Category Archives: Uncategorized

Money and Attention

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storyGiven the firehose of media attention pointing at the US Presidential election, it’s easy to get tired, fed-up, angry, worried… you name it with regard to the state of politics.

It is worth remembering that the players have a vested, mutual, interest in getting us scared, and angry enough, to give them money and attention.

Rather than bringing fear and hate into the world, consider the following…

Take a characteristics of your least favorite politician and remove it from yourself.

  • You might have a concern about a lack of tolerance.
  • You might have a concern about a lack of integrity.
  • You might have a concern about a focus on personal wealth.
  • You might have a concern about fairness.
  • You might not like the way the person looks.

Whatever the trigger, we are going to be reminded of it, a lot, over the next five months.

Become aware of the trigger…

…and work to subdue the trait from within yourself.

Healthcare Tradeoffs

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2016-05-13 12.25.44I’ve been helping an elderly friend navigate the healthcare system. It is easy to get present-procedure focused. No one took a long-term view of my buddy’s life path.

It’s going to be easiest to explain by putting myself in his shoes.

Let’s say I’m 80 years old and have a stroke, from which I will recover. At the hospital, they discover I need a pacemaker. The pacemaker is required because I have a condition, which is causing my heart to stop beating for up to 5 seconds at a time, mainly when I sleep.

The heart surgeon says I should fix my heart – he’s done the procedure close to 1,000 times. I am likely to see additional years of life.

Why would I hesitate?

I might hesitate because I know my family history.

By the time the pacemaker battery needs replacing (my late-80s) all my grandparents would have been dead, or nearing death.

Here’s what my family tree has been serving up…

  • Organ failure with Alzheimers (pacemaker kept on ticking until kidney failure killed the heart)
  • COPD with dementia
  • Cancer
  • Stroke

“Doc, I have a concern we are helping my body last long enough for me to lose my mind.”

No easy answers…

…but here are some questions:

  1. What’s my mental, physical, spiritual state now? How am I doing relative to peers and family history? There could be very good years left before dementia hits hard.
  2. Are there conditions/diagnoses where we switch off the pacemaker? Do I want to specify, now, what my power-of-attorney should do? It’s easier for a POA to follow my instructions than struggle to balance the considerations of: past self, ever changing conditions and future self.
  3. Does my POA have access to a medical advisor with the skill, and compassion, to navigate these decisions? Look for a middle-aged MD, with a large family tree, where the elders frequently live into their 90s.
  4. Do I have the capacity to continue to bring love into the world? I’d be willing to suffer quite a bit if it was a win for my children.

Lifestyle, diet and modern medicine can greatly reduce our chances of dying early. In each of our family trees, there comes a point where we’ve done about as good as we can expect.

I’ve preemptively forgiven my POA for the decisions that will need to be made.

I’ve had a wonderful life.

What’s the value of an extra day off, forever

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2016-04-07 10.36.45What would you pay to have one day off, every year, for the rest of your life?

Once you have enough to cover your basics, you are paying an implicit price (in future time) for every dollar you spend.

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A case study to illustrate…

Let’s say you are considering a $10,000 trip of a lifetime…

My preferred way to view spending is relative to my net worth. My give-a-hoot threshold is set at 0.1% of family net worth. It helps me not sweat the small stuff.

Applying that heuristic to a $10,000 choice, you need a net worth of $10 million (!) not to be thinking carefully about the trip.

So let’s think very carefully!

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Realistic financial freedom comes from chipping away – day by day – at the requirement to work full time to fund your core cost of living

The value of a future benefit is undervalued by nearly everyone. A short-term focus makes sense from an evolutionary perspective but greatly limits the options in the second half of your life.

Let me reframe $10,000 of spending for a family earning $120,000 per annum.

Core cost of living = $120,000

Capitalization Rate = 4%

= Capital required to retire completely

= $3,000,000

Divide that by 300 working days per annum, and you get $10,000 of capital per working day.

So the vacation could be priced as one day working, forever.

When you look at a new SUV, you could see an additional week working, forever.

Jewelry, RVs, hobbies, private education… All can be viewed in terms of time.

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Keeping it simple…

…every ten grand you invest in a balanced, low-cost portfolio, buys you an extra day off for the rest of your life.

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…and while it can be tougher for a young person to accumulate capital, the time payoff is FAR greater.

$1 million of family capital can buy you four-day weekends, for the rest of your life.

After you’ve bought it, don’t wait too long to spend your time.

Building Bridges

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2016-02-12 18.28.49A few years back, I identified my relationship with my daughter as an area that had the potential to greatly improve my life. At the time, I was devoting excessive energy to her via worry and stress. She was always in my mind, even when I was away from her.

