Archive for the ‘Uncategorized’ Category
Peter Buffett’s Ninety Grand
Posted by: Todd Metheny in Uncategorized on March 10th, 2010
I’ve seen lots of articles about “buy and hold” lately – one of the popular ones on the blogosphere recently is about the lady who bought $180 worth of Abbott Labs (ABT) stock in 1935, and, after simply reinvesting all the dividends (and no other investment), recently passed away owning over $7 million worth of the company’s stock. She lived humbly in a one bedroom house and left all of her wealth and belongings to a local community college. I’ve seen that story show up on a dozen blogs (and now it’s here, too). I have something of a counter-tale to share, and it’s about Peter Buffett, son of legendary investor and site mascot Warren Buffett.
The story is from an article I read in the March 8, 2010 copy of BusinessWeek. When Peter turned 19, Warren gave him roughly $90k worth of Berkshire stock with the understanding that it was unlikely that he would get anything else. He sold the stock soon after. If he had kept the stock, today it would be worth about $72 million (that would have been a nice retirement for Peter, eh?). He didn’t. But, according to the article, he has no regrets. And he has an excellent story about what he did with the money.
First, he dropped out of college (Stanford). He essentially used the money to survive. He spent money on recording equipment and basically turned his San Francisco apartment into a recording studio. Then he put an ad in the local paper advertising recording time.
One day he was washing his car when a neighbor asked what he did for a living. He told him he was a musician. The neighbor referred him to a relative that was an animator looking for new music. He followed up on the lead and ended up going to work on a branding project for a brand new TV station. The station became what we now know as MTV (VIA). He credits that inheritance as the opportunity to go out and start the life he wanted to have.
I just thought that both of these stories were interesting. Neither is right or wrong. Hopefully both people are (were) happy with their choices. I have to wonder if Peter could have kept a small part of his Berkshire interest. In the alternative, I have to wonder if that little old lady who died with 7 million worth of stock shouldn’t have liquidated some of it along the way and enjoyed the money. Just a thought. Thanks for reading.
PS – My Effective Yield post was featured in a blog carnival over at Mighty Bargain Hunter. Check it out.
Disclosure: I own class B shares of Berkshire Hathaway. No other positions in any of the companies mentioned.
Bottom-Up Investors
Posted by: Todd Metheny in Uncategorized on March 6th, 2010
I was talking to a friend about investing the other day and was questioned when I used the expression “bottom up investors.” (As an aside, I love to talk about investing. I try to be very selective about who I do this with – because I get excited, start talking fast, acting manic. None of us wants anyone to know how crazy we are. The truth is, most of the people I know aren’t as interested in the topic as I am, so I have to try to keep myself in check. My wife is the one who suffers – I don’t hold back with her;) I tried to explain, essentially, what I think it means to be a bottom up investor (not to be confused with a “bottoms up investor” – that is, one who finishes his or her drink before making an important investment decision. I kid.)
You can basically categorize most investors as either “top-down” or “bottom-up,” (or, perhaps – macro vs. micro). Top down investors make their decisions after evaluating large economic conditions (macro conditions). Based on their analysis, they try to identify particular sectors and industries that they believe will do well based on their view of the broader economy. Only after this step do they move on to individual investment opportunities. These are the investors you’ll find talking about the business cycle and longer term trends in things like technology.
Bottom up investors, on the other hand, believe that it is easier to be correct about a particular company than about the broader economy. For this reason, they don’t spend a lot of time forecasting the economy. Most bottom up investors don’t believe this is a prudent way to spend your time. There are, after all, so many variables that impact the broader economy – interest rates, commodities prices, inflation, natural disasters, political instability…just to name a few. Not many people are going to be experts in all of those things, or for that matter, have a working understanding of all those things.
Not only do top-down investors need to be right about their projection – they need to be right before their competitors are. If you aren’t – prices are going to be bid up to a level that reflects the underlying belief you’d like to make your investment on.
Plus, what happens when top-downers are wrong? What if they believe that interest rates (or inflation, or anything) is going down and it goes up? What then? Is that the time to abandon your investments? It would probably be time to re-evaluate your analysis and why you were wrong, but what’s your next move?
For bottom-up investors, if you decide that your investment thesis is still accurate, and the price goes down, or macro events surprise us – we can simply buy more of the company that we’ve become knowledgeable about. If the stock was undervalued at $18 a share, it’s an even better buy at $15 per share – assuming that the underlying information that you based your decision on hasn’t fundamentally changed.
