Details Cannot Lead You To Perfect


No one can manage the details.

The Booth School of Business at The University of Chicago recently published a piece about factor investing. They say there are 300 currently known factors that influence the future price of a security. You could read it here.

The 300 secrets to high stock returns.

300 you say.

Now, I don’t know about you, but I have trouble balancing risk, liquidity, yield, taxation, and growth. I can’t imagine what to do with the other 295.

Precision won’t lead to perfection.

You can do well enough with a couple of low fee funds and an advisor to manage and inform you.

Seeking perfection is for academics and the folks running the funds. You cannot make it worth your trouble to play this game. Don’t try. Good enough is all you need and that is pretty much just common sense, patience, and discipline.


I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

 

Think Process And Outcome Will Follow


Father’s Day has passed once again.

I hope everyone enjoyed or at least had good memories. Fathering is a process. It is one that requires foresight, reasonable skill, and an ability to learn and change the path. Like life.

Fatherhood involves planning

It is harder than some planning because it is about the whole family. Planning when single is child’s play. Narrow purpose, simple goals, less volatility.

Complex planning has wider range.

Because there are more variables, you must focus on general outcomes. Precision of all the variables is not going to happen. Miss by half a year, or 2%, or savings came up short, or unfortunate expenses appear, no matter.

The primo skill is adaptability.

It’s like golf. All champions expect and deal with trouble. They practice trouble shots because they know not many people can hit all the fairways and greens. They adapt to what they find.

Adaptability means learning the first rule of golf trouble. When you are in trouble, focus first on getting out of trouble. That’s what adaptability is about. Creative, and focused on method. One step at a time. Give up the big goal for a small step towards ultimate success.

Heroic shots are for non-winners.

Winning at golf and at life means process. Make the best play available in the circumstances at hand.

Every shot has a purpose. Get from here to the best place for success. Two-time U. S. Open golf champion Julius Boros once told the me the way to think your way around a golf course is to know where you want to play your next shot from. Aim for there. Then hit the ball, wait for it to come down. Reset the goal and do it again.

Nothing you have done up to there can be changed so forget it. Nothing beyond the shot at hand can be known so it doesn’t matter either. Only your best from where you are can matter.

Life is like that too.

Do your best one step at a time. Good process leads to good outcomes.


I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

Nature Has Its Own Speed


The speed limit is part of the problem

Most processes have within them a speed limit. A farmer cannot plant corn in May and expect a harvest in June. No matter how much he exhorts the corn to grow, it has its own time. Businesses are like that too.

New business beginnings

New businesses and new projects within an existing business follow a time of their own. Management can keep it from being longer, but not often can they make it shorter. Most business outcomes follow an S-Shaped curve. In the early going there is growth but not much. People become fed up if they have unreasonable expectations of the time needed. There is an easy answer that is universally right. It takes longer.

Cyanoacrylate was discovered in 1942 and found again in 1951 by Harry Coover and his associates at Eastman Kodak. It was not marketed until 1958. How many of you have heard of Eastman 910. Not many I’m sure. Cyanoacrylate is “Super-Glue” and we know it as Krazy Glue. It is a uniquely valuable product. Yet it was the ’70s before it was in common use. I first saw it in the late ’60s being used by football trainers to close wounds.

Your new business will not grow very quickly at first because only the early adaptor and geek crowd will find it. People come to Despair #1 when after four or five years of effort the business is barely established.

Later on

Not long after Despair #1 comes Euphoria #1. The business takes off like a rocket. The hockey stick part of the S-Curve. Sales mushroom. For those that anticipated it, the business will accommodate it. For others, they will go bankrupt while growing and profitable. You cannot outgrow financing problems.

Wendy’s Restaurants had a massive supply chain problem after their brilliant advertising campaign “Where’s the beef?” Sales rose faster than their ability to service them. Too much of a good thing is just as harmful as too little.

