Too Soon Old

Ski touring this past weekend. As I age, my solo long days are appreciated more and more.
Wearing a set of boots Gary sold me, looking across to the Gore Range and remembering his kindness.

As a private equity investor, seven years represented our maximum investment horizon. Everything beyond seven years was, essentially, forever.

Well, we’re coming up on our 17th wedding anniversary and it doesn’t feel like we’ve traveled “twice” beyond forever!

It does, however, feel very good to be traveling together.

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My focus on 7 is related to turning 53.

7 + 53 = 60

I suspect 60 will mark the end of my middle age.

The signs — less of everything — are all around me.


I started (re)reading this over the weekend. The chapter about “people your mother warned you about” is worth your time. The author points out that sometimes those people _are_ your mother. True but, the first time I read the book, I realized I was that person!
My weekend was filled with gratitude that I made a choice to seek better.

A book which has guided my life is Too Soon Old, Too Late Smart. I read it at the start of my marriage and applied its advice, gradually – point by point.

I would notice Dr. Livingston’s advice in others, then change those traits in myself. Ultra endurance sport gave me a set of skills related to not responding to others. Time and time again, I was rewarded when I overcame my urge to engage.

Outside of sport the game was to not-encourage certain aspects of my personality. I came to his writing with an understanding that my approach to relationships didn’t work, and a powerful desire to find a better way to love.

Like a new parent, I did not have confidence in what-to-do, so I focused on avoiding the big mistakes.

  • Don’t act on anger => easier than… be patient all the time
  • Focus on de-escalation => easier than… seeking to fix whatever seems to be the problem
  • Wait until the energy leaves the situation => better than… heated engagement
  • Schedule time together => better than… expecting my family to serve me
  • Avoid those who bring out the worst in me
  • Place myself in my best environment, especially with those I love

“Who we want to be” – those we seek are a revealed preference.

Lots of guys, and it is mainly guys, get themselves into unnecessary trouble with regards to sex. Tactics that have proven the test of time. I encourage these in my son…

Strength Training – very useful for anger modification. Like everything, I have tended to over-do-it.

Consistently toss plate and you’ll make less mistakes. Just seems to work.

As a young man, I used (extreme) endurance training. At 53, endurance-fatigue removes too many of the filters I use to manage my family life.

About those filers… I’ve come to realize that the greatest risk my family faces isn’t some external shock. It’s me. Specifically, the personality traits that I burnt off in my 30s will resurface and screw up an enviable situation.

Life gives each of us opportunities to start fresh, take parenthood. Not easy, often not much fun… very rewarding in hindsight, much like endurance sport. My kids have an experience of me that starts in my mid-40s. I love what they see in me. Fatherhood is a reminder that we can change, for the better, at any stage of our lives.

Pick a habit, learned young, that might be useful NOT to pass along.

Break the chain.

Dr. Livingston has ideas for you.

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Athletic spouse – when I pointed out the utility of this tactic, my son asked me to detail specifics!

With him, and you, I’ll leave this advice at “it just seems to work.”

By the way, to end up with an athletic spouse I needed to embrace everything implied, both in myself, and subordinating my “needs” to my goals. Again, elite sport was a useful teacher.

As a couple, we support whatever is required to have the physical partner we desire. We live in the fittest zip code in the US, have an extensive home gym, start each day with a workout… a mutually reinforcing positive cascade.

Having “fitness” as a core value creates blindspots:

  • desiring access to fit-folks we’d do well to avoid; and
  • being slow to embrace not-fit teachers, who are masters of subjects that can change our lives for the better.

Even with the blindspots, fitness crowds out choices that lead us astray. Having tried the not-fit path, it’s a good trade.

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Here’s an idea about freeing one’s self from the fears and anxieties that typify the mindset of high achievers.

As an endurance athlete, most of my efforts went into my sport. Prior to that, my energies went into finance. Prior to that, they went into school. However, in finance & in school, there was energy left for pursuits that could have led to ruin. Dr. Livingston covers most my mistakes in the first 20 pages on his book on love.

Despite its realities, elite endurance sport has a strong association with health. That association was enough to nudge me into seeking to be better person outside of sport.

Neat.

5, 10, 20 years of better… the compounding effect is real, especially when I transferred a “be the brand” coaching model to fatherhood.

There’s a very old teaching that was taught to me by Mark Allen…

If you want the full power of your actions, then tell no one.

From a walk in London (1993) to a couch in Hong Kong (2000) to a wonderful family (2022).

Brief moments, seemingly small choices, gradually reaching for better.

Melt Up


My inability to remember facts does not remove the ability of the past to influence my choices.

I want to move closer to my kids’ schools. The idea is to free up time, enable them to socialize with their pals at our home, and cut my annual car-hours.

Win, win, win.

Thing is… my local real estate market is not acting appropriately.

  • Median prices up 35% year-on-year (sustained upwards price momentum)
  • Lowest inventory on record before…
  • We lost 1,000 homes due to the recent Marshall Fire (constrained supply)
  • Mortgage affordability at multigenerational lows…
  • With a near-term expectation of increasing rates

It’s a perfect storm and creating a frenzy of FOMO-driven bidding.

It’s not just in real estate.

Three-year total returns on SP500… 31%, 18%, 29%… a dollar invested at the end of 2018, now priced at two dollars.

If you rode that wave at 2:1 leverage then you’re up 4x. Nice work, especially if you’re taking a share of profits on other people’s money.

The above puts 7% inflation in its proper context.

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I need to allocate capital in 2022. I’ve asked a wide range of contacts for ideas. One buddy responded with a series of questions:

  • What did you do the last time you had to make this decision?
  • What did you learn from your prior choices?
  • What is the impact of being wrong, both today and in the future?
  • Where are the sunk costs, and FOMO, in this decision?
  • You have time to make these choices, be wary of collapsing your decision timing, maintain your freedom of action as long as possible.

The questions above are the value for you. The next section is notes for my future self.

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At the last peak, just before the 2008 credit crisis, I bought a really big house (about triple the size of what we needed). I over-bought because I felt flush, after a liquidity event. Fortunately, I held a chunk of my investment capacity in reserve and was able to buy into the recovery (2010-2012).