For these reasons, most value investors tend to consider themselves “bottom-up” investors. Ben Graham, Seth Klarman and Michael Price would all fall into this category. Of course, the two aren’t necessarily mutually exclusive. You can be a little of this and a little of that. That’s how I would classify several famous investors like Peter Lynch, Ken Heebner, Bill Miller, David Einhorn and perhaps even Warren Buffett. Jim Rogers is an example of someone that I would consider extremely top-down (another famous example would be the Hunt brothers 
A word on throwing Buffett into the hybrid category: I’m pretty sure Buffett would call himself a “bottom-up” investor (Buffett would actually probably think these classifications are a waste of time;). While many of his investments have been of the bottom-up variety, his (BRK-B’s) most recent (and largest ever) investment involved the purchase of a railroad. This appears, to me at least, to be more of a top-down investment, for several reasons. For one, Buffett himself refers to this investment as an “all-in bet on the US economy.”
The question, then, becomes, what exactly is he betting on? To me, and I’m not going to pretend to know what Buffett is thinking (aside from what he says), this appears to be a bet on two things: (1) long term economic prosperity in the US – which would in turn increase demand for commodities, many of which are primarily shipped by rail (especially coal**), and (2) a long-term bet that the price of oil will remain high, which matters because the already steep advantage that rail has over trucking in terms of energy costs. The question in this analysis is that if he believes #2, why would he be decreasing positions he currently holds in energy companies (XOM and COP) in order to finance this acquisition?
**Coal itself actually raises another question as well (and I guess this is true of most commodity businesses) because of the regulatory uncertainty surrounding it. Companies have done their best to brand “clean coal” as something that actually exists – there’s a raging ongoing controversy about whether it does. This is just a comment – I don’t think Buffett is trying to make a call based on this, he’ll leave that to the lobbyists and marketing gurus.
The other top-down type consideration is what other ways there may be to monetize the actual land along rail lines – with things such as broadband cables and windmills speculative considerations. Again, I don’t think Buffett is specifically thinking about these considerations – but they exist.
Anyway, those are my long-winded thoughts on the difference between being a top-down and bottom-up investor (aside: do these words need to be hyphenated?). If you have a different take, feel free to leave it in the comments. Thanks for reading.
Disclosure: I currently have long positions in BRK-B and COP. No other positions in any other companies that are discussed.
I consider myself a bottom up investor;)
Jack Bogle on Financial Regulation
Posted by: Todd Metheny in Uncategorized on March 2nd, 2010
I just thought I would share this interview with Jack Bogle, founder of Vanguard. I’m not sure that I agree with regard to limiting what banks can invest in, but I definitely agree that there should be firm limits with regard to leverage and equity. Bogle also brings up the fact that the original investment banks were general (as opposed to limited) partnerships, and the partners had unlimited liability for the losses of the partnership. He uses the expression “skin in the game,” and points out that if the bankers making these trades would have had skin in the game – they would have been much more risk averse with the money involved.
Warren Buffett recently spoke on the issue and had a similar take. Buffett wants some sort of financial penalty from the CEOs that run these companies (and the market as a whole) into the ground. I don’t know when or if we’ll see a systemic shift in the way banks or regulated. As Bogle puts it in the video above – it needs to happen, it’s just a question of whether it happens now or after the next financial catastrophe. Hopefully it will happen sooner rather than later. Thanks for reading.
Simon Says
Posted by: Todd Metheny in Uncategorized on March 1st, 2010
I was talking to a good friend of mine earlier tonight about the stock market (one of my favorite topics!). He mentioned to me that his brother (who works for a major discount brokerage) told him that he believes that the market will have an approximately 10% correction in the next month or so and then a 30-40% correction sometime next year. Because of this, he’s stockpiling cash (and is clearly not worried about near term inflation).
My friend asked me what I thought of the prediction. My answer was the same answer I give to anyone that asks me about the short term gyrations of the market: I don’t believe that anyone can accurately and consistently predict what markets will do. If markets were always rational – perhaps. If there were only a few variables involved – perhaps (there are actually many variables – political instability, political regulation, the price of commodities, actions of consumers, natural disaster, accounting generosities, inflation/currency valuation, actions taken by the Federal Reserve, unforeseen changes in technology and preferences, private litigation – the list of variables is infinite).
