Bob Carlson

April 23, 2015

Passing on the Family Business

Filed under: Estate Planning — Bob @ 10:44 am

There are a lot of steps involved in passing a business on to the next generation of owners. Most families fail at it because they wait too long to start the process. A number of studies and surveys over the years have reached this conclusion. The latest study is based on a 2012 survey of hundreds of family businesses across the globe.

Family businesses should start thinking about succession as soon as possible, according to Astrachan. He says the most successful businesspeople who want to pass their company on to their children instill in them a clear set of values and teach the basics of business, collaboration and decision-making from a young age.

“If you live next to the ocean you’re going to have to teach your kids to swim,” says Astrachan. “Likewise, if you own a family business you’re going to have to teach them the equivalent.”

April 22, 2015

Money and Happiness Updated

Filed under: Economy,Retirement - General — Bob @ 3:14 pm

Here’s the latest in the continuing research on wealth and happiness. Longtime readers might remember that most research indicates that beyond a certain level money and wealth don’t increase happiness. The latest research supports that notion and indicates that most people are wired to seek more. So after reaching one set of goals they set their sets on new goals. That also might explain why happiness tends to increase after a certain age. Many people reach a point where they stop striving and are content with where they are in life.

For individuals, the concept of the hedonic treadmill is useful as a check on ambition and acquisitiveness. In a recent, extreme example of someone applying these lessons, the CEO of Gravity Payments took a pay cut from $1 million to $70,000 a year as a response to research that shows the extra money wouldn’t make him happier.

On a macro level, the study reminds us that, on average, people will not just demand a certain level of material well-being but regular increases in their standard of living as well, regardless of the starting point. The Chinese Communist Party understands this, and its ability to deliver consistent economic gains to its citizens has allowed it to stay in power even as it denies other rights that many citizens of wealthy countries enjoy.

April 21, 2015

Following Your Bliss

Filed under: Happiness & Money,Retirement - General — Bob @ 5:20 pm

Joseph Campbell was  thinker credited with coining the phrase, “Follow your bliss.” He did so in a PBS interview program with Bill Moyers and in a book that basically was transcribed interviews. This review summarizes the book and Campbell’s thinking on how to lead a more fulfilling life.

As Moyers notes in the introduction, Campbell saw as the greatest human transgression “the sin of inadvertence, of not being alert, not quite awake.” This, perhaps, is why the most rewarding part of the conversation deals with the dictum that has come to encapsulate Campbell’s philosophy on life: “Follow your bliss.” Decades before the screaming tyranny of work/life balance reached its modern crescendo, Campbell put a sympathetic ear to the soul’s cry and identified with enormous elegance and precision the root of our existential dissatisfaction.

A National Retirement Policy

Filed under: Economy — Bob @ 12:20 pm

The U.S. has an atrocious national retirement policy. Social Security is expensive and redistributes income. It also isn’t properly funded. The private savings system works for only a few people. There are examples of good national retirement policies. This article describes Australia’s, but there also are good models in Chile and Denmark. It’s too late for most people who are approaching retirement age. But a revised national policy would over time improve greatly individual security and I think national wealth.

What makes Oz so different? For Australians, not saving is simply not an option. The 1992 law required employers to divert 3 percent of most workers’ salaries into retirement accounts, and the level has been raised over time as the public has gotten used to the idea. Nine percent of virtually every paycheck now goes into these Super funds, and it will be 12 percent by 2020. One in five employees saves even more with voluntary contributions known as “salary sacrifice.” Some companies match workers’ contributions. Both contributions and investment earnings on them are subject to a 15 percent tax. That’s a lower rate than almost all workers pay in income tax. Withdrawals by people 60 and older are tax-free.

“It’s carrot and stick, basically,” says Jeremy Duffield, chairman of the Australian Centre for Financial Studies. “The carrot was you’d get some tax concessions for contributing to a Super. The stick was you had to do it.” Duffield was in the middle of a 30-year career at Vanguard when he returned to his native Australia in 1996, as the superannuation industry was taking root, to found Vanguard Investments Australia. Today about half of workers choose to have a money manager like Vanguard or Fidelity Investments manage their Super funds, but more participants are doing it themselves. The number of people in self-managed Super funds has grown 74 percent since 2004, and their assets have surged 244 percent, to A$439 billion ($422 billion).

Light Posting the Next Few Days

Filed under: Uncategorized — Bob @ 10:21 am

I’m traveling for a few days, so I’ll be away from the computer a lot of the time and unable to publish.

Financial Lessons for Kids Grandkids

Filed under: Helping Grandkids — Bob @ 8:20 am

The younger generations are financially illiterate for the most part. That’s bad news, since they are going to be largely on their own for building financial security. This article explains that most twenty-somethings are unable to answer three very basic questions about personal finance. Use it to check out the young adults in your family and as a springboard to teach them what they need to know.

