Significant Charitable Gifts Should Be Planned


Philanthropy and charitable giving.

Philanthropy as presented by The Gates Foundation, Warren Buffet, Phil Knight, Charlie Munger, The Koch brothers, The Huntsman family is different from what you and I might discuss with our planning assistants. From earlier times, Andrew Carnegie was huge and so have been the Ford and Rockefeller foundations. Billions of dollars have flowed back into the society. Many people feel inadequate by comparison.

As you will recall, comparison is the thief of joy.

Edmund Burke has a thought for you. “Nobody made a greater mistake than he who did nothing because he could only do a little.”

Understand your reason for giving and act in accordance with that. Maybe a few dollars to a family having a hard time is what works for you. Do what you can do. Everything helps. Pay no attention to what you think other people believe or do.

Some realize society has done well for them.

Certainly The Gates family, Warren Buffett, Charlie Munger, and Andrew Carnegie see/saw the world that way. They want to use the money that exceeds their needs to build society. How is their thing.

“To the extent that all I’ve done is pick stocks that have gone up and sat on my behind as my family got richer, I haven’t left much contribution to society. I guess it’s a lot like Wall Street. The difference is, I feel ashamed of it. I try to make up for it with philanthropy and meetings like this one today. This meeting is not out of kindness. This is atonement.” Charlie Munger

Not all gifts are socially motivated. In countries with estate taxes, donations can help reduce the tax burden. For some the current deduction is worth something.

Most philanthropy is tax-motivated.

“The notion that charity wouldn’t be hurt if you eliminated the death tax is absurd.” William Zabel

My experience is that Mr. Zabel’s view is overstated. There is a great deal of gifting done out a sense of obligation and trust for others to do what the donor would like to do but cannot.

Despite the rather cynical idea of tax benefits only, few donors ignore the effects. The charities themselves don’t have a test for benevolence. The spirit of the gift is never considered.

“Donors who are only interested in the tax benefits of their gifts may give philanthropy a bad name, but their money still helps.” Mark Litzler

Further proof that money can’t tell where it comes from or why.

The happy place

Suppose you would like to help society in ways that would please you. Suppose further your estate and current living will be as you wish. What to do with the extra is question that has two important pieces.

  1. How can I best achieve my wish for society? Effective thinking
  2. What is the best way to do it? Efficient thinking

Question 1 is about your purpose. Question 2 is about how you can bring what would be tax money into play. If a charity could get $500,000 from your estate without planning or they could get $1,000,000 without affecting how your lifestyle and estate is impacted, I suggest they will always take the million, even though the difference is tax money.

Some gifting methods work better as current year donations while others must be in the estate to work. Some depend on the tools, foundations, trusts, gift annuities, and more. Life insurance is an especially effective tool for estate based donations

Planned giving helps get the most satisfaction for you and the most money for the charities of your choice.

There are many approaches.

An effective one is to use unneeded RRSP income to purchase a life insurance policy where the premium is the amount of the pension receipt. The donation credit offsets the income and the charities eventually receive about triple what they might otherwise get. That varies with age and other personal circumstances.

People who set aside liquid assets to deal with a future tax liability can sometimes reorganize so they essentially, give away their taxes. Food for thought.

Many charities are frugal and efficient. Try to deliver the most you can with the resources you have available for your purpose. They will be grateful for your trouble.


I help business owners, and professionals 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.

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

Simple Is Hard To Do


The keys to success

Simple is hard because the helpers want to look impressive by showing complexity. Complexity sells to some people. It should not.

Simplicity building is a viable do-it-yourself project. Maybe the only one. But it will only go so far.

Its place is in determining purpose and strategy. The specific details can and often should be more complicated. The key will making sure the plan itself is simple and coherent, not just a collection of complicated tools.

Achievement comes from process

Tactics seldom achieve much by themselves.

This image appeared in a tweet recently.

You can see the tweet here.
The formula on the right is fuzzy, as it is in the original. Even if it were crystal clear to see, it would be fuzzy to the mind. For some reason, there is a tendency for us to be taken in by a mathematical formula with little Greek symbols lying on their sides.

The essential element in this is the method on the right is strategy, or process, and the formula on the right is about a tactic.

It is odd how each of us sees the merit of the process on the left side, yet find it hard to do.

The essential part of the left side

Spend less than you make. There are two aspects to this and both must be addressed.