It would be nice if a “buyer’s market” was around all the time. Life doesn’t work that way. In my lifetime, buyer’s markets happen six months per decade. Families need strategies that work for the other 95% of the time.

One of my goals is to avoid strategies requiring directional calls. In our case this means we will sell an investment property, before purchasing a new residence.

Downsides with selling: (a) the potential to “miss out” on the continued run up; (b) crystalizing tax liabilities; and (c) being priced out of the market if there’s another 35% pop.

The downsides are real but they don’t have any impact on our quality of life. This is a lesson. Identify fears, concerns and risks… write them down, make then real and ask… what are the true costs associated with them and does that matter to what the family is seeking to achieve.

Accepting the downsides enables us to avoid things that would impact our lives: being over exposed in a downturn and risking a future cash squeeze.

Also, think about family “problems” from a non-ownership point of view. Having “ability to own” creates a bias towards ownership. Many goals can be reached without deploying capital.

Take my desire to reduce time spent driving the kids around… $9,000 per annum buys me a lot of driving support, Looking at the problem in terms of money and time, I’m $25,000 away from having a third driver (our oldest) living with us.

I also know that I don’t need to remove a problem to feel a lot better… $100 a week worth of driving support is going to make me feel a whole lot better. So $10,000 of spending could solve a “problem” that’s nudging me to move across town.

…and I don’t need to place a large, new bet

…and I don’t need to go through the hassle of moving


Related to my story about solving problems without capital / ownership…

  • The joy from “being a coach” is different than the role of running a coaching business.
  • The satisfaction of teaching is different than the reality of running a school.
  • Purchasing assets nearly always constrains freedom of future action, in a world that’s constantly changing.

If you are a skilled practitioner then be wary of placing yourself in an administration role.

You don’t need to own it, to benefit from it.


Something about this melt up… Family net worth has exploded upwards but there hasn’t been big changes in family balance sheets.

Put simply… real estate is worth a lot more but it’s the same addresses, it’s the same assets.

The capital stock is the same, all that’s moved is the price.

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Another way I look at wealth, cash flow. Take the SP500… it’s doubled in price.

  • End 2018, $100 generated $2.14 in dividends.
  • End 2021, the $100 is now worth $200 and generating $2.54 in dividends

The 100% increase in price, is associated with a 19% increase in cash flow. One could argue that 80% of the increase in “wealth” has been a price move.

Using earnings yield, the numbers are different but the message is the same. There’s been a large price-driven move across our portfolios.

I see the same thing with real estate, a disconnect between price and cash flow.

When we look to the crypto-bros and think their gains aren’t connected to reality… humility could be in order.

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Here’s a boom-time risk assessment you can do…

Consider risk in terms of time (more detail here)…

  • Look at family assets in terms of years current spending.
  • Re-price those assets on a lower-multiple of cash flow, then see the impact on time (measured in years current spending).

You still OK?

Consider: What might this choice cost me, and my family, in terms of time?

My best decision of the last 20 years was moving away from a path that could wipe out my (enviable) lifestyle. I was in the middle of the 2005-2007 boom so the risks seemed very remote.

I made two changes: (a) banked the equivalent of ten years family spending off the table; and (b) removed all personal recourse funding from my life.

Then, as now, I didn’t have to make radical changes. I made adjustments to limit the downside from external financial circumstances.

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My points…

  • Consistent upward price moves are impacting our collective psychology.
  • These moves are mostly price driven.
  • Because price moves can happen in both directions… consider risk in terms of how much time you lose with an error.

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Finally, raise your prices!

If you can generate recurring cash flow (for yourself, or others) then there’s never been a better time to re-price your services.

$100,000 of cash flow is being priced at $3-5 million by many markets.

Metrics

Yesterday, Monarch Mountain, Colorado.
My capacity to spend a random weekday with someone I love… an essential wealth metric.

Sometimes, we need to look at information that make us feel uncomfortable. As a leader, I acknowledge “bad” news, as well as my capacity to receive it.

I like simple metrics, especially those that don’t require purchasing hardware or subscriptions!

The first one… can I spend a random weekday with someone I love? Shared experience is a form of wealth.

Another… last year, how often did “yesterday” screw up “this morning“? => hangovers, days without exercising, days without writing, days waking up late… depends on your goals.

Keep it simple.

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High-Performance Tracking

The amount of data coming from wearables has exploded over the last few years.

Like the early years of power meters, the data is best used to make our mistakes visible.

With health, the big ones might turn out to be: alcohol, intensity, salt, carbohydrate timing, inactivity, anaerobic load… time will tell.

In my life, the valuable information is in the mistakes. Most of us know what we ought to be doing. What’s helpful is clearly seeing my errors.

Soon, we will be able to be constantly connected to our physiology (blood lactate, HVR, HR, glucose, breathing rate, blood pressure). If we want then data will be constantly scrolling across our phones.

A lesson of Taleb’s Fooled By Randomness… the less often you check the data, the better the quality of the signal you receive. Nassim was writing about portfolio returns, the lesson applies widely.

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Consider the one thing you are seeking to achieve in 2022, and write it down. The One Thing is the thing, if I happened, that would create a positive cascade in your life.

One things from the last 20 years…

  • Get a loss-making business to profitability (reduce cash burn)
  • Launch a new product (make money, while saving time)
  • Launch a new company (create options for financial wealth creation)
  • Cash flow breakeven (increase self-directed time)
  • Write a book (establish expert credentials)
  • Improve my relationship with my daughter (become a world-class father)
  • Take care of a dying relative (learn about death)
  • Become an expert skier (mastery)
  • Win an Ironman (mastery)
  • Find love (connection)
  • Increase the kindness I show my wife (2022 goal)

Before you move forward, look back…

  • Where did I sleep last year?
  • How many nights did I spend away from my One Thing?

Where I am… a revealed preference.


Rather than banning video games and strictly limiting electronics…
I got my son hooked on Duolingo, a piano teaching app and Word Cookies.
It’s easier to work within human nature than seek to overcome it.

Asset Protection and Family Legal Structures

Our youngest. My kids did their first bouldering competitions this past year.
Climbing is a fun way to build upper body strength and gain confidence.

Twelve years ago, I found myself in an uncomfortable position. I had unlimited liability related to a nine-figure (USD) corporate insolvency.