How should we respond to all these prognosticators? There are two types of investors that I identify with. One group is full of people who are investing in low cost index funds with an eye toward retirement. This strategy should include dollar cost averaging and annual or bi-annual rebalancing of your allocations (rebalancing is a proven way to boost returns). It should also include sticking to your plan. Perhaps Simon is right, and the market does fall – how do you call a bottom? When do you get back in? Perhaps the market falls like it did until March of 2009, then rockets back up 30%. Do you buy back in after the 30% increase? A lot of people who sold at market lows have done that very thing. That’s the thing about moving in and out of stocks – you might be right once in awhile, but usually you can beat your own gut by being patient and passive. If you feel compelled to move into cash because of “impending doom,” perhaps your allocation is wrong. Maybe you need to be a little less invested in stocks and more heavily invested in bonds. Maybe you don’t have the risk tolerance to be 80 or 90% in stocks. That’s fine. Changing your allocation doesn’t have anything to do with trying to time the market – it has everything to do with your appetite for risk and personal preferences. Trying to time the market is a fool’s errand.
The other type of investor that I identify with are investors who do their own research in individual securities and consider themselves value investors. To truly be a value investor, to me, means to be a person that analyzes a company and comes up what with what he or she believes to be the fair value of that company. If the company is significantly undervalued based on that analysis (that is, if the margin of safety is large enough), a value investor will consider investing in the company. If you’re this type of investor, investing in your convictions – the short term movements of the market shouldn’t matter. If you’re convinced that $15 share is really worth $20, based on your own diligence and research, and the share price goes down to $10 – you don’t have a problem, you have an opportunity. The stock is now on sale. Markets are not always rational. Value investors tend to capitalize in the times when markets are least rational. Traders spend their time trying to analyze macro-economic trends. They are part of the herd. Value investors spend their time and energy trying not to be part of that herd. It isn’t always easy, but it can be profitable.
Just for fun, here are the levels the market would need to hit for Simon’s prediction to come true:
When he made the prediction, the market was at the following levels – Dow 10,325.26 and S&P 1,104.49.
10% lower in the next 1-2 months would put us at – 8992.73 and 994.04, respectively.
30-40% sometime next year (from current levels, not from the 10% drop level) would put the Dow at between 6195.16 and 7227.76, and the S&P at between 662.69 and 773.14.
Now there’s a record. I have no idea whether his prediction will come to pass or it won’t. Perhaps it will. If it does, it won’t change any of the opinions I’ve written here. It won’t convince me that people can predict markets with any accuracy, and it certainly won’t convince me to change my investment approach. It shouldn’t change yours, either. Thanks for reading.
The Berkshire Letter – One More Thing
Posted by: Todd Metheny in Uncategorized on February 28th, 2010
(Tilson comes on about 2 minutes in – ignore everyone on the video before him;)
One thing I didn’t mention in my previous post that I started to wish I had when I woke up in bed this morning was a couple of valuation tidbits about Berkshire Hathaway (BRK-B). On Friday, Whitney Tilson, a money manager that holds a significant portion of his funds portfolio in Berkshire, was on CNBC saying that he believed that Berkshire was worth considerably more than its current market value. Tilson admitted that Berkshire was not a stock that was going to double in the next year, but was a situation where you could buy something for $0.80 on the $1.
Tilson also correctly predicted before the split that the stock would be added to the S&P 500 and would have a jump on that addition. I added to my Berkshire position at $69 on that very supposition, and have been rewarded (so far at least) with a quick 15% jump. He knows this company very well.
Of course, Tilson is just one person attempting to value this company. Now that we have the benefit of hindsight…analysts expected Berkshire to report earnings of about $2 billion. Tilson predicted that number to be closer to $4 billion. Berkshire split the difference and actually reported just over $3 billion. Tilson predicted that their earnings beat would be a catalyst to drive the stock higher (I’ll be talking about catalysts in a future post).
What does Buffett think of his company’s valuation. He believes that Berkshire’s stock is worth more than what it’s currently being valued at. In his own words:
“In our (Burlington Northern) acquisition, the shareholders quite properly evaluated our offer at $100 per share. The cost to us, however, was somewhat higher since 40% of that $100 was delivered in our shares, which Charlie and I believed to be worth more than their market value.”
He goes on to explain why they used Berkshire stock in the deal even though they believed it was worth more than its market value. The point is, at least at the time of the deal, Buffett thought that Berkshire was worth more than its market value. We don’t know how much more. Clearly, he must not have thought that it was significantly undervalued or he would not have used it in the acquisition. So take that for what its worth.