The spending part is the easier to see. You just keep track of what you have spent in the past year or so and then decide if that describes the lifestyle you want. If you want a bigger lifestyle, you will spend more. Private jets cost more than intercity buses. More spending will reduce investable money.

At the same time you may find there is a waste of small amounts. It is beyond difficult to notice the $2 or $3 a day that just goes away. $3 per day is more than $1,000 per year, yet we can’t see it as we go. It takes the study of expenditures to even identify it and behavioural change to do something about it. Thinking in annual price makes it important. And don’t forget income taxes. $1,000 after tax is likely $1,600 of earnings. Look for leakage.

Choosing a lifestyle is an essential facet of success.

Income is manageable too. Education, ongoing training, seeking opportunities, or new positions increase the top line. If lifestyle remains constant, there will be more to save.

So the essence of all financial planning is organize your income and spending so there is money left over to invest.

Investing is another issue entirely

Investing can be as simple or as complex as you like. Right side or left side. Portfolio management can be a little like the right side, or much more simple. An S&P 500 index fund can be understood without the Greek symbols. As you drift from there, you find the complexity appears. ETFs and funds use the symbols to establish credibility. You can miss that if you want.

Another approach, less well diversified, is to look for stock in companies you use. Like your computer? Who made it? Using this methodology, you could have bought Lulu Lemon at $6, or Monster Energy at a dime.

There is a little more to this than just finding a great product. If there is lots of debt, you might want to wait a little. If management is made up of novices, be cautious. If there are enormous, established competitors, take a pass.

The key part is to have a large share of your portfolio in low cost, easily understood situations like a true index fund, and a small share looking for the unicorns of the investment world.

Be patient.

Stocks are volatile. you will have to have the discipline to stay invested in sound companies when Mr. Market turns. If you are relying on the Greek symbols, you will not be in when you should be. If you are in for simple reasons, like participating in the growth of the economy, you will be able to deal with the volatility.

Think process not detail.


I help business owners, and professionals 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.

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

Building A Plan


Suppose computer programming and financial planning were alike.

Both are structured yet flexible. Both allow for modifications as time passes. Both have an input – process – output format. Neither is well understood by people who do other things for a living. There will always be errors, some of which may exist for a long time.

To understand planning notice what a programmer has to say.

Insight

One of the most outspoken and eloquent of the programmers in the 50s and 60s was Edsger Dijkstra. His wit and wisdom survives and gives us some insight into how to think about those structured problems we face.

On Elegance

In mathematics, elegant is the ultimate compliment. You should seek it in planning because it makes things work better. It is not always easy.

Simplicity is a great virtue but it requires hard work to achieve it and education to appreciate it. And to make matters worse: complexity sells better

Simplicity is prerequisite for reliability.

How do we convince people that in programming simplicity and clarity —in short: what mathematicians call “elegance”— are not a dispensable luxury, but a crucial matter that decides between success and failure?

Try not to overthink it

First impressions and instincts are often correct. Better to get started.

There are very different programming styles. I tend to see them as Mozart versus Beethoven. When Mozart started to write, the composition was finished. He wrote the manuscript and it was ‘aus einem Guss’ (from one cast). In beautiful handwriting, too. Beethoven was a doubter and a struggler who started writing before he finished the composition and then glued corrections onto the page. In one place he did this nine times. When they peeled them, the last version proved identical to the first one.

Purpose

The task is difficult enough without adding needless possibilities. The unnecessary should be left out, at least in the beginning, and effort addressed entirely to the crucial. The initial effort will be incomplete and unresponsive to factors found later in life. That is ordinary and should be accepted as such.

“The art of programming is the art of organizing complexity, of mastering multitude and avoiding its bastard chaos as effectively as possible.”

You must do something

The problems of the real world are primarily those you are left with when you refuse to apply their effective solutions.

The Best Plans and Programs

  • Simple
  • Clear
  • Flexible
  • Capable of Maintenance as circumstances change
  • Powerful
  • Predictable

No plan is error free and no process is easy.

“Our intellectual powers are rather geared to master static relations and … our powers to visualize processes evolving in time are relatively poorly developed. For that reason we should do (as wise programmers aware of our limitations) our utmost to shorten the conceptual gap between the static program and the dynamic process, to make the correspondence between the program (spread out in text space) and the process (spread out in time) as trivial as possible.” Edsger Dijkstra

Keep in touch with your plan and its purpose. Being able to visual an abstract concept gets easier by being involved more. Successful visualization is the key to effective planning. Check frequently against predesigned parameters. Use visualization to make the process more real for you.

