John Garnaut writes a great piece on redesigning the Australian tax system to be simpler, cheaper, and fairer.
WHEN Peter Costello returned from holidays and resolved to earn the right to be prime minister, he stuck a great sheet of butcher’s paper on his office wall and called in his best advisers to draw up a decent tax system.
Pity it’s all just a fantasy. Damn you John for getting my hopes up!
Tim Oren writes a fascinating answer to the question:
What is the best reasoning behind why shareholders have limited liability for a corporation’s environmental and social costs? Not on a case by case basis, but why it is the blueprint for the most powerful pillar of society?
Check out Tim’s historical summary of Why Is Shareholder Liability Limited ?
As part of a general clean up of my website, I made some changes to the pages that hold my Adelaide Advertiser Real Estate section page count analysis.
I thought I would add updates to my blog rather than having them on a separate webpage.
Here is some background.
December 2nd, 2001
After some interesting comments from a friend of mine, I decided to begin charting the number of pages in the Adelaide Advertiser newspaper Real Estate liftout each saturday.
We believe that the number of pages in the liftout can be taken as an indicator of the state of the property market in Adelaide. More pages in the liftout generally means more properties being advertised.
Now what these figures actually mean does depend on a few different things, and by no means should be taken as a complete indicator of the property market. It is merely one more bit of information that may help to shed some light on what is happening in the marketplace.
My analysis of the figures is that an increase in the page count (which we take to mean an increase in the number of properties being advertised for sale) means one of two things (and perhaps even both).
– There are more people listing their properties. After a period of strong sales growth and increasing property values, many people take this as a perfect opportunity to sell their property… especially when Mrs. Bloggs from next door got such a good price for their home, and ours is so much nicer than theirs.
– The properties that are on the market are not selling, or at least not selling quite as quickly as they have before. Now there would be many factors that affect this result, in particular the Christmas holiday season tends to see people not looking at property quite so much, and hence sales tend to slow a little.
But it could also indicate the turning point in a property boom. Low stock levels and low interest rates combining to increase demand and hence values. After a while, people start to realise that their property is worth considerably more than it was 12 months ago, and perhaps decide to list it for sale.
Towards the end of the boom, once sales start to slow down, there are still people caught up in the sales cycle and property boom, and eagerly list their property for sale. But they don’t sell as quickly as anticipated, or a vendors unrealistic expectations cause properties to be passed in at auction.
Now as I’ve said, this is a rather crude and simple analysis of these numbers and there are many other factors which I have not taken into account with these figures.
Please note that none of the comments or data on these pages constitute financial advice. I am merely sharing some interesting information and speculating on what it may mean.
December 9th, 2001
I have started to collect details of the rental adverts from the Saturday Advertiser as well. I do this by counting the the number of columns in both the “Units and Townhouses” and the “Houses” for rent sections.
December 16th, 2001
I have added a new chart showing the three sets of figures normalised. The way I have done this is to take the 6 week moving averages and then adjust the figures so that the minimum value of the averages is taken as ‘0’ and the maximum value of the averages is taken as ‘1’ (or 100%). This allows us to compare the flow of the averages between the minimum and maximum values and then map the three sets of values (Sales, Rental Houses, and Rental Units) on the same chart.
June 8th, 2002
I have updated the charts with the last 6 months worth of data.
January 16th, 2003
I have updated the charts with the last 6 months worth of data.
I’ll get around to updating the charts with the latest data soon – I promise !
I manage my investment finances with Quickbooks.
I also suffer from a compulsion to over-engineer any solution I implement.
So, once I had worked out how Quickbooks works, I set about constructing a complex (but very accurate) mechanism for tracking my finances. It was a work of art, something which would make any accountant for a large corporation proud.
However, for my own finances it was overkill, and took far too long to actually enter any data.
So I’ve bitten the bullet, simplified the system, and am now in the process of re-entering two years worth of data.
It will be a lot of pain now, in return for significantly less pain on an ongoing basis.
The next step will be to document the (simple !) process so that my wife can do it all for me.
PaulZag writes about going into business in his blog. I too have thought seriously about this path. Once I started seriously thinking about business opportunities, I started seeing them everywhere. It almost seemed as though they were jumping out at me – like DVD hawkers on a busy Beijing street “hello hello, sir, you buy DVD, plenty cheap, you buy DVD, sir ? hello hello ?”.
I was depressed with my job and some of the changes that looked like happening. I wasn’t getting my own way, and that annoyed me (now that’s a scary thing to realise – petulance is not a terribly constructive behaviour). I saw all these opportunites in front of me to ditch my employer and the things he wanted me to do, and to do it all myself, do it all my own way.
Then one day I thought about how the conversation with my accountant might go. I had already broached the subject with him on my previous meeting, and he had a lot of suggestions for me to look at. Knowing the kind of questions he was going to ask, I sat and thought about it for a while. He was going to ask me things like how much money I thought I could make out of the business; how big could it grow; what’s my long term vision for it; more importantly, what’s my exit strategy.
When I realised I didn’t actually have a plan for all these things I had to step back and think. I had the entry strategy all worked out, but I couldn’t visualise an exit strategy. I couldn’t see where this would take me. All I could see for the ideas I had was that I was simply moving from Kiyosaki’s E quadrant to his S quadrant – moving from an employee to being self employed. With this approach, I was looking to change employers – I wasn’t looking to become an entrepreneur.
