16 
20 | § ¶Two Blogs
-- Anes Weblog and Money and Investing
For those who have not noticed, I stopped posting Money and Investing stories on this weblog. The Money and Investing weblog is completely separate from this one.
On the Anes Weblog you will find stories about what I do on my spare time, what I am thinking, and my views on current topics.
On Money and Investing you will find information about finances, career, self-employment/entrepreneurship, independent consulting, stock trading, saving, investing, and retirement. About half the posts is about things that I have done (for what it may be worth), and the other half is sensible (but without guarantees) financial advice. I invite you to check that site.
13 27 | § ¶If You Want To Learn How To Make Sushi – Go to Japan!
-- I Went To Sweden to Learn How to Make Broadband
If you really want to learn how to do something, you should learn it from the very best. Otherwise, you will not be making best use of your time – something that could be more valuable than the cost of learning from the best.
Six or seven years ago I visited a customer in Sweden that wanted to bring 100MBit/s Ethernet to the home, for about $20 to $30 USD/month. (Just so that you can compare, right now the DSL service in the US usually runs around 1 or 2Mbit/s). I was impressed. I helped in what I could, and then I was off to my next assignment.
Today, just by chance (or by the small size of the industry where I work) I end up back in Sweden working with the next generation of such an idea. The company is different. They are not providing the service but enabling other people to provide it. They have some of the guys from the other company, and a lot of the lessons learned. And it is my opportunity to bring all of this technology and all of this knowledge back to the Americas. Verizon FIOS and ATT U-Verse are already doing it for a portion of the homes for a higher price. The place where I will be working will try to bring it to the rest of America – the areas that Verizon and ATT have determined not to be the right markets.
I do not know how long I will be on this company. I do not know how much I will be able to achieve in the US Market. The US is not known for doing the biggest or the fastest – just the most profitable and efficient. It is like the Japanese Shinkansen… the US doesn’t have anything close to it just because it is not cost effective. Of one thing I am sure: I will be learning from the best and the pioneers in this area.
21 18 | § ¶PowerPoint is Not Word !!
-- Please save me from another unreadable slide!!!
One of my pet-peeves is the fact that Microsoft PowerPoint (or any other electronic slide program) is a low density information delivery method. You use it to deliver just a few ideas with a very high impact. You use it to convince someone to start moving in the direction you favor or as a starting point to educate on an idea.
I am not happy when I see people using PowerPoint as a way of creating a reference book. Or when people want to use it to make sure they do not forget about any topic during the presentation (that is what 3”x5” index cards are for). I am happy when I see just a couple of ideas on the slide, or a single chart that represents the whole idea. Even a picture that expresses a thousand words of ideas and emotions is good. I would be content if people kept themselves within the “6x6 rule” – the one that suggests that you should have no more than six bullets of up to six words on a slide.
Why so much fuss about it?
If you want to relay very detailed and complex information, use a handout! Or create a booklet. Microsoft Word (or Open Office Writer) is a great tool for this. Even the “notes” section of Microsoft PowerPoint is a powerful tool. When you fit massive amounts of information in PowerPoint you create an unreadable slide. It is unreadable for the presenter who has to turn the back to the audience to read a lengthy idea in tiny print. It is also unreadable for the audience who has to frown and focus to try to read the tiny print as well. Neither the presenter does his/her best, nor the audience pays any attention to him/her while they are reading the testament on the screen.
Next time, please, complete the job. Do the slides and do the handout. And don’t ever come up with the excuse you do not have the time to do it: if you improve the effectiveness of your message you will more than make up for the time invested on your presentation. Is your extra hour of work worth saving 10 * 1/4hr of time from your audience? Is your extra hour of work going to help you get a new client or finally convince your peers of implementing your idea? Spend the extra time. You will deliver a more powerful message, and you will project your professionalism.
13 21 | § ¶I Will Never Be the Same
-- For The Better
I spent 7 weeks in Australia, and I think that the experience changed my life in a way that made me different. It is not that Australia is a beautiful country where you feel like in America, but safer and everything looks cleaner – for they are like that, but that is not the point. It is not that my heart ached to come back to America to meet again with my wife and family – for it did – but that is not the point of this article either. Nor it is the type of work I did there, which was a good example of my abilities and a great way to prove that I could do implementations from start to finish in even the harshest work environments.