Post success

As sales shoot up, businesses reach Euphoria #2. Towards the top of the fast growth phase. Easy to borrow money, easy to sell stock, easy to add new customers. Let’s expand and build for the infinite future in front of us.

Then comes the shoulder of the S-Curve. Sales growth slows. Overcapacity sets in and financing becomes a burden. Despair #2.

Again easy enough to avoid if you know it is coming.

Overview

Businesses grow based on the number of customers available to them. The number is never infinite. In the beginning both your people and customers are committed to the product. As more people use it, and sales grow quickly, neither employees not customers are that committed. At the far end of the curve, people who don’t care much are the customers and the employees are not passionate either. Thus the shoulder.

Anticipation minimizes problems.

Draw a sweeping up to the right S-curve and break it into 3 parts.

  1. The slow growth beginning.
  2. The fast growth success
  3. The slow growth mature market.

Each will be about five years long. It is very difficult to shorten the duration of any.

What you can anticipate should inform your planning and good planning precedes sound execution. If you thought your business would grow in a straight line from beginning to peak, draw that on the curve too. You will see how far off you will be in the early years. Late years too. Thus despair. Weak thinking is always punishable.

Don’t expect to be able to move the natural growth cycle by much.

Nature has its own time. You can manage it but not change it.

“Knowing where the trap is—that’s the first step in evading it.” – Frank Herbert


I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

Going Fast Is Not The Whole Answer


Velocity or speed

Every science student has been ordered to know the difference between speed and velocity. Speed is scalar. Just a number. Velocity has the same number but with a vector for direction. When you think about it, the Ontario Provincial Police are right. Speed kills.

In business it doesn’t matter so much how fast you go, but it does matter your direction.

Absent thought about purpose, direction, strategy and more, you end up in the old joke category. “We are hopelessly lost, but we’re making good time.”

Defining the problem better helps keep the velocity aspect in place.

Something to read

The spring version of my University of Waterloo Alumni magazine arrived this past week and it has an interesting article.

A Lab With No Solutions

The Problem Lab

Professor Larry Smith is the director of “The Problem Lab.” Its purpose is to help young entrepreneurs improve the odds of their success. Professor Smith has a long history of helping students find their way. You could watch his TED Talk here.

The lab’s outlook and methodology applies well to everyone, even established businesses.

Solutions are not the answer for this lab. They want the problem known first. to that end they offer five questions:

Consider the history.

Who is affected? How much? How loudly are people complaining? For how long? The idea is to find ways to “Take the game up a notch.” Smith is not in favour of best practices but wants disruptive solutions.

Context

Know the problem’s environment. What attrributes affect it. Be sure the problem is big enough to matter when a solution is found.

Failure analysis

Few visible problems have no failed solutions alongside them. Find out what was tried and why it failed. There is little advantage to reinventing a failed solution. There is even less to inventing a solution to no known problem or one with a tiny market.

Scale

Who cares about the problem? Some solutions cannot scale because the cost to add incremental customers is quite large. Governments and business can scale because they have the resources to implement. If success analysis were considered, Salesforce would be a good example of scaling through the large entity model.

Connections

Find the key problem. Most problems are a collection rather than a monolith. Sometimes the key problem is not visible from the surface. Looking deeper and ignoring the accepted wisdom is the key. Why does Amazon Prime exist? Because customers don’t like paying for delivery. A non-intuitive definition of a sales restricting factor.

The Problem Lab is doing “shockingly well.”

As you might expect. Clearly defined and well-researched problems lend themselves to creative and comprehensive solutions. Read the article and give the idea some thought.

Who knew questions mattered more than answers?


I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

Cooking Up A Financial Plan


All planning is structured alike

Planning has five elements:

  1. Purpose or mission
  2. Strategy
  3. Tactics
  4. Logistics
  5. After action

Whether you are planning the invasion of Europe or planning dinner for the family, the elements are the same.

Purpose

We can estimate the family will be hungry by dinner time.The purpose is to plan a meal that satisfies their hunger and provides the required nourishment. Not unlike Eisenhower and Churchill outlining the 1944 invasion.

