Monthly Archives: July 2014

Too Painful To Care

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Monday I wrote about driving energy inwards to improve myself, my marriage, my family.

Related to this lesson, I’ve noticed a habit of avoiding knowledge that conflicts with my core beliefs. This isn’t anything new – human misjudgment is an ever present topic. However, spotting my own misjudgments can make me far more effective.

Being effective, and making better choices, is a more important to me than avoiding change.

A story.

The Tour de France just finished and I didn’t watch any of it. My lack of motivation was unusual and I wondered why.

The legacy of cheating has been to make it too painful to care. In my case, that manifests in a lack of interest in elite sport. In the case of the wider public, there is an element of truth-fatigue. It’s too painful to discover the reality that underlies an obsession with winning.

I’m using sport as an analogy – it’s an easy one for us to feel, and see in others. Choose your favorite sport and you’ll find a tendency to overlook it’s short-comings. If you can’t see it then ask a foreign friend their thoughts (or simply a pal that likes a rival franchise).

The lesson for daily living is deeper.

  • A friend with Alzheimer’s
  • An elder with dementia
  • A sexually abused child
  • A partner that defrauds the community

In these cases, we will feel a strong urge to “give the benefit of the doubt” to whatever causes the least pain. We will default towards inaction and strongly avoid information that compels us to face pain. I feel avoidance strongly in myself – it’s taken many setbacks for me to overcome.

One of the best lessons of hospice is that freedom lies on the other side of fear. Hospice lets me “be with” my fear of death/disease and feel grateful for today. Gratitude is powerful medicine to carry around inside.

Hospice is “easy” – it’s quiet and I’m not expected to solve anything. My home on the other hand… is often loud and I’m in charge. Maintaining serenity in my own house would be transformative for me, my wife and my kids.

So I look for small, daily, opportunities to practice equanimity:

  • Reading a conflicting viewpoint
  • Avoiding “justified” disappointment in a friend
  • Letting a commute unfold without battling my fellow drivers
  • Not playing into a negative emotional pattern with a spouse, child or myself (!)

Overcoming the smallest things, closest to us, can be powerful.

It takes courage to face pain.

Be brave.

Scope Lock

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It’s easy to let short-term news dominate our thinking.

  • Children killed in war
  • Lost airplanes
  • Destroyed airplanes
  • Crashed airplanes

With death, in particular, I was curious.

I asked Google, “How many people die, per day, in the world?”

Google replied, “about 150,000.”

Per DAY.

That helped me put my obsession into context.

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Realizing that my thoughts are largely wasted can create cognitive dissonance.

…but it’s awful

…I need to care (to show I’m a kind person)

I ask myself, ‘is linking worry to goodness effective?’ In my life, worry makes me anxious, not compassionate.

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Here’s what I’ve noticed in myself. There’s a hidden cost to obsession with others.

The more I focus on seeking to change others, the less energy I have to change myself.

What one thing, if it happened, would change everything?

In my case, kindness through daily action in my own house.

Beware of feeding what you want to leave behind. In my case, fear – anger – anxiety.

Talking About Dementia

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The medical director of the hospice where I volunteer gave a lunchtime presentation on dementia.

An interesting stat she shared was 45% of people 85 or older will show symptoms of dementia. With longer life spans, we’re going to be dealing with more dementia.

The mechanisms for the various types of dementia are not well understood but she cited the following risk factors:

  • Heart disease
  • Stroke
  • Alcohol use
  • Diabetes
  • Family History of Dementia

Like most of us, I have all-of-the-above in my family tree. If I live long enough then it’s likely that I’m going to bump into dementia.

What to do?

  • Consistency and routine in daily living
  • Physical and mental stimulation – stay engaged in your family, in your community, consider part time work
  • Safety – ID bracelets, honest discussions about driving
  • Reminders & Cues – at 45 I have a system in place to manage my days – if you are used to subcontracting all your admin then consider bringing it back in-house before you become part of the elder elderly.

