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.

Early Education

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

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

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

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

Thinking about the phases of our kids’ education…

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

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

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

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


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

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

No joke!

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

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

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

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


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

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

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

Be the brand.

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

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


Other thoughts

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

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

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

Some stories:

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

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

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

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

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

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

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

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

Where do we want to go?

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

Family Financial Strategy – December 2021

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

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


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

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

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

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

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



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

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

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

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

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


Recreational Capital and Associated Spending

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

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

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

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

By way of example, INVERT and consider…

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

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

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

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

The choices above:

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

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

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


Now we move along to KC’s questions

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

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

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

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

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

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Cash Flow

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

Then I look at the inflows by source…

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

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

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

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The Role of Time

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

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

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

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

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

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

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

But if it’s a secondary market…

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

Why are you doing it?

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

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

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

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

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


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

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

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


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

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

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

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

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

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

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Hidden Options

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

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

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

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Option Value of Fixed Rate Debt

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

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

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

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

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

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

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

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

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

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

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

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

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

“Less” is a useful process!

Wanting

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

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

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

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

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

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

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

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

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A Simple Case Study – the source of desires

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

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

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

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

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

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

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

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

Choose (very) wisely!

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

Risk of Ruin in Close Peers

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

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

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

Life is a game over time.

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Anti-Desires

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

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

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

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

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

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

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

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

++

A story.

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

You could be so much more…

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

But what does this voice want?

Fame, likes, the approval of strangers!

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

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

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

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

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

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

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

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

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

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

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

++

Write it down

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

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

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

Write down what your hear.

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

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

Strong downstream families enduring beyond my lifetime.

Challenging the Status Quo

Three nights in Mexico last week. Very enjoyable.

The cost of the status quo is hidden.

It simply isn’t possible to see both (a) what the future could be; and (b) the drag of accepting the way things are.

Over Thanksgiving my kids reminded me of this fact. They were amazing.


After a decade of fatherhood, they chilled the entire flight, enjoying each other.

Bickering

Earlier in the year, I told them that I was done spending time with all three. No “full family” trips.

I stuck to my guns. When it came to kids, I was 1s and 2s across the year. Much less refereeing between them.

But they missed hanging out with each other so they started a get-along campaign.

See Dad, we get along now.

Reminded me of another favorite lesson => to be sick of sickness is the only cure.

The part of me that likes to say “no” was a little sad at their improvement. Strange thing human nature!

I share the story as a holiday reminder that parents have a choice with regard to the status quo. It does take a lot of patience, skill and persistence to help everyone get along with each other.

While I can’t control the actions of others, as a parent, I can influence the incentive structure.

Even getting the incentives correct, change was slow and took many months, to become obvious.


Personal Recovery

Another thing that’s been frustrating is my lack of recovery. In my 50s, I simply do not bounce back from anything very well.

I’ve noticed that the days with “more” cardio are a whole lot easier for my mental health. So, with an eye towards “better”, I got myself an Oura ring to gain insight into resting HR, HRV and sleep quality.

This process was another reminder… Two things are necessary for progress: (a) make mistakes visible; and (b) have the courage to see, then address, uncomfortable truths.

You see, I bought the ring so it could tell me what I wanted to hear!

Unfortunately, the data has had other ideas. It’s early days, so I’ll skip the specifics until I’ve gone a full season.

Suffice to say, the message appears to be that my appetite is greater than my tolerance. The only way I’m going to fit in “more” is to go a whole lot easier (most of the time). This reminds me of an observation I shared with KP (when he was my age).

I used to do a lot more easy training than I remember.

He liked that quote so much, he hung it above his desk. As I near 53, I’m glad the memory came back to me.

Anybody over 50 who says “age is just a number” isn’t paying attention, or may be trying to sell you something. 🙂

A recurring theme across my fatherhood journey… remembering it is OK to be sensible.


Anaerobic Tolerance

Another observation, this one physiological, each time I give myself a novel anaerobic stimuli, it kicks my butt for at least a month.

The first month of something new kicks my butt. Being wrecked is obvious to me. Thereafter, the fatigue gets more subtle.

Mark Allen quote… just because you feel better, doesn’t mean you are better. At the time we were talking about over-reaching but it applies more broadly.

In other words, adaptations are continuing even when I can’t “feel” them.


A well worn race shirt

The shirt pictured above is from the last time I was “fast” in a conventional sense, August 2012. We had a 3 year old, a baby and my wife was 8-months pregnant with our youngest.

