Some Management Gets Results


Microwave ovens are efficient. 

Micro-managers not so much. Micromanagement is a bottleneck. While micromanaging is present everyone waits.

Micromanaging underutilized resources and because it is so frustrating, it drives away the most capable.

An identifier

If you are leading such that your people find forgiveness is easier to get than permission, expect to clean up some messes. Nothing happening is a problem. So is rogue activity.

Before anything happens, there must be a decision. If there are too many decisions extant, some will be delayed or even forgotten. A defense:

Delegate

You don’t have to make the decision, just begin the process.

Delegation requires proper technique. Many micro-managers have tried before, failed, and given up. Keeping decisions and information to yourself is debilitating for the organization. In that mode, managers prevent people from growing.

  1. Delegate to people you trust to be able to carry out the task. If you don’t trust them, they should not be there. If you don’t train them, and give them an opportunity to do things, you build your own reason to not trust them. Not smart.
  2. Delegate outcomes not methods. You can’t know the best way for other people. Most people will surprise you.
  3. Commit to them. Allocate resources to make it happen. Money obviously. Technical support people sometimes.
  4. Time always matters. The nature of decisions is to choose. You cannot delegate a 40-hour a week job to someone and expect their normal job to be done in the same time space. You can’t spend the same hour twice.

Support as needed with prompt responses. If you are aloof, people won’t ask for help or guidance until it is too late. Your loss. Your support is not to find flaws.

Powerful managers make decisions sooner.

Earlier decisions allow others to get busy.

They have another characteristic. People know there may be more to learn and don’t treat them as edicts. The best decisions evolve and edicts don’t. People don’t learn much when, upon learning more, there is no room to move.

Powerful managers can and do explain their reasoning.

That helps others to know the limits of the decision and to notice variances. Evolution requires something to compare to.

Best managers do nothing

Best managers get results by empowering others. By building teams. By allocating resources where they have the best chance to be productive.

You can tell the best. They take less credit for success and accept more blame for the inevitable errors. A high ego manager is an insecure manager.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has 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  866-285-7772

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Boost Your Brain


Give yourself the best chance.

Your brain seems pretty complicated but in some ways it is simple. Stupid even.

Negation is one of those cases.

Formal logic allows negation.

Aristotle taught us that a thing is or it is not. Not something is a concept our conscious brain can deal with.

But, our conscious brain doesn’t run many long term or subtle things and our subconscious brain doesn’t get “not.”

Use positive statements

If you are coaching a baseball team, never tell a pitcher,”Don’t walk this guy”  The conscious brain has nothing to do with pitching. The subconscious brain, that does, hears “Walk this guy.”

Every golfer knows about don’t hit it in the water.

Positive strategy statements matter 

President Obama articulated his foreign policy as, “Don’t do stupid stuff.” Can’t work. Negative statements provide no guidance. Negative statements cannot organize anything.

Positive statements work. Be generous has meaning, while don’t be selfish does not. You have a mental image of be generous. Right?

It matters most with children. 

Telling them what not to do has uneven results, while telling them what to do works better. Not perfect, just better.

Get up at 7:00 so you can be on time for school is simple and clear. Don’t be late for school is not an actionable instruction.

Action is the key

Action needs positive. Negative gets debate and second guessing and excuses.

Action works. Positive instructions tend to get it more often.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has 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  866-285-7772

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KPI – Key Performance Indicator


How do you judge achievement?

KPI is the buzzword that people relate to, but most don’t know how that works. There are pre-existing requirements.

Before you start to measure.

  1. Know the connection to purpose
    Do you know and understand the process you are trying to measure? If someone wants a scholarship at university, marks matter.  All marks?  No, only some of them. The mark on the Friday quiz is of little importance to the university you want. So in one way it doesn’t matter.
  2. Understand predictive qualities
    At the same time as it does not matter to the university, it may be an indicator of how a mark that does matter to them may turn out.  In that way it has predictive value.
  3. Learn to diagnose connectivity.
    Sometimes marks clearly demarcate the students knowledge of the subject matter. There are subjects where marks don’t matter much. Some subjects are more about how you can use the knowledge. Engineering is one of those. So is the course leading to being a chef. The mark on a project may matter more. Do universities care.  Maybe not. You need to know the difference.  Employers care about how you use knowledge.