Strategy

Strategy involves answering “W” questions. The specifics will relate to the purpose.

We know who likes what, how much each will eat, and how many are likely to be there. That addresses the who and some of the whats. We know when because dinner is always the same time. Better check to see if anyone has informed us of the likelihood of being late.

What will I make? A strategic decision. Preferences and quantities matter. A recipe is a strategic asset. What do I have to make it with? Recipes lead to questions like, what ingredients do I have and what must I acquire. These questions are not unlike decisions around saving for a hoped for retirement income.

When must I start so it is ready when is it needed and what resources are available?

Tactics

Tactics are about how. Shopping. Stove or barbecue? Paper plates or fine china. What is the order of preparation? You cannot have two things in the oven at once unless their cooking temperatures are the same. You must prepare some of the ingredients before final preparation. Washing vegetables for example. What tools are available? Cooking, preparation, presentation and delivery will all be considered. Usually at an intuitive level.

People make financial plans from the tactical perspective and fail. Dinner won’t work very well either if you start with the stove. Think about it this way. A steak knife is a tactical asset. A recipe is a strategic asset. You will have little success if you start with the steak knife instead of the recipe.

Logistics

The doing it part. Presumably, by now, you have the ingredients in the right quantities, prepared and scheduled for cooking. All the cooking will result in the food being hot and tasty at the right time. Other parts like salads, drinks, and dessert will fit in, but may not be limited by cooking. Bottlenecks in manufacturing must be managed a little differently than things that can be drawn from inventory. Like ice cream for dessert.

Supervision and control are part of logistics. The stove timer is set properly or someone checks back at a certain time. Maybe a meat thermometer will help. Tools make work easier. Like life insurance makes the risk of untimely death less catastrophic.

With proper planning and execution, the meal is satisfying and healthy. Everyone is pleased.

After action

With dinner, the after part involves clean up and review of the success of the recipe. Maybe portions were too small, or it was too salty, or it wasn’t all that good, or it was executed poorly. Notes for the future make the next implementation better. Just like monitoring your budget, your savings, and your portfolio. You should know what you expected and what you got. You should make adjustments when necessary. The 3Rs Record. Review. Revise.

You know what you need to know

I am sure everyone could plan and execute a meal. Even if it is tomato soup and a grilled cheese sandwiches. The process is always the same. All planning and execution follows the same procedure.

Mitigating hunger is a purpose. Foodstuffs and a recipe is strategy. A stove, a steak knife and a plate are tactics. Serving and eating are logistics. Clean up and assessment of the recipe is after action.

Financial planning is not different. Don’t overcomplicate it. Especially don’t begin with the tactical tools.


I help business owners, professionals, and others understand and manage risk and other financial issues.  To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

Understanding The Future


A special word

In Canada there is a special word that means the day after the day it rains. Monday.

It has not been so true lately, but it never seems to rain on work days. Could be just a perception problem.

Another special word

This one relates to our difficulty in predicting the future. We all have the problem and none of us like it. We know we will the entirety of our remaining life in the future and we don’t love surprises about things that matter.

The special word, RISK.

Risk is a synonym for “I don’t know the future.” Risk is everywhere, so we should learn to accept it as a fact and plan towards getting what we need regardless of its presence.

Risk Management

There are three simple choices.

1) Avoid.

Once we understand what the uncertainty arises from, we can do something about it. The problem is we are not well attuned to risk. We tend to overestimate the likelihood of good things happening and underestimate the likelihood of bad. Smokers will ignore the bad news because 1 in 200 is not so likely. Their next move is to buy a lottery ticket with a one in 20 million chance of winning and think through what they will do with the money. People should pay more attention to the base rate and build their future plans accordingly. Lotteries are easy to avoid. They are merely voluntary tax.

2) Minimize the risk you cannot avoid.