How can we reduce the impact of our not-helpful obsessions within our minds?

I use two techniques:

  • Be kind and generous to as many people as possible – lots of tiny actions
  • Express the same habit, directly, to the person with whom I want to improve my relationship

Now, it’s important to bear in mind that it only takes one person to torpedo a relationship. So I might not be successful.

That’s OK – “success” isn’t my goal.

If the goal isn’t “success” then what is it?

Take a minute and consider what your words to your children indicate about your definition of success.

When I’m stressed, my words might indicate a desire for compliance, quiet and solitude. Is that what my family really needs?

Those same desires can be satisfied via personal, internal serenity within whatever relationship I have with people.

What’s this have to do with the “one-on-one” trip?

Taking the toughest member of the family on a road trip was a way to “step up” within my household. I’ve been taking my oldest on the road since she could walk.

ax_zenMy young children have a simple agenda with me…”do stuff with Dad.”

It’s simple, but not easy.

It’s not easy because “dad” has a preference for strong coffee and exercising uphill. I also like to be left alone to read, write and think.

To do fatherhood “right.” I have to make the commitment to be with my child, on the child’s terms.

A habit of service spills over into other aspects of my life, for example my marriage.

  • Just me and the child
  • Focus on doing things the kid likes
  • Never more than three nights away
  • If the kid is awake then my agenda is put to one side

Truth be told, the trips started as a way to get my Alpha Child out of the house. The fact that I ended up with better relationships with everyone was an unexpected bonus from seven years of sticking with it.

ax_mexico

Non Financial Aspects of Estate Planning

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2016-03-09 15.23.39A friend asked me to give this talk to his firm, but I prefer to write short articles. 😉

When families talk about estate planning the discussion can center around cash flow, assets and tax minimization. While those topics need to be sorted, dollar-centric living can lead to regret.

If you apply last week’s tips about family leadership, you might discover certain realities about financial wealth.

2016-03-16 13.56.23Namely…

The highest use of an asset lies in its capacity to enable better choices…

  • flexibility to allocate time towards shared experiences
  • the ability to control one’s schedule
  • the opportunity to tag along when other people are doing what they enjoy
  • health in the context of body, mind and spirit

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2016-03-13 21.51.50Cash flow without education, connection and meaning can be a negative. Examples are the challenges faced by lottery winners, professional athletes and young, highly paid professionals.

With cash flow, I would go further and point out that excess family cash flow will ultimately be consumed by the least responsible adults in a family system.

You might tell yourself that you are “doing it for the kids” but the money ends up being blown by someone’s aunt or uncle.

2016-03-11 20.04.44-1What to do?

  • In your lifetime, use money to acquire time.
  • Share time with people you wish to influence with your values. Be the brand.
  • Remember that it’s better to earn, and spend, our own way in life. It’s what you did.
  • Have a bias towards “assets used for shared experiences,” rather than cash flow.

Ask the question, How do I wish to be remembered?

Be that person, today.

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2016-03-10 08.52.21Shared experiences, both positive and negative, bridge generations across time.

As a child, I had four grandparents and three great-grandparents. Of my childhood elders, only one made the transition into my children’s consciousness. The elder that bridged across did so because my daughter and I were involved in her end of life care.

Love, not money, is what travels across time.

2016-02-24 16.51.20

Family Leadership

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2016-02-08 10.36.04I’ve written about the concept of the good-enough parent — a combination of showing up and not retaliating. It is a simple strategy but quite challenging in the face of a disgruntled preschooler!

Seven years in, I’ve managed to make non-retaliation a habit. If you are still working on it then remember to practice all-the-time…

  • Yield in traffic and queues
  • Breathe into tension
  • Slow down

New habits are most easily created when we are capable of self-control — away from the kids, in low stress environments.

I’ve been at it for over 15 years.

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What’s next?

I’ll start by sharing what’s definitely not next.

A habit of constant correction will make you, and everyone in your house, miserable.

An easy way to make this visible… track your positive-to-negative interactions with your kids, spouse and friends.

Another way… ask a close friend… When I talk about myself, what do I say?

If this is an area for improvement then it’s already obvious to everyone around you.

It was shocking when I did this with my oldest. I became so aware of my error in approach that you can get a quick rise out of me by constantly correcting her in my presence.

Correcting less, in ALL areas of my life.

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2016-03-09 15.27.20What about next-level positive habits?

De-escalation – become skillful in draining the energy out of situations.

Most of us didn’t grow up in an environment that taught us these skills.

Becoming an effective family leader will require education, motivation and daily practice.