It was a reminder => assets are best protected before they need protection.

After the dust settled, I went to work, adjusting the legal structure of my life.

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Below are ideas for you to discuss with tax and legal experts in your local jurisdiction. Always keep in mind that you are not trying to avoid tax, you are seeking to avoid ruin.

Once you’ve spoken with the trust & tax advisors, invert the situation and spend time with an expert litigation attorney. Find out what they are looking for when they decide to go after someone’s balance sheet and future earnings.


Financially, there are two things I want to deliver to my kids:

  • Debt free education to the best of their ability (5-20 years time horizon); and
  • US$ 250,000 (15-25 years time horizon, 2022 purchasing power) per kid

The debt-free education is what I really care about. Get that done, and model wise choices, they won’t need any financial support from my generation.

Aiming for a capital bequest forces me to be conservative with my own choices, greatly reducing the likelihood my generation becomes a financial burden on the one that follows me.

The financial deliverables, to the kids, are done within my life expectancy.

My true legacy will be non-financial in nature.


529 Education Accounts – Our contributions had the benefit of a state tax deduction, which mitigated the increase in expense ratio. Gains and income roll up tax free. The assets can be swapped widely within families, and descendants. Assets sit outside the contributor’s balance sheet, and are treated as a completed gift. This can be an effective way to build assets for kids, grandkids and between extended family members.

=> This provides comfort, today. Having that much capital tied up in a non-discretionary account constrains my action. I ignore these dollars when I plan for the future BUT I can also ignore the contingent liability of wanting to help my kids get educated.

=> I also give them a big financial incentive for figuring out how to educate themselves, for less. In my mind, that money is already “theirs.”


Other tools:

Irrevocable Trust – if you are in a line of work that could result in litigation, or simply don’t want to give a financial incentive to anyone to sue (or divorce) a member of your family, then this can be an appropriate vehicle to establish. Assets within the trust sit outside your balance sheet.

Intentionally Defective Grantor Trust – an irrevocable trust where the tax liability stays with the grantor for their lifetime. A benefit of this trust is the income, and gains, associated with the assets are rolling up outside the grantor’s balance sheet, gross of tax.

=> example here might be a high-earning professional, in a field prone to litigation, setting up a trust to benefit their spouse/kids.

=> another example: I stick an investment property in a Grantor Trust and it rolls up to benefit my kids. That’s the capital bequest I want to deliver. Worried about possibly needing the money? Then one could add their spouse to the beneficiary class as a hedge against future circumstances.

There are other asset settlements, and other trust structures, that can be effective for families. Experts can tell you more.


Contingent Beneficiaries – Talk to an estate attorney about using a trust as a contingent beneficiary of any inheritance you might receive. Wills can be drafted offering you the ability to disclaim assets in favor of a trust. Separate from asset protection benefits, this could be a useful feature if the taxation rules around estate taxation change.

=> example: in 2021, the estate tax threshold is US$11.7 million (double for married couples). Current law has the threshold dropping to $6.2 million in 2025. Go further… what might happen to your potential estate tax liability if that threshold went to zero? Ask your local expert to explain how you can use part of your $11.7 million exemption, today.


Private Trust Company – how does one “run” the entire structure without ownership? Establish a private trust company and have someone reliable act for the corporation, this individual could be a family member, or not. Be very careful with decisions/officers concerning: investment strategy, trust agreement amendment capacity, beneficiary classes and distribution policy.

Move slowly, with intention.

Done well, these structures do not cost much (to establish, and to run) relative to the benefits they offer.


Thinking Ahead – with all this stuff, it’s not about where your family is “today.” Think about where you might be 5, 10, 15, 25 and 40 years from today.

  • Our 529 Accounts are an example. We set them up when the kids were born, contributed heavily in our high-tax years and did “nothing but watch.” They’re super flexible and my kids could elect to roll them forward.
  • The Grantor Trust => set up many years ago, it didn’t seem like it received a lot of assets. However, those assets have been compounding for a long time (gross of taxes). Change the tax law, and extend my lifespan, a trust could save real money for my family.
  • Try to cast your mind back, say, to 2009. Asset values had been hammered. Roll forward to 2021, many assets classes are up by a factor of 3-5x and salaries in your field are likely up 2-5x. If inflation cranks up for a few years then the thresholds will seem even closer.

All Family Is Optional – We’ve built everything with the ability to be collapsed, split and changed… changes will happen after my death (certainly) and late in my life (with my consent). Siblings, blended families, step-parents… anticipating a split into separate vehicles should be the default position.

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Things I learned from the process:

  • Our structure paid for itself in reduced insurance premiums.
  • Despite in-family expertise and external professional advice, “getting it right” took years and a few iterations.
  • Move assets slowly and watch what happens. My kids’ financial education started in kindergarten. Next big step will be discussing allocation of 529 accounts – use, roll forward or trade? When appropriate, discussions about intergenerational capital allocation.
  • Take advice from an expert in establishing these structures then… take advice from an expert at attacking your proposed structure. Know what can go wrong before you make irrevocable changes to your family’s balance sheet.
  • Give each generation, and each individual, the flexibility to live their life as they see fit.

Remember, seek local advice. This post is meant to get you thinking, not offer professional advice.

Kids and Spouses

Christmas in Mexico

I’m going to write this in the context it arises in my life. I have a hunch it applies more broadly. A variation pops up at least once-a-week in casual conversation.

Ten years ago, a wise preschool teacher shared a quote with me. I liked the quote so much, it’s been on my fridge ever since.


If you are triggered about things, or money, then look around for the unmet (childhood) emotional need.

I have used the quote to guide my life for the last ten years.

  • Give time, not money.
  • Share experiences, not spending.

There’s another aspect of the quote… If you run into an adult who’s childhood emotional needs were unmet… assets, and spending, will not fill their void.

The void cannot be filled from the outside. This is an area where we need to heal ourselves.

Go further… to the heart of addictions…

Quite often, the attempt to “be a good provider” for these folks, makes their emotional problems worse. Further, they are going to feel crazy because they will be miserable while surrounding by conventional “success.”

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Let’s step back from the underlying emotional issues and discuss how parents, and spouses, can guide family spending and investing.