Shortly thereafter, I decided to pause the racing. That one choice started a positive cascade of consequences that continue to benefit my family.

The “pausing” racing choice was a big one to make. I had a lot of my identity tied up in my relative performance.

I also had a mistaken belief that the process of race preparation was essential to look good. As I age, I’m bumping into the same fear.

Just like with my household, changing the incentives can lead to better.

Winter Season Planning

The trip to the Canyon marked the end of my summer season. On the bus ride back to our car, my wife asked “what’s next?” I’ll share the answers to that question and add some ideas that might be helpful.


One of my challenges with parenthood is being haunted by the thought… “I’m going to be old by the time I escape this grind.” In my 20s, that thought (and a divorce) helped me jettison myself from desk work.

Our youngest isn’t going to graduate high school until 2032, so there’s some truth in these feelings. However:

(1) my age isn’t necessary a problem, or a barrier, for a life with meaning;

(2) I had similar thoughts ~20 years ago and things turned out fine; and

(3) fear is a distraction from doing what solves the problem.

Anyhow, I wanted to acknowledge those thoughts as I’m certain many of us feel similarly, at times.


We’ll see how long he can continue to flash his age. He’s currently 5.11 at our local.

The Mental Benefit of Getting Better At Something

One of my coaching mentors, John Hellemans, has a wonderful presentation about triathlon. One of his lessons is “try something new, each year.” He backs this advice with a series of slides showing all the whacky equipment he tried out over the years. He must get a kick out of novelty.

Coming out of COVID (it seems we’ve been leaving the pandemic for all of 2021!), I was gym-strong. As a result, I’ve been able to get back, rather quickly, to a level of indoor climbing I’d last achieved in 1996.

Gains & novelty are fun.

What will you try this winter?

My areas for improvement: metabolic fitness via endurance cycling, skills & novelty via indoor climbing, eccentric leg strength via dryland ski training and agility via downhill skiing.


She’s always been a great runner, just didn’t like it! 🙂 Swimming helped her get used to how racing feels. PS: something I tell her, “by turning up at a race, regardless of outcome, you make everyone better.” She’s been shaking up the hierarchy at various squads around town. Be grateful for your competition, and remember that winning is fleeting.

Knowing What I Don’t Want

Do you know the conditions likely to to bring out your worst?

I sure do: tired, in traffic, the whole family in close proximity, after a day spent answering questions and listening to low-grade bickering between my kids.

Not going to spend time, and money, to put myself in that situation!

My personal planner, through to the end of March 2022, doesn’t have a single peak-period family drive (and the kids had to demonstrate a material improvement in behavior to get me to agree to fly with them).

The current situation tends to continue as long as we tolerate it.

Write out your “not to do” list.


New sheriff in town. Howdy partner!

The Value of Being Able to Change Course

The last year was another reminder how life surprises me.

In August 2020, our daughter started year round swim team. Team implies ~12 meets a year, 6 of those requiring travel. That’s a lot of time out of my “with my wife” allocation. It was a major adjustment for me, which we are still figuring out.

That wasn’t the surprising part, fatherhood can feel like a gradual drift down the priority list until the kids move out. Just the way it is, and why I make a priority of having fun with my wife.

I was surprised by the cost. Swimming is expensive for a “cheap” sport. Our cost is greatly increased by my desire for childcare => so I don’t lose my mind, being left home alone with the other kids.

++

Over the years we have considered properties in various vacation markets. I feel fortunate that I didn’t pull the trigger on anything. Because we didn’t lock ourselves into a secondary market, it was painless to cut the winter activity budget in half and cover the cost of swimming.

So no winter ski place rental, which eliminates Sunday drives home (in snow storms, tired, with all three kids).

Of Interest Here: I am being compensated by less of what I don’t like. Very tough to price the benefit of via negativa.

What would I pay to cut my worst days in half? No idea, but I do pause to notice the benefits of less.

The lesson isn’t my specific situation. The lesson is life changes every five years or so. Choices, and investments, that make sense today can be costly to unwind tomorrow => even when you get out at a profit.

We’ve owned a BoCo rental property since 2010 and I’m often tempted to swap it for a vacation place. By not buying in a secondary market:

  • I continued to hold a rental property in my home market.
  • I didn’t pay capital gains taxes.
  • The rental income more than covered my vacation rentals.
  • I benefited from 75% capital appreciation.
  • My net cost on the site is zero, a few years back I subdivided and sold part of the land.

