A Penny At A Time


A representation of reality

The Laffer Curve is a representation of how much revenue a government can expect to get for a given rate of tax. The essential idea is that there are always two rates of tax that raise the same amount of money. One is a low rate with a very large base, and the other is a high rate with a small base. Some of the simple minds seem to think if you double the rate on some item, you will generate twice the revenue.

Inelastic demand is an economic condition where doubling the rate would work. Real world conditions where people will buy more of a good regardless of price, are few. People substitute something similar to replace the oppressed item. Cheaper goods that are not as durable for example. If I only need a certain item to work once, durability doesn’t matter much. The underground economy is another effect.

The point of the Laffer Curve is revenue depends on two factors – rate of taxation and the base to which it applies.

Other Applications of two factor logic

Managing your expenses works the same way. You really don’t care about the price in isolation. You care about how much you must spend to accomplish a certain thing. I use an electric drill to provide about ten holes a year. I would be foolish to buy a $400 cordless machine for that. If I bought a 30 year old corded drill at a yard sale for $4.00, I doubt my life would be totally ruined. If I were a trades person who used the drill continuously in my work, I would be foolish not to spend the $400. The payoff in convenience and quality would be worth the investment. Value is function of price and volume. In their case cheap is expensive.

Suppose someone wins $50,000 in a lottery. They decide to spend $40,000 of it to reduce their debt. How should they decide what to pay first. In this case the volume is fixed at $40,000, so only the rate matters. Put the debts in order of interest rate at start at the top. Pay them off in order until the money is used.

Consider a high volume cafe or coffee shop. Should they aggressively shop for creamers? Yes. Two cents per unit is $5,000 a year if you sell 800 cups of coffee each day.

Applying to your budget.

Price is not the unique indicator of value. Volume and price together, given similar quality and convenience, will be fertile ground for management. Just like paying off debt, there should be an order to your approach. It won’t necessarily be the highest ticket items in you spending. Think price per unit and high volume. Then shopping for price will matter. Identify convenience and quality once you find a suspect.

Saving two cents a liter on gas at Costco, might not make sense if you must drive far out of your way to get it . The membership fee might mitigate against it too. But, if you go there three days a week anyway, why not use their fuel?

Remember the volume factor.

A bus pass is a good idea unless I only use it a few times a month.

Suppose I buy a new car once every ten years. By serious effort I can save $5,000 by shopping and negotiating and perhaps taking a colour or engine no one likes. Is that a smart saving?

Maybe. It works out to something less than $5,000 if I consider my trouble of getting the saving, but in easy to see numbers, it is $500 per year. About $10 per week. Is it worth the time investment? Maybe. It depends on what I didn’t do to spend time on shopping. If I took time off work, then maybe not. Is it a real saving or is it just a big number that looks good? If it adds poor reliability, higher insurance costs, potential maintenance issues, or higher fuel costs, likely not. Sometimes paying a little more is a better deal. Again cheap can be expensive.

Achieving Balance

We all want the same thing for less. If we can get it we should. Those savings are real. Sometimes the higher price provides enough extra value that we should take it. When we go looking for prospective savings, we should look for big numbers, but also look for high volume usage. In the latter case, small price variations can lead to meaningful advantage.


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

Mind The Gap


Hans Rosling and the Book “Factfulness”

The book points out that thinking in a binary form overlooks most of the important things. Rich/poor is a poor basis for thinking about economics and society. He similarly condemns the idea of “developed” and “developing” world.

Bill Gates has recently picked up on the same point. Why I want to stop talking about the developing world

Rich and Poor

The Roslings talk about four levels of wealth.

Level one is abject poverty and level four is wealthy. Level 2 and 3 are where people are in transition from poverty to wealth. The rich/poor comparison likely comes from ancient times when people were one or the other. 200 years ago, fully 85% of people would have been in level one.

It works a little like Maslow’s Hierarchy. Level one is deficient in the needs of life. Insufficient water, insufficient food, no medicine. little shelter. Level four has adequate everything. As one level is fulfilled, attention can be paid to the next. Until then, the next is not important.

In between things matter and are often overlooked.