Is rate of return a KPI for investment management.

Sometimes but not always. Over a lifetime it matters. Over a month it does not. The difference is the variability of the yield measurement must be accounted for. If we assume the market is open 250 days a year and it averages 10% before fees, the daily rate of return is 0.037%.

The S&P 500 Total Return Index is a little over 5,000 just now. On average, a change of 1.85 is it for the day. But in reality, some days are up much more and some are down. The variance from that 1.85 number is a measure of the noise in the market. Ups and downs of ten times that are not unusual.  So daily returns are not helpful.

It would be like measuring the speed of your car as 60 miles per hour on the highway, but at any point it could be 6 mph or 600 mph. a range of accuracy of one tenth to ten times is meaningless.

Over longer times the variability narrows. For 30 days the average works out to .082%. That doesn’t happen very often either but the range is much narrow. Over a year 10% happens, but there are no years that return 100%. There are some that lose 50% though.  Again not very helpful.

Yield is like the Friday Test.

It is not conclusive, but it may give you a predictive value. Maybe you are not diversified very well. Maybe you hold weak investments.

It may ask you to review you purpose and resources and time line and then use what you learn to make adjustments.

Assess connectivity

We have seen that stock market index values tend to show a rate of return around 10%.  That may be lower in future or higher. No one knows. That is why you record and review your holdings.

Connectivity to purpose will involve several adjustments.

How much tax is due? The rate

When is tax due? Deferred taxes are cheaper even if the rate is the same. Net present value.

What costs are incurred?  Trading, management, reporting, personal advisor add up. Assess the dollar cost against the value supplied before trying to minimize.

How much is inflation? Money is for using. $1,000 in a world where gasoline cost $10 per gallon is not the same as the world where it costs $1.00. The idea of investing is to have future value. Unless carefully adjusted, yield won’t help much in assessing that target.

Be careful

Simple things like golf have a scorecard and you would think the end score was enough to know. It is not. When I was a teenager I had a score of 66 with just 3 pars on the card. the 10 birdies and 5 bogies might be more instructive for measurement and improvement purposes. Something to do with my tendency to play 3 option 5 style on par 4’s. More recently my once a year game was 78 with 41 putts.  Again a lesson not clear from the scorecard.

Never forget, there is no single measure that tells you everything.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has 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  866-285-7772

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Complex Inputs – Unpredictable Outcomes


Estimating interactions

When you get a new prescription your pharmacist assesses it in the context of any other prescriptions you may be taking. The idea is that the active ingredient not only acts on the condition you have, but it also interacts with active ingredients in your other medications.

The resulting combination may be behave like neither of the original parts. That could be very good or very bad. Usually bad.

A simple relationship like that is between statins and grapefruit. If you take a statin, you will invariably be told to avoid eating grapefruit. Grapefruit acts to change the way the anti-cholesterol drug behaves. Hard on your liver.

Complex systems are unpredictable

Your body is one. The world economy is another. The stock market a third.

The stock market and the world economy are particularly intractable because they adapt. When something starts to work or fail in the stock market, people change how they relate to it. It would be like a blood pressure medication that changes to be an anti-bacterial because you started drinking green tea.

People make decisions in the economy and in the stock market and you must try to include that in your decisions. Most people can’t factor in their own emotions, never mind the experience and emotions of a fund manager in Singapore. They certainly can’t adjust for the effects that those emotions attenuate.

Some things to think about.