In 2016, I didn’t know how I would be surprised, but I could see the ability to cover vacation expenses with rental income. Also, it was also easy to calculate the taxes and agents fees deferred by not selling => make the cost of change visible.

I have a persistent feeling that owning is better. In secondary markets, the facts tell me otherwise.

Looking forward to 2032, I know we will be empty nesters. What that means for our life is unknowable today.

Stay variable.


Take Advantage of Childhood Opportunities

There is a limited window of time where my kids will think I am brilliant. I care about the value of my family’s human capital so I remember…

It is much easier to indoctrinate a child in “risk management by example” than to achieve anything by heckling a teen.

As a coach, my job was to teach my team what I would advise, without needing to say it.

Being the brand was excellent preparation for parenthood. Kids have a keen nose for inconsistency!

Prepared is better than protected.


Repeating good habits from a young age will do more for my family than any amount of lecturing. (1) Do it right, every single time. (2) Be open to learning from everyone, even your siblings!

Generational Transitions

There’s a straightforward way through the headwall – just take it one step at a time

Last week, Mark Spitznagel’s book came out (Safe Haven). Don’t expect any specific strategies for constructing Safe Haven insurance. Do expect to (re)learn useful concepts:

  • a reminder of the central role of time in our lives – the capacity to sustain action, cognizant of time, is extremely rare
  • a reminder that we think in terms of arithmetic averages but experience geometric averages (COVID, portfolio compounding, fitness, nutrition, body composition)
  • a reminder that downward moves (in %age terms) have the same impact, regardless of their position in the time series – the counter to this => absolute dollar losses are best taken later in the time series (down $100,000 wipes me out at 25 y.o. – not so at 60) // by the way, creating negative net worth early (via education loans) is a very nasty geometric headwind.
  • a reminder to consider the cost of your insurance strategy, including the decision not to insure. Health, accidents, portfolios, relationships, nutrition => “insurance” comes in many forms.

Also some great parables/examples to help explain mathematical concepts that I’d previously failed to grasp, most importantly, the negative waterfall of financial ruin in a geometric environment.

Related to geometric returns, some useful illustrations of how/when diversification fails, despite its enduring appeal.

Finally, using Eternal Return when assessing risk. With any important choices assume you’ll be stuck repeating that choice over-and-over. I’m not sure I would have been capable of applying this advice as a young man. At 52, my life continues to benefit from this mindset (health, accidents, portfolios, relationships, nutrition…).

++

Today, I want you to think about the past, present and future.

Specifically, I want you to look backwards 10-15 years, as well as forwards 10-15 years. This will give you a 20-30 year time span in which to consider family strategy.

We call 20-30 years a generation. For family leaders, it’s the shortest period we should be considering. Let me illustrate:

  • 2004 – met my wife
  • 2008 – birth of first child
  • 2032 – youngest child graduates high school
  • 2037 – youngest child self-sufficient financially

For our family finances, a generation will be closer to 40 years than 20.

Act with 25+ year time horizons => the Eternal Return is a useful mindset for multigenerational family systems.

++

Family Earning Capacity Over Time

The biggest change of the last 15 years, for us, has been the quasi-retirement of the two largest earners in our family system. Looking forward 15 years, the biggest change will be the addition of new earners into our family system.

The shift in earning capacity every 30 years, or so.

If you are the prime earner, today, then here is a question for you. Does your family system have the assets, earning power and desire to continue to run the overheads you have built over the last five years?

Current choices can create a “geometric” headwind for the next generation.

++

Family Risk Management Over Time

The demographic that seems to worry the most about financial risk is the Top 2%. Makes sense, they own most of the assets and, therefore, have the most to lose.

The easiest way to manage family financial risk is to create a cash flow statement with many different inflows, while having the capacity to painlessly chop outflows. I’ve been working on this for 20+ years, covering fixed overhead categories with a mix of inflows.

The option to shrink cash spending is valuable. Specifically, looking at your cash flow statement and seeing how much of it you could chop, at will.

For example, there are excellent reasons to borrow right now (inflation hedge, low nominal rates, negative real rates). However, the costs and negative-optionality of debt are hidden and difficult to price – particularly in a near-zero rate environment.

  • What is the correct way to price the ability for a lender, or my fixed overheads, to force me out at the bottom?
  • How do I price the capacity to invest during the next credit crisis?
  • What’s it worth to not have a boss?
  • How much is a lack of financial stress worth?