Consider water. When you have too little it is very time consuming to travel and retrieve it. It is not of good quality, so that affects your life and ability to do other things. When you have it, even if it is from a tap on a well in your village, many hours are freed up and the water quality improves. So too does your health. Other incremental gains move people from level one to level two and eventually level three. In level three they have the time and some money to improve themselves and improve their children’s chances of greater success.

We in level four can’t see the value very easily, because we take all of those fundamental things for granted. I am not old enough to remember when there was no indoor plumbing and no city supplied water. For me, roads have always been adequate, food stores competed for business, and the hydro was reliable. I cannot easily imagine the time cost to overcome those.

It is like a client who upon arranging new financing marveled at how little mail you got when you owed no one other than bank. According to him it freed up a day a week because he did not have to deal with creditors and manage cash flow. Thing we take for granted are often very hard to achieve the first time.

Success and failure

You would be wise to discard the succeed/ fail binary decision set when it comes to personal achievement. More likely there are intermediate layers between, and we should notice and appreciate those. Success is often the result of failure. Failure teaches and that moves us on the continuum between the ends.

We in the west are imbued with Aristotle’s logic. Yes/no. True/false. We/they. Aristotle’s Law of the Excluded Middle, is a fine idea for logic and some kinds of analysis, but it is very limiting. We should notice the middle when planning. Fuzzy Logic is more appropriate for analyzing the real world.

No one moves from failure to success in one leap.

Be a little patient. Change and learning don’t happen in an instant.
Planning and mentoring and teaching should focus on the middle conditions. It is the part that can be passed on to others most easily. They will recognize it long before they can see what success is made up of.

No hurry.


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

Can Successful Things Fail?


An oxymoron for a Monday.

Success can breed failure.

Joseph Schumpeter is one of the most influential economists of the 20th century. He was, in 1919, Austria’s finance minister and from 1932 to his death in 1950, a professor at Harvard. From the time he was 23 until his death at 67, he published 36 books.

One of them , Capitalism, Socialism, and Democracy, published in 1942 included two important observations.

“Unlike any other type of society, capitalism inevitably and by virtue of the very logic of its civilization creates, educates and subsidizes a vested interest in social unrest,”

“For such an atmosphere [of social hostility to capitalism] to develop it is necessary that there be groups whose interest it is to work up and organize resentment, to nurse it, to voice it and to lead it.”

Simply put, there will arise a class of people whose role is to attack capitalism

How familiar is that.

The recent election of Alexandria Ocasio-Cortez in New York is an example of how capitalism allows and creates its oppressors. Bernie Sanders, Justin Trudeau, Pierre Trudeau, Barack Obama, the UN, and San Francisco city politicians, come to mind.

It is important to notice the permission they have to act as they do.

What economics is about

Economics is the study of how society allocates scarce resources. Capitalism is not a political system, it is a way to carry out economic allocation. Those who contribute most, receive most. By this simple fundamental, great wealth is created because people deliver great value and are incented to do so.

Prior to capitalism, wealth grew slowly and making even enough to live was both difficult and tedious. Child labour was common because a family could not feed and shelter itself without their help. Abject poverty was the normal condition as recently as the early 19th century. As capitalism gradually gained a place, such poverty became much less common. Wealth sufficient to live and have opportunity, became the norm. Today, abject poverty is the lot of fewer than 15% of the people of earth as opposed to more than 85% in 1800.

Follow the purpose

Some see distribution of wealth as the primary factor, while others see creation as paramount.

The wealth of capitalism allows those who most value distribution to exist. If everyone still worked seventy hours a week to provide for themselves, there would be fewer rallies about the evils of wealth. As Schumpeter pointed out, wealth is a requirement for those “groups whose interest it is to work up and organize resentment, to nurse it, to voice it and to lead it.”

Similarly, unchecked capitalism cannot exist. We can recall a time when businesses obliterated the environment and abused people.

There must be a joining of interests.

Merging creation and distribution

You cannot distribute that what does not exist and the “educated elites” create no tangible wealth. Socialism is for that reason a self-defeating concept. It lacks a wealth creating incentive.

