Archive for November, 2009
What Makes for a Great Salesperson?
Posted by: Todd Metheny in Uncategorized on November 25th, 2009
I read a blog post the other day about what makes some people great salespeople. The post paints a picture of salespeople as intense cut throats that will do anything to close a sale. The kind of people that “eat what they kill” and “aren’t team players.” Salespeople, according to the article, are driven by the rush that comes with closing.
I’m sure there are salespeople like this. Whether or not this is an effective way to sell depends on multiple factors, including (1) What you’re selling, (2) Who you’re selling to and (3) What else, besides money, matters to you with regard to the sale.
Before I go any further, I should loudly admit that I don’t work in sales. I have, on a small scale. I used to have an active real estate license, and I worked as a retail manager for a short time in between college and law school. That doesn’t make me a good sales person. In fact, by the definition offered in the article I linked to above, I’m most definitely not a good sales person.
To some extent, most jobs in the private sector are sales jobs in some way. As a lawyer, the only product you sell is your advice. Lawyers simply sell what they know, just like accountants, consultants and, for the most part, doctors. If you’re an engineer, you’re creating the underlying product and (hopefully) educating the sales people about what the product does and how it works. Even though I don’t work directly in sales, I’ve had the opportunity to observe some salespeople that I think are pretty good. On top of that, I always feel qualified to write about what I feel makes a good salesperson from my viewpoint as a consumer.
Here’s what I think makes someone a good salesperson:
1. People that are good at building relationships tend to be good at sales. Why? Because we tend to prefer to buy things from people we like. It’s possible to bulldoze your way to a sale. You might get someone to buy from you with a cutthroat, aggressive sales strategy, but probably only once. I’m not going to go back to someone who is overly aggressive. I will go back, again and again, to someone I like. My wife and I buy our car and home owner’s insurance from a family friend. I know for a fact we could get cheaper insurance (my wife has checked). We don’t, and it’s certainly not because they bulldozed their way into our lives and we’re too passive to change. It’s because we have a relationship with the people involved, and we’d rather preserve that relationship than save a few bucks each month. That’s effective selling.
2. People who believe in what they’re selling tend to be good at sales. Frank, open, honest recommendations based on something a sales person actually believes is an effective way to sell something. Don’t sell Coke if you drink Pepsi. Don’t drive a Chevy if you drive a Honda. Don’t sell pharmaceuticals that you don’t believe actually work. Sell something you’re convinced works and you won’t need to rely on your acting skills to convince your customers.
3. Good sales people are knowledgeable about their products. A good friend of mine spent time in management at Best Buy. Now he works at a commission based sales job (which he’s great at, btw – he was born to sell). I remember casually asking him about this or that product in the section of the store he was a manager in. Even after he didn’t work there anymore, he could still compare the merits of one product to another. He kept up with the latest features in the latest products, even after he ceased to work there. You need to know why what you’re selling is better than what the other guy (or gal) is selling (that’s the essential question, isn’t it?).
4. Good salespeople are good communicators. When I say good communicators, I don’t mean they’re good at communicating with people that think like them. I’m excellent at communicating with people who think like I do. Most people are. Great communicators are good at gauging what type of person they’re dealing with, and tailoring their communications to that persons needs. This is a skill that will help you in any walk of life, but I would guess this is usually present in the best sales people. One of the best communicators I know, in terms of sales, is my uncle (Gene). You can throw Gene in any situation, and he’ll develop a rapport that isn’t just based on the fact that the other people like him. People walk away from him, for whatever reason, trusting him. In the field he works in (consulting), that trust is essential if he’s going to be able to effectively sell his company’s services. What did I miss? Thanks for reading.
Healthcare. Groan.
Posted by: Josh in Uncategorized on November 24th, 2009
Healthcare can be a pain in the ass.
This is the first post from one of the site’s new contributors. Josh is a personal trainer and actor living in NYC. In addition to being one of my best friends, he’s one of the most frugal and sensible people I know. Since he writes well and I trust him to do a good job, I’m always asking him to write content for the blog. When something happens that makes him angry, he calls me and takes me up on it. That’s his way of being a media watchdog. - Ed.
