Tag Archives: business

Five Questions Every Coach Needs To Ask Themselves

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Let’s cast our minds back to my 30-something self.

He’s bought a house in Christchurch, covered his taxes/utilities by giving a room to his property manager and has the ability to live free by renting out additional rooms.

Create a base of operations where you can live for free

Tick

Next up, he needs to figure out what sort of work to do and how to cover his cost of living.

A dozen triathlon coaching relationships (US$250) per month was what it took to cover basics. Those relationships were worth more than money. The relationships made his lifestyle sustainable.

Tick

Basic client filtering over time.

Which relationships to strengthen and retain? Green light client rating – immediate response, has all personal contact details. Travel to them.

Invert, which relationships are a source of distraction and drain energy? Red light client rating – still high service level, hand-off to a better fit at a natural breakpoint (end of season, end of project).

Move on to…

Next level client selection because => there is a limited number of close relationships we can sustain

What do I want to learn about?

  • Pro cycling
  • Lifestyles of the rich and famous
  • Olympic level triathlon
  • Sports medicine, orthopedics, biomechanics, kidney function, cardiology
  • Exercise physiology, metabolic health, blood markers
  • Financial planning
  • Military aviation
  • Theology and ministry
  • Addiction, Al-Anon, AA, recovery
  • Trust, estate and family law

These are areas I was able to study, from world-class experts, while covering my core cost of living.

Put another way, there are millions of interesting people out there. A consultant needs 5-12 relationships for a viable business. Craft those relationships with intent because your time is worth more than someone’s ability to pay.

Wise client selection is a game of getting paid to learn.

…but you gotta be lifestyle sustainable. So get that first!

Where do I want to visit?

Back in 2000, Christchurch NZ was cheap for a reason. It was far off the beaten path!

A material slice of my cost of living was international travel (airfares & hotels). I really enjoyed this aspect of my life.

I’m not alone. A key form of marketing is the ability to offer clients/investors the ability to travel to nice places. Most large companies have advisory boards, with a membership consisting of their key relationships. The advisory board has the perks of being a director, with none of the fiduciary risk.

I’ve had gigs in: Aspen, Hong Kong, Bermuda, Scotland, LA, Italy, London, Dubai, Paris, Cannes, Hawaii…

So, where do YOU want to go? Find that client, help them achieve their goals and undercharge them.

Rich folks love random acts of financial kindness. They’re always expected to pick up the tab, so paying for coffee/breakfast is a high-return investment.

A long term value added relationship with someone in a place you enjoy visiting – it’s worth more than whatever your financial deal is.

Invert (again) => don’t take work from a location you don’t want to visit. At any price.

One of my gigs came with an around-the-world ticket every six months. With a bit of planning, that covered an entire year’s worth of air travel. Another slice of my budget, covered.

What demographic am I curious about?

Tim’s blog on fame shares the Bill Murray quote, “trying being rich first.”

Actually, being rich is tough. It takes a lot of time and striving. Living rich is even worse, not for me.

Before you try to “be something” => get to know it. See what it’s like when nobody’s watching.

Coaching the rich, the fast, the famous, the savage, the beautiful… and paying attention, helped me look under-the-hood with regard to my values.

Be careful, desire is contagious.

Real Estate Switching Costs

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Real estate has had a good run since 2010.

It can be tempting to cash in profits.

Financial Case Study

My neighbor is just about at the point where he can net $1,000,000 dollars on the sale of his house. He’s retired and this represents a very substantial sum for him. One million dollars is also kind of a magic number emotionally as he never expected to be a millionaire.

For him to net $1,000,000 he will need to sell his place for about $1,067,500 gross.

He bought the house many years ago so, even after his primary residence exclusion, he’s going to have a tax bill of $70,000.

There will be other costs (moving, cleaning, etc…) adding up to $2,500.

So his certain costs today are $67,500 + $70,000 + $2,500 => $140,000

Putting this into his personal context…

Having paid off his mortgage by the time he retired, he has the ability to live on $1,500 per month. So he’s looking at a certain bill that’s worth 7 3/4 years’ living expenses.

He’s also a young retiree, with parents still alive.

So he might be living another 30+ years.