First, we need to sort ourselves.

My spending sets a floor above which everyone will operate. This might sound backwards but it’s my observed reality. My choices anchor “down” everyone around me.

INVERT: constraining myself is less likely to trigger resentment.

I’m the most powerful (spending) role model in my children’s life. I do them a lifelong favor by setting a consumption standard they can easily attain.

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Second, be brutally honest with yourself… Am I meeting the emotional needs of those around me?

When you are already a good emotional provider, it is very difficult for someone to trigger your need to be a good “financial” provider.

Rather than a high-stakes bargaining session… discussions about money end up closer to a 7th-grade math problem. An example… the ski-place…

  • 20-25 days spread across five resorts
  • Total cost of hotels/airfares ~$15,000
  • Shows the folly of seeking to “save” money in a single location by locking up capital

Clothes => let’s start by wearing everything in our existing wardrobes first

Cars, Furniture, Art => is there a more effective way to scratch this itch?

Recreational assets, out-of-town commitments, 2nd homes => …are you sure you want to give me an incentive to be away from you and the kids?

On and on and on… think past the purchase to overall incentives, habit creation and the impact of repeating the action for the next 5-10 years.

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Third, the “what are you going to do with the money” argument.

Related to, “but we can afford it…”

Ability to pay is probably the toughest one to control. It’s hard not to spend money in your checking account.

SIDE NOTE: this is a good argument to move cash out of places where it’s easy to spend. This was a (somewhat bizarre) benefit from a choice to STOP earning so much money when I was a young man. Financial success was making it harder to be who I wanted to be.

Here again, pause and consider,

  • What game do my actions show I am playing?
  • What is the game I want to be playing?
  • What game would move us towards “better” five years from now?

If you have kids then these questions usually point towards up-skilling independence via parental investment of TIME, and modeling behavior.

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Fourth, after you’ve done 1-2-3. Sit down and talk it over with the key people in your life.

If you are unable to convince them then have the humility to consider the possibility (albeit remote) you may be wrong!

In family systems, I’ve found it’s better to wait for a consensus to arrive than pulling rank.

Bonus: slower decisions are usually better decisions.

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Finally, related to the what will you do with the money discussion…

If you are focused on sharing time with the one’s you love then, hopefully, you will favor “experiences with them” over “making more money for them.”

Trustees, entrepreneurs, managers, exemplars, fiduciaries, parents, students, citizens…

We care for what we’ve been gifted by circumstances and pass it on.

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As a package, incorporating this process into your life results in a better allocation of time AND capital.

The expectation “we each take care of ourselves” is a good one. Even better when the parents model the behaviors required, and pass along the skills required to pull it off.


Let’s pull it together…

  • Sort myself first
  • When triggered, pause and look for the unmet emotional need
  • Smart leaders set the anchor with intention => I anchor those around me via my effort, personal standards, emotional control and personal spending.
  • Within family systems, remember my role is to meet emotional needs while teaching/modeling how to be self-sufficient financially.
  • Have the humility to see: (a) when helping-isn’t-helping; and (b) my own capacity for error.

Best Decisions

Due to aircraft mechanicals, it took us three days to get ourselves out of Mexico! United were terrific. Three COVID tests in six days for me. The possibility, of being delayed outside the US with a positive result, weighs on me when I travel.

There’s a saying in Private Equity that the best decisions we make can be the deals we don’t do.

Related, we all have thoughts that we are obligated to not act upon.

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The holidays can be a tough time for many.

Being surrounded by kids, Christmas is good for me – frequent socialization with very happy people. Their enthusiasm is contagious.

Childhood enthusiasm, sea-level sleeping, a two-month reduction in anaerobic load… combined for a pleasant finish to 2021.

The sort of finish that made me deeply grateful that I didn’t act upon a desire to dismantle my life. This desire followed me around June to October. It wasn’t much fun.


After I freaked out at the mess, my family made the (very useful) observation that I could “freak out later” and give them a chance to clean up, first.
Quit later, freak out later… pushing out the timetable for negative reactions was a winning personal policy for 2021.
When I was fed-up in the middle of the year, I pushed out my timeline for action by six months.

I have a policy to never leave myself in a position where my last interaction is a poor one. So, with a useful blog queued for Monday… I can share that 2021 was one of the toughest years of my adult life.

Externally, it was a great year. The kids absolutely crushed, the family’s net assets rose by a lot, my wife remained wonderful, my extended family took positive steps in their own lives, but…

But…

I was often very dissatisfied…

…very very very dissatisfied

🙂

…with the amount of money we were spending relative to the quality of my life.

Despite having a single residence, no mortgage, sending my kids to public school… cash out the door had crept up and up.

Not worth it (even when net worth is tracking upwards at a decent multiple of the spend).

“We can afford it” carries little weight in my internal life.

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Here’s something about dissatisfaction.

If you’re prone to getting _really_ upset, occasionally then this might help…

Looking deeply, I found it wasn’t with me all the time, or most of the time, just sometimes.

Like any emotion, it comes and goes. So an important thing to remember is not to act upon passing negative emotions.

Impulse control, learned in elite sport, has proven to be one of the most valuable assets I possess.

There’s also utility to be found in painful emotions. Persistent dissatisfaction nudged me to try some new things, and consider where my beliefs were making me miserable.

Clearly, it was my beliefs, rather than my situation that were causing the problem. My situation, by all measures, was great across the year.

Whittling down to misery-causing beliefs is not straightforward… …but these beliefs are usually obvious to those around us!

So my new things came primarily from saying “yes” to suggestions from my wife and kids.

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As I’ve written many times before, I also pay attention to when I am feeling content, serene and engaged.

  • One-on-one in nature, with friends/family.
  • Writing
  • Teaching
  • Reading
  • Learning

Things turned around, quite quickly, when I stopped sitting around and got to work on being engaged.

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If you have an extreme personality then you may be prone to fooling yourself into thinking you need to dismantle your life (to get to better). The desire to “chuck it all in and start fresh”… comes back again and again.

However, my emotional states are so fluid, a few small changes can be all it takes to nudge myself from “totally unacceptable” to “sustainable across the medium term.”

Once I arrive at a “sustainable” mindset, my task became noticing the good stuff that’s all around me.