Healthcare. Groan. Most of us have been bombarded with “news” about healthcare recently that lacks any substance. I for one am as tired of watered down, promises of miracle fixes as I am of the ridiculous, unsupported scare tactics of the other side. I want to share a personal story about my experience with my health insurance company, Blue Cross Blue Shield, and then give you some accessible resources that explain why we are in this mess and what can be done to help us out of it.
My story is a unique one in the healthcare discussion. Rather than being a life-or-death-Canadian-border-jumping-page-turner, my story involves the mundane realities of our normal healthcare needs. I was bit by a dog at 5:25PM. My skin was broken in several places, but I wasn’t going to need stitches. My first call was to a vet, who instructed me of the dangers of bacterial infections from dog bites and said I needed to get it taken care of that evening and not wait until the morning. My next call was to my doctor, whose office was closed. My third call was to my insurance company, whose office was also closed. My first annoyance: the local vet stays open later than both my insurance company and my doctor.
My bite was clearly not an emergency, so I went to the medical clinic around the block to see if I could be seen. This clinic informed me that insurance companies will not pay for tetanus shots (I later learned this was false…the first of many misinformed statements of the evening) and that I would have to pay out of pocket. I don’t pay a premium every month to then also pay for care. I went another two blocks to another medical clinic who said they could see me. Victory! Then I was informed that I couldn’t be seen because I needed a referral from my primary care physician. Defeat. I explained that my doctor’s office was closed. They asked that I get clearance form my insurance agent. I explained they were closed. They said then there was nothing they could do for me.
“Can I bring a referral tomorrow?”
“Nope. That’s what everyone says and no one does.”
“I’ll leave my credit card and driver’s license as collateral.”
“Nope.”
They recommended I go to an emergency room, where I would have to be seen. But I wasn’t having an emergency. This is what drives up costs. I went to the emergency room this summer after waking up during an allergic reaction, unable to breathe. They gave me a shot of adrenaline and some Benadryll and charged my insurance over $2,000. Although I have no regrets about that visit (not being able to breathe is scary), I knew there must be another option for my minor needs of a tetanus shot and some antibiotics. I refused to be another person who raises everyone’s premiums unnecessarily.
I remembered I could change my general practitioner at my whim online, and I asked if I could use their computer to do so. I could see eight from my perch at the window. I would change it to the doctor practicing here (the one they told me to change it to) and therefore wouldn’t need a referral. “No,” came the one word reply. I didn’t have enough time to make it to a computer and get back to the clinic before it closed at 8:00. My iphone didn’t support the website, so I couldn’t do it on that. I called my girlfriend. She, after much effort, managed to change it. I had her email me my confirmation. Victory! I strolled up to window with iphone in hand.
“Here. I changed it.”
“We need a hard copy.”
“Can you print it out on your computer?”
“Nope.”
Defeat.
Seeing my temples redden, the woman at the window leveled with me. “Insurance companies suck. If they can find a reason to not pay us, they will.” But the thing is, this doctor office sucked to. How hard is it to print out an email confirmation? Everyone was so angry at everyone else that no one would make any common sense concessions to streamline the arduous, expensive process.
At this point, I had been at this clinic for over two hours and the bacteria from the bite was getting a head start. Remember, the bite hadn’t even been cleaned out yet. I made a call to a friend who lived nearby and had a car. He printed out the confirmation and brought it to me. I slammed it on the counter.
The woman said, “Sorry, the doctor is on his way out the door.”
“What?!?!?!?!? Stop him!”
“Wait, Dr., you have another patient.”
He turned and looked me in the eye before he begrudgingly went back into his office.
I asked the woman if I should follow him, but before she could answer, he retuned and said, “Do you want to be seen or not? Hurry up…it’s now or never.”
I had a strange unflinching courage from my 2 and a half hour stint in the waiting room and I replied, “Don’t talk to me like that. I’ve been waiting forever to get clearance to be seen because I didn’t have a referral.”
