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.