Governments and capitalist enterprises are less effective when working apart and profoundly useful when working together. The roles become:

  1. Governments to regulate business in the interests of society as a whole and to provide some share of unearned wealth to those who cannot survive without it.
  2. Business to create wealth within that labyrinth of rules and practices.

The trick is to decide where lies the boundary between those interests.

When must distribution be subservient to creation? Government must recognize that business needs an environment where incentives are maximal and regulation minimal.

When must capitalism be subservient to the reasonable needs of society? Capitalism must recognize the value of a wealthier and safer group of consumers and workers.

Not an easy problem. It is certainly one where honest, well-intentioned people might disagree. More seriously, the common ground changes with time and circumstances.

The Laffer approach

We should aim for a world that optimizes the interaction of our needs, skills and resources. Rather like Arthur Laffer’s approach to an optimal tax rate. Beyond a point a higher rate raises less money.

Tax revenue is a function of two things. Rate and the base to which it applies. The distribution/creation problem is similar. How far can you push distribution and regulation without reducing output? Are you willing to pay the price to reduce some output for a greater societal good?

Defining the boundary will not create a perfect world because the world has many conflicting interests. We know with certainty though, attacking the problem from a single variable position loses. You must see and understand both sides to create optimal.

We should settle for optimized, but imperfect. The same rule applies in personal finance.


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

The Law of Conservation of Problems


Conservation Laws

In physics there are several conservation laws. Among them are:

  • Conservation of Energy
  • Conservation of Angular Momentum
  • Conservation of Electric Charge
  • Conservation of Weak Isospin

The laws require the existence of an isolated physical system. The idea is that no matter what happens within the system, the net total of the factors under review never changes. For example, energy could be heat, or light, or stored chemically. Whatever was there in the beginning will be there, possibly in a different form.

Closed Systems exist in more than physics.

Your family, your community, your church, even your country are closed systems. At least to some extent. There is a conservation law for that too. It is the law of conservation of problems.

Suppose you are struggling financially. Your problems are meeting the mortgage payment, keeping the family happy about what you can afford, finding a away to deal with an unforeseen car repair, and setting some aside for the future. Some will even find working to be stressful and unfulfilling. What would be the solution?

More money solves many problems

Like all of the ones itemized above. The problem is the closed system. Why do you suppose so many lottery winners see it as a curse rather than a blessing? Why do heirs often blow their inheritance?

Because of conservation. No life is without problems. Maybe the mortgage is no longer one, but there are the financial helpers and charities beating at the door. New phone numbers required too. Long lost friends and relatives appear. Lawyers to set up structures and accountants to do tax plans. If the numbers are big enough, maybe a security team.

One problem money won’t solve

People need to be moving toward some goal. That is what we do. Seek goals. Solve problems. We don’t handle completed goals very well.

The Money Game is a 50 year old book. A point from it bears repeating.

“I have known a lot of investors who came to the markets to make money, and they told themselves that what they wanted was the money: security, a trip around the world, a new sloop, a country estate, an art collection, a Caribbean house for cold winters. And they succeeded. So they sat on the dock of the Caribbean home, chatting with their art dealers and gazing fondly at the new sloop, and after a while it was a bit flat. Something was missing.”

So what was missing?

The struggle. We need a purpose, even when we don’t need the money. Always remember to have new goals. Always remember to prepare children for an inheritance.

A Warren Buffett thought.

“I will leave them enough money so that they would feel they could do anything, but not so much that they could do nothing.

The trick is in preparing them so that the money is not just a new a different problem. Start early.


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

Stress Kills


Medical fact

Stress leads to bodily dysfunction. Blood pressure, weight gain, heart disease, and stroke.

Stress should be avoided. But how?

Can it be managed?

Stress is unavoidable. Our world creates it for us. We must therefore minimize its effect.

Stress creates a physical response. Chemicals course through our body. At one time they protected us. The fight or flight response. Fifty thousand years ago, they were the totality of our options.

Fleeing or fighting used up the chemicals and we quickly returned to a less aroused state.

There is a big difference between what triggered fight/flee then and a customer who is angry because a delivery is late.