He launched into a huge diatribe, “I hate insurance! What does your general practitioner have anything to do with me treating a dog bite? Is he a bite specialist? It’s infuriating.”
I suddenly liked Dr. Asshole. We were on the same team now.
“I know,” I replied.
Then he saw the bite. “Oh, that’s bad. That can easily get infected.”
I gritted my teeth from quipping something that would ruin our new-found friendship. He ordered the nurse to give me a shot, clean the bite, and gave me a prescription for antibiotics, and then he disappeared. The whole meeting took less than a minute. That’s what I waited all night for? That’s what my insurance company wanted my general practitioner to okay before agreeing to pay for? That was the precious meeting the lady at the window was trying so desperately to protect?
My fury didn’t end there. As I was leaving they said I needed to schedule a check-up with Dr. Asshole. I refused. He was an asshole.
The woman said, “Well, you have to schedule an appointment with your new general practitioner so the insurance company will pay for this appointment.”
“I don’t need to see a doctor for anything.”
“You don’t need a physical?”
“No. I got one 5 months ago.”
“Well, just stop by and say hi so we can bill your insurance company for that appointment so they will accept payment for this appointment.”
“But I just saw him.”
“No, he isn’t in today, you saw Dr. Asshole, his partner.”
“Why didn’t you tell me to change my general practitioner to him and not Dr. Asshole?”
“He doesn’t accept your insurance.”
“But Dr. Asshole, who practices in the same office, does?”
“Yes.”
I was outraged at the waste, the senseless red tape piling up the bills. I begrudgingly agreed but called Blue Cross Blue Shield the next day (when they were open). They informed me that an additional appointment was unnecessary, and Dr. Guy-I-Never-Met could write a referral for Dr. Asshole. I almost screamed “IF I NEVER MET HIM, THEN WHAT QUALIFIES HIM TO WRITE A REFERRAL ON MY BEHALF?!?!?!?!?,” but instead I said, “Thank you, you have been very helpful.”
I then called and canceled the appointment.
Clearly the system is broken. One step in the right direction is that most people are willing to admit that now, although even now some still don’t. There are so many insurance companies and they create different rules and the doctor’s offices sometimes can’t even keep them straight. There are wasted appointments. There are forced trips to the ER when no other options are available. I saw all this first had from a minor dog bite. In this specific case, I don’t see why there’s not a law, or policy if that term scares you, that allows things like tetanus shots to be administered by any clinic or doctor’s office, and the patient’s insurance will pay a set fee regardless of where it was done. The same for throat cultures and other simple treatments. That seems like an easy way to cut some costs. Hell, maybe it is one of the 2000 plus pages of one of the current bills. Maybe I’m missing something, but the cries of death panels and abortions are too loud for me to hear the details about what is actually happening. Let’s start a meaningful discussion. Please share your stories, opinions, and comments.
Also, If you want incredible information on how we got were we are and how we can get out of it, listen to these two This American Life episodes. They are truly fascinating.
Thanks for reading.
A Lost and Found Full of Free Money
Posted by: Todd Metheny in Uncategorized on November 23rd, 2009
I don’t think I could have married someone that’s more supportive than my wife. She’s extremely supportive of all the things I do. I’m the kind of person that gets excited about ideas. I come home some days with something totally different and new, and I’m talking fast, and my eyes are bright – and she’s smiling back at me and saying, “Yes!! You should totally do that!!” In a world where you’ll have people lining up around the block to tell you why what you want to do won’t work, my wife is a bright light. It’s easy to believe in yourself when you get to live with someone that believes in you.
This blog has been one of those things. It has had little benefit for her, but she’s always encouraged me to keep doing it. She’s always believed in it. And she’s contributed a lot to it. In fact, she contributed the idea for this post.
Earlier today, she was reading Money magazine, which is completely uncharacteristic of her. She’s not a reader, and when she does read, she usually likes to read something related to medicine. Since we get Money (and Business Week!) though, sometimes she’ll flip through it just to see if she comes across something that she thinks would be interesting for the blog. Today, she found something like that, and suggested that I share it here.