“Visualization is simply the creation of a strong mental image of the thing desired, the perfecting it each day until it becomes almost as clear as an existing material thing.” William Walker Atkinson (1912)

Planning, like programming, is the reality making process. It is how you influence the future.


I help business owners, and professionals 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.

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

What Is The Opposite Of Socialism


Hint: It is not necessarily capitalism

Socialism is an economic system wherein each receives benefit from the effort and talent of all. The method of allocation of the outcomes is not initially offered into evidence. That defect is a significant flaw.

The method of creation and distribution of goods and services under socialism is unknowable.

Capitalism, on the other hand, is about creation and distribution. Really that’s all it is. A way to distribute goods and services, with money as the device used to barter.

Socialism requires a political system to support it, while the political system attached to capitalism is not required to help the system work, but exists to restrict it.

Capitalism is not inherently a political system so cannot be easily compared to socialism

The principle difference

Socialism is a goal driven system. Capitalism is not. The goals of socialism are kindness, equality, (usually of outcome), fairness, (undefined), and respect for differences. There are no specific goals of capitalism, but rather a system that emphasizes processes. Production, efficiency, innovation and accumulating capital.

Any thinking person would agree fairness, kindness, equality, and respect are reasonable goals. The capitalist system does not address them. They are up to the participants.

Equality of outcome doesn’t fit very well with capitalism because it is not objective. Equality of opportunity is reasonable.

None of fairness, equality and respect are required under capitalism, but few of us are pure capitalists. We all have a sense of sharing.

Socialism has goals with no process to achieve them, while capitalism has a process and outcomes, without specific outcome goals.

Socialism cannot be implemented

Socialism lacks incentives to produce wealth, and it lacks a definitive method of distributing whatever may remain from the earlier semi-capitalist system.

Where will the wealth come from? To assume talented people will work to no advantage is unrealistic. To assume nature and human nature will ignore what is unrealistic is delusional. Mother Nature is not benign. Mother Nature is perfectly fair and ruthless about it. Mother Nature’s version of fair does not include something for nothing. Socialism on the other hand, is based on the principle of a free lunch.

Margaret Thatcher’s insight, “The problem with socialism is that you eventually run out of other peoples’ money.”

You cannot rationally choose socialism or any of its variants without knowing how and how much wealth will be created. You cannot distribute what does not exist.

Socialism is noble in one way

It is nearly universally based on good intentions.

It is the execution of it that fails. Until it develops a process to create wealth, it will continue to fail. It needs money to share and thus succeed. Margaret Thatcher again. “No one would remember the Good Samaritan if he’d only had good intentions; he had money as well.”

There is a choice

Wealth, unevenly distributed, or nothing, shared equally.

So far, socialism is more about envy than anything else and that is very wrong. When you think about it, envy is the only sin that has no pleasure component.


I help business owners, and professionals 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.

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

What Is “Hard” Work


Good mathematicians are lazy

Why is that? Because there are things they find difficult and then they spend months finding an easier way to do them. Is it lazy to work 12 hours a day for 10 months to find an easier way to do something that takes an hour? Entire branches of mathematics have been developed to solve a particular problem. I recall a professor saying Gauss spent his entire life working on and off on a particular problem. Apparently he developed 23 solutions and that including development of several fields.

Is physical labour “hard” work?

Is playing basketball at a high level hard work? It is physically demanding.

My wife grew up on a farm and so she sees physical labour as meaningful and hard. In our modern society, there are tools and technique that solve many of the “hard” labour problems. Seth Godin recently dealt with this question. Hard Work He clarifies some variables.

In many ways it parallels the lazy mathematician situation. Does it count to create tools that eliminate physical or tedious labour?

Ultimately it is different

At university, the person who lived beside me was an amazing intellect. His version of math problems was, it isn’t a problem if you know how to do it. The problem exists only if there is no obvious solution.

It is likely that way with “hard” work.

Picasso worked at his art. In terms of time and mental energy it was challenging. Not so much in terms of physical labour. He knew how to do it, so was it hard work? Same rules apply to most other professions, callings, and vocations.

Hard work today depends on whether you know how to do it and draw joy from that contribution.