Anyhow, I ended 2021 grateful I didn’t burn it all down… and/or… take out my temporary feelings on those who provide the joy in my life.

My Iodine Year

I hosted a belated-birthday party for my son.
I could see why they were sticklers about getting the waivers signed!

A favorite observation from Scott Molina

You don’t need to feel good to do good.

He was talking about race performances. Time has shown Scott’s observation to apply more broadly, say, to families and parenting.

Related to my last post about the phases of early education, you are unlikely to regret the difficulties required to set your family on a better path.

Go further… regardless of the outcome for the generation that follows you… providing a wonderful childhood, to any kid, will be a source of longterm satisfaction.

I’ve been at the fatherhood game for more than a decade. Often I feel worn out. The “worn out” seems to be adaptive. Our oldest is now a teen and my fatigue provides motivation to continue the process of getting her ready to leave us.

So that’s the family bit… occasionally awful, often fatiguing, always satisfying in hindsight.


A bit of real-world physics right there.

Physically, my early 50s are much different than my early 40s. The rate of decline isn’t clear to me. The downward trajectory, however, is clear!

Specific tactics I’ve been using, and considering:

Anaerobic & Tempo Load – my ability to “do work” remains at a high level. What’s missing is the capacity to recover quickly from those efforts.

I can see why people choose to supplement their recovery hormones. I’ve skipped that path. I’ve skipped it because the last thing I need in my life is an increase in aggression. I also like the challenge-of-figuring-things-out.

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Strava – I ditched it at the start of this month. I felt the public posting was nudging me towards fatigue.

=> Limiting crowd size appears to help the quality of my decisions.

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Oura Ring – I bought the Gen 3 ring and have had it on for six weeks. It’s been a help. I particularly like the ability to look at what’s happening across the night.


Tired

Ready

Other Changes: turned my morning alarm off, stopped counting days skiing, stopped counting ski vertical and ditched all notifications.

Nothing buzzes, rings or flashes in my life.

Wonderful.


Oxygen Room – When I lived in Christchurch (NZ), I had an altitude room that I used for work/sleep. It was a low-oxygen room, created by running O2 concentrators, and pumping oxygen out of the room.

The company that sold me the system is now creating oxygen-rich rooms, to let people sleep at “sea level.” A friend installed one at her ski place and she loves it. When she caught COVID (breakthrough) with Influenza (same time), she headed “up” to be at “sea level” for recovery.

With the O2 room, I’m considering:

  • What’s the goal? Perhaps better recovery. Sea level sleep, when physically tired, is bliss.
  • Assuming better recovery, how’s that actually better?
  • How would I use the better recovery? History indicates I’m likely to add load until I am just-as-tired as before!

So maybe it’s better to save the $$$s and modify my load.

Time’s going to force load reductions on me, regardless of recovery protocols. Another reason to avoid hormone supplementation => I might as well figure it out now.


Do you notice what you’re not doing to yourself?

It is difficult to wrap my head around things “not done.”

My demographic doesn’t write much about all the alcohol, edibles, prescription drugs and hormone supplementation that’s going on. I’ve decided to skip all that.

When my kids ask why…

Reality is enough for me.

Also…

You will need to decide what you want to get done in life.


Preparation & Prudence

Our family feels like it’s moving into a new phase. The changes are impossible to ignore.

  • My challenges with “preparing” physically.
  • Watching my kids track into self-directed learning, and living.
  • The shortening window, of years, that lie ahead.

On every metric, my life (and the lives of those close to me) is on track.

A new question arose this year…

What was the goal of all the preparation and prudence? Amazing wife, all-star kids, cash burn under control, balance sheet on target, body doing better than I ever expected… what now?

Back in the summer, I wrote a small “to do” list. One of the items was 20 blogs in 20 weeks. This one is #20.

🙂

++

Thanks for reading and for getting in touch from time to time.

This holiday season, I hope you get outside and give yourself a chance to enjoy the view. I’ve been trying to look around more.

Picture below is moon-set from the middle of December. I never wonder “what now” when I’m enjoying the outdoors.



PS: Iodine is element 53 on the periodic table.

Early Education

My wife and I went skiing for a couple days. Our youngest missed her mom.
So… she wrapped her stuffy in my wife’s robe! Insta-mommy.

I watch where people send their kids to school. It’s a revealed preference for their values. Amongst my pals, Boulder is one of the few locations were public schools are the default choice.

One of the challenges our district faces is declining kindergarten enrollment – we don’t have a good idea “why.” Some things I’ve noticed with the families that have gone private:

  • Private school is contagious, by neighborhood, by family and by peer group. It would be great to get those families back into the district. I’m not sure we’ve asked them what it might take.
  • As elementary school enrollments shrink, the impact of a single weak teacher increases. How we support weak teachers is not clear to me.
  • Having switched one of our kids to a full-enrollment, school… there is a quality of experience issue with the schools that aren’t full. The overall experience at a “full” school is better.

Thinking about the phases of our kids’ education…

New Parents: The #1 thing we got right, eventually… Listen to professional educators. My default position is seeking to understand why staff’s view makes sense. Take time in forming opinions.

Age 2 to 6 => choose your daycare/preschool/early education based on where the child will get the best socialization skills. This is particularly important if you have a high-energy kid. Early socialization trumps preschool “academics.” All three of my kids started Grade One at the bottom of the class, all three caught up in 18 months.

Parents: model the socialization techniques the kids are learning at preschool. Learn from the teachers so the child is in a consistent environment at school, and at home.

Remember during this phase… the most important money you spend is childcare that benefits your marriage. You are under more stress than you realize – make time for each other.


Age 6 to 8 => a daily focus on learn-to-read and learn-to-learn. Learn-to-learn is building on the early socialization work that happened before they arrived in Grade One.

Parents: 20-minutes a day (read-to, read-aloud) in this phase has the highest return in your kids’ education career.

No joke!

10 minutes before school (read-together). 10 minutes before bed (read-to). HUGE.

The confidence boost from being able to read provides a positive association with learning. INVERT: smart kids (who can’t read) will wonder if they are stupid.

=>100 hours per year time investment. The highest return parenting time you will ever have.

