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“I hit the wall, and it wasn’t pretty. On the way back home from a work trip, I was walking down the aisle of the plane and passed out. Next thing I knew, the plane had landed and I was in a service area off the plane with soiled pants.”

“So, I was sitting next to this guy on the plane that was almost exactly like me – minus a few years. A veteran salesman who travels around for work a lot. High stress job with high demands. He told me his story of hitting the wall, and I know the feeling because I’ve come close myself. I can tell you all of the symptoms. I should teach a seminar on dealing with it.”

“Really you should teach a class on something you can’t fix yourself?” I rhetorically replied.

The above conversation is a shortened version of a story that an older friend told me. We laughed about it at the time (defensive mechanism or something?), but it’s a pretty appalling story. Frankly, anytime a person hits a mental or emotional wall that physically forces them to shut down it’s tragic, and I have a list of friends headed in that direction. Few seem able to stimulate the change needed to correct course, though.

In case you’re wondering what this has to do with financial complexity, I’ve been trying to figure out how to address other issues around the money life cycle beyond just money management issues. It’s easy stressing that single point because it’s so common for so many people, but money management is also almost the least important part. Money management is as much about money as it is change management, and that’s something everyone has problems with, which money can’t inherently fix.

So, this hitting the wall story is pretty bad, especially when your friend can relate so closely to the person telling it. I have mixed feelings about how to react to these situations because I’ve got a specific view that most people don’t care to hear. It seems like most people just like to complain, and prefer ignoring the next step – fixing or improving the situation. I always try and gauge if someone’s open to hearing what I actually think, but I’m hearing complaints so often, I tend not to care anymore.

I’ve got a great life, and a job that I really enjoy. I like to stress living a balanced life, but personally I hope to live an unbalanced one. One that’s unbalanced towards good situations and away from excessive pains. It’s really easy to do actually, but so few people seem to get this. They’re afraid and feel trapped either because they feel limited in options – either not having options or having options that just won’t work. I have a habit of saying that I’m lucky, but that’s bullshit. I’ve planned this – in a way – so I get easily annoyed when others complain because it doesn’t usually take much to improve things, but as I’ve learned, it takes more than just wanting to change.

You can see the wall coming at you and you know that you don’t want to hit it, but then why do you keep working long hours, taking on more work than you should, flying around on errands for you boss, making excuses for why you can’t change? That really sets me off, but I usually (less so each passing day, each passing complaint) hold back my reply because it doesn’t seem to affect people (so I’ll rant a bit on my blog). It feels hypocritical someone telling a person such as myself that you can’t change when I’m a great example of successful change.

As I said, I planned this. I didn’t plan the exact address or complete picture, but I set out with my values and needs, and I found the situation that would fill them. Those adjust with time, so I’m always on the lookout, checking my internal gauges, to make sure I shouldn’t act again. I don’t settle for mediocrity, and that’s easily the biggest mistake that people make. You don’t have to fight the fight in every part of your life, but it’s almost magical how everything falls together when you make sure that you’re at least fighting the important fights and taking on the meaningful challenges.

However, life isn’t a set of challenges and obstacles to outsmart. That’s another thing my friend said when he told me the hitting the wall story. It makes sense coming from him, a person with a special forces military background, that he sees life as being solved by outsmarting it. It just makes me want to scream, “Life isn’t something you can outsmart. Life just is.” You can plan for situations, and adapted to different problems, but life isn’t an obstacle course that’s set against you, which you can then overcome. Shear force – accepting longer work hours, more demanding work situations, or whatever else – doesn’t break you through to the other side. There is no other side, only that which you’re at now and where you’d mentally like to be. More of the same, or less of the good, isn’t outsmarting an obstacle.

Of course, none of this is all that complex. Most people who want to change know what they want to change, but not how. My friend thinks that he can keep from hitting the wall by going to an annual three day decompression camp, but years – decades – of built up stress isn’t solved by decompression camp when you’re that far down the road already. And my other younger friends think they can keep from becoming like the other, but they’re in the same environment, doing the same things, surrounded by the people they hope they won’t become, and assume that time will make things better or that they can just cut of at some point in the future. “Riiiight,” is all I say. That’s why you’re dad and his dad are workaholics.