What changed my life is that I proved to myself to be brave enough AND to have the means (skills, investments and savings) to quit gainful employment without having another job waiting for me. I haven’t seen a paycheck in two months and I feel good! Everyone’s risk tolerance is different, but for me, it meant that I was ready for another stage in my life: one that doesn’t depend on a salary. It meant that I felt I had accomplished the task of becoming independent from steady employment. It meant that I had saved/invested enough to meet the simplified lifestyle that I live – by design. It meant that if I worked, it was to have fun, to get some money to have more fun, or both: but not to pay obligations or past fun.
I recently started a new job. It is one where there is plenty of opportunity for growth – well balanced with more than plenty of risk of failure. I look forward to excelling there and gaining some skills that may prove useful if I decide to continue working: be it for a corporation or independently. However, at last I can say that I work for fun. And the day this job is not fun anymore, I now feel truly capable of quitting with no hesitations.
Work For Fun?
The premise sounds almost like the opposite of what I tell my peers. The reality is most of the time we work to pay the obligations that we have chosen to have (luxuries – the majority of our expenses) plus basic living expenses than most people may have to pay for (basic shelter, and basic food).
Ironically, I proved to myself that there is a great joy to be found on knowing you are not forced to work in a place you do not like. And I proved my assumption right: that it is a matter of reducing your wants to match your passive income. And then, if you feel so inclined, work a bit to have more fun.
Unfortunately, I must tell those people who haven’t invested too much: keep working hard just to pay the bills for now. But start making changes now that will improve your life in the medium to long term.
16 16 | § ¶And Like That, He Was Back
-- To gainful employment
Just like that, a month and a half since I left the world of gainful employment I will start at a new job in a Pre-IPO startup company (beginning of April 2007). So much for my self-employment trial, and I say that with sadness as I was already enjoying the fun of having my own business (which I will keep on the side for miscellaneous purposes).
There is something I discovered during my numerous hours thinking about the business model: there is a stage in anyone's career where the value of the ability to decide how perform a work exceeds the value of the ability to perform the work. My late employer valued my ability to decide how to perform a task or implement something a lot. The market also values my ability to perform it, but I have discovered that if I did 100 days of billable work at my current rate I would make close to what I made in gainful employment in base salary. If I do more than a 100 days of billable work the number will most probably come closer to what I have been doing, plus bonuses.
This lead me to the concussion that I had to do either (or both):
- I increased my billable work day rate.
- I increased the amount of billable days by several multiples. This would meant having employees or sub-contractors, as I have already demonstrated that a consultant can expect to have up to 200 billable work days in a year, but not more.
I found only one problem: I do not have experience hiring employees or retaining contractors, nor I do have experience managing people. It would impose a very big risk into my endeavor if I try: a risk I think I could absorb and pay the price of it, given that I do have savings and I can still generate money with my own work. I do, however, prefer the idea of having someone pay for my learning and experience at this point and that is what has motivated my change of heart with this consulting business.
I have decided to accept a position of Manager of Professional Services at a base salary that slightly improves my previous salary, but with an increased bonus/stock-option potential and the ability to learn the skills that will allow me to re-launch my business in more solid grounds.
For the opportunity to provide maximum financial benefit the company has to do well, I have to perform excellently, and I should stay for two to three years in the job. I have established a self-performance criteria that if I can't do more than a 100% of the services sales quota on the first year, I should seriously re-consider going back into independent consulting, however. I must do my best to learn the skills very fast and perform excellently, and I feel confident I will.
Good luck to myself in this new stage of my career. May I learn the skills I could use as an entrepreneur, or jump into the high levels of upper corporate management and its associated compensation. (I am flexible, you see?)
16 26 | § ¶And Like That, He is Gone
-- Leaving a Company After 10 years
This morning I resigned to the Company I have been working for the last 10 years. It leaves an empty space in my heart and still it remains with me. Those 10 years are the bulk of my career, the majority of what could be considered my professional self. There I learned about software development, expectations management, customer relations, and project management. I also learned about what makes a company grow, succeed, not succeed, create shareholder value, and what causes it to become a target for acquisitions.
