What Is Economics For?

We are all economic beings. We make hundreds of decisions every week based on economic factors. We would make better decisions if we understood the playing field and the rules of the game.

I recently discovered this 10-minute video that does a commendable job of explaining the basics. Invisible Hands: The fundamentals of Economics

The factors in economic thought

There are 6 factors we find in the video:

  1. Individual action
  2. Scarcity
  3. Choice
  4. Trade-offs
  5. Subjective Valuation
  6. Incentives

Individual Action

Nothing happens until someone makes a decision and acts. In economics there is the field of macro-economics which deals with the mile high view of the situation. It is the study of the accumulated actions of many individuals. All economics begins with individuals and how they decide and act on situations that affect them directly.


There is always scarcity. No one has, or can have, everything they want. It relates to resources we need to get what we want. The most common ones are money, time, and energy. We tend to think of money as the basis for economics but the thought processes connect well to anything in scarce supply.


Once we recognize scarcity, we must choose. Should I go to the casino with my paycheck or should I pay the hydro bill? Should I spend or save? Should I do somehting now or should I wait and do it later?

Choice causes automatic conflicts. If I have scarce resources, when I choose one thing, I always must give up having some other thing. Understand the idea of opportunity cost. The cost to not do something that could be beneficial.

Learning to choose is an important skill.


Trade offs mean I can find ways to get some or most of what I want with a smaller allocation of resource. What I get may not be exactly perfect, but good enough. Maybe I buy a cheaper model car and a vacation. Maybe I wait for a sale. Maybe I rent instead of buying. Maybe I eat hamburger with a fine sauce instead of a steak.

There are an infinite number of tradeoffs.

Subjective valuation

Recall the individual action principle. We do what we value and that need not be like what anyone else values. Smart shoppers look for motivated sellers. To do so they may need to wait. If you are in no hurry to spend your time resource, the money resource will be worth far more.

Never assume anyone else exactly matches your personal preferences.


Because we value subjectively, we make choices to match our preferences, and we trade-off our wants and resources to get what we want. We respond to changes in the context that can redirect our effort. Everyone responds to incentives. That’s why merchants have spring sales. That’s why governments organize the tax system to induce people to do things differently.

By the same argument, people avoid disincentives. We tend not to park in no parking spaces because we might get a ticket.

Watch the video. It is something you could share with a teenager and expect them to understand.

I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates.

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

Decisions When All The Outcomes Are Negative

For a long time I have believed people make poor decisions unless there is an answer that is “good.” We seem incapable of deciding between adverse situations. It is a fundamental emotional problem in divorce and business breakups. There is a money cost and some transition problem, or there is an emotional cost to continue as before.

Choose your poison as the saying goes.

The triggering event

The United States maximally demoted senior Iranian General Soleimani this week. He was arguably the mastermind behind the Iranian terror structure and a very highly placed member in the Iranian political hierarchy. It is not easy to determine who was the bigger winner by his demise. The Americans who have confused their enemy’s terror structure, or the leaders in Iran who likely saw the general as a political rival rather than a staff person.

The problem Iran now faces

Iran has at least five paths they can follow. None are attractive to the leadership.

  1. Culturally it is important for them to seem to fight back with military assets, but they cannot do that so long as The Untied States is prepared to destroy their economy with sanctions or their own military actions. I doubt the Iranian oil refineries, military infrastructure, ports, and communications infrastructure would survive 36 hours if they decide strike back is a choice. Yet culture demands something.
  2. The could escalate terrorism through surrogates. It would not take long for the US to decide that was a strike against them and respond. A similar result as 1) above but likely more restrained.
  3. Continue as before with somewhat less ambitious terrorist activity. That would probably buy some time but at the expense to the current leadership of seeming to do nothing. A risky choice for their leadership people. Iran is not politically stable and thie neighbours would welcome a change at the top.
  4. Make some minor concessions to reduce the embargoes and let the people have some economic breathing room. Again the cultural mandate gets in the way for at least some of the citizens.
  5. Make concessions but lie and cheat about compliance. Pretty much the current method except those methods only work when people trust you at least a little. No real expectation of that happening again.
  6. Enlist support from other countries to force the US to back off. The only country in the world that has that ability is China and they are already embroiled in a US confrontation. I doubt Iran is higher on the importance list.
  7. Replace the leadership with people whose aim is to make Iran a good world neighbour and citizen.