You have to push yourself beyond the wanting stage. You have to expect better and demand better. If you’re consistent at that, then you escape from life as a set of obstacles and walls to dodge. You move into a state of flow like finding flow on the soccer field or at bat on the baseball diamond.

These changes and improvements will follow you into your money situation. You might not become the richest man alive, but you’re view of what you need and how you’re fulfilled will change, which usually means you’re happier with less because you know the few things that actually matter. So, if you know you want change, but can’t, then figure out what actually matters to you, and if your values don’t match your environment, then you’ve probably got some clues now what needs to change.


the end is near

Long title, I know. I’m not actually advocating a withdrawal from US equities based on some belief about the impact from China, the housing market, and whatever else. I’m just drawing attention to silly arguments. These come up all of the time, especially with the recent market drop and accompanied frenzy from certain cirlces. The problem is that such reasoning is like playing a 6 degrees of separation game based on an expectation market of global politics, market indicators, etc., and not on the real intrinsic value market of real companies with real products and services. As Ramit at I Will Teach You To Be Rich puts it, “These are not the reasonable conclusions of someone who’s informed about personal finance, but someone who’s cobbled together a shaky theoretical framework that ties personal finance, global politics, and entrepreneurship together.”

We’re accustom to thinking about the market through our expectation of a certain level of return in a broad sense. However, that doesn’t mean you can get a jump on future market changes and exploit some change for your own profit in a specific, planned, and guaranteed way. I’ve discussed the efficient market hypothesis before, but it’s even simpler than that. Markets are made up of companies that provide a real service or product in the hopes of profit. Global politics, consumer savings rates, and such may impact the flow of goods and services, but they don’t substantially change the underlying markets and companies, and being worried about the recent dip in the US market, which also occurred in foreign markets, doesn’t mean that you should get out of the US market.

The market works by pitting multiple companies against one another, and some will go out of business from that (good), and some will thrive because of that (good). The strength of the US market is derived from the companies that make up that market like GE, Microsoft, and Walmart. The strength of these companies is based on the people they hire and the innovations they create. Unless there is some great shift from that situation where a foreign company also takes the lead (like Toyota pounding previous auto industry leaders like Ford and GM), then you are very safe keeping your money in the US market. And even then, on average, US companies are still fighting hard and well against the competition.

Thinking about the large growth in some foreign markets like China and India may make you anxious, but you should realize that 1) growth is inversely related to return (and return is what we as investor really care about), and 2) even with substantial growth, the US economy and markets are massive in comparison, and 200% growth for India is worth half a percent of growth in the US. That doesn’t mean that foreign markets and companies aren’t good investments, but there seems to be a persistent pessimistic sense of doom for the US economy and market. That’s nothing new, and that might even be a good reason why the US economy is so strong as companies are always on the lookout for failures and opportunities.

There are two more final reasons why you shouldn’t fear foreign market growth, but actually hope for it. First, growth in foreign markets is good for the US market and investors. This is a pie getting bigger scenario, and not a fight for the same pie. Also, increased competition forces companies to compete that much better, which leads to the second reason for not being afraid; No other market is as well established as the US market for that kind of pressure.

As I said already, the American market is built on American companies that hire the right people, which includes foreigners. This is so easy in the US because of the vast number of universities including a large number of world class universities and their high concentration in areas like the Silicon Valley and Boston (the two leading world entrepreneurial hot spots). These mental hot spots breed good ideas, and draw smart foreigners as much as they draw smart locals, and they’re drawn into a culture that values and supports entrepreneurialism. Additionally, these areas are supported by very experienced, wealthy, and competitive corporate and private funding industries (think venture capital). Being able to draw these three key factors into one if not multiple spots like in the US, or elsewhere, takes tremendous time and effort as it takes time to establish good schools, a good encouraging culture, and the money to support both.