With my grandparents, we used atomic clocks (automatically set for time, day of week, date, month) to help them keep track. Towards the end, I ran my grandmother’s calendar and would handle arrangements for key appointments. They were both in assisted living and my grandmother commented that she would have moved in earlier if it wasn’t for her reluctance to ask for help.

There was an excellent question from the audience… Do my visits have any impact? The doc made the point that the impact of a visit might be not seen until later – when the patient is happier, more content. Don’t assume that low, or no, response means that you’re having no impact.

In my own family, the anticipation of a visit was very positive. I went as far as planning a series of rotating visits more than a year in advance. Each elder needs a champion to marshall caregiving resources.

Likewise, with demented patients, don’t assume that negative behaviors are disease related – the patient could be acting out in response to pain, lack of stimulation or excessive stimulation.

Interesting point for older athletes – the body’s thirst, and hunger, mechanisms dull with age (as well as due to dementia).

The doc shared that artificial feeding of demented patients doesn’t prolong life and changes the nature of death – this is due to complications associated with tube feeding.

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The thought of losing one’s mind is terrifying and the topic of assisted suicide came up. We didn’t have time to explore that issue, but it’s going to be on the 2015 ballot in Colorado.

Given dementia rates in my family, it strikes me as more productive to create a care plan, rather than relying on a quick death, or euthanasia.

I was also left with the following:

Be sure to consider “who’s suffering?” 80% of hospice patients have cancer so my experience with the demented is limited. That said, be sure to look inward when you’re dealing with a family member with dementia. Our minds can torment us more than the disease torments our loved ones.

583My grandfather had advanced dementia and was fully capable of experiencing happiness and joy. He maintained his dignity, if not his memory, until the end of his life.

The death of an elder is an opportunity to make better decisions within the entire family. What did we get right? What would we change? What advance directives are needed for the next generation? for myself? Is my life structured appropriately if I start to experience symptoms of dementia?

IMG_0920Most personally, it strikes me that if I decide to kill myself then I deny my community the opportunity to learn from the end of my life.

As a society, we can learn to live better by taking care of people on the way out. My grandmother was moderately demented at death. She faced death with courage and caring for her was a gift, not a burden.

Watching a loved one unwind from Alzheimer’s is extremely difficult and I hope to have the ability to avoid judging opinions different than my own.

Real people, tough decisions.

The Person You Will Become

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IMG_2458The photos are from Bora Bora, an expensive vacation that Monsy and I took a few years ago.

The trip was worth the money. As “the Boulder couple,” my wife had me keeping her company as she ran around the island (20 miles), did her (five-mile) open water swim sessions and dragged a towel through the water (to build strength).

IMG_2451Another good memory is doing a sprint swim workout (while the Italians were sipping champagne) and Monica yelling at me to “swim straight.” I had trouble holding my line with the white sand bottom!

There were lots of honeymooners on the island. Comfortable in our own relationship, we wondered who “would make it.” Success being defined as sticking together as a couple.

One set of honeymooners was a high-profile couple. He was wealthy, she was stunning.

This week, I found out that things didn’t work out well for them. It was described to me as… he lost his hair, he lost his money, his wife started fooling around, he filed for divorce then he blew his brains out.

So sad for everyone involved.

For one moment, he lost all hope.

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IMG_3636Collectively, we tend to view divorce as a failure and a bad thing. There are elements of truth in that view and… there are elements of truth in the opposite view.

Failure can be a powerful catalyst for positive change.

Some of my failures have turned out to be useful experiences.

The key is getting through the suck, the pain, the hurt and the misery.

The people that we’ve hurt, let down, disappointed… they might have good cause to never forgive us. That’s their journey.

What’s important to remember is that life is precious and our darkest moments can be the catalyst for the person we want to become.

IMG_3663At 45 years old, my family gets the benefit of my past screw ups and failures. My prior errors are invisible to the people in my current life.

Stay in the game to meet the person you will become.

They might be wonderful.

How Am I Fooled By Fear?

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Monsy in Boulder

The best antidote I know for fear is a good laugh that is followed by asking myself, “What’s best for my wife and kids?”

Once we can see our fears, we discover their impact on every decision in our lives – relationships, office politics, athletics, contract bidding, you name it.