Option 8 -Wait for the 2020 Election in the United States

The eighth option is to run out the clock. Play the time game and hope President Trump is defeated in November. I don’t know the future, but I would want high odds to bet against him in the next election. It seems likely he will continue to the end of 2024.

All the while the clock is ticking in Iran.

I know too little about internal affairs in Iran, but what I do know from talking to people who have family there, is it would not take a lot to begin a new revolution. Given the economy there, a new revolution is fast becoming necessary. Would the Ayatollah and his helpers be able to survive for five years given their choices above. Not a chance.

What then?

Given every outcome is bad for the leadership in Iran, what can happen? Possibly some other option, or possibly a combination of things. I expect they will try, in order:

  1. Continue the terrorist game with concessions, subsequently sabotaged.
  2. Enlist world support, but with few takers given that the Americans would likely impose sanctions on anyone helping Iran.
  3. Violently suppress any internal revolution and continue to feign interest in concessions.
  4. Strike American interests violently if none of these methods work.

Step 4 is essentially to commit suicide.

External help

When none of your choices seem feasible, seek external help. The Iranians seem stuck in the condition that says, “If you continue to do what you have always done, you will get what you have always gotten.”

It is like asking what your customers want (citizens in this case) and then setting out to provide it. If you decide your own values must supersede the customer’s values, you cannot succeed for long.

Maybe the goal for Shia hegemony in the middle east is not an achievable goal. When an unachievable goal becomes your only goal, you will need external help to see other possibilities. Who could influence the Iranian leaders to think and act differently?

Examine your own life for unsolvable problems using current methods. Usually the way out of a problem with only bad outcomes, is to redefine the problem and its purpose. As the Turkish proverb says, “When you find yourself on the wrong road, turn back.”

I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates.

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

Who Discovered Water?

Water is among the most essential resources on our planet. It has always been so. Next to air, there may be nothing more crucial, yet we don’t know how it came to be discovered or even noticed.

Marshall McLuhan has made a good point. “We don’t know who discovered water, but we do know it was not a fish.”

We tend to be absorbed in what we know. We tend to take a great deal of it for granted and make new facts fit.

Everyone benefits from a wider view

People often attribute value to being a deep thinker, or a prized specialist. While both are valuable, they are not the right course for most of us. Specialization is narrow and deep. Specialization has its own problems. The principle one being it is very hard to see outside your specialty and as a result it is very hard to innovate within it. Specialists have a high tendency towards confirmation bias. It is the old hammers see only nails issue.

The other extreme is shallow and wide. The ability to use an observation in beekeeping to describe a problem in quantum mechanics. Shallow and wide tends to communicate better. They can find their commonality with the listener more easily.

The real question is simple. How shallow is helpful? Too shallow and no insight. Too deep and lose the ability to connect to others. How can we decide?

Curiousity is the key

It is impossible to be curious and not develop some skills in the shallow and wide pool.

I tried to make a list of what interests me. I started with language. I speak English, mathematics, accounting, and a smattering of French and music. The subjects that interest me are business, finance at the enterprise level, risk, personal finance, education, physics on the quantum side, psychology, philosophy, music history, poker, golf, some team sports, politics in theory and not practice, and humour. None of my interests are deep enough to qualify as specialist. I can however carry on a conversation about orchestral arrangement and wonder if left handed people are not well served by conventional orchestra structure. I enjoy questions like, “Can a fish be angry.”

Shallow and wide leads to common sense

I am a believer in the idea of common sense. I have been wondering if it is just a description of one’s biases derived from experience, or is it really a thing. At the moment I think it is a bit like society in general. It is the accumulation of structures and actions that work in a particular place and time. It is not the same everywhere and it is transient.