One last point from the Whitney Tilson interview: One of the annoying CNBC interviewers asked, and I paraphrase, “isn’t buying Berkshire the same thing as simply buying an index of the S&P 500 (the broader market)?” Tilson said that he didn’t think it was. He believes that Berkshire has a better valuation than the market as a whole, as well as less risk. The lesser risk is important. If Berkshire can offer a similar return as the market as a whole but with less risk, then that’s the preferable place to be, right? I think this issue of risk is due in part to (a) the huge amounts of cash that Berkshire generates and keeps on hand and (b) the extremely low cost (almost free) of capital that Berkshire maintains from all the “float” they generate. Anyway, I just thought I would be remiss if I didn’t mention anything about Berkshire’s actual position as a stock. Take it for what it’s worth. Thanks for reading.
Disclosure: I own class B shares of Berkshire Hathaway.
2009 Berkshire Hathaway Letter to Shareholders
Posted by: Todd Metheny in Uncategorized on February 27th, 2010
For fellow Buffett fans, reading his annual letters is one of life’s little pleasures. You get an insight into what he’s thinking and why he thinks it. The 2009 annual letter went live today on the Berkshire site. You can access it here.
I won’t try to interpret the letter for you. The letter itself is written in a very simple and straightforward manner, and I hope you’ll read it for yourself. They’ll be studying Buffett’s letters in business schools long after he’s gone, with smarter people than me leading the discussions. There’s a growing sentiment that the letter has lost some of its importance, because Buffett, something of a glutton when it comes to attention, has granted so much media access over the last several years. I personally feel like he’s almost constantly on CNBC talking about something or another. I admit to watching every interview, even with my in general disdain for CNBC and it’s vast array of momentum based stock market shows.
With that in mind, here are a few thoughts I had while reading this years letter:
- Berkshire’s insurance companies tend to make underwriting profits. This is important. The insurance business is so competitive, and being able to invest float at a profit is so valuable, that many insurance companies underwrite premiums at a loss. That is, they know they’re losing money on the underwriting at the outset, but are okay with this because they know they can invest the premiums at a greater (hopefully) profit than what they are losing. In bad years this is a strategy that can clearly backfire – what if you make miscalculations in your underwriting?
- Buffett talked a little bit about the acquisition of Burlington Northern. In case you don’t know Burlington is a railroad (something, according to his biographies, Buffett has always been enamored with). Buffett has previously called this acquisition, an “all-in” bet on the US economy. I think railroads should be able to grow their earnings under 2 sets of circumstances: (1) Significant economic growth returns, increasing the demand for commodities and therefore shipping, and (2) the price of oil increases, and therefore increases the cost gap between using rail as a means of shipping and it’s main alternative – trucking. Most prognosticators seem to believe that both these things are likely to occur, mainly driven by increased demand in emerging markets (driven by the chief emerging market – China).
- The point in the bullet above should help all RRs, not just BNI. Buffett had stakes in 2 other RRs at the time of the BNI purchase, NSC and UNP. He was forced to sell these because of rules related to the BNI acquisition.
- Buffett is silent on the point of succession in this particular letter, which I find very interesting. This is, perhaps, the point that shareholders are most interested in. He did heap praise on pretty much every Berkshire manager. Leading internal CEO candidates appear to be GEICO CEO Tony Nicely, National Indemnity manager Ajit Jain and NetJets CEO David Sokol (formerly CEO of MidAmerica Energy). I have been under the impression that Sokol is the leading candidate, mostly because of his involvement in the Constellation Energy deal, which fell through, but still made Berkshire almost $1 billion. I don’t recall another Berkshire manager having such large involvement in such a large deal, but I’m obviously not privy to the inner workings of the company.
- On a similar note, Buffett has previously indicated that he might bi-furcate the position, with one person acting as CEO (sort of a figure head and overseer of Berkshire’s businesses) while someone else acts as CIO (chief investment officer). Buffett has also discussed the possibility of having multiple investment managers run separate pools of money. This is pure speculation on my part, but managers that may be under consideration for this part of the job (though they all have their own interests and may not be interested) might be Seth Klarman of Baupost Group, Eddie Lampert of Sears Holding Company (SHLD), and Ian Cumming of Leucadia (LUK). You could name any number of managers that have modeled themselves specifically after Buffett as well, including Mohnish Pabrai. I don’t think there are really any value oriented managers that haven’t been inspired by Buffett in one way or another. I know who won’t be the new CIO – John Meriwether or any other “quants” that base their strategies on complex trading formulas and computerized strategies.
Buffett has also not changed what has become one of the most famous tenets of his investment strategy, “be fearful when others are greedy, and greedy when others are fearful.” He reaffirms that idea with this gem (from the ‘09 letter):
“We’ve put a lot of money to work during the chaos of the last 2 years. It’s been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. In the end, what counts in investing is what you pay for a business – through the purchase of a small piece of it in the stock market – and what the business earns in the succeeding decade or two.”