“If you do what you love, you will never work a day in your life.” Marc Anthony

Planning is “hard” work

Mostly because people don’t know how to do it. They make mistakes. They misdirect their effort. The value is not in the plan. The value is in the planning. Planning allows you to direct your efforts better. You will tend towards situations that improve your joy.

Planning reduces limits by identifying inefficiencies. In a perfect situation, it helps you be more effective. You solve the right problems.

What you get for planning and directed effort

People who execute effective effort efficiently, will seem to be doing nothing. Easy work. We overlook the hard work that made the easy expression possible.

“Ars est celare artem.” The art is in concealing the art.

It’s like watching a really skilled athlete. Everything they do looks easier than it is. Try skating like Connor McDavid.

Do not mistake exceptional skill as a “gift.” Most of those skills have been developed with difficulty over a long time. So it is with planning. Once done, it will look like it was easy. Avoid the idea that looking easy and being easy are the same thing.


I help business owners, and professionals 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.

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

Advice From Coach John Wooden


Basketball is like investing.

When you know how to do something well, you can coach well. John Wooden is in the Basketball Hall of Fame both as a player and as a coach. If they had a philosopher section he would be there too. You can apply his wisdom on becoming a better player to your investing program. You should expect success.

“When you improve a little each day, eventually big things occur. Don’t look for the quick, big improvements. See the small improvement one day at at a time. That is the only way it happens, and when it happens it lasts.”

Some other John Wooden thoughts

“Young people need models, not critics.” Criticism is far easier and far less effective. Being a good role model is a great achievement. Work at it a little each day.

“Be quick, but don’t hurry. When you hurry you’re more apt to make mistakes. But you have to be quick. If you’re not quick you can’t get things done.” Impatience is a hurry up thing. It is not your friend. Being both quick and patient is a high skill.

“It takes time to create excellence. If it could be done quickly, more people would do it.” Again a patience issue. Excellence is a journey. Notice it each day.

“Discipline yourself, and others won’t need to.” The other key to investing success. Discipline. The essence of discipline is knowing your skills and emotional responses. Stay inside your safe zone.

“Don’t mistake activity for achievement” Anyone can buy and sell securities. It is quite easy today. Being an active trader and being a successful investor are quite different skills.

“All of life is peaks and valleys. Don’t let the peaks get too high and the valleys too low.” One shot does not define a basketball player. It is their career results that matter. Not every stock goes up and not all of them stay down. Manage emotions on both ends of the spectrum. Greed and fear are your enemy.

Life is a team sport

“I think that in any group activity whether it be business, sports, or family there has to be leadership or it won’t be successful.” There are others who participate in what you do. Some can help and some rely on your performance. When assessing your plans and your results remember the important “W” question. Who is involved.

Building a life matters most

“Being a role model is the most powerful form of educating…too often fathers neglect it because they get so caught up in making a living they forget to make a life ” Everything that you do in the financial world is intended to make your life better. Never forget to make a life.

See your finances as related to a higher goal and it will get easier to see the reasons behind the pieces.


I help business owners, and professionals 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.

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

Does Do-It-Yourself Work?


North Americans seem obsessed with do-it-yourself

Most draw the line at root canals and vasectomies, but every person who can barbecue a hamburger, thinks they can run a restaurant. Everyone who can change a washer thinks they can be a plumber. Each of us thinks we can manage our investments. All of us are wrong. Every calling or profession has facts, rules and concepts, the ordinary person not only doesn’t know, but most often cannot know without the experience of doing.

Do it yourself is not necessarily cheaper. It depends on whether the outcome is good. Good enough is usually the best outcome achieved.

Why is do-it-yourself not self-correcting?

Do it yourself is seldom assessed. Recall the 3Rs of planning and performance. Record, review, and revise. If you do not analyze your performance against external standards you cannot know what you are achieving. We are seldom objective when assessing our own performances.

How we get to this point

People seek cost savings. People assume if they do not pay cash, they pay nothing. That is a juvenile belief. Similar to the two-year-old condition where they think if they cannot see you, you cannot see them. Everything has a cost, the question is whether you can or will assess it.

If we assume that professional management costs 1% annually, is it safe to assume that we could do it ourselves and save that amount? Clearly not.

It is free if we ignore time spent on accounting, reporting, assessing, searching for opportunities, and deciding on sales. I like to value my time at something over $0 per hour.

It is free if there are no costs. Transaction costs are much lower than they once were, but are still non-zero. Another cost is the income tax effect. Some funds are more tax effective than are individual accounts.