PS => the read-together before school, should morph into read-to-self each morning. I used a summer reading prize (100 mornings = $100) to establish this habit.


Age 9 to 12 => Our theme here: don’t mess with the streak!

Siblings, routine and habit form a virtuous circle of positive reinforcement.

“Read to self” every morning, summer reading prizes, consistent bedtimes, 2-3 different after school activities, consistent weekly schedules. This phase is about locking in a routine and keeping it rolling.

Be the brand.

If you’re not then they’re going to call you on it. 🙂

My expectation on the kids is “perform at grade level.” This lets them take all the credit for above-average performances.


Other thoughts

Earned Enrichment: there’s a joke that every parent thinks their two-year old is gifted. This is funny because it’s true.

In order to keep as many families in the public channel as possible… make it clear that all kids who want to accelerate their learning will be supported. Fairness of opportunity for all kids.

Related: make it clear that teachers will be supported. I’ve watched two weak teachers cause a (very polite) gradual exodus from a wonderful neighborhood school.

Some stories:

  • My son wants to take combined Grade 7/8 math next year. We have a simple policy, if you want to accelerate then you need an “A” in current year math. You need… A’s to Accelerate.
  • Seeing her older siblings ahead… our youngest wants to get ahead in math. At the start of each academic year, she gets a chance to test out. Once that test is done, we won’t intervene on the kid’s behalf. You gotta earn it, yourself. She’s been trying for two years and has a good shot next September!
  • Overall, I’m in no rush for the kids to accelerate their learning. Just like their sport, they have 10-20 years (!!!) of formal education ahead of them. The heavy lifting will come when I’m out of the picture and must be internally motivated. Our job is to set the schedule and not screw it up!
  • Same deal with sport. If school work falls apart then we will be dialing down the training load. You need to earn the right for extra training.
  • Fair doesn’t mean equal. My kids are always comparing who-gets-what. My focus is on supporting them, fairly, to get whatever outcome they can achieve on their own merits.
  • I was very unequal when they were young. In any given year, I over-allocated toward the kid who needed an early intervention of my time. I think school districts should do the same – prioritize early interventions across all demographics.

Finally, schedule time to focus on your stars. It is very easy to get wrapped up in problems.

1// One-on-one trips/special events in your best environment.

2// Acknowledge that successful parenting means getting out of their way — building their ability to live in the world — letting them go.

3// ABC => Always build confidence, or competence… depends on the situation!

INVERT: don’t crush their confidence when they are small.

The confidence point is a big one. Bad habits don’t take your family where you want to go.

That last point is a good one => take time to ask around…

Where do we want to go?

All too easy for strivers to keep striving, across generations.

Family Financial Strategy – December 2021

Everyone completed the “summer” reading challenge!
Across the time period, our oldest became a teenager.
I’m probably done trying to “push” her at anything. Although, there has been discussion of a cash prize for getting to know the local transit system via 100 bus rides to middle school. 🙂

Like all my stuff => this is not advice to your family. Speak with local experts before making tax, legal and portfolio changes in your life.


Iñaki asked, “what to do when the world seems crazy?”

I build my life so I don’t need to be right.

Related, I want to be able to unplug for 72 hours, without worry, whenever I feel like it.

This strategy is based on knowing that I’m prone to error and don’t want to spend my life connected to the matrix.

Further, even if you have 100% confidence in yourself, your kids/spouse are going to need something robust for when you’re gone.



Across 2019, I wanted to lean into equities but there wasn’t an event that gave me an opportunity. So I rolled along, rebalancing and living my life.

In March 2020, the pandemic created an opportunity. Personally, I leaned in (fairly hard) by increasing %age exposure to equities, at a time when rebalancing alone would have triggered buying.

In a fiduciary capacity, we only leaned a little. Two members of my investment committee, with wider views of the world, advised caution. Using the principle, most conservative view rules, we were conservative with allocation.

  • Both decisions made sense at the time and worked out.
  • Time matters. “Good enough” becomes more powerful the longer your time horizon.
  • Returns across generations are driven by a famous Munger-ism => “just try not to be stupid.”
  • The family’s position, 10 years past every generational transition, is impacted more by what you burned than what you earned.

At the end of 2021, given the whacky stuff I’m seeing around me, I don’t plan in leaning in at the next correction. Rebalancing will be good enough.


Recreational Capital and Associated Spending

A dominant focus on return/allocation in your financial portfolio, misses an important source of value creation => efficient use of “recreational” capital, and associated spending.

Recreational capital is any asset that’s held for non-financial reasons. This is a material slice of many balance sheets:

  • Boats, RVs, Cars
  • Offices
  • Second homes, vacation properties
  • Sizing up personal residences
  • Renovation projects, furniture, collectibles and art
  • Charters, vacation spending, travel spending
  • Any asset with a negative yield

You’ll see I included a line for the expenses associated with those assets. Some assets, when bought, lead to more spending.

By way of example, INVERT and consider…

When you sell all your assets in a remote location then… the spending associated with the location will plummet. Now that we spend our summers “at home” vs commuting to/from Canada, we cut spending by a big number.

Even if you don’t buy… for skiing, we stopped renting a condo in Vail. Our 2021 ski season cost will be less than what my last rental cost me. Skiing is a choice with a stack of associated spending, and negative-return investment opportunities.

It would be nice to think that these decisions were driven by being smart. That would be a mistake! The Canadian exit was driving by local tax policy and COVID forced a change in approach for skiing.

We did not realize the true cost of our “recreational” choices. We had to remove them, and watch for a couple years.

The choices above:

  • Create a larger working portfolio
  • Reduce annual spending
  • Increase the flexibility to change one’s mind
  • Don’t involve admin, maintenance or exit costs

In our financial portfolio, conservative nature means we “missed out” on much of the run up. However, because we adjusted our recreational capital, and associated spending, we greatly increased wealth over the last five years.

The wealth gain, from shrinking the recreational portfolio, is locked in. These gains are hidden from conventional metrics, that your advisor might show you.


Now we move along to KC’s questions

GB: total debt will remain modest relative to assets and cash flow

KC: How do you define “assets” and “cash flow” here?  Completely paid off asset or total value of asset? All assets – or just the assets on the investment side (excluding primary home?) Cash flow from all sources after expenses? What do you define as a modest target? 