Though the study did not examine the influence of peers, its results suggest both family and financial professionals could play an important role in improving young people’s financial habits. The researchers found that being close with parents was correlated with better money management among women—and that higher self-reported levels of being “thorough” and “careful” was correlated with better financial behavior among men. Among both sexes, higher self-reported levels of being “self-disciplined” was correlated with better money habits.

A Case for Day Dreaming

Filed under: Retirement - General — Bob @ 8:20 am

There’s a lot of discussion about how to deal with information overload. Here’s a piece (a 7-minute video with a brief written summary) in which a psychology professor argues that day dreaming is the best way to process and deal with all that extra information. He recommends 15 minutes of day dreaming every two hours.

Since 1986, the amount of information we absorb has increased fivefold and our options for getting more have become almost limitless. All this choice and access to data might seem like a luxury of contemporary life – and in some ways it is – but recent neuroscience studies have shown it’s making our brains work overtime. As it turns out, we aren’t just bad at multitasking, we’re not equipped for it at all. In fact, we’re just switching between tasks, which uses up neural resources that would otherwise go towards actual problem-solving.

April 20, 2015

Wisdom from Charlie Munger

Filed under: Economy,Retirement - General — Bob @ 5:21 pm

Charlie Munger is Warren Buffett’s sidekick and partner, and some think is at least as responsible for Berkshire Hathaway’s success as Buffett. He also is a major owner of a different company. This post is about that company’s annual meeting and Munger’s responses to a range of questions. It’s a multi-part post. It’s also wide-ranging and interesting.

Q: You have said that one of the most important things you picked up from Darwin was the value of forcing yourself to search for disconfirming evidence. What important thing did you pick up from Einstein?

Mr. Munger: I didn’t know anything about relativity until Einstein taught me. I wasn’t smart enough to figure it out for myself.

[laughter]

Of course, we look for disconfirming evidence. One of the directors said very simply, we should make a list of everything that irritates a customer, and then we should eliminate those defects one by one. Of course, that’s the way to compete in a service business. It involves continued fanaticism.

One of the reasons we bought the little company in Logan, Utah, [New Dawn Technologies] is that we liked the service and ethos of the place, and their recruitment methods. Of course, our past accountants, damn their souls –

[laughter]

– just went crazy when we did that. It looked to them like we’d gone stark raving mad. How could it be worth anything? It just bothered them, and they raised hell with us for months and months, and it made our reports late. I feel very good about that acquisition today.

The New Medicare Changes

Filed under: Medicare,Medicare Advantage — Bob @ 1:56 pm

Congress recently passed, and the President said he will sign, a new law containing what’ known as “the doc fix.” Some years ago Congress decided to save money on Medicare and Medicaid by setting up a schedule that reduced the amounts that would be paid to doctors. The reimbursement schedule was unrealistically low, often paying doctors less than their costs for services. So, each year Congress would change the law for one year only.

This year, Congress finally decided to come together with a permanent fix for doctors and for some hospital payments. Of course, this results in more money being paid to those medical providers, so someone has to pay for it. One group that will be paying for it is Medicare beneficiaries, but not for several years. This article describes many of the provisions and can help with your longer-term planning.

Starting in 2018, wealthier Medicare beneficiaries (individuals with incomes above $133,500, with thresholds higher for couples), would pay more for their Medicare coverage, a provision expected to impact 2% of beneficiaries.

In addition, starting in 2020, “first-dollar” supplemental Medicare insurance known as “Medigap” policies would not be able to cover the Part B deductible for new beneficiaries, which is currently $147 per year but has increased in past years. If the policy had been implemented in 2010, it would have affected Medigap coverage for roughly 10% of all 65-year-olds on Medicare, according to an analysis from the Kaiser Family Foundation. Based on declining Medigap enrollment trends among 65-year-olds, expect this policy to impact a smaller share of new Medicare beneficiaries in the future, according to the study. (KHN is an editorially independent program of the foundation.)

Medicare’s Problem Overpaying Hospitals

Filed under: Medicare,Medicare Advantage — Bob @ 8:30 am

Medicare started releasing detailed data fairly recently, and some outsiders have been studying the data closely for anomalies, overcharging, and other problems. Leading the way has been The Wall Street Journal with a series of articles pointing to problems and inconsistencies. The latest study (subscription might be required) shows how Medicare might be overpaying some hospitals, especially for cases known as outliers.

Medicare’s problems with outlier payments underscore its challenge in avoiding waste in the fee-for-service system, under which providers have an incentive to provide more—and more-expensive—care. Officials overseeing the federal program for the elderly and disabled began trying to curb excessive outlier payments more than a decade ago.

“There’s still manipulation going on” in outlier payments, said Tom Scully, a former Medicare administrator under President George W. Bush who led a 2003 push to limit rising outlier payments when hospitals boost prices. Mr. Scully, now a lawyer and a private-equity investor, said efforts to curb excess payments are “like Whac-A-Mole.”

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