to pay the outrageous 20% interest on your card.

Another way to look at the attractiveness of this investments is the Internal Rate of Return (IRR) method.   A $10 bulb returns 172% annually on your investment.  A $6 bulb returns 232%; a $4.25 bulb returns 248%, and a $1 bulb returns a whopping 555%.  Note that these bulbs are frequently available in dollar stores, as well as at Big Lots and other discount retailers; brand-name GE bulbs are available at Sam's Club for approximately $3 each.  (Canadian dollar stores even offer entry-level Sunbeam fluorescent bulbs for $1 Canadian, and their electricity rates are higher than in the USA.)   

Note that these are far, far better returns than Warren Buffett has gotten at Berkshire Hathaway, and basically risk-free (and tax-free) to boot.  I suspect that Warren, a legendarily sensible sort of fellow,  knows about fluorescent lights, and may even have a few in his Omaha childhood home; he'd undoubtedly invest billions in 248%-return risk- and tax-free ventures if they were made available.

(The Applied Genius Bulb Spreadsheet allows you to do these calculations for your situation, including your local electricity rates and the number of hours per day that you use the light.)

Just to beat the already-dead horse to death and beyond, there are a few additional and important (but difficult-to-quantify) benefits as well.

(a) If you air-condition your home, you should realize that you're paying close to twice as much, because most of the energy used by a traditional incandescent bulb is thrown off as heat.  You pay twice for that energy:  first when it's emitted from the bulb, and again when your air conditioner spits it out of your house.

(b) Fluorescent lights don't require changing nearly as often. You'll spend less time on a ladder changing hard-to-reach bulbs, as well as less time at the store buying them.  (Interestingly enough, it's this maintenance-cost savings which drove adoption of fluorescents in commercial buildings, not the power savings.)

(c) Saving electric power means slower increases for future electric power prices.  (OK,  you're sharing this benefit with everyone in the world, so the direct effect on your own electric bill of you choosing fluorescents is really, really small.  But you can feel good about it, knowing that you're in harmony with the first formulation of Kant's Categorical Imperative, which is often inaccurately equated with the Golden Rule but can be better paraphrased as "Do only that which you wish everyone would do.")

(d)  Last but not least, you can brag to your friends about how smart you are.  (But you should, eventually, 'fess up and tell 'em where you read about the business case for fluorescents.)

Get thee to the bulbery!

How to Sleep

According to legend, an early version of the Boy Scout Handbook started with the topic "How to Get Out of Bed."  (Early Scouts weren't that stupid -- the chapter showed stretching exercises.) 

In that spirit, I would like to dedicate the first Applied Genius topic to sleep -- and in particular, to Dr. James Maas of Cornell University and his masterpiece Power Sleep.  This book, and the method for curing sleep deprivation described therein, changed my life.  I had stumbled through graduate school at least 1 hour short of sleep, per day, for years.  When I forced myself to adopt the Maas method described below,  I got noticeably smarter (and happier).  I lost weight.  I was significantly more effective at work.  And my wife claims that there were other, ahem, improvements.

Sleep is vital to our health.  Most of us are chronically short on sleep.   Being sleep-deprived makes you cranky, stupid, and a dangerous driver.  When you're short on sleep, there's only one way to fix the problem:  go to bed earlier. (Sleeping late doesn't work, even though you think it does.)  Here's how.

1. Set your alarm clock for the time you'd like to awaken (e.g., 7:00 am.)  The first day, go to bed at your normal hour.  You will notice that the alarm clock will wake you up.  "Duh!", we hear you say.  But needing an alarm clock is a telltale symptom that you are sleep-deprived.
   
   
2. Go to bed 15 minutes earlier each day until you wake up naturally a little before the alarm clock rings.
   
   
3. When you no longer need the alarm clock to wake up at the right time, you are getting enough sleep -- possibly for the first time in a very long time.   (You might want to keep the alarm clock set anyhow, just to make sure.)
   
4. A 20-minute power nap in the middle of the day works wonders -- but don't sleep longer than that, no matter how tired you are.  Instead, wait an hour or two and have another short nap if you're still groggy.

Dr. Maas, I thank you profoundly for your work in Power Sleep.  I hope that Applied Genius readers purchase many, many copies.

Welcome to Applied Genius!

Welcome to Applied Genius -- and a special welcome to Dynamist readers.  We know that we would just be typing to ourselves if we didn't have your valuable attention, and we intend to treat it as a precious resource.

Applied Genius is all about sharing information with you to make your life better -- making money, saving money, having more fun, getting smarter, and living longer.  Much of our content is based on creative applications of scientific and other academic research -- with citations and references to give credit where credit is due.  The rest is based on common sense ideas that you wouldn't normally think of -- but which are blindingly obvious once explained.  (See, for example, our first topic on "How to Sleep," which combines both research-based and practical information on exactly that.)

Our ads feature a broken light bulb, and claim,

...our insight on business, finance, and consumer savvy replaces broken 20th-century ideas with stark 21st-century illumination.  We bet there's intensely useful information you ought to know, but don't...

...and we mean it.  You'll learn stuff here that would require months or years to find out for yourself, along with step-by-step instructions about how to put it into practice.

The original meaning of the word "genius" didn't have anything to do with intelligence.  The Romans believed that each of us was born with a genius (pronounced "genn-ee-oos"), a sort of "guardian angel" who looked out for our interests throughout life.

Applied Genius is run by a team of, well, "smart people with a practical bent," who want to apply our knowledge to make the world better for our readers.  We're not ready to reveal our secret identities (or quit our day jobs) quite yet, but you can expect some tantalizing hints.

Creating value from Applied Genius' information requires two participants:  US, for alerting you to the information and showing you how to use it -- and YOU, to actually put it into practice.  We hope that, for every $10 of value we create for you, that you'll share $1-$2 with us through the TipJar, just as you would tip a waiter for providing excellent service at a meal.  If you think our service is great, feel free to tip more -- and if you think our service is lousy, feel free to tip less (and let us know why you did, so we can improve.)  Fair enough?