When you feel the urge to make 6 degrees of separation reasoning, take the time to think about the above factors, and decide if anything fundamental has actually changed. Most likely it hasn’t, and on top of that, I’d be surprised (no offense to the anonymous reader) if you actually had a clue what it means to the market when Japanese confidence in the US is low, and how that impacts the US housing market, and by “direct” reasoning means the US market is doomed. Very smart people make these statements every day having no idea what that really means if they’re even able to make it sound sensible. Trust the market as a whole, and be confident in the long term sustainability of the US market and economy. Even the UK, which was the world leader before the US, is still a very strong market and economy after having lost its spot to the US. So, keep saving and investing as usual, and don’t listen to kooky and conspiracy theory reasoning.

windy road

It seems like retirement is such a big issue right now. I’ve helped my parents a little in choosing retirement options by helping them figure out which were best for their situation. However, there doesn’t seem to be much good information out there. It’s mostly fear and scare articles written by journalists who have little or no financial knowledge. I’ve read all too many opening lines such as “the stakes are high and the issues complex…” Oooh. Really? It might feel that way with a impending retirement, but if you take a step back, breath, and think about this for second, it’s rather simple and straight forward.

Retirement for anyone breaks down into three concerns: finances, enjoyment, and general fear. Finances is pretty obvious, you need and want $X for retirement – how else can you retire if you don’t have enough money. Enjoyment is pretty obvious, you’re entering a new part of your life that’s there precisely for your complete enjoyment – no one telling you want to do tomorrow morning, or when to wake up (besides your significant other at least). The fear involved should be obvious too, but there are many facets, most bad, but some are actually good – fear of your financial situation and having enough money, fear of finding enjoyment after a lifetime of having outside objectives define your day, and fear of the unknown such as the impact on the stock market, or whether social security will hold up, or any number of other issues.

I think the most common problem for baby boomers when thinking about retirement is the over obsession with your financial picture. As with everyone else, there’s already the basic misunderstanding of fiancial matters, but then there’s the added fear of a new financial situation – no job bringing in new money. However, this is probably the easiest part of your whole retirement because you can either educate yourself by reading books or websites, or by talking to a professional. In the end, run some numbers and do some planning. If you don’t have enough money, then maybe you don’t go into full retirement, but the bigger question is, “what is enough?” because that depends on what you want to do. What kind of enjoyment and activities do you expect to do and want to do?

The second most common problem comes at this point, “oh my. What do I actually want to do? I’ve got 10+ years of retirement that I have to plan out.” Wrong. You have 10+ years of retirement to LIVE. Planning your finances with enough flexibility for many different options is relatively easy. The key is keeping it simple. Don’t over plan, and don’t look at too many options. Make a check list of things that would be great to do in the next year, two, or three. Get an idea if that’s financial feasible. Also, most importantly of all, pick things that will have meaning to you. This might not be an easy task if you’ve never really thought about this much before.

Finding meaning is the real dilemma of retirement. Not social security, not the stock market, and not your kids’ inheritance (this doesn’t apply to you mom and dad – inheritance is numero uno for you). A life defined by your work, and now what? Work had some level of meaning, and through that meaning, you derived (hopefully) a high level of fulfillment and enjoyment. Now, you have to find that meaning from some place else, or so you think.

If work has really been a place for meaning and fulfillment, then there is no requirement to stop working. Maybe partial retirement is a better option even if you have enough money. Remember, with the workforce getting smaller as baby boomers retire, baby boomers will be in growing demand. You have a wealth of knowledge and experience that’s still valuable. Either way, partial retirement or no, the key is finding meaning, and if you aren’t finding ways to give back either to your community or elsewhere, then you might find retirement lacking.

All of this might be a little scary because it’s a part of life that’s new. Personally, I think that should be exciting. Life is uncontrollable and unpredictable, so when something new comes up there is something great in that, especially after a lifetime of semi-predictable work. The freedom in retirement is a little scary, but has a lot of potential. After 40+ years of work, when was the last time you thought about the potential in your life like when you graduated from school? Potential eventually turns into fulfillment (or not), but now that’s back again, and should be a fun thing to deal with.