It was just a little blurb:
“State treasuries contain about $33 billion in unclaimed funds, such as old dividend checks, dormant bank accounts, or refunds you forgot you were owed (or never knew about at all).”
Which begs the question – how do I find out if I’m one of the lucky people that’s owed money. Money offers two sites that allow you to find out whether you’re owed money, Unclaimed.org and Missingmoney.com.
You might be wondering what this money is or where it comes from. A typical situation might be a bank account that hasn’t had any activity in years or an insurance policy that was never collected on. If you have a deceased relative whose name comes up – heirs are able to claim unclaimed property as well. Check out the sites for more in-depth information.
If you find out you’re owed money, feel free to send some of it my way;) Good luck and thanks for reading.
An Easy Way to Save Fuel and Money
Posted by: RJ in Green Living on November 20th, 2009
Unfortunately I did not have a lot of time to put into this post. My original plan was to discuss the enormous energy losses that are the direct result of poor traffic management. I have several colleagues who have spent a good deal of time researching this and the numbers are staggering. Improving traffic flow is one of the most cost effective ways to reduce oil use. I was unable to pull this data together for today’s post so I decided to write on another measure which is even more effective and costs absolutely nothing.
The approach does not require scientific breakthroughs, it does not require huge capital expenditures, and it is something most of us have probably done before.
It is…..carpooling.
Two people driving separately in 30-mpg cars use 33% more fuel than the two of them carpooling in a single 20-mpg car. The US could literally cut its vehicle fuel consumption in half if it simply doubled the occupancy of every vehicle on the road while holding total miles driven constant. There are several start-up companies that are working to make this closer to reality. One of the better known is GoLoco.org (this company was started by the same woman who founded Zipcar).
With the advancement of mobile technology lots of people are beginning to think seriously about forming “smart” carpooling groups. The basic idea is that a mobile-phone based program allows drivers to input your travel destination before driving anywhere. Other users (riders) of the system input their desired destination (their current location is already known). The drivers are notified of any riders that can be picked up and dropped off along the way. Some people are even exploring the idea of charging occupants small fees and automatically paying the driver for the distance traveled. This is essentially a distributed taxi cab model – where everyone that joins the organization can earn small amounts of money by allowing people to carpool with them. The rates would be substantially lower than a cab fare. There are obvious potential legal issues with this and cab drivers would strongly object however in theory it has strong promise.
Several people I know are considering several ways to begin implementing this. The most promising idea I have heard is to launch this carpooling system on college campuses where there are lots of people driving to the same places at a given time. Another benefit of use on college campuses is that it would provide students a great way to meet people. Of course launching this would require that all members of the group pass a background check and would require some form of feedback for drivers and riders. Obnoxious riders or dangerous drivers would get poor ratings that could lead to their removal from the system.
At any rate, my thought with this entry was to get you to start thinking about sharing a ride with someone on your commute. While there is certainly a convenience factor with driving your own car, there are likely opportunities for you to carpool that you are missing. As carpooling apps or phone groups further develop, the lack of freedom associated with carpooling may completely disappear – given the ever expanding capabilities of our mobile devices this may be a reality sooner than you think.
Buffett and Goldman Team Up to Help Small Business
Posted by: Todd Metheny in Business Profiles, Economics on November 19th, 2009
Seriously, though, I just want to help you out.
I hear and see a lot of conspiracy theories out there about Goldman Sachs. More than any other investment banks or companies, I think GS might be the most scrutinized, talked about, and hated organization this side of the New York Yankees. In a distractionary move disguised as benevolence (j/k), Goldman is teaming up with Warren Buffett to fund loans for small business owners. The two are teaming up to provide $500 million for small business owners – both as access to capital and to further education.