The worst part was that I could see that the opportunities were windows – if I got into a particular market now and established myself, I could find a good niche, but that window would close soon. So I was putting pressure on myself to leave my job, without thinking through the consequences in full. I was afraid that if I missed this opportunity now, I would never have another.
I’ve since had to consider a cost benefit analysis for staying where I am and earning that good, reliable PAYE income, or leaping into the unknown without what my accountant would call a solid plan. As Paul writes, there are some real benefits to the boring PAYE income. Finance ability for starters – banks love people who are employed in well paying professional jobs with large well known companies.
My accountant is a very smart man, with loads of experience in business mentoring. I know that he will be a very tough critic of any plan I put in front of him, which is a good thing. That means I’m going to have to come to him with something that is well thought out and documented before he is going to give me any serious consideration.
What’s more, my personal situation right now is such that making the move to a self employed environment would put undue pressure on other areas of my life, so again, it may not be the right time to pursue that option.
Now that I think about it, I guess it’s a similar thing to what new investors experience when they first start to see the deals out in the marketplace. There are so many opportunities, and they start to see how one deal may be better than another.
Mmm… let me say that again…
Now that I think about it, I guess it’s a similar thing to what I experienced as a new investor, when I first started to see the deals out in the marketplace. There are so many opportunities, and I started to see how one deal may be better than another.
Then I started to concentrate on finding better and better deals. Then I started to search for that perfect deal, now that I knew what it might look like. But those deals never actually exist. Not where I was looking. Every time I saw a potential deal, it failed to meet my expectations. There was always an excuse. I knew I could do better. So I kept looking. I kept analysing. I kept searching. But I never actually acted. Analysis paralysis had set in. Okay now, I admit it. It was painful when my friends pointed it out to me, and I was in denial. But I have found wisdom in hindsight !
Realising that today’s opportunity was NOT that one deal that would make it for me was an important step. There never is one deal. There never is only one opportunity. If I went in looking for the perfect deal, then I would always be disappointed. Success is not defined by a single deal. It’s about learning which series of deals will build on each other to create further success down the track. Each deal is nothing more than a stepping stone to something larger, so to pin all your hopes and dreams on that first deal is going to lead to disappointment.
Once I realised that this deal is just part of a journey, it is not the destination itself, then I started to see deals in a different light. The exit strategy started to become more important that the deal itself. How could I leverage that deal for further deals in the future. Am I simply going to be tying my capital up in something that provides no future leverage ? Is the cashflow drain going to be such that it prevents me doing more deals in the future ?
It all depended on where I was going, what my plan was. Without a plan I couldn’t make these decisions. Without a plan, I was simply walking in the fog with no real idea of where I was going or what I needed to do to get there. Without a plan I had no real way of measuring deals to determine if they actually met my needs or not.
It’s exactly the same with business opportunities. More importantly with my time. If I invest my time in a venture, are the rewards going to be worth it ? Is it going to get me closer to my goal ? Or am I just taking this course of action in order to escape from something else. Am I just running away ?
I woke up one day realising that the challenges that faced me at work were simply that – challenges. I’m used to dealing with technical hurdles. Negotiating the minefield of technology and trying to fit a solution into a less than ideal world. Sometimes you need to change your solution. Sometimes you need to change the world.
I’ve always hated politics. I just wanted to play in my sandpit and play my way. And I wanted my icecream too.
When someone came into my sandpit and told me I might need to move to a different sandpit, where they did things differently, I got upset. I threatened to take my icecream and go home.
I had a choice. Several actually. I could move grudgingly into the new sandpit and play the game their way, and be bitter about it until I got so resentful that I did leave. Accepting the new sandpit as it was, was never really an option. I had needs, I had special sand building skills. I didn’t fit into the mould of the other kids in that other sandpit.
I was never going to be happy changing myself to fit their mould. I had to choose between fitting in or going home. Or did I ? Wasn’t there another option ? Why couldn’t I change my world ? Why couldn’t I invent a new sandpit. One which would keep everyone else happy and let me play in a way which I felt good about, one where I thought I was able to achieve both for myself and for everyone else. The problem was, I couldn’t just do this on my own. I needed other people’s support for this new sandpit idea. I needed to convince them that I could offer them something to get what I needed. I needed political skills. I needed diplomacy.
This is scary. For someone who hated politics, this is a new ballgame that I didn’t have any real experience with. Or did I ? It’s just another win-win goal. Positioning things so that you can offer something to those people in a position to offer you what you need in return. Knowing who is important to you goals and who can not help you. Understanding where the power lies and how to tap into that. Learning who can influence things on your behalf and how to utilise this ability.
It all sounds like scary stuff, which is why I have steered clear of it in the past. But at the end of the day, it’s just creating another win-win deal. The major difference compared with an isolated property transaction, is this is now with people you will need to work along side tomorrow, so sensitivity and an understanding of consequences is more important. Getting what you want at the expense of creating enemies and living in an uncomfortable environment is not an great solution. Playing in the sandpit is not fun if the other kids come up and kick over your sand castle because you kicked in theirs yesterday.
So I guess I’m learning politics. The gentle art of maniuplating others to get what you want, and doing so in such a way that everyone is happy with the outcome.
If I can learn to play this game, learn how to change my world rather than always having to change myself to fit in, then I think I can continue to play in the sandpit and enjoy the benefits that come with that.
So what have I learned ? Running away isn’t the solution. Especially when you don’t have a good plan yet for when you get to where you are running.