With them I also visited the most exotic locations and met people who thought very differently from my way of thinking or even my peers. I had the opportunity to see life through in different ways. I learned more from customers and partners than from any training I might have been given by the Company (which I may say, not too many, as I had always had the bad habit of avoiding instructor-led training).
The Company also contributed to my personal success. With the company I learned about stocks and stock options. I bought my real estate properties mostly with the funds coming out of stock and stock option transactions of the Company stock. The travels let me accumulate more than a million of airline miles that I used to share my international exposure with the person who taught me the value about it, my now wife. And in the Company I learned many valuable lessons I have been able to share with family and friends for their own personal growth, especially our two younger siblings and protégées (my brother and her sister).
Yet, through all the growth I may have had during the last 10 years and many positions I occupied in the Company, I feel no regrets in leaving, and on giving my notice effective immediately (more on it on a different article). Staying on the same place leads to stagnation. Once you learn everything that can be learn about something it is time to start the learning process again!
It is time to explore new opportunities. For now I will do a little of independent consulting and consider permanent and contract offers that may be presented along the way.
Farewell big Company, wish you the best of luck!
19 36 | § ¶The Employee and The Serf
-- Times Change, Concepts Don't
In the old medieval times there where land-owning nobles and land-working serfs. Both had their responsibilities. The serf had to work the land and give the majority of its produce to the land-owning noble, keeping a minor portion of his produce for his family's sustenance and to barter it for goods in the local market. The noble in turn had to protect the serf from attacks from fellow warring nobles, and ensure that his serves lived in a safe community. The noble also had to provide tribute to higher nobles, and had to pay for the upkeep of fortifications, armies, and other government needs. In times of war the serf had to serve for up to 40 days in the noble's army. In times of famine the nobles often shared their stores of food, for fear of loosing the serfs (and loosing all of the hands that worked their lands). Serfs where not allowed to move from one noble's land to the other without prior permission of both nobles. People who didn't owed lands (nobles), nor worked the land (serfs) better had a trade (craftsmen: blacksmith, carpenter, cobbler, etc.) or found themselves out of society (literally).
Civil rights and liberties have changed the lives of the common man and of the owner. Modern society doesn't impose serfdoom on those who don't own land. Furthermore, owning land doesn't directly make someone special, as the mere quarter of an acre on which most suburban homes sit now would not feed too many people if it had to be put to farm use, nor the house structure would produce anything that could be bartered for food or goods.
What is still true is that the employee (serf) is expected to produce far more than what he/she will bring home in the way of money. The business owner(s) (nobles) make use of most of the production to cover the costs of running the business and paying taxes (tribute) to higher authorities. Increasingly, business owners are expected to provide for social needs of the employees (serfs) – like medical and life insurance, and even vacation and sick time. Business owners hope that through good management they will be allowed to keep a reasonable amount of the value produced by the employees.
Both models have a drawback for the employee/serf. This person is not really free to get out of the situation where he/she is. Both the employee and the serf need sustenance (food and shelter) and the modern employee has the perceived need of acquiring luxury goods. The only way these people acquire the things they need is by producing. However, neither has the means to produce – the serf doesn't own the land and the employee doesn't own the business. The serf needs to move from one noble to the other, and the employee from one employer to the other.
Fortunately modern society does provide for the ability to move from one segment of the population to the other. Better yet, the move can be gradual or at once – up to every individual. An employee (serf) can become a business owner (noble). For this he/she needs to invest into the starting of a business and if successful can have people work for him/her and may be able to enjoy the production of those employees. It is all possible because we have a very liquid currency that can be accumulated and invested until it is time to start a business. We also have credit institutions and even venture capitalists willing to help someone with the energy to move from being a serf into being a noble.
As you might expect, nobody said the path to become a business owner/noble would be easy. Business may fail, and then you are in a worse situation than you where before. Just think that the path to Knighthood used to be riskier: you could fall a casualty of war in an attempt to impress your noble enough to make you a landed Knight.
Modern society does allows for the same person to be the equivalent of a serf and a noble. A serf in the sense that person works for an employee – and can only keep a portion of his production to feed his/her family. However, that same person can invest a portion of his/her earnings into companies – essentially becoming one of the owners of a corporation. By becoming one of the owners of the corporation, now he/she enjoys the excess production from such endeavor. He/she also shares the risks of the corporation, just as the noble(s) shared the risk of defending their land (market).