  1. Not everyone sees events the same way. Something that you may see as dreadful may be a cause for euphoria elsewhere in the world. Donald Trump’s surprise win in the election of 2016 was viewed by the “pundits” as likely to cause a sharp correction in the market. Didn’t happen. Not down 10% to 20% as the expected but up 20% instead. It is hard to predict what news other people pay attention to and harder still to know what they will think about it.
  2. Panic and greed are both contagious. You need to know how your fellow humans behave in the market.  It is typically not rational. There is a school of thought claiming people make decisions while they are temporarily insane and then rationalize why it makes sense after. That is not a variable you can easily use in deciding how the market will behave given new information.
  3. At emotional extremes, all the asset classes are correlated. It is very difficult to be well diversified in a crash. Emotions trumps logic and facts.
  4. Despite what you hear from the TV, there is no cause and effect in the stock market. The wise advice about future markets is, “They will be up if they go up, they will be down if they go down and they will be the same if they do neither.” Sometimes you can manufacture some possible causes after the fact, but even that is hopelessly simplified.
  5. Success cannot be measured in just one way. High yield is a measure that many use.  It does not mean the same thing all the time.  What would a 20% bond rate mean if income taxes are 50% of income and inflation is 15%? Lose 5% is what. Is that good. No. Therefore the 20% yield is relativistic and not helpful.
  6.  All your eggs in one basket is a very strong approach if you can pick the basket correctly. Few can, although there seems to be a tendency to believe it is easy looking backwards. Coulda, Woulda, Shoulda, turns into did for purposes of conversation or for buying just before the end of the quarterly report to avoid looking like you missed out.

Why buy and hold works.

None of the factors that affect prices today have time as a factor. When you introduce time, business variables like market share, innovation, administrative management, strategic vision, and finance become usable as factors for a decision. None of these change much day to day or even quarter to quarter. If you have the fundamentals organized and pay attention to how they change, you don’t need to know about the emotions of the trader in Singapore.

In the long run, prices follow fundamentals.


We are all emotional beings. Sometimes the only defense to emotions is don’t look at the market generated prices. They are not fact. They are aggregate opinion and that has variables you cannot use successfully.

Well, maybe look once a quarter.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has 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  866-285-7772

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Mistakes Are Valuable


History is not a trap

Many people make a mistake and are bound to it forever. Others make a mistake and move on. Perhaps learn something useful from it. The interesting point is they could be the same mistake.

Mistakes don’t define you.

Neither does success, but that’s a subject for another day.

How you relate to mistakes defines you. If you look at mistakes as instructions, you will have success. No one is smart enough or lucky enough to avoid all the mistakes there are to make.

It pays well to review them from time to time. Avoiding the familiar mistakes is an important step.

What if there are none to review?

Mistakes teach. If you don’t make any, you are not giving yourself the chance to be right either. It is like a bank lending officer.  If the loan ration is too he, there is a problem. The bank will lose money. If it is too low, the bank will make less than they should.

You don’t set out to make mistakes, but you should expose yourself to situations where they can occur.  It is uncomfortable but you are growing when you are uncomfortable. Avoiding mistakes is a mistake.

Sometimes there are many.

That is not a concern unless they are the same mistakes over and over. Life is exciting if there are mistakes in it. Like our cartoon friend Charlie Brown.

Sometimes I lie awake at night and I ask: ‘Where have I gone wrong?’ Then a voice answers: ‘This may take more than one night.’

Life evens out

If you make a mistake and withdraw you don’t have a chance to have the world treat you better the next time. If you are playing hockey and step on the puck and fall on a breakaway, sooner or later you will dump a puck deep for a line change and it will bounce erratically and go in.

Giving yourself a chance to win requires playing the game. Don’t stop too soon.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has 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  866-285-7772

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Cash Problem


Warren Buffet has a cash problem. 

I don’t think we need to organize a tag day for him. He doesn’t have that kind of problem. He has too much cash. $90 billion too much.

He likes to keep $20 billion for rainy days, but the other 90 is troubling

Why troubling?

Cash earns near nothing. That extra $90 billion earns about 1%. Just $900 million a year. Chump change. Just a tenth of the capital in a reasonable business would earn the same. The other $80 billion might as well be in green garbage bags in a broom closet.

How did this travesty come to be? 