This thinking comes from Your Money and Your Brain, which was recommended in If You Can (link to free eBook). Turns out that I’m a case study for how we fool ourselves.

Extreme Loss Aversion

Periodically, I’m stalked by a fear of being wiped out.

An antidote is to view the world through a bigger lens. Evaluate bad news with regards to my life – most “bad” news has no impact on me but I transfer remote fears into my home life.

Strike It Big!

The flip side of my risk aversion is a feeling that striking it big would solve all my problems. The voice in my head tells me, “then you won’t have to worry about anything.” However, that’s unlikely. I’ve always had fearful feelings.

The antidote is to point out the obvious:

  • we’re in a good position
  • keep doing what we’re doing
  • inappropriate, and unnecessary, risk is one of the few things that can screw us up

It’s a message that I give to others, and I’m repeating it to myself, here.

 

Better Thinking About Taxes

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Taxation is a topic that’s guaranteed to tip most people over the edge of rational thought.

Let’s see if I can help you make better decisions by slowing down your thinking.

The first thing you need to do is add up all the taxes that you’ve paid in the last year. Your total might include:

  • Federal, state and city income tax
  • Payroll taxes, worker’s compensation premiums and unemployment insurance contributions
  • State, county and city sales and use taxes
  • Real estate taxes and rates
  • Transfer taxes and stamp duties
  • Value-added tax (for my non-American friends)

The first step is painful. It’s a big number for almost everyone.

In fact, this step alone creates a level of pain that drives many smart people to over-react. Wind farm investments, geographic relocation and massive personal overheads are often reactions to a sense of injustice with regard to tax policy.

When I moved to Colorado, I was surprised to discover that it’s a low-cost place to live. In fact, it’s a far, far cheaper to live here than London, Hong Kong or Bermuda – all locations where I’ve paid significant taxes.

Taxes are best considered in light of our total cost of living. The cost of which includes education, housing and healthcare.

At the end of 2000, I left the low-tax environment of Hong Kong and ended up in New Zealand. In New Zealand, my marginal tax rate increased significantly but my core cost of living dropped by 95%.

Years later, working in Bermuda, I spent a small fortune on travel and living expenses to keep my average tax rate down. Eventually, I did the calculation that I’m sharing in this article and had an “a-ha” moment.

Today, in Boulder, my total tax bill (all of the bullets above) is roughly equal to the cost of a single private education in London, Hong Kong or Bermuda. With three kids, the life of an expatriate would be expensive. In fact, I’d have to work so much, I’d rarely see my family.

While an American city with a good school district is a low-cost location – even better was New Zealand. Moving to NZ, I lived with roommates, was covered by single-payer health care and worked for European / North American clients. I read about young people doing similar arbitrage with a bases in Asia, South America or small North American towns.

If you’re motivated then you can find opportunities to optimize your cost of living. Rather than worrying about your marginal tax rate, focus on the best location for your current life situation.

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As for the psychological impact of a tax increase, I often let my emotions get the better of me.

To understand your true exposure to tax rates, take your total tax bill and divide it by your net worth. That percentage is the true “take” of taxes from your family.

For example, consider a young woman earning $70,000 per annum. Her total taxes are  $17,500 and her net worth is $40,000. With an average tax rate of 25% (17,500/70,000), she’s paying 44% of net worth in taxes each year (17,500/40,000). She has a significant exposure to tax increases.

Compare the above to an older woman who’s been saving for many years. Her gross income is $165,000, her total tax payments are $50,000 and her net worth is $3.5 million. Despite having a far larger tax bill, her taxes represent 1.4% of her net worth. Her exposure to rising tax rates has been limited by decades of living below her means.

Smart savers free their families from exposure to tax policy.

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Takeaway points:

  1. Taxes are a component of living in a civilized society
  2. Analyze your cost of living in the largest possible context
  3. Healthcare, childcare, education, housing and real estate expenses must be incorporated in any discussion of taxation
  4. To understand your true exposure, consider taxes (and all other spending) relative to your family net asset statement

Minimum Effective Dose

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gordo_crunchMinimum effective dose is a concept popular in athletics. The first time I heard about it was through Joe Friel.  I think Joe defined it as, “the minimum dose of the most specific training to achieve the goal”

Contrast this with my (historical) default strategy of “a little more than the maximum dose that my life can possibly withstand.” At the time Joe shared his observation, I was trying to train about five-hours per day!