There is another option in both societies. The craftsman, that expert in a trade who barters his services for food, shelter, and goods rather than his raw work in the land. In modern times this expert on his field is called the independent consultant. This is the electrician, the plumber, and the carpenter. This person is also the staffing consultant, the temporary worker, the IT consultant, and many other flavors of the same idea: someone who barters his/her services directly for a compensation. Fortunately you do not have to go through a 10 year apprenticeship / slavery to earn your trade now. You just have to get education and experience (potentially a lot more than 10 years). Traditionally life has been more comfortable for this kind of person – but this person is not protected by the business owner (noble) from any social maladies. This person is not entitled to keeping his sustenance as the serf does either. If a there is no war, fletcher may be out of work, and if there is no wine the cooper (barrel maker) may be out of luck.
If you had the choice, would you rather be:
- A Serf / Employee.
- A Noble / Business Owner.
- A Craftsman / Independent Consultant.
- A combination?
16 21 | § ¶Real Estate: Increases in Price, Not in Social Status
-- Long Timer Reality Check
Real Estate has the habit of increasing in value over time – I do believe in real estate as one of the greatest investments you can have. It has the ability of creating great amounts of wealth with very low initial investment when leveraged by a mortgage loan. In fact, for many people the primary residence is the biggest asset families have.
Real Estate, however, has the habit of staying fairly constant. Lot size, house size, number of rooms and dimensions, number of bathrooms tend to stay the same. As time goes on people from any particular Social Level expect more out of a house. Years ago people where happy with one or two bathrooms in their houses. Nowadays middle class people want two and a half. Rooms where 10 x 10 feet, while 12 x 12 feet is becoming the norm. Real Estate agents still list dishwasher and food disposal machines as features, while most people think is a necessity. In short, a middle class family from today may expect a lot more than what a middle class family expected out of their home 30 years ago.
To make things more complex, new neighborhoods are often the ones in more demand by those who can afford them, and some old neighborhoods start to become less desirable – not as pricey.
This issue becomes particularly evident when an old couple (or single person) has been living on a house for 20 or 30 years. The day they decide to move they face a hard reality: the sale proceeds from their home may not buy a home that reflects the particular social level that the person or couple identify themselves with. The old house will most probably fetch a lot more than they paid for it but, no matter how nicely cared for, it may not fetch enough money to buy the property that reflects the perceived social status.
I have seen this shock to happen to my grandmother, to my in-laws, and today to a relative of my in-laws. In these and many of the other cases I have seen, the individual have come up with extra cash to move to a property in the same city that is comparable in social level and comfort level to the one they bought 20 or 30 years ago. Other people choose to move to less costly places – places where there may not be enough jobs but that suits them very well because they no longer need one. Plain downsizing is another option – especially if the family size has dramatically decreased in the past few years.
I think this particular phenomenon affects people who hold the same property for 20 years or more, and a lot less for those people who hold the property for 10 years or less. I am not sure what the best way to address this is, assuming it should be addressed. But I would throw a few suggestions:
- Upgrade residence once every 10 years – easier to say than to do. Will always require a lot of cash that may be needed for education, fun, or retirement.
- Save a lot of money – again, easier said than done. It is better to be prepared than to face a reality check.
- Buy in a very nice area of town, with very nice schools that produce very successful kids. Great school systems usually tend to attract people, regardless of house conditions. House value, and social level may probably be closely related in these communities – more so than in others.
22 21 | § ¶2007 Financial New Year Resolutions
-- Five Again
Last Year I started doing financial resolutions. Some other financial bloggers have them and I decided to follow suit even if I haven’t done normal New Year’s Resolutions in a long, long time.
For 2007 I plan to:
- Change Jobs – My 10+ year career has been very satisfactory. But after 10 years on the same company it is about time I try new things. I have to accomplish one of three things:
- Go into consulting – start my own business, providing the services I know how to provide and trying to grow the business into one in which I can have other consultants doing the extra work hat I can secure.
- Big company, lots of money – get more money, plain and simple. Make loads of cash to feed my investments.
- Startup – about the same money and a load of options. A place where I can feel the thrill of a very small company that I can make grow, and where I can quickly climb the corporate ladder due to my vast experience and hard work.