Brining this to a close, you shouldn’t be overly worried about the financial situations that are outside of your control. Baby boomers are the most powerful political group out there, and if you think the government is going to let social security fall apart, then you’re forgetting how influential your generation is. Additionally, many people are worried about the stock market. With so many people moving their money around and potentially getting out of the market, what will happen your money in the market? Easy, as you and other retirees take your money out, you’re going to spend it on something. You’re not taking the money out and hiding it under your bed. Your money is going directly into another company and providing economic growth somewhere, and that is what the market thrives on. The circle of money will continue, and baby boomer retirement money will leave your hands and move into the hands of those worthy of that money. I expect the stock market to do quite well in that situation, so don’t worry about a thing you can’t actually control, but instead get started on what has meaning to you.


A continuation of my fear in business series, post numero dos.

Economies of abundance, the Long Tail, digital rights management (DRM), which one of these doesn’t fit? The internet is changing the way we do business and making money, but how do these things affect you? Are you starting a new business, or creating a new product for an existing business, and you’re worried about someone else stealing your idea? Can intellectual property (IP) laws protect you, or will you be driven by a myopic business model of protectionism?

Whether you’re starting or already running a business, these are key questions that shouldn’t be over looked. However, there is an easy trap that’s been set for you when considering each, and that’s the trap of fear. Fear causes business myopia, and this will invariably harm your profits as innovation is ultimately hindered, which as the wise (and often misinterpreted) Peter Drucker noted as one of only two functions of a successful business (the other being marketing).

Sadly, this problem has been around for a long time, and many powerful corporations have been struck by this bug. Today, the end result that we have is a terrible IP situation in the US, and varying degrees of bad IP in other countries like England. Ultimately innovation is put on a leash, and protecting past revenue streams, and the business models built around them, become the name of the game.

Don’t get me wrong, I’m not against IP as it was originally intended, but IP has come a long way from its founding purpose and it’s now a tool for hindering innovation more than it’s a tool for encouraging innovation. This leads to the development of business models that hinge on IP law and in turn hinge on hindering innovation (both outside and inside the company). If you’re a small company without many solid revenue streams, you can’t afford to make this mistake, and if you’re a large company, then it might not appear to hurt much because you can rely on other areas of business, but don’t be fooled that you’re in a different situation from the smaller companies.

For larger companies, fear inducted myopia is actually the second stage of business myopia. First, they create a successful product or service, and then think they’re great. Nothing is better and no one else can compete even with all of those copycats out there. Truth be told, someone else is innovating, and is waiting for you to slip up by not innovating. This is myopic stage number one. The next stage is the realization that you’re not innovating, and that you’re behind the times, which can cause reactionary, knee jerk defense – think RIAA and MPAA tactics of wrongly suing just about everyone they can to protect their current business models.

For small businesses, two things can happen. You either recognize this situation, and realize that you should use IP to whatever advantage you can. No reason ignoring the reality that people might use IP against you and your own IP might protect you, or so the reasoning goes. The other thing that you could do is look at the successful companies and follow suite. They do it, so I should too. Our product that we haven’t finished yet is the greatest thing in the world, so we should protect it, right? Can’t be anything wrong with that expect that you’ve falling into the first stage of business myopia, and you don’t even have a successful product out yet.

If you’re of the first mind, I know the feeling being a entrepreneurial software developer with a patent lawyer in the family. But in the end, your job is innovation and if you get talked into fear driven business decisions by patent lawyers, you could miss the bigger picture (I have nothing against patent lawyers, and they’ll definitely have some good advice, but you need to realize that they’re a part of the system itself, and make their living that way). Certainly protect yourself where you can, but don’t plan your business model on what you think MIGHT happen if someone finds out you’ve had a good idea. By the time you’ve gotten this far, it’s too late for your competitors. Copying today’s iPod, or MySpace, or YouTube, and shipping that a year from now, will at best put you a year behind the current lead with its product that everyone wants instead of yours. Don’t let fear drive your business.