I firmly believe that these are the kind of actions that will actually be effective in stimulating the economy. Businesses and business people require support, which means they’ll spend more money on supplies, raw materials, attorneys and accountants. Aside from the possible jobs that the businesses directly create, they indirectly create jobs by creating demand for all of these ancillary services.
I think Buffett is on the right track here. This is a market solution of sorts. They’re calling this a “philanthropic” effort. I’m not sure what the terms attached to the capital or the educational funding are – but they sound like they’re pretty nice based on that word, philanthropic.
This appears to be part of an effort for Goldman to clean up their image post-bailout. Wall Street’s extravagant salaries in tough times are exactly endearing to the general public. They’re already being criticized for offering too little. Having their name in the headlines with Buffett (who’s officially their largest shareholder) can only help them. His squeaky clean brand is just the sort of thing Goldman needs. Initiatives that help this country out of a tight spot, like this one, is icing on the cake. Thanks for reading.
Geoengineering and Super Freakonomics
Posted by: Todd Metheny in Uncategorized on November 17th, 2009
This guy is just hoping someone does something.
“While there is a lot of room for a lot of legitimate debate about many aspects of global warming, let us say one thing here: we believe that anyone who reads our chapter without an agenda wouldn’t even find it particularly controversial.”
The quote above was taken from a blog post written by Stephen Dubner on the Freakonomics blog. I have to agree. The chapter doesn’t put forth any assertion that I found ridiculous. Of course, there are lots of people out there that knew and understood the problem and the science behind it much better than I do.
On some level, these guys are trying to be controversial. If you write something controversial, it gets people talking about it. When you hear people talking, it makes you want to read it. In fact, in the introduction of the book – the authors admit that they expect the book to bring up things that you don’t necessarily agree with.
Geoengineering is one of these controversial topics. Lauren Morello of ClimateWire wrote an excellent piece for the NY Times about some of the things at issue with regard to geoengineering and climate change. One of the arguments offered in Super Freakonomics is that we’re not going to be able to stop global warming by simply reducing greenhouse gases, because it’s unlikely that we’ll be able to cut them enough to make a significant difference. Plus, we’d have to get developing countries, like China and India. This will be a tough sell. Their qualm will be that the United States has burned energy all the way to their economic powerhouse, and now you want us to cut back?
If cutting greenhouse gas emissions won’t be enough, some scientist are offering geoengineering as an alternative. Geoengineering is basically just manipulation of conditions to affect the weather, or, in this case, climate change. Some scientists, believe, for instance, that adding a small amount of sulfur dioxide to the stratosphere would help cool the earth. Or, more simply, if you can create more clouds, you block more sunlight, and allow less heat to make it to the earth. If you read the chapter, you’ll get a much better explanation of what is being called Budyko’s Blanket. This entire theory has its opponents, namely Al Gore, who thinks pretty much all of geoengineering is nuts. Gore has become the de facto face of the entire movement, mainly because of An Inconvenient Truth.
I should let you know that this is way, way outside my circle of competence. I would love to see discussion on the topic from people that understand the issues and have read this particular chapter of the book. I meet the second criteria, not necessarily the first. I’m interested in any good articles or data on the topic. Thanks for reading.
Back to School and Blog Musings
Posted by: Todd Metheny in Uncategorized on November 16th, 2009
I like my job. I don’t like everything about it, of course, but I like the fact that I have a job. I like being an attorney (some days), and I feel like I’m working in a place and at a job that, for the most part, does good work. For some reason, though, I have a hard time sitting still. So I’m going back to school.
I don’t necessarily think that going back to school is a good idea. Especially if you already have an advanced degree. How many advanced degrees do you need? How many letters do you need behind your name? How necessary are all those letters?
For whatever reason, I’ve gotten it in my head recently that I’d like to be an estate planning attorney (it combines so many of my interests) rather than a litigation attorney. There are a lot of things I like about litigation. There are some things I don’t like. I feel like estate planning is an area where you get to help people and get to be the good guy most of the time.