Two things helped me here:

  1. learning the methods of outstanding preschool teachers – if they can teach preschoolers to de-escalate then they can certainly teach us!
  2. reading the secular writings of spiritual masters

2016-03-12 10.34.52Opening To Experience – the most valuable experiences shared with my family serve no purpose, other than sharing an experience with my family.

Often, my shared experiences are activities that I would not choose for myself. Recent examples, collecting sea shells, swim races, downhill skiing and art shopping.

2016-03-12 10.31.31Most of the leadership we were shown as children was about saying “no.”

Constantly being told what not to do.

Consider becoming the embodiment of what to do.

Is it any wonder many of us rebelled and left as soon as we could?!

Is it any wonder that many of us continue to hold resentments about events, and people, that haven’t existed for 20, 30 or 40 years?

To break this cycle, I say “yes” as much as possible. Yes to beachcombing. Yes to downhill skiing. Yes to painting. Yes to card games.

Stay open to experience.

Stay open to love.

2016-03-10 08.42.33

My Children’s Laughter

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Loading UpIn my mid-20s, it dawned on me that I had saved enough money to sail around the world.

Instead of a trip, I took a promotion.

By my early 30s, my net worth had grown and I took a leave of absence, to effectively, exercise all-day everyday.

It wasn’t a feeling of financial security that pushed me to make the change.

It was a set back, an unexpected divorce.

Other major changes have been triggered by unemployment or massive financial loss. In buddies, I’ve seen health issues as the trigger.

Most recently, it’s been misery. Unexpected misery has proven to be the most useful part of parenting.

A story about coping…

BelleSince 2008, I’ve done, or seriously considered…

  • Studying ministry
  • Teaching my kids, my wife’s family’s religion
  • Selling my house, buying a catamaran, sailing around the world – this would include boat-schooling my kids
  • A bioscience degree
  • Various start-ups
  • Returning to finance
  • Pursuing a world-title in a niche sport
  • Pursuing a world-title in another, even smaller, niche sport
  • Relocating to Australia
  • Relocating to California

Pretty big list but I’ve discovered that major change is unlikely to be the solution to a question, that I’ve had difficulty framing.

In my search, two mantras popped up…

2016-01-28 10.03.11Everything I need can be found at home – there is no happiness available in a new sport, new town, new house, new job, new partner… that isn’t available within my existing life.

2016-01-27 11.38.06Meaningful work is part of the solution – everything that I’ve enjoyed in my life is a result of effort. I’m constantly trying to fool myself that doing less will create more happiness. I have the means to make myself miserable through sloth.

Road tripBut what to do?

There are two traits with guaranteed huge payoffs to myself and every person with whom I interact – patience and kindness.

Patience moves my inner life towards serenity.

Kindness vaccinates my mind against anxiety and the opinions of others.

At some stage in your life, I hope you realize that you are free. When that realization touches fear, and a feeling of “WTF now?!”, I hope you remember to fall back on kindness and patience.

What does all this have to do with my kids’ laughing?

After five years of effort, I wouldn’t describe my inner life as jovial. However, I live with three of the happiest children in the world.

When I listen to their frequent laughter, I know that I am happy enough.

 

Two Gifts

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2016-01-09 19.05.25For a number of years, I’ve chosen one thing and constantly reminded myself that I have far more than I need of this item.

If you’ve heard me talk about my experiences with finance, or sport, one theme that I emphasize is a feeling that I was far more successful than I expected to be.

Another example might be talking about living with preschoolers… it’s the most hugs I’ve ever had in my life. I’m very well loved.

Or what it’s like to be married to my wife… sharing my life with her is far from a hardship posting.

This habit need not be built with the “big” things in our lives.

2016-01-09 16.56.53Each time I leave a tip at a restaurant, I might pause and say, internally, “isn’t it wonderful to be in a position where I have a little extra to give.”

Each time I reach into the fruit drawer of my fridge, “pretty amazing that we can have crispy apples, year round.”

If I shovel my neighbor’s sidewalk, “it’s so cool to have the time to help this person out.”

The point being to create, and reinforce, a trigger than reminds me that I am surrounded by examples of having more than I need.

So the first gift I wish for you is a feeling of having enough, in at least one area of your life.

2016-01-03 12.59.47++

A new habit I’m seeking to build is paying attention to how I feel when I’m walking.

I picked this one up from The Art of Power, by Hanh. It’s a wonderful book, filled with stories about how I fool myself!

I have found walking a little slower feels better.

I’ve noticed that breathing a little deeper feels better.

Strengthening those two habits will lead to better outcomes.

Because…

Most my errors come from quick action when anxious.

So the second gift I wish for you is short, pleasurable breaks whenever you find yourself walking.

2016-01-01 11.49.55

My Silver Year

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2015-12-27 13.50.08It was my 47th birthday last week.