When you know the base rate, you can have some insight into methods to minimize. People who are in reasonable physical shape live a little longer. What is more important is they live productive lives longer. I long ago decided that since death is inevitable, the key would be to die healthy. I think many could improve the odds of that by exercise and eating better and avoiding stress and laughing and refusing to compare themselves to others.

3) Understand the meaning

If the risk is small enough to afford, you have no risk. You might have a nuisance, but that will go away. It is like a bad haircut. Six weeks later the annoyance and problem is gone. A similar risk is one that is affordable if you reverse it. Like buying a car. If you don’t like it, sell it and buy another. The loss is small enough and the lesson valuable. Non-reversible risk is much more problematic. When faced with uncertainty, see if your plan B could be reverse it and walk away. If not be thorough.

4.) Risk you cannot afford to keep

These risks are nearly always insured. Insurance has premiums no one likes paying, but the premiums are more affordable than the loss. Given two bad choices, always pick the one you can afford. No one paying premiums to cover the right risk is insurance poor. People make a simple mistake in thinking. It is not the insurance that costs the money, avoiding the risk costs the money.

Working with the future

Identifying risk, understanding its nature and cost, assessing mitigation and acting to make the future more predictable is the work of an adult. Don’t overlook risk while pursuing something else.


I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Starting and Running Your Own Business


Historic Insight

In 1981 I co-edited a book for the Institute Of Chartered Accountants of Ontario. I got to write the overview. “Some things to think about before you decide.” There were several points there that were presented in more depth later in the book.

  1. Personal traits. Courage, vision, ambition and independence are crucial. Looking back I should have included persistence.
  2. Risk. If you are leaving a job, understand the risks. Today, many people choose the business route because jobs are more scarce. Risk is still an issue. Maybe even bigger because there are more micro businesses offering the service.
  3. Consider a 6-month “engagement period” while you think through the business, the industry, the risks, the financial requirements and the other skills you don’t yet have. In this case, haste makes more than waste. Likely bankruptcy.
  4. Know yourself. If you know yourself and the task you will tend to be successful. If you know only one of them, sometimes successful. If neither – never. Particularly notice if you like and need immediate feedback. Some business decisions take months, even years, to provide feedback. That makes many people uncomfortable.
  5. Do you need a team? Some people are good helpers. They tend to do less well in a business where they must be the leader, the helper, the janitor and the salesperson.
  6. Consider your family. Do they have the same risk tolerance, patience and ability to get by while the finances mature. Start-ups are hard. You will not welcome distractions from home. Ideally, they will be your cheerleaders. People think they don’t need that value, but they are wrong. Businesses provide very uneven emotional support. Some days you will need someone to help you feel better.
  7. Think marketing before product. Know what customers want before you know how to provide it. McDonalds did not invent hamburgers and IBM did not invent computers. Microsoft did not invent DOS. If you have not thought through marketing, life will be difficult and it won’t matter if you have a better mousetrap. People will not beat a path to your door unless your product is more efficient, better looking, or cheaper for the same benefit. AND they know about it. Peter Drucker claims that the purpose of a business is to create a customer. Notice that.
  8. Acquire help in your weak areas. Business are about marketing, production, finance and administration. Most business that succeed begin in product or marketing areas because those connect to customers. If you have those skills, buy the ones you don’t have. Do not spend scarce time being a mediocre accountant. Spend your time on your best skill.
  9. Learn decision making skills. Business people make more decisions in a day than some people make in a year. Deciding to do nothing is still a decision. Decision making and risk are closely related. Learn Plan B. Few decisions are perfect. The best managers quit doing dumb things sooner.
  10. Understand reality. Most business take 4 to 5 years to become self-sustaining. Meteoric success is uncommon. Be prepared for a long beginning. Unrealistic expectation kill good businesses too.

The key is to be prepared. Emotionally, financially, and with skills. You can learn a lot by studying successful people. Especially ones who had frustration and failure in the early going. Consider these older articles. Hopeful. and Big Money Working Half Days

Thorough effort in the beginning saves much trouble later.


I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

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