Key Questions

How might the switch make things better? Whatever they are… they are uncertain benefits to be weighed against certain financial costs.

How will surplus cash be invested? Given the choice between prime residential real estate and an investment account… most retirees prefer the hidden volatility of real estate.

Do I want to leave my community? When I left Christchurch (NZ), I left behind a fantastic group of people. Community has a far stronger association with a meaningful life than cash in a bank account.

Certain types of people make new friends easily. I’m not one of those people! What type of person are you?

What Can Go Wrong

Bull Markets — Assume that you can only “move out of town” once. In our case, we lack the financial resources to repurchase our existing real estate at current market prices. If we sell, and prices rise, then we will be priced out of the market.

Neutral Markets — Real estate is expensive to transact. In the example above, the vendor is paying 13% of gross proceeds in commissions, taxes and expenses. In any new purchase I assume that I “lose” (on paper) 10% of the gross purchase value at completion. In other words, I am going to need a 10% market increase to get my money back.

Bear Markets — Can I afford to be locked into this market for many years? Vacation markets, cities reliant on a single industry (oil and gas) and secondary locations… buyers can be locked in for five plus years. Am I OK with that risk?

The Good Enough Portfolio

There’s a lot to be said for an attitude that an existing position is “good enough.”

Each time I make a choice, change or modification it’s an opportunity for expense and error.

 

High Finance

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2016-09-24-10-14-55Keep your ears open this week. There will be a rare opportunity to learn about finance.

For my international friends, many of the American techniques (in the news) are available in your home countries. I have been applying finance, across four continents, for more than 25 years.

2016-09-25-18-48-42The overall financial system works great. However, when I try to explain certain shortcomings to my friends, their eyes glaze over and I lose them.

I wish I was more skillful.

Whether your favorite billionaire is a Cuban, a Koch, or a Buffett, we can learn a lot from insiders. A constant refrain from wealthy insiders is “complexity creates opportunity for the system to be gamed for economic benefit.”

Finance is a complex system. The system has been gamed extensively.

  • Offshore accounts (Panama Papers type stuff)
  • Thinly-capitalized investment vehicles, with lots of debt
  • Applying non-cash losses today, while deferring cash gains to tomorrow
  • Receiving preferential tax rates on gains associated with financial work
  • Using trusts to avoid estate and generation skipping taxes
  • Using special accounts to shelter income and gains across generations
  • Income reclassification to avoid income and payroll taxes

If the collective wants to run the system like that then I’ll bow to its will. However, I’m not sure the collective knows what’s up.

2016-09-28-10-43-49-1Like professional sports, my beef isn’t with the system. What irks me is the lack of integrity when insiders pretend the system is different than reality. The politics of the people I named above are different but their observations are often similar.

I’m grateful I can explain my personal reality without fear of banishment or loss.

Living a life you can disclose saves a lot of suffering.

Wisdom

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2016-06-20 09.38.59Last month, Dr. John wrote an excellent blog about medical wisdom. I’d urge everyone to read it. I took that post one step further and read Ending Medical Reversal, which was recommended in the article. If you want to make better life decisions then you need to make time to read and consider the book. At a minimum, ensure that the book is read by a leader within your family, firm or practice.

Aside from the specific examples, which are fascinating, I hope you take the following away from the book.

2016-06-18 08.42.46-2HUMILITY – medicine is a global field where we have tens of thousands of our brightest humans spending trillions of dollars. The book makes are strong case that 30 to 40% of that expenditure provides no net benefit to humanity.

The authors lay out numerous examples where billions are blown for no net benefit. It is a wonderful reminder of our shared capacity for irrationality and misjudgment.

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2016-06-18 08.44.11PARACHUTES – one of my favorite parts of the book is when they explain that there aren’t a whole lot of parachutes left in medicine.

What does this mean?

If all of humanity has to jump out of an airplane then nearly all of us are all going to do dramatically better if we’re giving a parachute.

A parachute is an intervention with big positive outcomes for a large slice of the population.

What are parachutes that you can apply in your life?

They probably include items like: exercise, germ theory, antibiotics, vaccines, not smoking and seat belts. In a capitalistic society, there’s a clear role for government to play in keeping society focused on the big ticket items.