It is free if the people are competent. Most are not. In information technology there is a common theme. The hardware works. The software works. The liveware is a problem. Same with portfolio building and management. We are each emotional and emotions kill performance.

Consider this first

You can easily assess whether an investment fund over or underperforms. How will you assess your managerial performance gap?


I help business owners, and professionals 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.

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

Three Laws That Help


A way to think about economic issues

Tyler Cowen is an Economist at George Mason University. He has over the years proposed three laws to govern thinking about economics and indirectly with everything else.

The Tyler Cowen Laws

1. Cowen’s First Law: There is something wrong with everything

2. Cowen’s Second Law: There is literature on everything.

3. Cowen’s Third Law: All propositions about real interest rates are wrong.

The First Law

The First Law could be renamed as the skeptic’s law, the no certainty law, or maybe just the law of reality. It is of course contradictory because to be true, the law itself must be untrue. Nonetheless, it is a wise place to start when assessing the validity of anything. If you cannot see the flaw, you don’t understand the situation well enough. Like a trial lawyer preparing both sides of the case so they can estimate what their real problems may be.

The Second Law

The Second Law proves the internet works. Unfortunately it works too well. A good deal of the information is suspect. It is smart to recall Law 1 when reviewing any proposed proof. The idea that there are scholarly papers proving any point is of little value. There are scholarly papers describing how alien beings regularly visit earth. Data mining is a curse when carried to extremes. Always look for contradictory information when researching anything.

The Third Law

The Third Law claims that real interest rates and their effects are never properly assessed. That poses some concerns in respect to retirement saving and planning. Most well contrived plans consider both interest rates and inflation and so long as the spread between them remains fairly constant, the plan will be robust on the earning side. Again the First Law applies.

Tyler Cowen may well be right on this point, and so you should consider the possibility when assessing your retirement prospects. When you build an accumulation and spending model for retirement purposes, do not be stuck with a single assumption. Test it with a range around your expectation.

Don’t forget taxes and be aware that yield minus taxes and inflation over 3% is an ambitious goal.

Think about a Fourth Law

No law and no rule covers all possible situations. I recognize this one is self-reflecting too, but the point is don’t trust your assumptions to be sacred truth. More to the point, never accept a plan that does not inform you of the assumptions inherent within.

All plans are based on historical relationships and historical contexts. Neither may appear in the future. Worse still, the order of things matters in real life but less so in theory. The average rate is likely a harmful concept. That the average depth of a river is four feet does not imply that you could walk across it without drowning. Averages hide more than they reveal.

Retain flexibility and build in a way to notice when things are drifting in ways you had not anticipated. The 3 Rs. Record, review, revise.

Cowen’s laws resolve into one law. Understand meaning before accepting a plan as useful.


I help business owners, and professionals 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.

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

Committed


Commitment comes in four forms

  • I commit myself either permanently or temporarily.
  • Someone else commits me either permanently or temporarily

I can commit myself permanently or temporarily.

These are the ones that matter. Most of the good in life flows fro m commitment of one kind or another. As it turns out permanently committed is nearly impossible. Perhaps suicide would qualify, but most of the other things are at least notionally possible to stop.

Wanting or expecting to be permanently committed is where to look. Marriage, raising children, a career, saving, holding ethical and moral standards lead to success. None of these are certain and commitment sometimes needs some effort. Commitment leads to a definition of life and its purpose.

Some permanent commitments are scarcely considered. A prominent tattoo might be fashionable today, but what about when you’re 60, or looking for a job, or a partner in life?

Temporary commitment is common. Treasurer of the Rotary Club, a Sunday morning tee time, a home for dinner, and the like. None of these tend to be onerous and few, if missed, would cause havoc.

The problem comes somewhere else. The present commitment to a future duty. People are terrible at assessing the present cost or value of future commitments. It is far easier to agree to be the president of the Chamber of Commerce two years from now than it would be if it started today. People use hyperbolic discounting when assessing the cost or value of things far in the future. That process tends to make anything far in the future near valueless.

When you are deciding on a commitment of your scarce money and time resources, be cautious and work it out as if it was happening immediately. You might find the prospective situation less attractive. Always remember the most useful word in English is NO.

I can be committed permanently or temporarily by someone else.

The temporary ones are usually ones you choose or can agree with. Perhaps a transfer at work, or a spouse commits you to attend a function. These temporary ones are generally innocuous.