Our stress responses do not automatically return us to normal. For most of us, exercise is a useful substitute for fleeing.

Another option.

Many years ago, I had a client with a heart condition. Strenuous exercise was out and his business still provided the odd adrenaline rush.

His cardiologist offered him a different idea. “Pet a dog. Your dog.” He did that. A fine dog who went to work with him each day. He got much petting.

I recall Gord telling me the dog was quite frantic when they stayed home on Good Friday. Today is a work day, what are we doing? It was hard to wake him up on a Sunday though.

Gord lived another 15 years. About ten times the expectation.

My choice

This is one of my stress relievers. He is a black pug. His name is Chi. That means energy in Chinese. When he was younger as he was here, that barely described him.

We are growing older together. He gives me insight into the process. Take life as you find it. Enjoy your people.

Consider a pet. They help you be a good human. For longer.


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

Factfulness


The late Hans Rosling

Many of you know Hans Rosling from his TED Talks. Statistics brought to life.

He passed away a year ago, but not before doing a book with Ola and Anna about his experiences and life lessons using data well.

Factfullness is worth the read. It is well written. Entertaining and informative.

Point of view

The book is about how the world is improving and what could be done to help it along. His point is that we have ten thinking biases that keep us from seeing reality.

Methodology to demonstrate

He uses questions with three choices for the answer. It is disturbing that so few know the answer. Even people who you would expect to know. People seldom choose correctly, and frequently choose the more wrong option.

He is seldom wrong when drawing the conclusion that most of us could not outperform a chimpanzee. They would average one right answer in three by choosing randomly, while we often do worse than one in ten.

The point

We would make better decisions if we knew more. Our leaders would too. The data is there but preconceived ideas block it.

Opportunities could be seen more readily and problems avoided. Good data, properly assessed, provides the key.

Planning relies on information

Planning fails if the inputs are wrong. That could be national defence planning, energy planning, education or whatever. Person al financial plans go wrong too.

Some of his points

  1. Urgency is seldom present
  2. Most of the answers lie in the middle, not at the extremes.
  3. Fear is a poor advisor
  4. We like negative stories and miss the more normal good outcomes
  5. We are linear thinkers and the world is not linear.
  6. We like to assign blame to an individual person or factor, often missing what caused the cause.

And 4 more.

Buy the book. Your world view will improve.


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

Plan B


Don’t rely on a single plan

Sometimes those who plan take their plan to extremes. Rationalizing outcomes hurts. They lose because most plans don’t turn out as people would prefer.

Every planner must be prepared to amend their plan when new information appears or old information becomes obsolete or proven wrong.

Financial independence is the goal

People who achieve this goal, do so by adapting, not by having one right plan. They have two plans.

  1. The one they are currently operating under, and
  2. The one they hold in concept for when things change. The evolved plan.

Repeat as necessary.

Notice the purpose is not to have a given plan work, but rather to achieve the goal.

Planning helps, but plans should be disposable.

Having just one approach fails

Chinese thought.

“Man with one chopstick goes hungry.”

Always have another option. Choices give you control.


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

Manage Littering In Society


Conventional litter is either hard or easy

If everyone tossed litter out the window of their car, the clean up would be time consuming, costly, and never-ending. Alternatively, if people kept their litter and dropped it in a trash container at a highway exit, the cleanup would be trivial.

The rest of society is like that too.

The littering group

Some people like to cause problems for others. They, to this day, throw things out their car window. They are few, but a nuisance. Some are just thoughtless, while others are more malicious. They like to make trouble.

They could be punished. There are fines for littering. But, the cost to find, and then fine, them is problematic. It is a case where a few well publicized cases might deter others, but there is no reasonable expectation of general enforcement.

Politics is also populated with many litterbugs. Meaningless accusations force people who are trying to accomplish things to divert some resources. Eventually, litter cleanup is all they do. And that is the opposition’s idea.

Other forms of litter

Society is costly to operate if everyone has objections. When is good enough, good enough? There is no perfect. There are however people who think their particular concern should be resolved perfectly.

Litter is a distraction.