To be an estate planning attorney is to be a tax attorney. For that reason, I’m going back to school to get my LLM in taxation. An LLM is a specialized research degree that you can get after you have a JD. I’m fortunate and proud to say that I’m getting it at what I consider to be a prestigious university (it is, at least, the best school I’ve ever had the privilege to go to).
So I’m excited about the challenge. I’m excited to learn something new. And I know it will mean that I have some new and (hopefully) interesting things to talk about on the blog. If I keep learning fresh and interesting things, I can share them hear. I think it will keep my message from getting stale.
On the other hand, it’s not like I don’t already have enough to do. Between my job, my wife, two rental units, our house, this blog, and what for me is a fairly active social life, and two other “projects” – it’s going to be tough. I’m hoping that it won’t negatively affect the frequency of my posts. We’ll see.
In any case, I’m going to do my best to deliver quality content on this site. Not everything has worked out exactly to plan. I’m supposed to be delivering an interview every month, but haven’t posted one since September. I have one set up to happen around Thanksgiving that I think we’re going to try to do on video. It should be a good one.
It also hasn’t worked out exactly as planned with the new contributors. They are literally the best people I could find to write for this site. Unfortunately, (or fortunately) that also means that their time is in demand. They are busy people The plan now is that you’ll see a post from RJ Scaringe (a tech entrepreneur with a PhD in mechanical engineering) later this week, and a post from Katie Fink (an MBA/CPA that works in corporate America) sometime in December. Josh (an actor running a couple of small businesses on the side), our third writer, should debut sometime around then as well. We’ll see how it plays out. If you’re new to the blog, I hope you’ll come back. If you read this blog regularly, thank you, and I hope you’ll keep coming back. I’ll try to make it work your 5 minutes;) Thanks for reading.
Super Freakonomics Review
Posted by: Todd Metheny in Reviews on November 13th, 2009
I finished my copy of the sequel to Freakonomics on a plane on the way back from visiting my wife’s family in Long Island, NY. I like traveling, in that I like going places and seeing and experiencing new things. I don’t like the actual act of traveling. I don’t like all the waiting involved with flying. I’ve never been able to sleep on planes for some reason – not even on the extremely long flights to Europe. A couple days after flying, it’s not uncommon for me to wake up with a cold.
One thing that makes flying bearable is the opportunity to read without many distractions. My wife usually goes to sleep soon after take off (sometimes before – the woman has a gift for sleep). Such was my situation with a half read copy of Super Freakonomics.
This is exactly the type of book I like to read. It’s the kind of book that challenges all the things you’ve come to accept as cannon. It’s sort of a new genre of bestseller – the book of sociological studies that isn’t really about anything, but has lots of loosely connected and interesting stuff.
The first book was surrounded by controversy. Controversy is almost a necessary marketing tool for a book like this. You need a little controversy to get people talking about whether or not your right at dinner parties, coffee shops, and wherever else people get together to gab. One chapter of the first book, in particular, created a tremendous amount of buzz. That chapter is what I would now refer to as the “abortion chapter.”
If you haven’t read the book (and you should) the hypothesis offered is that the dramatic fall in crime in the 1990s was due to the fact that it was found to be unconstitutional to outlaw abortion. That is, women could legally decide to have an abortion. I’m not going to make Levitt’s case here. I will say that it’s an interesting one. The data is very compelling, and he makes a dispassionate, economic and believable argument.
Like the first book, this book has been generating a healthy amount of buzz. Once again, one particular chapter has been at the forefront of the controversy. Not the chapter about prostitution, which I found fascinating. Not the chapter that proclaims that the high condom fail rate in India is due to the small genitalia of Indian men. It’s the chapter about global warming.
I’ll let you read the book, but just so you understand a little about the context, the book doesn’t dispute that global warming is a very real thing. In fact, it proclaims that there are basically people with any credibility in the scientific community that don’t accept that global warming is a very real threat. What they challenge, is whether the facts commonly associated with global warming are truly, well, facts.
The question is not whether they spoke with leading experts. The controversy is about whether they cherry picked quotes in an effort to manipulate what the leading experts were trying to say. I can’t say. Only the experts know whether the quotes attributed to them accurately reflect their beliefs. I don’t know that they’ve come forward publicly and said otherwise.