- Cash Only (Almost) – My brother experimented this year with a “Fun Account”, and I may want to incorporate some of it in my own life. The concept is simple; all discretionary expenses come out of a Debit Account where each month you deposit your discretionary money. Carry-overs from previous months are used for big expenses – travel, computers, etc. And when there is no money, there is no more spending – stay at home reflecting about your spending habits! I am doing the same this year. No more use of credit card! I do not care if they do not give me points/miles! If I want to work for myself some day, I need to learn how to live with plain, cold, hard cash. (Note: it is not extremely difficult, as I always had the cash in a savings account to pay the card in a sudden loss of job, but this time it is out of principle). Credit card will still remain there, as I need to use it for internet purchases, very few subscriptions, and other things in which I do not want to expose a lightly secured debit card – but as always pay full balance every month, if not sooner. For everything else, use the Master Card logo debit card.
- Dividend Income – Increase my yearly dividend and interest income by $2,000 a year. This means that on top of what I currently earn in dividends and interest (little more than $6,500 a year) I need to add $2,000 more to a total of $7,500/year. I am setting one of the 2008 financial resolutions to be $2,500 more up to $10,000/year in dividend income. This may sound like small money, but it is not a small feat. I do have a moderate growth portfolio mostly invested in stocks – a lot of them in retirement accounts which I do not count for the dividends amount. Balancing considerable growth with steady income is a challenge and an art I want to master. It is gaining perpetual income, vs. my current model that may require eating up into assets if I decide to retire today. The more dividends I earn, the easier is to try new and risky business ventures in my life.
- Emergency Fund – 6 months – I did 3 moths of emergency savings this year. I want six now – at $4,000 monthly expenses this means $21,000 ($24,000 – $3,000 in dividends) that I have to secure – double of what I have saved for that purpose. If I want to engage in risky business ventures in my life I better prepare myself for the hardships my actions may bring.
- Will, Living Will, Durable Power of Attorney, Health Proxy – This is one item I didn’t completed last year. Shame on me. It is a very simple set of documents, as all of the decisions have been taken already. It is all a matter of executing, and executing is all that counts – for thinking or even working a problem is worthless if it is not finished.
12 14 | § ¶The Teacher is the Problem, Not the Student
-- It is My Job
The other day I was talking to one of my primary financial knowledge protegees. I explained to her that she was doing well in her life, but had to improve. She went ballistic on me expressing that she doesn't has any debt, she lives well below her means, she is saving around 40% of her income, and is doing a reasonable effort to get a better job. She asked me what else I expected her to do, as if I was a cruel and inhumane person that asks the impossible from people.
I told her she wasn't doing one thing: understanding how to secure a stable life for her and her future family. She was blindly saving without knowing if it was too much, too little, or in the wrong way.The worst part is that it didn't clicked. I just got another barrage of complaints and expressions.
I did failed at explaining what it meant to “secure a stable life” for people that aren't even found or even born. It is a complex idea even for someone from a complex profession like hers. And even if I summarize it in an article today I bet I would get quizzing looks from many people.
Securing a stable life for a family is making sure that you have a plan on how to create enough worth to sustain you, your partner, any kids you have, educate kids with higher education, and retire comfortably (including increasing health costs). It does not mean that you have to have the money now, but you need to know how you will get it.
How someone gets there is up to the individual. Some people can generate massive amounts of cash at once, store them under the mattress and use them over the lifetime. For the rest of us it means learning things like the time value of money and how to invest the money in instruments that build up the wealth. It means to learn how to take calculated risk. It means finding a balance between how aggressively you advance in your career and how much you enjoy life – with a clear idea of what your needs are. It means visualizing life, before it happens. It means the almost impossible task of predicting a future that will certainly be different from the original plan.
The more you think about the idea, the more you think about why someone will avoid it. People will come up with many excuses, including that it is impossible to predict what life will bring us. I certainly have answers to that, and many other questions. (A plan is like a road-map – you know where you are and where you want to go, and you know how to get there – and to any other destination you may want to go in between or in the end.)
All in all, it is my job to convince her of this need, and no-one's else. Not even her job to understand, it is my job to help her understand. My father often says:
If the student failed to learn, the teacher failed to teach.Back to the drawing board in my approach at helping people to seek financial understanding.