Common sense is learnable but only with difficulty. Most of what is taught is indoctrination and denies the value of other experiences. It is best when experienced. What would you learn from studying bees compared to what would you learn from being stung? Would a Russian who experienced communism have the same view of socialism as a New York based university professor? Which would be right? Conceivably neither.

Points of view tend to be rigid

Narrow leads to hard points of view. Shallower leads to more flexible points of view. Shallow works better given the idea of transient. The Boomer way is not the only way, despite that it worked very well once. Boomers valued things. More modern generations value experiences. The old boomer t-shirt that said, “Whoever dies with the most toys wins” would be barely understood by a 20-year-old.

Younger people are more connected and they know more about other cultures and people than we ever did. We boomers tended to be deep within our perceived “best culture” because we could not easily see any other. That “The others” would eventually get it and be like us was a given. Maybe not.

We could learn about other ideas and deal with them based on evidence rather than point of view.

Marshall McLuhan again, “A point of view is not an acceptable substitute for insight and understanding.”

Insight and understanding

It amazes me how so many people believe they are right and yet can present little in the way of support for their way of thinking. What you cannot describe, you probably don’t know well enough.

Understanding is most easily found by reading or listening to people talk about things you do not agree with. If you can provide reasoned argument about what they miss or overempasize, you have a chance of understanding both their position and your own.

For example, “Is Donald Trump a bad president?”

The question has nothing to do with his character or his personailty or his style. It has to do with whether he is able to accomplish things for the good of the people. On that scoring system he seems to be quite effective. On other matters he doesn’t appear to do so well. That could be because we have never met him or interacted with him and must live vicariously through the eyes of the media.

Do people want a figurehead who in real estate agent parlance “shows well”, or do we want an executive who gets things done? Is there any value in a president being well-liked although incompetent as a leader? Would we be able to live with a benevolent robot as president?

Recent history seems to tell us that we want or at least prefer the figurehead style.

Be wider

People who can understand many points of view tend to learn more easily and to be able to communicate what they know better. Read a lot, listen a lot, expose yourelf to new situations when possibile.

I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates.

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

When Should You Quit Quick?

Most of us are conditioned by the idea that winners never quit and quitters never win. Is that a reasonable thing to believe?

Often not.

How does never quiting work in your favour?

Never quit is a one dimensional response to situations where the desired result is not coming. Or not coming as quickly as we want. Quitting seems a useful response, but maybe we are near success and can’t see it yet. These are examples of what a football coach called, “Quiting on the two-yard line” Very near success.

The question should include more data. Am I on your two-yard line and almost ready to score, or am I on my two-yard line and 98 yards from success. In the real world, it is difficult to tell because we never have all the information we need to make a perfect decision.

The idea of quitting is further confused by the idea of a sunk cost. I already have invested this and if I quit I must lose it.

Sunk costs should not inform future behaviour. You should always proceed from where you are with the idea of optimizing the future.

If we are always near solutions, quitting is a poor move. Persistence is valuable. If you find yourself sticking with something only because of your previous time and money investment, you might want to reconsider.

How does quitting work in your favour?

Not quitting includes a variable many people ignore. Opportunity cost. Choosing something else might provide a reward and you don’t get it if you persist. Again the information shortage makes the analysis difficult. All the information we need to do a good analysis lies in the future and so is unavailable.

Quitting can often provide new enthusiasm and new problems to attack with skills learned in the first project. Enthusiasm is a useful advantage. Persisting in the face of difficulty can be frustrating or boring and often both. If you are going on to something else to avoid the boredom you should stop and reevaluate.

There is no perfect answer to be had.

A choice mechanism

Look outside your project. Sometimes the most difficult problems have easy solutions in another field of study.