It is pretty simple really. Buffet is disciplined. He does not buy things except at his price. When there is nothing to buy, buy nothing.

He is patient too, so the cash horde may last a while.

Is he alone in having cash problems? 

Seems not. Seth Klarman at Baupost has a huge share of assets in cash, too. Same reasoning as Buffett. I have noticed some fund managers I like are holding 30%  and more of assets in cash.

What does it mean?

Mostly there is nothing to buy at a good price. That could change. Prices of businesses could fall, then the cash will be valuable. Managers who have no cash will not enjoy the lower priced securities because they will have nothing to use to buy the low priced stocks.

Worse still, they like all managers, will need to find cash for redemption. Not everyone will avoid panic. They will be forced to sell into an already falling market. More drops.

Index funds and ETFs could have a real problem. Do they hold much cash for redemptions? Nope! They must sell to get it.

Because of their concentration on a narrow set of stocks, the selling will harm indexes more than other stocks. Their stocks will fall more than they should. Some would argue just like indexes are now up more than fundamentals suggest is reasonable.

Is it certain that there will be a market correction? Yes.

Do we know when? No.

Should you hold cash to protect yourself from the fall? No. You should hold cash so you can set yourself up for the next run up. Also certain.

Think about it. 

Sometimes leaving a little yield on the table is smart. Being fully invested is not necessarily the way to make the most money.

Investing is a bit like baseball. The career batting average is more instructive than your last game. Play for the long value. Give a little to get more.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has 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  866-285-7772

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Staying Out Of Your Own Way


Most of life is easier than we make it

Why then does so little of it turn out to our advantage? There could be several reasons:

  1. We do not work as hard at it as we should. Often we think it is easier than it truly is.
  2. We rely on others to do things and fail to follow up and be sure they did.
  3. We hold irrational beliefs about our skill and how it relates to the world around us.
  4. We do everything right and are unlucky
  5. Someone sabotages our efforts

And the most likely of all.

We behave based on faulty knowledge. We believe things that are not true or perhaps are no longer true.

This particular phenomenon has been know for quite some time.

Henry Wheeler Shaw was an American humorist who died in 1885. He was a newspaper columnist, author, and lecturer under the pen name Josh Billings. He commented on everyday life as he saw it and was extremely popular after the Civil War

“I honestly believe it is better to know nothing than to know what ain’t so.”

Mark Twain was another of the genre who lived alongside and a bit after Josh Billings. He expanded on the thought.

“What gets us into trouble is not what we don’t know. It’s what we know for sure that just ain’t so.”

It is possible to think this wisdom relatively current. But, no.

Greek philosopher Antisthenes was a student of Socrates and he died nearly 2400 years ago. His thought on the subject demonstrates the need to keep your knowledge up to date.

“The most useful piece of learning for the uses of life is to unlearn what is untrue”

How do we unlearn what is untrue?

For most of us, with great difficulty.

We tend to hold on to things we know with some vigor. Forgetting is often harder than learning. One of the predictors of this failing is the idea, “It is like such and such but a little different.” That thought is almost always a ticket to a problem.

A cell phone is like a land phone but different. It is different in ways that make the comparison to a land phone nearly ridiculous. A modern cell phone plays music, shows movies, communicates by text and by visual connections. It takes high quality photographs and records both voice and movies. It has an assistant who answers questions we ask. It connects to the internet and can find nearly any fact known to man.

It is far closer to being a computer that can make phone calls than a phone that can surf the net.

Intuition fails sometimes

Our old knowledge gets in the way of being intuitive about any new situation. We must learn continuously. We must be humble enough to know and understand that what we know is just a faint shadow of what there is to know.

I have noticed young people have fewer problems adjusting their beliefs about most things.  A quick internet search clarifies what the facts are. We old folks tend to negotiate what is happening instead of just looking. We want to see the connection to what we know.

The young people are more acclimatized to change and they do so readily.

We can do better. We want to have meaning and that requires that we give up the idea whatever we know is right and useful.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has 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  866-285-7772

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