In my memory, all the remains from the 2008/2009 crisis is a note I wrote to myself to NEVER DO THAT AGAIN. Ten years along, there is no “pain scar” from the stress I endured.

With our next generation a decade out from starting to earn, we’re debt free, and happy to be there. It’s worth more than I can prove mathematically. I do not have the capacity to think in terms of negative optionality. I can’t price ruin.

I’ll finish with another note I wrote to myself:

Moderation is easier when the prime directive is simply staying in the game.

This applies to my appetite for risk, further wealth, spending choices and personal fitness => interestingly, my greed focuses on various forms of external winning, while my quality of experience is internal.

Building Allies

I spent the last week 1-on-1 with our oldest. Some in Mexico, some in Boulder.

Our oldest has a big interest in all-things-family.

I spent the weekend getting her on-side with some family adjustments.


Many families keep the kids in the dark about family finances – with our oldest coming into her teens, I’ve started the process of educating her about how to run a household.

I’m hoping improved disclosure will result in her supporting shifting some of my wife’s time back to me!

Do you know how much money it takes to run the family? No idea.

Why don’t you guess. $1 million

No, no that much but I did work for a guy that was close to that. Big spending creates big pressure.

We iterated until she got close enough.

OK, I need to come up with that much cash every year. That’s my main financial job and I enjoy it.

Now, how many days do I get each month in exchange for coming up with that cash?

What do you want to do?

Well, I’d like to do something other than hang around the house, alone, and do housework.

This time she answered bang on => two days per month.

June, July and August => How many days are you away with Mom? Ten each month.

Let’s convert that to a nice round number for the year. 100 days.

Take those 100 days, are they going to make my marriage stronger, or create stress?

Panic (!) on her behalf as the penny drops… I talk her down and reassure her that our marriage is “great”.

She did not need any encouragement to want to strengthen her parent’s marriage.

She did need to calmly, slowly, be led through where her desire to constantly take her mother away might lead.

She immediately came up with a useful idea => alternate chaperones with her best-swim-friend. A win-win-win for all of us.


On to cleaning => Earlier, she’d been slamming the vacuum around because she didn’t want to do her weekly chores.

She gets this from me, I’ve been known to toss furniture when frustrated. I’m trying to cut back on acting-out frustration. Out of all of us, I’m the one who needs to improve the most!

Sweetie, did you notice that I spent the last two days cleaning the entire house?

Yeah, but you had nothing to do.

Sweetie, how do you think that statement makes me feel?

Not good?

Actually, not that bad, the house does look great and that makes me happy. Do you think that there is something else I might rather be doing than staying home alone and cleaning?

That led us into a discussion about relative contributions.

Human happiness is a relative metric.

Is it fair that I’m handling all the cash generation, and doing most of the housework?

What would you like me to do?

I’d like you to help me spend more time with your mother. She’s my favorite person in the world.

16 Years of Marriage

Handmade card – always a winner!

My wife asked me to share ideas about our marriage.

I’m better in writing, so I figured I’d leave this for my kids, and you.


This morning, the summit of Bear Peak – one of the coolest places in Boulder County

16 years – it went by in a flash.

My inability to feel duration, can make me a little sad. I have a hunch that soon I’ll be an old guy wondering what just happened!

Acknowledging the reality of the fleeting nature of time… it is useful at helping me stay focused.

No time to waste.


Best Swim Coach, EVER

VP Pence took heat for his rules of marriage. To me, they were OBVIOUS and reflect how I act.

  • I met my wife at the pool. As a result, I don’t train with attractive, athletic females (other than her – she’s very attractive).
  • I don’t consume alcohol with females, or anybody else.
  • I don’t find myself 1-on-1 with females, especially other people’s spouses.

The above is a simple risk mitigation strategy. Applied across domains, over 50+ years, it works.

I keep myself away from situations where a poor decision results in ruin.

I pointed this out with regard to Andy’s accident and it applies everywhere. The decision is best made before you have to make a decision.

How do you stack up?


Wedding Day

So many have conflicts over money.

I don’t.

Since the late-1990s, I’ve paid the living expenses of everyone (male/female) who’s lived with me. By the time, our youngest graduates high school the bill will be over $6 million.

My favorite wife-quote about family finances is when she said to me, “What do you know about money?”

I just smiled.

I know how to make it, when to stop reaching for it, and what’s more important than money.

My financial knowledge has enabled our family to live a good life AND I have been able to educate my kids.