But what about the more permanent ones?

I have a friend who has a very unhappy life because his parents wanted him to be a dentist and he wanted to be musician. The compromise didn’t work either. We should be be very careful allowing others to pick our path. “It’s for your own good” is not always exactly true. Children don’t have much choice, so there is a tendency to overuse the idea. Parents have a duty to be sure the statement is objectively true before invoking it.

So we face problems

How do we commit ourselves to things that will benefit us in the long run? The first step is to know what will benefit and what will cost. As always, if you are willing to pay the price, then it is a decision that you can at least look back on as a lesson. You might want to avoid the spur of the moment facial tattoo. Maybe build friends who will give you good advice.

How do we avoid others “helping” us? That is a hard one for may people. I think people should learn to be better negotiators. Good negotiators tend to get what they want and need and they also can guide the behavior of the others in the transaction. You don’t have to make enemies to get what you want.

I think Chris Voss’s book, “Never Split The Difference” would be worth reading for high school students. Take a look and see what you think.


I help business owners, and professionals 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.

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

A Perfect Storm


This headline appeared recently

Canadian Exchange Insolvent After CEO Dies With Keys to US$145M of Cryptocurrency

Gerald Cotten, founder and chief executive officer of crypto exchange Quadrigacx, died unexpectedly in India last December. It seems that he was the only one who knew the password for about US$145 million of bitcoins and the like held by his firm. The confluence of odd things here was too much for me to pass on writing about it.

How could they have a single person with the password?

Coca Cola has a recipe that is possibly worth more than $145 million. (I suspect it not really unknowable but the secrecy is part of their mystique. Same for KFC’s blend of herbs and spices.) Coke has no problem writing it down and storing it safely. Maybe people in cryptocurrency businesses get caught up in the security hype they have themselves created and neglect the value of redundancy. As the IT folks will tell you, any file you don’t have three copies of is a file you don’t really care about.

On the other hand, maybe this is fabricated so others who do know the key can loot the accounts and have the bankruptcy tidy things up. Today is a cynic day.

How can people rationally trust tiny businesses with real money?

I am still cynical, but I think it is because there are many people who do not reason well when faced with a good story, a secret process, and obscure reasons for valuation. First does not always hold value.

I am reminded of a thought from an executive who worked with my father many years ago. On asked about being the first into a market, his reply was, “A pioneer is frequently a guy with an arrow in his belly. I don’t need to be first, I need to be first to be right.”

Trying to be first often leads to gaps in common sense. The first step in making money is not losing it. If you must speculate, the rule is don’t lose much.

How many businesses disappear at the loss of the founder?

You would be surprised. Many. The reason is much the same as the problem for Quadrigacx. The founder knows things no one else knows. The founder has relationships no one else has. The founder has powers no one else has. (Like signing checks.) Most founders think they are bulletproof and have little redundancy and even fewer plans in place.

When a founder dies, the business is usually not far behind. Value is lost. At the very best it will sold for a fraction of its previous value. Most often a small fraction. Estate sale is invariably a signal to expect a bargain.

An option

If you don’t see the need for redundancy or middle management, or cannot afford all of that yet, own life insurance. Most problems can be minimized with enough money. Even where the money won’t solve the problems, it will at least replace the value lost. I once mentioned to a member of a committee I was involved with that it must be unnerving to work for a proprietor who has less than 25% of the company value in life insurance coverage. He was CFO of The Thomson Organization. He just laughed and said, “That would be at least $5 billion.” I offered to take an application and arrange a medical. Sadly, it did not come to pass.

The reality for many business owners.

Life insurance lets you die neat. Understand that value.


I help business owners, and professionals 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.

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

Creating Involvement With Passion


Who is Boston’s greatest athlete of all time?

Boston Globe sports columnist Dan Shaughnessy started a firestorm on Monday following the Patriot’s Super Bowl win. He made Tom Brady the greatest Boston athlete of all time. You can see it here.

This one clinched it: Tom Brady is the greatest Boston athlete of all time

The choice seems not so crucial, but Boston has two things that make it significant.

  1. They have a list of worthy names to nominate for that position
  2. Their fans are passionate

The worthy names

There are four topping the list for this discussion.