Last winter, Monica started doing mini-walks when the kids were napping. We live on a hill and she’d powerwalk a quarter mile up, then a quarter mile down.

For a guy that used to aim for five hours of exercise a day, a half mile walk is a “why bother” level of activity. I’d sit at my desk, watch her leave and ask myself, “what the heck is she doing?!” At the time, she was knocking out 45 miles a week on our treadmill.

I was in a depressive funk and, perhaps, the mini-walks were her way of showing me the value of something rather than nothing.

Well, it worked. I started my mini-walks and they turned into some of the most pleasant time of my day. I moved through my funk.

The medical literature that I read is mixed on the value of exercise beyond about an hour a day. However, the value of movement (across a day) gets universal praise.

You can expand this concept beyond walking.

  • My relationship with my kids
  • Getting more efficient with my spending
  • Moderating my consumption of chocolate, beer or wine
  • Creating an ability to give a nice “no thanks”
  • Building a key relationship

A self-directed life comes from a habit of incremental change (but I have to constantly remind myself that the little things are worth it).

Should I Own Shares In My Employer?

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In the late-90s, I committed half my net worth into an investment scheme sponsored by my employer. The scheme was effectively leveraged 20:1. The deal worked out and was part of how I doubled my net worth within 24 months.

Emboldened by my success, in the early 2000s, I ended up with 100% of my net worth in a startup that was effectively leveraged 30:1. Taking out a home-equity loan, to cover my living expenses, triggered a desire to sell down my exposure.

The second deal worked out OK but it was painful. My returns fluctuated between +100% and -65% per annum. The ride up was fantastic, my net worth swelled 1,500%. The ride down was far less fun. In four months, the company crashed, I was unemployed and I watched 50 years’ living expenses go up in smoke.

So my answer, about owning your employer, is, “it depends.”

Depends on what?

Age – How old are you? What’s the implication of losing everything in the company, including your job? How long will it take you to earn your capital back?

The first time that I “bet the farm” I was 28 years old and able to save five years living expenses for each year I worked.

The money that I lost with the second gamble is gone forever. I’m grateful that I restructured my life to sustain that sort of loss.

Total Net Worth – What is your exposure as a percentage of your net worth? What is your exposure in terms of years living expenses?

Annual Free Cash Generation – Put your exposure in context. Based on the cash that you can save this year, how many years savings are tied up?

ProTip: the free cash generation check is a good way to review personal debts as well as the capital that you have tied up in your home. As our earning/saving potential changes, many of us are more exposed than we realize.

The above is an important cross check. If you’re sixty years old and 10% of your net worth represents ten years worth of savings… then you’re in a very different position from a twenty year old where 30% of net worth might equal six months worth of savings.

Reserves & Undrawn Bank Lines – after you make the investment, what are your liquid reserves and undrawn bank lines? Look at these in terms of gross annual salary, core family cash needs and your family cash flow forecast. How long can you last if everything blows up?

In my case, 50 years of living expenses went up in smoke but I knew that I had five years to figure out what to do.

Not wanting to make my life too easy, I had three kids in that time, which tripled my core cost of living. I didn’t anticipate that shift, but you can.

Contingent Liabilities – Does the investment have the ability to make further cash calls? Housing Associations, home ownership, private equity funds, partially paid shares… all can make cash calls at short notice.

Finally, be ruthlessly honest when you estimate your true exposure:

  • Salary
  • Bonus
  • Vested Equity (Shares & Options)
  • Unvested Equity (Shares & Options)
  • Pension / Retirement Account Exposure
  • Cash that you’ll spend if your employer disappears

The employees of Enron, Arthur Anderson, Lincoln Savings & Loan, and Lehman Brothers experienced a severe shift in less than six months. There are many more stories but it’s human nature to talk more about the boom, than the bust!