I have a spreadsheet that shows me… gross asset value, deferred taxes, tax basis (as at last tax filing year) and deferred agent’s fees (for real estate). So I can quickly look at real estate from gross to net after-tax realizable value. I compare those figures to gross rental income, and net cash flow (from my tax return).

I’m conservative with gross asset value on real estate, a discount from Zillow and my real estate agent’s estimate on value.

I assume 6.3% cost to exit, from real estate gross value, then tax the realized value at 25% of the gain over basis.

++

Cash Flow

I look at… total debt service, core cost of living, total cost of living => each of those numbers gets a little bigger, and I have less control over delaying payment/spending.

Then I look at the inflows by source…

  • real estate (net and gross — consider vacancy risk)
  • employment (by role and client — consider concentration)
  • passive (royalties, dividends, distributed gains)

I want to understand my concentration in expenses (what I can cut/control) as well as income (where the risks lie). I never want to be placed in a position of being a forced seller.

My total family debt stays under 10% of net assets. Assets calculated net of all taxes and agent’s fees.

++

The Role of Time

My thinking in my work, and family, is multigenerational… I look at assets, leverage, cash flow and spending at many levels…

  • What I actually own, owe, control, earn => me
  • Family level
  • Family & Corporate level => me, my family, my business
  • Multi-generational level => consolidated, over time

I think about expenses, earning power, saving power, asset utility (what benefits members) over time. I have a spreadsheet that projects the age of all living family members over time (2021, 2035, 2050). This helps me consider family asset strategy and consider when generational transitions are going to occur.

KEY for assets and cash flow => When generations stop working/saving, when kids start working/saving?

It’s not just “what you own.” It’s also when you own it, and when you sell it.

I see many people buying assets they will HAVE to sell in ten years time, mainly real estate. Now, if it’s your main home, then I get it. See below for the option value in the mortgage.

In this market, Boulder up 30% this year, it’s easy to convince yourself that you are silly not to supersize your balance sheet.

But if it’s a secondary market…

  • 10% in/out cost for the real estate
    • vs…
      • Less than 1% cost to go variable (AirBnB, Hotels.Com)
      • Total flexibility with capital (you don’t deploy into a low-occupancy, negative yielding asset)
      • No admin hassle (I really dislike organizing maintenance and cleaning)

Why are you doing it?

If you want to dazzle peers, suppliers and key relationships… …then you might be better off with a high-end club membership.

Your mind may try to convince you the joining fee is a waste of money. Note that the club joining fee is usually < 5% of a condo cost, and club dues run <10% of the condo’s cost to own.

With leasing we compare to “do nothing” => most people with ready finance will “do something.” If you’re going to do something, regardless, then something smaller can be a better option.

Your mind doesn’t see the rest of your portfolio performing better, with less hassle, by not owning an asset that’s a drag on return.

And… my mind at least, doesn’t remember how much I hate cleaning and dealing with remote maintenance issues!


KC: Tax bill as a %age of net assets-Where do you think a healthy range should be? 

Every year, I look at the tax bill relative to net assets on a consolidated basis. This lets you consider the impact of tax policy on your portfolio – smart savers free themselves from exposure to changes in tax policy. Taxes paid, as a percentage of net assets, should trend downwards over your working life.

I don’t think the taxes vs net assets number, itself, is important. What matters is trending down and asking yourself if you are worrying about the right things in your life. Lots of (wealthy) people fail to recognize how little impact the Feds have in their financial life. Others could use a nudge to save more, spend wisely.


GB: At that point, you’ll have built yourself an inflation-proof, tax-effective retirement annuity

KC: Can you help me understand the inflation-poof aspect of this strategy? Is it the income producing asset that is locked in at an low interest rate? How is RE more inflation-proof than other assets?

Real estate isn’t “more” but it can be “different”.

Local rents are influenced by local real economic growth. I like the prospects of Boulder, the Front Range and Colorado.

Local real estate values are influenced by macro (national interest rates, credit cycle) and local (replacement cost, demand) factors.

So a slice of local real estate can create an element of hedging between national, regional and local conditions. There are some other benefits…

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Hidden Options

Here in Boulder, Colorado, I believe our real estate values have a hidden option. There is a chance the best neighborhoods explode upwards towards the highest valued parts of: the Rockies (Vail/Aspen), California (Bay Area) or NYC. 

Now, I don’t have the $$$s to own trophy properties, but I don’t need to. As I wrote in The Next Doubling, it’s good enough to be nearby. For the option to pay out, we don’t need to get to the highest prices per sf => we merely need to close the gap, a bit, over time. That sort of option doesn’t exist in an index fund.

Another hidden option => we own a two-unit rental. We always have the option to move into one of the units and “live for free” by renting out the other unit.

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Option Value of Fixed Rate Debt

30-year fixed rate debt, with an option for the borrower to repay, is a valuable (oneway) option in an uncertain world. Unlike margin debt, the lender can’t call the loan on a whim.

Long rates have been declining for 40 years, so the value of this option is overlooked by many. In an inflationary environment, having a multiple of my core cost of living in low-cost fixed rate debt is a useful position.

A mortgage on a personal residence seems like a good deal to me……and if it turns out to be a bad deal then I exit via repayment or refinance.

++

Saving 2% p.a. and giving Goldman an option to close you out…

Quick note on margin debt, even at <1% p.a. cost, seems like a very bad idea.

Smart people borrowing money they don’t need, to make money they are unlikely to spend in their lifetimes. Everyone figuring they will be able to unwind their financial structure before anything bad happens to them.

This strategy never ends well and only makes sense when you are playing with other people’s money.

A general principle, some things only make sense when you ignore the rebound. Fasting, margin debt, intensity-bias for endurance sport… I have found one gets a better long-term result from building smarter habits.

++

Optimize over time. When I started paying attention to myself, I realized I needed a whole lot less spending, which implied less capital, which gave me much more time.

INVERT that last sentence => spending you don’t need, increases the capital you think you need, to spend more time doing what you want. I broke that cycle in 2000, got wrapped back up in it in 2005, got tossed back out during the 2008/2009 recession and, these days, cycle in/out depending on my moods!

Nearing 53, I laugh because “less” is being forced on my physical life, by time.