In any case, it’s a fascinating book. I enjoyed the first book, and I enjoyed this one as much if not more. I have two criticisms, and perhaps they are minor ones:
1. The titles of chapters – The titles, have very little connection to what the chapter is actually about. For example, one of the chapters is called “How Is a Street Prostitute Like a Department Store Santa?” Sounds fascinating, doesn’t it? Actually, it was. But the chapter was completely about street prostitutes. A single sentence explains how they’re alike. This is just a matter of marketing. It doesn’t hurt anything, but after seeing it repeatedly throughout the book, it annoyed me a smidgen.
2. Studies – The most annoying thing that ever (maybe not ever) happens to me in arguments is if I bring up a study (I do this sometimes in a feeble attempt to bolster my credibility) and someone tells me, “you can make a study say anything.” The problem is, this is at least partially true. You can create a confirmation bias that’s difficult to overcome. It’s difficult to mirror real world results in a lab environment, because it’s difficult to consider every variable. None of those things are my problem with this book. My problem with all books like this is, in my experience, if you go back and read the papers the book is based upon, the conclusion of the paper usually isn’t represented in the book. I’m not saying that’s the case with this book. I haven’t read all the underlying papers. But it’s something to keep in mind. If something really seems difficult to believe, I would suggest going back and reading the underlying paper that’s been referenced. As with anything else, be a filter, not a sponge (to quote one of Stephen Chbosky’s characters). In conclusion, read this book. I’d love to hear what you thought about it. Thanks for reading.
The Zen of Scott Boras
Posted by: Todd Metheny in Business Profiles, Economics, Entrepreneurship on November 12th, 2009
Make it $300 million and you've got yourself a deal.
For as long as I can remember, in any setting, big businesses have been viewed as the bad guys and the workers have been viewed as the good guys. I think this started with Karl Marx’s theory that a profit can only be made by a business owner by exploiting the worker. Marx’s theory, now dismissed by economists, was that the value of a product was set by each person’s work in making it, and that the owner of the business added no value to anything. Thus, the only way a profit could be made was if you exploited your workers (paid them less than the value of their efforts). Obviously, this ignores the value added by the risk undertaken by the business owner. The business person had to invest his time, money and resources into making the product, and should be rewarded if it ends up making money.
Interestingly, you never hear anyone say that they feel like professional athletes are being exploited. Even Karl Marx would have found this ludicrous (I think). These are people that make (on the low end) hundreds of thousands of dollars every year. Top players in their respective sports now make tens of millions of dollars every year. So it’s hard to say they’re being exploited, when the President of the United States makes a paltry $400,000, the Chief Justice of the U.S. Supreme Court makes $217,400 (John Roberts reportedly made over a million dollars practicing law the year before he become a US Supreme Court Justice), and your very capable family physician only makes $150,000 (and he’s handing over part of that to malpractice insurers, because you’ll sue him if he makes a mistake).
That being the case, you have to assume that if the Yankees can afford to pay Alex Rodriguez $30 million per year, that the people that own the team are making a little money of their own, right? I don’t know. I honestly don’t know this for sure. I do know that I hear owners complain about how high the salaries are, but they couldn’t keep escalating if the money wasn’t coming from somewhere right.
If you follow baseball, you may have heard of an agent named Scott Boras. Boras is associated with everything that’s wrong with baseball and the world. He consistently gets players top dollar. He got this year’s number one overall draft choice over $15 million. He got the Yankees first basemen $180 million over 8 years. He’s innovative and sneaky. He sometimes uses the rules to his advantage, once famously using a technicality to have two of his clients declared free agents outside the draft, and allowing them to sign for a lot more money than they otherwise would have. He might be the best at what he does.