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2016-06-18 08.33.54EXPECTATIONS – let’s say you do your part and follow the “parachutes,” what’s a reasonable expectation from modern medicine?

Keeping in mind that 30-40% of modern interventions are bunk, I was left with an expectation that most procedures will usually make most people a little better.

That’s it.

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If we have the courage to consider:

  • widespread error
  • limited number of high-value options
  • realistic expectations

then we might find that there are new resources to focus on parachutes in other areas of our society. The cost of the status quo is often hidden from view.

There are plenty of good ideas: universal basic health services, early-childhood programs, pre-K, drug treatment, parent coaching and financial literacy training (see Kristof at the NYT). Other authors prefer infrastructure projects.

Whatever your preference, it’s clear that uninformed choices can waste valuable resources.

 

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A final note about change.

Even clearly harmful treatments can take a decade to exit the system (plenty of examples in the book). Strangely, I took this as a message of hope.

You might not be able to reform the healthcare system but you can certainly make better decisions within your own life.

Keep at it.

Ultimately, the truth wins.

Can’t Be Bought

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bearLooking forward to 50, I will find myself with 10, 7 and 6 year olds living under my roof. Those are great ages to accompany a 50-something man as he explores the world.

There remains a lot to look forward to.

The key advice that I give myself, and offer you, is to approach life with the understanding that you can’t be bought.

The reality is, often, we can be bought. If that describes your current position then keep your mind open to the possibility of increasing your price until you remove it all together. That’s what I’ve been working towards for the last 20 years, or so.

What’s your price?

I must remember the dissatisfactions have come from letting money influence my life choices. I’ve taken on assignments because I thought I should, rather than because they fit my principles. I’ve sustained a double-whammy when those assignments took me away from the people closest to me.

What are better principles to guide my thinking?

  • Lean towards marriage, family, friends, local community – let’s call these Core People
  • Share experiences with Core People
  • Pay attention to spending that has an immediate beneficial impact – my highest utility spending is childcare that enables me to share experiences or spend time alone
  • Aim to help all people – keep broadening my circle of altruism
  • Set aside time for continuous simplification – automatic bill pay, empty time in my schedule, reduced admin, streamline possessions
  • Don’t pay for luxury – adversity makes fond memories

Every day offers a chance to turn toward my principles.

Elder, Mentor, Adviser

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foxy_ladyMy youth, my 20s and my 30s were characterized by a lack of charm.

Fortunately, I had some habits that smoothed the waves I left in my wake!

What habits smooth relationships?

  • I’m on time
  • I do what’s asked of me
  • When I can’t do something I tell you
  • I express myself clearly

If we invert those points then we arrive at a list that will ensure you move away from success…

Chronically late, inability to complete simple tasks, no/slow replies and indirect communication.

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About clear communication… it takes trust to have the courage to speak clearly and directly.

It also takes emotional depth to be able to receive honest feedback.

Two things that I’m working on here:

  • Be conscious of my effect on the world
  • Stop when I am triggered and search inwards, rather than attack outwards

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I was chatting with a member of my family council about the best fiduciary we know.

What makes our friend outstanding?

It’s not his capacity to execute, his technical knowledge or his connections => all of these are excellent.

He has three characteristics that are rare to find in a highly competent individual:

  1. The ability to sit, listen and observe
  2. The capacity to entertain points of view that are outside his preference and training
  3. A willingness to inconvenience himself to do the right thing.

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I’ll share with you that my idea of active listening is forcing my mouth shut while I struggle to hold a list of “to do” items in my head. When a gap appears in the conversation, these pour out of me.

Like me, you might be prone to the mistaken belief that you have to fix every thing you touch.

My friend, a world-class non-executive director, is effective by listening, considering alternatives and being open to small acts of assistance.

Freedom of Occupation – Choosing Personal Freedom

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Lexi_airportOver the last year, I have been offered attractive opportunities to return to full-time work.

In evaluating the opportunities, I realized the interaction of two variables.

  • The value that we can add to a situation. Call it my “value-added per hour.”
  • My core cost of living.

In the course of my career, I’ve lived the life of an athletic coach as well as an executive. Sometimes I’ve done both at the same time.