In my early 40s, “less” happened due to kids and a nasty recession.

In my early 30s, “less” felt liberating, and made time for a lot more self-directed time.

“Less” is a useful process!

Wanting

Needles District, Canyonlands NP.
If you get to Moab then do yourself a favor and spend a night under the stars (with the moon down).
This pic was taken hiking back from the Confluence Overlook, 10-year bucket list destination for me.
A sustainable way to enjoy longer workouts is to slow down => 10 miles in 4 hours.

I had a post queued up for Monday but it was about trust law and a bit dry!

I’ll re-work it and release it at the end of the year. A low traffic period of time.

++

Last week, I finished a book called Wanting. An easy read, filled with short anecdotes, about desire.

Having spent my life in the business of money, I know about conventional desire. My time in athletics exposed me to another aspect, Victory & Vanity.

Greed comes in many shapes and forms. As I age, one form I contend with is wanting to get back to the past – a past remembered as better, stronger, more vigorous… this longing doesn’t serve me well.

For example, a longing for vigor can cause me to do too much exercise, thereby assuring exhaustion (ie a lack of vigor)!

The Wanting book was a guided personal review => considering the source of, and the likely results of, my desires.

++

A Simple Case Study – the source of desires

A decade ago, shortly after visiting Aspen, I found myself wanting to buy a Range Rover. This desire appeared to “come out of nowhere”, but it didn’t really.

I’d been in Aspen for a training camp with three guys in my age group. Let’s call them the Three Amigos. I had visited their houses, been driven around in their cars (Range Rovers) and elevated my heart rate with some very competitive swim/bike/run.

The Three Amigos were people in whom I was able to see different aspects of myself. In many dimensions they were more than myself. With my heart rate up, this is a very powerful modeling situation – both consciously and unconsciously.

The Range Rover desire was the first thing I noticed. There was more.

Here’s the tip: I tend to notice my material desires before the deeper stuff.

When I notice that I’m wanting to buy the same socks as a buddy (Doc J you have a pair of very nice purple socks BTW)… pause and consider.

When I notice the mimetic transfer of a material desire (socks, car) then I pause and consider what else I might be sucking up from this person. Because I know it’s happening strongly in my unconscious.

++

Thinking about an earlier draft of this post. I realized that the influence of my friends runs far deeper… watch, skis, bike, entree selection, career nudging for my children… my desires are influenced, to a point of external unconscious control, by my mentors (nears and peers).

Choose (very) wisely!

++

The day after Canyonlands was a ride in the Colorado National Monument.
~30 miles, 2,500 of climbing.
Real training, not in my basement!

Risk of Ruin in Close Peers

Here’s a tip about ruin => in a group of peers, the group will tend towards the risk-seeking level of its most risk-seeking member.

We drift upwards, until something goes wrong, then we blame the situation.

Smart systems avoid catastrophe – here’s a simple one, teams of three, most conservative opinion binds the group. I use this in the mountains, and on my investment committee.

Life is a game over time.

++

Anti-Desires

The power of desire works in reverse => consider people (and their specific choices) who repulse you.

The book asks the reader to consider, “Who are you not rooting for?”

It helps to be brutally honest. Owning my greed is easier than acknowledging secret envy!

It took a couple weeks (and 48 hours off my screens in Utah) to dig into my hidden desires. Part of the Wanting discussion centers around “thick” and “thin” desires.

Let’s start with a “thick” desire => do right by my kids. Where’s that going to lead us? A series of strong downstream families that endure beyond my life.

When I see someone crushing the family-side of their life, I’m happy for them => alignment with my thick values.

Compare to “thin” desires => the Range Rover, a fancy ski jacket, etc… Thin, material desires are relatively easy to spot.

Envy is less easy to spot. Disgust, however, is easy to feel => there’s the feeling again… let me consider it.

++

A story.

My kids are doing great in all domains – school, sport and social. Notwithstanding this reality, I often hear a voice in my head saying…

You could be so much more…

Funny though, the voice predates my child! It’s a voice that’s been following me around for many years.

But what does this voice want?

Fame, likes, the approval of strangers!

If you repulse me then you likely have these things, all of which I secretly want… 😮

Thin, hollow desire that, most importantly, can NEVER be satisfied.

When I started publishing, I had a desire to help 1,000 people. I wrote it down as part of The Artist’s Way, bought in July 2000. Having far exceeded my goal, you’d think the desire would wane.

My desire for recognition, when fed, only grows stronger!

I see hidden desire through my anti-desires, my envy of others. What am I thinking about when I feel disgust? How might I deal with those feelings of envy?

Don’t water the seeds of envy. Simple, not easy.

Let’s get into tactics I’ve been experimenting with…

#1 – get myself to play a different game by competing in a different environment. This started in 2000. To get myself to step outside my innate monetary greed, I had to leave my daily exposure to high finance. To think clearly, I need to power down my phone and lock it in my car for a couple days.

Reduce my drive for material consumption and constant external approval… Axing Facebook/Instagram was a huge win for me. Not easy. Like stopping drinking, what am I supposed to do with all this extra time?

Not racing => the removal of a constant incentive for “more” in my physical life. Signing up for a race is a step towards fatigue. Fatigue that works against my thick desires.

On the screen you are reading this post on… who is on my screen most often? who’s like me, but more? who’s triggering my disgust?

++

Write it down

Several times in my life, I’ve had a moment of clarity. A moment where I realized my thin desires were carrying me towards an outcome I didn’t want.

The moments are fleeting, so I write them down: the change and why I need to make it. Often, I try the change for 30-days and pay attention to how I feel.

The path forward is not always clear. I know people, who have a deep feeling “this isn’t it” and want to make a change. Other internal voices might be, “you gotta get out of here” or “this isn’t me.”

Write down what your hear.

Or maybe you wake up and realize your choices are destroying your health. In the early 1990s, I got kind of fat and didn’t like it. When I’m tempted to deviate from my system of healthy eating/exercise, I remind myself just how much I didn’t enjoy being chubby!

If you’re anything like me then your thin desires will persist and keep trying to lead you astray. The stronger they get, the more I need to slow down, reduce stress and consider where I want my choices to take me.

Strong downstream families enduring beyond my lifetime.