Most parents want to see their kids grow up. I made a choice to go one step further. I’m educating our children in how I see the world. These lessons will endure into the next century.

Invert => how much of your family’s financial wealth from 1950 do you have right now?

My ancestors legacy is good ideas, memories of what didn’t work, a debt-free education and a life-changing introduction to my first boss in finance.


She wouldn’t have been smiling if she knew the doc had underestimated the size of the baby by three pounds. There’s a lot about childbirth that’s better not to know.

To finance our life, I need one good idea per decade. The rest of the time I avoid mistakes, and manage spending.

It takes a lot of effort to avoid mistakes. I write this blog to help my kids identify their inevitable mistakes.

Mistakes are effective teachers, I “manage” by:

  • letting things go wrong
  • letting other people be wrong
  • surfacing, considering and fixing my own mistakes

Across 50-100 year time horizons, wealth habits add up. A simple annuity calculation (laid out many times in previous blogs) will show that my choice to avoid financial conflict will end up “costing” my heirs millions.

The human capital I am building will more than cover this amount.

  • Education
  • Motivation
  • Ruin Not Experienced (divorce, substance abuse, spending, investment)

There is deep, multigenerational wisdom when we act with long time horizons. In my current life, I try to be the parent I’d like my grandkids to experience.


You will not regret creating a composite image, like this, for each of your pregnancies

What are the choices that caused your family tree to lose capital, lose members and lose productivity?

Be as open as possible about errors, they tend to repeat.


Not all toddlers are difficult

Two years ago, my son decided to hold up his finger and yell, “BOOGER!”

Yes, there was a nasty one hanging there!

As I sorted his booger, I decided to fire every staff member in my life.

What works:

  • An unimpeachable moral authority stemming from out-working everyone around me
  • Relentless attention to detail (in myself) – no days off, no exceptions
  • A schedule that enables me to follow up on the above, especially when it’s inconvenient

Before talking to others… How do I measure up?

Confidence comes from knowing you can outwork your competition over long time horizons. My kids are very confident, with good reason.

Tough to beat.


Get in my belly!

Let’s talk about staff.

We got through the highest stress period of our marriage (babies and preschoolers) because I had the courage to make a poor financial decision. I spent money so we could maintain some sort of life between the two of us.

Our recent trip to Death Valley let me price opting out (of living in the real world).

  • 160 student contact days ($50)
  • Leaves 205 non-student contact days ($200)
  • 365 overnights ($50)

Multiply that out, gross it up for payroll taxes => $80,000 per annum and I can watch someone else deal with my kids boogers… 😉

I’m sure many professional people cut that number in half when calculating the exit cost from an unhappy marriage, or when feeling overwhelmed (as we all do) with a young family.

But is that winning? Before blowing up a marriage, look two generations out, consider your unborn grandkids.

I don’t serve anyone by having my family see me opt out.

Queen Elizabeth comes to mind. Still grinding!

The goal of life is not to opt out of the obligations of citizenship, or be worshipped for position. To build a successful organization, requires a long term commitment to service.

Even then, there’s going to be scandals, setbacks, challenges and very good reasons to quit.

Keep moving forward and be comfortable with what you control (your actions).

Goodness, in action, inoculates one from the options of others.


If you want the result then you must accept the work.

Finding => Be the person you want to marry => you’ll have a positive influence on everyone around you and, when things don’t work out, you’ll be well placed to keep moving towards better.

Retaining => Be clear about your minimums => cleaning, sex, financial contributions, social engagements => table everything you hear your friends complaining about.

Optimizing => Take care of yourself => knowing it is better being married to an athletic spouse… I need to be an athletic spouse.

Being Effective => Do not manage from the couch => If you don’t care enough to stand up then let it go.

Willful Blindness Is The Seed of Bitterness => Be clear about what you don’t want => very few people want to be left alone and, even the kindest partner, is likely to grow bitter when the “division of inconvenience” is out of whack.

Knowing actions matter, I watch => in myself, and everyone around me…

  • What is done first?
  • Ruthlessly honest inventory of time allocation. Do not fool myself by saying something is important, when I allocate little time to it.
  • What am I doing when I am willing to inconvenience myself? My core values live here.
  • Is there something small I can do, daily, to support the people who are essential to me? Have I asked?

I try to stay humble by remembering how each chapter of my family’s story will end.

Iterate towards better. Document, then share what works.


The Beginning, O’ahu 2004