An excellent coach, or personal trainer, might net $35 per hour.

A skilled executive will be closer to $500 per hour.

Who has more personal freedom?

When I was younger, I was inclined to believe that more pay results in more freedom.

I’m not sure.

When I think through my pals, the individual who’s daily life most closely resembles my own isn’t who you’d expect. He is a $35 per hour consultant. My friend can live well on $500 per WEEK and has no net assets. He’s created a life where he has freedom of occupation and can say “no” to anyone.

Because of the value-added per hour differential, my buddy works about 25 hours per week. He nets more than his baseline needs. He lives an abundant life, free from financial pressure. He travels internationally. He can work from anywhere and enjoys freedom of location.

What about the executive?

A corporate lifestyle is highly variable, bouncing from 20 to 65+ hours per week. Sleep is often sacrificed and it’s common to spend much of the year nudging health back on track. Vacations are spent immersed in passions that take a back seat to the primacy of career (hobbies, sports, marriage, family).

My point is we all make trades => to get more, of what we think will make us happy, we can be tempted to pay in health, in failed relationships, in reduced freedom and, occasionally, in ethics.

When I speak with highly-paid professionals, they focus on the need for increased assets, and passive income, to attain the freedom they desire.

They ask my help to create a plan that results in freedom.

Freedom to do what?

The freedom to be healthy, to be serene, to be a great spouse, to do my job the right way.

Freedom might be closer than you think.

The Do-Something Investment

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Ax_snow1I saw that Clinton’s son-in-law took some big losses at his hedge fund by making bets on Greece. People are speculating that the Clinton family lost a lot of money in the deal.

While the scale might be different, I see this error in every family that I get to know.

We err by making an investment to help someone “do something.”

Some examples from my own investment history:

  • I’m self-employed and have often been tempted to buy myself an office so I can have a place to do something
  • I’ve offered to back friends in start-ups so they can have the funds to create a business and do something
  • I backed myself in a low-return business, where I didn’t understand the market, so I could have something to do
  • I guaranteed the debt of a friend’s business so he could borrow additional money for his start-up
  • I purchased a property so a friend could have a job acting as my property manager

To limit the damage, I have two questions that I ask.

First: What is the purpose of my family balance sheet?

  • Maintain independence and dignity of elders
  • Educate the kids
  • Share experiences with each other
  • Produce a growing stream of cash flow to fund my future living expenses
  • Support a feeling of security and freedom of occupation

You might have a different list. I’d encourage you to write your list down because the checklist might help prevent expensive errors.

Second: How well have I done with predicting my life on a ten-year prospective basis?

While my life has been rewarding, it’s path has been unpredictable on a ten-year rolling basis.

The unpredictability of life means there is value in maintaining a straight-forward balance sheet that isn’t concentrated in any individual, geography or company.

Put plainly, I’m nearly certain to continue to get the future wrong – especially when I try to predict my family’s needs, desires, location…

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Let’s say an investment can get past those two questions.

It is time to keep it real.

#1 – Are we backing the best members of our team?

The best people don’t need the help of connected parties.

Because…

There is plenty of money available for good people with good ideas.

Therefore, by definition, most family investments are focused on the weakest members of the team.

Don’t do it.

#2 – Can we afford to lose our maximum exposure immediately?

Concentration kills.

If you can’t afford to lose your full exposure, immediately, then don’t do it.

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If you’re struggling to say “no” then

  1. say “yes” to spending time to help raise funding from a third party
  2. lease instead of buy
  3. focus on enjoying each other’s company, rather than investing together
  4. make an introduction to an expert in the industry to facilitate a working apprenticeship
  5. pay for expert instruction

These options have had a great rate of return in my life.

Seeking Truth, Enduring Pain

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SXMMy favorite quote on pain comes from a champion athlete, Dave Scott.

Dave was giving a talk the day before an Ironman triathlon and was asked, “How do you deal with the pain of racing?”

His reply…

First of all, it’s not pain, it’s managed discomfort

Along the same vein, I heard Dave’s rival (Mark Allen) share the advice that…

To achieve a result, you need to be willing to accept whatever is required to get to the result

Many people confuse pain, with the process.