For a great thread on the economics behind these choices, and why no matter how hard the RIAA tries its current business is doomed to failure, check out a thread of posts at Techdirt with the most recent called Infinity is your friend in economics (the rest of the thread is at the bottom of that post). I’m planning on my own posts about the economics of abundance and basically regurgitating what Mike at Techdirt has already written. Still, the more people repeating this the better and repetition is key to learning new things.


You gain strength, courage, and confidence by every experience in which you really stop to look fear in the face. You must do the thing which you think you cannot do. -Eleanor Roosevelt

He who awaits much can expect little. -Gabriel García Márquez

This should be the first in a few posts about fear and its negative impact on life, and I’m particularly interested in fear in business models and intellectual property rights.

Fighting your fears can provide some of the greatest experiences in life as it certainly has for me. This makes sense if you recognize that change is the leading cause of fear. Change brings up thoughts of instability and uncertainty. Thanks to my parents and my choice of profession (as a software developer for financial companies), I’m comfortable with change, and actually almost uncomfortable if there isn’t change.

Now that I’ve entered the entrepreneurial world, volatility and change are ever more present factors in my life, and while I love it, there’s still a natural fear that registers probably from some primitive part of my brain. The better you are at recognizing your fears and dealing with them, the freer, more agile, and adept you’ll be in life, business, and everything else, and this will manifest itself in your financial situation as your financial picture is really a dollar-by-dollar snapshot of your real world life.

Change has been a good friend of mine throughout my life, and I have one experience that I’d like to share (and more that I’m eager to share in other posts). Of all of the choices I’ve had to make in life one of the hardest has been quitting my job at Citigroup years ago where I had worked as an intern through college and then full time after. I was a developer on one of its internal trading software suites, and had the privilege (in their eyes) of supporting my traders directly from the trade floor with a seat right next to them (constant noise and confusion is not a prime work environment for IT as cool as it might sound, although the constant and direct “client” contact was enormously beneficial). I had a great paying job with all the wage benefits of working in the financial industry, although without the horrible horrible working hours on the business side.

Quitting this job wasn’t an easy choice, and this is one of the few times when my parents didn’t understand my desire to quit such a “dream” job, buy a car, drive across the country, and move myself to California without a job already waiting for me. While I was raised on my parents’ values, baby boomers have a decidedly different view of the world than their kids (I’ve had some interesting discussions about their views of financial markets as compared to mine and even some of their parents’ views vs theirs, but that’s another post. Helping baby boomers is not the same as helping Gen X and Y simply because of the different life experiences and expectations). Of course, fear of change and instability was a driving factor in their concern that I shouldn’t quit and move to the opposite shore.

Right out of college I had what my parents, and even more so their parents, saw has the ultimate life goal – a stable wage paying job with a 401(k) that you can work at until you retire. I say, “BORING!” They say, “JACKPOT!” However, as everyone should know by now, pension funds don’t work (a 401(k) isn’t a pension fund, though) and are relics of a generation past, and corporations generally show more loyalty to the bottom line than their employees, so the expectation of giving decades of your life to one company is a simple myth because the “favor” won’t (and shouldn’t) be returned (The well being of your future should never be set by the time you spend waiting for that future, and time served shouldn’t correlate directly to compensation, but more toward value returned).

Eventually, I convinced my parents I was right. Although, maybe not fully convinced until I moved, found a much better job, and increased my enjoyment of life and my standard of living by folds. Still, all indications were that I should move and find something that better suited me. Staying at a job that was immensely boring, very constrained by bureaucratic barriers, and my own general mentality as an entrepreneur would never let me be happy there. Delaying the inevitable for the fear of losing money and phantom “job stability” did nothing for my mental and emotional health, nor my long term financial future.

So, finishing on a personal finance note, part of the reason for budgeting or tracking your finances is to create a map that helps uncover potential real life problems, but changing your budget won’t inherently change your life, and it won’t and can’t uncover deep rooted problems. This is why the overall plan is enormously more important than tracking your day-to-day habits. Setting goals that encompass more than your finances is key to proper financial planning because in the end, your financial picture is only a slim snapshot of your real world life.