Borrowing from the late Oliver Sachs, I decided to look up 47 on the periodic table. I was happy to discover it’s the element Silver (47Ag). So the next 12 months will represent my Silver Year.

When I’m going through a tough patch, I tell myself to live-every-phase.

I have two tendencies that distract from a goal of living every phase of my life.

The first is wishing backwards – mourning the loss of peak physical power.

The second is wishing forwards – feeling like I am trapped in a perpetual holding pattern with my preschoolers. Wishing for freedom that, I believe, will come later.

The above thinking is not useful.

A useful antidote is to reflect on the advantages of my Silver Year.

My life is straightforward, surrounded by wonderful people, close to nature and simple.

While I’m past my athletic sell-by date, nearly all my physical changes so far have been positive.

Staying healthy is easier, and requires much less time, than I expected. As a former ultra-endurance athlete, the toughest part has been changing my belief system to reflect what I’ve seen with my body.

With that in mind, I’ll offer this observation about my younger self.

  • If you have the capacity to convince yourself that total focus towards your goal is “necessary”
  • If you have the capacity to commit significant, sustained attention towards a narrow field of interest
  • If you have the capacity to recover from high workloads
  • then you have what it takes to succeed.

Yay!

However…

You also have the capacity for sustained, extremely poor judgement.

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Success in a narrow niche is about getting a lot of work done, shedding non-core and motivating others to help you achieve.

However…

As we age, we’re likely to value connection more than success.

…and connection is about being good enough across a wide-network of relationships.

…and my relationships benefit from what I don’t do, don’t say, don’t indulge

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Now, at this stage of my life, there is a growing realization that the people around me don’t care about my personal productivity. They want to see me happy and serene.

However, I notice that time is passing and the window for getting-stuff-done is closing.

But what stuff will “I” value having gotten done if I arrive at my Golden Year (79Au)?!

I deal with this tension by pausing and paying attention whenever I feel happy, content and serene.

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The motto “live every day” always makes me feel like I should be enjoying myself.

For my Silver Year, I prefer “live every phase” — giving myself permission to experience my difficulties as they come and vowing to keep moving forward despite knowing how the story will end.

 

Buffett and Munger For Familes – My Wife’s Cats

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Two Cool CatsWhat can a family learn from one of the most successful investment partnerships of my lifetime?

Last month, I read Tren Griffin’s book on Munger and re-read Warren Buffett’s Owner’s Manual for Berkshire Hathaway.

I read them NOT to figure out how to make money. I read them for ideas to make myself more useful to my family and make less mistakes in my decision making.

A successful partnership is characterized by:

  • Shared responsibility and shared benefits
  • Trust and open communication
  • Confidentiality, only when necessary, rather than secrecy

The role of the managing partners:

  • Allocate capital
  • Structure incentives
  • Seek to embody shared values
  • Communicate via stories
  • Resist the urge to seek an edge

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Financial Strategy, for capital allocation

This is important. Even financially-sophisticated families get caught up in the noise that constantly surrounds us.

Keep It Simple

  1. Focus on sustainable cash flow divided by capital employed
  2. A fundamental reference point is the 30-year rate on US government securities
  3. Treat deferred tax as a valuable, unsecured, non-recourse loan from the government

My recent article on the Boulder real estate market used the above.

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Understand the value of deferred taxation

If you sold everything you owned (right now) then how much tax would you have to pay?

Many would be proud of a low number. I know that it would make me feel safe.

Buffett and Munger would argue that you want this number as high as possible.

In my family’s case, we would have to pay 6% of family assets, on a portfolio with an average investment age of less than five years.

Historically, we’ve earned ~15% per annum on family capital. I don’t expect that to continue, so let’s assume the family earns 7.5% going forward.

What’s the value of NOT selling and letting the 6% deferred tax asset continue to compound?

7.5% of 6.0% is an extra 0.45% per annum.

Let’s make that number real.

Express it in dollars and compare to your family budget.

  • In our family, it’s equivalent to our federal income tax bill
  • In a friend’s family, it’s equivalent to what they pay for professional advice
  • In another family, it is more than they save each year

If your advisers churn your assets then they are costing you much more than their fees.

View percentages in dollar equivalents.

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Berkshire has bought sub-par business in the past. However, so long as the businesses have decent management, good labor relations and generate a little cash… they stick with them.

It’s like my wife’s cats.

  • When she goes out of town, they pee on our bedding and furniture.
  • Most weeks, they barf a few times around the house.
  • However, the kids love them and are aware of their faults.

By sticking with the cats, despite their faults, I demonstrate loyalty to the entire family.

That said, I’ve made the point…

We’re not replacing the cats.