Others, incorrectly, believe that they can achieve a meaningful life without having to endure discomfort.

Plan => Do Work => Recover & Evaluate

Plan => Do Work => Recover & Evaluate

Plan => Do Work => Recover & Evaluate

The discomfort comes within the process. Specifically, with identifying, and addressing, our shortcomings and beliefs that prevent success.

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What’s the opposite of “seeking truth, enduring pain?”

Lies and pleasure?

I don’t think so.

Think about a situation where someone “can’t handle the truth.”

What do you receive from them when you probe the truth?

Fear and anger

These are “negative” emotions but useful to point the way towards truth.

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The ability to see the world clearly requires a commitment towards radical honesty within our own lives.

If I can’t see the truth within myself, I’ll constantly be fooling myself with others.

So…

When I feel fear and anger, I know that I am on to something.

I might be close to an area that’s holding back clear thinking.

Seek the truth beyond the triggers.

Book Recommendation along these lines is Ray Dalio’s Principles – available as a free PDF.

What I Learned Last Year

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biscottiTwo themes have dominated my goals for the last couple of years: my relationship with my eldest daughter and my finances.

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Kids – my daughter worked herself out, no input from me. I didn’t change her nature, I accepted it, and we enjoyed the inevitable progression from preschooler to school-age girl.

For my pals with kids – avoid abandonment and retaliation – everything else is details.

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Optimism is the only worldview borne out by the facts.

At the end of 2008, I wrote-off 65% of my family balance sheet, was unemployed, owned a loss-making business and was facing civil liability relating to large-scale fraud.

You may have forgotten but everything we were reading was doom and gloom. In reality, that was one of the most useful periods of my life because I was forced to face the gross inefficiency of my spending choices.

The changes that result from earlier setbacks lead to an appreciation of a more simple life and I’ve continued to strip away non-core activities.

My wife is stumped when asked, “What does Gordo do?”

I enjoy my life and serve my family

Act in the spirit of service to the people that love you.

Act as if things will work out.

Keep simplifying.

Free yourself to spend time on what matters.

For the pessimist in your head that likes to point out that we’re all dead in the long run… be wary of overstating your importance in the world.

My death will be a setback for a few people but it won’t change the positive trajectory of history. I will play my role then hand off to the younger generation.

There will be tears and that’s OK.

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Human Capital & Family Finances

What can each of us bring to our families, and communities?

Strong relationships built on mutual respect and strengthened via self-improvement.

Six years ago, I was left with a home and cash assets. With interest rates moving towards 200-year lows, I realized that I had to be invested. I made an error by going all-in with real estate. Why an error?

  • I was geographically concentrated – the bulk of the portfolio was within two miles of each other.
  • I invested too much – I failed to understand the short-term cash needs of my young family, which arrived in 2008/2011/2012.
  • Each asset represented many years of living expenses – lumpy assets are inefficient when you’re moving towards retirement.
  • Real estate takes a long time to sell. With a traditional portfolio, a gradual sell down is easier to achieve.

My purchases had a margin of safety and I was able to trade my way out of the situation – 4 out of 8 addresses have been sold. Start to finish, it will take 8-10 years for me to change my asset allocation. Our family financial structure gave me time to make the change, we earned income, and we had exposure to asset appreciation.

Time worked things out – we did well but so did all others that were invested from 2009 to 2014.

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The final lesson – I am greedy in irrational ways. I can soothe my ego by noting that my flaws are widely shared.

I am susceptible to the Endowment Effect. I overvalue what I have – my wife had to force me to sell our old house, I wanted to hold out.

I overvalue future desires. I’m constantly fooling myself that MORE will make a difference.

My antidote:

  • Write down my desires (steam shower, truck, boat, kitchen appliances, vacations, clothes, car, office, ski chalet) then wait and let desire pass
  • Make the wealth cost of “more” both painful and visible
  • Note the choices that create my best days (train AM/PM, help someone, learn, write, teach, spend time with my wife, under scheduled)
  • Spend money to create true luxuries (childcare, time to think, time to learn)
  • Schedule my happiness essentials (time in nature, time with my wife, quiet time to think)

Keep it simple:

  1. Notice the good in life
  2. Write good things down
  3. Do more good things