  1. Ted Williams in baseball
  2. Bill Russell in basketball
  3. Bobby Orr in hockey
  4. Tom Brady in football

Each would be in the conversation about greatest player in their sport, regardless of the city. Any could be a compromise choice and people could accept it, even if compromises are seldom satisfactory.

To pick just one is certain to spark emotions.

Passionate fans

Boston has a strong Irish contingent and arguments on these lines have lead to physical brawls in the town’s saloons. It has been said that the Irish invented whiskey, sarcasm, and bare knuckle brawling. On one night, and in that order. Passion runs high and sports, being essentially meaningless, allows for full expression. It is surprising the level of detail sports fans can bring to mind in support of their opinion. The candidates for Greatest Boston Athlete provide lots of evidence to support their selection.

The final decision is mostly opinion, of course. It is beyond difficult to compare athletes in different sports in different eras. That problem will not reduce the intensity of the discussion, even a little.

The article Dan wrote was undoubtedly the fuel for many watercooler and bar talks during the day. He did his job. He got people involved.

Involvement matters.

The same matters in everyday life on subjects less controversial. We each can learn to better connect with others. We should. Our story will be accepted more readily, be implemented more easily, and be shared more effortlessly, when it creates both intellectual interest and emotional expression. Dan’s story does both. Career details and comparison for argument. The passion of pre-held beliefs. The opinion of others not in the conversation..

It is a volatile mix. If you care about the end result, it is best handled by leading rather than telling.

  1. Clarify the question.
  2. Assemble the detail for each option.
  3. Discover the other’s position
  4. Find how they came to hold that belief.
  5. Offer alternative beliefs with reasons that connect to their belief and how they came to hold it.
  6. Reassess agreement.
  7. Revisit the list and address movement towards what you want.

Recognize one fact. If someone has a strongly held belief, they will not change theirs because you tell them to do so. Logic won’t work. If it did perennial losing teams would have no fans.

It is like the old adage about leading a horse to water. Getting him to drink has to do with showing the value of the water and less to do with the leading.

Decide what you want

Do you want agreement, or do you want to stimulate discussion, or have someone change their mind. Consider the intermediate possibilities. Be sure you care how it turns out. If you don’t, you won’t have the passion needed to be convincing.

No matter the purpose, you will need a simple dramatic statement of your position.

Consider Hartley’s First Law, “You can lead a horse to water, but if you can get him to float on his back, you’ve got something.”

The discussion of Brady as greatest Boston athlete ever will be exciting. Dan’s article is a “float on his back” approach.

Whether anyone changes their mind is another question. I am sure the purpose of the article was to instigate. To open discussion. I doubt there is any reason to believe the result will be all Boston sports fan are now “Brady is the best ever” advocates. If anything, they may have made their old belief even more solid.

Everyone knows Bobby Orr is the best ever. Silly question.


I help business owners, and professionals 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.

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

In Praise of Inefficient


Inefficient has value

There are at least two obvious values.

  1. In any operation where there is a chain of steps, optimizing any step tends to suboptimize the whole. For example in manufacturing, putting a super fast machine in the middle of moderately fast machines tends to create problems feeding it, and storage problems for the pieces that the later machines are not prepared to accept.
    Working overtime to create parts for it tends to defeat cost advantages and especially so when you consider the fast machine will just build ever growing inventory. It is the tendency of weak management to put over-capable pieces in place for “flexibility.”
    This is especially true with overqualified people who can not be promoted because their replacement would be unable to handle the one off questions. The same result usually happens because most capable people don’t stay in dead-end jobs. So hiring and retraining. Generally, a good employee is always working at something they cannot yet do and seeing their growth.
  2. Best products evolve. So, it is necessary that refinements can become apparent. If the system of producing them is too rigid there is no room for a variation. Unexpected variations lead to two possibilities. A need for a quality control system assessment if there are many of the same one, and insight into improvements in the product itself.

Inefficient is usually a little better if it is allowed to evolve. You will be hard pressed to find any product whose improvements did not appear partly because there was inefficiency in either the original design or in the original process that made it.

Build in the opportunity for unforeseeable change

A little randomness in everything you do leads to improvements, most of which you would have never seen otherwise. Do not be afraid of trying things. Watch for opportunities.

Listen carefully for people saying things like, “That’s odd. I wonder why it happened?”

Might work for portfolio design, or child management, or hiring practices. Avoid rigid ideas. Not all dogma is exactly right.

A little inefficient is a little more effective.


I help business owners, and professionals 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.

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

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