Some concerns make sense even though unique to an individual. Your neighbour wants to divert water runoff into your basement. A municipal bylaw should exist to prevent that because it could happen to others. The municipality, once informed, should do something about it.

Some concerns are not worth the price to fix. Jordan Peterson is making a fine living just now, pointing out some of the absurdities. I can agree that each of us has the right to have an express an opinion. I have not found anything that makes it mandatory for anyone else to take their opinion seriously. That is where the problems arise. There are people who want to use government panels, the courts, and public opinion to make their opinion a mandatory condition. These litter society. And do so at great cost.

Predictability matters.

Life should have limits and rules. Like football. The out of bounds lines don’t change. People can rely on that and govern their play accordingly.

Life is becoming less predictable. The cost to deal with retroactively established standards is quite high. The problem has arisen because some have found aspects of life so odious that they must be expunged. Even to the point of revising history. Some people are perpetually offended.

Cultural appropriation fascinates me. There is no one, anywhere, who has not expropriated ideas, or symbols of another culture. They do so because they are useful or beautiful.

We must reach a guideline where we can deal with substantive issues easily and well, and trivia not at all.

Facing charges from decades past is important in some cases. Child abuse, murder, and rape, make sense. Using today’s standards of behaviour and applying them to an old context does not. Society was not perfect in the past and some things have become different. Many have improved. Racism meant something entirely different 75 years ago. So did poverty. We have moved well forward and yet there are people who try to argue it is worse now than then. They are objectively wrong. Yet perfection is not achievable.

Some things are a constant.

There will always be be inconsiderate people, selfish people, bullies, and thugs. Like gun controls, the rules to defeat them affect the people who are already respectable citizens more than they do the miscreants. Those don’t comply anyway.

Complying then is an added and unnecessary cost for a huge share of the people. I doubt there are many of the unwelcome crowd who change their behaviour much by passing laws. Especially true when the laws seem to be too difficult or expensive to enforce. Try to get a school to deal with a bully.

The future

The litterbugs will expand in number because nothing prevents it.

I have no solution and expect the problem to get worse. Social media allows people with a grudge to have a forum. Some opportunists can pick up on that at take it to another level. Years later the case will have disappeared, and at great cost.

What should be the threshold for action?

If a problem affects one in a million, or even just one, or if the problem is exaggerated or invented, what should we do?

There is no obvious way to put lies and costly trivia into a bin for later collection and disposal. Good answers to that are presently non-existent. Ideas welcome.


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

The 3Rs


Every plan needs maintenance

Seth Godin posted this article recently. It is a worthy thought and the point is clearly evident, yet some people seem to miss the point.

The wrong bus

Your first mistake was getting on the A53 bus, the one that goes crosstown instead of to where you’re going.

Mistakes like this happen all the time.

The big mistake, though, the one that will cost you, is staying on that bus.

I know it wasn’t easy to get on the bus. I know you got a seat. I know it’s getting dark outside. But you’re on the wrong bus, and staying on the wrong bus won’t make it the right bus.

If you really want to get where you set out to go, you’re going to have to get off the wrong bus.

There are two aspects to the problem

  1. Identifying that you are on the wrong bus
  2. Getting off

The 3Rs help you with both

The three Rs are Record, Review and Revise,

When you are on the bus, you look out the window and notice what is happening. The record part. After a while you notice the landmarks are unfamiliar. You begin to pay more attention and compare what you see with what you expected to see. Review.

When the review points to unacceptable outcomes, you must revise. Revision can be fairly straightforward or near impossible.

Revise

Carefully consider decisions that will be hard to reverse. The difficulty in revising a plan is a measure of its risk. I suppose the fourth R. There is no risk in taking an action that is both cheap and easy to reverse. Coffee cups and saucers or mugs in the office kitchen. A no thought decision. Most of life comes with decisions that are harder to fix if wrong.

Some are expensive to reverse. Like marriage. That’s why we date and have an engagement period. We are trying to perfect the decision. To know, as best we can, if the likelihood of reversing is very small.

Some businesses are easier to get out of than others. Some debt is a long burden. Hiring is an under-rated skill. Investments may go wrong, but are usually easy to fix.