Suppose you were concerned that Erdos-Renyi graphs didn’t deal with real world problems like clustering and closure. You could become stuck rather quickly and getting unstuck from within the problem is unlikely. Suppose instead you turned your mind to how crickets chirp together. Exactly as Duncan Watts and Steven Strogatz did. You can find the result in the Watts Strogatz model. It deals with “small world problems” and is one of the 100 most cited papers.

Our minds like new problems. Too focussed is a problem. When Bill Lear was building the LearJet in the early 60s, he had the engineers working on two problems at once. The jet and 8-track tape players. When a jet engineer got stuck they went across the campus and spent some time working on the 8-track player and its tape configuration.

They often returned refreshed and creative.

When quitting isn’t quitting

It is a question of what exactly you are leaving behind. The purpose or the method. Giving up on a purpose is a much more serious issue than giving up on a method when you find another one with more promise.

Successful people reshape and redefine the purpose as they learn more and they try alternative ways, sometimes dozens or even hundreds of them to get where they are going. Good solutions evolve and evolution means giving up on the old as it is replaced by the better.

If you would not do what you are doing now if you had it to do over again, then continuing to do the same thing seems wrong. If you would try a different way you should.

Judging what problems to tackle and how, is an advanced thinking skill.

I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates.

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

Good Communication Begins With An Action Orientation

I spent some time with the grandchildren over the holidays. It is refreshing emotionally and intellectually, but physically, they have more energy than I.

I did notice they are willing to see things new ways. Hopefully they are willing to think more than superficially.

Things are not as they first seem

For example.

  • We discussed 2020 as being a leap year. This year it is not 365 days until your next birthday. Details can change things. From that we came to the discussion of how many months have 28 days. Just one and then only three times each four years, offers one. Not so fast. All the months have 28 days. How many months have 28 days is not the same question as how many months have exactly 28 days.
  • How many lions can you put in an empty cage? Fierce debate about how big the lions are, and how big the cage is. Can they stand on top of each other? None matters. More argument. The clear answer is one. Always one. Because after you put one lion in the cage it is no longer an empty cage. No more can meet the test.

Words have meaning and sometimes our assumptions about meaning leads us to quick, easy, and wrong answers.

Communication is difficult

Drawing meaning from others is never easy. In terms of importance, we each weigh things differently. When we speak we have an image of what we are talking about in our mind and we see only certain aspects of it. Like lions and cages. How those may be observed differently isn’t part of our speaker mandate.

Listening then must be an active skill. We must draw out our own meaning from the information presented. We must fit it to our experience. We must ask questions, because many speakers use pronouns too often. In their mind, they see what they are discussing and assume others do too. Not so. Listeners must drag those factors out and even then they may get it wrong.

Communication matters

When you talk to young children about what is important in life, learning to communicate should be an important part of the discussion. It is two part. Learn how to hear others and learn how to send messages.

Both look passive, but both should be active. When sending, tailor the message to the audience. Be interesting to them. What works for one audience might not work for another. Be aware.

Spoken communication, or even text, is easy enough to understand by how you tailor the message. But what of a book or article? The audience is mostly unknown. There, the key will be clarity. Few pronouns and certainly none with ambiguous reference. Appeal to an active listener or reader. What questions will this passage raise? All good novels leave questions at the end of chapters.

When receiving messages, be asking questions. When some are unanswered, you will have trouble fitting all of the data together. You may need to revisit the article to see if you have missed something. More likely it is poorly written and you should note that. When you see examples, you can more easily correct your own writing.

Be context aware is advice for both senders and recipients. Learn a little about the author. Is their worldview immensely different from yours? What will they take for granted (assume) in their writing that you many not possess. Each of us have certain built in assumptions about thow the world works and it shows. If we are careless, assumptions become axioms and the resulting conclusions become facts. Believing a thing that is not objectively true leads to problems.

History, for example, is written from a viewing point.

“Until lions have their historians, tales of the hunt shall always glorify the hunters.” African Proverb

Challenge the viewing point to see what is missing. Especially do so if you are reading or listening to political commentary or a sales pitch.