My wife and I are attending the annual meeting in Omaha the first weekend in May. My father-in-law plans to join us and perhaps one or both of my brothers-in-law. It should be a good time. Hopefully he’ll address the succession issue there – though I doubt we’ll get names. His position has always been, why would I announce a list? GE announced a list and all the candidates that weren’t chosen left the company. Buffett’s trying to keep that from happening. As a shareholder, I hope he does. Thanks for reading.
Disclosure: I own Berkshire Hathaway Class B shares. I also have a position in Norfolk Southern Corporation (NSC). I don’t directly own shares in any of the other companies mentioned.
Thoughts on Gift Cards
Posted by: Todd Metheny in Uncategorized on February 18th, 2010
Disclosure - Long HD;)
I know I haven’t blogged in awhile, and realize that this is an odd topic to bring me out of my blogging hibernation. I actually have dozens of half-written posts and ideas in queue – I just haven’t been able to decide what role I want the blog to play in my life going forward. I’m pretty confident it’s not going to be a 4-5 post per week blog again anytime soon. With that said, let’s turn to my muse of the moment, gift cards.
My question is essentially, why are gift cards such a popular gift? I actually believe I already know the answer to that question. It’s because people feel like a gift card is a more personalized gift than just giving someone cash. A gift card says, “I know how much you like to read so I got you this gift card to Barnes and Noble!” Whereas money says (perhaps), “This is practical and useful to everyone. I don’t need to know anything about you or put any thought into this. I knew you’d like it.”
The problem with gift cards, is that they aren’t as valuable as cash, and yet they still cost the full face value that reflects their spending power. Why aren’t they as valuable as cash? Because you can only spend them at one place, but you can spend cash anywhere. They lock you in to having to shop at a specific store.
But wait! There’s more!
Buying gift cards also erodes value for the receiver (in favor of the company issuing the gift card). Why? Because the receiver may not use the gift card right away (or at all). I don’t have any data on this, but my bet is that some percentage (let’s say 2%) never get used at all. Even if they do get used, if they don’t get used for months (or years), value is being lost. Consider the following situation: You saunter into Barnes and Noble, stroll up in the counter, and request their finest gift card with a value of, say $100. The assume that the company immediately runs off and invests your $100 in a random investment – let’s say Treasury Inflation Protected Securities (TIPS) paying the inflation rate + 3% (a good deal!). You give the gift card to Randy Reader for his birthday (which is that night). Randy is sort of a lazy, shiftless, dolt, and though he loves to read, he’s usually too lazy to get off his butt and go spend his impressive cache of gift cards. He puts it in his wallet and forgets about it for about a year. During that year, inflation has occurred at approximately 3%. Randy goes to spend his gift card, and has no idea that his $100 gift card is actually buying 3% less merchandise than it would have a year ago. Meanwhile the company sits back with it’s $106 dollars and enjoys 3 extra gallons of milk (2 if you go organic) with the extra money they made as a result of Randy’s 12 month lag.
All of this is on top of the fact that you’re restricted on where you can spend the money, which in itself takes value away. If you’d have given Randy cash – he probably could have bought his books at a cheaper price on Amazon (most definitely cheaper if he decided to buy ebooks). Or he could have bought any other thing in the world that can be bought with USD. Cash helps Randy spend his money based on what he values at that moment. Plus, Randy could be the one to invest in the TIPS instead of Barnes and Noble – or the stock market. Whatever he wants.
So right now you’re probably thinking, why does this guy hates gift cards so much? I don’t. I just think that they should be sold at a discount to their face value to make them worth purchasing. Maybe 1% or so. Of course, this would also lead to more people buying gift cards (for every purchase – for themselves or otherwise). A whole new market would form. Derivatives tracking gift card discounts would be created. Chaos would ensue. The world would end. And it will probably never happen. This is just one fellow’s opinion.
To wrap up, my call to action is this, next time you’re on your way to a wedding and stop at Target to pick up a card and a gift card to shove in it – put a check in it instead. Randy and his new wife will appreciate it. Maybe. Or maybe they’ll tear open the car and cry out, “CASH!?! I was hoping for a GIFTCARD!” Thanks for reading.
What Matters Now
Posted by: Todd Metheny in Uncategorized on December 15th, 2009
Here’s something I read that I believe is worth the time it takes to read. Enjoy. I’ll be back blogging soon.
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.