What makes Scott Boras especially interesting is that almost every baseball fan you meet hates his guts. His responsibility to his clients is to get them the best deal he can. He’s good at getting them very good deals. And people hate him for it, because it usually means that the top talent goes to the teams with the most money to spend. But people don’t hate the players for taking the largest deal (which is simply logical to do, all other factors being equal – you can’t play baseball forever).
People don’t hate the owners. After all, they’re in the same boat we are. They’re poor and lonely and just want to win games, but greedy super agents like Scott Boras are ruining the game, right? Right?
It’s unique, that the employees and their agents are viewed as greedy for taking top dollar. The owners escape being viewed as Wal-Mart. The owners would not pay so much that they no longer made money. They are running businesses, and you can’t stay in business losing money every year. I don’t have a point, other than this: lay off poor (he’s rich), defenseless (actually, he’s very capable of defending himself) Scott Boras. I actually just think this is pretty interesting. Thanks for reading.
Target Date Retirement Funds
Posted by: Todd Metheny in Uncategorized on November 11th, 2009
I see a lot of criticisms for Target Date Retirement Funds. Recently, I’ve seen a lot of commentary about how much money many of the funds have lost during the last year. If you’re near retirement, the last year has been particularly tough on you, no matter what asset class you’re invested in. There’s no safe haven. No one went unscathed.
The reason Target Date Retirement Funds got hit hard is obvious – they hold a lot of stocks. Of course, they hold different amounts of stock from year to year, but overall they tend to be heavily weighted in favor of stocks. This is a demonstration of the shift in investment philosophy that has occurred over the years.
I remember the first time I read The Intelligent Investor by Benjamin Graham. When he talks about the most aggressive portfolios in his day, Graham says that a very aggressive portfolio should be 75% stocks and 25% bonds. That was very aggressive back then. And that was only for the most enterprising of investors. The type of investors that do their own research, know how to read balance sheets, value assets and determine a fair value selling point for a stock (how many people do you know that can do this?). A more typical Graham portfolio might be 50% stocks and 50% bonds.
There was a clear reason for this. Graham was writing and studying investing during the Great Depression. The maxim that you hear all the time now – “rule number one is don’t lose money” (the alternatives are all positive) was borne out of a time when people had lost lots and lots of it in a short amount of time. Graham was focused on a defensive type of investing that minimized risk.
By contrast, when you talked to people about investing in the late 1990s, the general consensus was that people under 30 (incredibly, I’ve even heard some “gurus” say 40) didn’t need to own any bonds at all. The thinking was that over the historical long term, stocks outperformed bonds (still true). If you weren’t going to touch the money over 35 years, there’s a good chance that a portfolio filled with stocks will beat out a mixed portfolio.
One of the problems with stocks is you don’t know when a huge dip in the market will occur. It often takes stocks a long time to rebound to their previous levels from big crashes (recent market activity notwithstanding). It’s easy to feel like you have a large appetite for risk when stocks are moving upward. During the tech boom, for instance, everyone all of the sudden had this huge risk tolerance. Jim Cramer famously proclaimed in 2000 that internet companies “are the only ones worth owning now.” We all know what happened after that. It isn’t difficult to make Jim Cramer look silly (he does that on his own), but I think he has sort of epitomized the period of the recent bull markets and down falls.
In this same period, it was a period where people were complaining about their pensions and demanding they be offered some of the upside of the booming stock market. They didn’t want that downside though! How many people would trade their 401(k) for a pension today?
I honestly don’t think that Target Date Retirement Funds are a bad thing. I think they can be in some circumstances. I think you have to find a fund with very low fees. I would avoid anything that is actively managed and try to go for a fund full of index funds. Vanguard’s Target Date Funds, for instance, have a split of American stocks, International stocks and bonds in a mix of index funds.
Who are these funds right for? People who don’t want to mess with their investments. People who aren’t going to rebalance. Rebalancing has been shown to reduce risk and possibly increase returns. If your allocation is 75% stocks and 25% bonds, and stocks go down, you sell some bonds and buy more stock to bring your allocation back to what it was. This forces you to follow another old maxim, “buy low and sell high.” Best of luck. Thanks for reading.