Children are an immense difficulty to reverse. Mothers who have given up a child for adoption at birth have a void. Custody fights are often bitter and costly. Having children changes everything. Be sure you know.

The defense to the risk of revision

Careful planning of the things that are hard to repair. The financial things can be modeled to some extent. A good modeled outcome means nothing. No model is complete. The advantage is that you cannot build a model without thinking through the variables. That expands knowledge and identifies interactive variables. Planning is useful, plans are not.

Thoughtful choice of methods matters. There are many ways to approach every problem. It is wise to look for flexibility and total cost. Sometimes cheap is expensive.

Well implemented is a key. Do not overlook the required agreements. You will recall that the fall in the Garden of Eden resulted from ignoring the apple end user agreement.

Pay attention to which bus you have chosen and why. Be prepared to make changes to get to your destination.


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

Will Some New Form Of Socialism Work?


Old Wisdom

There is an old idea that claims insanity is redoing something and expecting a different result. Like watching a recorded replay of a failure and assuming they wouldn’t be stupid enough to do it again.

Seems we are willing to do it again. Maybe several times.

Like socialism

The current, nearest to complete failure, example is Venezuela. The International Monetary Fund recently posited that inflation there would reach 1,000,000% by year end. At that rate money would be worth 1/10,000 in a year. Pretty good deal for the people who owe money. I suppose it might have an adverse effect on floating interest rates.

If prices doubled about once a month, would you be okay? Probably not. That fine pension would be come useless and investments would behave in strange ways. Practically, there is no defense if you stay in the zone of destruction. Karate sensei’s observation, “The best defense to danger is to be somewhere else.”

But where?

Venezuela was and still is a country with immense natural resource wealth. Their mistake was to assume that nothing need be added to that wealth to make it useful. Natural resources are useless without capital to develop, people skills to engineer and build infrastructure, and skilled labour to operate it once built. Socialism provides disincentives to capital and to skilled people. So, not so strangely, they go away.

So far, they have places to go.

That may not continue. We are presently seeing the rise of “democratic socialism.” Its attributes are the same as the ideologically disproved “socialism.” Names don’t matter. Names are symbols. They are not reality. You cannot rename a cow and create a racehorse.

Socialism has proven itself uniformly harmful everywhere it has been tried. Its 100% failure rate should influence people, but the ones who support it seem blind to reality.

The flaw

Margaret Thatcher once said, “The problem with socialism is that you eventually run out of other peoples’ money.” Her point is that socialism is about distribution of money, not about creation of wealth. If distribution overtakes creation, the failure is certain. People soon grow tired of getting nothing for something.

People and countries avoid the something for nothing trap by valuing work and achievement and cooperation. None of those are common in socialist countries. There, no one can afford to be anything but selfish.

An overview

Despite what Bernie Sanders and others think and say, socialism has never worked. We should be smart enough to avoid it. The capitalist alternative has flaws, but it tends to produce wealth. Some, but not all, of that wealth can be distributed effectively. It’s when socialism’s greedy impulse to distribute all kicks in that we have trouble. The goose and the golden egg lesson.

Hear Winston Churchill,

  1. “Some regard private enterprise as if it were a predatory tiger to be shot. Others look upon it as a cow they can milk. Only a handful see it for what it really is – the strong horse that pulls the whole cart.”
  2. “Socialism is a philosophy of failure, the creed of ignorance and the gospel of envy. Its inherent virtue is the equal sharing of misery except for those running the government.”

It is smart to use tactics that have been proven to work. Good intentions might not get you where you need to be.


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

A Parenting Purpose


Parenting is complex

Some parents think they can supply physical things and have childhood work.

Not usually. There is a long list of values.

  • the necessities of life,
  • establishing standards and a moral compass,
  • self awareness and self respect,
  • a spiritual awareness,
  • a sense of humour
  • a sense of style
  • the value of work,
  • getting along in a group.
  • self esteem

There is no shortage of articles on love and belonging

A complicated endeavour, yet most children get enough of each to get along.

What do they get for depth?

Life is never all roses. Adults face challenges that are not easily overcome. How do they deal with adversity? From where do they get strength?