Communication matters. Active listening is a valuable skill. Active sending is about deciding what the audience is willing to learn and how to help them move from where they are now to a new place.

Think about meaning not just the words.

Question for today: How do you treat negative yield bonds for tax purposes?

I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates.

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

What Do We Mean By Success?

The two hardest things to handle in life are failure and success.

What does it mean

Success is not as easy as people think. Success in terms of money may not even be desirable.

“Possessions, outward success, publicity, luxury – to me these have always been contemptible. I believe that a simple and unassuming manner of life is best for everyone, best for both the body and the mind.” Albert Einstein

“What is money? A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do.” Bob Dylan

Where does success come from?

There is no magic formula for success. There are characteristics and behaviours thats eem to attract it though. You might start there.


“Most people achieved their greatest success one step beyond what looked like their greatest failure.”
Brian Tracy

“Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination are omnipotent. The slogan “press on” has solved and always will solve the problems of the human race.”       Attributed to Calvin Coolidge

“Success is determined not by whether or not you face obstacles, but by your reaction to them. And if you look at these obstacles as a containing fence, they become your excuse for failure. If you look at them as a hurdle, each one strengthens you for the next. Dr. Ben Carson


“Before anything else, preparation is the key to success.”  Alexander Graham Bell

“One important key to success is self-confidence. An important key to self-confidence is preparation.” Arthur Ashe

“The secret of success in life is for a man to be ready for his opportunity when it comes.” Benjamin Disraeli

Preparation is a key because it allows you to notice opportunities when they present themselves. Athletes practice to give them quicker responses to unfolding situations. In martial arts, the practice is aimed at creating a familiar and effective response to a threat.


Success is a byproduct of preparation and persistence. It is not a goal, but a system of behaviour. Choosing the end point matters.

“Strive not to be a success, but rather to be of value.”  Albert Einstein

It is the result of applied skill.

“Success is more a function of consistent common sense than it is of genius.”  An Wang

It requires enthusiasm

“Success is not the key to happiness. Happiness is the key to success”  Albert Schwitzer

Success requires focus and intention

“The majority see the obstacles; the few see the objectives; history records the successes of the latter, while oblivion is the reward of the former”  Alfred Armand Montapert

Success demands decisions

“Life is made up of a series of judgments on insufficient data, and if we waited to run down all our doubts, it would flow past us.” Billings Learned Hand

Success is more than wealth

“Defeating pride makes you good. Overcoming anger makes you cheerful. Overcoming passion makes you successful. Overcoming greed makes you happy.”  Arabian proverb

Time to revisit the new year’s resolutions. We are half way to January 12th. That is the date when half have been abandoned.

Forming goals well helps in their achievement. Success is about a process.

I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates.

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

Is Strategy A Thing?

If you have followed this blog for a while you have seen the idea of strategy. In particular, strategy is the domain of the person not their helpers. Strategy answers several questions. All with a “W” at the front. What do I want, what do I have to get it with, who is involved, when do I need it, why do I want it all?

The problem with strategy

There is is one serious issue. It doesn’t accomplish anything. So there is a tendency to work at it and stop.

Strategy in a more useful sense.

Startegy is the process of discovering your context. It is about organizing yourself in such a way that efficient methods can be applied to get what you hope to get out of life. As you organize it, one of the clear gains is you to discover that your strategic context does not permit you do what you need to do.

What do you do then?

Easy enough. Have you ever used a kaleidescope? When you don’t like the pattern what do you do? You shake it so the pieces are aligned differently. Same thing with your startegic context. Shake the box and see what can be different. Maybe your cost of living is too high. Maybe your debt is poorly organized. Maybe your savings are too high given your expectations for the future. Maybe you should be making more money.

What are you looking for?

If you don’t like what you see, shake the box again. You  are looking for an arrangement of variables that is actionable. Everything you should do aims at action.

No action. No outcome. No change. No improvement.

Organize and reorganize your strategic view until it is efficiently actionable.

I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages. The result: more security, more efficient income, larger and more liquid estates.

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

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