From something learned in childhood.

It could be the spiritual idea, the ability to share feelings, the self esteem, or the work ethic. It is not always the same thing.

There is one thing that seems to help and it is a worthy parental goal.

Good memories

I found this short article recently, and it is touching and on point.

“The Brothers Karamazov” and the Power of Memory

The author has a signed baseball on his desk. It is nearly 40 years old now and he has no recollection of the baseball part of the game. Just the experience of going to a game with his grandfather. The baseball is a talisman of a good time and it enhances his life.

“Strong memories—of good times, of challenges met, of shaping experiences commonly shared—are the critical foundation of a good and meaningful life, particularly if you are young. Cherished memories of days passed can spur us on, can exhort us, and can motivate us when our own days seem dark and unendurable…”

The millennials have it right

Passing on the meaning of life is no simple thing. Memories are an important aspect of the foundation. We see how millennials value experiences more than things. Worth thinking that through. They may be better adjusted and more resilient than some think.

Creating good memories is an important part of passing on the important parts of living successfully.


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

Another Tax Proposed


An estate tax in Canada

The Canadian Centre for Policy Alternatives (CCPA) is a left leaning think tank in Ottawa. They recently released a report around the tiresome topic of wealth inequality. Their conclusion was that an inheritance tax would smooth things out.

In their view a tax of 45% on estates over $5 million would be very helpful in achieving the equality goal. They have carefully calculated the tax revenue but have provided little evidence supporting the view around the equality issue. It is a popular mistake.

An old concern

In 1993 I became convinced that Canada would adopt some form of taxation on estates. My thinking was that from a government perspective, it was a perfect tax.

It applied to only a few people so numbers worked in favour. The money would be taken from the estate not the people involved and the owner of the estate was dead, therefore without political influence. It addressed the phony “social justice” angle that rich people could afford it and would therefore appeal to many who had neither thought about it nor expected to pay.

Best of all it would raise some money in a new way. “Revenue tools” are becoming harder to find and more needed. It could help pay interest on the foolishly created government debt.

As it turns out, very little paying would happen. The CCPA analysis indicated the revenue could be $2 billion. Given that Ontario’s interest bill is in the $12 billion range and the federal bill higher still, it is a trivial amount.

It’s hard for me to see $2 billion as trivial, but everything is contextual.

Who would win?

An estate tax would match late finance minister, Edgar Benson’s idea regarding the 1971 tax reform bill. “It should be called, the accountant’s, lawyer’s and life insurance company’s relief act.” A bonanza for the professions.

Historically, estate taxes are easy enough to manage. The structures are somewhat more complex than people like, but the methods exist and they work. Thus the relief for accountants and lawyers. Another easy structure is to use life insurance to pay the bill. Welcome relief for me and I suppose for others.

The government would raise some money and the economy of professional advisors would expand. The rest of the economy might not do so well.

Some businesses require a certain scale.

Some businesses must be large to be efficient enough to survive. It is not an accident that Walmart sells things for less than local stores. They can because they have the purchasing power, inventory sourcing and management skills, and distribution skills to wring costs out of the system. No local business could afford the infrastructure so they disappear. Taking away some of their money would do more harm than people think.

Do you think two small “Apples” would be as valuable as one big one? An interesting graphic about Apple’s relative size from the New York Times.

It is not only the Walmarts of the world that would suffer. Most small businesses would disappear or be sold to a large company in order to meet the tax liability. That would have adverse effects on local employment. Consolidation works and the acquiring company likely has another business like it in another place.

Many family businesses are already badly harmed by the capital gains tax due at death. Borrowing to pay the tax due on a business is often a cause of failure or sale. Careful succession is an important management task for a successful business. Many overlook it and fewer still do the simple thing. Insure the future tax cost.

Life Insurance is a process

If you have a future tax obligation, life insurance converts the unaffordable large amount into affordable annual premiums. As always, if you can turn an event into a process, you can manage it better. Don’t overlook the obvious.

PS:

In 1993, I also assumed that the United Sates would have a national sales tax. They have not done that either. Prophesy is difficult.


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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